TATA CONSULTING ENGINEERS LTD, MUMBAI V. ADDL CIT 7(3), MUMBAI

ITA 265/MUM/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88578 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 13-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: DINESH VYAS
• Keywords: Depreciation; Additional depreciation; Earning of tax free income; Cost of acquisition; Bad and doubtful debts; Revised return
• Section: 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - E BENCH , !' , ! BEFORE S/SH.JOGINDER SINGH, JUDICIAL MEM BER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO.265/MUM/2011, # # # # $ $ $ $ / ASSESSMENT YEAR-2006-07 TATA CONSULTING ENGINEERS LTD. MATULYA CENTREA,249,SENAPATI BAPAT MARG, LOWER PAREL,MUMBAI-13 PAN: AABCT0772E # VS. ACIT 7(3), MUMBAI. /. ITA NO.2460/MUM/2012, # # # # $ $ $ $ / ASSESSMENT YEAR-2007-08 TATA CONSULTING ENGINEERS LTD. MATULYACENTREA,249,SENAPATI BAPAT MARG, LOWER PAREL,MUMBAI-13 # VS. ACIT 7(3), MUMBAI. /. ITA NO.2210/MUM/2012, # # # # $ $ $ $ / ASSESSMENT YEAR-2007-08 ACIT 7(3), MUMBAI. # VS. M/S TEC CONSULTING ENGINEERS LTD., MATULYA CENTRE A, 249, SENAPATI BAPAT MARG, LOWER P AREL(W), MUMBAI-400013 ( %& / APPELLANT) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + ! !! ! / ASSESSEE BY :SHRI DINESH VYAS , + ! / REVENUE BY : SHRI NEIL PHILIP # # # # , ,, , *- *- *- *- / DATE OF HEARING : 12 -02-2015 .$ , *- / DATE OF PRONOUNCEMENT : 04 -03-2015 # # # # , 1961 , ,, , 254(1) ! !! ! ** ** ** ** !/ !/ !/ !/ ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER BENCH, [KAMIHB [KAMIHB [KAMIHB [KAMIHB ! # : CHALLENGING THE ORDERS DATED 05.10.2010,26.12.2011 OF THE CIT(A)-13,MUMBAI,THE ASSESSEE AND THE ASSESSING OFFICERS HAVE FILED VARIOUS GROUNDS O F APPEAL FOR THE ABOVE MENTIONED TWO ASSESSMENT YEARS(AY.S.).FOR THE AY.2007-08 CROSS AP PEALS HAVE BEEN FILED BY BOTH THE PARTIES, WHEREAS FOR EARLIER AY.ONLY THE ASSESSEE HAS FILED THE APPEAL. ITA NO. 265/MUM/2011,AY.2005-06: THE GROUNDS SET OUT HEREUNDER ARE WITHOUT PREJUDICE TO ONE ANOTHER: 1. (A) THE COMMISSIONER OF INCOME-TAX (APPEALS) [HE REINAFTER REFERRED TO AS THE CIT (A)] ERRED IN CONFIRMING THE DISALLOWANCE OF BAD DEBTS OF RS. 69, 22,117 WRITTEN OFF BY THE APPELLANT IN THE ACCOUNTS DURING THE PREVIOUS YEAR UNDER APPEAL. (B) THE C1T (A) ERRED IN DISREGARDING ADDITIONAL SU BMISSIONS FILED UNDER RULE 46A OF THE INCOME- TAX RULES, 1962 AND FURTHER ERRED IN HOLDING THAT A PPELLANT HAS NOT PLACED ANY MATERIAL BEFORE ADDITIONAL COMMISSIONER OF INCOME- TAX [HEREINAFTER REFERRED TO AS THE ACIT] IN SUPPORT OF ITS CLAIM FOR BAD DEBTS. (C) THE CIT (A) ERRED IN IGNORING THE JURISDICTIONA L HON'BLE INCOME-TAX APPELLATE TRIBUNAL'S ORDER IN APPELLANT'S OWN CASE FOR ASSESSMENT YEAR 2 005-06 FILED ALONG WITH THE SUBMISSION DATED MAY 17.20 I 0 AND CONFIRMING THE DISALLOWANCE OF BA D DEBTS WRITTEN OFF DURING THE RELEVANT ASSESSMENT YEAR. 2. (A) THE CIT (A) ERRED IN CONFIRMING THE DISALLOW ANCE UNDER SECTION 14A OF THE ACT BY HOLDING THAT THE PROVISIONS OF SECTION 14A OF THE ACT ARE A TTRACTED IN THE APPELLANTS CASE. THE CIT (A) OUGHT TO HAVE CONFIRMED THAT PROVISIONS OF SECTION 14A OF THE ACT ARE NOT APPLICABLE AS THE APPELLANT HAS NOT INCURRED ANY EXPENDITURE I N RELATION TO THE EARNING OF TAX FREE INCOME. 