TaxTMI 
TaxTMI 
2022 (10) TMI 682
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....of assessment u/s. 147 of the Act, and therefore, for the sake of brevity, we deem it not necessary to reproduce the grounds of appeal raised by the assessee for these assessment years. ITA No. 3202/Chny/2016 for the AY 2009-10: 3. The first issue that came up for our consideration from Ground No. 2 of the assessee's appeal is disallowance of interest expenditure u/s. 36(1)(iii) of the Act. The facts with regard to the impugned dispute are that during the financial year relevant to the AY 2009-10, the assessee has borrowed Rs. 40 Crs. from M/s. L& T Infrastructure Finance Ltd., in addition to the loans remain outstanding as on opening date. The assessee had also incurred interest expenditure of Rs. 13,31,08,289/-. During the course of assessment proceedings, it was noticed that the assessee has borrowed loans from banks and financial institutions, but diverted said loans to associate concerns and subsidiary companies in the form of loans for non-business purpose and thus, called upon the assessee to explain, as to why, interest expenditure u/s. 36(1)(iii) of the Act, cannot be disallowed. In response, the assessee submitted that loans borrowed from banks and financial institu....
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....htly disallowed interest expenses and their order should be upheld. 7. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The facts borne out from the record indicates that during the impugned assessment year, the assessee does not generate any income from business operations except other income being interest income as per published accounts which is available in Paper Book filed by the assessee. It is also an admitted fact that the assessee has borrowed huge loans and advances from banks and financial institutions and advanced interest free loans to subsidiary companies and associate concerns. Although, the assessee claims that there is a business expediency in advancing loans and advances to subsidiary companies and associate concerns, but, on perusal of financial statements filed by the assessee, we find that even the subsidiary companies does not have any business activity to support the claim of the assessee. Further, the Ld. CIT(A) had recorded categorical findings that loans borrowed from M/s. L& T Infrastructure Pvt. Ltd., has been utilized for acquiring shares and advancing loans to sister concerns.....
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....td., for development of 70 acres of land and income from said project is recognized from FY 2012-13 on the basis of Accounting Standard-9. Further, M/s. SSI Ltd., which was directly amalgamated with assessee vide High Court order dated 25.04.2008 also indicates that the assessee is entered into real-estate business through its subsidiaries. Therefore, the assessee argued that the depreciation on plant & machinery, cannot be disallowed. 10. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The AO has disallowed depreciation on plant & machinery on the ground that the assessee has not generated any business income for the impugned assessment years except other income being interest income. We find that as per declared financial results for the year ending 31.03.2009, except other income being interest income on debentures and deposits and income from current investments, the assessee has not earned any receipts from operations including so called real estate business. Further, as admitted by the assessee itself, revenue from real estate business was started from FY 2011-12 onwards. From the above, it is very c....
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....owance of foreign travel expenses. The AO has disallowed foreign travel expenses on the ground that the assessee has failed to prove nexus between the expenditure for foreign travel and business purpose. It was the explanation of the assessee that the Director of the company has taken a foreign travel for the purpose of business of a parent company but not for the assessee's business. 13. Having heard both the sides and considering relevant material on record and we find that the assessee could not justify foreign travel expenses with necessary evidence to prove that said expenditure has been incurred for the purpose of business of the assessee. If the assessee has incurred foreign travel expenses for the business of the parent company, then, the parent company should have incurred the cost of travel of the Director, but not the assessee company. Therefore, we are of the considered view that the assessee is not entitled for deduction towards foreign travel expenses and thus, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the assessee. 14. In the result, appeal filed by the assessee in ITA No. 3202/Chny/2016 for the AY 2009-10 is dismis....
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....g of assessment, the AO refers to financial statements and income and expenditure reported by the assessee for the relevant assessment year to form reasonable belief of escapement of income without there being any fresh tangible material to suggest escapement of income. Therefore, he submitted that in absence of fresh tangible material, re-opening of assessment is invalid and liable to be quashed. In this regard, he relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Kelvinator of India Ltd., reported in 320 ITR 561 (SC) and also the decision of the Hon'ble Madras High Court in the case of RPG Transmissions Ltd., reported in [2014] 48 taxmann.com 57 (Madras). 19. The Ld. DR, on the other hand, supporting the order of the Ld. CIT(A), submitted that assessment for the impugned assessment year has been re-opened within four years from the end of the relevant assessment years. Further, there is tangible material in the possession of the AO to form reasonable belief of escapement of income. Further, at the stage of re-opening of assessment what is required to be seen is formation of belief on the basis of material in the possession of the AO. However, th....
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....usion that there is an escapement of income for assessment, reasons must have a live link for formation of belief. A similar view expressed by the Hon'ble Delhi High Court in the case of CIT v. Usha International Ltd., reported in 348 ITR 485 where the Hon'ble Delhi High Court by following the decision of the Hon'ble Supreme Court in the case of Kelvinator of India Ltd., held that in absence of fresh material, re-opening of assessment is invalid and liable to be quashed. The Hon'ble jurisdictional High Court of Madras in the case of RPG Transmission Ltd., (supra) held that the re-opening was not justified where the AO had actually before him all relevant materials at time of original assessment itself. 21. In this case, on perusal of reasons recorded for re-opening of assessment, we find that the AO does not have any fresh tangible material to come to the conclusion that there is an escapement of income and further, the basis for reasonable belief of escapement of income is financial statements filed by the assessee for relevant assessment year and thus, we are of the considered view that re-opening of assessment in the given facts and circumstances of the case, is....
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....pporting the order of the Ld. CIT(A), submitted that the Ld. CIT(A) erred in deleting the disallowance made by the AO u/s. 14A r.w.r. 8D of IT Rules, by following the decision of ITAT Chennai Bench in the case of M. Bhaskaran, in ITA No. 1717/MDS/2013 dated 31.07.2014 without appreciating the fact that Department has not accepted the decision of Tribunal on merits and has preferred further appeal before the Hon'ble High Court. The DR further submitted that as per CBDT Circular No. 5/2014 dated 11.02.2014, sec. 14A r.w.r. 8D provides for disallowance of expenditure in a particular year, even where the taxpayer is not in receipt of exempt income for that year. The Ld. CIT(A) without appreciating the above facts simply deleted the additions made by the AO. 27. We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The issue of disallowance of expenses u/s. 14A r.w.r. 8D in absence of exempt income is not a res integra. The Hon'ble Delhi High Court in the case of Cheminvest Ltd., had considered a similar issue and held that Sec. 14A of the Act, will not apply, if no exempt income is received during the previo....
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....ss. Hence, we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the Revenue. 29. In the result, appeal filed by the assessee in ITA No. 3204/Chny/2016 & appeal filed by the Revenue in ITA No. 18/Chny/2017 are dismissed. ITA No. 3203/Chny/2016 for the AY 2010-11: 30. The first issue that came up for our consideration from Ground No. 2 of the assessee's appeal is validity of re-opening of assessment. The facts with regard to the impugned dispute are that the assessee is engaged in the business of Urban Infrastructure Development, filed its return of income for the AY 2010-11 on 29.09.2010 admitting a loss of Rs. 23,30,76,150/-. The case was selected for scrutiny and the assessment has been completed u/s. 143(3) of the Act, on 31.03.2013 and determined total loss at Rs. 10,98,98,318/-, by making disallowances u/s. 14A r.w.r. 8D of Income Tax Rules, 1962. The assessment has been subsequently re-opened u/s. 147 of the Act, for the reasons recorded, as per which, income chargeable to tax had been escaped assessment on account of depreciation on plant & machinery and accordingly, notice u/s. 148 of the Act, dated 24.01.2014 was served on the asses....
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....C) and also the decision of the Hon'ble Madras High Court in the case of RPG Transmissions Ltd., reported in [2014] 48 taxmann.com 57 (Madras). 33. The Ld. DR, on the other hand, supporting the order of the Ld. CIT(A), submitted that assessment for the impugned assessment year has been re-opened within four years from the end of the relevant assessment years. Further, there is tangible material in the possession of the AO to form reasonable belief of escapement of income. Further, at the stage of re-opening of assessment what is required to be seen is formation of belief on the basis of material in the possession of the AO. However, the AO does not require to establish escapement of income. In this case, the assessment has been re-opened on the basis of fresh materials and thus, there is no merit in the arguments of the assessee for re-opening of assessment is on change of opinion. In this regard, he relied upon the decision of the Hon'ble Madras High Court in the case of Cairn India Ltd. v. Dy. Director of Income Tax-1, (International Taxation), Chennai, reported in [2021] 130 taxmann.com 167 (Madras). 34. We have heard both the parties, perused the materials available o....
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....stified where the AO had actually before him all relevant materials at time of original assessment itself. 35. In this case, on perusal of reasons recorded for re-opening of assessment, we find that the AO does not have any fresh tangible material to come to the conclusion that there is an escapement of income and further, the basis for reasonable belief of escapement of income is financial statements filed by the assessee for relevant assessment year and thus, we are of the considered view that re-opening of assessment in the given facts and circumstances of the case, is bad in law and liable to be quashed and hence, we quashed re-opening of assessment and consequent re-assessment order passed by the AO u/s. 143(3) r.w.s. 147 of the Act. 36. In the result, appeal filed by the assessee in ITA No. 3203/Chny/2016 for the AY 2010-11 is allowed. ITA No. 3205/Chny/2016 for the AY 2012-13: 37. The first issue that came up for our consideration from Ground Nos. 2 & 3 of the assessee's appeal is disallowance u/s. 14A r.w.r. 8D of Income Tax Rules, 1962. During the course of assessment proceedings, the AO noticed that the assessee has earned dividend income of Rs. 50,22,099/-. Howev....