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TMI Blog2023 (7) TMI 1500X X X X Extracts X X X X X X X X Extracts X X X X ..... ounts of the assessee. The Act does not require the assessee to establish that the debts have in fact become bad before writing off. The CBDT vide Circular dated 30/05/2016 in an unambiguous manner explained the mandate of section and the law as explained by Hon'ble Apex Court in the case of TRF Ltd.(supra). Decided against revenue. Disallowance to business/capital loss - DR submits that during assessment proceedings the assessee failed to produce relevant documents in support of its claim - HELD THAT:- A perusal of documents on record reveals that the assessee had furnished audit report in Form No. 64 before the Assessing Officer. CIT(A) has given a categoric finding that the Assessing Officer has selectively considered Form-64 furnished by the assessee for respective funds. AO has ignored various losses under respective heads of income and has taken only short-term capital gain of Rs. 32.00 lacs from ICICI Technology Incubator Fund. There is no justification for adopting such selective approach by the Ao - CIT(A) after examining the documents on record allowed assessee s claim on the basis of Form-64. We see no infirmity in findings of the CIT(A) on this issue. The ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from past lease transactions. Notional interest for the purpose of determining annual value u/s. 23(1)(a) - As submitted that the assessee has received deposit against let out property - notional interest on account of deposit has been considered by the Assessing Officer for arriving at the annual value under section 23(1)(a) of the Act - HELD THAT:- We find that in assessee s own case for Assessment Year 2004-05, the Assessing Officer had made addition on account of notional rent on deposit while determining annual value u/s. 23(1)(a) - CIT(A) deleted the addition. The Revenue carried the issue in appeal before the Tribunal. The Co-ordinate Bench following its own order on identical issue in the case of ICICI Ltd for Assessment Year 2002-03 upheld the findings of CIT(A) in deleting the addition. Facts being identical in the impugned assessment year, we see no reason to take a different view. Thus, ground of appeal by Revenue is dismissed. Disallowance of deduction u/s. 36(1)(viia) - HELD THAT:- We find that the CIT(A) has deleted the addition by following the order of CIT(A) in Assessment Year 2003-04 and 2004-05. Against the order of CIT(A) for Assessment Year 2004-05 the Revenue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in directing the AO to re-compute the exemption claimed on tax free interest u/s. 10(15) of the I.T. Act . 6. On the facts and in the circumstances of the case and in law, the Id. CIT(A) erred in deleting the additions of depreciation on leased assets amounting to Rs. 232,25,76,303/- 7. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in allowing the deduction u/s. 80M of the I.T. Act amounting to Rs. 156,34,12,743/- 8. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the notional interest taken for the purpose of determining the annual value u/s. 23(l)(a) of the I.T. Act amounting to Rs. 1,14,90,085/- . 9. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowances of deduction u/s. 36(l) (vii) of the IT. Act amounting to Rs. 99,50,38,623/- . 3. The appeal of Revenue is decided in seriatim of grounds raised. Bad Debts Written Off: 4. Both sides made exhaustive submissions in respect of ground No. 1 of appeal. The assessee has claimed bad debts written off to the tune of Rs. 15,03,06,07,093/- u/s. 36(1)(vii) of Income Tax Act, 1961 [in short 't ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made addition made in respect of bad debts written off aggregating to Rs. 769,57,10,766/-. Aggrieved by the addition made in assessment order dated 28/02/2006, the assessee carried the issue in appeal before CIT(A). The CIT(A) following the order of his predecessor in assessment years 2000-01, 2002-03 and 2004-05 deleted the addition, summarily. 5. Shri P.C. Chhotaray representing the Department made exhaustive submissions assailing the findings of CIT(A) in respect of bad debts written off . The Ld. Departmental Representative submitted that the assessee has failed to substantiate that the bad debts written off had indeed become Bad . The ld. Departmental Representative in a manner similar to detailed discussion made by the Assessing Officer in the assessment order divided the parties into different categories in respect of which the assessee had written off bad debts. He pointed that claim of bad debts in respect of nine big companies aggregating to Rs. 498.98 crores constitute approximately 65% of bad debts disallowed by the Assessing Officer. The nine parties in respect of which bad debts have been written off by the assessee and rejected by the Assessing Officer are: S. No. Na ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. The Auditors had not made any observation that the amounts were written off in the accounts as irrecoverable. The details of expenses does not indicate that the bad debts written off have been debited to P L Account. The Assessing Officer has categorically observed that there is nothing to show that such huge amount of debts involving such a large number of parties is a bad debt. The ld. Departmental Representative strongly supported the findings of Assessing Officer in rejecting assessee s claim. 9. With regard to fee written off, the ld. Departmental Representative submitted that the claim was made in the revised return on the ground that it was inadvertently omitted to be claimed in the original return. The assessee had not furnished any details before the Assessing Officer to show that the fees was in fact irrecoverable and hence, the debit had become bad. As in the case of debtors of AFL the Auditors have not reported that any fee is to be written off as irrecoverable. 