TaxTMI 
TaxTMI 
2016 (7) TMI 613
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....in the facts and circumstances of the case. 2.1. The brief facts of this issue is that the assessee is an Individual and is Managing Director of M/s. TT Ltd. a leading knitwear manufacturing concern. The Assessee has controlling interest and is holding shares worth Rs. 15.89 Crores therein and has income from the said company in the form of Managerial Remuneration amounting to Rs. 35.20 Lacs, Royalty & Advertisement Pool A/c. amounting to Rs. 1.49 Crores both assessed as Business 'Income. The assessee is running "Wind Mill" a priority industry Project as its Proprietor and generates electrical energy which is sold wholly to Tamil Nadu Electricity Board which also is assessed as Business Income. The assessee has Dividend Income Rs. 51.68 Lacs on Shares in TT Ltd. above which has been claimed as exempt u/s 10(34) of the Act. The assessee borrowed secured loans Rs. 10.63 Crores & unsecured Loans Rs. 5.57 Crores on which he paid interest Rs. 1.87 Crores (including Rs. 42.04 Lacs on Wind Mill) during this year. The assessee paid interest on unsecured loan of Rs. 46.76 lacs and on secured loans Rs. 93.81 lacs and finance charges of Rs. 4.38 lacs against the said loans. The assessee st....
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....s. 14A whereas the AO was rightly disallowed expense in relation to dividend income earned by the assessee which he claimed as exempt." 2.2. The Ld DR stated that the borrowed funds as on 31.3.2009 as per the books were outstanding at Rs. 16.19 crores and whereas the own funds available with the assessee were only Rs. 15.467 crores. Hence it could be presumed that the investments were made out of borrowed funds and accordingly disallowance u/s 14A of the Act has been rightly made by the ld AO. In response to this, the ld AR argued that investments made in TT Ltd are strategic investments and business expediency investments and the same were made in the earlier years out of own funds. He stated that the increase in borrowed funds were due to loans availed by the assessee for purpose of acquisition of windmill which was made in Financial Year 2006-07 (Rs 6.20 crores) ; vehicle loans availed during Financial Years 2007-08 & 2008-09 (Rs 0.06 crores) ; loan availed for acquisition of Karol Bagh Office building (Rs 2.15 crores) and working capital for business during Financial Years 2007-08 & 2008-09 amounting to average of Rs. 2.22 crores, whereas, the investments in TT Ltd were made....
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....ares for managing, controlling, administrating, financing the controlled company i/e M/s TT Limited and that holding the majority shares in the said managed company is for earning royalty income, managerial remuneration and dividend income which is earned incidentally is an integral part of the business. These submissions were not controverted by the revenue before us. Accordingly we hold that the investments made in shares of TT Limited out of own funds of the assessee take the character of strategic investments in order to protect the business interest and was not made with a view to earn dividend income. The reliance placed by the ld AR on the decision of the Hon'ble Jurisdictional High Court in the case of CIT vs Rajeeva Lachan Konaria reported in 208 ITR 616 (Cal) is well founded. Though this decision was rendered in the context of allowability of interest expenditure u/s 36(1)(iii) of the Act, the principles laid down thereon would apply with equal force to the facts of the instant case for the purpose of disallowance u/s 14A of the Act. 2.3.2. We also find that the assessee in the course of proceedings u/s 263 of the Act for the Asst Year 2004-05 vide order u/s 263 ....
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....are sold and the income derived therefrom is offered to tax as business income. The remaining 37% of the shares are retained. It has remained unsold with the assessee. It is those unsold shares have yielded dividend, for which, the assessee has not incurred any expenditure at all. Though the dividend income is exempted from payment of tax, if any expenditure is incurred in earning the said income, the said expenditure also cannot be deducted. But in this case, when the assessee has not retained shares with the intention of earning dividend income and the dividend income is incidental to his business of sale of shares, which remained unsold by the assessee, it cannot be said that the expenditure incurred in acquiring the shares has to be apportioned to the extent of dividend income and that should be disallowed from deductions. In that view of the matter, the approach of the authorities is not in conformity with the statutory provisions contained under the Act. Therefore, the impugned orders are not sustainable and require to be set aside. Accordingly, we pass the following: ORDER (i) Appeal is allowed. (ii) Impugned orders are hereby set aside. (iii) The substantial que....
