TaxTMI 
TaxTMI 
2013 (10) TMI 459
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....tion of such interest expenses for the purpose of business. The assessee submitted that it had borrowed money in the earlier years for the purpose of business and outstanding borrowings were to the tune of Rs. 52.78 crore as on 31.3.2003. The assessee had a small capital base and since it was incurring losses, the losses were funded by the borrowings. It was thus clear that the borrowings had been used for the purpose of business. The borrowings had been made at very higher interest rate and, therefore, to reduce the cost of borrowings the assessee had issued bonds worth Rs. 55 crore in assessment year 2007-08 on 27-9-2006. Money raised through bonds were used to repay the loans to the extent of Rs. 54.99 lakh on the same date i.e. 27.9.2006. Thus the interest expenditure had been incurred wholly and exclusively for the purpose of business. The AO however did not accept the explanation given. It was observed by him that prior to assessment year 2005-06 the assessee was only having car rental and other income. In assessment year 2005-06, the assessee started professional work of brokerage/ commission and also business of BPO. The BPO business and car rental business had been sold in....
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....d. It was, therefore, urged that the claim should be allowed this year also. 2.3 CIT(A) after considering the submissions of the assessee observed that interest on borrowings made in the earlier years had been allowed and the same borrowings were replaced by the bonds in assessment year 2007- 08 and interest on the bonds were also allowed and, therefore, it was accepted by the department that the borrowings or bonds had been issued for the purpose of business. Even if the car rental business and BPO business had been transferred in assessment year 2007-08, the loans taken earlier continued to be used for the purpose of business. There was no dispute that loans had been taken in the earlier year for the purpose of business and, therefore, interest had to be allowed. CIT(A) accordingly, directed the AO to delete the addition made on account of disallowance of interest, aggrieved by which the revenue is in appeal before Tribunal. 2.4 Before us learned AR for the assessee reiterated the submissions made before lower authorities whereas the learned DR placed reliance on the order of assessing officer. 2.5 We have perused the records and considered the matter carefully. The disp....
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....owed - 1,020/- Others 1,23,929/- Disallowed - 1,23,929/- Legal Fees ROC filling Expenses 4,590/- Disallowed - 4,590/- Total 30,33,044/- 12,00,000/- 18,33,044/- 3.1 The AO also noted that the assessee had claimed audit expenses at Rs. 8, 25,000/- on account of statutory audit and internal audit which was on the higher side as auditors of the assessee company were also auditors of IF&LS and many other related companies of IL&FS. It was observed by him that the assessee had made a higher claim only to reduce the income to avoid taxation. He, therefore, allowed the audit expenses only at Rs. 5,00,000/- and the balance amount of Rs. 3,25,000/- was disallowed. Regarding S.T.T, 6,02,322/-. AO observed that the same pertained to assessment year 2007-08 and was not allowable this year and accordingly disallowed the same. Similarly the claim of Rs. 5,06,789/- being the margin funding interest paid to IL&FS was also disallowed. The AO also noted that the assessee had claimed total expenditure of Rs. 30,14,745/- relating to various heads which included a sum of Rs. 24,16,600/- on account of stamp duty paid in relation to issue of bonds and Rs.....
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....nds issued in assessment year 2007-08 but process for creating the charge in favour of the bond holders was completed this year. These expenses were allowable as the same were incurred in connection with raising the funds for the purpose of business in view of the judgment of Hon'ble Supreme Court in case of India Cements Ltd. (60 ITR 52). The professional fees of Rs. 5,81,055/- had been paid for the purpose of accounting work, preparation to cash flow, compilation of financial statements, legal work etc and, therefore, these expenses could not be disallowed. CIT (A), therefore, directed the AO to delete the addition made on account of disallowance of these expenses. He however confirmed the disallowance of S.T.T. expenses. Aggrieved by the decision of CIT(A) the revenue is in appeal before Tribunal. 3.3 Before us the learned AR for the assessee reiterated the submissions made before lower authorities whereas the learned DR placed reliance on the findings given in the assessment order. 3.4 We have perused the records and considered the matter carefully. The dispute is regarding disallowance of various expenses. The major disallowance was on account of disallowance of sala....
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....se (f) to the Explanation 1 of section 115JB as per which expenses relatable to any income which is exempt u/s 10 is required to be added to the book profit. The assessee submitted before the AO that it had not incurred any direct expenses for making of investments and, therefore, no disallowance of interest was required to be made. AO however computed the disallowance of interest and other expenses as per Rule 8D at Rs. 1,48,32,122/- and this amount was added to the book profit u/s 115JB. In appeal CIT(A) confirmed the addition made by AO, aggrieved by which the assessee is in appeal before Tribunal. 4.1 Before us, learned AR for the assessee submitted that only the expenditure actually incurred in relation to the exempt income and debited to the P&L account could be added under clause (f) of Explanation 1 to section 115JB. It was also submitted that no adjustment on this account could be made as per the disallowance made under Rule 8D. Reliance was placed on the decision of Delhi bench of Tribunal in case of Goetze (India) Ltd. v. Commissioner of Income-tax (32 SOT 101) which was followed by another bench of Delhi Tribunal in case of Quippo Telecom Infrastructure Ltd. v/s ACIT....