10. Likewise, in respect of bunch of debtors (comprising of twenty parties), where the bad debts written off exceeds Rs. 1.00 crore, the submissions of ld. Departmental Representative are summed up as u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. Where loans are advanced for larger projects, the assessee bank was part of the consortium of lenders, the loan is secured by the assets and in case of default or where the situation arises leading to sale of assets, the assessee gets is prorate share as part of consortium. She further submitted that even if the loans are secured in some cases it becomes difficult to liquidate assets of the borrower on account of lengthy procedures or obsolete deteriorated machinery. In case of consortium lending sometimes all constituents of the consortium does not concur to the sale of the asset. The ld.Counsel for the assessee pointed that in some of the cases assets of the defaulting companies were assigned to Asset Reconstruction Company India Limited (ARCIL). However, despite best efforts sometimes even ARCIL failed to sell the assets be it land or building. The ld.Counsel for the assessee submits that in so far as nine companies which have been specifically referred to by the Assessing Officer and the Ld. Departmental Representative is concerned, the assets of the defaulting companies were assigned to ARCIL. Whatever amounts have been recovered by ARCIL that has been offered to tax b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s the conditions stipulated in sub-section (2) of section 36 of the Act. She emphasized that CBDT Circular has clarified that no appeals are to be filed by the Department on this ground and appeals filed may be withdrawn/not pressed. 15. We have heard the submissions made by rival sides and have examined the orders of authorities below. We have also perused the decisions on which both sides have placed reliance in support of their respective arguments. 16. At the outset it is observed that the assessee has written off bad debts to the tune of Rs. 1503,06,07,093/- u/s. 36(1)(vii) of the Act. The Assessing Officer while analyzing the debts written off by the assessee has rejected the claim of assessee to the extent of Rs. 769,75,10,766/-. The remaining claim of the assessee has been accepted by the Assessing Officer. While examining the claim of bad debts written off, the Assessing Officer has segmented the debtors into large debtors, bad debt written off more than Rs. 1.00 crore, bad debts in respect of which allegedly vague explanation has been offered by the assessee, bad debts in respect of erstwhile AFL and fees written off. It is an undisputed fact that the assessee has written ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeals may henceforth be filed on this ground and appeals already filed, if any, on this issue before various Court/Tribunals may be withdrawn/not pressed upon. 17. The main plank of arguments by the ld. Departmental Representative is that the assessee has failed to establish that debts that have been written off had in fact become bad. In support of this contention the ld. Departmental Representative has placed reliance on various case laws. The requirement to establish that the debts have become bad was done away vide amendment effective from 1st April, 1989. Under the old provisions of section 36(1)(vii) of the Act as were applicable prior to 1st April, 1989, it was mandatory to establish before writing off that the debts have become bad. After amendment (effective from 1st April, 1989) the requirement of section 36(1)(vii) as explained by Hon'ble Apex Court in the case of TRF Ltd.(supra) is, it is sufficient if the bad debt is written off as irrecoverable in accounts of the assessee. The Act does not require the assessee to establish that the debts have in fact become bad before writing off. The CBDT vide Circular dated 30/05/2016 (supra) in an unambiguous manner explained ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ook and audit report in Form-64 for ICICI Technology Incubator Fund is at page-57 to 63 of the paper book. The CIT(A) has given a categoric finding that the Assessing Officer has selectively considered Form -64 furnished by the assessee for respective funds. The Assessing Officer has ignored various losses under respective heads of income and has taken only short-term capital gain of Rs. 32.00 lacs from ICICI Technology Incubator Fund. There is no justification for adopting such selective approach by the Assessing Officer. The CIT(A) after examining the documents on record allowed assessee s claim on the basis of Form-64. We see no infirmity in findings of the CIT(A) on this issue. The ground No. 2 raised by the Revenue is devoid of any merit, hence, dismissed. 21. In ground No. 3 of appeal, the Revenue has assailed deleting of addition in respect of non-cash right back amounting to Rs. 19.35 lacs. The ld. Counsel for the assessee submitted at the outset that this issue is recurring starting from assessment year 1987-88 in the case of erstwhile ICICI Ltd. Thereafter, in assessee s own case for assessment year 2004-05 and 2005-06, the Tribunal has decided the issue in favour of asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above, we restore the issue to the file of the Assessing Officer for considering afresh with similar direction and only after reasonable opportunity of being heard to the assessee. Ground No. 4, raised by the Revenue is allowed for statistical purposes. In light of above order of Tribunal, we restore this issue back to the file of Assessing Officer with similar directions. In the result, ground No. 3 of appeal is allowed for statistical purposes. 