2 ITA NOS.265/M/11,2460&2210/M/12 TATA CONSULTING ENGI NEERS LTD. (B) WITHOUT PREJUDICE TO THE ABOVE, THE CIT (A) ERR ED IN NOT ADJUDICATING AND CONFIRMING THE APPELLANT'S CONTENTION THAT THE PROVISIONS OF SUB-S ECTION (2) AND (3) OF SECTION 14A READ WITH RULE 80 OF INCOME-TAX RULES, 1962 DO NOT APPLY TO THE RE LEVANT ASSESSMENT YEAR AND HAVE NO RETROSPECTIVE OPERATION. (C) WITHOUT PREJUDICE TO THE ABOVE, THE CIT (A) ERR ED IN DIRECTING ACIT TO APPLY THE WEIGHTED METHOD FOR COMPUTATION OF DISALLOWANCE UNDER SECTIO N 14A WITHOUT ASSIGNING ANY REASON FOR THE SAME. (D) WITHOUT PREJUDICE TO THE ABOVE, THE CIT (A) ERR ED IN DISREGARDING THE APPELLANT'S CONTENTION THAT SHOULD ANY PART OF THE INTEREST BE DISALLOWED; THE APPELLANT SHOULD BE PERMITTED TO CAPITALIZE SUCH INTEREST AND ENHANCE THE COST OF ACQUISITION O F THE SHARES/UNITS TO WHICH SAID EXPENDITURE IS HELD TO BE RELATED. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, MODIFY OR DELETE ANY OF THE GROUNDS TAKEN IN APPEAL ITA NO. 2460/MUM/2012,AY.2007-08:(APPEAL BY THE ASS ESSEE) 1. THE LD. COMMISSIONER OF INCOME TAX (APPEAL), ['C IT(A)'], ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER ('AO') IN DISALLOWING BAD DEBTS O F RS. 34,30,813/- WRITTEN OFF BY THE APPELLANT DURING THE PREVIOUS YEAR. 2.YOUR APPELLANT SUBMITS THAT ON THE FACTS AND CIRC UMSTANCES OF THE CASE AND ON A PROPER APPRECIATION OF THE PROVISIONS OF SECTION 36(1)(VII ) OF THE INCOME TAX ACT, 1961 ('THE ACT'), THE CIT(A) OUGHT NOT TO HAVE DISALLOWED ANY BAD DEBTS. 2. THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING EXPENDITURE OF RS. 226,215 UNDER SECTION 14A OF THE ACT. WITHOUT PREJUDICE TO ABOVE, THE CIT(A) CIT(A) IN CO NFIRMING THE ACTION OF THE AO IN APPLYING RULE 8D(2)(III) OF THE INCOME TAX RULES, 1962 TO THE CUR RENT YEAR. YOUR APPELLANT SUBMITS THAT THE AO BE DIRECTED TO D ELETE THE DISALLOWANCE OF RS. 226,215/-. 3. THE LD. CIT(A) ERRED IN NOT ALLOWING THE CLAIM F OR DEPRECIATION AMOUNTING TO RS. 1,42,47,733 /- ON THE GROUND THAT THE SAME PERTAINS TO EARLIER YEA RS AND IS NOT ALLOWABLE DURING THE CURRENT YEAR. 4. THE LD. CIT(A) ERRED IN ALLOWING A DEDUCTION OF RS. 34.83.000/- INSTEAD OF RS. 67,53,000/- BEING GROSS AMOUNT TOWARDS PROVISION FOR FORESEEABLE LOSS ES. WITHOUT PREJUDICE TO THE ABOVE, THE LD. CIT(A) ERRE D IN NOT ALLOWING A DEDUCTION OF RS. 32,70,000/- FOR PROVISION FOR FORESEEABLE LOSSES PERTAINING TO EARLIER ASSESSMENT YEARS WRITTEN BACK IN THE CURRENT YEAR, SINCE THE SAME WAS DISALLOWED IN EARL IER ASSESSMENT YEARS. ALL THE AFORESAID GROUNDS ARC WITHOUT PREJUDICE TO ONE ANOTHER THE APPELLANT CRAVE LEAVE TO ADD TO, ALTER, AMEND O R MODIFY ANY OF THE FOREGOING GROUNDS OF APPEAL, IF AND WHEN NECESSARY. ITA NO. 2210/MUM/2012,AY.-2007-08(APPEAL BY THE AO) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING THE FORESEEABLE LOSSES OF RS.34,83,000/- IGNORING T HE FACT THAT IT IS MERE PROVISION AND NOT THE ACTUAL EXPENDITURE FOR WHICH THE ASSESSEE HAS NEITH ER MADE ANY CLAIM IN THE RETURN OF INCOME NOR FILED REVISED RETURN OF INCOME. