AI Drafter 
TaxTMI 
TaxTMI 
2017 (12) TMI 1410
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....ssment the Assessing Officer inter alia made following additions/disallowances : i. Disallowance of deduction u/s. 80IA claimed in respect of infrastructure facility developed for Sardar Sarovar Project Rs. 21,98,82,046/-. ii. Disallowance u/s. 40(a)(ia) Rs. 63,70,000/-. iii. Disallowance u/s. 14A r.w. Rule 8D Rs. 2,40,31,932/-. iv. Expenditure on Repairs & Maintenance claimed as revenue treated as capital in nature Rs. 46,21,003/-. v. Disallowance of Interest u/s. 36(1)(iii) Rs. 97,110/-. vi. Disallowance of Commission paid to M/s. Rex Poly Extrusion Ltd., Sangli Rs. 3,48,03,510/-. Apart from above additions/disallowances, the Assessing Officer computed Fringe Benefit Tax (FBT) Rs. 26,93,118/- on medical and hospitalization expenses reimbursed to the employees. Aggrieved by the assessment order dated 23-12-2010 passed u/s. 143(3) r.w.s. 115WE(3) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), the assessee filed appeal before the Commissioner of Income Tax (Appeals). The First Appellate Authority accepted assessee's plea only in respect of disallowance u/s. 40(a)(ia) on commission paid to Non- Executive....
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....more than the investment made. The ld. AR referred to Balance Sheet of assessee company as on 31-03-2008 at page 58 of the paper book. The ld. AR pointed that own funds of assessee including Share Capital and Reserves and Surplus are to the tune of Rs. 662 crores, as against investment of Rs. 347 crores. Thus, in view of the decision of Hon'ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. HDFC Bank Ltd. reported as 366 ITR 505 no disallowance is warranted under Rule 8D(2)(ii). In respect of disallowance under Rule 8D(2)(iii) the ld. AR submitted that for the purpose of computing average investment only those investments on which the assessee has earned tax free income should be considered. The issue can be remitted back to Assessing Officer for excluding investments on which the assessee has not earned any dividend income and recompute disallowance u/s. 14A r.w. Rule 8D(2)(iii). 5.2 In respect of ground No. 3 the ld. AR pointed that the assessee has incurred expenditure on repairs and maintenance of building and has claimed the same to be revenue in nature. However, the Assessing Officer without appreciating the nature of expenditure and the well se....
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.... and circumstances. 5.5 In respect of last ground No. 6 relating to Fringe Benefit Tax on reimbursement of medical expenditure to employees, the ld. AR fairly admitted that this issue has been decided against the assessee by the Tribunal in assessee's own case in assessment year 2007-08. 6. On the other hand Shri Rajiv Kumar representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals). 6.1 The ld. DR submitted that the issue raised in ground No. 1 of the appeal by assessee has been adjudicated by the Co-ordinate Bench of the Tribunal in assessee's own case in immediately preceding assessment years. 6.2 In respect of ground No. 2 the ld. DR submitted that the Assessing Officer has rightly computed disallowance u/s. 14A with respect to average investment under Rule 8D(2)(iii). The Assessing Officer while computing average investment at the end of year has excluded investments made by assessee in foreign companies and where no tax free income has been earned. Therefore, as against investment of Rs. 347 crores, the Assessing Officer has taken value of investment as Rs. 151 crores. No useful purpose would be served for remitting this ....
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....rs, we allow assessee's claim of deduction amounting to Rs. 21,98,82,046/- u/s. 80IA of the Act. Accordingly, ground No. 1 raised in the appeal by assessee is allowed. 8. The next issue in appeal by the assessee is with respect to disallowance u/s. 14A. The assessee has received tax free dividend income to the tune of Rs. 16.87 crores. Admittedly, the assessee has not made any suo-moto disallowance to earn aforesaid tax free income. The Assessing Officer has computed disallowance u/s. 14A in accordance with the provisions of Rule 8D(2)(ii) and 8D(2)(iii). In so far as disallowance on account of interest expenditure under Rule 8D(2)(ii) is concerned, a perusal of Balance Sheet as on 31-03-2008 (at page 58 of paper book) shows that the assessee has own interest free funds including Share Capital and Reserves and Surplus to the tune of Rs. 662 crores, as against the investment of Rs. 347 crores. It is a well accepted proposition that where the assessee is having own funds, as well as borrowed funds it shall be presumed that the assessee has made investments from own funds. In the instant case we find that own funds of the assessee are much more than the investments made. Rule 8D(2)....
