AI OCR 
TaxTMI 
TaxTMI 
TaxTMI 
2014 (2) TMI 1020
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....d by the appellant @ 25% applicable to intangible assets on the ground that the appellant's rights under the concerned Lease Deeds granting long term lease of lands to the appellant were recovered by the expression "or any other business or commercial rights of similar nature" used in clause (b) of Explanation3 below sub-section (1) of Section 32. 3.2. Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, the Ld. CIT (A) ought to have appreciated that in terms of the ratio of the decision of the Gujarat High Court in DCIT vs. Sun Pharmaceuticals Industry Ltd. (227 CTR 206), the appellant deserved to be granted full deduction in respect of the expenditure on lease premia actually incurred by the appellant in the present assessment year. 3.3. Without prejudice to the foregoing, in law and in the facts and circumstances of the appellant's case, the Ld. CIT(A) ought to have directed the Ld. CIT (A) for granting proportionate deduction in respect of the premia of lease hold lands paid by the appellant based on the period for which the appellant had been granted the respective leases. 4. In law and in the facts and circumstances of the ....
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....quently the assessment was framed u/s. 143(3) vide order dated 30-12-2008 and the total income was determined at Rs.271,33,84,180/- by making various additions / disallowances. Aggrieved by the order of A.O. assessee carried the matter before the CIT (A). CIT (A) vide his order dated 19-2-2009 granted partial relief to the assessee. It is against the aforesaid order of CIT (A), the assessee is now in appeal before us. Ground No.2 is with respect to the disallowance made u/s.14A r.w.s. rule 8D. 6. During the course of assessment proceedings A.O. observed that the assessee had shown exempt income comprising of tax free interest on bonds (Rs.1,01,48,630/-) and dividend (Rs.12,98,69,465/-) aggregating toRs.14,00,18,095/-. Assessee was asked to show cause as to why disallowance u/s. 14A should not be made. The assessee inter alia submitted that out of the total exempt income of Rs.14 crore, the amount of Rs.6,12,14,747/- was the income earned by SUGEN project. Since Sugen project was under construction, no expenditure was claimed by the assessee in respect of the said project and therefore there was no question of making any disallowance in connection to the said income. With respect ....
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....3,47,000/-, he enhanced the disallowance to the extent of Rs.5,30,592/-( 48,77,592 -43,47,000). Aggrieved by the order of the CIT (A) the assessee is now in appeal before us. 8. Before us, the Ld. A.R. submitted that the A.O. has made the disallowance u/s.14A on an adhoc basis without pointing out any specific instance of the expenditure incurred to earn exempt income. He further submitted that rule 8D is prospective in nature as held by Hon'ble Bombay High Court in the case of Godrej Boyce 328 ITR 80. As the assessment year in the present appeal is 2006-07 he submitted that the provisions of rule 8D were not applicable to the year under appeal. He further submitted that on identical issues in the assessment year 2004-05 the addition made on account of disallowance u/s. 14A was deleted by Hon'ble Tribunal. He placed on record copy of the decision in ITA No.504 & 773/Ahd/2008 dated 12-10-2012 & placed it at page-81 to 95 of the paper book. The Ld. A.R. pointed out from the Balance sheet placed at page 31 of the paper book, that the assessee was having shareholders funds to the extent of Rs.2607.18 crores as against which the investments was only to the extent of Rs.195.10 crores. H....
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...., 1962. In the case of Godrej Boyce Mfg. Co. Ltd. vs. CIT (2010) 328 ITR 81 (Bom.), the Hon'ble High Court has held that Rule 8D is not retrospective and is applicable from A.Y. 2008-09. 11. In the case of Maxopp Investment Ltd. (2011) 64 DTR 122 (Del.),Hon'ble High Court relying on the decision in the case of Hero Cycles Ltd. (323 ITR 518) has held that the expression "expenditure incurred" in Sec.14A refers to actual expenditure and not to some imagined expenditure. The corollary to this is if no expenditure is incurred in relation to exempt income, no disallowance can be made u/s. 14A of the Act. It further held that "the requirement of the A.O. embarking upon determination of the amount of expenditure incurred in relation to exempt income would be triggered only if the A.O. returns to a finding that he is not satisfied with the correctness of the claim of the assessee in respect of such expenditure. Therefore the condition precedent for A.O. entering upon a determination of the amount of expenditure incurred in relation to exempt income is that the A.O. must record that he is not satisfied with the correctness of claim of assessee in respect of such expenditure. It further hel....