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD.CIT(A) ERRED IN ALLOWING DEDUCTION OF RETENTION MONEY AMOUNTING TO RS.77,21, 000/- IGNORING THE FACT THAT THE ASSESSEE COMPANY HAS NEITHER CLAIMED IT IN THE RETURN OF INC OME NOR FILED REVISED RETURN OF INCOME. 3. THE LD. CIT(A)'S ORDER IS PERVERSE IN LAW AND ON FACTS AND DESERVES TO BE SET ASIDE. 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE AND THAT OF THE AO RESTORED. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD A NEW GROUND THAT MAY BE NECESSARY. ITA NO. 265/MUM/2011,AY.2005-06: ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF PROVIDI NG ENGINEERING CONSULTANCY SERVICES,FILED ITS RETURN OF INCOME ON 30.11.2006 DECLARING TOTAL INCO ME OF RS. 25,69,12,952/-. LATER ON A REVISED RETURN WAS FILED ON 31.03.2008 DECLARING INCOME OF RS. 24.87 CRORES.THE ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ON 29.12.2008 U/S.143(3) O F THE ACT,DETERMINING THE INCOME OF THE ASSESSEE AT RS.26,69,83,241/-. 3 ITA NOS.265/M/11,2460&2210/M/12 TATA CONSULTING ENGI NEERS LTD. 2. FIRST GROUND OF APPEAL IS ABOUT DISALLOWANCE OF BAD DEBTS OF RS.69.22 LAKHS.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD WRITTEN OFF AN AMOUNT OF RS. 90.49 LAKHS AS BAD DEBTS DURING THE YEAR OUT OF WHICH AN AMOUNT OF RS. 21.27 LAKHS PERTAINED TO AHMADABAD MUNICIPAL CORPORATION.THE AO ALLOWED THE SAID AMOUNT AND BALANCE OF RS. 69.22 LAKHS WAS DISALLOWED BY THE AO.HE MADE ENQUIRY IN T HIS REGARD AND HELD THAT THE ONLY EVIDENCE PRODUCED BY THE ASSESSEE WAS BY WAY OF SINGLE CORRE SPONDENCE LETTER INFORMING THE OUTSTANDING PAYMENT, THAT THE AMOUNT MENTIONED IN THE LETTER AN D IN THE BOOKS OF ACCOUNTS DID NOT MATCH, THAT THE ASSESSEE DID NOT PRODUCE ANY EVIDENCE TO INDICA TE THAT AMOUNT OUTSTANDING AGAINST EACH OF THE CLIENTS HAD BEEN DISPUTED, THAT THE PARTIES HAD NOT SPELT OUT THE REASON FOR NOT MAKING THE PAYMENT, THAT THERE WAS NO EVIDENCE TO DRAW THE CONCLUSION T HAT THE PAYMENT IN OR LIKELIHOOD WAS NOT RECEIVABLE,THAT IN RESPECT OF THE LIST OF NOT PROVI DED EARLIER AND TO BE WRITTEN OFF AS BAD DEBT- 2005 - 06 AMOUNTING TO RS. 31.40 LAKHS THE AO HELD THAT TH E LIST DID NOT MENTION THE YEAR TO WHICH IT PERTAINED,THAT NO EVIDENCE WAS PRODUCED TO SHOW THA T SAME HAD BECOME BAD, THAT THE ASSESSEE DID NOT EXPLAIN AS TO WHY SAID TRANSACTION WERE TREATED AS BAD DEBTS. HE FURTHER MENTIONED THAT THE ASSESSEE WAS REQUIRED TO MENTION THE YEAR OF TRANSA CTION FOR EACH CASE AND WAS TO FILE COPIES OF LEDGER ACCOUNT OF THOSE PARTIES. 3. AGGRIEVED BY THE ORDER OF THE AO THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,THE ASSESSEE PRODUCED THE CERTAIN DOCUMENTS WHICH WERE NOT MADE AVAILABLE TO THE AO.THE FAA HELD THAT NO FRESH EVID ENCES COULD BE ADMITTED AT THE APPELLATE STAGE IN VIOLATION OF RULE 46A OF THE INCOME-TAX RULES,19 62(RULES), THAT THE COPIES OF LEDGER ACCOUNT OF THE PARTIES IN RESPECT OF THE AMOUNTS SOUGHT TO BE WRITTEN OFF AS BAD DEBTS WERE NOT PRODUCED DURING THE APPELLATE PROCEEDINGS,THAT IT WAS NOT PO SSIBLE TO VERIFY THE EXACT FACT AS REGARDS APPLICA -BILITY OF PROVISIONS OF SECTION 36(1)(VII) R.W.S. 36(2) OF THE ACT, THAT THE ASSESSEE HAD FAILED TO PRODUCE ANY DOCUMENTARY EVIDENCE TO SHOW THAT THE D EBTS HAD BECOME BAD.REFERRING TO THE JUDGMENT OF OMAN INTERNATIONAL BANK AND (313 ITR 12 8)OF BOMBAY HIGH COURT,THE FAA HELD THAT DISALLOWANCE OF BAD DEBTS OF RS. 69.22 LAKHS M ADE BY THE AO WAS TO BE CONFIRMED. 