2013 (3) TMI 485

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....r. Without prejudice if at all Sec. 14A applies then the disallowance has to be restricted and is required to be worked as per Rule 8D of Income-tax Rules." 2. The assessee is a company engaged in the business of finance, running restaurants and providing hotel services. During the previous year the assessee earned dividend income which does not form part of the total income under the Income Tax 1961 (the Act). Under Section 14A of the Act any expenditure incurred for the purpose of earning any income which does not form part of the total income under the Act shall not be allowed as a deduction while computing total income. Admittedly there were no direct expenses incurred by the assessee to earn dividend income. The AO however, invok....

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....uilding Premises and therefore your Appellant is not liable to deduct TDS and therefore Sec.40(a)(ia) does not apply and the disallowance be deleted." 6. One Mangaldas Mehta & Company Pvt. Ltd. (MMCPL) owned a property at Ahmedabad. The same was entrusted to the assessee for running a heritage hotel. The terms and conditions subject to which the hotel was to be run by the assessee was that 25% of the income from running the heritage hotel subject to a maximum of Rs. 15 lacs will be paid by the assessee to MMCPL. During the previous year the gross collections received by the assessee out of room tariff of the hotel was Rs. 61,31,033/-. As agreed the assessee was to pay 25% of the same to MMCPL, which works to sum of Rs.15,32,758/-. The....

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....of the view that the disallowance made by the AO had to be upheld. 8. Aggrieved by the order of the CIT(A) the assessee has preferred Ground No.3 before the Tribunal. 9. We have heard the rival submissions. The ld. Counsel for the assessee reiterated the stand of the assessee as was put forth before the revenue authorities. Reliance was placed by him on the following decisions: 1. Kamat Hotels India Ltd. vs. ITO 78 ITD 241 (Mad) 2. ITO vs. Sringar Cinema Pvt. Ltd., 20 SOT 420 (Mum). It was also submitted by him that the assessee did not claim the sum of Rs. 15 lacs by debiting the same to the profit and loss account and, therefore, the provisions of section 40(a)(ia) of the Act are not attracted. In this regard he pointed out....

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....Fifteen lakhs with Mangaldas Mehta & Co. Pvt. Ltd. using the property of that company. FURTHER RESOLVED THAT Board will every year in the beginning decide the income sharing with MMCPL & Director Shri Abhay Mangalda be & is hereby authorized to negotiate with MMCPL for the same." It appears to us from the above that it was a business arrangement between the assessee and MMCPL pursuant to which the sum of Rs.15 lakhs was paid by the Assessee to MMCPL and the said payment cannot be termed as rent. This fact is also further strengthened by the accounting treatment given by the assessee as well as MMCPL in respect of the receipts in their books of accounts. The decision in the case of Kamat Hotels India Ltd. (supra) also supports the plea....