TaxTMI 
TaxTMI 
2015 (3) TMI 1333
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....ppeals) did not appreciated that the receipt of Rs. 29,21,771-00 being rent of "Infrastructure Facilities" installed in the property Let Out, and are integral part of Property in total which is Let Out, as such, it should be assessed as "Rental Income" 2. The Ld. C.I.T. (Appeals) erred on facts and in law in confirming the disallowance of Rs. 1109156-00 on account of "Foreign Travelling Expenses" of the Directors of the Company, which were incurred wholly and exclusively for the purpose of Development of Business and for exploring business opportunities for Company. 3. The Ld. C.I.T. (Appeals) erred on facts and in law in confirming the disallowance of. Rs. 1,32,953-00 incurred in connection with sponsor ship of "Educational Expenses" of Director of the Company for conducting Professional Course . 3.1 The Ld. C.I.T. (Appeal) did not appreciate that expenses incurred are for the purpose of business as benefit resulted in Development and Growth of the Company in subsequent year. 3.2 The Ld. C.I.T. (Appeal) did not appreciated that after completion of the Studies in Financial Year 2008-09, the said Director joined the Company and because of his spec....
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.... rent of the property and are part and parcel of each other. The infrastructure facilities, namely lift, generator, air conditioning plant, fire fighting plant, etc. along with the building space form a composite as a whole. Neither of the building space nor the infrastructure facilities can be used solely without dependence on each other. The primary object was to let out the property along with the right to use common facilities. He has also laced reliance upon the judgment of the Hon'ble Supreme Court in the case of Shambhu Investment Pvt. Ltd. vs. CIT [2003] 129 Taxman 70 (SC). The ld. CIT(A) re-examined the claim of the assessee in the light of assessee's contentions, but was not convinced with it and he has confirmed the order of the Assessing Officer treating the infrastructure charges as business income. 6. Now the assessee has preferred an appeal before the Tribunal with the submission that all the infrastructure facilities like lift, generator, air condition plant and fire fighting plant are fitted and installed in the building and these are the integral part of the building. Neither the building space nor the infrastructure facilities can be used solely withou....
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....hly rent basis to various parties along with furniture, fixture, light, air conditioners, etc. for being used as table space and providing services like watch and ward staff, electricity and water and other common amenities without any separate charges was assessable as income from property and not business income. Through this judgment, the Hon'ble Apex Court has confirmed the judgment of the Hon'ble High Court of Calcutta. 11. Similar view was also expressed by the Mumbai Bench of the Tribunal in the case of DCIT vs. Vaishnav S. Puri (HUF) (supra), in which the Tribunal has held the income from letting out of building for consolidated monthly rent which includes the furniture and fixtures, air conditioners, etc. is to be treated as income from house property and not as business income. 12. Similar view was also expressed by the Mumbai Bench of the Tribunal in the case of Marwar Textiles (Agency) (P) Ltd. vs. Income Tax Officer (supra), in which it is held that the entire receipts being composite receipts on account of letting out of furnished accommodation, was rightly held as income from house property. 13. We have also carefully perused the lease deed and infra....
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....e and site development, internal room size, elevation, etc., the M.D. and Director of the company decided to visit Egypt as Egypt has some of the best for residential apartments in the world. He has also placed reliance upon the Minutes of the Board of Meeting and the following case laws in support of his contentions:- 1. Rahuljee & Company (P) Ltd., vs. ITAT & Others, 73 DTR 89. 2. CIT vs. Williamson Tea (Assam) Ltd., 38 taxmann.com 154 17. The ld. D.R., on the other hand, has placed reliance upon the order of the ld. CIT(A), with the submission that onus is upon the assessee to place the relevant evidence on record in order to justify that the foreign travel was undertaken to explore the business opportunities. Mere oral submissions are not sufficient to justify the claim. If the assessee has gone to explore business opportunities, there must have been some correspondence exchanged between the assessee and the foreign clients/advisers/consultants. In the absence of any evidence placed on record, the claim of the assessee is not justified and the ld. CIT(A) has rightly disallowed the expenditure incurred on foreign travel. 18. Having carefully examined the ....
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....is order for assessment year 2005-06, has confirmed the order of the Assessing Officer and the claim of the assessee was disallowed. 21. Now the assessee is before the Tribunal and during the course of hearing of the appeal, the ld. counsel for the assessee has invited our attention to the order of the Tribunal in the assessee's own case for assessment year 2005-06 with the submission that the impugned issue was raised before the Tribunal and the Tribunal has decided the issue in favour of the assessee by holding that the expenditure was incurred for business purposes. Copy of the order of the Tribunal is placed on record. Since the impugned issue has already been adjudicated by the Tribunal in assessment year 2005-06 and the claim of expenditure incurred on education of Shri. Mukund Halwasiya was allowed, we find no reason to disallow the claim in the impugned assessment year. We, therefore, following the order of the Tribunal for assessment year 2005-06, allow the claim of the assessee after setting aside the order of the ld. CIT(A) in this regard. Accordingly, the addition made on this count is hereby deleted. 22. Apropos ground No.4, it is noticed that the Assessing O....
