9911796707
TMI Blog2022 (3) TMI 1634X X X X Extracts X X X X X X X X Extracts X X X X ..... aving heard rival submissions and after due consideration of relevant material on record including the orders of Tribunal in earlier years, our adjudication would be as under. First, we take up assessee's appeal ITA No. 74/Chny/2015 for AY 2006-07 which arises out of the order of learned Commissioner of Income Tax (Appeals)-LTU, Chennai dated 14.11.2014 in the matter of assessment framed by Ld. AO u/s 143(3) on 26.12.2008. The assessee has raised additional grounds of appeal which are also taken on record. The effective grounds to be adjudicated by us read as under: - 1. The Order of the Commissioner of Income tax (Appeals) is contrary to law, weight of evidence and probabilities of the case. 2. The Commissioner of Income tax (Appeals) erred in coming to the conclusion that IRR method reflects the correct method of accounting the real income which has been prescribed to be followed by the Institute of Chartered Accountants of India. 2.1 The Commissioner of Income tax (Appeals) ought to have considered the fact that the appellant company has been following Even Spread Method (ESM) in recognizing the income of hire purchase transactions since inception and the shift made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... peals) ought to have appreciated that under mercantile system of accounting, revenue expenditure should be allowed in the year in which it was incurred irrespective of the treatment given in the books of the Appellant. 2.2 The commissioner of Income Tax (Appeals) has given relief in the AY 2008-09 hence the Appellant has not added the issue in its original grounds of appeal however being advised by its counsel the appellant prays to add it as an additional ground of appeal. 2. The assessee being a resident corporate assessee is stated to be engaged in the business of hire purchasing and leasing. It was assessed u/s 143(3) on 26.12.2018 wherein the returned income of Rs. 134.63 Crores was determined at Rs. 155.93 Crores after certain additions / disallowances. Upon further appeal, the Ld. CIT(A) granted partial relief to the assessee which has resulted into cross-appeals before us. The issues which form subject matter of assessee's appeal are adjudicated as under: - 3. Ground Nos. 2 to 2.2: Method of recognizing income on hire purchase contracts: 3.1 It transpired that to recognize income on hire purchase contracts, the assessee switched over to Internal Rate of Return (IRR) m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... these years, stands disposed-off on similar lines. 4. Ground Nos. 3 & 3.1: Provision for reversal of NPA: 4.1 The assessee made provision for non-performing assets (NPA) as per directions of RBI. In the assessment of earlier years, such provision was added to the taxable income and not allowed to the assessee. During this year, the assessee reversed NPA provisions for Rs. 659.11 Lacs and submitted that the same should be reduced from income. It was submitted that since the provisions were taxed in earlier years, the reversals should not be taxed in this year. However, Ld. AO rejected the plea in the light of the fact that the issued had not attained finality in earlier years. 4.2 The Ld. CIT(A), following the decision of Tribunal for AY 2001-02 in ITA Nos. 955 & 829/Mds/2005 dated 31.07.2007 confirmed the stand of Ld. AO against which the assessee is in further appeal before us. 4.3 We find that what the assessee is claiming is that the reversal should not be included in total income on the ground that provisions were not allowed in earlier years. We also find that this issue has been set-aside by Tribunal in ITA Nos. 72 & 73/Mds/2015 dated 04.09.2019. The bench, vide para 5. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 015 dated 04.09.2019. The bench held that after amalgamation, the assessee has all the rights as well as liabilities of amalgamating company which were transferred to it. Such recoveries of bad-debts were nothing but business receipts for assessee and therefore, assessable in its hands. Respectfully, following the same, we dismiss the grounds urged by assessee, in this regard. This issue arises in assessee's appeals for AYs 2007-08 to 2010-11 also. Facts being remaining the same, the assessee's ground for all these years stands dismissed. 6. Addl. Ground Nos. 1 to 2.2 : Business Origin Cost 6.1 The assessee paid commission to direct market agents for procurement of business. This amount represents upfront expenditure incurred in the course of business and termed as 'business origin cost'. In the books of accounts, the assessee has apportioned the cost over the terms of the contract and accordingly, debited a sum of Rs. 1175.17 Lacs in this year. The balance of Rs. 610.17 Lacs was carried over in Balance Sheet for amortization in subsequent years. However, in the computation of income, the assessee has claimed the balance amount of Rs. 610.17 Lacs also on the ground that it is a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee has raised an additional ground of appeal qua disallowance u/s 40(a)(i) which is adjudicated as under. 