TaxTMI 
TaxTMI 
2023 (11) TMI 938
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.... on account of disallowance of remuneration paid to various filed/sales organizers. 2. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 14,88,247/- made by AO on account of disallowance of temple maintenance and pooja expenses. 3. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 11,50,341/- made by AO on account of disallowance of expenditure reimbursed by the assessee to staff recreation clubs. 4. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 7,76,24,000/- made by AO on account of disallowance of deduction claimed u/s 80IA. 5. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 28,04,91,224/- made by AO on account of disallowance of power charges paid to M/s KPPL. 5.1 On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 28,04,91,224/- made by AO on account of disallowance of power charges paid to M/s KPPL on the basis of acceptance of the re....
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.... (iii) Investment in unquoted equity shares of subsidiary companies, which are made for purpose of strategic investment, and investment in equity shares of other companies on which no dividend was received also needs to be excluded while computing disallowance under Rule 8D read with Section 14A of the Act; and 5. That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) has grossly erred in confirming the disallowance of Rs. 4,14,43,268/- u/s 14A for the purpose of computation of book profit us/ 115JB of the Act. 6. That on the facts and in the circumstances of the case, the Ld.CIT(Appeals) has grossly erred in holding that the payment of Rs. 5,06,011/- on account of advertisement issued in newspapers requesting warrant holders to convert their warrants, which were issues in earlier years, into equity shares of the company is in nature of capital expenditure. 7. That on the facts and circumstances of the case and in law, the appellant is entitled to a deduction of Rs. 43,23,650/- on account of payment to AP TRANSCO for spares and supervision charges in connection with laying of Transmission Line in the light of the finding recorded by t....
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....id to staff recreation clubs. We find that the issues in these two grounds were also decided in favour of the assessee by the Tribunal in para 63 page 35 of the Tribunal as under: "63. Ground no.2 and 3 are with respect to the deletion of the disallowance by the Ld.CIT(A) with respect to the temple maintenance and Pooja expenses as well as amount paid to staff recreation clubs. This is identical to ground no.2 raised by the assessee for AY 2006-07 wherein the Ld.CIT(A) deleted the above disallowance relying upon the decision of the coordinate bench in assessee's own case for earlier years. There are no changes in the facts and circumstances of the case pointed out before us. As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench which is been relied upon by the Ld.CIT(A), we do not find any infirmity in his order in deleting the above disallowance. Accordingly, ground nos. 2 & 3 of the appeal are dismissed." 8. Facts being identical following the said order, we dismissed ground no. 2 & 3 of grounds of appeal of the Revenue. 9. Ground No.4 of grounds of appeal of the Revenue is in respect of deletion of addition made on acco....
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....strated that the rates paid to Keshav Power Ltd. are comparable and beneficial to the assessee. The issue has been decided in the favour of the assessee for AY 2006-07 and the Ld. DR fairly agreed that there is no change in the facts and circumstances of the case. This ground of appeal is identical to ground no.2 of the appeal of the assessee wherein we have held that the power charges paid by the assessee to Keshav Power Ltd. are allowable as deduction to the assessee. In view of this we do not find any reason to deviate from our decision for AY 2006-07. Accordingly, ground no.5 of the appeal of the Ld.AO is dismissed." 12. Facts being identical following the order of the Tribunal in assessee's own case, we sustain the order of the Ld.CIT(A) and reject ground no.5 and 5.1 of grounds of appeal of the Revenue. 13. Ground No. 6 & 6.1 of the Revenue's appeal are in respect of partly deletion of disallowance made u/s 14A read with Rule 8D while computing the income under normal provisions of the Act as well as while computing the book profits u/s 115JB of the Act. The assessee in its appeal in grounds 1 to 5 of the grounds of appeal also challenged the order of the Ld. CIT(Appeal....
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....of the High Court to project their case. 16. As can be seen, the contention on behalf of the assessee was rejected by the CIT(A) as also by the High Court primarily on the ground that the assessee had not kept their interest free funds in separate account and as such had purchased the bonds/shares from mixed account. This is how a proportionate amount of the interest paid on the borrowings/deposits, was considered to have been incurred to earn the tax-free income on bonds/shares and such proportionate amount was disallowed applying Section 14A of the Act. 17. In a situation where the assessee has mixed fund (made up partly of interest free funds and partly of interest bearing funds) and payment is made out of that mixed fund, the investment must be considered to have been made out of the interest free fund. To put it another way, in respect of payment made out of mixed fund, it is the assessee who has such right of appropriation and also the right to assert from what part of the fund a particular investment is made and it may not be permissible for the Revenue to make an estimation of a proportionate figure. For accepting such a proposition, it would be helpful to....
