GE Capital Services India, New Delhi V. DCIT, New Delhi

ITA 479/DEL/2011

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0238 (ITAT-DELHI)
• Duration Of Justice: 9 year(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 28-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SUSHMA SINGH
• Assessee Lawyers: VASUDEVAN
• Keywords: Business income; Depreciation; Earning of tax free income; Proportionate interest; Question of law; Bad and doubtful debts; Revenue expenditure; Capital expenditure; TDS; Rule 8D; Set aside
• Section: 143(3); 14A; 37(1); 43D; 43; 13; 22; 37

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL [DELHI BENCH C: NEW DELHI] BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER A N D SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITA NOS. ASSESSMENT YEARS 3719/DEL/2007 2002 - 03 4835/DEL/2010 2003 - 04 M/S. GE CAPITAL SERVICES INDIA , AIFACS BUILDING, 1, RAFI MARG, NEW DELHI PAN : AAACG0239L VS. ADDL. CIT, RANGE-12, NEW DELHI ( APPELLANT ) ( RESPONDENT ) ITA NO. 4836/DEL/2010 ASSESSMENT YEAR: 2004-05 M/S. GE CAPITAL SERVICES INDIA, AIFACS BUILDING, 1, RAFI MARG, NEW DELHI PAN : AAACG0239L VS. ADDL. CIT, RANGE-12 (1) NEW DELHI ( APPELLANT ) ( RESPONDENT ) ITA NOS. 4918 & 4919/DEL/2010 ASSESSMENT YEARS: 2005-06 & 2006-07 M/S. GE CAPITAL SERVICES INDIA, AIFACS BUILDING, 1, RAFI MARG, NEW DELHI PAN : AAACG0239L VS. ADDL. CIT, RANGE-12, NEW DELHI ( APPELLANT ) ( RESPONDENT ) ITA NO. 479/DEL/2011 (ASSESSMENT YEAR: 2007-08) M/S. GE CAPITAL SERVICES INDIA, AIFACS BUILDING, 1, RAFI MARG, NEW DELHI PAN : AAACG0239L VS. ADDL. CIT, RANGE-12 (1) NEW DELHI ( APPELLANT ) ( RESPONDENT ) PAGE | 2 ITA NO. 3952/DEL/2007 (ASSESSMENT YEAR: 2002-03) ADDL. CIT, RANGE-12 (1) NEW DELHI VS. M/S. GE CAPITAL SERVICES INDIA, AIFACS BUILDING, 1, RAFI MARG, NEW DELHI PAN : AAACG0239L ( APPELLANT ) ( RESPONDENT ) ITA NOS. 5006, 5007, 5557, 5558/DEL/2010 & 770/DEL/2011 (ASSESSMENT YEARS: 2003-04, 2004-05, 2005-06, 2006-07 AND 2007-08) ADDL. CIT, RANGE-12 (1) NEW DELHI VS. M/S. GE CAPITAL SERVICES INDIA, AIFACS BUILDING, 1, RAFI MARG, NEW DELHI PAN : AAACG0239L ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : SHRI ROHIT GARG, ADV .; SHRI SIDDHARTH JOSHI, ADV.; & SHRI VASUDEVAN, ADV. REVENUE BY : MS. S USHMA SINGH, [ CIT ] DR ; DATE OF HEARING 20.11.2019 DATE OF PRONOUNCEMENT 18.02.2020 O R D E R PER PRASHANT MAHARISHI, A.M.: 1. THIS IS THE BUNCH OF 12 APPEALS FOR SIX YEARS OF THE SAME ASSESSEE INVOLVING SIMILAR GROUND OF APPEALS; THEREFORE, THEY ARE HEARD TOGETHER FOR THE CONVENIENCE OF THE PARTIES AND NOW DISPOSED OFF, BY THIS COMMON ORDER. ASSESSMENT YEAR : 2002-03 : 2. ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF FINANCING THROUGH HIRE PURCHASE, LEASE AND LOANS. FOR THE ASSESSMENT YEAR 2002-03 ASSESSEE FILED RETURN OF INCOME ON 31.10.2002 DECLARING INCOME OF RS.65,41,08,720/-. THE ADDITIONAL COMMISSIONER OF PAGE | 3 INCOME TAX, RANGE-12, NEW DELHI [THE ASSESSING OFFICER] PASSED ORDER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) ON 30.03.2005 DETERMINING TOTAL INCOME OF THE ASSESSEE AT RS.87,01,68,210/-. THE ASSESSING OFFICER MADE SEVERAL ADDITIONS / DISALLOWANCE TO THE RETURNED INCOME WHICH WERE CHALLENGED BEFORE THE LEARNED CIT (APPEALS)-XV, NEW DELHI, WHO PASSED AN ORDER ON 30.07.2007 PARTLY ALLOWING THE APPEAL. THEREFORE, ASSESSEE AS WELL AS THE ASSESSING OFFICER AGGRIEVED WITH THE ORDER HAS PREFERRED APPEALS BEFORE US. 3. WE FIRST COME TO THE APPEAL OF THE ASSESSEE. ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL IN ITA NO. 3719/DEL/2007 FOR THE 2002-03:- 1. THAT THE ORDER DATED JULY 30, 2007 PASSED BY THE LEARNEDCOMMISSIONER OF INCOME TAX (APPEALS)-XV [CIT(A)] IS ERRONEOUS AND BAD IN LAW IN SO FAR AS AND TO SUCH EXTENT AS IT CONFIRMS THE ADDITIONS/DISALLOWANCES AND/OR LEVY OF INTEREST MADE IN THE ASSESSMENT ORDER, DATED MARCH 30,2005, BY THE ASSESSING OFFICER (AO). 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING AN AD-HOC DISALLOWANCE OF RS.80,000/- U/S 14A OF THE ACT, ON ACCOUNT OF PURPORTED MANAGEMENT / ADMINISTRATIVE EXPENSES AND OTHER COSTS ALLEGEDLY ATTRIBUTED TOWARDS EARNING DIVIDEND INCOME, EVEN THOUGH THE AO HAD BROUGHT NOTHING ON RECORD TO SHOW THAT THE APPELLANT HAD ACTUALLY INCURRED ANY EXPENDITURE TO EARN THE DIVIDEND INCOME. 3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.18,72,22,842/- ON ACCOUNT OF REVENUE EXPENDITURE INCURRED IN RESPECT OF RAISING LOAN FUNDS BY TREATING THE SAME AS DEFERRED REVENUE EXPENDITURE. 3.1 THAT THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT FOR PURPOSES OF THE ACT, REVENUE EXPENSES HAVE TO BE ALLOWED IN FULL IN THE YEAR OF INCURRENCE UNLESS SPECIFICALLY DEFERRED UNDER LIMITED CIRCUMSTANCES AS PRESCRIBED UNDER THE ACT. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN UPHOLDING DISALLOWANCE OF RS.73,46,160/- BEING PROVISION FOR DOUBTFUL ASSETS CREATED IN COMPLIANCE WITH THE NON-BANKING FINANCIAL COMPANIES PRUDENTIAL NORMS (RBI) DIRECTIVES, 1998 ISSUED BY THE RESERVE BANK OF INDIA IN PURSUANCE OF THE POWERS GRANTED TO IT UNDER SECTION 45JA OF THE RBI ACT. PAGE | 4 5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS.29,60,838/- ON PURCHASE OF SOFTWARE FOR UPDATING THE EXISTING DATA PROCESSING SYSTEM OF THE APPELLANT COMPANY, BY REGARDING THE SAME AS CAPITAL EXPENDITURE WITHOUT APPRECIATING THAT THE CLAIM FOR SIMILAR REVENUE EXPENDITURE IN THE FY 1996-97 HAS BEEN UPHELD BY THE HONBLE TRIBUNAL AND FURTHER CONFIRMED BY THE HON'BLE DELHI HIGH COURT IN THE APPELLANTS OWN CASE. 6 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 65,85,835/- BEING BAD DEBTS WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. 7 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE LEVY OF INTEREST OF RS.1,08,38,534/- UNDER SECTION 234D OF THE ACT. 4. THE FIRST GROUND OF APPEAL IS GENERAL IN NATURE AND, THEREFORE, IT IS DISMISSED. 5. VIDE SECOND GROUND, ASSESSEE HAS CHALLENGED THE AD-HOC DISALLOWANCE OF RS.80,000/- ON ACCOUNT OF SECTION 14A OF THE ACT CONFIRMED BY THE LEARNED CIT (APPEALS). DURING THE YEAR, ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 16,00,010/-. ASSESSEE WAS ASKED TO SHOW CAUSE ABOUT THE DISALLOWANCE U/S 14A OF THE ACT, AS IT HAS NOT CONSIDERED ANY EXPENDITURE AS DISALLOWABLE. ASSESSEE EXPLAINED THAT ASSESSEE IS A NON-BANKING FINANCE COMPANY DEALING IN LOAN ACTIVITIES AND HAS NOT INCURRED ANY EXPENDITURE FOR EARNING SUCH INCOME. IT WAS FURTHER STATED THAT INVESTMENT IS OUT OF ITS OWN FUNDS. ASSESSING OFFICER DISREGARDED THE ABOVE CONTENTION AND DISALLOWED A SUM OF RS.11,11,02,452/- BEING THE INTEREST ATTRIBUTABLE TO THE INVESTMENT AND FURTHER RS. 25 LAKHS OUT OF ADMINISTRATIVE EXPENDITURE. THE ASSESSEE CONTESTED THE SAME BEFORE THE CIT (APPEALS) WHO DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE AT 5% OF THE DIVIDEND INCOME FOLLOWING ORDERS OF LD CIT A OF EARLIER YEARS. THUS, HE SUSTAINED THE DISALLOWANCE OF RS.80,000/-. THIS IS CHALLENGED BY THE ASSESSEE. PAGE | 5 6. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE CO-ORDINATE BENCH FOR ASSESSMENT YEAR 2000-01 AND FURTHER CONFIRMED BY THE HONBLE HIGH COURT. HE ALSO SUBMITTED THAT THERE IS NO SATISFACTION RECORDED BY THE AO WITH REGARD TO CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONBLE HIGH COURT IN ASSESSEES OWN CASE, WHEREIN THE ORDER PASSED BY THE CO- ORDINATE BENCH FOR ASSESSMENT YEAR 2001-02 HAS BEEN UPHELD IN ITA. NO. 468/DEL/2017 DATED 23.08.2017. FURTHER BEFORE US THE LEARNED A R CONTESTED THAT THERE IS NO SATISFACTION RECORDED BY THE LEARNED ASSESSING OFFICER ABOUT THE CLAIM OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPT INCOME. WE FIND CONSIDERABLE FORCE IN THIS ARGUMENT OF THE ASSESSEE, WHICH WAS ALSO TAKEN UP IN ASSESSEES APPEAL ITA. NOS. 761 AND 762/DEL/2016 FOR ASSESSMENT YEARS 2008-09 AND 2009-10 VIDE PARA NO. 14, THE ADDITION WAS DIRECTED TO BE DELETED IN VIEW OF ABSENCE OF ANY SATISFACTION. IN THE PRESENT CASE ALSO ASSESSEE HAS STATED THAT IT DOES NOT INCUR ANY EXPENDITURE FOR THE PURPOSES OF THE EARNING EXEMPT INCOME. WE DO NOT FIND ANY SATISFACTION RECORDED BY THE LD AO ABOUT THE CORRECTNESS OF THE CLAIM OF ASSESSEE. IN VIEW OF THIS GROUND NO. 2 OF THE APPEAL OF ASSESSEE IS ALLOWED. 9. GROUND NO. 3 OF THE APPEAL IS AGAINST DISALLOWANCE OF RS.18,72,22,842/- ON ACCOUNT OF REVENUE EXPENDITURE INCURRED IN PAGE | 6 RESPECT OF RAISING LOAN FUNDS BY TREATING THE SAME AS DEFERRED REVENUE EXPENDITURE. THE FACT SHOWS THAT IN THE COMPUTATION OF TOTAL INCOME THE ASSESSEE HAS ADDED BACK DEFERRED REVENUE EXPENDITURE OF RS.9,37,29,751/- AND CLAIMED A DEDUCTION OF RS.18,72,22,842/- IN THE COMPUTATION OF INCOME U/S 37(1) OF THE ACT. THE ASSESSEE HAS INCURRED AN EXPENDITURE OF RS.47,13,80,476/- OUT OF WHICH RS.28,41,57,625/- IS DEBITED TO THE PROFIT AND LOSS ACCOUNT AND THE BALANCE SUM OF RS.18,72,22,842/- WAS CLAIMED AS DEDUCTION IN THE COMPUTATION OF TOTAL INCOME. THE ASSESSEE SUBMITTED THAT THIS EXPENDITURE WAS INCURRED ON DEBENTURES ISSUED AND DISCOUNT THEREON. THE ABOVE ISSUE FIRSTLY AROSE IN ASSESSMENT YEAR 2000-01. ACCORDING TO THE ASSESSING OFFICER THE DEBENTURES EXPENDITURE WAS SPREAD OVER THE TENURE OF DEBENTURES, WITH RESPECT TO THE INTEREST EXPENDITURE ONLY PORTION RELATING TO THE PREVIOUS YEAR IS ALLOWABLE. THE OTHER EXPENDITURE WAS ALSO REQUIRED TO BE SPREAD OVER. THEREFORE, THE NET DISALLOWANCE OF RS.9,34,93,091/- WAS MADE. THE ABOVE ISSUE REACHED BEFORE THE LEARNED CIT (APPEALS) WHO VIDE PARA NO. 3 UPHELD THE ORDER OF THE ASSESSING OFFICER. THEREFORE, ASSESSEE IS IN APPEAL. 10. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THE ABOVE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE CO-ORDINATE BENCH FOR ASSESSMENT YEAR 2000-01 DATED 21.05.2015. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 11. