9911796707
TMI Blog2017 (5) TMI 1717X X X X Extracts X X X X X X X X Extracts X X X X ..... g an insurance company, its income is to be computed under Section 44 of the Income Tax Act, 1961 r/w the First Schedule and under Rule 5(a) of the First Schedule, no adjustment under Section 14A of the Income Tax Act, 1961, to the balance of profits is permissible and consequently the Ld. Commissioner (Appeals) erred in holding that the provisions of Section 14A are attracted and in confirming the disallowance of Rs. 55,05,796/made by the Assessing Officer in the Assessment. 3. Without prejudice to the above ground, the Appellant submits that the Ld. Commissioner / (Appeals) erred in confirming the disallowance of Rs. 55,05,796/- under Section 14A of the Income Tax Act, 1961, when the tax-free investments were made by the Appellant out of its own funds and no other expenditure has been incurred to earn the tax-free income. 4. The Appellant may be permitted to add, alter, amend or delete all or any of the above grounds of appeal." The grounds raised by the department are as under: "1. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) was justified in allowing Rs. 2,32,22,600/- being prior period expenditure in computing the total income ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee. Being aggrieved of the addition so made, assessee preferred appeal before the CIT(A). 4. The learned CIT(A), after considering the submissions of the assessee and perusing the materials on record, though agreed with the suo motu adjustment made by the assessee however, he was of the view that the same is acceptable if the prior period income has been offered to tax in earlier assessment years. He, therefore, directed the AO to delete the addition of Rs. 2,33,22,600/- subject to verification of the fact whether the assessee has offered prior period income in earlier assessment years. Being aggrieved with the aforesaid decision of the CIT(A), both the assessee and the department are before us. 5. The learned AR taking us through the audited profit & loss account and computation of income for the impugned assessment year submitted that the assessee has not at all claimed the prior period expenditure of Rs. 2.58 crores in its profit & loss account. The learned AR submitted, what the assessee has done is, it has adjusted the prior period income of Rs. 2,33,22,600/- against the prior period expenditure of Rs. 2,58,31,240/- and offered the net amount of Rs. 25,08,640/- as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following similar method of accounting from earlier assessment years and offered similar income on account of adjustment of prior period income and expenditure and the AO in assessments completed u/s. 143(3) has accepted non only such accounting treatment given by the assessee but also the income offered. Therefore, when the assessee has not claimed any deduction on account of prior period expenditure by debiting it to the profit & loss account, the disallowance made by the AO is totally unjustified. Therefore, we direct deletion of the amount from the income of the assessee. The ground raised by the assessee is allowed and that of the department is dismissed. 8. Ground nos. 2 & 3 of assessee's appeal relate to disallowance made u/s. 14A of the Act. Briefly, facts are during the assessment proceedings, the AO noticing that assessee has earned exempt income by way of dividend amounting to Rs. 4,91,63,414/-, whereas, the assessee has made suo motu disallowance of Rs. 32,16,629/- u/s. 14A of the Act, called upon the assessee to explain why disallowance should not be made as per the method prescribed under Rule 8D. Though the assesse objected to the proposed disallowance, the AO reje ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reported in [1990] 240 ITR 139. Thus, when the income of the assessee as well as the expenditure are governed by specific provision which have an overriding effect, then it is not open for the AO to invoke the other provisions of the Act for carrying out the disallowance or adjustment in the income. Thus, we hold that, no disallowance u/s 14A can be made in the case of the assessee and hence grounds raised in the Cross Objections are allowed." 12. Further, similar view has also been expressed by the co-ordinate Bench in case of ICICI Prudential Insurance Co. Ltd. Vs. ACIT (supra). Following the consistent view of the Tribunal, we hold that no disallowance u/s. 14A read with Rule 8D can be made in case of the assessee. Ground nos. 2 & 3 are allowed. 13. The only other surviving issue is in relation to allowance of assessee's claim of depreciation on computer software as raised in ground no.2 of departmental appeal. Briefly the facts are, in course of assessment proceedings, the AO noticed that the assessee has claimed depreciation of Rs. 1,88,51,231/- on computer software. After calling for necessary details and examining them, the AO found that though the assessee claimed to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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