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TMI Blog2016 (3) TMI 1177X X X X Extracts X X X X X X X X Extracts X X X X ..... ce for this purpose will be the opening credit balance i.e., the balance brought forward as on 1st April of the relevant accounting year.Therefore, bearing in mind the circular issued by CBDT dated 26-11-2008 appeal decides in favour of assessee Denial of set off of brought forward capital loss against short term capital gain u/s. 74 - Held that:- Similar issue had arisen in the case of one of the group entities i.e. Kotak Mahindra Capital Co.Ltd [2012 (8) TMI 339 - ITAT MUMBAI] as held that the provisions of sec.74 which deal with carry forward and set off of losses under the head “capital gains” as amended by Finance Act, 2002, will apply only to the unabsorbed capital loss for the assessment year 2003-04 and onwards and will not apply to the unabsorbed capital losses relating to the assessment years prior to the assessment year 2003-04. Accordingly, we answer the question referred to this Special Bench in favour of the assessee holding that the assessee is entitled to set off the longterm capital loss incurred in AY 2001-02 against the short-term capital gain made by it in AY 2003-04 - Decided in favour of assessee Administrative expenses disallowed u/s. 14A - Held that:- We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le completing the assessment u/s. 143(3) r.w.s.147/263 of the Act,the AO reduced the bad debts, amounting to ₹ 2. 84 crores from the provision of bad debts of ₹ 7.12 crores and accordingly allowed no bad debts.He held that bad debts were allowable to the extent they were in excess of provision for bad debts,that provisions had already been allowed,that the provisions of sec.36(ii), 36(1)(vii)(a) and 36(1)(viii) of the Act were clear in that regard. The assessee had claimed that it had no opening balance or provision for bad and doubtful debts, that the bad debts were to be reduced from opening balance of provisions of bad and doubtful debts, that it was entitled to make claim for full amount of bad debts,that the provisions for the bad debts existed on the last day of the year.However the AO considered the current year's provision for bad and doubtful debts and made an addition of ₹ 2.84 crores. 3.1.During the appellate proceedings,before the First Appellate Authority (FAA) the assessee made elaborate submissions and referred to Instruction No.17/2008 dt.26.11.2008. After considering the assessment order and the submission of the assessee ,the FAA held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in respect of provisions made by them for bad and doubtful debts relating to advances made by them in the rural branches. Such deduction is limited to a specified percentage of the aggregate average advances made by the rural branches. The Apex Court held that the deduction on the account of provision for bad and doubtful debts is distinct and independent of the provisions of section 36(1)(vii) relating to allowance of the bad debts. Contention of the Revenue that the Banks covered by clause (viia) were not entitled to deduction under section 36(1)(vii) was rejected. The Court held that proviso to section 36(1)(vii) would ensure that there would be no double benefit of deduction in such cases. 15. In the present case, however, the question of method of operation of proviso to section 36(1(vii) arises. Such proviso as noted, provides that in case of an assessee to which clause (viia) applies, the amount of deduction relating to any such debt or part thereof shall be limited to the amount by which such debt or part thereof exceeds the credit balance in the provision for bad and doubtful debts account made under that clause. The revenue's contention is that by virtue of such pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been inclined to admit the appeals. However, when such circular issued under section 119(2) of the Act clarifies the position beyond any doubt, we have no reason to entertain the revenue's appeals. As already noted, the statutory provision is silent on the precise method of working out the deduction. It is by now well-settled that such circulars issued by the Board in exercise of its statutory powers under section 119(2) of the Act, may have the effect of relaxing the rigours of a statutory provision. In the case of Catholic Syrian Bank Ltd. (supra) itself, the Apex Court touched on the effect of the circular issued by the Board. It was observed as under:- "Now, we shall proceed to examine the effect of the circulars which are in force and are issued by the Central Board of Direct Taxes (for short, "the Board") in exercise of the power vested in it under section 119 of the Act. Circulars can be issued by the Board to explain or tone down the rigours of law and to ensure fair enforcement of its provisions. These circulars have the force of law and are binding on the income-tax authorities, though they cannot be enforced adversely against the assessee. Normally, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tionate depreciation on premises given on rent/lease. During the course of hearing before us the AR did not press the ground.Hence, same stands dismissed as not pressed. 