8.2 In AY 2009-10, the assessee paid professional charges of Rs. 74.62 Lacs to its UK Branch for carrying out marketing of BPO operations relating to IT / ITES sectors. Out of this, an amount of Rs. 66.05 Lacs was paid to Singapore branch whereas the balance Rs. 8.57 Lacs was paid to Krishna Kalambur of Australia. The assessee did not deduct tax at source on the ground that the expenses were incurred by overseas branch and the payments were not taxable in India. Therefore, there was no obligation of withholding tax liability. 8.3 However, Ld. AO rejected the same on the ground that payment was for the purpose of getting marketing information which was utilized by the assessee for its business purposes. The assessee utilized the data collected by the Singapore Branch for its business purposes in India. Accordingly, Explanation-2 to Sec. 9(1)(vii) would apply since the non-resident provided technical support to assessee for its business activities. Relying upon various judicial pronouncements, Ld. AO disallowed the expenditure u/s 40(a)(i). 8.4 The Ld. CIT(A), following a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... AY 2005-06. Accordingly, the loss was added back to the income of the assessee. The Ld. CIT(A), following appellate order for AY 2004-05, allowed the assessee's ground. Aggrieved, the revenue is in further appeal before us. 11.2 We find that this issue is subject matter of Tribunal order ITA Nos. 285 & 286/Chny/2015 dated 04.09.2019. The coordinate bench, at para 9.5 of the order, observed that Ld. CIT(A) did not appreciate the facts of the issue properly. The courts have held that if the securities are regularly purchased and sold, they could be stock-in-trade. Therefore, the matter was remitted back to the file of Ld. AO for fresh examination with a direction to the assessee to place all the material before Ld. AO. Since facts are similar in this year and with a view to enable revenue to take consistent stand in the matter, we remit this issue back to the file of Ld. AO on similar lines. As per chart placed before us, this issue also arises in revenue's appeal ITA No. 289/Chny/2015 for AY 2007-08, ITA No. 291/Chny/15 for AY 2008-09 and ITA No. 293/Chny/2015 for AY 2010-11. Therefore, this issue, in all these years, stands restored back to the file of Ld. AO on similar lines. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l for AY 2006-07 stands partly allowed for statistical purposes. 15. ITA No. 288/Chny/2015 & 290/Chny/15, AYs 2006-07 & 2007-08 15.1 The assessee was subjected to reassessment proceedings for these years. The assessment was framed u/s 143(3) r.w.s. 147 for AY 2006-07 on 30.12.2011. The sole subject matter of revenue's appeal is grant of indexation benefit by Ld. CIT(A) to the assessee on government securities holding that Bonds and Debentures are distinguishable from government securities. The assessee claimed indexation benefit on government securities. However, Ld. AO denied the same on the ground that all capital assets which are in the nature of debt instruments, excluding capital indexed bonds issued by Government, was not eligible with the insertion of third proviso to Sec. 48. The Ld. CIT(A), following first appellate order for AY 2003-04 allowed indexation benefit. Aggrieved, the revenue is in further appeal before us. 15.2 We find that this issue has been settled in assessee's favor by coordinate bench in its order dated 31.03.2017 ITA No. 284/Chny/15 for AY 2003-04 (para 7 to 13). The bench observed that government securities are not excluded from the definition of ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... solve the contradiction and with a view to enable the revenue to take consistent stand in the matter, we remit this issue to the file of Ld. AO on similar lines. The assessee is directed to furnish the requisite details and Ld. AO, after due verification, may re-adjudicate this issue. Needless to add that the assessee is free to rely on various judicial pronouncements as placed before us. This issue stand allowed for statistical purposes in this year as well as in ITA No. 291/Chny/2015 for AY 2008-09. Disallowance u/s 14A 17. This issue arises in assessee's appeal for AY 2008-09 to 2010-11 as well as in revenue's appeal for AY 2007-08. Facts in AY 2007-08 are that the assessee earned exempt dividend income of Rs. 1881.19 Lacs as well as exempt long-term capital gains for Rs. 263.20 Lacs. However, no disallowance was offered u/s 14A and during assessment proceedings, the assessee agreed for disallowance of 2% of exempt income. The Ld. AO, invoking Rule 8D, computed aggregate disallowance of Rs. 152.11 Lacs. The Ld. CIT(A) noted that Rule 8D would not apply to this year and accordingly, directed Ld. AO to restrict the disallowance to the extent of 2% as held in various judicial p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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