ASHOK LEYLAND LIMITED, CHENNAI V. DCIT COMPANY CIRCLE 1 (1), CHENNAI

ITA 748/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3778 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-11-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 01-03-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V M MAHIDAR
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Business income; Opportunity of being heard; Principle of natural justice; Earning of tax free income; Bad and doubtful debts; TDS; Rule 8D
• Section: 43B; 143(3); 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , ! ' # , % #& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ./ ITA NO.748/CHNY/2018 ) *) / ASSESSMENT YEAR : 2011-12 M/S ASHOK LEYLAND LIMITED, (SINCE ASHOK LEYLAND PROJECT SERVICES LIMITED MERGED WITH ASHLEY SERVICES LIMITED WHICH SUBSEQUENTLY MERGED WITH ASHOK LEYLAND LIMITED), 1, SARDAR PATEL ROAD, GUINDY, CHENNAI - 600 032. PAN : AAACA 4651 L V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE 1(1), CHENNAI - 600 034. (,-/ APPELLANT) (./,-/ RESPONDENT) ,- 0 1 / APPELLANT BY : SH. R. VIJAYARAGHAVAN, ADVOCATE ./,- 0 1 / RESPONDENT BY : SHRI V.M. MAHIDAR, JCIT 2 0 3% / DATE OF HEARING : 05.08.2019 45* 0 3% / DATE OF PRONOUNCEMENT : 04.11.2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGA INST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 3, CHENNAI [CIT(A) FOR SHORT] DATED 30.11.2017 FOR THE ASSES SMENT YEAR 2011- 12. 2 I.T.A. NO.748/CHNY/18 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APP EALS), IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE. 2. BAD AND DOUBTFUL DEBTS DISALLOWED - RS. 46,63,000 : 2.1 THE CIT(A) HAS ERRED IN UPHOLDING THE DISALLOWA NCES OF BAD AND DOUBTFUL DEBTS MADE BY THE AO WITHOUT APPRECIATING THE FACTS . APPROVING THE ACTION OF AO CAUSES DOUBLE JEOPARDY 2.2 THAT, ON ONE HAND CIT(A) HAD CONCURRED WITH THE FACTS SUBMITTED BY YOUR APPELLANT THAT THE CORRESPONDING PROVISION FOR BAD DEBTS WAS ALREADY DISALLOWED IN THE COMPUTATION OF BUSINESS INCOME OF YOUR APPELLANT IN AY 2010- 11 AND ON THE OTHER HAND, APPROVED THE ACTION OF AO TO DISALLOW THE BAD DEBTS AGAIN, WHEN THE SAME IS WRITTEN-OFF I.E. IN Y 2011-1 2 THEREBY CAUSING DOUBLE JEOPARDY. REASONING OF CIT(A) TO UPHOLD AO ACTION OF DISALLO WANCE IS FACTUALLY INCORRECT 2.3 THE CIT(A) ERRED IN OBSERVING THAT THE APPELLANT FAILED TO PRODUCE NECESSARY EVIDENCE FOR WRITE-OFF OF THE DEBT FROM T HE BOOKS OF ACCOUNTS, WHICH IS CONTRARY TO THE FACT AS IT WAS NEVER RAISED BY T HE AO. 2.3.1 AO HAD ONLY SOUGHT FOR PROOF OF EVIDENCE THAT, DOUBTFUL DEBTS WERE DISALLOWED IN PREVIOUS YEARS ALONG WITH RELEVANT (E DGER COPIES WHICH WERE DULY SUBMITTED BY YOUR APPELLANT WHEREAS AO HAD UNILATER ALLY MADE AN ADDITION BY STATING THAT THE ASSESSE FAILED TO PRODUCE THE EVI DENCE SUPPORTING THE WRITE- OFF OF DEBT FROM THE BOOKS OF ACCOUNTS. DETAILS OF WRITE-OFF WAS AVAILABLE ON RECORD BUT I GNORED BY THE A.O. 2.4 AO HAD ALSO IGNORED THE FACT THAT WRITE OFF FROM THE BOOKS OF ACCOUNTS WAS DULY DISCLOSED IN SCHEDULE 2.3 TO THE PROFIT AND LOSS ACCOUNT WHICH WAS DULY SUBMITTED AND AVAILABLE BEFORE THE AO ON RECORD; 3 I.T.A. NO.748/CHNY/18 2.4.1 THE ACTION OF THE AO IN MAKING A UNILATERAL DIS ALLOWANCE IS IN VIOLATION OF THE PRINCIPLES OF NATURE JUSTICE WITHOUT AN OPPORTU NITY BEING GIVEN TO YOUR APPELLANT AND HENCE REQUIRES TO BE STUCK DOWN. 3. DISALLOWANCE FOR REVERSAL OF GENERATION TAX : SECTION 41 CANNOT BE APPLIED AS AMOUNTS WERE DISALL OWED IN EARLIER YEAR : 3.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO TO MAKE AN ADDITION OF REVERSAL OF GENERATION TAX AS INCOME U/S 41(1) OF THE ACT WITHOUT UNDERSTANDING THE FACTS THAT THE SAME WERE DISALLOW ED IN THE EARLIER ASSESSMENT YEAR U/S 43B. 3.2 THE CIT(A) FAILED TO APPRECIATE THAT AN ADDITION U/S 41(1) CAN BE TRIGGERED ONLY WHEN THE SAME HAS BEEN CLAIMED AS EXP ENDITURE IN THE PREVIOUS YEARS. 3.3 THE CIT(A) FAILED TO RENDER JUSTICE BY BRUSHING A SIDE THE SUBMISSIONS OF THE APPELLANT MADE BEFORE HIM. REASONING OF CIT(A) TO UPHOLD AO ACTION OF DISALLO WANCE IS FACTUALLY INCORRECT 3.4 THE CIT(A) ERRED IN OBSERVING THAT APPELLANT FAI LED TO GIVE THE NECESSARY EXPLANATIONS WHICH IS CONTRARY TO THE FACT SINCE YOU R APPELLANT WERE NEVER GIVEN ANY OPPORTUNITY TO BE HEARD ON THIS MATER 3.5 CIT(A) HAD ERRED IN CONCURRING WITH THE FINDINGS OF AO AND TOTALLY IGNORED THE FOLLOWING FACTS PUT FORWARD BY YOUR APP ELLANT THAT, (A) THE AO HAD SOUGHT FOR A NOTE ON GENERATION TAX REVERSAL WHICH D ULY FURNISHED BY YOUR APPELLANT BUT THE LEARNED AO HAD INCORRECTLY STATED THE FACTS IN HIS ORDER THAT THE ASSESSE HAS NOT OFFERED ANY EXPLANATION. (B) T HE AO HAD ALSO RECORDED AN INCORRECT FACT THAT THE EXPENDITURE WAS CLAIMED IN E ARLIER YEARS BY YOUR APPELLANT. HENCE THE ORDER OF CIT(A) IS LIABLE TO B E OVERRULED TO RENDER JUSTICE. 4. DISALLOWANCE OF ADVANCES WRITTEN-OFF - RS.62,27,603 : DISALLOWANCE BY AO WAS UPHELD WITHOUT UNDERSTANDIN G THE ISSUE : 4 I.T.A. NO.748/CHNY/18 4.1 THE CIT(A) ERRED IN UPHOLDING THE ACTION OF THE AO IN DISALLOWING THE ADVANCES WRITTEN OFF AND BRUSHED ASIDE YOUR APPELLA NTS SUBMISSION ON THEIR CLAIM ON EVERY ITEM CLAIMED THERE ON. 4.2 CIT(A) HAD ERRED IN CONCURRING WITH THE ADDITION MADE BY THE LEARNED AO WITHOUT GOING THE NATURE