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. WE FOUND THAT IDENTICAL ISSUE AROSE IN CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2000-01 WHEREIN VIDE PARA NOS. 1518 THE ORDER OF CO- ORDINATE BENCH IT HAS DELETED THE ABOVE ADDITION. NO CONTRARY DECISION WAS PRODUCED BEFORE US. THE CO-ORDINATE BENCH AFTER DISCUSSION OF THE FACTS IN PARA NOS. 1516 HAS DISCUSSED THE FACTS OF THE CASE IN PARA NO. 17 AND THEN RELYING UPON THE DECIDED IN PAGE | 7 THE CASE OF GROUP COMPANY , DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FURTHER, IN PARA NO. 18 THE CO-ORDINATE BENCH ALSO DISCUSSED THE DECISION RELIED UPON BY THE ASSESSING OFFICER. IN VIEW OF THIS FACT, RESPECTFULLY FOLLOWING THE DECISION OF THE CO- ORDINATE BENCH WE ALLOW GROUND NO. 3 OF THE APPEAL AND DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF RS.18,72,22,842/-. 12. GROUND NO. 4 IS WITH RESPECT TO DISALLOWANCE OF RS.73,46,160/- BEING PROVISIONS FOR BAD AND DOUBTFUL DEBTS CREATED IN COMPLIANCE WITH NBFC PRUDENTIAL NORMS DIRECTIVES, 1998 ISSUED BY RESERVE BANK OF INDIA IN PURSUANCE OF PROVISIONS OF SECTION 45JA OF THE RBI ACT. ASSESSING OFFICER NOTED THAT ASSESSEE HAS DEBITED RS.8,34,22,265/- IN ITS PROFIT AND LOSS ACCOUNT. HOWEVER, IN THE COMPUTATION OF TOTAL INCOME IT ONLY ADDED BACK RS.7,60,76,165/- AND HAS ALSO ATTACHED A NOTE TREATING THAT THE BALANCE PROVISION IS ON ACCOUNT OF NBFC PRUDENTIAL NORMS SAME IS ALLOWABLE. ASSESSING OFFICER DISALLOWED THE SAME IN VIEW OF THE PROVISIONS OF THE ACT UNDER SECTION 36(I)(VII) WHICH PROHIBITS THAT THE PROVISION FOR BAD AND DOUBTFUL DEBT IS NOT TO BE CONSIDERED AS A WRITE OFF. THUS, HE DISALLOWED THE ABOVE SUM ALSO. THE LEARNED CIT (APPEALS) CONFIRMED THE ABOVE DISALLOWANCE VIDE PARA NO. 4 OF HIS ORDER. 13. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 WHEREIN PARA NO. 14 THE ISSUE IS DECIDED AGAINST THE ASSESSEE FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. 320 ITR 577. 14. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 15. ON CAREFUL CONSIDERATION OF THE FACT THE ABOVE CONTROVERSY IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE DECISION OF THE PAGE | 8 HONBLE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD. (SUPRA) AND ALSO IN THE CASE OF THE ASSESSEE BY THE VARIOUS DECISIONS OF THE CO-ORDINATE BENCHS. THUS, WE DISMISS GROUND NO. 4 OF THE APPEAL. 16. GROUND NO. 5 OF THE APPEAL IS AGAINST THE DISALLOWANCE OF RS.29,60,838/- ON PURCHASE OF SOFT-WARE FOR UP-DATING THE EXISTING DATA PROCESSING SYSTEM OF THE APPELLANT COMPANY HOLDING IT AS CAPITAL EXPENDITURE. 17. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT THIS ISSUE HAS BEEN CONSIDERED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 VIDE PARA NOS. 79 AND FURTHER FOR ASSESSMENT YEAR 2001-02 AT PAGE NOS. 39 THE ABOVE ISSUE WAS CONSIDERED. HOWEVER, FOR ASSESSMENT YEAR 2001-02 THE ISSUE HAS BEEN REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. 18. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO CONSIDERED THAT THE ABOVE ISSUE IS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR EARLIER YEARS. 19. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE ISSUE INVOLVED IS THAT SOFTWARE EXPENDITURE INCURRED BY THE ASSESSEE IS ALLOWABLE AS REVENUE EXPENDITURE OR NOT. CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 IN ITA. NOS. 2808 AND 2898/DEL/2007 VIDE PARA NO. 6 HAS DISCUSSED THE WHOLE ISSUE AND ULTIMATELY SET ASIDE IT BACK TO THE FILE OF THE LEARNED ASSESSING OFFICER STATING THAT THE DESCRIPTION OF THE SOFT- WARE ACQUIRED BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES DOES NOT THROW ANY LIGHT ON THE NATURE, USE OR PURPOSE OF THE SOFT-WARE WHICH IS TO BE UNDERSTOOD IN THE CONTEXT OF ITS FUNCTIONAL USE TO THE TAXPAYERS SPECIFIC BUSINESS. AS THE ABOVE NECESSARY EXERCISE WAS NOT CARRIED OUT, IT RESTORED BACK THE ISSUE TO THE FILE OF THE PAGE | 9 ASSESSING OFFICER. THE FACTS BEFORE US ARE SIMILAR AND HENCE RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02 WE SET ASIDE THIS ISSUE TO THE FILE OF THE LEARNED ASSESSING OFFICER WITH SIMILAR DIRECTION. ACCORDINGLY, GROUND NO. 5 OF THE APPEAL IS ALLOWED WITH ABOVE DIRECTION. 20. GROUND NO. 6 OF THE APPEAL IS WITH RESPECT TO THE CONFIRMATION OF DISALLOWANCE OF RS.65,85,835/- BEING BAD DEBT WRITTEN OFF AS IRRECOVERABLE IN THE ACCOUNTS OF THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEE DID NOT SUBMIT DETAILS OR EXPLANATION BEFORE THE ASSESSING OFFICER. IN ABSENCE OF SUCH DETAILS THE LEARNED ASSESSING OFFICER HELD THAT IT IS NOT POSSIBLE TO ASCERTAIN EITHER THE NATURE OF THE TRANSACTION OF THE WRITE OFF OR WHETHER THE AMOUNT CLAIMED WAS ACCOUNTED FOR AS INCOME IN AN EARLIER YEAR OR WAS MONEY LENT IN THE ORDINARY COURSE OF BUSINESS. THUS, DISALLOWANCE WAS MADE. THE LEARNED CIT (APPEALS) CONSIDERED THESE ISSUES VIDE GROUND NO. 8 IN PARA NO. 7 OF HIS ORDER DISMISSING THE CLAIM OF THE ASSESSEE. 21. THE LEARNED AUTHORIZED REPRESENTATIVE SUBMITTED THAT IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 IN FAVOUR OF THE ASSESSEE. 22. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. 23. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS. THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000- 01 HAS DECIDED THIS ISSUE AT PAGE NOS. 1921. THE CO-ORDINATE BENCH HAS GIVEN A FINDING THAT IN THAT CASE THE DEBT HAS ACTUALLY BEEN WRITTEN OFF AND HENCE ALLOWED THE CLAIM OF THE ASSESSEE. THE CO-ORDINATE BENCH FOLLOWED THE DECISION OF THE HONBLE SUPREME PAGE | 10 COURT IN 323 ITR 397 T. R. F. LTD . V. COMMISSIONER OF INCOME TAX. THE LEARNED DEPARTMENTAL REPRESENTATIVE COULD NOT DISPUTE THE APPLICABILITY OF ABOVE DECISION TO THE FACTS OF THE PRESENT YEAR. IN VIEW OF THIS RESPECTFULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH FOR ASSESSMENT YEAR 2000-01, WE ALLOW GROUND NO. 6 OF THE APPEAL. 24. GROUND NO. 7 OF THE APPEAL IS WITH RESPECT TO CHARGEABILITY OF INTEREST UNDER SECTION 234D OF THE ACT. THE ABOVE ISSUE IS CONSEQUENTIAL IN NATURE, HENCE WE DIRECT THE ASSESSING OFFICER TO RE-COMPUTE THE INTEREST UNDER THAT SECTION AFTER RE-COMPUTING THE INCOME OF THE ASSESSEE IN PURSUANCE OF THIS ORDER. ACCORDINGLY SAME IS ALLOWED, FOR STATISTICAL PURPOSES. 25. THE ASSESSEE HAS RAISED TWO ADDITIONAL GROUNDS IN THIS APPEAL AS UNDER: ADDITIONAL GROUND NO. 1:- 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT (APPEALS) ERRED IN EXCEEDING ITS JURISDICTION UNDER SECTION 251(1)(A) OF THE INCOME TAX ACT, 1961 BY REMANDING THE ISSUE OF DEDUCTION OF RS.12,62,01,895/- IN RESPECT OF WRITE OFF / REVERSAL MADE OUT OF PROVISION FOR BAD AND DOUBTFUL DEBTS TO THE ASSESSING OFFICER, COMPLETELY IGNORING THAT SUCH POWERS AS REMAINED HAS BEEN EXTREMELY TAKEN AWAY BY WAY OF FINANCE ACT, 2001 WITH EFFECT FROM 1.06.2001. ADDITIONAL GROUND NO. 2:- 2. BASES ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN NOT GRANTING TAX CREDIT TO THE EXTENT OF RS.1,64,86,007/- FROM OUT OF TOTAL TAX CREDIT OF RS.43,97,24,236/- AS CLAIMED BY THE APPELLANT FOR THE RETURN OF INCOME. 26. THE ABOVE ADDITIONAL GROUNDS HAVE ALREADY BEEN ADMITTED BY THE CO-ORDINATE BENCH VIDE THEIR INTERIM ORDER DATED 03.02.2017. THEREFORE, NOW THEY HAVE TO BE ADJUDICATED UPON. THE ISSUE IS PAGE | 11 ARISING VIDE PARA NOS. 8 AND 8.1 OF THE ORDER OF THE LEARNED CIT (APPEALS). 27. THE ASSESSEE IN GROUND NO. 8 CHALLENGED THE NON-ALLOWANCE OF DEDUCTION IN RESPECT OF WRITE OFF AND REVERSAL OF RS.12,62,01,895/- OUT OF PROVISION FOR BAD AND DOUBTFUL DEBTS MADE BY ASSESSEE AS PER NBFC PRUDENTIAL NORMS. THE ASSESSEE DID NOT CLAIM THE ABOVE SUM IN THE RETURN OF INCOME AS IT WAS ORIGINALLY CLAIMED IN ASSESSMENT YEAR 2001-02 AS PROVISION FOR BAD AND DOUBTFUL DEBTS. THE CLAIM OF THE ASSESSEE IS THAT AS THE SAME WAS DISALLOWED IN ASSESSMENT YEAR 2001-02 THE SAME IS ALLOWABLE ON WRITE OFF BASIS IN THE YEAR UNDER APPEAL. THE ASSESSEE HAS SUBMITTED THAT PROVISIONS OF RS.10,89,00,157/- HAS BEEN WRITTEN OFF DURING THE YEAR, BUT WAS CLAIMED IN ASSESSMENT YEAR 2001-02. FURTHER RS.1,73,01,738/- WAS A PROVISION REVERSED DURING THE YEAR WHICH WAS PART OF CLAIM FOR ASSESSMENT YEAR 2001-02. THE LEARNED CIT (APPEALS) CONSIDERED THE SUBMISSION OF THE ASSESSEE AND DIRECTED THE ASSESSING OFFICER TO EXAMINE THE CONTENTIONS OF THE APPELLANT THAT AN AMOUNT OF RS.12,62,01,895/- , IF FORMING PART OF THE PROVISION DISALLOWED IN THE EARLIER YEAR AND HAS BEEN WRITTEN OFF DURING THE YEAR AND FURTHER IF THERE IS A REVERSAL OF PROVISION MADE IN EARLIER YEARS, DURING THE CURRENT YEAR, THEN ASSESSING OFFICER MAY EXAMINE THE CLAIM OF THE ASSESSEE AND UPON VERIFICATION, IF FOUND CORRECT, DECIDE TO ALLOW THE CLAIM. ABOVE IS NOT THE REMAND OF THE ISSUE TO THE ASSESSING OFFICER, BUT DIRECTION TO THE ASSESSEE FOR VERIFICATION OF CLAIM ON FACTUAL BASIS. AS THE ABOVE FACTS WERE NOT AVAILABLE WITH CONCLUSIVE EVIDENCE BEFORE THE CIT (APPEALS), WE DO NOT FIND ANY INFIRMITY IN THE DIRECTION ISSUED BY THE LEARNED CIT (APPEALS). ACCORDING TO US, THE CIT (APPEALS) IS CORRECT IN GIVING SUCH DIRECTION, WHICH IS IN FACT IN THE BENEFIT OF THE ASSESSEE. THIS IS SO FOR THE REASON THAT ASSESSEE HAS NOT CLAIMED THE ABOVE DEDUCTION IN ITS RETURN OF INCOME. ACCORDINGLY, ADDITIONAL GROUND RAISED BY GROUND NO. 1 IS DISMISSED. PAGE | 12 28. SECOND ADDITIONAL GROUND RAISED IS WITH RESPECT TO NOT GRANTING THE TAX CREDIT TO THE EXTENT OF RS.1,64,86,007/- OUT OF TOTAL CREDIT OF RS.43,97,24,236/- AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. 29. ON CAREFUL CONSIDERATION OF THE ARGUMENT OF THE PARTIES IT IS APPARENT THAT ASSESSEE HAS MADE CERTAIN CLAIM OF TAX CREDITS IN ITS RETURN OF INCOME. OUT OF THAT, CERTAIN CREDITS WERE NOT ALLOWED. THE DISALLOWANCE OF THE ABOVE CREDIT MAY BE FOR THE REASON THAT THE TDS CERTIFICATES WERE NOT AVAILABLE. THEREFORE, WE SET ASIDE THIS GROUND TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO THE ASSESSEE TO PRODUCE THE NECESSARY TDS CERTIFICATE BEFORE THE ASSESSING OFFICER WHO AFTER EXAMINATION AND VERIFICATION SHOULD GRANT THE CREDIT OF THE SAME TO THE ASSESSEE. THUS, ADDITIONAL GROUND NO. 2 IS ALLOWED WITH ABOVE DIRECTION. 