TaxTMI 
TaxTMI 
2021 (11) TMI 412
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....in granting relief to the assessee on account of "Various Expenses" of Rs. 34,17,636/- considering such expenses being incurred for the purpose of Business. 2. That on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Interest on delayed deposit of TDS" of Rs. 45,319/- and "TDS written off of Rs. 73,143/- considering both as admissible. 3. That on the facts and circumstances of the case and in law, the Ld. CITA) has erred in Rs. 1,06,63,457/- granting relief to the assessee on account of "Interest u/s. 36(1)(iii)" of Rs. 2,97,23,922/- against interest free loans and advances given to its subsidiaries without any business purpose. 4. The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. Ground no. 1: 5. The department vide ground no. 1 has agitated against the action of the Ld. CIT(A) in deleting various disallowances of expenses amounting to Rs. 34,17,636/- made by the Learned Assessing Officer (in short, the Ld. AO') holding that the same were ....
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....ation of Lease Deed' of Rs. 30,500/-, 'Interest on TDS' of Rs. 45,319/-, 'TDS written off' of Rs. 73,143/-, 'Travelling & Conveyance' of Rs. 13,33,954/- and 'Personal expenses' of Rs. 56,000/-. I observe that the Ld. A.O has specifically discussed the items of disallowance, and has generally been persuaded to make the disallowances on grounds that these expenses have been claimed by the appellant even when the business has not commenced in the case of the appellant. Further, I observe that the Ld. A.O. has observed that several of the claims of expenses were capital in nature and cannot be allowed as revenue expenses. 2. The first two items of disallowance [A] & [B] relate to the impugned sum of Rs. 2,85,000/- paid to M/s. DSK Legal for consultancy work and Rs. 2,25,000/- paid to Ms Niharika Bisaria for certain research work. The Ld. A.O has disallowed these expenses by holding that these were not directly or intimately connected with business, and in any case the appellant-company had not earned any income under the head of business as the same said business had not commenced. The same has been countered by the appellant on grounds that....
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....that the expenses incurred there at were all business expenditure and not personal nor capital in nature. It was argued that such revenue expenses incurred for the period from setting up of the business and commencement of business is to be allowed as business expenditure. The appellant relied upon judgments as have been recorded in support of its contentions. 3. It was argued by the appellant that the admitted fact is that is no dispute that a Joint Venture has been entered into between the Appellant Company and MIDC on 12th May 2003. The appellant also placed a copy of the agreement in the Paper Book at Page Nos. 118 to 163 of the Paper Book which was submitted in appeal. It was argued that as the new business was set up at least on 12th May 2003, the appellant had admittedly had taken a rented office at Mumbai since September 2003, and that therefore in such factual Circumstances, the following revenue, expenses incurred by the Appellant Company at its Mumbai Office in regard to new project including depreciation on Fixed Assets admittedly installed at Mumbai Office, were wholly allowable as business expenditure. a. Payments to DSK Legal : Rs. 2,85,000 ....
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....nance of the building, Similarly, the Ld. A.O also disallowed a sum of Rs. 6,48,000/- as Tenant Service Charges, and the Ld, A.O. took a view that such charges cannot be a part of business income and there was no scope of deduction under the head of house property u/s. 24 of the Act, and accordingly he disallowed the same. The Ld. A.O made further from heads of 'Preparation of Site plan' of Rs. 10,000/-, 'Registration of Lease Deed' of Rs. 30,500/-, 'Interest on TDS' of Rs. 45,319/-, 'TDS written off' of Rs. 73,143/-, 'Travelling & Conveyance' of Rs. 13,33,954/- and 'Personal expenses' of Rs. 56,000/-. 6. Having carefully considered the matter, I find that the Ld. A.O was unjustified in taking a view that the business of the assessee had not commenced, when he himself has recorded about the agreement entered by the appellant with the MIDC about a housing project at Mumbai. The assessee has justified the expenses in so far that they were legitimate business expenses, and that the genuineness of the claims had not been questioned by the ld. A.O. There would undoubtedly be certain expenditure in the setting up and-maintenance of....