OF AMOUNTS WRITTEN OFF WHICH IS SUMMARIZED BELOW NATURE AMOUNT BASIS FOR CLAIM DIVIDEND RECEIVABLE 4,109 DIVIDEND RECEIVABLE WAS ACCOUNTED ON ACCRUAL BASIS AND OFFERED TO TAX IN PRECEDING YEARS. THE SAME WAS CHARGED TO P&L IN Y 2011-12 SINCE THE SAME WAS IRRECOVERABLE. DEDUCTION FOR THE SAID AMOUNT IS ELIGIBLE, SINCE THE CORRESPONDING INCOME WAS OFFERED TO TAX BY YOUR APPELLANT. SERVICE TAX CREDIT 44,90,526 SERVICE TAX PAID ON INPUTS WAS CAPITALISED IN BOOKS AND CLAIMED FOR REFUND FROM TAX AUTHORITIES. THIS WAS CHARGED OFF TO P&L IN Y 2011-12 IN THE NATURAL PROCESS OF ACCOUNTING SINCE CREDIT WAS NOT GRANTED. DEDUCTION FOR THE SAID AMOUNT IS ELIGIBLE, SINCE THE SERVICE TAX PAID ON INPUTS FOR WHICH CREDIT WAS NOT GRANTED WOULD ASSUME THE CHARACTER OF THE INPUTS FOR WHICH IT WAS ORIGINALLY PAID AND HENCE, IS ALLOWABLE AS DEDUCTION. ADVANCES WRITTEN OFF 15,60,825 YOUR APPELLANT HAD INCURRED CERTAIN OFFICE MAINTENANCE EXPENDITURE ON BEHALF OF ONE OF ITS GROUP COMPANIES, M/S. 5 I.T.A. NO.748/CHNY/18 INDIRAN ENGINEERING PROJECTS AND SYSTEMS KISH (LLC). SAID GROUP COMPANY HAD GONE INTO WINDING UP PROCESS AND HENCE, THE RECEIVABLE ADVANCES FROM THE SAID GROUP COMPANY WAS CHARGED OFF TO P&L ACCOUNT. THIS EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY IN RELATION TO BUSINESS OF THE APPELLANT AND HENCE, THE APPELLANT IS ELIGIBLE TO CLAIM DEDUCTION FOR THE SAME. CREDIT FOR TAXES DEDUCTED AT SOURCE (TDS) 1,72,143 TDS DEDUCTED ON INCOME OF THE APPELLANT WAS CLAIMED AS CREDIT IN PRECEDING YEARS, BUT WAS NOT GRANTED. THIS WAS CHARGED OFF TO P&L IN Y 2011-12 IN THE NATURAL PROCESS OF ACCOUNTING AS THE CREDIT WAS NOT GRANTED. ONCE THE CREDIT WAS NOT GRANTED, IT WOULD ASSUME THE CHARACTER OF EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY IN RELATION TO INCOME OF THE APPELLANT WHICH IS DEDUCTIBLE WHILE COMPUTING INCOME FROM BUSINESS! PROFESSION. CIT(A) HAD FAILED TO RENDER JUSTICE BY UPHOLDING T HE ACTION OF AO NOT FOLLOWING THE PRINCIPLES OF NATURAL JUSTICE 4.3 DURING THE ASSESSMENT PROCEEDINGS, THE AO SOUGHT FOR PARTY WISE BREAK- UP OF THE WRITE OFF WHICH WAS DULY FURNISHED BY YOU R APPELLANT. NO FURTHER INFORMATION WAS SOUGHT FROM YOUR APPELLANT, AND HEN CE, THE ACTION OF THE AC IN MAKING A UNILATERAL DISALLOWANCE IS IN VIOLATION OF THE PRINCIPLES OF NATURE JUSTICE AND HENCE REQUIRES TO BE STUCK DOWN. 6 I.T.A. NO.748/CHNY/18 4.3 FURTHER, THE STATEMENT OF THE AO AND THE ALLEGAT ION MADE BY THE CIT(A) THAT THE APPELLANT FAILED TO OFFER ANY EXPLANATION FOR WRITE OFF, IS FACTUALLY INCORRECT AND CONTRARY TO THE FACTS. 