TaxTMI 
TaxTMI 
2018 (6) TMI 826
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....evenue expenditure by following clause 2.2 of the concession agreement of the assessee with the MDC for five years. 3. In the facts and under the circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of Rs. 96,14,068/- without appreciating the facts that the Ld. CIT(A)-XXVII, New Delhi vide appeal order no. 415/2013-14 dated 29.08.2014 for the A.Y. 2009-10 in the own case of the assessee decided the appeal on this issue in favour of the department. 4. The appellant craves to be allowed to add any fresh grounds of appeal and/or delete or amend any of the grounds of appeal. 2. Briefly stated facts of the case are that the assessee was engaged in the business of advertising and filed return of income for the year under consideration on 30/09/2011, declaring total income of Rs. 4,53,60,290/-. The case was selected scrutiny and notice under section 143(2) of the Income-tax Act, 1961 (in short the 'Act') was issued and complied with. In the assessment completed under section 143(3) of the Act, the Assessing Officer made disallowance amounting to Rs. 1,84,960/- under section 14A of the Act and disallowance of Rs. 96,14,068/- under section 37(1) ....
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....ction 14A and expenses towards non-taxable income must be excluded; (e) Once a proximate cause for disallowance is established - which is the relationship of the expenditure with income which does not form part of the total income - a disallowance has to be effected. AH expenditure incurred in relation to income which does not form part of the total income under the provisions of the Act has to be disallowed under Section 14A. Income which does not form part of the total income is broadly adverted to as exempt income as an abbreviated appellation. " 5.4. In the case of Maxopp Investment Ltd v CIT (Delhi HC) (2011) 5 Tax Corp (DT) 49842 (DELHI), the Hon'ble court observed: "30. As we have already noticed, sub-section (2) of Section 14A of the said Act refers to the method of determination of the amount of expenditure incurred in relation to exempt income. The expression used is - "such method as may be prescribed". We have already mentioned above that by virtue of Notification No.45/2008 dated 24/03/2008, the Central Board of Direct Taxes introduced Rule 8D in the said Rules. The said Rule 8D also makes it dear that where the AO, having regard to the a....
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....rm part of the total income." 5.5. Thus whenever the issue of 14A arises the AO should ascertain the correctness of the claim of the appellant in respect of expenditure incurred or not incurred in relation to income which does not form part of the total income under the Act. 5.6. In case the AO is satisfied with the claim of the appellant, the AO should accept the claim of the appellant so far as the quantum of disallowance is concerned. In case the AO after giving the appellant an opportunity of being heard, is not satisfied with the correctness of the claim of the appellant, he should reject the claim after giving reasons. The AO is to then determine the amount of expenditure incurred in relation to income which does not form part of the total income. The language of sub section 14/4(1) is abundantly clear that relation has to be seen between the exempt income and expenditure incurred in relation to it. 5.7. Reference is also made to the order of the Hon'ble ITAT in the case of Promain Ltd. for A. y. 2009-10. The Hon'ble ITAT observed as under: "9. In the present case, we find that the assessee had major investments of Rs. 14.86 crores ....
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....older has no control and cannot insist on payment of dividend. When declared, it is subjected to dividend distribution tax. 16. What is also noticeable is that the entire or whole expenditure has been disallowed as if there was no expenditure incurred by the respondent-assessee for conducting business. The CIT(A) has positively held that the business was set up and had commenced. The said finding is accepted. The respondent-assessee, therefore, had to incur expenditure for the business in the form of investment in shares of cement companies and to further expand and consolidate their business. Expenditure had to be also incurred to protect the investment made. The genuineness of the said expenditure and the fact that it was incurred for business activities was not doubted by the Assessing Officer and has also not been doubted by the CIT(A). 17. In these circumstances, we do not find any merit in the present appeals. The same are dismissed m limine." 5.9 In view of the above, since the appellant did not have any dividend income and it had strategic investment therefore no disallowance under 14A can be made. The addition of Rs. 1,84,960/- is therefore delet....
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....he rival submission and perused the relevant material on record. In the instant case, the assessee entered into an agreement with the "Municipal Corporation of Delhi" (MCD) for maintaining and operating public urinals in lieu of "OOH" advertisement media display on operation maintenance and transfer basis. In pursuance of the said agreement, the assessee incurred an expenditure of Rs. 1,20,17,585/-, which has been claimed as revenue expenditure. The contention of the assessee that there is no concept of deferred revenue expenditure in the Income Tax Act and the assessee is entitled to claim the expenditure incurred in the year itself. Before the Ld. CIT(A) the assessee relied on the decision of the Hon'ble Delhi High Court in the case of Citi Financial Consumer Finance Ltd.(supra). For ready reference, the relevant finding of the Hon'ble Delhi High Court in the said case is reproduced as under: "11. This Court, thus, explained in no uncertain terms that the normal rule accepted bv the Supreme Court in the said judgment was that the expenditure is to be allowed in the year in which it was incurred. Only at the instance of the assessee who wanted to spread over, the court ha....
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.... disallowable on an application of this test. If the advantage consists merely in facilitating the assessee's trading operations or enabling the management and conduct of the assessee's business to be carried on more efficiently or more profitably white leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future. The test of enduring benefit is therefore not a certain or conclusive test and it cannot be applied blindly and mechanically without regard to the particular facts and circumstances of a given case." 13. Applying the aforesaid principle to the facts of this case, it clearly emerges that the expenditure on publicity and advertisement is to be treated as revenue in nature allowable fully in the year in which it was incurred. Concededly, there is no advantage which has accrued to the assessee in the capital field. The expenditure was incurred to facilitate the assessee's trading operations. No fixed capital was created by this expenditure. We may also add here that in the Income-Tax laws, there is no concept of deferred revenue expenditure. Once the assessee claims the ded....