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....greements had been entered into, key personnel had been recruited and the assessee-company had started working necessary infrastructure like office premises, office equipments etc. and the assessee-company was ready to commence trading operation as on the date of incorporation viz., 3-8-1995 notwithstanding the fact that commercial operations started with effect from 1-10-1995. On revenue's appeal: HELD The factual findings recorded by the Tribunal cannot be categorized as perverse. The date of commencement of business was certified as 9-8-1995, though the date of incorporation was 3-8-1995. The Tribunal has referred to various facts as to what was required to be done before the first actual sale invoice to a customer was issued. It included recruitment of employees, their training and establishment of showrooms by taking places on rent etc. Advertisements had also been issued and in fact the Indian joint venture partner on 25-7-1995 had appointed their Public Relations Consultant for the period 15-8-1995 onwards. [Para 5] In the case. of CIT v. L.G. Electronics (India) Ltd. [2006] ITR 545/[2005] 149 Taxman 166 (Delhi), it has been observed that the d....
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....commenced/performed activities relating to designing of commercial vehicles and related products, R&D, buying and selling of parts and it was in process of construction of factory building for manufacture of commercial vehicles, merely because manufacturing and sale of vehicle did not take place, it could not be said that business of assessee had not been set up as manufacturing activity of assessee was a part of composite business activities. *** 8. I also observe that where necessary permissions have been obtained and agreements have been entered into by the taxpayer with the Competent Authorities, Hon'ble Courts have opined that where such approval/permissions have been obtained as on date the assessee set up its business and was ready to commence said business and, therefore, expenses incurred for purpose of business after said date of approval were eligible for deduction under section 37(1). The Hon'ble ITAT, Mumbai-C Bench in the case of Deputy Commissioner of Income-tax, Mumbai v. PPFAS Asset Management (P) Ltd. [2019] 105 taxmann. Com 103 (Mumbai-Trib) has observed so. The head notes for such decision are as under: IT: In case of assessee,....
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....g in the case at hand, I observe that the Ld. AO himself has recorded that by entering into an agreement with the MIDC, the necessary assumption would be that the project had begun, and, therefore the assessee was to undertake expenses towards the project, even if for the preliminary work related to the project, and the Office/business establishment had been started for the said purpose of the project. I therefore hold that the following payments/expenses were towards the commencement of business. (1) Payments to DSK Legal- Rs. 2,85,000/- (2) Payment to Niharika Bissaria for research work- Rs. 2,25,000/- (3) Rent paid for Mumbai Office - Rs. 12,06,482/-.(4) Payment to studio Praxis for Architectural Consultancy fees and (5) Rs. 43,200/- Brokerage paid to Knight Frank India Pvt. Ltd. Rs. 3,24,000/-. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office, and they cannot be rejected merely as the business was not bringing positive incomes. As such I am inclined to accept the arguments of the appellant and direct the Ld. AO to treat the said expenses as revenue expenses, and allow the same. 10. As regards, the matter of expenses....
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....amount had been included in the income of the Appellant the Ld. AO was not justified in disallowing the same. For the foresaid reasons, the disallowance of Rs. 3,73,126/- made by the Ld. AO was unsustainable in the bare facts of the case and the same is directed to be deleted. 11. The next item of disallowance is regarding an amount of Rs. 10,000/- made by the Ld. AO towards preparation of the site plan. The Ld. AO has disallowed the same on grounds that the same is a capital expenditure, and therefore not allowable. After examining the issue, I am in agreement with the Ld. AO and confirm such disallowance of Rs. 10,000/-, as the said preparation of the plan, and the plan per se definitely confers an enduring benefit to the appellant. The action of the Ld. AO in the matter is confirmed, and the limb of the ground stands dismissed. 12. In the matter of the claim of expenses towards the registration of the sale deed, being an amount of Rs. 30,500/-, I observe that the same once again tantamount to a capital expenditure with an enduring benefit conferred upon the appellant company. In any case, I observe that this item of disallowance has not been pressed by the appe....