4. BEFORE US,AUTHORISED REPRESENTATIVE(AR) STATED THAT IN THE SCHEDULE 12 OF THE PROFIT & LOSS ACCOUNT IT HAD SHOWN THE AMOUNT OF BAD DEBTS WRITTE N OFF, THAT PARTYWISE DETAILS OF BAD DEBTS AND EXPLANATION WAS SUBMITTED BEFORE THE FAA,THAT BEFOR E HIM EVIDENCES WITH RESPECT TO RECOVERY OF BAD DEBTS WERE ALSO FILED, THAT DETAILS OF BAD DEBT S AND EVIDENCES DEMONSTRATING EFFORTS MADE FOR RECOVERY OF BAD DEBTS WERE SUBMITTED BEFORE THE AO ON 17.10.2008. HE REFERRED TO PAGE 11,27 TO 45,114 TO 132 OF THE PAPER BOOK. AR RELIED UPON THE CASES OF TRF VS. CIT (323 ITR 397), OMAN INTERNATIONAL BANK(313 ITR 128),M.P.WAREHOUSING & L OGISTIC CORPORATION LTD. (21 TAXMANN.COM 322),C.M.S.SECURITIES LTD.(ITA NO. 7531/MUM/2011).D EPARTMENTAL REPRESENTATIVE(DR) SUPPORT -ED THE ORDER OF THE FAA. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE AO AND THE FAA HAD DISALLOWED THE CLAIM MADE BY THE AS SESSEE AS THEY WERE OF THE OPINION THAT DETAILS OF BAD DEBTS AND EVIDENCES DEMONSTRATING EF FORTS MADE FOR RECOVERY OF BAD DEBTS WERE LAKING.IN OUR OPINION AFTER THE DECISION OF TRF LDT .(SUPRA)THE LEGAL POSITION IS VERY CLEAR AND THAT IS TO OBTAIN A DEDUCTION IN RELATION TO BAD DEBTS, IT IS NOT NECESSARY FOR THE ASSESSEE TO ESTABLISH T HAT THE DEBT,IN FACT, HAS BECOME IRRECOVERABLE :IT IS E NOUGH IF THE BAD DEBT IS WRITTEN OFF AS IRRECOVERAB -LE IN THE ACCOUNTS OF THE ASSESSEE.WE HAVE GONE TH ROUGH THE PAPER BOOK OF THE ASSESSEE AND IT IS FOUND THAT AMOUNT IN QUESTION HAS BEEN ACTUALLY WRI TTEN OFF.WE FURTHER FIND THAT ISSUE OF BAD DEBTS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE T RIBUNAL WHILE DECIDING THE APPEAL FOR THE AY. 2005-06(ITA/ 3378/MUM/2009).CONSIDERING THE ABOVE F ACTS AND LEGAL POSITION, WE DECIDE FIRST GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. 4 ITA NOS.265/M/11,2460&2210/M/12 TATA CONSULTING ENGI NEERS LTD. 6. NEXT EFFECTIVE GROUND OF APPEAL IS ABOUT CONFIRMATI ON OF DISALLOWANCE MADE BY THE AO U/S. 14A OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE, AS ON 31.03.2006, HAD INVESTED ITS FUNDS IN THE UNQUOTED EQUITY SHARE S AND MUTUAL FUNDS AS WELL AS QUOTED MUTUAL FUNDS TO THE TUNE OF RS. 2307.18 LAKHS,THAT IT HAD SHOWN DIVIDEND INCOME,THAT IT CLAIMED THAT THE DIVIDEND INCOME RECEIVED FROM THE SHARE AND UNITS W ERE NOT TAXABLE,THAT IT HAD PAID INTEREST ON SECURED AND UNSECURED LOANS TAKEN,THAT IT HAD FAILE D TO DISCHARGE THE ONUS THAT NO INTEREST BEARING FUNDS HAD BEEN UTILISED FOR MAKING THE ABOVE REFERR ED INVESTMENTS, THAT IT COULD NOT BE STATED THAT NO EXPENSES WERE INCURRED IN CONNECTION WITH EARNIN G OF EXEMPT INCOME.REFERRING TO THE RULE 8D OF THE RULES R.W.S. 14A OF THE ACT,THE AO MADE A DI SALLOWANCE OF RS. 10.08 LAKHS.