TaxTMI 
TaxTMI 
2019 (7) TMI 1567
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....facts in deleting Rs. 21,98,109/- out of the addition of Rs. 23,08,469/- made on account of disallowance of legal expenditure treated as capital expenditure." 4. The grounds of appeal raised by the assessee in its cross objection read as under:- "1. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding partial disallowance of Rs. 19,49,768/- u/s. 14A of the I.T. Act out disallowance of administrative expenses, as narrated on pages 24 and 25 of his order. 2. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding partial disallowance of Rs. 19,49,768/- u/s. 14A of the I.T. Act in the book profit of assessee u/s.115JB. 3. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding disallowance of Rs. 40,074 being employees' contribution to P.F. and ESI u/s. 36[1][va], following the decision of the Jurisdictional High Court i.e. Hon'ble High Court of Gujarat in case of Gujarat State Road Transport Corporation 366 ITR 170. 4. On the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in upholding disallowance of Rs. 1,10,300 being payment....
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....f borrowed funds amounting to Rs. 51.20 lacs is already disallowed in Return of Income. It was also argued that investment is also made in mutual funds and same are growth schemes from which no dividend would ever be earned hence such investments cannot be subject matter of disallowance under Section 14A. With regard to balance investments in the shares of Adani Enterprises for Rs. 225.32 crores, it was argued that same were made in earlier years and in those years there was no interest bearing borrowings and even Assessing Officer has not made any proportionate interest disallowance except bank charges in those assessment years hence such investment should be excluded for making proportionate interest disallowance. So far as disallowance of administrative expenditure under Rule 8D(2)(iii) is concerned, it was argued that disallowance made by Assessing Officer has exceeded actual expenditure debited in Books of Account and majority of expenditure debited in Books of Account and claimed as expenditure pertains to rent income which is separately disclosed as income from business hence no such disallowance is called for. 3.5 On careful consideration of entire facts, it is observed ....
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....llant has not claimed or debited any interest expenditure in A.Y. 2011-12 or earlier years wherein such investments are made which proves that such investments have direct nexus of utilisation of interestfree funds. It is further observed that even new loan taken during the year under consideration is not used for making repayment of loan taken in earlier year hence even on this ground, no proportionate interest disallowance is called for. (v) In the nutshell, the Appellant has established the nexus of use of interest-free funds for making investment in shares and whenever borrowed funds are used, proportionate interest disallowance is already made in Return of Income hence there is no need for making separate disallowance under Rule 8D(2)(ii) for Rs. 2,77,28,566/-. 3.6 So far as disallowance of administrative expenditure under Rule 8D(2)(iii) is concerned, Assessing Officer has made disallowance of Rs. 1,21,69,984/- whereas actual expenditure debited in Books of Account other than purchase of stock-in-trade, financial cost is Rs. 79,78,592/-. When expenditure debited in Books of Account is lower than disallowance computed under Rule 8D, disallowance cannot be made simp....
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....10,51,967 Facts remaining the same, following the above order, impugned disallowance is restricted to Rs. 10,51,967. Balance disallowance is deleted. This ground of appeal is partly allowed." Considering these facts, disallowance is required to be recomputed as under: Sr. No. Particulars of Expenditure Amount Amount Remarks Amount disallowable (Rs.) 1 Other Expenses 3,586,663 (i) Rate & Taxes 65, 783 Municipal tax paid for various residential flats & Milestone, Shrijibag which are rented properties including company professional tax of Rs. 2000/- (ii) Repairs & Maintenance Building 461,473 Paid to towards maintenance of society wherein the fiats are rented. & Printer & Computer AMC. (iii) Electricity Expenses 181,151 Paid on rented properties (iv) Insurance 61,565 Paid on rented properties. Considered by CIT(A) in AY 2011-12 61,565 (v) Auditor 30,337 Paid on rented properties. Considered by C/T(A) in AY 2011-12 30,337 (vi) Legal & Professional Fees 2,327,737 Professional relates....
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....f the CIT(A) except placing reliance upon the order of the AO. We find that the action of the CIT(A) is in tune with law and judicial precedents. Without repeating the contents of the CIT(A), we endorse the same. 10. As regards the disallowance of administrative expenditure, the AO has computed the disallowance at Rs. 1,21,69,984/- under Rule 8D(2)(iii) as noted above. The CIT(A) has analysed the nature of expenditure and restricted the same to Rs. 19,49,768/- as per the tabulation reproduced in the CIT(A)'s order. Both Revenue and assessee are aggrieved by the aforesaid action of the CIT(A). The Revenue seeks disallowance of the amount as computed under Rule 8D(2)(iii) whereas the assessee has disputed the analysis of the CIT(A). It is the case of the assessee that itemized expenditure can be demonstrably relatable to various segment of taxable income. For instance, the disallowance of Rs. 61,565/- made by the CIT(A) on account of insurance expenses incurred was paid for rented properties and thus has no relation to the exempt income. Likewise, the personnel expenses of Rs. 17,00,616/- is also claimed by the assessee to be towards timely collection of rent expenses. The assessee....
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.... Rs. 1,10,300/- debited to ELP for research report for acquisition of Delhi Golf Link properties Pvt. Ltd. and Rs. 21,98,169/being amount payable towards professional fees for various legal assistance. He therefore held that as the payments were made as reimbursement of fees for search report for acquisition of Delhi Golf Link properties Pvt. Ltd. it was in the nature of capital expense and by no stretch of imagination can be said to be revenue expenditure. On the other hand, Appellant has argued that payment of Rs. 21,98,169/- made to Economic Law Practice is for retainer fee and for services provided during the year hence it is allowable as revenue expenditure. Further, payment of Rs. 1,10,300/- made to ELP for obtaining search report for acquisition of Delhi Golf Link Properties Pvt. Limited, it is submitted that investment was made for expansion of existing business hence such expenditure is allowable revenue expenditure. On careful consideration of entire facts, it is observed that payment of Rs. 1,10,300/- made to ELP for obtaining search report for acquisition of shares is towards new capital investment and which cannot give Appellant any benefit of revenue in nature. By ....