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....me from House property. However, as the same have been claimed as a deduction under the head of business income and receipts disclosed under that head, I see no good reason for the impugned disallowance. The action of the Ld. AO in the matter is therefore held to be unsustainable in the facts of the case, and is directed to be deleted. This limb of the ground stands allowed. 8. Regarding Travelling & Conveyance & Personnel expenses of Rs. 13,33,954/- & Rs. 56,000/-, the Ld. CIT(A) discussed these issues as under:- "17. For the next items of disallowance, I observe that the Ld. AO has made further disallowances of Rs. 13,33,954/- and Rs. 56,000/- on grounds that they unjustified claims of represented "Travelling and Conveyance allowances" and " Personnel expenditure " for the Mumbai Office. The Ld. AO has observed added back 80% of the claims of travelling and conveyance allowances claimed by the appellant and has added back an amount of Rs. 56,000/- on grounds that the aid amount was in the nature of a capital expenditure. I observe that the ld. AO has made a 80% disallowance in the matter of the travelling and conveyance allowances, on his own reasoning that such expen....
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.... in his assessment order has not been able to bring any specific material on record to prove that expenses shown in the profit and loss Asst. Year 2008-09 a/c were in any way attributable specifically for earning rental income. But has made ad hoc disallowance of Rs. 1,50,000/- deeming that has been some nexus of some portion of the expenses incurred by the assessee company during the year to earn rental income. Therefore, in view of the above and the lack of proper working to show that expenses specifically for earning rental income having claimed as expenditure under the head business or profession, we are of the view that AO was not justified in making such ad hoc disallowance. We delete the same. This ground is also allowed." d. The Income Tax Appellate Tribunal of Kolkata in the matter of Ved Prakash Lohia vs. ITO (ITA No. 373/Kol/2012) pronounced on 04.12.2015 held " Ad hoc disallowance is always made without having any concrete evidence that the assessee has incurred the expenses for personal use. We, therefore, find no reason to disallow the above expenses incurred by the assessee. Hence, we delete the same. Thus, the ground no. 2 of the assessee is allowed and aga....
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.... sum of Rs. 9372/- being 20% of administrative expenses." h. The Income Tax Appellate Tribunal-Delhi in the matter of ACIT, Circle-1 vs. Raj Kumar (ITA No. 4165/Del/2009) pronounced on 22.05.2015 held " We find that the ad hoc disallowance without rejecting the audited books of account and without pointing out any discrepancy in the books, the disallowance of expenditure of ad hoc basis is not valid in the eyes of law and the learned CIT(A) has rightly deleted the impugned additions, which does not need any interference on our part Hence, we uphold the action of the learned CIT(A) on the above sited additions." i. The Income Tax Appellate Tribunal-Kolkata in the matter of Bhola Das, Burdwan vs. ITO Ward 2(4)/Asansol (ITA No. 1894/Kol/2013) pronounced on 01.06.2015 held " The AO has disallowance on account of labour charges. Sundry creditors and transport charges. In fact all the disallowance have been made out of the profit & loss account on ad hoc basis but the AO has not rejected the books of account. With invoking the provisions of section 5(3) of the Act and without pointing out any defect in the labour charges, purchases and transport charges claimed, the AO ....
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....gs, there is no merit in ground no. 1 of the appeal of the department. The same is accordingly dismissed. Ground no. 2: 10. Vide ground no. 2 the Revenue has contested the action of the Ld. CIT(A) in deleting the disallowance made by the Ld. AO on account of interest on delayed payment and TDS written off. 11. The issue relating to delayed payment of interest incurred on TDS has been discussed in paras 14-15 of the impugned order of the Ld. CIT(A). Relevant parts of the findings of the ld. CIT(A) on this issue are reproduced as under:- "14. The Ld. A.O has further disallowed amounts of Rs. 45,319/- on account of payment incurred for delayed payment of TDS. The Ld. A.O has stated that the same is penal in nature. The Ld. A.O has further held that TDS written off, being an amount of Rs. 73,143/- cannot be claimed as an expenditure. The question therefore to be addressed is whether these items were allowable in the hands of the appellant- company. I have carefully examined the action of the Ld. A.O in making the impugned disallowance of Rs. 45,319/-, treating the said amounts as having been fines/penalties paid by the appellant for infarctions of law before the TDS A....
