Loading judgment…
No AI summary yet for this case.
Detected automatically from the text. The count shows how many other judgments on BharatTax rely on the same authority.
Income Tax Appellate Tribunal, DELHI BENCHES : H : NEW DELHI
Before: SHRI R.S. SYAL, AM & SMT. BEENA A. PILLAI, JM
& 2600/Del/2013 ORDER PER R.S. SYAL, AM: These two cross appeals – one by the assessee and the other by the Revenue – arise out of the order passed by the CIT(A) on 31.12.2012 in relation to the assessment year 2009-10.
First ground of the assessee’s appeal is general. In the absence of any argument advanced in respect of this ground, we dismiss the same.
Ground Nos. 2 and 3 are against the confirmation of disallowance of Rs.2,01,85,871/- u/s 14A of the Income-tax Act, 1961 (hereinafter also called `the Act’) over and above the sum of Rs.23,43,803/- voluntarily offered by the assessee as disallowable u/s 14A.
Briefly stated, the facts of the case are that the assessee is a Government of India enterprise. It earned exempt income of Rs.2,36,66,766/- including dividend and tax free income from UTI bonds.
The assessee suo motu offered disallowance for a sum of Rs.23,43,803/-, being ½% of average investments in terms of Rule 8D(2)(iii). The AO noticed that no disallowance was offered u/s 14A in respect of interest.
Firstly, he dealt with the assessee’s objection that there was no expenditure 2 satisfaction and, thereafter, computed disallowance for a sum of Rs.2,01,85,870/- as per Rule 8D(2)(ii) which was added in addition to the disallowance offered by the assessee. The ld. CIT(A) sustained the same after taking into account the judgment of the Hon’ble Delhi High Court passed in the assessee’s own case for the AYs 2006-07 and 2007-08. The assessee is aggrieved against the sustenance of this disallowance.
We have heard the rival submissions and perused the relevant material on record. It is noticed that the AO has specifically recorded satisfaction for disallowance u/s 14A in paras 4.4 to 4.7. This indicates that the pre-requisite condition for making disallowance u/s 14A, being the recording of satisfaction by the AO, is fully satisfied. Now comes the question of disallowance of interest in terms of Rule 8D(2)(ii). The ld. AR contended that the investment was financed out of the assessee’s own capital and, hence, no disallowance on account of interest can be made. He submitted that such investments were continuing from earlier years except for a fresh investment of Rs.10 lac made during the year. We find that this issue has travelled to the Hon’ble Delhi High Court in assessee’s own case 3 & 2600/Del/2013 for the AYs 2006-07 and 2007-08. Vide its judgment dated 17.8.2012, a copy of which is placed at pages 128 onwards of the paper book, the Hon’ble High court has rejected the assessee’s contention that the judgment in the case of Maxopp Invest Ltd. v. CIT (2011) 203 Taxman 364 (Delhi) was not applicable and further there was material on record to show that it had sufficient funds to deploy for the purpose of such investment. The assessee’s argument that the rule of consistency be followed because in earlier years the claim for interest was not disallowed also came to be repelled by the Hon’ble High Court. Relevant discussion has been made by their Lordships in paras 4 and 5 of the judgment. After turning down the assessee’s contentions, the Hon’ble Delhi High Court remitted the matter to the AO for determining the extent of liability u/s 14A in terms of the judgment in the case of Maxopp Investment. As the facts and circumstances for the instant year are mutatis mutandis similar to those of the earlier years which have been dealt with by the Hon’ble High Court in the aforestated order, respectfully following the precedent, we also set aside the impugned order and remit the matter to the file of the AO for reaching a fresh decision in this regard in conformity with ratio of the judgment of the & 2600/Del/2013 Hon’ble High Court rendered in the case of the assessee for earlier years.
Needless to say, the assessee will be allowed a reasonable opportunity of hearing in such fresh proceedings. These two grounds are, therefore, allowed for statistical purposes.