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.... corresponding shares were allotted in financial year 2007-08. Therefore, the Assessing Officer has failed to appreciate the fact that the said advance did not become income generating investment in the concerned financial year i.e. 2005-06, in which it was advanced. It was further explained that the shareholder becomes eligible for dividend income only when shares are allotted to him and allotment process was completed in financial year 2007-08. Thus, there was no question of eligibility of any exempt income in financial year 2005-06. It was further contended that the total income exempted from tax was Rs. 87,111.76 consisting of dividend income of Rs. 35,750/- exempted under section 10(34) of the Act, long term capital gain of Rs. 1,18,922.27 exempted under section 10(38) of the Act and short term capital loss of Rs. 67,560.51. Therefore, disallowance made by the Assessing Officer at Rs. 9,52,017/- was irrational. It was further contended that provisions of sub-section (1) and (2) of section 14A of the Act were introduced w.e.f. 1.4.2007 by the Finance Act, 2006, therefore, it cannot be invoked to the issue pertaining to assessment year 2006-07 and no alleged disallowance can be ....
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....he considered view that no disallowance under section 14A of the Act is called for for investment in shares and mutual funds and advances given to M/s G.R. Maintenance & Services Pvt. Ltd. for allotment of shares. We accordingly set aside the order of the ld. CIT(A) in this regard and delete the addition. I.T.A. No. 24/LKW/2012: 34. Through this appeal, the assessee has assailed the order of the ld. CIT(A), inter alia, on following grounds:- 1. The Ld. C.I.T. (Appeals)-I, erred on facts and in law in upholding the Order of the Ld. A.O. that Receipts of Rs. 24,61,858-00 should be assessed as "Business Income" instead of "Income from House Property" as shown by the appellant. 1.1 The Ld. C.I.T. (Appeals) did not appreciated that the receipt of Rs. 24,61,858-00 being rent of "Infrastructure Facilities" installed in the property Let Out, and are integral part of Property in total which is Let Out, as such, it should be assessed as "Rental Income" 2. The Ld. C.I.T. (Appeals) erred on facts and in law in conforming the adhoc. disallowance of Rs. 6,43,333.00 on account of "Travelling and Business Promotion Expenses" incurred solely and exclusively for the ....
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....ssment year 2006-07 disallowance made for expenses incurred on foreign travel was confirmed by the Tribunal, but in the present assessment year i.e. 2007-08 no expense on account of foreign travel was claimed. The disallowance of local expenses was deleted by the ld. CIT(A) in assessment year 2006-07 and the order of the ld. CIT(A) was later on confirmed by the Tribunal. Therefore, following the order of the Tribunal, we find no merit on account of travelling expenses, as it was also done on ad hoc basis. Accordingly, we delete the addition. 40. Apropos ground No.3, it is noticed that identical issue was raised in assessment year 2006-07. The Tribunal has adjudicated this issue in the light of the amendment brought in section 14A and introduction of rule 8D. Since the provisions of sub-section (1) and (2) of section 14A was inserted w.e.f. 1.4.2007 and the provisions of rule 8D was introduced w.e.f. 24.3.2008 relevant to the assessment year 2008-09, disallowance under section 14A of the Act cannot be made in assessment year 2007-08. It was also held in the light of the fact that shares were allotted in financial year 2007-08. Therefore, following the order of the Tribunal in ass....
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....uch, it should be assessed as "Rental Income" 2. The Ld. C.I.T. (Appeals) erred on facts and in Law in confirming the addition of Rs. 14,43,346-00 under section 14A of Jncome Tax Act, 1961 which is not applicable in the present of sets of facts and circumstances. 3. The Additions upheld are highly excessive, contrary to the facts, law and principle of natural justice without providing sufficient opportunity to have its say on the reasons relied upon by him. 46. Apropos ground No.1, it is noticed that the receipts on account of infrastructure facility was treated to be business income following the orders of earlier years. 47. This issue was examined by us in the foregoing appeals, in which it has been held that the entire receipts would be the rental income under the head income from house property. Since there is no change in the facts in the impugned assessment year, we treat the receipts on account of infrastructure facilities as rental income under the head income from house property and allow the ground of appeal of the assessee on this issue. 48. Apropos ground No.2, it is noticed that the disallowance of Rs. 14,43,346/- was made under section 14A o....