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....est on capital that would be borrowed by 'the assessee otherwise. Hence, the amounts should be allowed as deduction. The revenue did not allow such deduction, The High Court affirmed the view. On appeal to the Supreme Court: HELD When Interest is paid for committing a default in respect of a statutory liability to pay advance tax, the amount paid and the expenditure incurred in that connection is in no way connected with preserving or promoting the business of the assessee. This is not expenditure which is incurred and which has to be taken into account before the profits of the business are calculated. The liability in the case of payment of income-tax and interest for delayed payment of income-tax or advance tax arises on the computation of the profits and gains of business. The tax which is. payable is on the assessee's income after the income is determined. This cannot, therefore, be considered as an expenditure for the purpose of earning any income or profits. Interest which is paid for delayed payment of advance. tax on such income cannot be considered as expenditure wholly and exclusively for the purpose of business. Under the Act, the paym....
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....d that interest on arrears of tax is compensatory in nature and not penal. This question has also been considered by this Court in Civil Appeal No. 830 of 1979 titled Sarya Sugar Mills (P.) Ltd. v. CIT decided on 29-2-1996, In that view of the matter; the appeal is allowed and question Nos. 1 and 2 are answered in favour of the assessee and against the revenue. In view of the above judgment, there remains no doubt that the interest expense on the delayed payment of service tax is allowable deduction. The above principles can be applied to the interest expenses levied on account of delayed payment of TDS as it relates to the expenses claimed by the assessee which are subject to the TDS provisions. The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer. The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of t....
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....ndings of the Ld. CIT(A) on this issue has been given in para 16 of the impugned order, which for the sake of ready reference is reproduced here under:- "16. As regards the amount of Rs. 73,143/-, the Ld. AO has stated that TDS written off is not an expenditure, and therefore ought to be disallowed. I find that no specific submissions have been made by the appellant in the matter except stating that the written off of the impugned TDS amounts were on account of the claims of TDS not being pressed in time. To me it appears that the amounts have been written off by the appellant on account of the fact that the TDS certificates were not received by it in time leading to an apparent forfeiture of claim of TDS in the matter. Having weighed all aspects in the matter, I observe that the impugned disallowance in question has been made by the Ld. AO on account of the fact that, in his opinion, any loss arising on account of tax payable/tax refundable was not an admissible deduction. However, I observe that the Ld. A.O has not disputed the fact that the TDS of Rs. 73,143/- was made out of the revenues offered to tax by the appellant company in earlier years. Therefore, the limited i....
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....f interest expenditure, the Ld. AO disallowed a sum of Rs. 2,97,23,922/- paid to HDFC Bank Ltd. observing that the assessee had given interest free loans/advances to its subsidiaries for business purpose. The assessee explained before the Ld. CIT(A) as under:- "9. The next issue relate to disallowance of Rs. 2,97,23,922 paid to HDFC Bank Ltd. on account of Interest on borrowings from the said bank. The Assessing Officer alleged that the Assessee Company claimed Interest of Rs. 3,00,65,071/- out of which Rs. 2,97,23,922 related to interest paid to HDFC Ltd. from whom the assessee took a loan of Rs. 11,00,00,000 on 31.03.2003 and the limit was extended to Rs. 37,00,00,000 during the previous year relevant to the Assessment Year. The amount of Loan from HOFC Ltd. was Rs. 35.33 crores as on 31st March, 2004 as against Rs. 11.00 crores as on 31st March, 2003. The Loan from HDFC Ltd. was secured by mortgage of Immoveable Properties being Tower A of First India Place, Gurgaon, owned by the assessee company from which the rental income is received and assessed to tax and Building and Building B at Bengal Intelligent Park, Kolkata owned by Bengal Intelligent Parks, Kolkata owned by....
