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TMI Blog2016 (8) TMI 1204X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee while processing a return under Section 143(1) of the Act. Even though it is an interest levied on the amount refunded to the assessee, in fact, it is an interest for delayed payment of tax. In other words, the amount refunded to the assessee while processing return under Section 143(1) of the Act was considered as non-payment of tax and interest was charged for the period in which the assessee was holding the amount. Therefore, the interest paid by the assessee cannot be construed as expenditure for earning the income or for business purpose. Therefore, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the disallowance made by the Assessing Officer. Disallowance made under Section 14A read with Rule 8D - Held that:- CIT(Appeals) found that unquoted investments with subordinated debts of Yes Bank Ltd. would not come within the purview of Section 14A of the Act and after the direction of the CIT(Appeals), what was disputed is in respect of the investment made by the assessee in shares and debentures of other companies. This Tribunal is of the considered opinion that the Assessing Officer has to mandatorily compute the expenditure inc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on to Section 115JB of the Act to reduce the amount transferred to Statutory Reserve as per the guidelines of Reserve Bank of India, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer by placing his reliance on the order of this Tribunal in the assessee's own case for the assessment year 2009-10. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Deletion of bad debts - Held that:- This Tribunal is of the considered opinion that merely because an appeal is pending before the High Court that cannot be a reason to take a different view on the issue. A perusal of the order of this Tribunal shows that on verification of the computation of book profit, the CIT(Appeals) found that the assessee has written off bad debt to the extent of ₹ 572,36,31,000/- which includes a sum of ₹ 141,94,63,000/-. On identical set of facts, the CIT(Appeals) deleted the disallowance made by the Assessing Officer for earlier assessment years. This Tribunal, in fact, confirmed the similar order of the CIT(Appeals). Therefore, this Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... L MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER Assessee by : Shri R. Sivaraman, Advocate Revenue by : Dr. U. Anjaneyalu, CIT O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: Both the appeals of the assessee and Revenue are directed against the same order of the Commissioner of Income Tax (Appeals)-15, Chennai, dated 24.09.2015 and pertains to assessment year 2012-13. Therefore, we heard both the appeals together and disposing of the same by this common order. Let s first take the assessee s appeal in I.T.A. No.454/Mds/2016. 2. The first issue arises for consideration is disallowance of ₹ 375,10,96,984/- transferred to Reserve Fund under Section 45-IC of Reserve Bank of India Act. 3. Shri R. Sivaraman, the Ld.counsel for the assessee, submitted that the assessee transferred a sum of ₹ 375,10,96,984/- to Reserve Fund as required under Section 45-IC of the Reserve Bank of India Act and claimed the same as appropriation of funds by overriding title. However, the Assessing Officer disallowed the claim of the assessee by holding the same as application of income. The CIT(Appeals) also confirmed the order of the Assessing Officer by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue under Section 234D of the Act was claimed as deduction under Section 37 of the Act, otherwise the interest is an allowable expenditure under Section 36(1)(iii) of the Act. The Ld. counsel submitted that the interest paid by the assessee on the amount refunded by the Department has to be taken as loan. 8. On the contrary, Dr. U. Anjaneyalu, the Ld. Departmental Representative, submitted that the interest charged under Section 234D of the Act cannot be equated to the interest paid on the loan borrowed by the assessee. It is not a loan which was availed by the assessee from the Department. Prima facie, the Department found that there was an excess payment, therefore, the same was refunded to the assessee. On completion of assessment, the Revenue found that what was refunded to the assessee was not correct. Therefore, the interest was charged on the income-tax which is due from the assessee. The tax was not collected on the amount refunded to the assessee. What was collected from the assessee is the tax which was otherwise expected to be paid by the assessee. Since the assessee enjoyed the money due to the Department, interest was charged under Section 234D of the Act, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance can be made by estimating income under Rule 8D. The CIT(Appeals) directed the Assessing Officer to exclude the investment made in subsidiary company, therefore, the assessee cannot have any grievance at all. The disallowance was made only in respect of investments in other companies. In fact, according to the Ld. D.R., the disallowance was computed on the average investment which yielded income at the rate of 0.5%. In view of the direction of the CIT(Appeals), according to the Ld. D.R., the assessee cannot have any grievance at all. 13. We have considered the rival submissions on either side and perused the relevant material available on record. The CIT(Appeals) directed the Assessing Officer to exclude the investment made by the assessee in the subsidiary company and also investments made in the unquoted investments with subordinate debts of Yes Bank Ltd. to the extent of Rs. 50 Crores. The CIT(Appeals) found that unquoted investments with subordinated debts of Yes Bank Ltd. would not come within the purview of Section 14A of the Act and after the direction of the CIT(Appeals), what was disputed is in respect of the investment made by the assessee in shares and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ival submissions on either side and perused the relevant material available on record. The tax deducted which was not given credit to the extent of ₹ 67,16,883/- is not in dispute. The assessee claims that it has to be given credit without any restriction. We have carefully gone through the provisions of Section 140A of the Act. When the self-assessment tax was to be paid, the assessee has to take into account the tax already paid and also the tax deducted or collected at source. Therefore, when a tax was collected in respect of the income, which was accrued to the assessee during the year under consideration, the same has to be given credit. This Tribunal is of the considered opinion that the credit found in Form 26AS and the certificate issued by the deductor under Form 16A need to be verified. The Assessing Officer shall give credit in accordance with law while computing the tax liability of the assessee. Therefore, this Tribunal do not find any reason to interfere with the order of the CIT(Appeals) in which a direction was issued to give credit after verification, if permissible under the Act. This Tribunal is of the considered opinion that such direction would not prejud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e computed as per the provisions of the Companies Act and further addition or deduction has to be made as provided under Explanation to Section 115JB of the Act. It is not the case of the assessee that the amount transferred to Statutory Reserve is an item to be reduced from the book profit computed as per the provisions of Companies Act. In the absence of any provision in Explanation to Section 115JB of the Act to reduce the amount transferred to Statutory Reserve as per the guidelines of Reserve Bank of India, this Tribunal is of the considered opinion that the CIT(Appeals) has rightly confirmed the order of the Assessing Officer by placing his reliance on the order of this Tribunal in the assessee's own case for the assessment year 2009-10. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 22. Now coming to Revenue s appeal in I.T.A. No.728/Mds/2016, the first ground of appeal is with regard to deletion of bad debts to the extent of ₹ 141,94,63,000/-. 23. Dr. U. Anjaneyalu, the Ld. Departmental Representative, submitted that the Assessing Officer found that the debt was writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... This Tribunal is of the considered opinion that merely because an appeal is pending before the High Court that cannot be a reason to take a different view on the issue. A perusal of the order of this Tribunal shows that on verification of the computation of book profit, the CIT(Appeals) found that the assessee has written off bad debt to the extent of ₹ 572,36,31,000/- which includes a sum of ₹ 141,94,63,000/-. On identical set of facts, the CIT(Appeals) deleted the disallowance made by the Assessing Officer for earlier assessment years. This Tribunal, in fact, confirmed the similar order of the CIT(Appeals). Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. 26. The next ground of appeal is with regard to addition made on account of royalty to the extent of ₹ 13,75,69,684/-. 27. Dr. U. Anjaneyalu, the Ld. Departmental Representative, submitted that the Assessing Officer made an addition of ₹ 15,72,22,496/- paid to Shriram Ownership Trust. The Assessing Officer treated the same as capital expenditure and allowed depreciation at the rate of 12.5%. According to the Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rease the share capital of the company. Hence, it has to be treated as capital expenditure. Therefore, the CIT(Appeals), according to the Ld. D.R., is not justified in allowing the claim of the assessee. 32. On the contrary, Shri R. Sivaraman, the Ld.counsel for the assessee, submitted that the Employees Stock Option Scheme, 2005 promoted by the company was implemented with effect from 13.10.2005. The object of the Scheme was to motivate the employees to achieve the business goals and to retain key talented employees in the organization. As per this Scheme, an eligible employee is entitled to own equity shares of face value of ₹ 10/- each at an excess price of ₹ 35/- on the date of grant. The issue price of ₹ 35/- per share and fair price on the date of vesting on the employee was taken as amount foregone by the assessee and the same was claimed over the period of vesting. Placing reliance on the judgment of Madras High Court in CIT v. PVP Ventures Ltd. (235 Taxmann 554), the Ld.counsel submitted that on identical set of facts, the Madras High Court allowed the claim of the assessee. The Ld.counsel has also placed his reliance on the decision of this Tribunal i ..... 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