TaxTMI 
TaxTMI 
2019 (10) TMI 709
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.... - (i) disallowance of Nano Project related to expenses by treating the same as capital in nature amounting to Rs. 43,82,54,995/-. (ii) disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with rule 8D of the Rules. For this assessee has raised the following grounds: - "1. Proceeding u/s 263 is invalid and bad in law 1.1 erred in holding that the order passed by the Assessing Officer under section 143(3) r.w.s. 144C of the Act is erroneous and prejudicial to the interest of the Revenue; 1.2 erred in assuming the jurisdiction under section 263 of the Act by relying on the decision of Bombay High Court in Case of Ciba of India Ltd (jo Taxman 505) (Bom) without appreciating that the facts in appellant's case are different; 1.3 erred in not appreciating that the proceedings under section 263 of the Act are invalid and bad in law; 1.4 erred in assuming jurisdiction under section 263 of the Act even when Assessing Officer ('AO') had already examined the issues during assessment proceedings, 1.5 erred in not appreciating that the appellant had disclosed all facts before AC and hence order under section 263 ....
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....the Act on 11.02.2016, wherein he noted that on verification of records it is revealed that the assessee has claimed salary, staff welfare expenses, travelling conveyance, hotel expenses etc. in respect of Nano project established at Singur, West Bengal, which was capitalized in the books of account but claimed as revenue expenditure in the computation of income filed along with return of income under the Income Tax Act. The total expenditure claimed amounting to Rs. 43,82,54,495/- was wrongly allowed by the Assessing Officer. According to CIT(LTU) this is not in order as the Nano Project altogether a new plant set up in Singur during the relevant period and it is not an expansion of the existing one. Therefore, he proposed to disallow the above noted expenses. According to him, the assessment order passed is erroneous in so far as it is prejudicial to the interest of the Revenue. Subsequently, vide notice dated 23.02.2016, CIT (LTU) issued another notice stating that while working out the disallowance of expenses relatable to exempt income under section 14A of the Act, the AO failed to consider the interest expenses of Rs. 113.69 crores paid on borrowing for R & D expenses. On thi....
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....nd 8.2 as under: - "8.1 Regarding disallowance under section 14A of the Act r.w.r. 8D of the Income Tax Rules, during the year under consideration, the interest which is capitalized in books includes interest of Rs. 113.69 crores on borrowings for R & D expenditure. The assessee submitted that section 14A of the Act is not applicable in respect of the aforesaid finance cost including the interest incurred on specific borrowing for R & D expenditure. The entire investment, income from which is not liable to tax, made by the company is attributable to the self-generated funds and hence, no borrowing cost is attributable to the same. All borrowings are made towards specific purpose and none of the borrowing is made towards making such investments, income from which is not liable to tax. Since no expenditure has been incurred by the company in relation to such investments, Rule 8D is not applicable. The assessee officer has discarded the decision of the Bombay High Court in the case of Godrej & Boyce Mfg. Co. Limited, (328 ITR 81) mandating him to establish the fact that expenditure has been incurred to earn exempt income. 8.2 I have carefully considered the issue and perused the r....
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....s under: - "3. Details of expenses incurred on transfer of nano plant from Singur to Sanad; During year under consideration i.e. AY 2009-10 no expenses on relocation had been debited to profit and loss account." 7. Further, the details were again given vide letter dated 8.01.2013 vide item No. 1 as under "Details of expenses incurred on transfer of Nano Plant from Singur to Sanad We submit to your goodself that the expense incurred on relocation of nano plant from Singur to Sanad have been debited to CWIP. The relocation expenses had been debited to Profit and Loss account in FY 2009-10 (AY 2010-11) and have been added back in the computation of income of that year. We enclose wherewith the relevant annexure of the Tax Audit Report for the assessment year 2010-11 as 'Annexure'." 8. The assessee has given complete details of re-location expenses amounting to Rs. 144,10,49,109/-. Again, submissions were filed on 18.01.2013 regarding non-applicability of the section 14A of the Act as well as the expenses incurred for shifting of Nano plant from Singur to Sanad which read as under: - "1. Submissions alongwith cop of documents justifying non applicability of section 14A in....
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....ur. However due to unavoidable circumstances, the Nano project had to be abandoned in Singur and relocated to Sanad, Gujarat. Subsequent to the abandonment of the Singur project, the company also incurred certain relocation expenses for moving the entire project from Singur to Gujart. The company, however, has claimed only the revenue expenses incurred in relation to day to day operations at Singur, amounting to Rs. 43,82,54,995/- as deduction in its return of income and the relocation expenses have not been claimed as deductible expense. During the course of assessment proceedings these were examined by the assessing officer, the company has further furnished the details on the relocation expenses. Copy of the submissions filed with the assessing officer are enclosed as Annexure 2 in assessee's paper book at pages 68 to 72. In view of these facts, the learned Counsel for the assessee made submissions that the AO had formed an opinion that these are revenue expenditure and assessee has rightly claimed the same. The AO has not disallowed these expenses while framing assessment under section 143(3) of the Act on this very reason and complete details were examined on various occasions....