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.... to assessment year 2004-05 it had acquired 25000 shares (i.e. 1/3rd share) of the said M/s. Energetic Construction Pvt. Ltd. The said investment was wholly commercially expedient in as much as the said company was also in the same line of business of developing real estate projects as is evidence from the memorandum and articles of association enclosed in the Paper book at page nos. 334 to 374. The appellant company had made the said investment to gain from the business prospects of the said M/s. Energetic Construction Pvt. Ltd. as the said company had entered into a joint venture with its subsidiary companies for the development of a commercial centre namely "World Trade Centre" on the land measuring 11.47 acres. The said M/s. Energetic Construction Pvt. Ltd. had already made a investment of Rs. 46.57 crores in the said project. The said company along with its subsidiaries were also granted a license by the Director Town & Country Planning, Haryana to develop a commercial centre. Seeing the huge potential for development of the said company, the appellant also invested in the said company and made advances for furtherance of its business. The appellant company ultimately acquired....
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....which Rs. 2,97,23,922/- related to interest paid HDFC Ltd. from the assessee took a loan of Rs. 11,00,00,000 on 31.03.2003 and the limit was extended to Rs. 37,00,00,000/- during the previous year relevant to the Assessment Year. b. On facts, it was submitted that the amount of Loan from HDFC Ltd. was Rs. 35.33 crores as on 31st March, 2004 as against Rs. 11.00 crores as on 31st March, 2003, and that the loan from HDFC Ltd. was secured by mortgage of Immoveable Properties, being Tower A of First India Place, Gurgaon, owned by the assessee company from which the rental income is received and assessed to tax and Building A and building B at Bengal Intelligent Park, Kolkata owned by Bengal Intelligent Parks Pvt. Ltd., a subsidiary of the assessee company and also assignment of receivables from the aforesaid properties owned by the assessee-company and its subsidiary companies. c. Drawing attention to the Audited Balance Sheet it would contended by the appellant that the Loans advanced to various parties mainly subsidiary companies (Schedule 7 of the audited Balance Sheet) as on 31st March 2003 and 2004 are as under:- Name of the Subsidiary Op. Balance Cl. Ba....
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....om the memorandum and articles of association enclosed in the Paper Book at page nos. 334 to 374. The appellant company made the said investment to gain from the business prospects of the said M/s. Energetic Construction Pvt. Ltd. as the said company had entered into a joint venture with its subsidiary companies for the development of a commercial centre namely "World Trade Centre" on the land measuring 11.47 acres. The said M/s. Energetic Construction Pvt. Ltd. had already made an investment of Rs. 46.57 crores in the said project. The said company along with its subsidiaries were also granted a license by the Director Town & Country Planning, Haryana to develop a commercial centre. Seeing the huge potential for development of the said company, the appellant also invested in the said company and made advances for furtherance of its business. The appellant company ultimately acquired the said company M/s. Energetic Construction Pvt. Ltd. in the FY 2007-08, when it became a fully owned subsidiary of the Appellant Company. The financials of the of the said M/s. Energetic Construction Pvt. Ltd. for the AY 2004-05 and onwards are enclosed at Page Nos. 212 to 332. In these facts and cir....
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.... There has to be a nexus. between the advancing of funds and business interest of the assessee. Some business objective should be sought to have been achieved by extending such interest free advances when the assessee firm/company itself is borrowing funds for running its business. 5. The Hon'ble Supreme Court has also delved into the case where there would be mixed fund at the disposal of the assessee. It further clarifies that under Section 36(1)(iii) the ultimate use of the fund is important. It may not be relevant as to whether the advances have been extended out of the borrowed funds or out of mixed funds which include borrowed funds. The test to be applied in such cases is not the source of the funds but the purpose for which the advances are extended. Having analyzed the facts emerging in the case at hand, 1 observe that the appellant-company was eligible to claim the interest paid of Rs. 2,97,23,922/- to the concerned bank as a eligible business expense, and the action of the td, A.O in disallowing the same cannot be sustained. Such addition by the Ld. A.O is therefore deleted, and the ground of appeal stands allowed." Being aggrieved by the above a....