4.1.Next Ground of Appeal is about denial of set off of brought forward capital loss against short term capital gain u/s. 74 of the Act amounting to ₹ 2.16 crores.During the assessment proceedings the AO found that the assessee had earned short term capital gain amount of ₹ 2,16,760,177/- and had offered it for tax ,that vide its note No.15 it had claimed a set off of long term capital loss, that in the note to the return of income the assessee had mentioned that it had a capital loss of ₹ 8.11 crores brought forward from AY. 2003-04, that during the year there is short term capital gain of ₹ 2.16 crores.Considering these facts,he held that the provisions of section 74 of the Act were prospective and could not change the character of past losses,that capital losses were brought forward from AY.2000-01,that the amended provisions of section 74 were not applicable to the brought forward capital losses,that amendment was applicable for the AY.2003-04,that FAA in one of the group cases had deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aid decision was rendered by the bench of three judges of Supreme Court and that too on 18th December, 1975 that is well before the decision rendered by the Bench of two judges of Hon'ble apex Court in the case of Reliance Jute and Industries Ltd on October 10, 1979. 37. In the case of Govinddas & Ors. (supra), the HUF was a partner in the export firm and in the mining firm. During the course of assessment proceedings for the AY 1957-58, the claim was made on behalf of the members of the HUF that they had effected the partial partition of their immovable property on 15th November, 1955. This claim was accepted by the AO after due enquiry and finding was recorded by him in the order of assessment. Consequent to its partial partition, the HUF ceased to be a partner in the export firm and the mining firm and two Members of the HUF namely Gulabdas and his son Govinddas continued to be partners in these two firms in their individual capacity. The result was that from and after the assessment year 1957-58, no part of the income of the Export Firm or the Mining Firm was included in the assessment of the Hindu Undivided Family. The assessments of the Export Firm and the Mining Firm for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ra) was rendered on the interpretation of the provisions of sec.297(2)(d)(ii) of 1961 Act and relying on these specific provisions, the Hon'ble Supreme Court held that the right vested in the assessee as per 1922 Act had been saved. He has contended that in the situation as obtained in the case of Govind Das, the rights were accrued under 1922 Act and they were held to have been saved because of repeal of old Legislature keeping in view the specific provisions contained in sec.297(2)(d)(ii). 39. After having perused carefully the entire text of the judgment of the Hon'ble Supreme Court in the case of Govinddas & Ors. (supra), we are unable to agree with this contention of Ld. DR. It is observed that the entire discussion in the case of Govinddas & Ors. was made by the Hon'ble Supreme Court without referring to the provisions of sec.297(2)(d) and even the issue was decided in favour of the assessee without any reference to the said provision as is evident from page no.133 of the report. It was only after deciding the issue in favour of the assessee that their Lordships of Supreme Court proceeded to deal with and discuss the contention raised by the revenue relying on the provisio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ary implication. 40. In the present case, the provisions of sec.74(1) as amended w.e.f. 1.4.2003 have been relied upon by the revenue authorities to disallow the assessee's claim for set off of long-term capital loss relating to AY 2001-02 against short-term capital gain of the year under consideration and as already noted by us, the plain grammatical construction of the language of sec.74(1) as amended w.e.f. 1.4.2003 makes it clear that the same are applicable and deal with carry forward and set off of loss under the head "capital gain" incurred in AY 2003-04 and subsequent years. The right accrued to the assessee by virtue of sec.74(1) as it stood prior to the amendment made w.e.f.1.4.2003 thus has not been taken away either expressly by the provisions of sec. 74(1) as amended w.e.f. 1.4.2003 or even by implication. 