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.... pointed out that those judgments have attained finality. On reading of these judgments, we are of the considered opinion that the High Courts have correctly interpreted the scope of Section 14A of the Act in their decisions favouring the assessees. 20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the assessees in bonds/shares using interest free funds, under Section 14A of the Act. In other words, if investments in securities is made out of common funds and the assessee has available, non-interest-bearing funds larger than the investments made in tax- free securities then in such cases, disallowance under Section 14A cannot be made. 17. The ratio of this decision squarely applies to the facts of the assessee's case. On perusal of the balance sheet as on 31.03.2008, we see that the assessee was having share capital/reserve and surplus to the extent of Rs. 11,471.43 million as against investments of Rs. 6,138.27 million. Therefore, since the assessee was having sufficient interest free funds to meet the investments no disallowance is warranted u/s 14A read with Rule 8D(2)(ii) while computing the income under the norm....
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....hat there cannot be any disallowance u/s 14A read with Rule 8D while computing the income under normal provisions of the Act by the AO in the absence of recording any satisfaction as to why the suo moto disallowance made by the assessee is incorrect. Ground nos. 1 to 4 of assessee's appeal are allowed and ground no.6 of Revenue's appeal is dismissed. 21. Coming to disallowance made u/s 14A read with Rule 8D while computing the book profits u/s 115JB of the Act, we find that the issue is squarely covered by the decision of the Hon'ble Spl. Bench of Delhi Tribunal in the case of ACIT Vs. Vireet Investments Pvt. Ltd. (165 ITD 27), wherein it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income Tax Rules, 1962. Thus, respectfully following the Spl. Bench decision, we restore the issue of disallowance u/s 14A while computing the book profits u/s 115JB to the AO with a direction to decide the issue afresh in the light of the decision of the Spl. Bench of Delhi Tribunal in the case of ACIT Vs. Vireet Investments Pvt. Ltd. (supra). Ground no.5 of....
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.... the debenture warrants were issued in the year 2001 and these warrants were converted into equity shares during the assessment year under consideration i.e. 2008-09. The assessee incurred expenditure of Rs. 5,06,011/- towards advertisement in newspapers for conversion of warrants to equity share capital. This expenditure is related to the process of increase in share capital by conversion of debenture warrants to shares. The ld.CIT(A) following the decision of the Hon'ble Supreme Court in the case of CIT Vs. Broke Bond India Ltd. (225 ITR 798) held that such expenditure is capital in nature. The Hon'ble Supreme Court in the case of CIT Vs. Broke Bond India Ltd. (supra) held that the expenditure incurred by a company in connection with issue of shares with a view to increase a share capital is directly related to the expansion of capital base of the company and expenditure is capital expenditure. In the circumstances, we hold that the Ld.CIT(A) has rightly applied the ratio of the decision of the Hon'ble Supreme Court in the case of Broke Bond India Ltd. Vs. CIT (supra) in holding that the advertisement expenditure is capital in nature. Thus, we sustain the order of the Ld.CIT(A) a....
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....rcumstances of the case and in law the Ld.CIT(A) has erred in reducing the addition of Rs. 26,39,00,000/- to Rs. 6,29,49,703/- made by AO under normal provisions on account of disallowance u/s 14A r.w. Rule 8D. 6.1 On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in reducing the addition of Rs. 26,39,00,000/- to Rs. 6,29,49,703/- /- made by AO u/s 115JB on account of disallowance u/s 14A r.w. Rule 8D. 7. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 6,54,59,535/- made by AO on account of disallowance of expenditure in relation to laying of transmission towers & lines treating the same as capital expenditure. 8. On the facts and circumstances of the case and in law the Ld.CIT(A) has erred in deleting the addition of Rs. 10,00,519/- made by AO on account of disallowance of depreciation claim by the assessee @60% on UPS and Printers instead of 15%." The grounds of appeal of the assessee are as under: 1. "That on facts and in circumstances of the case, the Ld.CIT(A) has erred in partially upholding the action of the AO in making the disallowance u/s 14A of....
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....l of the assessee and ground no.6 of grounds of appeal of the Revenue are in respect of disallowance made u/s 14A read with Rule 8D while computing the income under normal provisions of the IT Act. These grounds are similar to ground nos. 1 to 4 of assessee's appeal and ground no.6 of Revenue's appeal for the AY 2008-09. While disposing off the appeal for the AY 2008-09, we have held that since the share capital and reserve and surplus are more than the investments there cannot be any disallowance u/s 14A read with Rule 8D(2)(ii). Further we have also held that in the absence of recording any satisfaction by the AO in not accepting the suo moto disallowance made by the assessee there cannot be any disallowance u/s 14A read with Rule 8D of the Act in view of the decision of the Hon'ble Supreme Court in the case of Maxopp Investments P. Ltd. (402 ITR 640). As the facts are similar for the assessment year under consideration the decision taken therein shall apply mutatismutandis to the appeal for the AY 2009-10. Ground nos. 1 to 4 of the assessee's appeal are allowed and ground no.6 of the Revenue's appeal is dismissed. 29. Similarly, ground no.5 of grounds of appeal of the assesse....