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.... Ld. CIT(A) has erred in granting relief to the assessee on account of expenses incurred on "Travelling Expenses"(11,22,040/-), car Hiring Charges (5,56,674/-), Salary to Mumbai Staff (54,23,326/-), Rent of Mumbai Office of (20,58,768/-), Staff Welfare (Mumbai)(4,19,535/-), Niharika Bisaria Research (3,50,000/-) and Praveen P. Shah (3,35,000/-)" accumulating Rs. 1,02,65,343/- for setting up and maintenance of Mumbai office, disallowed during assessment considering it to be Capital in nature. 2. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of expenses incurred on "Energetic Construction (2,00,000/-), MR Vomado (7,50,000/-). Bangalore Property (40,000/-), Allianze Bajaj (35,000/-) and Medicas & Investor relation (55,559/- accumulating Rs. 10,80,559/- for setting up and maintenance of Bangalore office, disallowed during assessment considering it to be Capital in nature. 3. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of "Fin Management & Advisory" of Rs. 1,65,300/- and "MOU" of Rs. 12,500/- disallo....
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....have been agitated by the appellant in this ground of appeal. I observe that the appellant-company has agitated the various disallowances/additions totaling Rs. 5,42,39,750/- made under different heads as follows: (1) 'Travelling expenses' of Rs. 11,22,040/-, (2) "Car Hire' of Rs. 5,56,674/-, (3) 'Salary of Staff of Rs. 54,23,326/-; (4) 'Rent on Mumbai office' of Rs. 20,58,768/-, (5) 'Staff Welfare: of Rs. 4,19,535/-,'(6) Niharika Bisaria for real estate research' of Rs. 3,50,000/- (7) 'Paid to. Praveen P. Shah for CIS work' of Rs. 3,35,000/-, (8) BIP brochure of Rs. 30,000/- (9) 'Energetic Construction' of Rs. 2,00,000/-, (10) 'Legal Fees' of Rs. 7,50,000/- (11) 'Construction & Design' of Rs. 40,000/-, (12) 'Lease & Hire charges of Rs. 35,000/-, (13) 'Professional charges' of Rs. 55,559/-. (14) 'Consultancy fees of Rs. 1,65,300/-, '(15) Universal Legal' of Rs. 12,500/-, (16) 'Rate & Taxes' of Rs. 25,124/-,(17) 'Repair of Mumbai office' of Rs. 1,28,421/-, (18) Misc. expenses of Rs. 11,42,480 & Rs. 10,500/-, (19) 'Loan Processing Fees' of Rs. 45,37,560/-, (20) 'Ten....
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....nd allowed. b. Disallowance of Salary to Staff at Mumbai & Rent charges paid at Mumbai Office of Rs. 54,23,326/- and Rs. 20,58,768/- respectively: I this matter also, the Ld. A.O, I observe has made the impugned disallowances on grounds that there' were no incomes from the Mumbai Office, and the payments of salary and rent for the Mumbai Office was not justified. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office and they cannot be rejected merely as the business was not bringing positive incomes. Here I observe that the Ld. A.O has admitted to the fact of the date of agreement and the commencement of business, and therefore in my considered view of the matter, there is an inherent contradiction in. the view of the Ld. A.O that the business had not commenced and therefore the expenses ought to be capitalized. As this matter has been dealt extensively and adjudicated in favour of the appellant for the A.Y 2004-05 being decided simultaneously, herein I only record that along similar lines, the claims of-expenditure in this year are to be allowed. As such I am unable to sustain any portion of the disallowances made by th....