30. IN THE RESULT, ITA. NO. 3719/DEL/2007 FILED BY THE ASSESSEE, IS PARTLY ALLOWED. 31. NOW WE COME TO THE APPEAL OF THE REVENUE IN ITA. NO. 3952/DEL/2007 WHERE IN REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 3952/DEL/2007 FOR THE ASSESSMENT YEAR 2002-03:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT (A) ERRED IN DELETING THE DISALLOWANCE OF RS. 11,11,02,452/- MADE U/S 14A ON ACCOUNT OF DISPROPORTIONATE INTEREST PAID ON THE BORROWED FUNDS UTILIZED FOR MAKING INVESTMENTS IN SHARES ON WHICH THE TAX FREE DIVIDEND INCOME HAS BEEN EARNED, WITHOUT APPRECIATING THE FACTS ON RECORDS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN RESTRICTING THE DISALLOWANCE TO RS. 80,000/- FROM 25,00,000/- MADE U/S 14A BEING PROPORTIONATE MANAGEMENT AND ADMINISTRATIVE EXPENSES INCURRED WHICH ARE ATTRIBUTABLE TO INVESTMENT MADE IN THE SHARES ON WHICH THE TAX FREE DIVIDEND INCOME HAS BEEN EARNED, WITHOUT APPRECIATING THE FACTS ON RECORD. PAGE | 13 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF DEPRECIATION OF RS. 60,00,00,000/- ON THE DC SET, IGNORING THE FACT THAT THE SAID MOVABLE ASSET WAS SOLD BY THE ASSESSEE COMPANY DURING THE YEAR TO M/S CHUGH EXPORTS PRIVATE LIMITED BY EXECUTING AN AGREEMENT WITH THEM ON 20.09.2001 AND THAT THE ASSESSEE COMPANY HAD ALSO RECEIVED PART CONSIDERATION OF RS. 5.50,000/- FROM THE BUYER ON THE DATE OF AGREEMENT I.E. 20.09.2001, MEANING THEREBY THAT THE SALE WAS COMPLETE AND AS SUCH THE DEPRECIATION WAS NOT ADMISSIBLE TO THE ASSESSEE COMPANY ON SUCH SOLD ASSET. 32. GROUND NOS. 1 AND 2 OF THE APPEAL ARE WITH RESPECT TO DISALLOWANCE DELETED BY THE LEARNED CIT (APPEALS). THE ABOVE ISSUE HAS ALREADY BEEN DECIDED BY US WHILE DECIDING GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE WHEREIN WE HAVE HELD THAT IN ABSENCE OF PROPER SATISFACTION BY THE ASSESSING OFFICER NO DISALLOWANCE U/S 14 A OF THE ACT CAN BE MADE. AS WE HAVE ALREADY HELD THAT, EVEN THE DISALLOWANCE SUSTAINED BY THE LEARNED CIT (APPEALS) CANNOT BE UPHELD IN ABSENCE OF SUCH PROPER SATISFACTION WE FIND NO MERIT IN GROUND NOS. 1 AND 2 OF THE APPEAL OF THE REVENUE. ACCORDINGLY, BOTH THE GROUND NOS. 1 AND 2 ARE DISMISSED. 33. IN GROUND NO. 3 THE LEARNED ASSESSING OFFICER HAS RAISED AN ISSUE WHERE THE DEPRECIATION ON THE PURCHASE OF D.G. SET HAS BEEN DISALLOWED BY THE ASSESSING OFFICER IS DELETED. 34. THE BRIEF FACTS SHOWS THAT ASSESSEE HAS ENTERED INTO AN AGREEMENT ON 20.09.2001 TO SELL D.G. SET FOR WHICH IT HAD RE- POSITION ORDER. IT WAS SOLD BY THE ASSESSEE FOR RS. 2.40 CRORES OUT OF WHICH ADVANCE OF RS. 5.50 LAKHS WAS RECEIVED UP-FRONT AND THE BALANCE SUM WAS TO BE RECEIVED IN 35 EQUALLY MONTHLY INSTALLMENTS OF RS. 6.7 LAKHS EACH. THE ASSESSEE CLAIMED DEPRECIATION ON THE SAME. THE ASSESSING OFFICER DISALLOWED STATING THAT ASSESSEE HAS SOLD A MOVABLE PROPERTY; POSSESSION OF IT HAS BEEN TAKEN BY PURCHASER FROM THE DEFAULTING PARTY. HOWEVER, AS PER PARA NO. 4 OF THE AGREEMENT IT IS PROVIDED THAT PAGE | 14 PURCHASER WOULD INTIMATE ASSESSEE ABOUT THE POSSESSION AND PERFORMING CERTAIN ACTIONS PURSUANT THAT TO. THEREFORE, ASSESSING OFFICER TREATED AS SALE IN INSTALLMENTS. THEREFORE, HE DISALLOWED DEPRECIATION @ 25% ON THE SAME ON THE TOTAL COST OF RS. 2.40 CRORES. THUS, DISALLOWANCE OF RS. 60 LAKHS WAS MADE. 35. ON APPEAL BEFORE THE LEARNED CIT (APPEALS) VIDE PARA NO. 9.3 WHEREIN DRAWING DISTINCTION BETWEEN A CONTRACT OF SALE AND AGREEMENT TO SELL THE DISALLOWANCE WAS DELETED. 36. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 37. THE LEARNED AUTHORIZED REPRESENTATIVE REITERATED THE CONTENTIONS RAISED BEFORE THE LOWER AUTHORITIES. 38. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE LEARNED CIT (APPEALS) HAS CORRECTLY HELD THAT THE EQUIPMENT UNDER THE AGREEMENT TO SALE WOULD LEGALLY BE THE PROPERTY OF THE COUNTER PARTY SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS. UNTIL SUCH TIME THAT FULL CONSIDERATION OF SALE IS NOT RECEIVED BY THE ASSESSEE, THE ASSESSEE REMAINS THE OWNER OF THE APPELLANT. IN VIEW OF THIS, WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS). ACCORDINGLY, GROUND NO. 3 OF THE APPEAL IS DISMISSED. 39. IN THE RESULT, ITA. NO. 3952/DEL/2007 FILED BY THE LEARNED ASSESSING OFFICER IS DISMISSED. PAGE | 15 ASSESSMENT YEAR : 2003-04 : 40. NOW WE COME TO THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-04. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 4835/DEL/2010 FOR THE 2003-04:- 1 THAT THE ORDER DATED AUGUST 24,2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV [CIT(A)] IS ERRONEOUS AND BAD IN LAW TO THE EXTENT THE SAME CONFIRMS THE ADDITIONS/ DISALLOWANCES/LEVY OF INTEREST MADE IN THE ASSESSMENT ORDER. 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS. 1,17,41,651/- INCURRED BY THE APPELLANT TOWARDS UPDATING, MODIFICATION AND RATIONALIZATION OF APPLICATION SOFTWARE BY TREATING THE SAME AS CAPITAL EXPENDITURE. 3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.7,02,97,332/- BEING THE UNAMORTISED EXPENDITURE INCURRED BY THE APPELLANT ON RAISING LOAN FUNDS, THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS, CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37(1) AND ALLIED PROVISIONS OF THE INCOME TAX ACT,1961( THE ACT) 3.1 THAT THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING PURPOSES OF THE ACT, REVENUE EXPENSES HAVE TO BE ALLOWED IN FULL IN THE YEAR OF ACCRUAL AND NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE ALLOWABILITY OF DEDUCTION UNDER SECTION 36(1 )(VIII), AMOUNTING TO RS.46,918/- AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. 5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.24,00,000/- BEING BAD DEBTS WRITTEN OFF BY THE APPELLANT IN ITS BOOKS OF ACCOUNT OF THE YEAR UNDER APPEAL. 5.1 THAT THE LEARNED CIT(A) ERRED IN DISREGARDING THE JUDGMENT OF THE HONOURABLE APEX COURT IN THE CASE OF TRF LIMITED (CIVIL APPEAL NO.5293 OF 2003) AND CIRCULAR NO.551 DATED JANUARY 23,1990 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES .WHEREIN IT HAS BEEN PROVIDED THAT FOR ALLOWABILITY OF DEDUCTION UNDER SECTION 36(1 )(VIII) IT IS PAGE | 16 SUFFICIENT IF THE DEBT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. 41. NOW WE COME TO THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-04. GROUND NO. 1 IS GENERAL IN NATURE. THEREFORE, IT IS DISMISSED. 42. ON OTHER GROUNDS BOTH THE PARTIES CONFIRMED THAT THE FACTS OF THE PRESENT CASE IN ALL OTHER GROUNDS EXCEPT ONE ARE SIMILAR AND COVERED BY THE ISSUES IN APPEAL OF THE ASSESSEE AS WELL AS REVENUE FOR ASSESSMENT YEAR 2002-03. THEIR ARGUMENTS FOR THOSE GROUNDS ARE ALSO SIMILAR. 43. GROUND NO. 2 IS WITH RESPECT TO THE SOFT-WARE EXPENDITURE OF RS.1,17,41,651/-. THIS GROUND IS IDENTICAL TO GROUND NO. 5 FOR ASSESSMENT YEAR 2002-03 IN ASSESSEES APPEAL. WE HAVE SET ASIDE THIS GROUND OF APPEAL TO THE FILE OF THE ASSESSING OFFICER FOLLOWING THE DECISION OF ITAT IN EARLIER YEARS. FOR SIMILAR REASONS WE ALSO SET ASIDE THIS GROUND OF APPEAL TO THE FILE OF THE ASSESSING OFFICER. 44. GROUND NO. 3 IS WITH RESPECT TO THE DISALLOWANCE OF RS.7,02,97,332/- BEING AMORTIZED EXPENDITURE INCURRED BY THE ASSESSEE FOR RAISING OF LOANS. THIS GROUND IS IDENTICAL TO GROUND NO. 3 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 WHEREIN WE HAVE DELETED THE ABOVE DISALLOWANCE. FOR SIMILAR REASONS WE DIRECT THE ASSESSING OFFICER TO DELETE THIS DISALLOWANCE TOO AND GROUND NO. 3 IS ALLOWED. 45. GROUND NO. 4 IS WITH RESPECT TO NON-ADJUDICATION BY CIT (APPEALS) WITH RESPECT TO THE ALLOWABILITY OF DEDUCTION UNDER SECTION 36(1)(VIII) OF THE ACT AMOUNTING TO RS.46,918/- AND REFERRING BACK THE MATTER TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICATION. THE LEARNED CIT (APPEALS) HAS DEALT WITH THIS ISSUE VIDE PAGE NOS. 1213 OF THE ORDER. THE ISSUE INVOLVED IS THAT PAGE | 17 ASSESSING OFFICER DISALLOWED THE CLAIM UNDER SECTION 36(1)(VIII) OF THE ACT OF RS.49,318/-FOR THE REASON THAT ASSESSEE SUBMITTED COPIES OF ONLY 6 AGREEMENTS OUT OF THE TOTAL CLAIM RELATED TO 7 LOAN AGREEMENTS. IN ABSENCE OF DETAIL ABOUT ONE LOAN AGREEMENT, THE ASSESSING OFFICER RESTRICTED THE CLAIM OF THE ASSESSEE TO RS.25,04,496/- INSTEAD OF RS.25,53,814/-. THE CIT (APPEALS) ALSO NOTED THAT THE DISALLOWANCE HAS BEEN MADE BY THE ASSESSING OFFICER ONLY FOR THE REASON FOR NON-PRODUCTION OF 7 TH AGREEMENT. THEREFORE, HE DIRECTED THE ASSESSING OFFICER TO EXAMINE THE TENURE OF LOAN AGREEMENT WITH RESPECT TO 7 TH AGREEMENT AND IF ELIGIBLE TO GRANT THE DEDUCTION TO THE ASSESSEE. THE LEARNED AUTHORIZED REPRESENTATIVE COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS). WE ALSO FIND THAT IF THE AGREEMENT IS NOT AVAILABLE WITH THE ASSESSING OFFICER, AND IF THE CLAIM IS MADE BEFORE THE LEARNED CIT (APPEALS) THERE IS NOTHING WRONG IN CIT (APPEALS) DIRECTING THE ASSESSING OFFICER TO VERIFY AND IF FOUND IN ACCORDANCE WITH LAW TO GRANT THE DEDUCTION. GROUND NO. 4 IS DISMISSED. 46. GROUND NO. 5 IS WITH RESPECT TO THE CONFIRMATION OF DISALLOWANCE OF RS. 24 LAKHS BEING BAD DEBTS WRITTEN OFF IN THE BOOKS OF THE ASSESSEE. THIS ISSUE HAS BEEN CONSIDERED IN GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03 AND CLAIM OF THE ASSESSEE IS ALLOWED. FOR SIMILAR REASONS WE ALSO ALLOW GROUND NO. 5 OF THE APPEAL. 47. ACCORDINGLY, APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2003-04 IN ITA. NO. 4835 (DEL) OF 2010 IS PARTLY ALLOWED. 48. NOW WE COME TO THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2003-04 IN ITA. NO. 5006(DEL) OF 2010. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 5006/DEL/2010 FOR THE ASSESSMENT YEAR 2003-04:- PAGE | 18 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.45,00,000/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION ON DG SET. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS RESTRICTED THE ADDITION OF RS. 24,00,000/- OUT OF TOTAL ADDITION OF RS. 1,29,40,532/- MADE BY THE AO ON ACCOUNT OF BAD DEBTS. 49. GROUND NO. 1 IS GENERAL IN NATURE AND, THEREFORE, SAME IS DISMISSED. 50. GROUND NO. 2 IS WITH RESPECT TO DELETION OF THE ADDITION OF RS.45 LAKHS ON ACCOUNT OF DEPRECIATION AND DG SETS. THIS ISSUE IS ALREADY DECIDED BY US IN GROUND NO. 3 OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002-03 WHEREIN THE CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECTLY ALLOWED BY THE CIT (APPEALS). THEREFORE, FOR SIMILAR REASONS WE DISMISS GROUND NO. 2 OF THE APPEAL. 51. GROUND NO. 3 IS WITH RESPECT TO RESTRICTING THE ADDITION BY THE LEARNED CIT (APPEALS) TO THE EXTENT OF RS.24 LAKHS AGAINST THE ADDITION MADE BY THE ASSESSING OFFICER OF RS.1,29,40,532/-. THIS ISSUE WHILE CONSIDERING THE APPEAL OF THE ASSESSEE IS CONNECTED WITH GROUND NO. 5 OF THE APPEAL. WHILE DECIDING GROUND NO. 5 OF THE APPEAL WE HAVE HELD THAT ASSESSEE IS ENTITLED TO THE DEDUCTION OF RS.24 LAKHS ALSO. FOR THE SIMILAR REASONS WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT (APPEALS) IN DELETING THE ADDITION OF RS.1,29,40,532/-. ACCORDINGLY, GROUND NO. 3 OF THE APPEAL OF THE ASSESSING OFFICER IS DISMISSED. PAGE | 19 52. IN THE RESULT, FOR AY 2003-04 , APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR : 2004-05 : 53. NOW WE COME TO ASSESSMENT YEAR 2004-05. ASSESSEE HAS FILED APPEAL IN ITA. NO. 4836 (DEL) 2010 AND THE REVENUE HAS FILED AN APPEAL IN I8TA. NO. 5007 (DEL) OF 2010 FOR ASSESSMENT YEAR 2004- 05. 54. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 4836/DEL/2010 FOR THE 2004-05:- 1. THAT THE ORDER DATED AUGUST 27, 2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV [CIT(A)] IS ERRONEOUS AND BAD IN LAW TO THE EXTENT THE SAME CONFIRMS THE ADDITIONS/ DISALLOWANCES/LEVY OF INTEREST MADE IN THE ASSESSMENT ORDER. 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSES OF RS. 11,59,489/- INCURRED BY THE APPELLANT TOWARDS UPDATING, MODIFICATION AND RATIONALIZATION OF APPLICATION SOFTWARE BY TREATING THE SAME AS CAPITAL EXPENDITURE. 3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.12,41,12,160/- BEING THE UNAMORTISED EXPENDITURE INCURRED BY THE APPELLANT ON RAISING LOAN FUNDS, THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS, CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37(1) AND ALLIED PROVISIONS OF THE INCOME TAX ACT,1961( THE ACT) 3.1 THAT THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT FOR PURPOSES OF THE ACT, REVENUE EXPENSES HAVE TO BE ALLOWED IN FULL IN THE ACCRUAL AND NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS. 4 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 17,00,000/- BEING BAD DEBTS WRITTEN OFF BY THE APPELLANT IN ITS BOOKS OF ACCOUNT OF THE YEAR UNDER APPEAL. 4.1 THAT THE LEARNED CIT(A) ERRED IN DISREGARDING THE JUDGMENT OF THE HONOURABLE APEX COURT IN THE CASE OF TRF LIMITED (CIVIL PAGE | 20 APPEAL NO.5293 OF 2003) AND CIRCULAR NO.551 DATED JANUARY 23,1990 ISSUED BY THE CENTRAL BOARD OF DIRECT TAXES .WHEREIN IT HAS BEEN PROVIDED THAT FOR ALLOWABILITY OF DEDUCTION UNDER SECTION 36(1 )(VIII) IT IS SUFFICIENT IF THE DEBT HAS BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNT. 5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A), THE LEARNED CIT(A) HAS ERRED INADVERTENTLY MENTIONING THE RELIEF GRANTED TO THE APPELLANT AT RS.88,617/- AGAINST RS.12,78,62,104/- BEING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE ACT. 6. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE ALLOWABILITY OF CLAIM FOR BAD DEBTS, AMOUNTING TO RS.46,98,373/-,AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. 55. THE FIRST GROUND OF APPEAL OF THE ASSESSEE IS GENERAL IN NATURE, HENCE DISMISSED. 56. FOR ALL OTHER GROUNDS BOTH THE PARTIES CONFIRMED THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE COMPARED TO THE FACTS FOR ASSESSMENT YEAR 2002-03 WHICH BOTH OF THEM ARGUED EXTENSIVELY AND, THEREFORE, SAME MAY BE CONSIDERED. WE ALSO FOUND THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE COMPARED TO EARLIER YEARS. 57. GROUND NO. 2 IS WITH RELATION TO ALLOWABILITY OF EXPENSES AMOUNTING TO RS.11,59,489/- INCURRED BY THE ASSESSEE TOWARDS UP-DATE MODIFICATION AND REALIZATION OF APPLICANTS SOFTWARE. ASSESSING OFFICER TREATED THE SAME AS CAPITAL EXPENDITURE. THE CIT (APPEALS) DELETED THE ABOVE DISALLOWANCE ACCEPTING THE CLAIM OF THE ASSESSEE THAT IT IS REVENUE EXPENDITURE. THIS ISSUE IS ALREADY COVERED BY OUR DECISION IN THE CASE OF THE ASSESSEE FOR ASSESSMENT YEAR 2001-02 WHEREIN FOLLOWING THE ORDER OF THE CO- ORDINATE BENCH IN ASSESSEES OWN CASE THE ISSUE WAS SET ASIDE TO THE FILE OF THE ASSESSING OFFICER. FOR SIMILAR REASONS WE ALSO SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR THE REASONS GIVEN BY US IN DECIDING GROUND NO. 5 OF THE APPEAL OF THE ASSESSEE PAGE | 21 FOR ASSESSMENT YEAR 2002-03. ACCORDINGLY, GROUND NO. 2 OF THE APPEAL IS ALLOWED. 58. GROUND NO. 3 IS SIMILAR TO GROUND NO. 3 IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03, WHICH WE HAVE ALLOWED IN FAVOUR OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03. THEREFORE, FOR SIMILAR REASONS GROUND NO. 3 OF THE APPEAL IS ALLOWED. 59. GROUND NO. 4 IS WITH RESPECT TO THE DISALLOWANCE OF RS.17 LAKHS BEING BAD DEBTS WRITTEN OFF. THIS ISSUE IS ALREADY DECIDED BY US IN GROUND NO. 6 OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002-03, FOR SIMILAR REASONS WE ALLOW THE ABOVE GROUND. 60. GROUND NO. 5 IS WITH RESPECT TO THE DISALLOWANCE UNDER SECTION 14A OF THE ACT WHEREIN THE ACTUAL RELIEF GRANTED TO THE ASSESSEE IS RS.12,78,62,104/- WHEREAS IN THE ORDER THE DISALLOWANCE DELETED WAS MENTIONED AT ONLY RS.88,617/-. ON CAREFUL EXAMINATION OF THE FACTS AND THE ORDERS OF THE LOWER AUTHORITIES, WE FIND THAT THE LEARNED ASSESSING OFFICER HAS WORKED OUT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT OF RS.12,78,62,104/-. THE ABOVE DISALLOWANCE WAS COMPRISED OF INTEREST DISALLOWANCE OF RS.12,78,62,103/-. THE LEARNED CIT (APPEALS) CONSIDERED THE ABOVE ISSUE AS PER GROUND NO. 6 OF THE APPEAL AT PAGE NOS. 2024. IT IS APPARENT THAT THE CIT (APPEALS) AT PAGE NO. 24 HAS WRONGLY MENTIONED THE SUM OF RS.88,617/- INSTEAD OF RS.12,78,62,104/-. ACCORDINGLY, GROUND NO. 5 OF THE APPEAL IS ALLOWED. 61. THE SIXTH GROUND OF APPEAL IS WITH RESPECT TO THE DIRECTION OF THE LEARNED CIT (APPEALS) TO VERIFY THE CLAIM OF THE ASSESSEE OF BAD DEBTS AMOUNTING TO RS.46,98,373/-. THE CLAIM OF THE ASSESSEE IS THAT THE ASSESSING OFFICER HAS NOT GRANTED DEDUCTION IN RESPECT OF WRITE OF AGAINST THE PROVISION FOR BAD AND DOUBTFUL DEBTS DISALLOWED IN EARLIER YEARS. THE APPELLANT SUBMITTED THAT RS. PAGE | 22 4698373 PERTAINING TO WRITE OF AN AMOUNT PERTAINING TO THE PARTIES IN RESPECT OF WHICH DETAILS FURNISHED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT. NATURALLY IF AN AMOUNT IS TAXED IN ONE YEAR ALREADY AND DISALLOWED BEING A MERE PROVISION, WHEN IN SUBSEQUENT YEAR IT IS WRITTEN OF IT NEEDS TO BE ALLOWED. THE LEARNED CIT A HAS CONSIDERED THE ARGUMENT OF THE ASSESSEE AND DIRECTED THE LEARNED ASSESSING OFFICER TO EXAMINE THE CONTENTION OF THE APPELLANT FROM THE POINT OF DOUBLE TAXATION AND HE HAS DIRECTED THAT IF THE CONTENTION OF THE APPELLANT IS FOUND CORRECT THEN THE LEARNED ASSESSING OFFICER SHOULD ALLOW THE CLAIM OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A WHO HAS GIVEN DIRECTION TO THE LEARNED ASSESSING OFFICER TO JUST SEE AND VERIFY WHETHER THE CLAIM OF THE ASSESSEE WITH RESPECT TO DOUBLE TAXATION OF THE SAME AMOUNT, WHICH WAS EARLIER DISALLOWED, IS NOT ONCE AGAIN TAXED IN THE HANDS OF THE ASSESSEE. AS THE DIRECTION OF THE LEARNED CIT A IS CORRECT LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE; WE DO NOT FIND ANY INFIRMITY IN THE SAME AND CONFIRM HIS ORDER. ACCORDINGLY, GROUND NUMBER SIX OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 62. ASSESSEE HAS MADE AN APPLICATION FOR ADMISSION OF THE ADDITIONAL GROUND OF APPEAL WHEREIN ASSESSEE IS AGGRIEVED WITH THE FACT THAT ASSESSEE HAS NOT BEEN GRANTED TAX CREDIT TO THE EXTENT OF 1 6015683/ OUT OF THE TOTAL TAX CREDIT OF 6 08123655/ AS CLAIMED BY THE APPELLANT IN THE RETURN OF INCOME. THE ASSESSEE SUBMITTED THAT AT THE TIME OF PASSING OF THE ASSESSMENT ORDER THE LEARNED ASSESSING OFFICER HAS ONLY ALLOWED THE TDS CREDIT OF 5 63828843/ WHICH WAS ENHANCED TO 5 66327066/ HOWEVER THE LEARNED ASSESSING OFFICER HAS STILL NOT GRANTED THE BALANCE CREDIT FOR TAX DEDUCTION AT SOURCE. IT WAS STATED THAT ASSESSEE HAS FILED THE TOTAL TDS CERTIFICATES OF 6 08123655/ VIDE VARIOUS LETTERS HOWEVER AO DID NOT GRANT THE FULL CREDIT OF THE ABOVE SUM. IT WAS STATED THAT THIS IS MERELY A TECHNICAL GROUND AND IT MAY BE ADMITTED. PAGE | 23 63. AS WE HAVE ALREADY ADMITTED THE IDENTICAL GROUND IN ASSESSEES APPEAL FOR EARLIER YEARS WE DO NOT FIND ANY HESITATION IN ADMITTING THIS GROUND OF APPEAL. NATURALLY, IF THE ASSESSEE IS ELIGIBLE FOR TAX CREDIT, WHICH IS SUPPORTED BY THE TAX DEDUCTION AT SOURCE CERTIFICATES FURNISHED IN CASE OF THE ASSESSEE, THE ASSESSING OFFICER IS DUTY-BOUND TO GRANT CREDIT, IF THE CERTIFICATES ARE FOUND TO BE IN ORDER. IN VIEW OF THIS WE DIRECT THE LEARNED ASSESSING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AND VERIFY THE TAX DEDUCTION AT SOURCE CERTIFICATE. IF ON VERIFICATION THOSE ARE FOUND IN ORDER, THE AO IS DIRECTED TO GRANT CREDIT OF THE ABOVE TAX DEDUCTION AT SOURCE. ACCORDINGLY, ADDITIONAL GROUND FILED BY THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTIONS. 