TaxTMI 
TaxTMI 
2016 (5) TMI 815
X X X X Extracts X X X X
X X X X Extracts X X X X
..... The assessee had earned dividend income of Rs. 1,28,316/- during the year. 4. Before the learned CIT (Appeals), the assessee contended that the provisions of section 14A of the Act read with Rule 8D of the Income Tax Rules are not applicable as the total investments in shares and mutual funds have been made out of own funds. The assessee's investment during the year was a nominal amount of Rs. 97,233/- which was made from the internal cash accruals of the company and no money was borrowed for making any investment. It was pointed out that where investment is made out of own resources and availability of funds in the form of capital reserves and net profit, the provision of section 14A and Rule 8D do not apply. Reliance was placed on the judgment of Hon'ble Punjab & Haryana High Court in the case of CIT Vs. Hero Cycles Ltd. (2010) 323 ITR 518 and Mumbai High Court in the case of CIT Vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Mum). After considering the submissions of the assessee and the case laws relied on by it, the learned CIT (Appeals) has held that since the assessee has earned exempt income under sections 10(34) and 10(35) of the Act and also it has bee....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f both the parties, perused the findings of the authorities below and considered the material available on record. The only issue to be decided by us is whether the disallowance sustained by the learned CIT (Appeals) to the extent of Rs. 10 lacs or made by the Assessing Officer as per Rule 8D is applicable to the facts of the present case. From the perusal of the documents brought on record, we observe that the assessee has total owned funds to the tune of Rs. 214,46,46,911/- as on 31.3.2008, while the investments as on that date are amounting to Rs. 1,42,73,785/-. These figures show that the assessee owns funds far more than the investments. In such a scenario, presumption can be taken that the investments have been made out of owned funds only. If the investments are made out of owned funds, no disallowance on account of interest can be made under section 14A of the Act. The proposition to the effect that such a presumption can be taken has been laid down by the Hon'ble Jurisdictional High Court of Punjab & Haryana in the case of Bright Enterprises Pvt. Ltd. Vs. CIT in ITA No.624 of 2013 dated 24.7.2015 and also in the case of CIT Vs. Kapsons Associates, ITA No.354 of 2013 (O....
X X X X Extracts X X X X
X X X X Extracts X X X X
.....51 crores in his Profit & Loss Account on account of forfeiture by M/s BHEL. The assessee explained to the Assessing Officer that it had entered into a contract with BHEL for supply of 50MW turbine. The price of the machinery as per contract is Rs. 24.75 crores. The assessee has paid an advance of Rs. 2.51 crores. On the plea that it has found the supplier namely M/s DF Power Systems Pvt. Ltd. for supply of same machinery at a cheaper rate, the assessee forgone to acquire the machine and as a result Rs. 2.51 crores were forfeited by BHEL. The Assessing Officer disallowed the said claim of the assessee stating that any payment made by the assessee for purchase of plant and machinery is a capital expenditure as per the accounting principles. The amount of Rs. 2.51 crores given as advance for purchase of machinery forfeited by BHEL has to be treated as capital expenditure. Reliance was placed on the judgment of Hon'ble Supreme Court in the case of Swadeshi Cotton Mills Co. Ltd. Vs. CIT (1967) 63 ITR 65. 12. Before the learned CIT (Appeals), it was submitted that the expenditure is in the nature of revenue expenditure forgone in the interest of the business and to safeguard the f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....n terms of engineering and procurement. Therefore, BHEL did not immediately put on hold the various activities related to the project resulting in built up of inventory. It was also stated that the BHEL had clarified that expenses on account of engineering charges, procurement of material and inventory carrying cost had already been incurred totaling to Rs. 3,67,86,000/-. The fresh order booked by the assessee with DF Power Systems Pvt. Ltd. dated 26.2.2008 for purchase of 50 MW Dongfang Steam Turbine generator for Rs. 21.70 crores was placed on record. In view of all these facts, it was stated that since the decision of the amending agreement was taken on account of business prudence, the same has to be allowed as revenue expenditure. Reliance was placed on a number of judgments of various High Courts as under : i) CIT Vs. Majestic Auto Ltd. (2009) 315 ITR 445 (P&H) ii) Idea Cellular Ltd. Vs. Addl.CIT (2014) 65 SOT 15 (Mum) iii) Reliance Footprints Vs. ACIT (2014) 29 ITR (Trib) 82 (Mum) iv) ACIT Vs. Anjani Kumar Co. Ltd. (2003) 259 ITR 114 (Raj) v) ACIT Vs. Am Kryon International Pvt. Ltd. ITA No. 474/2014 dated 29.10.2015 (Chd.Trib). 14. The judgment of the Hon'ble....
X X X X Extracts X X X X
X X X X Extracts X X X X
....niversal. Each case depends on its own facts, and a close similarity between one case and another is not enough, because even a single significant detail may alter the entire aspect. In deciding such cases, one should avoid the temptation to decide cases (as said by Cordozo) by matching the colour of one case against the colour of an another. To decide, therefore, on which side of the line a case falls, its broad resemblance to another case is not at all decisive. What is decisive is the nature of the business, the nature of the expenditure, the nature of the right acquired, and their relation inter se, and this is the only key to resolve the issue in the light of the general principles, which are followed in such cases." 19. We are aware of the fact that in the present case, the issue involved is that of losses and not of expenditure incurred by the assessee, however,, we feel that the parameters involved in both the cases are the same. This proposition has also been fortified by the judgment of Madras High Court in the case of CIT Vs. Madras Auto Service Ltd. (19881) 156 ITR 740 (Mad). 20. Undoubtedly, the money originally was paid for acquiring a machinery, i.e. a capital ass....