Maxopp Investment Ltd v. Cit, New

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 1024 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 2 VersusGUJARAT LEASE FINANCING LTD ========================================================== Appearance: MR MR BHATT, SENIOR ADVOCATE with MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHIandHONOURABLE MR.JUSTICE B.N. KARIA Date : 13/08/2018 ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgment of the Income-tax Appellate Tribunal dated 16.11.2017. Following questions are presented for our consideration. “(A) Whether the Appellate Tribunal was justified in restricting the disallowance of Rs.1,28,00,000/- under Section 14A of the Act to the extent of Rs.2,40,000/-? (B) Whether the Appellate Tribunal has erred in not following the decision of the Hon'ble Supreme Court in the case of Maxopp Investment Ltd. vs. CIT, New Delhi, which has applied the “theory of apportionment” of expenses (including interest) ? (C) Whether the Appellate Tribunal has erred in allowing the bad debt claim of C/TAXAP/1024/2018 ORDER the assessee ignoring the fact that the debts in question were not trading debts of the assessee as required u/s 36(1)(viii) of the Act ? (D) Whether the Appellate Tribunal ignored the fact that the assessee has debited the principal amount which could never appear as a debt on account of trade ? (E) Whether the Appellate Tribunal has erred in treating the hire purchases as stock in trade ? (F) Whether the Appellate Tribunal has failed to consider that the assessee is not a banking entity where bill discounting can be accepted to be trading receipt and the resultant debt be treated as bad trading debt ? (G) Whether the Appellate Tribunal has erred in deleting the disallowance u/s.36(1)(iii) made by the AO inspite of the fact that the assessee could neither prove the nexus between the interest free funds and the advances and there was no element of commercial expediency ? (H) Whether the Appellate Tribunal has substantially erred in the disallowance of depreciation amounting to Rs.1234005/- on leased assets ? (I) Whether the Appellate Tribunal has substantially erred in deleting the disallowance of depreciation amounting to Rs.1129214/- on sale and leased back assets ? (J) Whether the Appellate Tribunal has erred in law in deleting the addition of disallowance u/s.14A to the Book Profit C/TAXAP/1024/2018 ORDER in contravention to Explanation of Section 115JB of Act ?” 2. Questions (A) and (B) pertain to disallowance under Section 14A of the Act which the Tribunal restricted to Rs.2.40 lacs on the ground that assessee had sufficient interest free funds for investing in assets earning tax free income. Disallowance of Rs.2.40 lacs was made for administrative expenses. This issue, we have already examined in assessee’s Tax Appeals No.1022 and 1023 of 2018. No separate discussion is necessary. 3. Questions No.(C), (D), (E) and (F) pertain to the Revenue’s objection to the assessee’s claim of bad debt under Section 36(1)(viii) of the Income-tax Act, 1961. The Tribunal examined the claim at length and accepted the assessee’s stand inter alia observing that undisputedly the assessee is in the business of lease, financing and investment. The bad debts claim were in relation to higher purchase and lease transactions and were in respect of principal amount interest, penalty, bill discounting etc. The Tribunal expenses. This issue, we have already examined in assessee’s Tax Appeals No.1022 and 1023 of 2018. No separate discussion is necessary. 3. Questions No.(C), (D), (E) and (F) pertain to the Revenue’s objection to the assessee’s claim of bad debt under Section 36(1)(viii) of the Income-tax Act, 1961. The Tribunal examined the claim at length and accepted the assessee’s stand inter alia observing that undisputedly the assessee is in the business of lease, financing and investment. The bad debts claim were in relation to higher purchase and lease transactions and were in respect of principal amount interest, penalty, bill discounting etc. The Tribunal therefore correctly observed that such bad debts arose out of the assessee’s ordinary course of business. No question of law arises. C/TAXAP/1024/2018 ORDER 4. Questions (H) and (I) pertain to assessee’s claim of depreciation on the leased assets and has been discussed in our separate order passed today in case of this very assessee in Tax Appeal No.1022 of 2018. claim of depreciation on the leased assets and has been discussed in our separate order passed today in case of this very assessee in Tax Appeal No.1022 of 2018. 5. Question (G) is consequential. When we have confirmed the Tribunal’s judgment in relation to deletion of disallowance under Section 14A confirmed the Tribunal’s judgment in relation to deletion of disallowance under Section 14A of the Act, there would be no further question of considering its impact on the assessee’s computation of income for Section 115JB of the Act. assessee’s computation of income for Section 115JB of the Act. 6. Tax Appeal is dismissed. (AKIL KURESHI, J) K.K. SAIYED (B.N. KARIA, J)