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....e order of CIT(A), we find that the addition was deleted by him on the basis that the Assessing Officer has not appreciated the business connection with the sister concern and commercial expediency as argued by the assessee in respect of these transactions of investment. He has noted in Para 13 of his order that deduction was claimed by the assessee u/s 36 (1) (iii) of the I. T. Act. Thereafter it is noted by CIT(A) in para 14 of his order that it cannot be said that the amounts invested by assessee are for non business purpose, though same may be indirect business connection. We are of the considered opinion that having business connection is different thing and making investment for business expediency is different thing altogether. In the present case, this is the only claim of the assessee before the Assessing Officer and before us also that the investments made by the assessee in sister concerns who are engaged in a connected or similar business. Even if this is correct then also, it cannot be said that this investment in sister concern is for business purpose or for business expediency. Hence, the judgment of Hon'ble apex court rendered in the case of S. A. Builders (Supr....
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.... not necessary to show that the expenditure was a profitable one or that in fact any profit was earned." It is indeed difficult to see how, after this observation of the court, there can be any scope for controversy in regard to the interpretation of s. 57(iii). It is also interesting to note that, according to the revenue, the expenditure would disqualify for deduction only if no income results from such expenditure in a particular assessment year, but if there is some income, howsoever small or meagre, the expenditure would be eligible for deduction. This means that in a case where the expenditure is Rs. 1,000, if there is income of even Re. 1, the expenditure would be deductible and there would be resulting loss of Rs. 999 under the head " Income from other sources ". But if there is no income, then, on the argument of the revenue, the expenditure would have to be ignored as it would not be liable to be deducted. This would indeed be a strange and highly anomalous result and it is difficult to believe that the legislature could have ever intended to produce such illogicality. Moreover, it must be remembered that when a profit and loss account is cast in respect....
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....enditure is incurred in relation to income which does not form part of the total income under this Act. Hence, it has to be first established by the assessee that deduction on account of interest is allowable under some provisions of the Act. In our considered opinion, in the facts of the present case, interest is not an allowable expenditure under any provision of the Act. It is definitely not allowable for computing salary income or income from house property. It cannot be said that deduction on account of interest expenditure is to be allowed for computing income from capital gain since income on account of capital gain is taxable because deduction on account of interest expenditure is not allowable for computing capital gain. For computing capital Gain, deduction is allowable in respect of cost of acquisition, cost of improvement and cost of transfer only and interest does not fall in any of these three categories. From A.Y. 2004 - 05, it is not an allowable deduction u/s 57 (iii) i.e. for computing Income from other Sources also because, deduction is allowable under this section for those expenses which are incurred for earning an income taxable under the head income from othe....
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....me and hence, it is not relevant as to whether there was actual dividend income in the present year or not. In this regard, we are aware that there are Tribunal decisions as well as the judgment of Hon'ble Allahabad High Court also that if there is no dividend income actually earned then no disallowance can be made u/s 14A but in these judgments, the judgment of Hon'ble Apex Court rendered in the case of Rajendra Prasad Moody (supra) was not brought to the notice of the tribunal and Hon'ble High Court and hence, it was not taken note of. It was also not taken note of that even if it is held that no disallowance is to be made u/s 14A of the Act, then also, there has to be a positive finding that under which section, this interest expenditure is allowable. Since dividend income is not subject to tax as income from other sources from assessment year 2004-05, it cannot be said that interest expenditure has to be allowed u/s 57(iii) of the Act. This is also not a case of the assessee that investment in shares was made out of borrowed funds in course of dealing in shares and therefore, interest expenditure is allowable u/s 36 (1) (iii) of the Act. We have already seen that in....
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.... making investment in shares and therefore, it cannot be accepted that the investment was made out of fund available in the form of sundry creditors. 43. As per above discussion, we have seen that interest expenditure incurred by the assessee by borrowing funds for making investment in shares is not allowable from assessment year 2004-05 because the dividend income is not taxable income under the head income from other sources and therefore, deduction is not allowable u/s 57(iii) of the Act. We have also seen that no deduction is allowable u/s 36 (1) (iii) also. Hence we reverse the order of learned CIT (A) and restore that of the A.O. Regarding various judgments cited by the learned AR of the assessee including the judgment of Hon'ble apex court rendered in the case of S. A. Builders (Supra), we would like to observe that no judgment is rendering any help to the assessee because we have seen that deduction is not allowable under any provisions of any section of Income Tax Act. Hence, there is no need to disallow any expenses which is not allowable. In fact, the assessee has failed to make out a case that deduction of interest expenditure is allowable under the provisi....
