TaxTMI 
TaxTMI 
2021 (10) TMI 567
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....tatutory deduction of depreciation on interest of Rs. 1,29,63,747/- held to be capitalized by the A.O. 4. THAT in the facts and circumstances of the case, the Learned CIT(A) erred in confirming the disallowance , made by AO, out of subscription and membership expenses of Rs. 3,62,992/-. 5. THAT the appellant craves leave to add, alter, amend or drop any of the above grounds at the time of hearing. 2. Facts giving rise to the present appeal are that the assessee filed its return of income on 26.09.2012 through electronic mode declaring income of Rs. 8,05,23,960/- after claiming the deduction of Rs. 63,70,888/- under chapter VI-A. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Income Tax Act, 1961('the Act') vide order dated 17.03.2015. By framing the assessment, the Assessing Officer noticed that the assessee had claimed loss on exchange fluctuation of Rs. 97,91,000/-. The assessee was asked as to why the claim should not be disallowed. In response thereto, the assessee filed its reply however, the reply of the assessee was not found acceptable, therefore, the Assessing Officer disallowed the claim of the assessee on exchan....
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....d decided the issue by observing as under:- 7. Decision "I have considered the facts of the issue, basis of additions made by the Assessing Officer and the submissions of the appellant. From the perusal of profit and loss account, I find that the assessee has declared other income amounting to Rs. 46.22 lakhs which consists of interest from bank deposits amounting to Rs. 41.19 lakhs and dividend income from long term investments at Rs. 1.16 lakhs besides profit on sale of fixed assets at Rs. 3.87 lakhs. Thus, it may be seen that the assessee has earned long term capital gain, eligible for deduction u/s 10(38) of the Act. The Assessing Officer has rightly worked out disallowable expenses as per the provisions u/s 14A r.w.Rule 8D of I.T.Rules, 1962. Therefore, the disallowance made by the Assessing Officer is confirmed. The Assessing Officer has apportioned interest expenditure for the investments in the shares. The ground of appeal is dismissed." 9. We find that the Ld.CIT(A) has mechanically confirmed the findings of the Assessing Officer, without adverting to the submissions of the assessee that no expenditure was incurred for earning of exempt income when it ....
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.... allowed. 10. Ground Nos.2 & 3 are inter-related and are against the disallowance of interest of Rs. 1,29,63,747/- and not allowing the depreciation thereon which was treated by the Assessing Officer being incurred on capital expansion. 11. Ld. Counsel for the assessee reiterated the submissions as made before the authorities below. It was contended that the Assessing Officer mis-directed himself by not appreciating the facts correctly. He submitted that the Assessing Officer stated in the assessment order that loan which was taken from Mizuho Corporate Bank Ltd. was payable in half yearly installment as per their amortization schedule starting from 31.10.2013 to 30.04.2016. It was further contended that the Assessing Officer then proceeded to make disallowance of Rs. 1,29,63,747/- being the interest on such loan on the basis that loan was unsecured from Mizuho Corporation Bank Ltd. and the interest expenditure did not relate to Financial Year under consideration and the amount of loan had been expended for capital expansion. Thus, as per Assessing Officer, the interest expended was needed to be capitalized. Ld. Counsel for the assessee submitted that the details of interest ....
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....ed the material available on record and gone through the orders of the authorities below. Ld.CIT(A) has confirmed the addition by observing as under:- 11.2. "Whereas the DCIT has given a finding that Note 5 of the balance sheet states that the assessee has taken unsecured loan from Mizuho Corporation Bank which is payable in half yearly installment as per their amortization schedule which is going to start from 31.10.2013. As the expenditure does not relate to the period under consideration i.e. 01.04.2011 to 31.03.2012, the same is not allowable for the period under consideration. 11.3. Thus, it is evident the assessee has made a provision of interest on loans taken from Mizuho Corporation Bank, Japan for the assessment year 2012-13 and that the said interest was not paid to the said Bank. It has also been noted that the said foreign bank has branches in India and is duly on the list of Reserve Bank of India. Thus, the interest on loan is also subjected to the provisions of Section 43B of the Income Tax Act. But the interest is payable in foreign exchange subject to the Provisions of DT AA which says that such interest may also be taxed in the Contracting State i....