AI Drafter 
TaxTMI 
TaxTMI 
2014 (12) TMI 136
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....eals) erred in deleting the addition amounting to Rs. 23,64,019/- made on account of capital expenditure irrespective of the fact huge expenditure towards repair and maintenance on machinery and plant made, which extended the life time, relying on the decision of the Hon.Supreme Court in the case of CIT vs. Saravana Spinning Mills Pvt.Ltd. (2007) 293 ITR 201 (SC). 2. On the facts and in the circumstances of the case and in law, the ld.CIT(Appeals) erred in deleting the addition of Rs. 2,05,481/- made on account of disallowance u/s.14A of the Act of the expenses incurred for earning dividend income exempt u/s.10(34)/10(35) of the Act irrespective of decision of CIT vs Abhishek Land Pvt.Ltd. 286 ITR 01 CT & H High court wherein it was held that the onus was entirely on the assessee to prove that all the borrowed funds were used for business. In terms of section 106 of the Evidence Act, the assessee was under obligation to prove that interest bearing fund was not used for investment yielding exempt income. 3. Disallowance of dedn.u/s.80IA(4)(iv) of Rs. 3,14,275: The CIT(A) deleted the addition relying on the decision of the ITAT in the case of Alembic Ltd. for A.Y. 2003-04 vide ....
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....venue in nature. The Ld.CIT(A) has given a finding on fact which calls for no interference. 5. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has decided this issue in para-4.3 of his order by observing as under:- "4.3. I have considered the submissions of the ld.AR and the facts of the case. In various cases the Supreme Court and other High Courts have held that replacement of parts of a large machine would not amount to creation of any new asset or incurring of capital expenditure. Where the manufacturing activity is carried on by machines comprising of various parts, and where one or more of the parts is replaced, it would not amount to replacement of the whole. This proposition has been reiterated by the Supreme Court in the case of Saravana Spinning Mills, in the context of a carding machine, in the following terms: "Similarly, in the carding department we have carding machines with autolevelers. If the autoleveler fails, the carding machine becomes non-functional. If an autoleveler is to be repaired then that repair would come within the connotation o....
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....ent from the nature of the parts replaced that they were small parts of large machines, which may require replacement on being worn out. But incurring expenditure on purchase of such items, no new assets came into existence which were capable of producing any saleable item. Accordingly, it is held that expenditure on replacement of such parts was revenue in nature. Accordingly, the disallowance of Rs. 11,65,906 is directed to be deleted. 4.3.5. Regarding expenses of Rs. 4,60,308 on spares of furnace [at item no.(4) above], it is clear that the parts purchased were consumables and therefore not capital in nature. The expenses were incurred mainly on replacement of spares used to measure the furnace temperature, excess temperature, zone temperature, detect flame, measurement and control of conveyor speed, etc. Replacement of spares does not create any capital asset. Hence, the disallowance of Rs. 4,60,308/- is deleted." 5.1. The ld.counsel for the assessee has also filed a Chart along with Annexure 'A', which is reproduced hereunder:- Annexure-A Sr. No. of AO Amount (Rs.) Page No. Remarks 1. 3,11,405 161-165 77-82 Addition of Rs. 3,11,405 represent ex....
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....view, we do not find any infirmity in the order of the ld.CIT(A) so far these two additions are concnered. In respect of the other additions mentioned at Sl.Nos.3,4,5 & 6 of the aforementioned Annexure-A, the ld.CIT(A) has given a finding on fact that such expenditure is in Revenue nature, the ld.Sr.DR has not pointed out any material on record suggesting that the finding of the ld.CIT(A) is not correct. Therefore, we are of the considered view that there is no infirmity in the order of the ld.CIT(A), same is hereby upheld. 6. Ground No.2 is against the deletion of addition of Rs. 2,05,481/- made on account of 2,05,481/- made on account of disallowance u/s.14A. 6.1. At the outset, the ld.counsel for the assessee pointed out that this issue is wrongly take and has become infructuous as the ld.CIT(A), in fact, has confirmed the addition against which the assessee has filed cross-objection. This submission of the assessee is not controverted by the ld.Sr.DR, therefore ground is rejected being not maintainable. 7. Ground No.3 is against the disallowance of claim of deduction u/s.80IA(4)(iv) of the Act of Rs. 3,14,275/-. The Sr.DR supported the order of the AO and submitted tha....
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....hat the Hon'ble Bombay High Court rendered in the case of Godrej & Boyce Mfg.Co.Ltd. vs. Dy.CIT reported at (2010) 328 ITR 81 (Bom.) has held that Rule 8D would be applicable only from AY 2008-09. Therefore, invoking the provisions of Rule 8-D is not justified. He submitted that there is a reduction in the investment in the current year. He drew our attention towards page Nos.33 & 34 of the paper-book, wherein shown the total investments have gone down from Rs. 1,28,07,854/- to Rs. 94,05,809/-. 11.1. On the contrary, ld.Sr.DR supported the order of the Assessing Officer. 12. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement relied upon by the ld.counsel for the assessee. We find merit in the contention of the ld.counsel for the assessee that Rule 8D would be applicable only with effect from AY 2008-09 in view of the judgement of Hon'ble Bombay High Court rendered in the case of Godrej & Boyce Mfg.Co.Ltd.(supra). Therefore, the AO was not justified in computing the disallowance by invoking the provisions of Rule 8D of the I.T. Rules, 1962. We find that the AO has observed ....
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.... 16.1. The ld.counsel for the assessee submitted that the application made u/s.154 of the Act was rejected by the AO without giving an opportunity to the assessee. He further submitted that the income from sales made to M/s.Yogi Engineering Works amounting to Rs. 4,46,353/- was already included in the income of the assessee for AY 1999-2000 before the Settlement Commission. With respect to the provision of Rs. 3,08,225/- for debit notes received from M/s.Maruti Udyog Ltd., the excess provision was not claimed in AY 1999-2000, therefore the question of charging to tax the amount written back does not arise. 16.2. On the contrary, the ld.Sr.DR supported the orders of the authorities below. 17. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. We find that the ld.CIT(A) has dismissed the appeal vide para-5 of his order, by observing as under:- "5. I have carefully considered the facts of the case and the submissions of the appellant. A perusal of the order of the Settlement Commission dt.13.6.02, does not indicate that the aforesaid incomes were offered for taxation. The appellant has referred....