TaxTMI 
TaxTMI 
2021 (9) TMI 1409
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....unt of capitalization of the interest." 3) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 2,21,32,624/- made by the AO on account of brokerage and commission." 4) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 38,08,6241- made by the AO on account of net interest free security deposit." 5) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 6, 78,81,157/-made by the AO on account of non-allocation of proportionate over head expenditure to other group entities." 6) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case by restricting the addition of Rs. 2,77,16,42, 129/- made by the AO to Rs. 6,61,871/- u/s 14A." 7) "Ld. Commissioner of Income Tax (Appeals) erred in law and on the facts of the case in deleting the addition of Rs. 18,67,82,2877- made by the AO on account of treating the business income as 'Income from the House Property." 8) "Ld. Commissioner of e case in deleting the addition of Rs.....
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....aring for the assessee filed ground-wise chart and submitted that most of the issues involved in the appeal are squarely covered by the decision of Coordinate bench in assessee's own case in preceding years. It was further, submitted that except ground No. 13 and 15 of the appeal which are new issues, all the other grounds are fully covered in favour of assessee. 5. The Ld. CIT DR did not dispute the factual position. However, he submitted that where the facts and basis of disallowance/addition is same, the orders of coordinate bench may be followed. Further, the Ld. DR advanced arguments in respect of Ground 6,11 and 15 involving issue of disallowance u/s 14A, disallowance of expense on personal nature and transfer pricing adjustment u/s 92C respectively. With regard, to ground no. 13, he relied upon the assessment order and supported the action of the assessing officer. Firstly, we are taking up appeal filed by the revenue. 6.1 Ground No. 1 is against deletion of addition on account of revenue recognition from construction project as per Percentage of Completion Method (POCM). The assessing officer has considered the addition on the basis of observation of Special Auditor i....
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....order before us. It is noted that the issue of capitalization of interest is a recurring issue and has been extensively dealt with first appellate authority and Coordinate bench in favour of assessee in preceding years wherein it has been held that notional capitalization of interest is not permissible particularly when the assessee has already capitalized interest pertaining to projects under execution. There is nothing on record to show that facts and the basis of disallowance in the year under consideration is different from that in preceding years. As the issue of capitalization of interest has been decided by the Coordinate bench in preceding years, the same is decided as per the table given in para 19. 8.1 Vide Ground No. 3, the revenue is aggrieved by the order of CIT(A) deleting disallowance of brokerage expense amounting to Rs. 2,21,32,083/-. The assessing officer considered the disallowance on the ground that brokerage paid by the assessee should have been linked with each project and transferred to WIP and recognized as per POCM method. 8.2 The CIT(A) deleted the addition on the basis of order of Coordinate bench in assessee's own case for AY 2006-07 and finding re....
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....ra 19 of this order. 10.1 Ground No. 5 is against deletion of disallowance of expenses towards allocation of overheads to other group entities. The assessing officer has considered the disallowance of Rs. 6,78,81,157/- after making allocation of overhead expenses claimed by the assessee to group concerns namely M/s. DLF Infocity Developers (Chennai) Ltd. and M/s. DLF Cyber City Developers Ltd. The allocation of expense and consequential disallowance is wholly on the basis of assessment order passed for AY 2006-07 to 2011-12 which is evident from Para 5.1 of the assessment order. 10.2 In the impugned appellate order, the CIT(A) deleted the addition by following the reasoning given in order of CIT(A) in preceding years i.e. AY 2006-07 to 2011-12 as well as order of ITAT in assessee's own case of AY 2006-07. 10.3 On careful perusal of the facts, we find that the basis adopted by the assessing office while making disallowance of expenses in the hands of the assessee on account of allocation of overheads to group concerns is static and borrowed from earlier years assessment orders. Further, as this issue has already been decided by Coordinate bench in AY 2006-07 to 2011-12 wher....