24. The grounds No. 4,5 7 of the appeal are inter connected, hence, taken up together for adjudication. The ld. Departmental Representative submitted that the issue in ground No. 4, 5 and 7 of appeal relates to disallowance of expenditure u/s. 14A for earning income exempt from tax. The ld. Departmental Representative submitted that Hon'ble Apex Court in the case of Maxopp Investments Ltd. vs. CIT, 402 ITR 640, has held that doctrine of apportionment would apply in respect of interest expenditure. He submitted that the law laid down by Hon'ble Bombay High Court in the case CIT vs. Reliance Utilities Power Ltd., 313 ITR 340(Bom) and CIT vs.HDFC Bank Ltd. 366 ITR 505 (Bom) is not a good law. He vehemently argued that the interest exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h in assessee s own case in appeal by the Revenue for Assessment Year 2004-05 in ITA No. 6137/Mum/2008. The Tribunal decided the issue as under: 7. We have further noted that the learned Commissioner (Appeals) while issuing fresh direction to the Assessing Officer regarding computation of net exempt income under section 10(23G) of the Act has followed his order in assessee s own case for assessment year 2001 02. However, the Tribunal, while deciding the appeal of the Revenue in ITA No. 393/ Mum./2008, dated 2nd March 2016, has restored the matter back to the file of the Assessing Officer for considering afresh. Therefore, consistent with the view taken by the Tribunal in preceding assessment year, we are inclined to restore the matter back to the file of the Assessing Officer for deciding afresh keeping in view the directions of the Tribunal reproduced herein above. At this stage, we must observe, though, the learned Departmental Representative had submitted before us that the issue relating to part disallowance of administrative expenditure was not considered earlier by the learned Commissioner (Appeals) and the Tribunal, however, we do not agree with the same. We have noted that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 6 of appeal, the Revenue has assailed the findings of CIT(A) in deleting addition of depreciation on lease assets. The ld.Counsel for the assessee stated at the outset that this is a recurring issue, The Tribunal in assessee s own case for Assessment Year 2004-05 and 2005-06 has allowed the claim of depreciation. The CIT(A) has allowed claim of assessee by following the order of Tribunal in earlier Assessment Years . 28. The Ld. Departmental Representative vehemently supporting the assessment order submitted that depreciation on leased assets was disallowed by the Assessing Officer following the earlier assessment /appellate orders for Assessment Year 1994-95 to 2002-03 treating lease transaction as finance transactions. However, he fairly submitted that the issue of depreciation on leased assets was considered by the Tribunal in assessee's own case. 29. We have heard the submissions made by both sides. We find that the issue relating to allowability of claim of depreciation on leased assets was considered by the Tribunal in Revenue s appeal for Assessment Year 2004-05 (supra). The Co-ordinate Bench decided this issue in favour of assessee as under: 17. We have heard rival co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... op Typography, 368 ITR 330 (Bom). 31. Both sides heard. We find that in assessee s own case for Assessment Year 2004-05, the Assessing Officer had made addition on account of notional rent on deposit while determining annual value u/s. 23(1)(a) of the Act. The CIT(A) deleted the addition. The Revenue carried the issue in appeal before the Tribunal. The Co-ordinate Bench following its own order on identical issue in the case of ICICI Ltd for Assessment Year 2002-03in ITA No. 836/Mum/2008 decided on 07/07/2017 upheld the findings of CIT(A) in deleting the addition. Facts being identical in the impugned assessment year, we see no reason to take a different view. Thus, ground No. 8 of appeal by Revenue is dismissed. 32. The last effective ground raised in the appeal by the Revenue is with respect to disallowance of deduction u/s. 36(1)(viia) of the Act . The ld. Counsel for the assessee submitted that deduction is to be allowed as per proviso to sub-clause (a) @ 10% of net doubtful assets. She pointed that the CIT(A) has granted relief to the assessee by following the orders of earlier Assessment Years. The Tribunal in assessee s own case for Assessment Year 2004-05 has decided this is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e decision of Co-ordinate Bench in assessee's own case, the ground No. 9 of the present appeal is dismissed being devoid of any merit. 35. The ground No. 10 11 of appeal are general in nature, hence, require no separate adjudication. 36. In the result, appeal by the Revenue is partly allowed for statistical purpose. ITA No. 8420/Mum/2010-A.Y. 2003-04 : Assesssee s Appeal. 37. The assessee in appeal has raised six grounds. The ground No. 1 and 6 are general in nature, hence, require no adjudication. 38. In ground No. 2 of appeal, the assessee has assailed the findings of CIT(A) in restricting disallowance u/s. 10(23G) on the direct expenses i.e. Rs. 41,23,15,359/-. The ld.Counsel for the assessee stated at Bar that the assessee Bank has accepted the findings of CIT(A) on this issue, hence, ground No. 2 of appeal is not pressed. In view of the statement made by ld.Counsel for the assessee, ground No. 2 of appeal is dismissed as not pressed. 39. In ground No. 3 of appeal the assessee has assailed allocation of interest expenditure for earning Rs. 9,38,35,223/- and in ground No. 4 of appeal assessee has prayed that provisions of section 115JB of the Act are not applicable to the as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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