2016 (6) TMI 118

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....come Tax (Appeals) -16, Mumbai [hereinafter referred to CIT(A)] erred in confirming the disallowance of Rs. 2,17,167/- under section 14A of the I.T. Act r.w.r. 8D of the I.T. Rule being the expenses attributable to investment giving rise to the exempted income. Your Appellant submits that it has made strategic investment in shares of its subsidiary for acquiring controlling interest; further the Appellant has not incurred any expenditure attributable to investment activity giving rise to the exempted income and hence no disallowance u/s 14A of the Act is called for". 2. The assessee company is engaged in the business of manufacturing, selling, trading, import and export of textile dyestuffs. Ld. AO from the perusal of the Balance-sheet noted that, assessee has purchased unquoted shares of M/s Texanlab Laboratories Private Limited amounting to Rs. 4,99,99,000/-, the income from these investments will not form part of the total income. In response to the show cause notice as to why disallowance under section 14A r.w. Rule 8D should not be made, the assessee submitted that, assessee has not earned any exempt income from such investments and these investments were made purely for....

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....ion 14A will not apply if no exempt income is received or receivable during the relevant previous year". 7. Thus, respectfully following the aforesaid ratio, we hold that, no disallowance under section 14A is called for accordingly, ground raised by the assessee is allowed. 8. Now, we will take-up ITA No. 3046/Mum/2014, vide which following grounds have been raised:- "1. The Commissioner of Income Tax (Appeals) -16, Mumbai [hereinafter referred to CIT(A)] erred in confirming the disallowance of Rs. 14,66,757/- under section 14A of the I.T. Act r.w.r. 8D of the I.T. Rule being the expenses attributable to investment giving rise to the exempted income. Your Appellant submits that it has made strategic investment in shares of its subsidiary for acquiring controlling interest; further the Appellant has not incurred any expenditure attributable to investment activity giving rise to the exempted income and hence no disallowance u/s 14A of the Act is called for". 9. It has been admitted by both the parties that, in this year also, assessee has not earned any exempt income from the investment made in the subsidiary company. Even finding of the AO as well as CIT(A) are exactl....

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....e of "current repairs" as such repairs has to be for the purpose of preserving or maintaining an already existing assets; (iii) The provision of explanation 1 to section 32 of the I.T. Act applies to these renovation and repairs expenses incurred on the leased premises". However, he allowed depreciation and net addition of Rs. 1,88,75,358/- was made. 13. Before the CIT(A), detailed submissions were made, duly supported by various judicial pronouncements which has been dealt and decided by the CIT(A) from pages 5 to 6 of the appellate order. After analyzing the facts, he decided this issue in favour of the assessee after observing and holding as under:- "I have carefully considered the contention of the appellant and also carefully gone through the documents available on record. I find that the appellant had incurred expenditure of Rs. 1,98,68,798/- towards the leasehold improvements and claimed the same as revenue expenditure. It is also a matter of record that the appellant had taken the premises on leave & license for the period of 5 years only for the purpose of its office, laboratory, research and development work. It is also submitted that the leave & license agree....

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....n business premises. The Department has referred to Explanation 1 to section 32, which only refers to any capital expenditure incurred. It does not speak about the revenue expenditure. Thus, reference of Explanation 1 to section 32 in the grounds of appeal may not be relevant. The section 30(a)(i) on the other hand provides that, if repairs have been carried out in the premises occupies as a tenant then it has to be allowed as deduction under section 30 as 'repairs' that is, as cost of repairs to the premises. The Hon'ble Delhi High Court in the case of High Line Pins, reported in 306 ITR 182 has dealt this issue in detail wherein it was observed and held as under:- After having considered the arguments advanced by the learned counsel for the parties and examined the decisions cited by them, we are of the view that the assessee's claim for deduction under Section 30(a)(i) has been rightly allowed by the Tribunal. The decisions cited by the learned counsel for the revenue relate to "current repairs". There is a clear distinction between the expression "repairs" and the expression "current repairs". It is obvious that the word "repairs" is much wider than the expression "current r....