ADITYA BIRLA FINANCE LIMITED,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME-TAX - 2(1)(1), MUMBAI

ITA 4821/MUM/2024Status: DisposedITAT Mumbai08 July 202540 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal addressed several grounds. For the issue of interest on NPAs, the Tribunal noted that the assessee is an NBFC and has to follow RBI directives. It was held that income not recognized in books as per RBI directives cannot be hypothetically regarded as income. The Tribunal found that the assessee's own case for earlier years had been decided by the Jurisdictional Mumbai Tribunal on this issue. The Tribunal decided to follow the decision of the Jurisdictional Tribunal and allowed the appeal on this ground. For depreciation on goodwill, the Tribunal referred to the Supreme Court decision in CIT v. Smifs Securities Ltd. and held that goodwill arising on amalgamation is an intangible asset eligible for depreciation. The appeal on this ground was allowed. Regarding leave encashment and bonus under Section 43B, the Tribunal noted that the amounts were paid during the year and are allowable. The appeal on this ground was allowed. For Section 80G deduction, the Tribunal held that the restriction under Explanation 2 to Section 37(1) does not bar the claim. The appeal was allowed. For TCS and TDS credit issues (Grounds 5, 6, and 7), the Tribunal directed the AO to verify the claims as per law after giving an opportunity of hearing, allowing these grounds for statistical purposes. For DDT demand (Ground 8), the Tribunal directed the AO to verify the claim as per law after giving an opportunity of hearing, allowing the ground for statistical purposes. For brought forward losses (Ground 9) and book profits (Ground 10), the Tribunal noted that rectification applications were pending before the CIT(A) and directed the assessee to pursue the matter with him, dismissing these grounds. For consequential increase in deduction under Section 36(1)(viia) (Ground 11), the Tribunal noted this was a new claim and sent it to the AO for adjudication. The appeal was partly allowed.

What were the facts?

The assessee, Aditya Birla Finance Limited, filed an appeal against the order of the CIT(A) for Assessment Year 2017-18. The appeal challenges the CIT(A)'s confirmation of the Assessing Officer's (AO) actions on several grounds. These include the addition of interest on Non-Performing Assets (NPAs), disallowance of depreciation on goodwill, non-allowance of leave encashment and bonus claims under Section 43B, disallowance of deduction under Section 80G for donations used for CSR, non-granting of credit for Tax Collected at Source (TCS), short credit for Tax Deducted at Source (TDS), non-granting of TDS credit for an erstwhile division, demand for Dividend Distribution Tax (DDT) without credit, non-granting of set-off for brought forward losses, and issues related to book profits under Section 115JB. The AO's assessment order was dated December 26, 2019, and the CIT(A)'s appellate order was dated July 25, 2024.

What were the issues?

The Tribunal had to decide the following questions: 1. Whether the interest accrued on NPAs amounting to Rs. 29,14,85,619/- is taxable under the Act, considering the assessee is an NBFC mandated to follow RBI Prudential Norms, and only real income is taxable. 2. Whether depreciation on goodwill arising on the acquisition of a division, amounting to Rs. 6,36,37,882/-, is allowable under Section 32 of the Act, following the Supreme Court decision in CIT v. Smifs Securities Ltd. 3. Whether leave encashment (Rs. 1,08,99,749/-) and bonus (Rs. 1,41,45,067/-) paid during the year are allowable as deductions under Section 43B of the Act. 4. Whether the deduction claimed under Section 80G for donations amounting to Rs. 4,75,95,190/-, used to fulfil CSR obligations under Section 135 of the Companies Act, 2013, is allowable. 5. Whether credit for TCS amounting to Rs. 1,63,195/- should be granted. 6. Whether short credit for TDS amounting to Rs. 15,67,59,175/- has been granted, and if credit for TDS should be allowed for the assessment year for which the underlying sum is assessable as per Section 199 and Rule 37BA(3)(i). 7. Whether TDS amounting to Rs. 1,16,80,993/- pertaining to an erstwhile division should be granted. 8. Whether a demand for DDT amounting to Rs. 23,13,292/- (including interest u/s. 115P) is valid without granting credit for DDT paid. 9. Whether brought forward losses amounting to Rs. 115,60,62,424/- should be set off. 10. Whether book profits under Section 115JB were correctly computed. 11. Whether a consequential increase in deduction under Section 36(1)(viia) is allowable based on the finally determined total income. Assessee's Contentions: - For Issue 1: The assessee argued that income on NPAs not recognized in books as per RBI directives is not real income and not taxable. Relied on its own case for AY 2012-13 to AY 2014-15 before the Jurisdictional Mumbai Tribunal. - For Issue 2: The assessee contended that goodwill is an intangible asset eligible for depreciation under Section 32, citing CIT v. Smifs Securities Ltd. - For Issue 3: The assessee argued that amounts paid during the year are allowable under Section 43B. - For Issue 4: The assessee argued that Explanation 2 to Section 37(1) does not bar Section 80G deductions. - For Issue 5: The assessee claimed eligibility for TCS credit as it appears in Form 26AS. - For Issue 6 & 7: The assessee argued for full TDS credit as per Section 199 and Rule 37BA(3)(i), and for credit pertaining to merged entities. - For Issue 8: The assessee claimed DDT was paid and credit should be granted, despite a clerical error in the challan year. - For Issue 9 & 10: The assessee stated that rectification orders for brought forward losses and book profits were passed by the AO, and the CIT(A) erroneously dismissed these grounds for lack of evidence. - For Issue 11: The assessee claimed a consequential increase in deduction under Section 36(1)(viia) on the finally determined total income. Revenue's Contentions: - The judgment does not explicitly record the revenue's specific contentions for each issue, other than its representative appearing before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 143(3),Section 32,Section 43B,Section 80G,Section 37(1),Section 135,Section 199,Section 115P,Section 115-O,Section 115JB,Section 36(1)(viia)

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Before: SHRI SANDEEP GOSAIN & SHRI PRABHASH SHANKAR

For Appellant: Shri Yogesh Thar & Ms. S.Jayaram, ARs
For Respondent: Shri Rajesh Kumar Yadav, (CIT DR)
Hearing: 11.06.2025Pronounced: 08.07.2025

PER PRABHASH SHANKAR [A.M.] :- The present appeal arising from the appellate order dated 25.07.2024 is filed by the assessee against the order passed by the Learned Commissioner of Income-tax (Appeals)/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] pertaining to assessment order passed u/s.143(3) of the Income-tax Act, 1961 [hereinafter referred to as “Act”] dated 26.12.2019 for the Assessment Year [A.Y.] 2017-18. ITA No. 4821/Mum/2024 A.Y. 2017-18 Aditya Birla Finance

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