(APPORTION - ABLE INTEREST RS. 4,30,608+ OTHER EXPENSES RS. 5,78 , 045). 7. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE CONTENDE D BEFORE THE FAA THAT IT HAD SUFFICIENT POSITIVE BALANCE FOR MAKING INVESTMENT,THAT IT HAD CASH SURPLUS,RESERVES,OWN FUNDS TO MAKE INVEST -MENTS,THAT THERE COULD NOT BE ANY DISALLOWANCE OF INTEREST,THAT BANK BALANCE AS AT THE END OF THE MONTH FOR THE YEAR ENDED ON 31.03.2006 WAS PRODUCED BY THE ASSESSEE,THAT IT WAS INCORRECT TO CONCLUDE THAT IF BANK ACCOUNT WAS SHOWING THE DEBIT BALANCE AS AT THE END OF THE MONTHS THE INVESTMENTS WERE NOT MADE OUT OF THE OWN FUNDS, THA T THERE WAS NO DIVIDEND DISTRIBUTION UNDER THE GROWTH OPTIONS,THAT OUT OF THE TOTAL INVESTMENT OF RS. 2307.18 LAKHS INVESTMENT IN THE MUTUAL FUNDS GROWTH SCHEME WAS FROM RS.1650 CRORES,THAT TH E CAPITAL WAS REFLECTED IN THE NET ANNUAL VALUE. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE A ND THE ASSESSMENT ORDER,THE FAA HELD THAT THE ASSESSEE COULD NOT PROVE THE NEXUS THAT INVESTMENTS WERE MADE OUT OF FREE FUNDS ONLY,THAT IT WAS MAINTAINING ANY OVERDRAFTS BANK ACCOUNT OUT OF WHIC H THE INVESTMENT HAD BEEN MADE,THAT NO SEPARATE BANK ACCOUNT FOR THE PURPOSE OF INVESTMENT HAD BEEN MAINTAINED.HE REFERRED TO THE JUDGMENT OF ABHISHEK INDUSTRIES LTD. (286 ITR 1) OF THE HON'BLE PUNJAB & HARYANA HIGH COURT AND HELD THAT THE ASSESSEE HAD FAILED TO DISCHARGE THE ONUS CAST UPON IT.HE ALSO REFERRED TO CASES SOUTHERN PETRO CHEMICAL INDUSTRIES (93 TTJ 161), S. G. INVESTMENTS AND INDUSTRIES LTD. (89 ITD 44), DAGA CAPITAL MANAGEMENT (P) LTD. (119 TTJ MUMB AI).FINALLY,HE DIRECTED THE AO TO REWORK THE DISALLOWANCE U/S. 14A OF THE ACT. 8. BEFORE US,AR CONTENDED THAT SUFFICIENT OWN FUNDS WE RE AVAILABLE TO THE ASSESSEE FOR MAKING INVESTMENTS,THAT SUBMISSION WAS MADE BEFORE THE FAA SHOWING THE AVAILABILITY OF FUNDS ON THE DATE OF MAKING INVESTMENT IN MUTUAL FUNDS,THAT WHIL E DECIDING THE APPEAL FOR THE AY 2007-08, THE FAA, VIDE HIS ORDER DATED 26.12.2011,HAD ACCEPTED T HE CONTENTION OF THE ASSESSEE AND HAD DELETED THE DISALLOWANCE IN RESPECT OF THE INTEREST,THAT TH E DEPARTMENT HAD NOT CHALLENGED THE ORDER OF THE FAA BEFORE THE TRIBUNAL,THAT FOR THE SUBSEQUENT TWO AY.S.THE ASSESSEE HAD MADE A CLAIM FOR INTEREST AND SAME WAS ALLOWED BY THE FAA.HE RELIED UPON THE CASES OF RELIANCE UTILITIES & POWER CO.LTD.(313 ITR 340),HDFC BANK LIMITED (ITA NO.330 OF 2012,BOM HC),POLYOLEFINS INDUSTRI - ES LTD.(ITA NO. 3897 OF 2010,BOM-HC) AND HERO CYCLE S LTD.(323ITR518).HE ALTERNATIVELY ARGUED THAT INTEREST DISALLOWANCE SHOULD BE LIMITED TO INTEREST ONLY FOR THOSE INSTANCES WHERE THERE WAS OVERDRAFT AT THE TIME OF MAKING MUTUAL FUND IN VESTMENT AND ONLY FOR THE PERIOD TILL WHICH THERE WAS OVERDRAFT IN BANK ACCOUNT. WITH REGARD TO DISALLOWANCE OF ADMINISTRATIVE EXPEN SES THE AR CONTENDED THAT DIVIDEND WAS DIRECTLY CREDITED TO BANK ACCOUNT, THAT NO ADMINIST RATIVE EXPENSES WERE INCURRED FOR COLLECTION, THAT NO DISALLOWANCE FOR ADMINISTRATIVE EXPENSES SH OULD BE MADE, HE PLACED RELIANCE OF DECISION OF HON'BLE KARNATAKA HIGH COURT DELIVERED IN THE CA SE OF KANADA BANK ITA-NO.1397 OF 2006.HE FURTHER ARGUED THAT DISALLOWANCE SHOULD BE RESTRICT ED TO ONE /TWO PERCENT OF DIVIDEND INCOME.HE RELIED UPON THE CASES OF M/S HDFC BANK LTD. (ITAT M UMBAI),GODREJ AGROVET LTD. (ITA NO. 934 OF 2011),CREATIVE GARMETS PVT. LTD.