41. The golden rule of construction is that, in the absence of anything in the enactment to show that it is to have retrospective operation, it cannot be so construed as to have the effect of altering the law applicable to a claim in litigation at the time when the Act was passed. After referring to this golden rule in its judgment in the case of Maharaja Chint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 1960-61 and 1961-62 against the speculation profits of the previous year 1962-63. The Hon'ble Allahabad High Court upheld the decision of the Tribunal and while disposing off the appeal filed by the revenue against the order of the Hon'ble Allahabad High Court, the Hon'ble Supreme Court held that under the Income-tax Act, 1922, the assessee was entitled to carry forward the losses of the speculation business and set off such losses against the profit made from that business in future years. It was held that the fact that right created by operation of sec.24(2) was a vested right could not be disputed and such a right which had accrued and had become vested continued to be capable of being enforced notwithstanding the repeal of the statute under which that right accrued unless the repealing statute took away such right expressly. It is worthwhile to note here that in the case of Shah Sadiq and Sons (supra), reliance was placed on behalf of the revenue in support of its case on the decision of the Hon'ble Calcutta High Court in the case of Reliance Jute Mills Co. Ltd. vs. CIT 86 ITR 570 (which was affirmed by the Hon'ble Supreme Court in 120 ITR 921) and it was opined by the Hon'bl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessment year 1989-90. The Ld. CIT (A) confirmed the view taken by the AO. The Tribunal however took a different view that a vested right had accrued to the assessee to carry forward and set off the unabsorbed deduction u/s.80HHC to which it was entitled to during the subsequent years. The Hon'ble Madras High Court upheld the decision of the Tribunal holding that a vested right u/s.80VVA(4) of the Act had accrued in favour of the assessee and that right was not taken away either expressly or by necessary implication by deletion of sec.80VVA of the Act. For this conclusion, the Hon'ble Madras High Court relied on the decision of Hon'ble Supreme Court in the case of CIT vs. Shah Sadiq and Sons (supra). It was noted by the Hon'ble Madras High Court that the decision in the case of Shah Sadiq and Sons (supra) was rendered by the Hon'ble Supreme Court with reference to sec.6 of General Clauses Act and it was held by Hon'ble Madras High Court that though the Supreme Court was dealing with a case of repeal of enactment, the principles laid down in the case of Shah Sadiq and Sons (supra) would apply to carry forward of deduction provided u/s.80VVA(4) of the Act. It was held that there ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the AO to follow the directions of the Tribunal given while adjudicating the issue under consideration in the earlier years. ITA3506/M/08 (04-05): 6.The first Ground of Appeal is about administrative expenses disallowed u/s. 14A of the Act.During the assessment proceedings,the AO found that the assessee had earned dividend income of ₹ 5.57 crores and had claimed it exempt u/s.10(33) of the Act. He directed the assessee to explain as to why some expenses should not be attributed to earning of the exempt income invoking the provisions of section 14A of the Act.After considering the submission of the assessee made vide its letter dt 21.12.2006 the AO made a disallowance of 10% of the dividend income i.e.Rs.55,75,565/-.As the assessee had already disallowed 1% of the dividend income therefore, he disallowed ₹ 50.18 lakhs, (Rs.55.75 lakhs-5.57 lakhs).During the appellate proceedings the FAA, following the orders of his predecessors for the AY.s 2002-03 and 2004-05 restricted the disallowance to 1% of the dividend income. 6.1.Before us, the DR supported the order of the AO. The AR referred to the cases of Tata Consulting Engineers Ltd. ( ITA/265/Mum/11 & ITA/2460/Mu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3.The assessee did not press first Ground of Appeal, hence same stands dismissed. Ground No.2 is restored back to the file of AO to follow the directions of the Tribunal given for the earlier years. The assessee has filed an additional ground for the year under consideration also and it deals with the set off of brought forward losses.Following our orders for the earlier years, additional ground raised by the assessee,is admitted and is decided in its favour. ITA No.3508/Mum/2008 -AY.07-08: 14.Ground No.1, 2 and 3,filed by the AO,are about administrative expenses to be disallowed u/s. 14A of the Act,Club entrance and subscription fee and disallowance of bad debts u/s. 36 (1)(vii)(a).We have decide these ground's against the AO while adjudicating the appeals filed for the earlier years.Following those orders all the three ground's stand dismissed. 15.Last Ground of Appeal is about disallowance of exemption claimed u/s.54EC of the Act. During the assessment proceedings,the AO held that capital gain under consideration was taxable as short term capital gain as per the provisions of section 50C of the Act. 15.1.During the appellate proceedings,the assessee referred to the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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