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....al are dismissed. Ground no. 4:: 25. Vide ground no. 4 the revenue has contested the action of the Ld. CIT(A) in respect of deletion of disallowance made by the Ld. AO out of 'interest expenditure' and 'loan processing fees' on account of interest free loans and advances given to its subsidiaries. 26. Both the learned representatives before us submitted that this issue is identical as discussed in ground no. 3 of the revenue's appeal (ITA No. 2584/Kol/2019) for the A.Y 2004-05: 27. In view of findings given above, while deciding the identical issue vide ground no. 3 of revenue's appeal for A.Y 2004-05, this issue is accordingly decided in favour of assessee and the order of the Ld. CIT(A) on this issue is accordingly upheld. Ground no. 4 of revenue's appeal(ITA No. 2585/Kol/2019 for the A.Y 2005-06) is dismissed. Ground no. 5: 28. Vide ground no. 5 the revenue has contested the action of the Ld. CIT(A) in granting relief to the assessee on account of undisclosed income of Rs. 13,70,962/- added by the ld. AO on the basis of data base (AIR) information available in Form 26AS. It was explained before the Ld. CIT(A) that the Ld. AO had made....
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....count of "Contractual payment" of Rs. 26,68,993/- disallowed by the A.O. u/s. 40(a)(ia) following the observation made by the Auditor. 4. The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. Ground nos. 1 & 2: 31. Both the learned representatives submitted before us that this issue raised vide ground no. 1 & 2 is relating to claim of various expenditure incurred by the assessee for business purposes and relating to disallowance of interest expenditure. This issue has already been discussed by us in earlier paras of this order while adjudicating the identical issue for the AYs. 2004-05 and 2005-06(supra). Since the facts and issues are identical our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 & 2 of revenue's appeal are dismissed. Ground no. 3 32. Vide ground no. 3 the revenue has contested the action of the ld. CIT(A) in granting relief of Rs. 26,68,993/- disallowed by the ld. AO u/s. 40(a)(ia) of the Income Tax Act, 1961. 33. The Ld. Counsel for the assessee has submitted before us that th....
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....ing grounds of appeal:- "1. That, on the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of Rs. 2,00,00,000/- arbitrarily made by the Assessing Officer under section 2(22)(e) of the Income Tax Act, 1961 on mere suspicion and surmises. 2. That, the Ld. Commissioner of Income Tax (Appeals) having admitted the additional ground raised by the Appellant Company erred in confirming the addition of Rs. 4,92,76,605 made by the Assessing Officer which was voluntarily offered to tax by the assessee under misconception of law relating to the provisions of section 2(22)(e) of the Act." Ground no. 1 40. The issue taken by the assessee in this appeal is relating to addition made by the Ld. AO u/s. 2(22) (e) of the Income Tax Act on account of deemed dividend. 41. At the outset, the ld. Counsel for the assessee has invited our attention to para 13(3) of the impugned order of the Ld. CIT(A), wherein the Ld. CIT(A) has observed that the action of the ld. AO appears to be an ad hoc estimate and further that the facts of the case were not clear. 42. The Ld. Counsel for the assessee has submitted that the asse....
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....siness purposes. This issue has already been discussed in earlier paras of this order while adjudicating the identical issue for the AYs. 2005-06, 2006-07, "07-08 and "08-09 respectively (supra). Since the facts and issues are identical our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 & 2 of revenue's appeal are dismissed. Ground No. 3 46. The revenue is aggrieved by the action of the ld. CIT(A) in deleting the disallowance made by the Ld. AO u/s. 14A of the Income Tax Act, 1961 on account of expenditure incurred for earning of tax exempt income. 47. The Ld. CIT(A) while decided this issue has observed that own funds of the assessee were much more than the investments made, therefore, the presumption would be that the assessee used its own funds for making this investments.. Relevant part of findings of the Ld. CIT(A) is reproduced as under:- "3. After examining the matter, I observe that he Ld. A.O made this impugned disallowance on similar grounds as the earlier ground No. 2 relating to interest disallowance on account of interest free advances from borrowed finds, and not accepting the sold expenditure as business expen....