TaxTMI 
TaxTMI 
2016 (1) TMI 647
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.... of the case are that the assessee is engaged in the business of pharmaceuticals and filed its return of income on 26.09.2008 declaring loss of Rs. 25,80,056/-. Subsequently, the assessee has filed a revised return on 30.09.2008 declaring the loss at Rs. 16,01,096/-. The case of the assessee was processed under section 143(1) of the Act and the case was selected for scrutiny. Notice under section 143(2) of the Act was issued. After considering the details filed by the assessee, the Assessing Officer completed the assessment under section 143(3) and determined the total income of the assessee at Rs. 31,34,301/- by making various additions. 3. With regard to the disallowance of Rs. 2,33,324/- under section 14A read with Rule 8D, the Assessing Officer has noted that the assessee was in receipt of Rs. 2,715/- being tax free dividend. When the Assessing Officer enquired about the applicability of section 14A, the assessee has stated that its entire investment was out of surplus generated from business expenditure attributable to earn this exempt income. However, the Assessing Officer has observed that the assessee would have used its office establishment as well as its staff and also....
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....d after examination of the accounts and rejection if any, of the assessee's claim or explanation. There was no scrutiny of the accounts by the Assessing Officer. This aspect went completely unnoticed by the Commissioner (Appeals) and the Tribunal. The entire exempt income was Rs. 48,90,000, whereas the disallowance ultimately directed worked out to nearly 110 per cent. of that sum, i. e., Rs. 52,56,197. Section 14A or rule 8D of the Income-tax Rules, 1962, cannot be interpreted so as to mean that the entire exempt income is to be disallowed. The window for disallowance was indicated in section 14A and was only to the extent of disallowing expenditure "incurred by the assessee in relation to the tax exempt income". This proportion or portion of the exempt income surely cannot swallow the entire amount. The order of the Assessing Officer was set aside. The initiation of penalty proceedings also was set aside. The matter was remitted to the Assessing Officer for fresh consideration." 8. In the present case, the assessee has earned exempt dividend income of Rs. 2,715/-. The assessee has not admitted any expenses to earn the above dividend income. The Assessing Officer disallowed....
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.... Assessing Officer to delete the addition made on this issue. Accordingly, the ground raised by the Revenue is dismissed. 13. The next ground raised in the appeal of the Revenue relates to disallowance of capital expenditure claimed as revenue in nature under section 37 of the Act. The Assessing Officer has observed that under repairs and maintenance (others), the assessee had debited Rs. 59,47,601/- and when the details were called for, the assessee has furnished ledger copy and also produced the bills for verification. After verification, the Assessing Officer has observed that out these expenditures, an amount of Rs. 43,29,728/- was incurred in connection with the renovation of hotel property at Phalodi. On going through the details filed, the Assessing Officer has noted that the assessee has purchased bulk quantity of building materials like cement, bricks, iron & steel, flooring materials, etc. and also noticed that cements were purchased in the range of 40 to 50 bags and iron & steel were purchased in huge quantities in kilograms. Therefore, the Assessing Officer has held that such huge quantities of materials could have been used only to extend the property to carry out r....
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....ficer. It is not the case of the Assessing Officer that he has doubted the repairing works carried out by the assessee. The Assessing Officer has not found that the assessee has enhanced the existing rooms/restaurant. The only objection of the Assessing Officer is that the assessee has procured bulk quantity of building materials like cement, bricks, iron & steel, flooring materials, etc. and to carry out such bulk quantity of building materials are not required to carry out minor repairs. It has to be seen the building condition in which the materials so purchased were used for repairing work. Before the ld. CIT(A), the assessee has submitted that the repair works were carried out in a heritage building, which is more than 250 years old and also submitted that the assessee has incurred the expenditure towards repair of the building viz., in the ground floor : (i) renovate the walls/floor of the existing lobby - red stone, bajri & gitty, (ii) central courtyards to be opened up to allow for air circulation, (iii) Accounts & administration department was shifted behind the reception, (iv) flooring of the staircase to be repl....