(ITA NO. 389/M/2 012),SHAKUNTALADEVI TRADE & INVESTMENT PVT. LTD.(ITA NO. 8006/M/2010)AND M/S.THE ASHOKA TR ADING CO. PVT. LTD.(ITA NO. 2270-2271/ 5 ITA NOS.265/M/11,2460&2210/M/12 TATA CONSULTING ENGI NEERS LTD. KOL/2010). 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE HAD RECEIVED TAX FRE E DIVIDEND INCOME,THAT IT WAS MAINTAINING OVERDRAFT ACCOUNT,THAT IT WAS NOT POSSIBLE TO LINK INVESTMENT AND AVAILABILITY OF FUNDS.IN THE CASES OF RELIANCE UTILITY AND HDFC LTD.(SUPRA) CERTAIN PR INCIPLES HAVE BEEN LAID.CONSIDERING THESE PRINCIPLES WE ARE OF THE OPINION THAT IF THE ASSESS EE HAS SUFFICIENT FUNDS AND RESERVES THEN IT HAS TO BE ACCEPTED THAT INVESTMENT HAS BEEN MADE OUT OF SU CH FUNDS.BUT,THE AVAILABILITY OF FUNDS HAS TO BE PROVED.WE FIND THAT IN THE MATTER OF MUTUAL FUND S IT MAY NOT BE TRUE.THE ASSESSEE HAD MADE AN ALTERNATE ARGUMENT AND WE ARE OF THE OPINION THAT C ONSIDERING THE FACTS OF THE CASE,IN THE INTEREST OF JUSTICE, MATTER SHOULD BE SENT BACK TO THE FILE OF THE AO TO DETERMINE THE INTEREST DISALLOWANCE WITHIN THE PARAMETERS OF THE ALTERNATIVE ARGUMENT. AS FAR AS ADMINISTRATIVE DISALLOWANCE IS CONCERNED, WE ARE OF THE OPINION THAT DISALLOWANCE @ 1% WILL BE SUFFICIENT TO MEET THE END OF JUSTICE.GROUN D OF NO.2 IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. ITA NO. 2460/MUM/2012,AY.2007-08: 10. FIRST GROUND OF APPEAL IS DEALS WITH DISALLOWANCE O F BAD DEBTS AMOUNTING TO RS.34,30,813/-. FOLLOWING OUR ORDER FOR THE EARLIER YEAR,WE DECIDE GROUND NO.1 IN FAVOUR OF THE ASSESSEE,AS THE FACTS FOR THE AY.S.ARE IDENTICAL. 11. NEXT GROUND OF APPEAL IS DISALLOWANCE MADE U/S. 14A OF THE ACT, AMOUNTING TO RS. 2.26 LAKHS. WE HAVE DECIDED THE IDENTICAL ISSUE IN FAVOUR OF TH E ASSESSEE IN PART,WHILE ADJUDICATING THE APPEAL FOR THE EARLIER AY.FOLLOWING THE SAME WE RESTORE BA CK THE ISSUE TO THE FILE OF THE AO TO DETERMINE THE INTEREST DISALLOWANCE WITHIN THE PARAMETERS OF THE ALTERNATIVE ARGUMENT, AS MENTIONED AT PARAGRAPH NO.9 OF THE ORDER.AS FAR AS DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE IS CONCERNED,WE ARE RESTRICTING IT TO 1%,FOLLOWING THE ORDER FOR TH E LAST AY.GROUND NO.2 IS ALLOWED IN FAVOUR OF THE ASSESSEE IN PART. 12. THIRD GROUND OF APPEAL PERTAINS TO CLAIM FOR DEPREC IATION OF RS. 1.42 CRORES.DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE MADE A CLAIM O F FURTHER ADDITIONAL DEPRECIATION AMOUNTING TO RS. 1,25,87,517/- DUE TO DIFFERENCE IN DEPRECIAT ION RATE FROM 25% TO 60% FOR THE AY 2004-05 AND 2005-06. IT WAS CONTENDED THAT ASSESSEE HAD CLA IMED DEPRECIATION, @ 25% INSTEAD OF 60%. THE FAA REJECTED THE CLAIM MADE BY THE ASSESSEE AND HELD THAT IT WAS NOT ALLOWABLE DURING THE YEAR UNDER CONSIDERATION AS IT PERTAINED TO AY 2004 -05 AND 2005-06. 