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....onics Pvt. Ltd in ITA No. 3317/Ahm/2011 & CO No. 44/Ahm/2012 dated 2.3.2012 in support of his contentions. The ld CITA appreciating the contentions of the assessee deleted the disallowance. Aggrieved, the revenue is in appeal before us on the following ground:- "2. On the facts & circumstances of the case, the Ld. CIT(A)-XX, Kolkata has erred in deleting the addition of Rs. 4,54,080/- on account of depreciation claimed on land." 3.2. The Ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR vehemently relied on the order of the ld CITA. 3.3. We have heard the rival submissions. At the outset, we find that the action of the ld AO in trying to disturb the opening Written Down Value (WDV) attributable to the cost of land and thereby trying the disallow the depreciation component thereon is not appreciated , as, if at all, the ld AO has got any grievance on the impugned issue, then he should have reopened the assessment for the Asst Year 2007-08 ( i.e. the year in which land on which windmill was installed was purchased) and disallowed the depreciation thereon in that year. He cannot unilaterally disallow the depreciation based on the opening writte....
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....st of such wind mill. The foundation structure or the specially demarcated appurtenant thereto cannot be considered as equivalent to a hotel or a cinema building which is adjunct to carrying on a hotel business or theatre business. On the other hand these can be deemed only a part of a windmill for harnessing wind energy. In coming to this conclusion we are fortified by decision of Hon'ble Karnataka High Court in the case of CIT v. Karnataka Power Corporation (247 ITR 268) where it was held that whether a the building can be treated as a plant was a question of fact and when it is found as a fact that the building has been so planned and constructed as to serve the assessee's ITA No.176/Mds/2010 6 special technical requirement, it would qualify to be treated as a plant. In our opinion, the expenses relating to the land and foundation specially incurred with a view to serve the technical requirements would also become a part of the plant in a case that of a wind mill. If we look at Appendix I to the Incometax Rules, prescribing the rates of depreciation, it can be seen that Legislature has given higher depreciation rate of 80% on anti-pollution devices, energy saving and renewable e....
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....shown an amount of Rs. 7,93,379/- paid to M/s Adsun Advertising Agency which was disallowed by him in the assessment. Before the ld CITA, the assessee produced the copy of the bill of M/s Adsun Advertising Agency. The ld CITA observed that all the payments were made by account payee cheques and accordingly deleted the disallowance. Aggrieved, the revenue is in appeal before us on the following ground:- "3. On the facts & circumstances of the case, the Ld. CIT(A)-XX, Kolkata has erred in deleting the addition of Rs. 7,93,379/- on account of advertisement expenses without bills." 4.2. The ld DR argued that the bill of M/s Adsun Advertising Agency was never subjected to verification by the ld AO and accordingly prayed for setting aside of this issue to the file of the ld AO which was fairly accepted by the ld AR. 4.3. We have heard the rival submissions. In the facts and circumstances, we deem it fit and appropriate, to set aside this issue to the file of the ld AO , to decide the same in the light of evidences submitted by the assessee in this regard. Accordingly, the ground no 3 raised by the revenue is allowed for statistical purposes. 5. The last issue to be deci....
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....s and the assessee u/s 194C of the Act as the transaction was purely in the nature of purchase / sale of materials and accordingly the provisions of section 194C of the Act cannot be made applicable to the facts of the instant case. Aggrieved, the revenue is in appeal before us on the following ground:- "4. On the facts & circumstances of the case, the Ld. CIT(a)-XX, Kolkata has erred in deleting the addition of Rs. 11,18,698/- on account of disallowance u/s. 40(a)(ia) read with section 194C on advertisement materials." 5.2. The ld DR vehemently relied on the order of the ld AO. In response to this, the ld AR stated that the assessee has not supplied materials to the job worker and hence does not fall within the definition of 'work' as per section 194C of the Act. The assessee has purchased only diaries, calenders etc for which the bills are available in pages 36 to 40 of the paper book filed by the assessee. 5.3. We have heard the rival submissions and perused the materials available on record including the paper book filed by the assessee. We find from the details and the bills submitted in pages 36 to 40 of the paper book, the assessee had only made payments for purchas....
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....e ld AR argued that this advance was made with a bona fide belief to carry out certain repair works in the business premises. In any case, he argued that there cannot be any addition towards notional interest income. He further argued that the ld CITA had held while dealing with the issue of disallowance u/s 14A of the Act that the assessee had enough own funds at its disposal and having held so, it has to be presumed that the advance to wife Smt. Kala Devi Jain also should have been made out of own funds and hence there is no question of making any addition towards notional interest income thereon. In response to this, the ld DR vehemently relied on the order of the ld AO. 6.3. We have heard the rival submissions. We find that we have already held while dealing with the issue of disallowance u/s 14A of the Act that the assessee is having sufficient own funds at its disposal which would easily cover the advance given to the wife Smt Kala Devi Jain in the sum of Rs. 7,00,000/- also. Hence there is no question of charging any notional interest thereon on the said advance presumed to have been given out of own funds. Hence the addition made in the sum of Rs. 39,375/- is directed to....