5. DISALLOWANCE OF RS. 97,500 U/S.14A R.W.RULE 8D : SECTION 14A DISALLOWANCE NOT WARRANTED : 5.1 THE CIT(A) ERRED IN NOT ACCEPTING THE APPELLANT S CONTENTION THAT NO DISALLOWANCE U/S 14A IS WARRANTED, SINCE THE APPELLA NT HAS NOT INCURRED ANY EXPENDITURE FOR THE PURPOSE OF EARNING DIVIDEND INCO ME WHICH IS EXEMPT FROM TAX. 5.2 THE CIT(A) FAILED TO UNDERSTAND THAT THE AC HAS MADE A CATEGORICAL OBSERVATION THAT THERE ARE NO DIRECT EXPENSE AND INT EREST EXPENSES WHICH HAVE BEEN INCURRED IN RELATION TO THE INVESTMENTS OF THE APPELLANT AND HAS CONTRADICTED HIMSELF BY MAKING OF A DISALLOWANCE OF ADMINISTRATIVE EXPENSES AT 0.5% OF THE AVERAGE VALUE OF INVESTMENTS, DESPITE YOU R APPELLANTS SUBMISSION THAT NO EXPENSES WERE INCURRED BY YOUR APPELLANT FOR EARNING SUCH EXEMPT INCOME. 5.2 INCORRECT RELIANCE ON JUDICIAL PRECEDENTS WHICH ARE FACTUALLY DIFFERENT : THE CIT(A) ERRED IN BRUSHING ASIDE ALL THE DECISIO NS QUOTED BY YOUR APPELLANT AND WITHOUT ANY JUSTIFICATION RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF EXEMPT INCOME BY ADOPTING THE DECISION IN THE CASE OF M/S. RAYALLA CORPORATION (P) LTD I.T.A. NO. 908/MDS/2015, THE FACTS OF WHICH ARE DISTINGUISHABLE FROM THE FACTS OF YOUR APPELLANT. 5.3 NO INVESTMENTS MADE IN Y 2011-12 : THE CIT(A) FAILED TO APPRECIATE THAT DIVIDEND HAS BEEN RECEIVED OUT OF INVESTMENTS MADE IN THE PRECEDING PREVIOUS YEARS AND NO FRESH INVESTMENT WAS MADE DURING Y 2011 -12. 5.4 DISALLOWANCE OF ADMINISTRATIVE EXPENDITURE CANNOT EXCEED 2% OF EXEMPT INCOME : THE CIT(A) ERRED IN NOT CONSIDERING OUR SUBMISSION THAT EVEN IF SALARY AND ADMINISTRATIVE EXPENDITURE CAN BE REASONABLY EST IMATED AS BEING ATTRIBUTABLE TO MANAGEMENT OF INVESTMENT PORTFOLIOS , THE DISALLOWANCE U/S 14A SHOULD BE RESTRICTED TO 2% OF THE AMOUNT OF THE EXEMP T INCOME AS HELD BY THE HONBLE ITAT IN YOUR APPELLANTS OWN CASE FOR AY 2008 -09 (ITA NO. 2839/MDS/2014 DATED 23.09.2016) AND IN THE CASE OF CIT V. HERO CY CLES 323 7 I.T.A. NO.748/CHNY/18 ITR 518 (P&H HIGH COURT) AND DCITV. JINDAL PHOTO LIMI TED ITA NO. 814 (DEL) 2011. 5.5 INCORRECT INTERPRETATIONS MADE BY AC WHILE APPLY ING RULE 8D : THE CIT(A) FAILED TO DISPOSE GROUNDS RAISED BY YOUR APPELLANT ON THE WRONG INTERPRETATION OF THE PROVISIONS MADE BY THE AO BY INCLUDING THE F OLLOWING INVESTMENTS FOR COMPUTATION OF DISALLOWANCE AT 0.5% OF AVERAGE VALUE OF INVESTMENTS UNDER THE 3 LIMB OF RULE 8D: 5.5.1 INVESTMENTS WHICH DID NOT YIELD A DIVIDEND INC OME DURING THE SUBJECT Y ARE REQUIRED TO BE EXCLUDED AS HELD IN ACIT.V. M. BA SKARAN [2015] 152 LTD 844 (CHENNAI - TRIB.) AND ACIT V. VIREET INVESTMENT PRI VATE LIMITED (2017] 58 ITR(T) 313 (DELHI -TRIB.) (SB); 5.5.2 INVESTMENTS WHICH ARE STRATEGIC IN