64. IN THE RESULT APPEAL NUMBER 4836/DEL/2010 FOR ASSESSMENT YEAR 2004 05 FILED BY THE ASSESSEE IS PARTLY ALLOWED. 65. NOW WE COME TO ITA NUMBER 5007 DELHI 2010 FILED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 12 (ONE) NEW DELHI FOR ASSESSMENT YEAR 2004 05. THE LEARNED AO HAS RAISED FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 33,75,000/- MADE BY THE AO ON ACCOUNT OF DEPRECIATION ON DG SET. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 12,78,62,104/- MADE BY THE AO ON ACCOUNT OF DIVIDEND INCOME UNDER SECTION 14A OF THE ACT. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 17,00,000/- MADE BY THE AO ON ACCOUNT OF BAD DEBTS. 66. GROUND NUMBER ONE OF THE APPEAL IS GENERAL IN NATURE AND THEREFORE IT IS DISMISSED. PAGE | 24 67. GROUND NUMBER TWO IS WITH RESPECT TO THE DELETION OF DISALLOWANCE OF THE APPRECIATION OF RS. 3375000/ ON ACCOUNT OF DEPRECIATION ON D G SETS. BOTH THE PARTIES CONFIRMED THAT THE FACTS OF THE CASE ARE IDENTICAL TO GROUND NUMBER THREE OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002 03. WE HAVE ALREADY DECIDED THIS GROUND WHILE DECIDING APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2002 03 AND CONFIRMED THE ORDER OF THE LEARNED CIT A IN DELETING THE DISALLOWANCE OF DEPRECIATION. FOR SIMILAR REASONS WE DISMISS GROUND NUMBER TWO OF THE APPEAL AND CONFIRM THE ORDER OF THE LEARNED CIT A IN DELETING THE DISALLOWANCE OF RS. 3375000 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DEPRECIATION ON DIESEL GENERATING SETS. 68. GROUND NUMBER THREE OF THE APPEAL IS WITH RESPECT TO DELETION OF DISALLOWANCE OF 1 27862104/ MADE BY THE ASSESSING OFFICER ON ACCOUNT OF DIVIDEND INCOME UNDER SECTION 14 A OF THE INCOME TAX ACT. FACTS PUT IN NARROW SHELL, SHOWS THAT ASSESSEE HAS EARNED A DIVIDEND INCOME OF 1 7081012/ AS EXEMPT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE WAS ASKED TO THAT WHY THE EXPENDITURE ON EARNING DIVIDEND INCOME SHOULD NOT BE DISALLOWED AS ASSESSEE DID NOT CONSIDER ANY EXPENDITURE IS DISALLOWANCE BY THE FOR EARNING EXEMPT INCOME. THE ASSESSEE AS EXPLAINED IN THE EARLIER YEARS STATED THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF THE SAID DIVIDEND INCOME FROM INVESTMENT IN SHARES, FURTHER IT WAS STATED THAT INVESTMENT WERE MADE IN EARLIER YEARS OUT OF ITS OWN FUNDS IN THE ORDINARY COURSE OF BUSINESS. THE LEARNED ASSESSING OFFICER AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE DISALLOWED THE INTEREST ON SUCH INVESTMENT AMOUNTING TO 1 27862103/ UNDER SECTION 14 A OF THE INCOME TAX ACT. THE LEARNED CIT A HELD THAT THE INVESTMENTS AS HELD IN THE EARLIER YEARS ARE MADE OUT OF INTERNAL ACCRUALS HENCE HE DELETED THE ADDITION. 69. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER WHEREAS THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THERE IS NO SATISFACTION PAGE | 25 RECORDED BY THE LEARNED ASSESSING OFFICER WITH RESPECT TO THE EXPLANATION OF THE ASSESSEE THAT NO EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE ON EARNING EXEMPT INCOME. HE SUBMITTED THAT ON RECORDING OF THE SATISFACTION CLEARLY GOES IN FAVOUR OF THE ASSESSEE AND NO DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT CAN BE MADE. 70. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE THE ASSESSEE HAS CATEGORICALLY STATED BEFORE THE LEARNED ASSESSING OFFICER THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. THE LEARNED ASSESSING OFFICER, WITHOUT RECORDING ANY SATISFACTION TO THE FACT ABOUT THE INCORRECTNESS OF THE CLAIM OF THE ASSESSEE, ON EXAMINATION OF THE ACCOUNTS OF THE ASSESSEE, PROCEEDED TO DISALLOW THE EXPENDITURE UNDER SECTION 14 A OF THE ACT. RECORDING OF THE SATISFACTION IS THE FIRST STEP FOR MAKING A DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT. SUCH SATISFACTION HAS TO BE RECORDED BY THE AO ON EXAMINATION OF THE ACCOUNTS OF THE ASSESSEE. HERE AS ASSESSEE CLAIMED THAT IT DID NOT INCUR ANY EXPENDITURE FOR EARNING EXEMPT INCOME, THE LEARNED ASSESSING OFFICER HAS NOT RECORDED HIS SATISFACTION THAT WHY THE EXPLANATION FURNISHED BY THE ASSESSEE IS INCORRECT. EVEN OTHERWISE, THE LEARNED ASSESSING OFFICER HAS DISALLOWED THE PROPORTIONATE INTEREST EXPENDITURE, SUCH INVESTMENT MADE BY THE ASSESSEE HAVE COME OUT OF THE INTERNAL ACCRUALS, NO DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE CAN BE MADE. AO DID NOT MAKE ANY DISALLOWANCE OF THE EXPENDITURE OTHER THAN INTEREST EXPENDITURE. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A EXCEPT TO THE EXTENT OF WRONG MENTION OF THE SUM IN THE LAST LINE-ITEM AT PAGE NUMBER 24 OF HIS ORDER WHICH WAS PART OF THE ONE OF THE GROUNDS RAISED BY THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE LEARNED CIT A TO THAT EXTENT IS UPHELD AND GROUND NUMBER THREE OF THE APPEAL OF THE AO IS DISMISSED. 71. GROUND NUMBER FOUR OF THE APPEAL OF AO IS WITH RESPECT TO DELETION OF THE ADDITION OF 17 LAKHS MADE BY THE ASSESSING PAGE | 26 OFFICER BECAUSE OF BAD DEBT. AO FOUND THAT ASSESSEE HAS CLAIMED BAD DEBTS OF 7 8388724/. ON EXAMINATION OF THE CLAIM, HE FOUND THAT BAD DEBT CLAIMED TO BE WRITTEN OF AMOUNTING TO 17 LAKHS ASSESSEE DID NOT FILE ANY DETAILS. THEREFORE, HE MADE THE ABOVE DISALLOWANCE. THE LEARNED CIT A FOUND THAT THAT THE ABOVE DEBT HAS BEEN WRITTEN OFF BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT AND BUSINESS INCOME WITH RESPECT TO ABOVE BUSINESS IS SHOWN. 72. PARTIES SUBMITTED BEFORE US THAT THIS IS IDENTICAL TO GROUND NUMBER THREE OF THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2003 04 AND NO OTHER FACTS ARE REQUIRED TO BE BROUGHT ON RECORD. AS THE LEARNED CIT A HAS DELETED THE ABOVE DISALLOWANCE FOR THE REASON THAT SUCH AMOUNT THREE PRESENTS DEBTS WRITTEN OFF AS BAD DEBT. HE REFERRED THAT IF THE DEBT IS WRITTEN OFF AS RECOVERABLE IN ITS ACCOUNTS BY THE ASSESSEE IT SHOULD BE ALLOWED. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A. THEREFORE, GROUND NUMBER FOUR OF THE APPEAL OF THE AO IS DISMISSED. 73. IN THE RESULT, ITA NUMBER 5007/DEL /2010 FILED BY THE ASSESSING OFFICER IS DISMISSED. 74. IN THE RESULT, APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2004 05 IS PARTLY ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. ASSESSMENT YEAR 2005 06 75. FOR ASSESSMENT YEAR 2005 06, THE LEARNED COMMISSIONER OF INCOME TAX APPEALS XV, NEW DELHI PASSED AN ORDER DATED 13/9/2010 IN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE ADDITIONAL COMMISSIONER OF INCOME TAX RANGE - 12 NEW DELHI PASSED UNDER SECTION 143 (3) OF THE ACT ON 30/12/2018 WHEREIN THE RETURNED INCOME OF 80 29583750 DISCLOSED BY THE ASSESSEE IN RETURN FILED ON 30 OCTOBER 2005 IS ASSESSED AT 9 56360025/. THE ASSESSEE GOT PARTIAL RELIEF IN THE APPEAL AND THEREFORE BOTH THE PARTIES ARE IN APPEAL BEFORE US. 76. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 4918/DEL/2010 FOR THE 2005-06:- PAGE | 27 1. THAT THE ORDER DATED SEPTEMBER 13, 2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV [CIT(A)] IS ERRONEOUS AND BAD IN LAW TO THE EXTENT THE SAME CONFIRMS THE ADDITIONS/ DISALLOWANCES/LEVY OF INTEREST MADE IN THE ASSESSMENT ORDER. 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 17,56,37,492/- BEING THE UNAMORTISED EXPENDITURE INCURRED BY THE APPELLANT ON RAISING LOAN FUNDS, THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS, CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37(1) AND ALLIED PROVISIONS OF THE INCOME TAX ACT,1961( THE ACT) 2.1 THAT THE LEARNED CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT FOR PURPOSES OF THE ACT, REVENUE EXPENSES HAVE TO BE ALLOWED IN FULL IN THE YEAR OF ACCRUAL AND NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS. 1,19,01,068/- UNDER SECTION 14A OF THE INCOME TAX ACT, 1961 (THE ACT) BY ERRONEOUSLY HOLDING THAT THE APPELLANT CANNOT EARN DIVIDEND INCOME WITHOUT INCURRING ADMINISTRATIVE EXPENSES. 4. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE APPELLANTS CLAIM, AMOUNTING TO RS.16,15,567/-, FOR CONSEQUENTIAL DEPRECIATION ON LEASEHOLD IMPROVEMENTS CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. 5. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE APPELLANTS CLAIM, AMOUNTING TO RS. 18,79,669/-, FOR CONSEQUENTIAL DEPRECIATION ON SOFTWARE EXPENSES CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. 77. GROUND NUMBER ONE OF THE APPEAL IS GENERAL IN NATURE AND THEREFORE IN ABSENCE OF ANY ARGUMENT ON THE SAME, IT IS DISMISSED. 78. GROUND NUMBER TWO IS WITH RESPECT TO THE DISALLOWANCE CONFIRMED BY THE LEARNED CIT A OF 1 75637492 BEING THE UNAMORTIZED EXPENDITURE INCURRED BY THE ASSESSEE ON RAISING LOAN FUNDS THOUGH TREATED AS A DEFERRED REVENUE EXPENDITURE IN ITS BOOKS OF ACCOUNTS HOWEVER CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37 (ONE) OF THE ACT. THE IDENTICAL ISSUE IS INVOLVED IN THE PAGE | 28 APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2000 01 AND 2001 02 WHEREIN THE CLAIM OF THE ASSESSEE WAS DECIDED IN ITS FAVOUR. IDENTICAL ISSUE WAS ALSO THERE IN ASSESSMENT YEAR 2002 03, 2003 04 AND 2004 05. WHILE DECIDING IDENTICAL GROUND, WE HAVE FOLLOWED THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE AND ALLOWED THIS GROUND OF APPEAL. 79. BOTH THE PARTIES CONFIRMED THAT THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE OF THE CURRENT YEAR COMPARED TO THE FACTS OF THOSE YEARS. THEREFORE FOR THE SIMILAR REASONS WE ALLOW GROUND NUMBER TWO OF THE APPEAL AND DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE DISALLOWANCE OF 1 75637492. 