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....l rights. The contention of the assessee was not found acceptable to the A.O. for the reasons as summed-up in his order which are as under:- "6.5.3.To sum up:- (1) The lease is for a period of 99 years, which is a substantial period for holding the property. (2) Once a lump sum payment was made, then the assessee company is required to pay yearly rent of Rs.1 per sq. mtr. only, which is negligible because for all intents and purposes, the assessee company had become the owner so naturally not to pay any rent for a property in the capacity as good as an owner. (3) The assessee has neither made payment nor executed the lease deed in the relevant period. (4) The assessee has acquired enduring advantage for a long period of 99 years which is also in a way a perpetual right conferred on the assessee due to the payment of lump sum amount as premium. (5) The property was acquired for all intents and purposes in the capacity of an owner and the lump sum payment was made as a consideration for acquiring the rights over the property. (6) Such premium is capital in nature and therefore depreciation is not allowable. (7) Such premium cannot be said to be any other business or commercia....
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....e respondent's case, the Ld. CIT (A) has erred in not granting depreciation @ 25% on the premium of Rs.2,39,39,500/- paid for lease hold land to Surat Municipal Corporation. In doing so, he has erred in treating tenancy rights in the land as a tangible asset, which in fact, is an intangible asset, eligible for depreciation u/s. 32 of the I.T. Act. 2. Without prejudice to the above, premium paid [for leasehold land for a period of 99 years] is revenue in nature. Thereby the CIT (A) has erred in not allowing premium paid as revenue expenditure for the leasehold land to Surat Municipal Corporation. 3. Without prejudice to the above, the premium of Rs.2,39,239,500/- paid for leasehold land for a period of 99 years should be allowed to be amortized over the period of lease i.e. 99 years. Thereby, the Ld. CIT(A) has erred in law as well as in facts of the respondent's case, in not allowing to amortize the premium paid over the period of 99 years." The Hon'ble ITAT at para-27 held that - " We find that the payment of premium for obtaining the 99 years lease was evidently an expenditure incurred in Capital field for obtaining an asset of enduring nature, which cannot stand on a differe....
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....owable revenue expenditure. With due regard to the ratio of such decision, the appellant's claim cannot be accepted on the following reasons:- a) The appellant has not claimed entire expenditure as revenue expenditure in its return of income. In fact, the appellant has claimed the premium paid for lease hold land as intangible asset and claimed depreciation on it. Further, the previous year is not the first year of such payment and claim and therefore, allowability of entire payment as revenue cannot be considered in the present assessment year. b) The claim of entire premium paid as revenue expenditure was one of the grounds of appeal (ground No.2.) as discussed earlier before the Hon'ble ITAT in appellant's own case, but the same was dismissed by the Hon'ble ITAT vide order dt. 23-12-2008. The appellant is placing reliance on Hon'ble Gujarat High Court (supra) to claim it in entirety since the decision of Sun Pharmaceuticals (supra) was not relied on by appellant before the Hon'ble ITAT. But, in the case of Sun Pharmaceuticals (supra), the Hon. ITAT decision in favour of appellant was dated 17-2-99, i.e. before the Hon'ble ITAT's order in appellant's case i.e. 23-12-2008 and, t....
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.... The said verdict is as follows, reproduced from the Head Notes (329 ITR 479):- "The assessee-company claimed deduction of a sum of Rs.48,02,616/- being payment to GIDC. It contended that the lease rent in respect of the land allotted to the assesseecompany being very nominal i.e. at Rs.40 per year,the payment was nothing else but advance rent and hence, allowable as revenue expenditure. After going through the lease agreement the A.O. disallowed the claim holding that the assessee had acquired a benefit of enduring nature in the form of use of land for a period of 99 years; that the land had been transferred through a registered deed involving transfer of immovable property and thus, the assessee had acquired a fixed asset in the form of a parcel of land. The Tribunal held that the lease rent was deductible. On appeal to the High Court: Held, dismissing the appeal, that the Tribunal had found that the land in question was not acquired by the assessee. Merely because the deed was registered the transaction in question would not assume a different character. The lease rent was very nominal. By obtaining the land on lease the capital structure of the assessee did not undergo any c....