TaxTMI 
TaxTMI 
TaxTMI 
2013 (6) TMI 776
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....tatement or to establish that it had its own surplus funds for investment in dividends ? (II) Whether on the facts and circumstances of the case, the Appellate Tribunal was right in directing to allow corporate debt restructuring expenses of 2.57 crores on payment to financial consultants in connection with waiver of loans, by spreading it over a period of 6 years disregarding the fact that such expenditure in relation to capital assets constitutes capital expenditure, which is specifically excluded in section 37(1) of the Act ? (III) Whether, on the facts and circumstances of the case, the Appellate Tribunal was right in directing to exclude the waived amount of 11.63 crores out of the principal loans, from the total income, disregarding the inclusive definition of income u/s.2(24) and the profits and gains business in section 28 and the ratio settled in the landmark decision in the case of CIT v/s. T.V. Sundaram Iyengar & Sons Ltd., 222 ITR 344 (SC), holding that waiver of such loans received in the course of business constitutes income receipt on being written off, by virtue of section 28(1) itself ? (IV) Whether, on the facts and circumstances of the case, the Appel....
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....hares and, therefore, under Section 14A of the Act, it held that there was no question of disallowance in respect of interest expenditure. For other expenses, the request was made for restoring the matter back to the Assessing Officer, however, the respondentassessee with a view to put an end to the entire dispute had agreed with disallowance of Rs. 5 lakh, which according to the Tribunal was meeting the ends of justice and, therefore, the Tribunal had confirmed disallowance of Rs. 5 lakh in respect of administrative expenses. 3.3 The learned counsel Shri K.M. Parikh appearing on behalf of Revenue has vehemently submitted before us that in absence of any material to indicate that the assessee had discharged his burden of establishing that it had interest free funds available with it, the Tribunal's finding requires interference. He also urged this Court that as far as the calculation is concerned, in the Assessment Year 2004-2005, the Rule 8D which has come into being subsequently and it being prospective in nature, the authorities ought to have considered the judgment of the Delhi High Court while calculating such expenses. He has relied on the decision of the Delhi High Cou....
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....atisfied with the claim of the assessee with regard to the expenditure or no expenditure, as the case may be, the assessing officer is to accept the claim of the assessee insofar as the quantum of disallowance under section 14A is concerned. In such eventuality, the assessing officer cannot embark upon a determination of the amount of expenditure for the purposes of section14A(1). In case, the assessing officer is not, on the basis of objective criteria and after giving the assessee a reasonable opportunity, satisfied with the correctness of the claim of the assessee, he shall have to reject the claim and state the reasons for doing so. Having done so, the assessing officer will have to determine the amount of expenditure incurred in relation to income which does not form part of the total income under the said Act. He is required to do so on the basis of a reasonable and acceptable method of apportionment." 3.5 Per contra, the learned counsel Shri Manish Shah appearing on behalf of respondent-assessee has submitted that there would not arise any question of deduction of any expenditure incurred in relation to the income under total income, nor would arise the question of applyin....
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....roached the issue by setting aside the order of disallowance under Section 14A of the Act in respect of interest expenditure. When the very basis for employing Section 14A of the Act on factual matrix is lacking, the disallowance to the extent of 10% of dividend income was not permissible. When it transpires from record that the assessee's own funds were at higher, then the investment made by it and with nothing to indicate that the borrowed funds were utilised for the purpose of investment in shares and for earning dividends, the Tribunal committed no error in disallowing the sum of Rs. 1,14,43,040/-. 3.9 As far as other administrative expenses are concerned, the Revenue had requested to restore the matter back to the Assessing Officer. However, to put an end to the entire dispute with regard to other expenses, the assessee permitted disallowance of Rs. 5 lakh. The Tribunal considering the volume and quantum of investment disallowed the said amount of Rs. 5 lakh, which though is on estimated basis, it is a reasonable base and, therefore, the first question merits no consideration. 3.10 Needless to specify at this stage that when from the facts that have emerged from record....
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....lding the expenditure as revenue in nature, it spread the same over a period. The Tribunal further held that : "34. We have considered the rival submissions, perused the materials on record and gone through the orders of authorities below and various judgments cited by ld.AR of the assessee. We find that Ld.CIT(A) has decided this issue in favour of assessee by following these very judgments of Hon'ble Apex Court which are cited by the Ld.AR of the assessee before us and considering the facts of the present case, we do not find any good reason to interfere in the order of Ld.CIT(A) on this issue. We therefore decline to interfere in the order of Ld.CIT(A) on this issue. This ground of Revenue is also rejected." 4.3 In the present case also, the CDR expenses to the tune of Rs. 2.57 crore have been rightly held by both the CIT (Appeals) and the Tribunal as revenue in nature and the same has rightly not been held to be capital in nature. For the waiver of the loan, the payment has been made to the financial consultants. This was for the purpose of business and the same was held to be allowable under Section 37(1) of the Act. Having held the said amount to be revenue in nature ....
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....in any of the preceding years and, hence, there was no question of applying the provision as such. Section 28 of the Act deals with profits and gains of business or profession and clause (iv) thereof says that the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession shall be chargeable as income under head 'Profits & Gains of business or profession'." 5.2 As the assessee company was not found to be carrying on the business of obtaining loan, the Court held that the remission of such loan by the creditors was a benefit arising out of such business and, therefore, such remission of unsecured loan was not taxable at the ends of the assessee. 5.3 The CIT (Appeals) upheld in favour of the assessee by holding thus : "5. .. .. I have gone through the appeal order for A.Yr.2004-05. The facts of A.Yr.2005-06 being identical to A.Yr.2004-05, I am in agreement with my predecessor Ld.CIT(A) that the decision of Gujarat High Court in the case of Chetan Chemicals (P) Ltd. (2004) 267 ITR 770 (Guj.) and Mumbai Tribunal's decision in the case of Helios Food Improvers Pvt Ltd fully apply to appellant's ....