80. GROUND NUMBER THREE IS WITH RESPECT TO THE CONFIRMATION OF DISALLOWANCE OF 1 1901068 UNDER SECTION 14 A OF THE INCOME TAX ACT. ASSESSEE HAS ON DIVIDEND INCOME OF 9 294525/ WHICH IS EXEMPT. AO ASKED ASSESSEE TO EXPLAIN AS TO WHY EXPENDITURE IN RELATION TO EXEMPT INCOME SHOULD NOT BE DISALLOWED UNDER SECTION 14 A OF THE ACT APPLYING RULE 8D NOTIFIED FOR THE ABOVE PURPOSES. THE ASSESSEE SUBMITTED THAT ASSESSEE HAS NOT INCURRED ANY SPECIFIC OR SUBSTANTIAL EXPENDITURE AND RULE 8D DOES NOT APPLY TO THE IMPUGNED ASSESSMENT YEAR. THE AO REJECTING THE CONTENTION OF THE ASSESSEE APPLIED PROVISIONS OF RULE 8D AND DISALLOWED A SUM OF 1 28694779 UNDER SECTION 14 A OF THE INCOME TAX ACT AS COMPUTED IN ACCORDANCE WITH RULE 8D. ON APPEAL BEFORE THE LEARNED CIT A HE HELD THAT PROVISIONS OF SECTION 14 A IS NOT APPLICABLE TO THE FACTS OF THE CASE AS FAR AS THE DISALLOWANCE ON ACCOUNT OF INTEREST IS CONCERNED. HE THUS DELETED THE ADDITION ON ACCOUNT OF INTEREST OF RS. 116739712/. HOWEVER WITH RESPECT TO THE INTEREST EXPENDITURE HE UPHELD THE DISALLOWANCE OF 1 1901068/. THE ASSESSEE IS IN APPEAL BEFORE US. 81. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE LEARNED ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION ABOUT THE INCORRECT AND IS OF THE CLAIM OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. HE PAGE | 29 SUBMITTED THAT IN ABSENCE OF SUCH SATISFACTION THE DISALLOWANCE CANNOT BE MADE. 82. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. 83. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT THE ASSESSEE HAS CLAIMED BEFORE THE ASSESSING OFFICER THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING EXEMPT INCOME. THE LEARNED AO WITHOUT RECORDING ANY SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE THAT IT DID NOT INCURRED ANY EXPENDITURE, HAS PROCEEDED TO APPLY THE PROVISIONS OF RULE 8D OF THE INCOME TAX RULES AND MADE THE DISALLOWANCE. RECORDING OF THE SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE ON INCURRING THE EXPENDITURE FOR EXEMPT INCOME IS A NECESSARY INGREDIENT FOR INVOKING THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT. IN ABSENCE OF ANY SUCH SATISFACTION, NO DISALLOWANCE CAN BE UPHELD. IN THE OTHER YEARS OF THE APPEAL, ALSO THE IDENTICAL ISSUE AROSE WHEREIN WE HAVE DELETED THE DISALLOWANCE HOLDING THAT THE ASSESSING OFFICER HAS FAILED TO RECORD ANY SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE OF NOT INCURRING ANY EXPENDITURE. THEREFORE, WE ALSO DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE DISALLOWANCE FOR THIS REASON. FURTHER THE PROVISIONS OF RULE 8D OF THE INCOME TAX ACT CANNOT BE APPLIED TO ASSESSMENT YEAR 2005 06. IN THE RESULT GROUND NUMBER THREE OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 84. GROUND NUMBER FOUR OF THE APPEAL IS WITH RESPECT TO THE CONFIRMATION OF THE DISALLOWANCE IN NOT ADJUDICATING THE CLAIM OF THE APPELLANT OF 1 615567/ FOR CONSEQUENTIAL DEPRECIATION ON LEASEHOLD IMPROVEMENTS CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. THE CLAIM OF THE ASSESSEE IS THAT DURING THE ASSESSMENT YEAR 95 96 AND 96 97 AND IN 97-98 IT HAD INCURRED CERTAIN EXPENDITURE FOR IMPROVEMENT OF THE LEASEHOLD PREMISES. IT WERE CLAIMED AS REVENUE EXPENDITURE BUT WERE NOT ALLOWED AS SUCH AND WERE HELD TO BE CAPITAL EXPENDITURE. AGAINST THE ABOUT DISALLOWANCE THE PAGE | 30 APPEALS OF THE ASSESSEE ARE PENDING BEFORE THE HONOURABLE HIGH COURT. DURING THIS YEAR THE CLAIM OF THE ASSESSEE IS THAT THE APPRECIATION ON SUCH LEASEHOLD PREMISES PERTAINING TO THE IMPUGNED ASSESSMENT YEARS 1 615567. THE AO WITHOUT PASSING ANY ORDER REJECTED THE CLAIM OF THE APPELLANT THE LEARNED CIT A, SET ASIDE THE WHOLE ISSUE BY DIRECTING THE ASSESSING OFFICER TO ALLOW THE CLAIM FOR CONSEQUENTIAL DEPRECIATION AFTER DUE VERIFICATION AND EXAMINATION OF FACTS WITH REFERENCE TO THE RECORDS. ON CAREFUL APPRECIATION OF THE FACTS PLACED BEFORE US WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A WHO IN FACT IS DIRECTED THE LEARNED ASSESSING OFFICER TO ALLOW THE DEPRECIATION TO THE ASSESSEE IF IN EARLIER YEARS SAME HAS BEEN ALLOWED AS STATED BY THE ASSESSEE. WE THEREFORE UPHOLD THE ORDER OF THE LEARNED CIT CAPITAL AND DISMISS GROUND NUMBER FOUR. 85. GROUND NUMBER FIVE IS WITH RESPECT TO NON-ADJUDICATION BY THE LEARNED CIT A OF CLAIM OF 1 879669/ FOR CONSEQUENTIAL DEPRECIATION ON SOFTWARE EXPENSES CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. FOR THE SIMILAR REASONS AS GIVEN BY US IN GROUND NUMBER FOUR OF THE APPEAL OF THE ASSESSEE FOR THESE IMPUGNED YEAR WE ALSO DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A IN DIRECTING THE LEARNED ASSESSING OFFICER TO MAKE VERIFICATION AND THEN ALLOW THE CLAIM OF THE ASSESSEE OF DEPRECIATION ON SOFTWARE EXPENSES. ACCORDINGLY GROUND NUMBER FIVE OF THE APPEAL OF THE ASSESSEE IS DISMISSED. 86. IN THE RESULT ITA NUMBER 4918/DEL/2010 FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2005 06 IS PARTLY ALLOWED. 87. NOW WE COME TO THE APPEAL OF THE LEARNED ASSESSING OFFICER IN ITA NUMBER 5557/DEL/2010 FOR THE SAME ASSESSMENT YEAR WHEREIN IT HAS RAISED FOUR GROUNDS OF APPEAL OUT OF WHICH GROUND NUMBER ONE IS GENERAL IN NATURE. THEREFORE, GROUND NUMBER ONE OF THE APPEAL IS DISMISSED. 88. GROUND NUMBER TWO IS WITH RESPECT TO THE DISALLOWANCE OF THE DEPRECIATION OF RS. 2147673 ON ACCOUNT OF PART OF THE COMPUTERS PAGE | 31 AGAINST WHICH ASSESSEES CLAIM DEPRECIATION AT THE RATE OF 60% WHEREAS THE LEARNED ASSESSING OFFICER HAS ALLOWED THE DEPRECIATION AT THE RATE OF 25% HOLDING IT TO BE GENERAL PLANT AND MACHINERY. THE LEARNED CIT A ALLOWED THE CLAIM OF THE ASSESSEE HOLDING THAT THAT DEPRECIATION ON COMPUTER PERIPHERALS NECESSARY IS ELIGIBLE FOR DEPRECIATION AT THE RATE OF 60%. 89. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED AO WHERE THE LEARNED AUTHORISED REPRESENTATIVE REFERRED THAT THIS ISSUE SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONOURABLE DELHI HIGH COURT IN 358 ITR 47 IN CIT VERSUS BSES YAMUNA POWERS LTD. 90. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FIND THAT ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONOURABLE DELHI HIGH COURT IN 358 ITR 47 WHEREIN COMPUTER ACCESSORIES AND PERIPHERALS ARE HELD TO BE AN INTEGRAL PART OF THE COMPUTER SYSTEM AND THEREFORE THEY ARE ENTITLED TO HIGHER RATE OF DEPRECIATION OF 60%. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT A AND DISMISS GROUND NUMBER TWO OF THE APPEAL OF THE AO. 91. GROUND NUMBER THREE OF THE APPEAL IS WITH RESPECT TO THE DISALLOWANCE DELETED BY THE LEARNED CIT A UNDER SECTION 14 A OF THE INCOME TAX ACT. THE LEARNED AO HAS MADE THE DISALLOWANCE OF 1 TO 8694779/ WHEREAS THE LEARNED CIT A HAS DELETED THE ADDITION OF RS. 116793711/ AND THEREFORE THE ASSESSING OFFICER IS IN APPEAL BEFORE US. 92. WHILE DECIDING THE APPEAL OF THE ASSESSEE WE HAVE HELD THAT THERE IS NO SATISFACTION RECORDED BY THE LEARNED ASSESSING OFFICER AND THEREFORE THE COMPLETE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER IS NOT SUSTAINABLE. IN VIEW OF THIS GROUND NUMBER THREE OF THE APPEAL OF THE AO IS DISMISSED. 93. GROUND NUMBER FOUR OF THE APPEAL IS WITH RESPECT TO THE DELETION OF ADDITION OF 1 0971876 MADE BY THE ASSESSING OFFICER ON ACCOUNT OF REVERSAL OF INCOME. THE BRIEF FACTS OF THE ISSUE SHOWS THAT ASSESSEE IS A NBFC, IT DID NOT RECOGNIZE INCOME OF INTEREST PAGE | 32 ON STICKY LOANS. SO AFTER PASSING ENTRIES OF INTEREST IN BOOKS, IT REVERSED THE SAME. THUS IT DID NOT OFFER THE INTEREST ON STICKY LOANS AS ITS INCOME. LD AO NOTED THAT ASSESSEE IS REVERSING THE INCOME AGAINST THE PRINCIPLES OF MERCANTILE SYSTEM OF ACCOUNTING THUS INCOME REVERSED WAS THEREFORE ADDED BY THE LEARNED ASSESSING OFFICER. AO FURTHER NOTED THAT ASSESSEE WOULD BE ELIGIBLE TO CLAIM OF DEDUCTION IN THE YEAR IN WHICH THE SAME IS WRITTEN OFF. THEREFORE, HE DISALLOWED THE ABOVE SUM. 94. THE CLAIM OF THE ASSESSEE WAS THAT THE ACCOUNTING TREATMENT FOLLOWED BY THE APPELLANT OF NOT RECOGNIZING INTEREST ON STICKY LOAN IS AS PER ACCOUNTING STANDARD 9 SSUED BY ICAI. IT WAS FURTHER STATED THAT APPELLANT HAS BEEN CONSISTENTLY FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING AND EVEN UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST ON STICKY LOAN DOES NOT ACCRUE TO THE ASSESSEE AS THERE IS NO REASONABLE CERTAINTY OF ITS COLLECTION. THE LEARNED ASSESSING OFFICER REJECTED THE ABOVE CLAIM. THE LEARNED CIT A DELETED THE ABOVE DISALLOWANCE NOTING THAT THE ASSESSEE IS A NONBANKING FINANCIAL COMPANY AND IT HAS BEEN CONSISTENTLY FOLLOWING THE MERCANTILE METHOD OF ACCOUNTING AND ITS ACCOUNTS MAINTAINED IN ACCORDANCE WITH THE ACCOUNTING STANDARD ISSUED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA. IT WAS FURTHER NOTED THAT THE INCOME RECOGNITION SHALL BE BASED ON THE RECOGNISED ACCOUNTING STANDARD. HE FURTHER NOTED THAT ON STICKY LOANS THERE IS NO CERTAINTY OF RECEIPT OF THE ABOVE INTEREST INCOME. UNLESS THERE IS A REASONABLE CERTAINTY OF RECOVERY OF REALIZATION OF THE ABOVE INCOME NO SUCH INCOME CAN BE RECOGNIZED FROM NON-PERFORMING ASSET AS IT DID NOT ACCRUE TO THE ASSESSEE. HE THEREFORE SUBMITTED THAT IF SUCH INCOME IS CHARGED TO TAX IT FAILS THE ACCRUAL TEST AND HENCE INCORRECT. THEREFORE HE DELETED THE ADDITION. ON HEARING THE PARTIES, WE FOUND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF COMMISSIONER OF INCOME TAX V. ELGI FINANCE LTD., (2007) 293 ITR 357 . FURTHER IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE HONOURABLE BOMBAY HIGH COURT RECENTLY IN BAJAJ FINANCE LIMITED PAGE | 33 INCOME TAX APPEAL NO. 237 OF 2017 WITH INCOME TAX APPEAL NO 485 OF 2017 WHERE IN IT HAS BEEN HELD THAT :- 6.. GUJARAT HIGH COURT IN CASE OF PRINCIPAL CIT VS. MAHILA SEWA SAHAKARI BANK LTD1 HAD HELD THAT IN CASE OF A CO OPERATIVE BANK, THE INTEREST ON NPAS WOULD NOT BE CHARGEABLE TO TAX ON MERE ACCRUAL. THE COURT REFERRED TO AND RELIED UPON THE DECISION OF THE SUPREME COURT IN THE CASE OF SOUTHERN TECHNOLOGIES LTD VS. JOINT CIT2 . WE MAY NOTE THAT THE DECISION CONCERNS THE ASSESSMENT YEAR 2010-11 WHEN A CO- OPERATIVE BANK WAS NOT INCLUDED UNDER SECTION 43D OF THE ACT WHICH WAS INSERTED BY FINANCE ACT, 2017 W.E.F 1.4.2018. 