12.1. BEFORE US,AR STATED THAT LETTER DATED 02.12.2009 WA S SUBMITTED BEFORE THE AO, THAT THE AO DID NOT REJECT THE CLAIM OF THE ASSESSEE ON MERITS, THAT HE HAD REJECTED THE CLAIM ONLY ON THE GROUND THAT THE ASSESSEE DID NOT MAKE THE CLAIM IN ITS RET URN OF INCOME OR REVISED RETURN OF INCOME, THAT THE FAA HAD NOT EXAMINED THE FACTS OF THE CASE AND HAD SUMMARILY DISMISSED THE GROUND THAT CLAIM CAN MADE BEFORE THE AO OTHERWISE THEN BY FILI NG REVISED RETURN.IN HIS SUPPORT HE REFERRED CASES OF BALMUKUND ACHARY(310 ITR 310),RAMCO INTERN ATIONAL(332 ITR 306),CHICAGO PNEMATIC INDIA LTD.(15 SOT 252),HERO HONDA FINLEASE LTD. (11 5 TTJ 752) AND RAJ RANI GULATI (345 ITR 350).DR SUPPORTED THE ORDER OF THE FAA. 12.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE FAA HAS REJECTED THE CLAIM MADE BY THE ASSESSEE AS HE WAS OF THE OPINION THAT THE ASSESSEE SHOULD HAVE FILED A REVISED RETURN OF INCOME.WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF BROKERS & SHAREHOLDERS (349 ITR 336) HAS HE LD THAT APPELLATE AUTHORITIES CAN ADMIT NEW CLAIM MADE BY THE ASSESSEE DURING APPEAL PROCEEDING S.CONSIDERING THE RATION OF ABOVE JUDGMENT WE ARE REMITTING THE ISSUE TO THE FILE OF THE FAA T O DECIDE THE CLAIM MADE BY THE ASSESSEE AFTER CONSIDERING THE ABOVE JUDGMENT AND AFTER GIVING A R EASONABLE OPPORTUNITY OF HEARING TO THE THE 6 ITA NOS.265/M/11,2460&2210/M/12 TATA CONSULTING ENGI NEERS LTD. ASSESSEE.GROUND NO.3 IS DECIDED IN FAVOUR OF THE AS SESSEE,IN PART. 13. LAST GROUND OF APPEAL IS ABOUT ALLOWING DEDUCTION O F RS. 34.83 LAKHS INSTEAD OF RS. 67.53 LAKHS,BEING GROSS AMOUNT TOWARDS PROVISION FOR FORE SEEABLE LOSSES DURING THE ASSESSMENT PROCEED -INGS.VIDE ITS LETTER,DATED 02.02.2008,THE ASSESSEE CLAIMED EXPENSES FOR PROVISION OF FORESEEABLE LOSSES OF RS.67,53,000/-MADE DURING THE YEAR AND AL SO CLAIMED THE AMOUNT OF RS. 32,70,000/- BEING PROVISION WRITTEN BACK AGAINST THE EARLIER PR OVISIONS MADE WHICH WAS ADDED BACK TO THE INCOME IN EARLIER AY.THE ASSESSEE,IN THE COMPUTATIO N OF INCOME,HAD ADDED BACK RS. 34.83 LAKHS BEING DIFFERENCE BETWEEN PROVISIONS MADE AND LOSS W RITTEN BACK (67.53 LAKHS -32.70 LAKHS RS. 38.83)AS PER THE PAST PRACTICE.THE AO HELD THAT THE AMOUNT IN QUESTION WAS NOT ALLOWABLE BECAUSE THE ASSESSEE HAD NOT CLAIMED THE SAME AT THE TIME O F FILING OF RETURN OF INCOME, THAT IT HAD NOT FILED ANY REVISED RETURN CLAIMING THE DISPUTED AMOUNT. 13.1. DURING THE APPELLATE PROCEEDINGS,THE FAA REFERRED T O THE JUDGMENT OF HON'BLE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE OF BALMUKUND ACHAR YA(ITA NO.217 OF 2001)AND HELD THAT PRINCIPALLY AMOUNT OF FORESEEABLE LOSSES HAD TO BE ALLOWED BY THE AO,THAT THE DISALLOWANCE OF LOSSES, AMOUNTING TO RS. 34.83 LAKHS,WAS NOT SUSTAI NABLE. 13.2. BEFORE US,THE AR STATED THAT THE FAA SHOULD HAVE AL LOWED THE CORRECT AMOUNT OF LOSS AND NOT THE PART OF IT.DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH.WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ONLY DISPUTE BETWEEN THE ASSESSEE AND DEPARTMENT IS CORRECT AMOUNT OF LOSSES.AFTER CONSID ERING THE FACTS OF THE CASE,WE ARE OF THE OPINION THAT,IN THE INTEREST OF JUSTICE,MATTER SHOU LD BE RESTORED BACK TO THE FILE OF THE AO TO EXAMINE THE ISSUE AFRESH.HE IS DIRECTED TO