NATURE AND N OT INTENDED FOR EARNING DIVIDEND ARE REQUIRED TO BE EXCLUDED AS HELD IN EIH ASSOCIATED HOTELS LTD. V. DCIT BY THE HIGH COURT OF MADRAS 2013- TIOL-796-ITAT-MA D (ITA NO 1503 & 1624/MDS/ 2012 DT. 17-07-2013) AND CIT VS RPG TRANSMISSIONS LTD [2014] 48 TAXMANN.COM 57 (MADRAS HIGH COURT); 5.5.3 INVESTMENTS IN OVERSEAS ENTITIES WHOSE DIVIDEND INCOME IS TAXABLE ARE REQUIRED TO BE EXCLUDED AS HELD IN CIT V. SUZION ENE RGY LIMITED [2013] 354 ITR 630 (GUI); 5.5.4 INVESTMENTS IN UNLISTED ENTITIES CANNOT BE INCL UDED IF THERE IS A POSSIBILITY OF THE GAINS ON TRANSFER OF THE SHARES BEING TAXABLE, AS HELD IN CIT V. HOLCIM INDIA P.LTD. [2014] 272 CTR 282(DELHI) (HC); 5.5.5 AO ERRED IN ADOPTING THE INCORRECT AVERAGE VALUE OF TOTAL ASSETS OF THE APPELLANT BY CONSIDERING THE AMOUNT OF TOTAL ASSETS NET OF CURRENT LIABILITIES AND PROVISIONS INSTEAD OF THE GROSS AMOUNT OF TOTAL ASS ETS. 6. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GR OUNDS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE IS A COMPANY INCORPORATED UNDER COMP ANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANAGE MENT 8 I.T.A. NO.748/CHNY/18 CONSULTANCY IN THE AREAS OF IMPLEMENTATION AND PROM OTION OF THE PROJECTS. THE RETURN FOR THE ASSESSMENT YEAR 2011- 12 WAS FILED ON 29 TH SEPTEMBER, 2011 DISCLOSING TOTAL INCOME OF 9783/-. AGAINST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPL ETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE - 1(1), CHENNAI (A.O. IN SHORT) VIDE ORDER DATED 27 TH MARCH, 2014 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT 'THE ACT') AT TOTAL INCOME OF 1,17,57,080/-. WHILE DOING SO, THE A.O. HAS MADE THE FOLLOWING DISALLOWANCES; (1) DISALLOWANCE OF DOUBTFUL DEBTS 46,63,000/- (2) ADDITION ON ACCOUNT OF REVERSAL OF GENERATION TAX 3,07,486/- (3) ADDITION ON ACCOUNT OF ADVANCES WRITTEN OFF 62,27,603/- (4) DISALLOWANCE UNDER SECTION 14A 5,59,208/- 4. BEING AGGRIEVED BY THE ABOVE ADDITIONS, AN APPEA L WAS PREFERRED BY THE CIT(A), WHO VIDE IMPUGNED ORDER PA RTIALLY ALLOWED THE APPEAL BY DIRECTING THE A.O. TO RESTRICT THE AM OUNT OF DISALLOWANCE UNDER SECTION 14A OF THE ACT TO THE EX TENT OF EXEMPT INCOME AND THE BALANCE ADDITIONS HAD BEEN CONFIRMED BY THE CIT(A). 5. BEING AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. GROUND NOS.1 AND 6 ARE 9 I.T.A. NO.748/CHNY/18 GENERAL NATURE. GROUND NO.2 CHALLENGES THE DISALLO WANCE OF BAD AND DOUBTFUL DEBTS OF 46,63,000/-. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF PROVISION FOR BAD AND DOUBT FUL DEBTS ON THE GROUND THAT THE ASSESSEE HAD FAILED TO SUBSTANTIATE THAT THE DEBTS WERE WRITTEN OFF IN THE BOOKS OF ACCOUNT. EVEN BEF ORE THE CIT(APPEALS), THE ASSESSEE CONTENDED THAT THE PROVI SION FOR BAD AND DOUBTFUL DEBTS WERE DEBITED TO THE PROFIT & LOS S ACCOUNT IN THE ASSESSMENT YEAR 2010-11, THE SAME WAS DISALLOWED WH ILE COMPUTING THE TAXABLE INCOME FOR ASSESSMENT YEAR 20 10-11. DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2011-12, THE PROVISION WAS REVERSED. IT WAS CLAIMED EVEN BE FORE THE CIT(A) THAT SINCE THE PROVISION WAS NOT ALLOWED AS DEDUCTI ON IN THE ASSESSMENT YEAR 2010-11, THE SAME SHOULD NOT BE TAX ED IN THE YEAR OF REVERSAL OF PROVISION. HOWEVER, THE CIT(A) CONF IRMED THE ADDITION TAKING NOTE OF THE FINDINGS OF THE A.O. THAT WHAT W AS DISALLOWED WAS ONLY PROVISION OF BAD AND DOUBTFUL DEBTS DEBITED TO PROFIT & LOSS ACCOUNT. 6. BEING AGGRIEVED, THE ASSESSEE IS BEFORE US IN TH E PRESENT APPEAL. SIMILAR CONTENTIONS AS ADVANCED BEFORE THE CIT(A) WERE REITERATED EVEN BEFORE US. IT WAS FURTHER CLAIMED THAT MATERIAL AVAILABLE ON RECORD CLEARLY ESTABLISHES THAT THE PR OVISION FOR BAD AND 10 I.T.A. NO.748/CHNY/18 DOUBTFUL DEBTS WERE DISALLOWED WHILE COMPUTING THE TAXABLE INCOME FOR ASSESSMENT YEAR 2010-11 AND THEREFORE, IN THE Y EAR OF REVERSAL THE SAME CANNOT BE TAXED. 7. ON THE CONTRARY, THE LD. SENIOR DEPARTMENTAL REP RESENTATIVE (D.R FOR SHORT) PLACED HIS RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 8. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE A.O. DISALLOWED THE PROVI SION FOR BAD AND DOUBTFUL DEBTS OF 46,63,000/- ON THE GROUND THAT THE ASSESSEE HAD NOT BEEN ABLE TO PROVE THE FACTUM OF WRITING OFF OF THE DEBTS IN THE BOOKS OF ACCOUNT. HOWEVER, BEFORE THE CIT(A), ALTO GETHER NEW PLEA WAS TAKEN CITING THAT IT IS ONLY REVERSAL OF THE PR OVISION FOR BAD AND DOUBTFUL DEBTS WHICH WAS DISALLOWED BY THE ASSESSEE ITSELF FOR THE ASSESSMENT YEAR 2010-11 AND THE SAME WAS REVERSED I N THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THERE CANNOT BE ANY QUARREL AS TO THE PROPOSITION A DVANCED BY THE LD.COUNSEL FOR THE ASSESSEE THAT IN THE YEAR OF REV ERSAL OF THE PROVISION, NO ADDITION CAN BE MADE IN THE EVENT OF PROVISION WAS DISALLOWED IN THE YEAR OF CREATION OF PROVISION. H OWEVER, ONE SHOULD APPRECIATE THAT CLAIM FOR RELEVANCE OF REVERSAL OF PROVISION FOR BAD AND DOUBTFUL DEBTS AND THE ALLOWANCE FOR PROVISION OF BAD AND 11 I.T.A. NO.748/CHNY/18 DOUBTFUL DEBTS STAND ON ALTOGETHER DIFFERENT FOOTIN G. THIS ISSUE REQUIRES A DUE VERIFICATION OF FACTS. IN THESE CIR CUMSTANCES, WE ARE OF THE CONSIDERED OPINION THAT THE MATTER SHOULD GO BACK TO THE FILE OF THE A.O. FOR DE NOVO ASSESSMENT OF THE ISSUE IN ACCORDANCE WITH LAW. 9. GROUND NO.2 FILED BY THE ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSES. 10. GROUND NO.3 CHALLENGES THE ADDITION MADE ON ACC OUNT OF REVERSAL OF GENERATION TAX. 11. THE A.O. MADE ADDITION ON ACCOUNT OF REVERSAL O F GENERATION TAX TO THE EXTENT OF 3,07,486/- BY HOLDING THAT THE ASSESSEE WAS NOT ABLE TO OFFER ANY EXPLANATION AS TO HOW THE SAM E SHOULD NOT BE TAXED. THE A.O. WAS OF THE VIEW THAT THE SAME AMOU NTS TO CESSATION OF LIABILITY. ACCORDINGLY, HE BROUGHT TO TAX UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 12. EVEN DURING THE COURSE OF PROCEEDING BEFORE THE CIT(A), IT WAS CONTENDED THAT THIS PROVISION FOR GENERATION TA X WAS DISALLOWED IN THE EARLIER YEARS UNDER THE PROVISIONS OF SECTIO N 43B OF THE ACT AND THE SAME WAS REVERSED DURING THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR UNDER CONSIDERATION. THUS, IT WAS CONTENDED THAT 12 I.T.A. NO.748/CHNY/18 IT CANNOT BE BROUGHT TO TAX. THE CIT(A) CONFIRMED THE ACTION OF THE A.O. TAKING NOTE OF THE FACT THAT THE LIABILITY FOR PAYMENT OF GENERATION TAX CEASES TO EXIST. 13. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE US IN THE PRESENT APPEAL. IT WAS CONTESTED BEFORE US THAT TH E QUESTION OF DISALLOWANCE UNDER SECTION 41(1) OF THE ACT DOES NO T ARISE AS THE EXPENDITURE WAS NEVER ALLOWED AS DEDUCTION. 14. ON THE CONTRARY, THE LD. SENIOR D.R. PLACED HIS RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 15. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE A.O. MADE DISALLOWANCE IN VOKING THE PROVISIONS OF SECTION 41(1) OF THE ACT IN RESPECT O F REVERSAL OF PROVISION FOR GENERATION TAX. THE CONTENTION OF TH E ASSESSEE THAT THE PROVISION WAS DISALLOWED UNDER SECTION 43B OF T HE ACT IN THE EARLIER YEARS WAS NEVER LOOKED INTO BY THE LOWER AU THORITIES. THEREFORE, THE ISSUE REQUIRES REMISSION TO THE A.O. FOR DUE VERIFICATION OF THE FACTUAL ASPECTS OF THE CLAIM. WE ORDER ACCORDINGLY. 16. GROUND NO.3 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. 13 I.T.A. NO.748/CHNY/18 17. GROUND NO.4 CHALLENGES THE DECISION OF CIT(A) C HALLENGING THE CORRECTNESS OF HIS CONFIRMATION OF THE ADDITION ON ACCOUNT OF ADVANCES WRITTEN OFF TO THE EXTENT OF 62,27,603/-. 18. THE A.O. DISALLOWED THE CLAIM OF THE ASSESSEE F OR DEDUCTION OF ADVANCES WRITTEN OFF WITH THE FOLLOWING PARTICUL ARS: SL.NO. PARTICULARS AMOUNT IN (1) DIVIDEND RECEIVABLE 4109 (2) TDS CREDIT NOT GRANTED 172143 (3) SERVICE TAX CREDIT CHARGED OFF 4490526 (4) ADVANCE WRITTEN OFF 1560825 TOTAL 6227603 THE A.O. DISALLOWED THE ABOVE ON THE GROUND THAT NO REASON OR SO WHY THE ADVANCES WERE WRITTEN OFF WAS FURNISHED BY THE ASSESSEE. EVEN BEFORE THE CIT(A), NO EXPLANATION