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....e by orders of Coordinate bench, the ground is decided as per the table given in para 19 of this order. 13.1 Ground 9 is directed against order of CIT(A) deleting disallowance of depreciation of building DLF Centre to the tune of Rs. 4,45,732/- u/s 32 of the Act. The assessing officer made the disallowance on the basis of observation of Special auditor relevant for AY 2006-07 as per which WDV of the property was calculated as on 01/04/2005 after reducing notional depreciation from 01/04/1999 to 31/03/2005. The initial disallowance of depreciation was in AY 2006-07 and thereafter every year on the basis of reduced WDV. 13.2 The CIT(A) deleted the disallowance in AY 2006-07 and the revenue accepted the order of CIT(A) on this issue and did not prefer appeal before ITAT. However, in AY 2007- 08 this issue came for consideration before Coordinate bench for the first time wherein vide order dated 01/11/2017 in ITA No. 4342/D/12 the disallowance of depreciation was deleted as per finding recorded in Para 151. Further, the Ld. Counsel submitted that the assessing officer has accepted the claim of depreciation on DLF Centre building in AY 2016-17 and no disallowance was made. 13.3....
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....66.67% of the total expenses relating to aircraft and helicopter including depreciation. 15.2 The CIT(A) after placing reliance on the judgement of Hon'ble Delhi High Court in the case of Dalmia Cement (Bharat) Ltd. 254 ITR 377 held that assessing officer cannot question the reasonableness of the expenditure incurred for the purpose of business. On the basis of decision of Hon'ble Gujarat High Court in the case of Sayaji Iron and Engg. Co 253 ITR 749I, it was further held that assessee is a public ltd. company and being a distinct assessee, there cannot be a case of disallowance of expenses on account of personal expense. If the expenses are incurred for the purpose of Director or employees of the company, the same are allowable. 15.3 We find that this issue came for up consideration before Coordinate bench in AY 2010-11 and 2011-12 wherein the disallowance of expenses relating to aircraft and helicopter on the ground of personal expense was deleted. The finding of Coordinate bench in ITA No. 4793/D/15 relating to AY 2010-11 is reproduced hereunder: 4. Ground number 16 and 17 of the appeal is with respect to the disallowance of expenses not incurred wholly and exclus....
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.... of this we do not find any infirmity in the order of the learned CIT(A) in deleting the above disallowance. Accordingly ground number 16 and 17 of the appeal of the learned assessing officer is dismissed. As the basis of disallowance in the present appeal is same as that in AY 2010-11 and respectfully following the order of Coordinate bench, this ground is decided as per table at para 19 of this order. 16.1 Ground No. 12 is against deletion of addition of interest of Rs. 1,59,02,000/- by the CIT(A). The assessing officer vide para 13.3 and 13.4 of the assessment order has observed that rate of interest charged by the assessee company on loans advanced to group concerns is less than that paid to financial institutions and banks. The assessing officer worked out the interest short charged from the group concerns on proportionate basis and accordingly made addition in the hands of the assessee. 16.2 The assessee succeeded before CIT(A) who deleted the addition as per finding record at Para 20.1 of the impugned order. The CIT(A) relied upon the decisions of Apex Court in the case of S.A. Builders 288 ITR 1 and M/s. Taparia Tools 372 ITR 605 (SC) while holding that assessing o....
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.... the amount of interest charged from its subsidiaries. He deleted the disallowance relying on the decision of the honourable Supreme Court in case of SA builders (288 ITR 1) and M/s Taparia Tools V JCIT wherein he noted that the honourable Supreme Court has observed that while examining the allowability of deduction of the interest the AO is required to consider the genuineness of the business borrowing and that the borrowing was for the purposes of the business and not an illusionary and colourable transaction. Once the genuineness of the borrowing is proved and the interest is paid on the borrowing it is not within the powers of the learned assessing officer disallowed the deduction either on the ground that the rate of interest is unreasonably high of that the assessee had himself charged the lower rate of interest on the money which it has advanced. The learned departmental representative could not controvert the above finding of the learned CIT - A. In view of this, we confirm the order of the learned CIT - capital and dismiss ground number 18 and 19of the appeal. Respectfully following the order of Coordinate bench and taking the consistent view, we uphold the order of CIT....