ALLOW TH E CORRECT AMOUNT OF LOSS AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING. GROUND NO.4 IS D ECIDED IN FAVOUR OF THE ASSESSEE, IN PART. ITA NO. 2210 AY-2007-08 14. FIRST GROUND OF APPEAL FILED BY THE AO IS ABOUT FOR ESEEABLE LOSSES. WHILE DECIDING THE APPEAL FILED BY THE ASSESSEE.WE HAVE RESTORED BACK THE MAT TER TO THE FILE OF THE AO FOR DECIDING THE ISSUE. WE HAVE HELD THAT THE APPELLATE AUTHORITIES CAN ADM IT THE FRESH CLAIM IN LIGHT OF THE DECISION OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA).IN OUR OPINI ON, THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.IT IS ALSO FOUND THAT THE FAA H AD ACCEPTED THE CLAIM OF FORESEEABLE LOSS IN THE AY.S. 2008-09 AND 2009-10,BUT,THE AO DID NOT FILE A NY APPEALS BEFORE THE TRIBUNAL WHEREIN HE HAD REVERSED THE ORDER OF THE AO IN DISALLOWING FOR ESEEABLE LOSS.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE,GROUND NO.1 IS DECIDED AG AINST THE AO. 15. GROUND NO.2 IS ABOUT DEDUCTION OF RS. 77.21 LAKHS U NDER THE HEAD RETENTION MONEY. DURING THE ASSESSMENT PROCEEDINGS, THE AO HELD THAT RETENT ION AMOUNT WAS PAYABLE ONLY AFTER COMPLETION OF JOBS/WORKS,THAT IT COULD NOT BE TREATED AS INCOM E,THAT ASSESSEE WAS NOT JUSTIFIED IN ITS CLAIM FOR REDUCTION INCOME FOR THE PURPOSE OF COMPUTATION OF INCOME FOR THE YEAR UNDER CONSIDERATION IN VIEW OF THE PROVISIONS OF THE ACT. AS THE ASSESSEE HAD BEEN CLAIMED THE AMOUNT IN QUESTION AT THE TIME OF FILING OF INCOME-TAX RETURN,HE HELD THAT SA ME COULD NOT BE CONSIDERED. 15.1. THE FAA,DECIDING THE ISSUE IN FAVOUR OF THE ASSESSE E,HELD THAT THE AO HAD DISALLOWED THE DEDUCTION ON ACCOUNT OF RETENTION MONEY BECAUSE ASS ESSEE HAD NOT CLAIMED IT AT THE TIME OF FILING OF RETURN AND THAT IT HAD NOT FILED REVISED RETURN. RELYING ON THE JUDGMENT OF BALMUKUND ACHARYA (SUPRA),HE ALLOWED THE APPEAL OF THE ASSESSEE. 15.2. DURING THE COURSE OF THE HEARING BEFORE US, THE DR SUPPORTED THE ORDER OF THE AO.AR RELIED UPON CASES MENTIONED AT PARAGRAPH NO 12.1 OF THE OR DER.HE ALSO RELIED UPON THE CASE OF PRUTHVI BROKERS & SHAREHOLDERS (SUPRA).WE FIND THAT IN THE CASE OF PRUTHVI BROKEES THE ISSUE HAS BEEN DECIDED CONCLUSIVELY.AS AN APPELLATE AUTHORITY, IF THE FAA HAD ADMITTED THE NEW CLAIM THEN IN OUR OPINION HE HAS RIGHTLY APPLIED THE PROVISIONS OF LA W.UPHOLDING HIS ORDER, WE DECIDE GROUND NO.2 AGAINST THE AO. 7 ITA NOS.265/M/11,2460&2210/M/12 TATA CONSULTING ENGI NEERS LTD. AS A RESULT,APPEAL FILED BY THE AO STAND DISMISSED AND APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. 0*1 #)* - , #3 , * 4 5 #)* 6 7 , 8 3 , * 9 . ORDER PRONOUNCED IN THE O PEN COURT ON 4 TH ,MARCH,2015. !/ , .$ ! 8 :# 4 EKPZ EKPZ EKPZ EKPZ , 201 5 , ; SD/- SD/- ( /JOGINDER SINGH) ( !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! / ACCOUNTANT MEMBER / MUMBAI, :# /DATE: 04.03.2015 SK !/ !/ !/ !/ , ,, , '*< '*< '*< '*< =!<$* =!<$* =!<$* =!<$* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT(A)/ > ? , 4. THE CONCERNED CIT / > ? 5. DR E BENCH, ITAT, MUMBAI / <@ '*# , . . . 6. GUARD FILE/ 0 (<* '* //TRUE COPY// !/# / BY ORDER, A / DY./ASST. REGISTRAR , /ITAT, MUMBAI.