AS TO THE CI RCUMSTANCES UNDER WHICH THE ADVANCES WERE WRITTEN OFF WAS FURNI SHED. THEREFORE, THE CIT(A) CONFIRMED THE ADDITION MADE B Y THE A.O. 19. BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFO RE US IN THE PRESENT APPEAL. IT IS CONTENDED BEFORE US THAT THE STATUTORY CLAIMS, WHICH WERE NOT RECEIVED, WERE ACTUALLY WRITTEN OFF IN THE BOOKS AND THE ONUS DOES NOT LIE ON THE ASSESSEE TO ESTABLISH THAT THE DEBTS WERE ACTUALLY BECAME BAD. 14 I.T.A. NO.748/CHNY/18 20. ON THE CONTRARY, THE LD. SENIOR D.R. PLACED HI S RELIANCE ON THE ORDERS OF THE LOWER AUTHORITIES. 21. WE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. FOR ALLOWING THE CLAIM OF ADV ANCES WRITTEN OFF, THE ONUS ALWAYS LIES UPON THE ASSESSEE TO PROVE THA T THE ADVANCES WERE MADE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPO SES. FROM THE DETAILS FILED BEFORE US, IT APPEARS THAT THE STATUT ORY CLAIMS SUCH AS TDS AND SERVICE TAX WERE ALSO WRITTEN OFF. THERE I S NOTHING ON RECORD TO SHOW THAT THESE ADVANCES WERE MADE WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSES. FURTHER, IN RES PECT OF STATUTORY CLAIMS RECEIVABLE, IT REQUIRES TO BE VERIFIED WHETH ER THE SAME WAS OFFERED TO TAX IN THE EARLIER YEARS. IN THE CIRCUM STANCES, WE REMIT THE ISSUE BACK TO THE FILE OF THE A.O. FOR CARRYING OUT NECESSARY VERIFICATION AND THEREAFTER DECIDE THE ISSUE IN ACC ORDANCE WITH LAW. 22. GROUND NO.4 IS PARTLY ALLOWED FOR STATISTICAL P URPOSES. 23. GROUND NO.5 CHALLENGES THE ADDITION MADE UNDER SECTION 14A OF THE ACT. 24. THE A.O. DISALLOWED A SUM OF 5,49,208/- UNDER SECTION 14A OF THE ACT. ON APPEAL BEFORE THE CIT(A), THE CIT(A ) RESTRICTED THE DISALLOWANCE TO THE EXTENT OF EXEMPT INCOME AND THE DECISION OF THE 15 I.T.A. NO.748/CHNY/18 CIT(A) IS NO DOUBT IN CONSONANCE WITH THE LAW LAID DOWN BY THE HON'BLE MADRAS HIGH COURT IN REDINGTON (INDIA) LTD. V. ADDL. CIT (2017) 392 ITR 633. HOWEVER, WHILE COMPUTING THE D ISALLOWANCE, ONLY THE AMOUNT OF INVESTMENTS WHICH YIELDED EXEMPT ED INCOME ALONE HAS TO BE CONSIDERED. THEREFORE, WE REMIT TH E MATTER BACK TO THE FILE OF THE A.O. TO RECOMPUTE THE AMOUNT OF DIS ALLOWANCE UNDER SECTION 14A OF THE ACT CONSIDERING ONLY THE INVESTM ENTS WHICH YIELDED EXEMPTED INCOME. 25. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 4 TH NOVEMBER, 2019 AT CHENNAI. SD/- SD/- ( . . . ) ( ! ' # ) (N.R.S. GANESAN) (INTURI RAMA RAO) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER /CHENNAI, 7 /DATED, THE 4 TH NOVEMBER, 2019. KRI. 0 .389 :9*3 /COPY TO: 1. ,- /APPELLANT 2. ./,- /RESPONDENT 3. 2 ;3 () /CIT(A)-3, CHENNAI 4. PRINCIPAL CIT- 1, CHENNAI 5. 9< .3 /DR 6. =) > /GF.