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.... the total income under this Act. 3(3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act. Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001. RULE 8D OF THE RULES: "8D. Method for determining amount of expenditure in relation to income not includible in total income.--(1) Where the Assessing Officer having regard to the accounts of the assessee of the previous year, is not satisfied with-- (a) the correctness of the claim of expenditure made by the assessee ; or (b) the claim made by the assessee that no expenditure has been incurred in relation to income which does not form part of the total income under the Act for such previous year, he shall determine the amount of ....
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....ly two options are left with the Assessing Officer - one is to accept the expenditures claimed by the assessee and if he disputes the same, he has to compute the expenditures by adopting the formula laid down in rule 8D of the Rules. 9. Turning to the facts of the case, the assessee has earned the dividend income at Rs. 68,635/- for which it has claimed expenditures of only Rs. 16,544/- of which details were furnished before the Assessing Officer. Apparently, the quantum of expenditures does not commensurate with the exempted income claimed by the assessee. Therefore, the Assessing Officer has every reason to doubt the correctness of the expenditures claimed by the assessee for earning the exempted income of Rs. 17,68,735/-. Therefore, we are of the view that the Assessing Officer has to re-compute the expenditures relating to the dividend income which does not form part of total income under this Act and for computing the expenditures, the Assessing Officer has no other option but to adopt the formula laid down under rule 8D of the Rules and he did the same. But from the calculation, we find that the Assessing Officer has not determined the amount of expenditures directly....
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....lity. For the sake of reference, we extract the relevant portion of the order of the ld. CIT(A) as under:- "6.3.1 I have carefully considered the detailed submissions made by the Id. AR and also perused the material in the form of analysis of various advances made during the year amounting to Rs. 2,70,38,236/-. I have taken note of the fact that the above advances have been made to various parties in the manner as detailed in para 6.1 herein above.. This demonstrate that the major advance of Rs. 2,12,18,417/- has been made to M/s. G.R. Maintenance and Services Pvt. Ltd, towards share capital, which stands allotted to the appellant in the F.Y. 2007-08. Some other interest free "advances" have been against the credit card payment to AEB Ltd. (Rs. 92,501) unmaterialised land deals ( Rs. 10 lacs, Rs. 2.5 lacs, Rs. 2 lacs & Rs. 2 lacs to Asha Garg, Ashok Pathak, Mohan Kapoor and Sonia Shetti), advance made and received back to Shri R.K. Almal and S.K. Almal ( Rs. 62,400/- each), advance made for supply of material or business transaction ( Rs. 8 lacs to Country Power Management Co. Pvt. Ltd., and Unique Construction ), and refund of flat booking amount (Rs.5,65,082/- and Rs. 22....
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....dered to be out of borrowed funds in succeeding year. We have also carefully examined the calculation made by the Assessing Officer as per rule 8D of the rules and we find that the Assessing Officer has treated the investment out of mixed funds and he has computed the disallowance by applying the formula given in rule sub-rule (2) clause (3) of rule 8D of the rules; whereas no disallowance can be made where it is established that the investment in shares are made out of own funds available with the assessee. In the instant case, it has been established that the investment in shares were made by the assessee out of own funds available with it. Therefore, no disallowance can be made on account of expenditure incurred by way of interest during the previous year. Whatever disallowances are to be made that can only be made as per clause (3) of sub-rule(2) of rule 8D of the rules. We, therefore, set aside the order of the ld. CIT(A) and direct the Assessing Officer to re-compute the disallowance as per clause (3) of sub-rule(2) of rule 8D of the rules. I.T.A. No. 81/LKW/2013: 56. Through this appeal, the assessee has assailed the order of the ld. CIT(A) on the following grounds:- ....
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..... C. I. T. (A)-I, Lko, erred on facts and in law in holding infrastructure charges Rs. 7,87,155-00 as Income from Other Sources, instead of Income under the head House Property, as shown by the appellant. 1.1 The Ld. C. I. T. (Appeals)-l, did not appreciate that "Infrastructure Facilities" installed in the property let out and is an integral part of Property. Thus the Rent received on it has been correctly shown as "Rental Income". 2. The Ld. C. I. T. (Appeals) erred on Facts and in Law in confirming the addition of Rs. 15,07,703-00 u/s 14A of I. T. Act 1961 which is not applicable in the present sets of facts and circumstances. 4. The Additions upheld are highly excessive, contrary to the facts, law and principle of natural justice without providing sufficient opportunity to have its say on the reasons relied upon by him. 60. Ground No.1 relates to the nature of receipt received on account of infrastructure facility and this issue has already been adjudicated by us in the foregoing appeal, in which it has been held that it is a part of rental income and to be assessed as income from house property. Following the view taken in the foregoing appeals, we....