Ground No.4 is against the confirmation of addition of expenses claimed towards provision for earned leave/half pay leave by invoking the provisions of Section 43B(f) of the Act.
After considering the rival submissions and perusing the relevant material on record, we find that similar issue came up for consideration before the Tribunal in the assessee’s own case for the preceding year. The tribunal was pleased to remit the matter to the file of AO for deciding this issue afresh as per law. A copy of such order has been placed on record.
Respectfully following the precedent, we also set aside the impugned order and send the matter back to the file of AO for a fresh decision as per law, after allowing a reasonable opportunity of being heard to the assessee.
The last effective ground raised
by the assessee towards interest u/s 234B is consequential and, accordingly, disposed of. & 2600/Del/2013
9. First ground of the Revenue’s appeal is against deletion of addition of Rs.1,20,43,111/- made by the AO by treating foreign exchange fluctuation loss on account of premium on forward contracts as speculative loss. The assessee claimed deduction of Rs.1,20,43,111/- towards premium paid on forward contracts. On being called upon to justify the deduction, the assessee submitted that these were hedging transaction and no speculative transaction was involved. Not satisfied, the AO made addition of Rs.1.20 crore and odd, which came to be deleted in the first appeal.
After considering the rival submissions and perusing the relevant material on record, we find that the ld. CIT(A) has recorded a categorical finding that the transaction of premium for forward contract related to hedging of foreign exchange and was settled by actual delivery and not by way of making payment for difference. This finding has not been controverted by the ld. DR. It is further observed that similar issue was decided by the ld. CIT(A) in the assessee’s favour for the immediately preceding assessment year and the Department has accepted such decision without filing any further appeal before the Tribunal. Under these needs to be upheld on this score.
The second ground is against the deletion of addition of Rs.83,74,393/- made by the AO on account of repair and maintenance expenses in respect of let out house property. The AO observed that the deduction was claimed by the assessee on account of repairs and maintenance, administrative expenses and various other expenses relating to properties given on rent. He recorded in the assessment order that the assessee failed to give details of such expenses incurred in relation to let out properties. Thereafter, he proportionately made disallowance for a sum of Rs.83,74,393/-. This disallowance came to be knocked out in the first appeal by observing that the maintenance charges recovered by the assessee were credited to the Profit & Loss Account and such maintenance income was more than the expenses disallowed.
After going through the impugned order and the relevant material on record, it is observed that the assessee made recoveries towards common maintenance and repairs from its tenants amounting to Rs.1,04,63,138/-.
As against that, the AO has computed and made proportionate disallowance 7 & 2600/Del/2013 of Rs.83,74,393/- towards expenses relating to properties let out. Since recoveries in this regard accounted for by the assessee as income in its books of account are more than the amount of disallowance computed by the AO, we approve the view taken by the ld. CIT(A) on this issue. This ground is not allowed.
The last ground is against the deletion of addition of Rs.34,29,164/- being depreciation on let out building. The AO noticed that the assessee claimed depreciation on block of building which also included building let out. Since no depreciation is permissible in respect of building let out from which rental income is earned in terms of Chapter IV-C, the AO made disallowance of depreciation amounting to Rs.34,29,164/-. The ld. CIT(A) deleted this disallowance.
After considering the rival submissions and perusing the relevant material on record, it is found that parts of building let out do not constitute a separate block of assets. This portion forms part of single block of building on which the assessee has been consistently claiming depreciation ab initio. After falling in the eligible block of building, if a part of building is later on let out, which cannot be segregated from the block, then there 8 on rent. Similar view taken by the ld. CIT(A) in the assessee’s own case for the AY 2008-09 has been accepted by the Revenue and no further appeal has been filed. We, therefore, uphold the impugned order on this issue.
In the result, the appeal of the assessee is partly allowed for statistical purposes and that of the Revenue is dismissed.
The order pronounced in the open court on 21.01.2016.