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....03,894/- viii Damaged flooring in system storage division of stock department trimex by replacing certain titles & soleing 6,29,317/- ix Soleing, flooring, plastering & painting work in Dydrolic Research Centre Building 6,11,732/- x Strengthening of structural shade in large pumps division by using binder, runner & truss 7,35,775/- xi Civil work of factory Building 2,00,000/- xii Roofing, replacement of factory shed 3,52,280/- Total 46,21,003/- A perusal of the impugned order shows that the assessee company has incurred expenditure to the tune of Rs. 10.11 crores on repairs to machinery and Rs. 3.94 crores in respect of repairs to building. After detailed verification of the expenditure furnished by the assessee, the Assessing Officer disallowed expenditure aggregating to Rs. 46,21,000/- holding it to be capital in nature. The Commissioner of Income Tax (Appeals) has given a finding that the expenditure has been incurred for renovation of building, construction of extension to HRC and sump well etc., therefore, these expenditures cannot be categorized as „current repairs'. The Hon'ble Apex Court in the case of....
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....l by assessee is allowed. 11. In ground No. 5 of the appeal the assessee is assailed payment of commission to M/s. Rex Poly Extrusion Limited. The authorities below have disallowed payment of commission primarily for the following reasons: a. The appellant has not proved the exact nature of services rendered by Rex Poly Extrusion Ltd. b. Rex Poly Extrusion Ltd. is based at Sangli and getting orders for Kirloskar Brothers Limited from places spread out over vast geographical area like Satluj Jal Vidut Nigam Limited, Reliance Infrastructure, Paharpur cooling, etc. appears incredible. c. The reply of Rex Poly Extrusion Ltd. is very general and Rex Poly Extrusion Ltd. is also not able to substantiate the payment of commission. d. There is no match in the nature of business of assessee and Rex Poly Extrusion Ltd. e. There is no consistency in the reason or logic in deciding the percentage of commission. 12. The assessee has furnished a copy of letter of appointment dated 01-05-2007 vide which the services of M/s. Rex Poly Extrusion Limited were engaged. The contention of the assessee is that M/s. Rex Poly Extrusion Limited is instrument....
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....e case of revenue that M/s. Rex Poly Extrusion Limited is in any way connected or is having any interest in the assessee company or vice-versa. 12.1 The ld. DR has placed reliance on the decision of Precision Electronics Ltd. Vs. Deputy Commissioner of Income Tax (supra) to contend that by merely furnishing letter of appointment onus is not discharged by the assessee to prove that M/s. Rex Poly Extrusion Limited has rendered same services to the assessee and is eligible to receive commission for same. The assessee is also under obligation to show the nature of services rendered. In the case of Precision Electronics Ltd. Vs. Deputy Commissioner of Income Tax (supra) the assessee company was engaged in manufacturing of PCB board for Telecom purpose. The Precision Electronics Ltd. claimed to have engaged services of M/s. SLF Industries Ltd. for procuring order from DOT and MTNL against the payment of commission @ 6.5% on the net order value procured from DOT and MTNL. However, during the assessment proceedings, the Precision Electronics Ltd. failed to furnish any written agreement or any correspondence between M/s. SLF Industries Ltd. to establish the nature of liaisoning services ....
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....led reimbursement of medical expenses to the employees liable for Fringe Benefit Tax. The ld. AR of assessee has fairly admitted that this issue has been considered by the Co-ordinate Bench of the Tribunal in assessee's own case and has decided against the assessee. We find that the Coordinate Bench of the Tribunal in assessee's own appeal for assessment year 2007-08 after considering CBDT Circular No. 8 of 2005 has decided the issue against the assessee. The relevant extract of the findings of Tribunal read as under : "10.1 As discussed above, the Hon'ble Supreme Court had occasion to consider the binding nature of the Circular issued by the CBDT on the taxability of various Fringe Benefits in a recent case reported in 301 ITR 289. Since the CBDT has issued clarification that reimbursement of medical expenses up to Rs. 15,000/- is taxable as a fringe benefit in the hands of the employer, the Assessing Officer following the Circular has rightly treated the reimbursement of medical expenses to employees and non-working directors of the company as a fringe benefit under section 115 WB(2)(E) of the Act. Accordingly, the action of the Assessing Officer on this ground is upheld....