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....ly linked with power generation. On the sale of excess Carbon Credits the income was received and hence as correctly held by the Tribunal it is capital receipt and it cannot be business receipt or income. In the circumstances, we do not find any element of law in this appeal." The learned departmental representative could not controvert the above decision and therefore respectfully following the decision of the honourable Andhra Pradesh High Court we confirm the order of the learned CIT - A in deleting the addition of Rs. 122,34,040 on account of Carbon credit receipt holding the same to be a capital receipt. Accordingly ground number 19 of the appeal is dismissed. In the light of the decision of Hon'ble Andhra Pradesh High Court and Coordinate bench, we find no reasons to deviate from view taken by the CIT(A) and the order of CIT(A) deleting the addition is upheld. Accordingly, this ground is also decided as per table at Para 19 of this order. Coming to the cross objection of the assessee (Co No.6 of 2021) 18.1 The sole issue involved in the CO is addition of Rs. 6,80,874/- being notional rent in respect of kiosks let out to tenants. The assessee is not recognizi....
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....rounds raised in these appeals are decided by the Coordinate Bench in appeals right from AY 2006-07 till AY 2011-12and in absence of any change of facts and respectfully following the decisions of Coordinate bench which is binding upon us, the various grounds which have been tabulated hereinbelow is based on order of Coordinate bench for AY 2008-09 and 2011-12 which is a matter of precedence, we respectfully follow. Gr No. Particulars of the Ground Issue covered by ITA order dtd. 27/5/2019 for A.Y. 2008-09 Issue on identical facts and circumstances dealt with in order dated 29/09/2020 in ITA No. 4187 & 4793/D/15 for A.Y. 2010-11 Issue on identical facts and circumstances dealt with in order dated 29/09/2020 in ITA No. 4794/D/15 for A.Y. 2011-12 Our decision on grounds following the order of coordinate bench in preceding years Appeal of the revenue (ITA No. 5941/Del/17) 1 Disallowance deleted on account of revenue recognition under POCM Para number 81- 87 of the order Para number 9 of the order Para number 13 of the order Dismissed 2 Holding that interest expenditure is capital in nature which CIT appeal allowed in fav....
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....7 Para number 13 of the order Dismissed 12 Deletion of addition on account of notional interest income for interest income short book. -- -- Covered in favour of the assessee by paragraph number 25-26 of the order.25-26 of the order. Para number 13 of the order Dismissed 14 Deletion of addition on account of carbon credits -- -- Para number 15 of the order Dismissed Cross Objection of the assessee (CO No. 6 of 2021) 1 Addition of notional rent on kiosks Decided in favour of the assesse as per paragraph number 21-24 Covered in favour of the assessee by paragraph number 32 of the order. Covered in favour of the assessee by paragraph number 7-10 of the order. Allowed 20. However, we deem it fit to adjudicate in detail the grounds for which specific arguments were advanced by the both the sides including the grounds which are not directly covered by the orders of Coordinate bench. 21.1 Ground No. 6 of the revenue's appeal is against deletion of disallowance of Rs. 2,77,16,42,129/- u/s 14A read with Rule 8D of the Income Tax Act, 1961. The assessee in its return of income made su....
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....871/- being salary to an employee looking after the work of investment which are mainly continuing from earlier years. The assessing officer made enhanced disallowance u/s 14A after invoking Rule 8D(2)(ii) and (iii). The CIT(A) deleted the disallowance u/s 14A by holding as under: "13.4 I find that section 14A(2) provides that the Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act and section 14A(3) provides that, "the provisions of sub section (2) shall apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act". While a lot of emphasis is placed by the counsel on wordings of section 14A(2) which refer to the need of' Assessing Officer's satisfac....