7. IN CASE OF CIT VS. DEOGIRI NAGARI SAHAKARI BANK LTD & ORS.3, THIS COURT HAD EXPRESSED A SIMILAR VIEW. WE MAY FURTHER CLARIFY THAT IN THE SAID CASE, THE COURT WAS CONCERNED WITH A SIMILAR CLAIM RAISED BY THE CO-OPERATIVE BANK AND THE COURT DID RECORD THAT THE ASSESSEE WAS A CO-OPERATIVE BANK AND NOT NBFC. HOWEVER, THIS DISTINCTION MAY NOT HAVE MUCH SIGNIFICANCE NOW IN VIEW OF THE FACT THAT THIS COURT IN CASE OF CIT VS. M/S. KEC HOLDINGS LTD (INCOME TAX APPEAL NO. 221 OF 2012 DECIDED ON 11.6.2014) HELD AND OBSERVED AS UNDER: '8. THE ASSESSEE HAD CREDITED ONLY AN AMOUNT OF RS.38,57,933/AS INTEREST ON LOANS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE INTEREST ACCRUED ON THE ENTIRE LOANS SHOULD HAVE BEEN SHOWN AS INCOME. THE DETAILS AS TO HOW THE INTEREST INCOME ON ACCRUAL BASIS SAME. ONCE THE VIEW TAKEN BY THE TRIBUNAL WAS POSSIBLE AND IN THE GIVEN FACTS AND CIRCUMSTANCES THE INCOME HAS NOT BEEN REALIZED BY THE ASSESSEE, THE ADDITION WAS RIGHTLY DELETED. WE, THEREFORE, DO NOT FIND THAT THE APPEAL RAISES ANY PAGE | 34 SUBSTANTIAL QUESTION OF LAW. IT IS ACCORDINGLY DISMISSED. NO COSTS.' 8. DELHI HIGH COURT IN CASE OF CIT VS. VASISTH CHAY VYAPAR LTD4 HELD THAT INTEREST ON NPAS CANNOT BE TAXED ON ACCRUAL BASIS. IT WAS NOTED THAT NBFC WOULD BE GOVERNED BY THE DIRECTIONS ISSUED BY THE RESERVE BANK OF INDIA AND RBI DIRECTIVES PROVIDED THAT UNDER CERTAIN CIRCUMSTANCES, A LOAN OR ADVANCE WOULD BE TREATED AS NPA. THE COURT ON THE REAL INCOME THEORY HELD THAT SUCH INTEREST WOULD NOT BE TAXABLE. WE NOTICE THAT THE DECISION OF THE DELHI HIGH COURT IN CASE OF VASISTH CHAY VYAPAR LTD (SUPRA) WAS CARRIED IN THE APPEAL BY THE REVENUE BEFORE THE SUPREME COURT. THE SUPREME COURT IN THE JUDGMENT REPORTED IN [2018] 253 TAXMAN 401 (SC) APPROVED THE DECISION OF THE HIGH COURT AND DISMISSED THE APPEAL. UNDER THESE CIRCUMSTANCES, THIS QUESTION IS NOT ENTERTAINED. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT AL. ACCORDINGLY GROUND NUMBER FOUR OF THE APPEAL IS DISMISSED. 95. IN THE RESULT, APPEAL FILED BY THE LEARNED ASSESSING OFFICER IN ITA NUMBER 5557/DEL/2010 FOR ASSESSMENT YEAR 2005 06 IS DISMISSED. 96. ACCORDINGLY, FOR ASSESSMENT YEAR 2005 06, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED IN APPEAL FILED BY THE LEARNED ASSESSING OFFICER IS DISMISSED. AY 2006-07 97. FOR ASSESSMENT YEAR 2006 07 THE ASSESSMENT ORDER WAS PASSED UNDER SECTION 143 (3) OF THE INCOME TAX ACT ON 30/12/2008 AT 6 99492966/ AGAIN THE RETURNED INCOME OF THE ASSESSEE AT RS. 403766160 AS PER RETURN OF INCOME FILED ON 27 NOVEMBER 2006. PAGE | 35 THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT A PASSED AN ORDER DATED 13/9/2010 AGAINST WHICH BOTH THE PARTIES ARE IN APPEAL BEFORE US. 98. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 4919/DEL/2010 FOR THE 2006-07:- 1. THAT THE ORDER DATED SEPTEMBER 13, 2010 PASSED BY THE CIT(A) IS ERRONEOUS AND BAD IN LAW TO THE EXTENT THE SAME CONFIRMS THE ADDITIONS/ DISALLOWANCES/LEVY OF INTEREST MADE IN THE ASSESSMENT ORDER. 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.22,33,62,501/- BEING THE UNAMORTISED EXPENDITURE INCURRED BY THE APPELLANT ON RAISING LOAN FUNDS, THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS, CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37(1) AND ALLIED PROVISIONS OF THE ACT. 2.1 THAT THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT FOR PURPOSES OF THE ACT, REVENUE EXPENSES HAVE TO BE ALLOWED IN FULL IN THE YEAR OF ACCRUAL AND NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNTS. 3 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.80,63,307/- UNDER SECTION 14A OF THE ACT BY ERRONEOUSLY HOLDING THAT THE APPELLANT CANNOT EARN DIVIDEND INCOME WITHOUT INCURRING ADMINISTRATIVE EXPENSES. 4 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE APPELLANTS CLAIM, AMOUNTING TO RS.14,54,010/-, FOR CONSEQUENTIAL DEPRECIATION ON LEASEHOLD IMPROVEMENTS CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. 5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE APPELLANTS CLAIM, AMOUNTING TO RS.7,51,868/-, FOR CONSEQUENTIAL DEPRECIATION ON SOFTWARE EXPENSES CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR VERIFICATION. PAGE | 36 99. GROUND NUMBER ONE OF THE APPEAL IS GENERAL IN NATURE AND THEREFORE IT IS DISMISSED. 100. GROUND NUMBER TWO IS WITH RESPECT TO THE CONFIRMATION OF THE DISALLOWANCE OF RS. 223362501/ ON ACCOUNT OF UNAMORTIZED EXPENDITURE INCURRED BY THE ASSESSEE ON RAISING OF LOAN FUNDS THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS AND CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37 (1) OF THE ACT. 101. BOTH THE PARTIES CONFIRM THAT THIS ISSUE IS IDENTICAL TO GROUND NUMBER THREE OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002 03 TO 2005 06 AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WHILE DECIDING THIS GROUND OF APPEAL IN THOSE YEARS, WE HAVE RELIED UPON THE ORDER OF THE COORDINATE BENCH FOR ASSESSMENT YEAR 2000 01 AND FOUR 2001 02 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. FOR THE SAME REASONS WE ALSO ALLOW GROUND NUMBER TWO OF THE APPEAL OF THE ASSESSEE. 102. GROUND NUMBER THREE OF THE APPEAL OF THE ASSESSEE IS WITH RESPECT TO THE CONFIRMATION OF THE DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT BY THE LEARNED CIT A OF 8 063307 ON ACCOUNT OF ADMINISTRATIVE EXPENSES. THIS IS CONNECTED TO GROUND NUMBER THREE OF THE APPEAL OF THE LEARNED ASSESSING OFFICER WHERE HES AGGRIEVED WITH THE ORDER OF THE LEARNED CIT A WHEREIN HE DELETED THE ADDITION OF 7 5362471/ OUT OF THE TOTAL ADDITION MADE OF 8 3425779/. BOTH THE PARTIES CONFIRM THAT THIS ISSUE IS IDENTICAL TO GROUND NUMBER TWO OF THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2002 03. THE BRIEF FACTS OF THE CASE SHOWS THAT ASSESSEE HAS EARNED DIVIDEND INCOME OF 9 51037/ WHICH IS EXEMPT UNDER THE INCOME TAX ACT. THE ASSESSEE WAS ASKED TO EXPLAIN WHY THE EXPENDITURE SHOULD NOT BE DISALLOWED UNDER SECTION 14 A OF THE INCOME TAX ACT APPLYING RULE 8D. THE ASSESSEE STATED THAT THE ASSESSEE IS EARNING DIVIDEND INCOME BUT DOES NOT INVOLVE INCURRING OF ANY SPECIFIC SUBSTANTIAL EXPENDITURE. IT WAS FURTHER OBJECTED THAT THE RULE 8D DOES NOT APPLY TO THE IMPUGNED ASSESSMENT YEAR. THE LEARNED ASSESSING OFFICER CONSIDERED THE PAGE | 37 EXPLANATION OF THE ASSESSEE REJECTED THE SAME AND STATED IN GENERAL TERMS THAT ASSESSEE IS EXEMPT INCOME CANNOT BE SAID TO HAVE NOT RESULTED INTO ANY EXPENDITURE IS THERE IS AN INBUILT EXPENDITURE IN THOSE INVESTMENT. THUS HE DISALLOWED THE SUM OF 8 3425779/ UNDER SECTION 14 A OF THE INCOME TAX ACT APPLYING THE PROVISIONS OF RULE 8D. THE ASSESSEE CHALLENGED THE SAME BEFORE THE LEARNED CIT A WHO HELD THAT ASSESSEE HAS MADE INVESTMENT OUT OF ITS OWN FUNDS AND NOT OUT OF BORROWED CAPITAL AND THEREFORE THERE CANNOT BE IN THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE. HOWEVER HE UPHELD THE DISALLOWANCE ON ACCOUNT OF 0.5% OF THE AVERAGE VALUE OF THE INVESTMENT AS ADMINISTRATIVE EXPENDITURE AMOUNTING TO 8 063308/. THEREFORE, BOTH THE PARTIES ARE IN APPEAL WITH RESPECT OF GROUNDS BEFORE US. 103. THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY STATED THAT THERE IS NO SATISFACTION RECORDED BY THE LEARNED ASSESSING OFFICER WITH RESPECT TO THE CLAIM OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE AND THEREFORE THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER UNDER SECTION 14 A OF THE INCOME TAX ACT IS NOT SUSTAINABLE. 104. THE LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED ASSESSING OFFICER. 105. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND FOUND THAT BEFORE THE ASSESSING OFFICER IT WAS STATED BY THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF THE EXEMPT INCOME, HOWEVER THE LEARNED ASSESSING OFFICER HAS WITHOUT RECORDING ANY SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE, INVOKED THE PROVISIONS OF SECTION 14 A OF THE INCOME TAX ACT AND APPLYING RULE 8D FOR COMPUTATION OF THE DISALLOWANCE, DISALLOWED IT. RECORDING OF THE SATISFACTION ABOUT THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE IS A BASIC REQUIREMENT FOR MAKING ANY DISALLOWANCE UNDER THAT SECTION. AS THE LEARNED ASSESSING OFFICER HAS FAILED TO MAKE ANY SUCH SATISFACTION, AS PER OUR ORDER IN EARLIER YEARS, IN ABSENCE OF SUCH SATISFACTION, DELETING PAGE | 38 THE ABOVE DISALLOWANCE IS FOLLOWED. HENCE, WE DELETE THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER. ACCORDINGLY, GROUND NUMBER THREE OF THE APPEAL OF THE ASSESSEE IS ALLOWED AND GROUND NUMBER THREE OF THE APPEAL OF THE LEARNED ASSESSING OFFICER IS DISMISSED. 106. GROUND NUMBER FOUR AND FIVE OF THE APPEAL OF THE ASSESSEE IS WITH RESPECT TO THE DIRECTION OF THE LEARNED CIT A TO THE ASSESSING OFFICER FOR VERIFICATION. IN FACT THE LEARNED CIT A DIRECTED THE ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE WITH RESPECT TO THE CONSEQUENTIAL DEPRECIATION ON LEASE OR IMPROVEMENTS AND DEPRECIATION ON SOFTWARE EXPENSES. THE IDENTICAL ISSUE AROSE IN THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 2005 06 WHEREIN WE HAVE DISMISSED THIS GROUND OF APPEAL. FOR SIMILAR REASONS WE DISMISS BOTH THESE GROUNDS. 107. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 108. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 5558/DEL/2010 FOR THE ASSESSMENT YEAR 2006-07:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 6,29,052/- MADE BY THE AO ON ACCOUNT OF DIFFERENTIAL DEPRECIATION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 7,53,62,471/- OUT OF TOTAL ADDITION OF RS. 8,34,25,779/- MADE BY THE AO ON ACCOUNT OF SECTION 14A OF THE ACT, AS PER PROVISIONS OF RULE 8D OF THE IT RULES, 1962. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 55,63,413/- MADE BY THE AO ON ACCOUNT OF REVERSAL OF INCOME. 