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Income Tax : CBDT has granted scientific research approval under the Income-tax Act, 2025, allowing eligible donations to qualify for tax benef...
ORDER NO. 104 OF 2012 – The following transfers/postings in the grade of Additional/Joint/Deputy/Assistant Commissioners of Income Tax, is hereby ordered with immediate effect and until further orders:
As regards the provision for bad and doubtful debts, the question again is whether in computing the income of the trust on commercial principles, the provision can be deducted or where the deduction can be allowed only in accordance with the provisions of Section 36(i)(vii) read with Section 36(2)(i) of the Act. We have already held that the income of the trust available for application to charitable purposes in India should be computed not in accordance with the strict provisions of the Income Tax Act but should be computed in accordance with commercial principles and it is on this footing that the payment of Income Tax Act under the VDIS was treated as a deduction and as proper amplication of the income of the trust. The same line of reasoning holds good for the provision for bad and doubtful debts. Even under the computation provision of the Act such a provision was considered allowable up to and including the assessment year 1988-89 and it was only from the assessment year 1989-90 that the Act required that a mere provision would not be allowable as a deduction and the actual writing off of the debt was a necessary pre-condition. Be that as it may, under the commercial principles it has always been recognized that a provision, reasonably made for a loss or an outgoing, can be deducted from the income if there is apprehension that the debt might become bad. There is nothing brought on record to show that the provision was not made bona fide. In such a situation the ratio of the decisions cited by us while dealing with the deductibility of the taxes paid under the VDIS will equally apply. We accordingly hold that while computing the income available to the trust for application to charitable purposes in India in accordance with Section 11(1)(a) the provision for doubtful debts must be deducted.
Explanation-3 to section 43(1) says that where the AO is satisfied that the main purpose of the transfer of such assets to the assessee was the reduction of liability to income tax by claiming depreciation with a reference to an enhanced cost, then the actual cost to the assessee shall be such an amount as the AO may determine having regard to all the circumstances of the case.
The facts of the case are that the assessee had leased its property at Vidyavihar to Minicon Insulated Wires Pvt. Ltd. (MIWPL) at Rs. 22,56,000, which in turn was leased out by MIWPL to various other parties, from which it was receiving rents of Rs. 1,59,34,618. The AO, relying on the orders of the preceding years, added the rents received by MIWPL at Rs. 1,59,34,618 in the hands of the assessee, holding that the rent agreement between the assessee and MIWPL was a sham, and the entire rent received by the company actually belonged to the assessee, as assessee and MIWPL are related parties.
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We find that there is no dispute about the fact that the assessee was a ‘resident but not ordinarily resident’ for the relevant assessment year. The mere fact that she relocated to India on 29th May 2005 does not alter her residential status, so far Income Tax Act is concerned, with effect from that date. Quite fairly, learned Commissioner has also not specifically disputed this position even as he has laid lot of emphasis on the fact that she returned to India on 29th May 2005 and the fact that sale was concluded after that date i.e. 31st May 2005, but then nothing really turns on these facts because whether sales took place after assessee’s relocating to India or not, her residential status continues to be of the ‘resident but not ordinarily resident’ throughout the relevant previous year.
We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that the assessee while filing the return of income in response to the notice u/s 153A declared an additional income of Rs. 25 lakhs and, in alternative, claimed that the disallowance, if any, u/s 10A may be restricted to Rs. 40,24,656/- only instead of Rs. 64,24,656/-. The ld. CIT(A) after examining the issue held that the assessee is entitled to telescoping of Rs. 25 lakhs disclosed as additional income from the income determined by the A.O.
A lot of emphasis has been placed by the CIT(A) on this Tribunal’s decision in the case of TIL Ltd (supra). However, as we have decided the matter on merits and on the first principles, we see no need to deal with the said judicial precedent. Our reasoning could be different than the reasoning adopted by the CIT(A) and that adopted by the coordinate bench in TIL’s case (supra), but then our conclusion is the same as arrived by the CIT(A) and by the coordinate bench. It is this aspect of the matter which is material for the present purposes.
Inland Ports were specifically mentioned as an infrastructure facility in the statutory provision and in the understanding of the CBEC, which administers the Customs Act, an Inland Container Depot was actually an Inland Port. There is also no dispute that even in 1983 amendments had been made to the Customs Act by treating the Inland Container Depots as part of the customs port for purpose of customs formalities and clearances.
Only grievance of the Revenue is that the amendment brought in the Income Tax Act u/s. 40(a(ia) was only effective from 1.4.2010 and not retrospective in nature. However, we find that in a catena of case laws as mentioned, it has been held that the amendment in section 40(a)(ia) is remedial and curative in nature and has retrospective effect. In this case, admittedly, the TDS deducted was deposited before the date of the filing of the return and under such situation, there cannot be any disallowance u/s. 40(a)(ia). Thus we find that Ld. Commissioner of Income Tax (Appeals) has taken a correct view in the matter, which does not need any interference on our part. Accordingly, we uphold the same.
