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TMI Blog2016 (3) TMI 1372X X X X Extracts X X X X X X X X Extracts X X X X ..... ts, and therefore, this issue is sent back to the file of AO. The AO is directed to follow the directions given in the order of the Tribunal of earlier years [ 2014 (12) TMI 881 - ITAT MUMBAI ] and he shall give adequate opportunity of hearing to the assessee to bring the correct facts on record. Allocation of administrative expenses attributable to earning income u/s. 10(23G) - HELD THAT:- Issue involved in these grounds is identical to the issue involved in ground no.4 above. It is further noted by us that this issue has also been sent back by the Tribunal in the earlier year to the file of the AO for verification of facts. Therefore, respectfully following the order of the Tribunal of earlier years, we send this issue back to the file of the AO and direct him to follow the directions given in the order of the earlier years and re-decide this issue after giving adequate opportunity of hearing to the assessee. Thus, with these directions this issue is sent back to the file of the AO and these grounds may be treated as allowed for statistical purposes. Deduction u/s. 80M - HELD THAT:- This issue has also been sent back by the Tribunal in A.Ys 1999-2000 to 2001-02 and a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 03-04. 2. First we take up the assessee‟s appeal in ITA No.4319/MUM/2007. The grounds raised by the assessee are reproduced as under: 1. The Learned Commr. of Income Tax (A) has erred in disallowing ₹ 88,69,66,465/- being The lease equalisation charge debited to Profit and Loss account. The appellant submits that the said amount is an allowable deduction u/s 37(1) of the Income Tax Act, 1961. The disallowance is made without considering the full facts submitted before the Learned ACIT. 2. On the facts and circumstances of the case the disallowance of lease equalisation charge amounting to ₹ 88,69,66,465/- is not correct and is not justified and be deleted. 3. The Learned Commr. of Income Tax (A) has erred in disallowing the claim of the appellant u/s 35D at ₹ 18,92,153/-. On the facts circumstances of the case the appellant submits that they are entitled to deduction of ₹ 18,92,153/- u/s 35D of the Income Tax Act, 1961. 4. The Learned Commr. of Income Tax (A) has erred in confirming the allocation of ₹ 32,32,00,000/- as the interest attributable to earning income u/s 10(23G). The appellant submit that the method adopt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee by the judgment of the Tribunal in assessee‟s own case for A.Ys 1994-95 to 1997-08 and 1998-99 to 2002-03. 3.1 On the other hand, the ld. DR has also not disputed the submission of the assessee that the issue is covered by the earlier orders of the Tribunal in assessee‟s own case. 3.2 We have gone through the facts of this case and the submissions made by both the sides. We find that an identical issue had come up in the earlier years, wherein this issue has been sent back by the Tribunal to the file of the AO vide its order dt. 6.9.2013 in ITA No. 2307 to 2310/Mum/2011 for A.Ys 1994-95 to 1997-98 with the following observations: 7. We have considered the rival submissions and also perused the relevant material available on record. We have also gone through the guidance note issued by ICAI explaining the concept of lease equalization with the illustration. The said guidance note is basically issued for the purpose of accounting and the concept of lease equalization, as mentioned therein, is based on the rationale of matching cost with revenue so that the periodic net income from the finance lease is determined in a true and fair manner. This constitut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the cases like the one in hand, where the relevant transactions are treated as finance lease and the assessee is allowed depreciation after having found him the owner of the leased assets, the depreciation allowed as per the rates prescribed in the Income Tax Act could be more than the depreciation claimed by the assessee in its books of account at the rate prescribed under the Companies Act. For example, the assessee may be entitled to claim depreciation at 100% on the leased assets in the first year itself under the income Tax Act whereas in the books of account, it might have claimed depreciation on the said leased assets under the companies Act @ 10%. In such a case, if the annual leasing charge is equivalent to 30% of the value of leased assets, the assessee would debit its P L account by lease equalization charges to the extent of 20% of the value of asset as per the guidance note issued by ICAI. If the lease equalization charges so debited are allowed as deduction while computing the total income of the assessee under the Income tax Act in addition to 100% depreciation already allowed, the