109. GROUND NUMBER ONE OF THE APPEAL OF THE LEARNED ASSESSING OFFICER IS GENERAL IN NATURE AND THEREFORE SAME IS DISMISSED. GROUND NUMBER TWO OF THE APPEAL IS WITH RESPECT TO THE ADDITION DELETED BY THE LEARNED CIT A OF 6 29052 ON ACCOUNT OF DIFFERENTIAL PAGE | 39 DEPRECIATION. THIS GROUND IS IDENTICAL TO THE GROUND NUMBER TWO OF THE APPEAL OF THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 2005 06 WHICH HAS BEEN DISMISSED BY FOLLOWING THE DECISION OF THE HONOURABLE DELHI HIGH COURT WHEREIN IT HAS BEEN HELD THAT COMPUTER PERIPHERALS AND ITS ACCESSORIES ARE ENTITLED TO DEPRECIATION AT THE RATE OF 60% INSTEAD OF 25% AS ALLOWED BY THE LEARNED ASSESSING OFFICER. FOR THIS REASON , WE DISMISS GROUND NUMBER TWO OF THE APPEAL OF THE LEARNED ASSESSING OFFICER. 110. GROUND NUMBER FOUR OF THE APPEAL OF AO IS IDENTICAL TO GROUND NUMBER FOUR OF THE APPEAL FOR ASSESSMENT YEAR 2005 06. THAT GROUND IN THAT ASSESSMENT YEAR IS BEEN DISMISSED BUYERS FOLLOWING THE DECISION OF THE HONOURABLE BOMBAY HIGH COURT. FOR THIS REASON THIS GROUND IS ALSO DISMISSED. 111. IN THE RESULT APPEAL OF THE LEARNED ASSESSING OFFICER IS DISMISSED. 112. CONSEQUENTLY ITA NUMBER 4919/DEL/2010 FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2006 07 IS PARTLY ALLOWED AND ITA NUMBER 5558/DEL/2010 FILED BY THE AO IS DISMISSED. A Y 2007-08 113. FOR ASSESSMENT YEAR 2007 08 ASSESSEE FILED ITS RETURN OF INCOME AT 7 00151305/ ON 31/10/2007 WHICH WAS REVISED AT SAME INCOME ON 31/3/2009. THE LEARNED ASSESSING OFFICER PASSED AN ORDER UNDER SECTION 143 (3) OF THE INCOME TAX ACT ON 21/12/2009 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT 7 59702860/. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LEARNED CIT A, WHO PASSED AN ORDER ON 12/11/2010 PARTLY ALLOWING THE APPEAL OF THE ASSESSEE AND THEREFORE BOTH THE PARTIES ARE IN APPEAL BEFORE US. 114. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 479/DEL/2011 FOR THE 2007-08:- 1 THAT THE ORDER DATED NOVEMBER 12,2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV [CIT(A)] IS ERRONEOUS AND BAD IN LAW TO THE EXTENT THE SAME CONFIRMS THE ADDITIONS/ DISALLOWANCES/LEVY OF INTEREST MADE IN THE ASSESSMENT ORDER DATED DECEMBER 12,2009 PASSED UNDER SECTION 143(3) OF THE ACT, BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12(1),NEW DELHI (ASSESSING OFFICER) PAGE | 40 2 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 17,70,85,277/- BEING UNAMORTISED EXPENDITURE INCURRED BY THE APPELLANT ON RAISING LOAN FUNDS, THOUGH TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNTS, CLAIMED UPFRONT IN THE RETURN OF INCOME UNDER SECTION 37(1) AND ALLIED PROVISIONS OF THE ACT. 2.1 THAT THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN NOT APPRECIATING THAT FOR PURPOSES OF THE ACT, REVENUE EXPENSES HAVE TO BE ALLOWED IN FULL IN THE YEAR OF ACCRUAL AND NO ADVERSE INFERENCE CAN BE DRAWN ON THE BASIS OF ENTRIES RECORDED IN THE BOOKS OF ACCOUNTS. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN CONFIRMING DISALLOWANCE OF RS.49,73,520/- UNDER SECTION 14A OF THE ACT BY ERRONEOUSLY HOLDING THAT THE APPELLANT CANNOT EARN DIVIDEND INCOME WITHOUT INCURRING ADMINISTRATIVE EXPENSES. 4 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE APPELLANTS CLAIM, AMOUNTING TO RS.13,08,609/-FOR CONSEQUENTIAL DEPRECIATION ON LEASEHOLD IMPROVEMENTS CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR FURTHER VERIFICATION. 5 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN NOT ADJUDICATING ON THE APPELLANTS CLAIM, AMOUNTING TO RS.300,747/-, FOR CONSEQUENTIAL DEPRECIATION ON SOFTWARE EXPENSES CAPITALIZED IN EARLIER YEARS AND REFERRING BACK THE MATTER TO THE ASSESSING OFFICER FOR FURTHER VERIFICATION. 115. GROUND NUMBER ONE OF THE APPEAL IS GENERAL IN NATURE AND THEREFORE SAME IS DISMISSED. 116. GROUND NUMBER TWO IS IDENTICAL TO GROUND NUMBER TWO IN APPEAL OF THE ASSESSEE FOR EARLIER YEARS WHEREIN THE LEARNED CIT A HAS CONFIRMED THE DISALLOWANCE OF 1 77085277 BEING UNAMORTIZED EXPENDITURE INCURRED BY THE APPELLANT ON RAISING LOAN FUNDS TREATING THE SAME AS DEFERRED REVENUE EXPENDITURE IN ITS BOOKS OF ACCOUNTS BUT CLAIMING SAME AS A DEDUCTION UNDER SECTION 37 (1) OF THE INCOME TAX ACT IN ITS COMPUTATION. IDENTICAL ISSUE AROSE IN GROUND NUMBER TWO FOR ASSESSMENT YEAR 2005 06 AND 2006 07 PAGE | 41 AS WELL AS GROUND NUMBER THREE FOR ASSESSMENT YEAR 2002 03, 2003 04 AND 2004 05 WHEREIN FOLLOWING THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000 01 AND 2001 02 THE ORDER OF THE LEARNED CIT A WAS REVERSED AND CLAIM OF THE ASSESSEE WAS ALLOWED. AS THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ALSO ALLOW GROUND NUMBER TWO OF THE APPEAL. 117. GROUND NUMBER THREE OF THE APPEAL IS WITH RESPECT TO DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT CONFIRMED BY THE LEARNED CIT A OF RS. 4973520/. THE LEARNED ASSESSING OFFICER IS PREFERRED THE APPEAL WHEREIN THE LEARNED CIT A HAS DELETED THE DISALLOWANCE OF 6 4997750 UNDER SECTION 14 A OF THE INCOME TAX ACT WITH RESPECT TO THE INTEREST EXPENDITURE. THEREFORE, ASSESSEE IS CONTESTING THE DISALLOWANCE CONFIRMED BY THE LEARNED CIT A WITH RESPECT TO THE OTHER ADMINISTRATIVE EXPENDITURE AND AO IS IN APPEAL BEFORE US WITH RESPECT TO THE DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE MADE BY DELETED BY THE LEARNED CIT APPEAL. THE FACTS ARE IDENTICAL TO THE FACTS STATED FOR ASSESSMENT YEAR 2005 06 AND 2007 08. THE ARGUMENT OF THE ASSESSEE IS THAT THE LEARNED ASSESSING OFFICER IS NOT RECORDED ANY SATISFACTION WITH RESPECT TO THE CLAIM OF THE ASSESSEE THAT IT HAS NOT INCURRED ANY EXPENDITURE FOR EARNING OF THE EXEMPT INCOME. ON IDENTICAL FACTS AND CIRCUMSTANCES IN ABSENCE OF ANY SATISFACTION RECORDED BY THE LEARNED ASSESSING OFFICER WE HAVE DELETED THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEARNED CIT A. FOR THE SAME REASON WE ALSO DIRECT THE LEARNED ASSESSING OFFICER TO DELETE THE DISALLOWANCE UNDER SECTION 14 A OF THE INCOME TAX ACT AS THERE IS NO SATISFACTION RECORDED BY HIM WITH RESPECT TO THE CORRECTNESS OF THE CLAIM OF THE ASSESSEE OF NOT INCURRING ANY EXPENDITURE FOR EARNING OF THE EXEMPT INCOME. ACCORDINGLY, GROUND NUMBER THREE OF THE APPEAL OF THE LEARNED ASSESSING OFFICER IS DISMISSED AND GROUND NUMBER THREE OF ASSESSEE IS ALLOWED. PAGE | 42 118. GROUND NUMBER FOUR AND FIVE OF THE APPEAL OF THE ASSESSEE ARE SIMILAR TO THE GROUND NUMBER FOUR AND FIVE OF THE APPEAL OF THE ASSESSEE FOR EARLIER YEARS WHEREIN THE ASSESSEE IS AGREED WITH THE DIRECTION OF THE LEARNED CIT A TO THE LEARNED ASSESSING OFFICER TO ALLOW THE CLAIM OF THE ASSESSEE AFTER VERIFICATION. WE HAVE ALREADY DISMISSED THOSE GROUNDS FOR ASSESSMENT YEAR 2005 06 AND 2006 07 AND THEREFORE WE DO NOT FIND ANY REASON TO DEVIATE FROM THAT DECISION AND DISMISS GROUND NUMBER FOUR AND FIVE OF THE APPEAL OF THE ASSESSEE. 119. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 120. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 770/DEL/2011 FOR THE ASSESSMENT YEAR 2007-08:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER OF THE CIT(A) IS ERRONEOUS, PERVERSE, ILLEGAL AND AGAINST THE PROVISIONS OF LAW WHICH IS LIABLE TO BE SET ASIDE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 2,75,015/- MADE BY THE AO ON ACCOUNT OF DIFFERENTIAL DEPRECIATION ON THE PARTS OF COMPUTERS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 6,49,67,750/- MADE BY THE AO ON ACCOUNT OF INTEREST U/S 14A READ WITH RULE 8D. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS. 34,46,669/- MADE BY THE AO ON ACCOUNT OF REVERSAL OF INCOME. 121. GROUND NUMBER ONE OF THE APPEAL IS GENERAL IN NATURE AND THEREFORE SAME IS DISMISSED. GROUND NUMBER TWO OF THE APPEAL IS WITH RESPECT TO THE DISALLOWANCE OF DEPRECIATION DELETED BY THE LEARNED CIT A ON PARTS OF THE COMPUTERS FOLLOWING THE DECISION OF THE HONOURABLE DELHI HIGH COURT WHEREIN IT HAS BEEN HELD THAT PARTS OF THE COMPUTERS SUCH AS PERIPHERAL SAID NECESSARY THAT ALSO COMPUTERS AND ARE ENTITLED TO DEPRECIATION AT THE RATE OF 60% INSTEAD OF DEPRECIATION AT THE RATE OF 25% ALLOWED BY THE PAGE | 43 ASSESSING OFFICER. THEREFORE, FOR THE SAME REASON WE DISMISS GROUND NUMBER TWO OF THE APPEAL OF THE AO. 122. GROUND NUMBER FOUR OF THE APPEAL IS WITH RESPECT TO THE DISALLOWANCE DELETED BY THE LEARNED CIT APPEAL OF 3 446669 ON ACCOUNT OF REVERSAL OF INCOME BEING INTEREST ON STICKY LOANS. THIS GROUND IS IDENTICAL TO GROUND NUMBER FOUR FOR ASSESSMENT YEAR 2005 06 AND 2006 07. FOR THOSE ASSESSMENT YEARS WE HAVE UPHELD THE ORDER OF THE LEARNED CIT A FOLLOWING THE DECISION OF THE HONOURABLE BOMBAY HIGH COURT. AND FOR THE SAME REASONS WE DISMISS GROUND NUMBER FOUR OF THE APPEAL. 123. IN THE RESULT, APPEAL FILED BY THE LEARNED ASSESSING OFFICER IS DISMISSED. 124. CONSEQUENTLY, ITA NUMBER 770/DEL/2011 FILED BY THE LEARNED ASSESSING OFFICER FOR ASSESSMENT YEAR 2007 08 IS DISMISSED AN APPEAL FILED BY THE ASSESSEE FOR THE SAME ASSESSMENT YEAR IN ITA NUMBER 479/DEL/2011 IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 18/02/2020. SD/- SD/- (K. NARASIMHA CHARY) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18/02/2020 *MEHTA* COPY FORWARDED TO 1. APPELLANTS; 2. RESPONDENTS; 3. CIT; 4. CIT (APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI PAGE | 44 DATE OF DICTATION 18 /02/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18 /02/2020 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER 18 /02/2020 DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/ PS 18 /02/2020 DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 18 /02/2020 DATE ON WHICH THE FAIR ORDER C OMES BACK TO THE SR. PS/ PS 18 /02/2020 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 18 /02/2020 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 18 /02/2020 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER