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TMI Blog2012 (11) TMI 1226X X X X Extracts X X X X X X X X Extracts X X X X ..... ell as facts in deleting ₹ 4,77,99,935/-. This figure represents accumulated balance brought forward from previous years upto 31.03.2007. The assessee has transferred this directly to the balance sheet which is not routed through the Income & Expenditure A/c. 3. The short issue that we are required to adjudicate in this appeal is whether or not the ld. CIT(Appeals) was justified in deleting the disallowance of ₹ 4,77,99,935/- in respect of accumulated loss brought forward from the preceding previous years. 4. Briefly stated the relevant material facts are like this. The assessee before us is set up under Calcutta Metropolitan Development Authority Act, 1972 and is functioning under the administrative control of the Urban Development Department of Government of West Bengal. It is engaged in planning, functioning, coordinating and executing various projects within the Calcutta Metropolitan Development area. In the course of assessment proceedings, which were completed under section 144, the Assessing Officer adopted the figure of ₹ 5,92,04,65,613/- which was, according to the Assessing Officer, excess of income over expenditure as per the printed audited accounts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee on year to year basis. The accumulated accounting surplus in the sum of ₹ 4,77,99,92,935/- relating to the earlier years cannot be brought to tax by any stretch of imagination in the year under appeal, more particularly when the Assessing Officer has already assessed the appellant in each of the preceding four years based on its audited accounts for those years; and that for year prior to 01.04.2002, its income was not liable to tax in view of the exemption contained in section 10(20A) of the said Act, which provision was deleted by the Finance Act, 2002 only w.e.f. 01.04.2003. In that view of the matter, the total income of the appellant for the year under appeal has to be computed with reference to the net surplus of ₹ 79,53,56,308/- reflected in the audited income and expenditure account drawn for the financial year ending 31st March, 2008 corresponding to the assessment year 2008-09; and without considering any accounting surplus lying in the income and expenditure account, as brought forward from the earlier years. 14. Further the transfers from the sinking fund in the sum of ₹ 34,57,25,744/- and/or transfers to the sinking fund in the sum of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... grounds of appeal, which we will take up together, the assessee has raised the following grievances:- (1) That the learned Commissioner of Income Tax (Appeals)- XXXII, Kolkata erred in arbitrarily and wrongly holding that the appellant assessee Authority was not entitled to deduct from the excess of income over expenditure (as per I audited accounts) the interest of ₹ 17,23,91,106/- provided by it on the loans granted to the statutory bodies and local authorities, even when there was no recovery of either the principal and/or the interest deemed to accrue thereon under the mercantile system of accounting during the last 20 years or so. (2) That the learned CIT(Appeals) erred in arbitrarily and wrongly alleging and /or holding that there was no evidenced on record to show that the recovery of loans granted to the statutory bodies and local authorities by the appellant assessee Authority was doubtful and/or that there had been no recovery of any part of the interest deemed to accrue thereon under the mercantile system of accounting. (3) That the learned CIT(A) should have held that the said interest of ₹ 17,23,91,106/- was not assessable to income tax in the hands ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lier years. However, I find that it is only an assertion made by the appellant that the recovery of such loans itself was doubtful since such assertion on part of the assesese is not backed by any evidence. The assessee is following mercantile system of accounting, therefore, it is required to offer to tax all the incomes that had accrued to it during the year under consideration. When, admittedly, the loans have been given to Statutory Bodies and Local Bodies, it appears highly unlikely that the recovery of loan and the amount of interest thereon from them would be doubtful. There is no evidence placed on record by the appellant that actually there had been no recovery of any part of the interest that had become due on the loans lent by it to other statutory bodies and local authorities. There is no claim of non-performing assets (NPA) in the audited income and expenditure account of the year under appeal to which the appellant has claimed the amount of interest under consideration to relate to. Therefore, I do not find any justification in the assessee's suggestion to reduce the amount of such interest from the excess of income over expenditure (as per audited accounts) of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,576/- did not relate to the activities carried on by the appellant assessee Authority and/or that such revenue expenditure was not deductible in computing the income of the appellant assessee Authority for the year under appeal, more particularly in the light of the undisputed fact that such expenditure was allowed by the Assessing Officer himself in the hands of the appellant assessee authority even in the immediately preceding year, viz. assessment year 2007-08". 15. This claim for deduction from amount of excess of income over expenditure has been declined by the CIT(Appeals) by observing as follows :- "20. Similarly, I do not find any justification in the action of the assessee in reducing the amount of 'absorbed overheads not deducted earlier' of ₹ 31,21,93,576/- from the amount of excess of income over expenditure (as per audited accounts). It has been contended by the assessee that the said expenditure was not being claimed by the assessee due to a wrong accounting policy being followed by it and that a wrong accounting policy followed by an assessee cannot be decisive for tax purposes. 21. An expenditure to be allowed should first all the expenditure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e learned CIT(Appeals) erred in arbitrarily and wrongly disallowing the loss of ₹ 66,57,12,685/- in respect of development projects completed by the appellant assessee authority, out of its own funds, during the financial year relevant to the assessment year 2008-09. (7) That the learned CIT(Appeals) erred in arbitrarily and wrongly alleging and/or holding that appellant assessee Authority did not adduce any details or any evidence in support of the said loss of ₹ 66,57,12,685/-. 19. As the assessment was completed on best judgment basis, the facts relating to these issues did not come up for specific adjudication by the Assessing Officer, though the CIT(Appeals) has rejected the claim of the assessee, after taking into account inputs by way of remand report, by observing as follows:- "22. As regards the claim of loss of ₹ 40,44,99,562/-, which the appellant sought to reduce from the amount of excess of income over expenditure in the computation of income proposed in the statement of facts filed along with Form 35, it is observed that 'estimated losses of ₹ 5,79,03,511/- in respect of partially completed housing projects' and 'estimated profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 22. Ground Nos. 5, 6 & 7 are thus allowed in the terms indicated above. 23. In Ground Nos. 8 & 9, the assessee has raised the following grievances:- "8. That the learned CIT(Appeals) erred in arbitrarily and wrongly not allowing deduction in respect of ₹ 46,818/-, which mount was disallowed in the immediately preceding year, under section 40(a)(ia) of the Income Tax Act, 1961; and the relevant taxes deducted at source in the aggregate sum of ₹ 1,030/- was duly deposited by the appellant assessee authority during the previous year relevant to the assessment year under appeal. 9. That the learned CIT(Appeals) erred in arbitrarily and wrongly alleging and/or holding that the appellant assessee authority did not produce any evidence in support of its claim that the taxes deducted at source in the aggregate sum of ₹ 1,030/- had been duly paid by it during the previous year relevant to the assessment year under appeal, even when the relevant receipted challans evidencing such payments were duly produced before the learned CIT(Appeals) in the course of the hearing of the appeal before him". 24. Learned representatives fairly agree that these issues can ..... X X X X Extracts X X X X X X X X Extracts X X X X
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