assessee will get deduction of 120% of the value of asset in the first year itself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following observations: 8. We have carefully considered the rival submissions. We see considerable force in the contention of the learned counsel of the assessee that in the absence of a specific definition, the word industrial undertaking should be interpreted in its popular meaning and that it should not be confined to only the activities of manufacture or production. However, we find that the issue as to whether or not the activities of the assessee amounted to the assessee being an industrial undertaking has not been examined at all either by the Assessing Officer or the learned CIT(A). The Assessing Officer simply assumed that the assessee was not an industrial undertaking or that there was no extension of an industrial undertaking. The same course has been followed by the learned CIT(A). The assessee has also not relied upon any specific material produced before the authorities below in this context. We are therefore of the view that this issue has to be examined and the facts of the assessee s case have to be brought out by the Assessing Officer in the first instance. We therefore remit this issue to the file of the Assessing Officer with the directions to decid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... only. Further, the Ld. A.R submitted that the assessee is having both own funds and loan funds and the investments made in eligible companies are funded out of own funds only. In this regard, the Ld A.R placed reliance on the decision rendered by Hon'ble Mumbai High Court in the case of M/s. Reliance Utilities Power Ltd. (2009) (178 Taxman 135). We notice that the assessing officer has not examined contentions of the assessee about the availability of own funds. In any case, the assessee is required to prove the nexus between own funds and investments on the date of making investment. Since the claim of the assessee requires verification of factual aspects, we are of the view that this issue also requires examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to examine this issue afresh by duly considering the information/explanations that may be furnished by the assessee and take appropriate decision in accordance with the law. 5.2 We find that the issue involved in this year also requires re-look to ascertain the correct facts, and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 115JB. It has been brought to our notice that in A.Y 2002-03 this issue has been restored back to the file of the AO by the Tribunal vide its order dt. 17.12.2014 in ITA No. 77/Mum/2006 with the following observations: 6. The next issue relates to the addition of Provision for diminution in the value securities . The Ld A.R submitted that the securities forms part of the assessee s stock in trade and the assessee is valuing the stock at Cost or market value whichever is lower . The Ld A.R submitted that the market value of securities fluctuate every year and hence the assessee has followed the system of making provision every year, instead of writing off the loss arising on account of fall in the market value of securities below the cost. However, we notice that the claim of the assessee that the securities are forming part of stock in trade has not been examined by the tax authorities. Further the claim of the assessee that it was following the system of valuing the securities under the principle, viz., cost or market value whichever is lower also requires examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6,22,902/- to the book profit u/s. 115JA of the I.T. Act relying on the decision given by the Hon'ble Supreme court in the case of Appollo Tyres Ltd. 255 ITR 273 and also the decision of Bombay High Court in the case of CIT Vs. Kinetic Motors Company Ltd. 262 ITR 330 by ignoring the fact that as per section 115JA(2) of the I.T. Act the assessee company prepares its Profit Loss account for the relevant previous year in accordance with the provisions of Part II III of Schedule VI of the Companies Act, 1956 as increased by amount shown as provision, reserve, payments, expenditure relatable to any income to which any of the provisions of Schedule III applies. 5. On the facts and in the circumstances of the case as well as in law, the Learned CIT(A) has erred in deleting the addition made on account of provision for non performing assets amounting to ₹ 9,36,22,902/- to the book profit u/s. 115JA of the I.T. Act by ignoring the fact that the decision given on the same issue by the Ld.CIT (A) CIT(A) for Assessment Years 1999-2000 and 2001-02 has not been accepted, appeal filed to the Hon'ble ITAT is still pending and the issue has not reached its finality. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own case in A.Ys 1993-94, 1994-95, 1996-97 and 1997-98 and in A.Ys 1998-99, 1999-2000, 2000-01, 2001-02 and 2002-03 this issue has been accepted in principle by the Tribunal, but restored it back to the file of the AO for verification of facts. 10.1 We have gone through the judgment of the Tribunal for A.Y 1998-99 in ITA No. 4600/Mum/2001 dt. 10.4.2015. In this order, the Tribunal has decided this issue in favour of the assessee in principle, but restored it back for the limited purpose of verification of the relevant facts with the following observations: 14. In ground no. 1 the revenue has challenged the deletion of disallowance of club expenses of the executives of ₹ 15,30,456/-. It has been admitted by both the parties and this issue had come up for consideration in assessee's own case for the earlier years wherein it stands decided in favour of the assessee by the Tribunal in A.Ys. 1993-94, 1994-95 and 1996-97. Learned counsel also submitted that this issue also stands covered by the decision of Hon'ble Supreme Court in the case of CIT Vs. United Glass Mgf. Co. Ltd. in Civil Appeal No. 6447 of 2012 order dated 12th September 2012. 15. After conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s have been credited to the profit and loss account and depreciation u/s. 32(1) of the Act has also been claimed. The Assessing Officer sought details from the assessee in respect of leased transactions. After discussing the facts of the case at length and after considering the submissions of the assessee and also various clauses of the lease agreement, the Assessing Officer was of the firm belief that the true nature of the transaction is one of finance transaction and it was in the guise of lease transactions for expected tax benefits. The Assessing Officer finally came to the conclusion that the assessee is not entitled to depreciation of equipment leased out during the year including the depreciation on sale of leased back transaction and disallowed the total depreciation of all the assets at ₹ 37,04,84,925/-. However, the Assessing Officer reduced the capital component at ₹ 4,61,94,437/- The assessee carried the matter before the CIT(A). The CIT(A) has discussed this grievance of the assessee at para 37 onwards. It was claimed before the CIT(A) that if the depreciation on the leased assets are not allowed, the concept of general leasing transactions will be rendere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ground nos. 4 5: 12. In these grounds, the revenue has challenged the action of the ld. CIT(A) in deleting the addition made on account of provision for non-performing assets of ₹ 9,36,22,902/- to the book profit u/s. 115JA of the Act. It was fairly submitted during the course of hearing before us that this issue has been decided in favour of the revenue by the Tribunal in the assessee‟s own case in A.Y 2002-03. 12.1 We have gone through the order of the Tribunal in the assessee‟s own case in A.Y 2002-03 and find that this issue has been decided against the assessee by the Tribunal vide its order dt. 17.12.2014 in ITA No. 978/Mum/2006 with the following observations: 5. The next issue relates to the addition of Provision for Non-Performing Assets while computing the book profit u/s 115JB of the Act. The assessing officer added the same by treating as unascertained liability . The Ld A.R submitted that it was a diminution in the value of assets and hence the same cannot be considered as unascertained liability. However, we notice that the Finance Act, 2009 has made amendment in sec. 115JB of the Act with retrospective effect from 1.4.2001 by ins ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the arguments of the appellant are supported by the decision of Supreme Court in the case of Appollo Tyres Ltd. 255 ITR 273 and also the decision of Bombay High Court in the case of Kinetic Motors Co. Ltd. 262 ITR 330. Further, another decision of Bombay High Court in the case of CIT Vs. Echjay Forging 251 ITR 15 and also the decision of Mumbai ITAT in the case of Indian Hotels Co. Ltd. 92 ITD 97 also support the claim of appellant, therefore, relying on the findings of my predecessor in appellant s own case and various case laws discussed above, I am of the view that the AO was not justified in adding the lease equalization reserve while computing the book profit. Thus, ground no. 9 and 10 are allowed. Since the facts of this year are similar to the facts of A.Y 1997-98, therefore relying on findings of my predecessor and my own findings, the AO is directed to not to add equalisation reserve while computing the book profit. Thus, this ground of appeal is allowed. 13.1 The ld. DR has relied upon the order of the AO and the assessee has relied upon the order of the ld. CIT(A) as well as the following judgments : ICICI Venture Funds (Karnataka High Court) IRCTC (De ..... X X X X Extracts X X X X X X X X Extracts X X X X
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