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....t expenses is unsubstantiated and not based on books of account of the assessee. The CIT(A) has given a specific finding that no part of interest bearing funds were used for making investment yielding exempt income. In these circumstances, we are constrained to observe the satisfaction recorded by the assessing officer fails to pass the test laid down by Supreme Court and does not provide valid basis for invocation of rule 8D. We find that identical issue came up for consideration before Coordinate bench in the case of assessee for immediately preceding AY 2011-12 (ITA No. 4794/D/15) and AY 2010- 11 (ITA No.4793/D/15)wherein the disallowance was deleted by observing that satisfaction recorded by the assessing officer is invalid. The satisfaction recorded in present case is ad-verbatim that in AY 2010-11 and 2011-12. The finding of coordinate bench in AY 2010-11 is reproduced hereunder for ready reference: "18. We have carefully considered the rival contention and perused the orders of the lower authorities. Apparently in this case the learned assessing officer has not recorded the satisfaction stating that why the claim of the assessee that it has incurred only Rs. 1,81....
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....gned order of the ITAT and the consequential order of the AO dated 28/30th December 2016 are hereby set aside but without any order as to costs." Therefore respectfully following the decision of Honourable Delhi High Court, we direct the learned assessing officer to delete the disallowances u/s 14 A of the act by invoking rule 8D without recording of satisfaction. Accordingly ground number 10 of the appeal of the learned assessing officer is dismissed and ground number one of the appeal of the assessee is allowed." In the light of finding recorded in aforesaid para and respectfully following the order of Coordinate bench, we find no reasons to interfere with order of CIT(A) deleting the disallowance u/s 14A r.w.r 8D and same is upheld. 22.1 Ground No.13 is in respect of deletion of disallowance of expenditure to the tune of Rs. 14,64,00,000/- on account of short/non-allocation of proportionate overhead expenditure to windmill unit in Gujarat and Karnataka. The assessing officer made the disallowance on the ground that the windmill units located in Gujarat and Karnataka are claiming deduction u/s 80IA and assessee has failed to allocate overhead expenses to these unit....
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.... crore to the windmill in Karnataka and Rs.:10.74 crore to windmill in Gujarat. It is pertinent to note that the operations and maintenance of the windmills has been outsourced by the company to M/s Suzlon Infrastructure Services Ltd. and M/s. Evercan India Ltd. who submit the quarterly bills to the company for the operation and maintenance of the windmills. The company has only incurred expenditure in connection with insurance and rebate for the early payment to the parties. There is no linkage and justification for the allocation of any expenses to the windmill project, no expenditure claimed in the taxable income can be linked with the windmill project. In view of the above, it is clear that no, expenditure can be allocated to the windmill project. Both the divisions have maintained the separate books of accounts and all the expenditure in the nature of operational and general and administrative expenses have been debited to the respective divisions. There is no force in the argument of the Assessing Officer that the assessee has not allocated any expenses to the separate divisions. The separate books of accounts maintained by both the divisions leave no "scope for maki....
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....nal transaction u/s 92B, considered adjustment u/s 92C after benchmarking the same @ 0.3750% p.a. being 50% of the interest saved. 23.2 The respondent succeeded before CIT(A) which deleted the addition by holding that corporate guarantree is not an international transaction in terms of section 92B of the Income Tax Act, 1961. 23.3 The Ld. DR disputed that finding of CIT(A) and argued that giving of corporate guarantee to bank on behalf of AE results in saving of interest in the hands of the AE. Further, as per amendment brought in by Finance Act, 2012 in section 92B, the rendering of Corporate guarantee is an international transaction as per clause (c) of Explanation to section 92B of the Act. It was accordingly argued that TPO has rightly benchmarked the transaction for the purpose of transfer pricing adjustment after applying interest saving approach. 23.4 The Ld. AR reiterated the arguments advanced before CIT(A) and supported the order of CIT(A). It was argued that giving corporate guarantee to bank does not have any bearing on profit, income, losses or assets of the companies, the same cannot be treated as international transaction u/s 92B of the Income Tax Act, 1961.....