AI Drafter 
TaxTMI 
TaxTMI 
2020 (3) TMI 592
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....Rs. 6,77,67,630/- made on account of disallowance of interest in respect of interest free advances. 2. That the ld.CIT(A) erred in law and on facts in deleting the addition of rs.7,05,498/- made on account of Capital Expenditure (Information Technology Expenses). 3. That the ld.CIT(A) erred in law and on facts in restricting the addition to Rs. 2,610/- from Rs. 13,514 made u/s.14A r.w Rule 8D. 4. That the ld.CIT(A) erred in law and on facts in deleting the addition of Rs. 15,53,966 made on account of income corresponding to TDS and not applying the provisions of sec.199 read with Rule 37BA. 5. The appellant craves to leave, to amend and/or to alter any ground or add a new ground which may be necessary. 2. The first issue raised by the Revenue is that the ''Ld. CIT (A)'' erred in deleting addition made by the AO for Rs. 6,77,67,630/- only on account of diversion of interest bearing funds. 3. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of development & sale of plots of land and commercial complexes. The assessee in the year under consideration has shown advances....
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....nue is in appeal before us. 5. Both the Ld. DR and Ld. AR before us relied on the order of the authorities below as favorable to them. 6. We have heard the rival contentions of both the parties and perused the relevant materials available on records. Admittedly, the amount of interest free advances stand at Rs. 56,47,30,250/- whereas the own funds of the assessee stands at Rs. 1,15,36,49,790/- only. Undoubtedly, the own interest free funds of the assessee exceeds the amount of interest free advances as discussed above. Therefore, we are of the view that no disallowance of interest expenses on account of diversion of the fund is warranted. In this regard, we find support and guidance from the judgement of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 wherein it was held as under:- "The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet the investments. In this case this pre....
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.... supporting bills of the impugned expenses to substantiate it claim as revenue expenditure. 8.4 In view of the above, the AO treated the Information Technology Expenditure as capital in nature which are eligible for depreciation. Accordingly, the AO allowed depreication on such expenditure amounting to Rs. 1,32,295/- and added the balance amount of Rs. 7,05,498.00 to the total income of the assessee. Aggreived assessee preferred an appeal to the ''Ld.CIT (A)''. 9. The assessee before the ''Ld.CIT (A)'' claim to have furnished the copies of the ledger of Infromation technology showing the following expenses. Sr.No. Particulars Amount (in Rs.) 1. Facility management cost 7,24,066 2. Network costs 62,187 3. IT consumables 51,540 Total 8,37,793/- 9.1 The assessee further furnished the details of the facility management expenses which was paid to three parties as detailed under. Name of party Amount (in Rs.) Nature of expense/service availed Aster Netweoks Pvt. Ltd. 3,24,000 Manpower facility charges are paid for day to day IT hardware, software and network support services.....
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....med by the assessee. Had the AO been doubted on the genuineness of the expenses claimed by the assessee, then he would have disallowed the entire expenditure. But he has not done so. 11.1 Now the controversy arises whether the expenditure caimed by the assessee representing the capital expenditure which are eligible for depreciation. It is the admitted fact that there was no allegation of the revenue to the effect that some asset came into existence out of such expenditure. Further more, we find that major expenses were incurred by the assessee in the name of three parties which were providing services to the assessee as discussed above. On perusal of the same expenses, we find that these expenditure are incurred in routine and therefore no benefit of enduring nature is arising. 11.2 Similarly, we also note that the expenses incurred on IT consumables are also routine expenses which doesn not bring any fixed asset into existence. We also note that the Hon'ble Gujarat High Court in the case of CIT Vs N.J. India Invest(P) Ltd., reported in 32 taxmann.com 367 has decided the issue in favour of the assessee. The relevant extract of the order is reproduced as under: "6. T....
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.... 10,904/- 3. Administrative Expenses Rs. 2,610/- Total Rs. 13514/- In view of the above, the AO made disallowance of Rs. 13,514/- and added to the total income of the assessee. 13. Aggreived assessee preferred an appeal to the ''Ld.CIT (A)'' who has deleted the disallowance of interest expenses by observing that the own fund of the assessee exceeds the amount of investments. Accordingly, he was of the view that there cannot be any disallowance of interest expenses on account of interest paid on the borrowed fund. However, the ''Ld.CIT (A)'' restricted the addition made by the AO for Rs. 2,610/- on account of administrative expenses. Being aggrieved by the order of the ''Ld.CIT (A)'' the Revenue is in appeal before us. 14. Both the ld. DR and the AR before us vehemently supported the order of the auhorites below to the extent favourable to them. 15. We have heard the rival contentions of both the parties and perused the relevant materials available on record. At the outset, we note that the own fund of the assessee as on 31/03/2014 stands at Rs. 1,15,36,49,790/- whereas the investment stand at Rs....
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....n entries in the form 26AS showing the TDS deducted by several parties amounting to Rs. 1,16,238/- only which was not claim by the assessee in its income tax return. Accordingly, the AO was of the view that the assessee has not offered the corresponding income representing such TDS amount for Rs. 15,53,966/- only. Accordingly, the AO added the same to the total income of the assessee. 18. Aggreived assessee preferred an appeal to the ''Ld.CIT (A)'' who deleted the addition made by the AO by observing that the corresponding income against the amount of TDS has been offered to tax by the assessee in the subsequent year. The ''Ld.CIT (A)'' also observed that there was no change in the rate of tax and therefore there was no loss to the revenue. Being aggrieved by the order of the ''Ld.CIT (A)'' the Revenue is in appeal before us. 19. Both ld. DR and Ld. AR before us relied on the order of the authorities below as favourbale to them. 20. We have heard the rival contention and perused the relevant material availale on record. Admittedly, there is no change in the rate of tax for the year under consideration vis-a-vis in th....