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....incurred Rs. 6,97,83,185/- as development charges/laying transmission lines and towers for extending EHT supply for expansion of existing cement business of the company. The assessee also contended that the said expenditure though has been capitalized in the books it has been claimed as Revenue expenditure in the computation of income for the reason that by incurring the said expenditure the company has not created any new asset nor received any new enduring benefit. It was also contended that the company does not have any ownership on the said assets and the expenditure was pre forced incurred in connection with business to be run from these plants and the expenditure is in the nature of Revenue for expansion of existing business and therefore is Revenue expenditure allowable u/s 37(1) of the Act. Assessee placed reliance on the decision of the Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co. Ltd. Vs. CIT (82 ITR 363) for the proposition that the accounting treatment in the books of account would made no difference to make its claim in as much as the claim is allowable as Revenue expenditure. Reliance was also placed on the decision of the Hon'ble Delhi High C....
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....der. Therefore, the revised claim was not examined on merit. Keeping in view the decision of Hon'ble Supreme Court in the case of CIT vs. NTPC Ltd. 229 ITR 383 (SC), as an appellate authority, I admit the revised claim under this head for due consideration on merit, for rendering natural justice to the appellant. The Ld. Counsel furnished before me the details of expenses incurred for laying the transmission lines, which were paid to AP TRANSCO and TNEB, I find the appellant had made a claim of Rs. 6.54 Crores in respect of the payment that were made during the current year only. The appellant had incurred an amount of Rs. 43,23,650/- in the immediately preceding previous year, which is shown as opening balance in the current year. The appellant has pleaded that since the aforesaid amount of Rs. Rs. 43,23,650/- was in the nature of advance, the same was allowable in the current year, the year in which liability for such expenses had crystallized. 7.5.3 On careful consideration of the agreement of the appellant with AP TRANSCO and TNEB, I find that the appellant was required to make payment in terms of the said agreement, which required it to make payment of aforesaid a....
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....running service line for the purpose of the fourth unit in the process of expansion of business. The assessee claimed this amount as Revenue expenditure whereas the AO held that the benefit derived by the assessee was of enduring nature and therefore was a capital expenditure. The Hon'ble Delhi High Court held as under: "10. Our attention has been drawn to Hindustan Times Ltd. v. CIT [1980] 122 ITR 977 , which is a decision rendered by a Division Bench of this Court. In that case, the assessed was getting supplies of direct current from the Municipal Committee to work its machines in its business premises. The cables were replaced at the instance of the assessed by alternating current and for this purpose, the assessed had paid some amount to the Municipal Committee being the cost of laying cables which belonged to the Municipal Committee. The Tribunal held that the expenditure incurred was of a capital nature but this view was upset by this Court. The Division Bench was of the view that the word "enduring" has a special significance. It adopted the view expressed by the House of Lords in IRC v. Canon Co. (1968) 45 Tax Cases 18 (HL), at p. 74 that what matters is the natur....
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.... payment should equally be regarded as a business expense, but if the lump sum payment brings in a capital asset, then that puts the business on another footing altogether. 3. Whether for the purpose of the expenditure, any capital was withdrawn, or, in other words, whether the object of incurring the expenditure was to employ what was taken in as capital of the business. Again, it is to be seen whether the expenditure incurred was part of the fixed capital of the business or part of its circulating capital." 14. The decision of the Supreme Court proceeded on the basis, as has been recorded in the judgment, that the expenditure of demolishing and reconstructing the building was incurred by the assessed itself but the asset in question did not belong to the assessed. On that basis, it was held that the only advantage which the assessed derived by spending the money was that it got a lease of the new building and from the business point of view, it also got a benefit of reduced rent. It was, therefore, held that the High Court had rightly considered this as obtaining a business advantage and, therefore, the expenditure would be a revenue expenditure. 15. In....
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....deduction in the current assessment year i.e. 2009-10. Since, we have held that the said expenditure is Revenue expenditure allowable as deduction u/s 37(1) of the Act the claim of the assessee for deduction of this amount should be considered in the AY 2008-09 as the liability is held to be crystallized in the said assessment year. Thus, we direct the AO to consider the claim of the assessee in the AY 2008-09. Ground no.6 of appeal of the assessee is allowed for statistical purpose. 41. Coming to ground no.8 of the grounds of appeal of the Revenue in respect of deletion of disallowance of depreciation on UPS and printers, we find that the issue is covered in favour of the assessee by the Hon'ble Delhi High Court in the case of CIT Vs. BSES Yamuna Powers Ltd. which decision was applied by the Ld.CIT(A) in holding that claim for depreciation allowance at 60% on UPS & printers is held to be justified. We see no infirmity in the order passed by the Ld.CIT(A). Ground no.8 of grounds of appeal of the Revenue is dismissed. ITA No.4572/Del/2014 (AY 2010-11 - Revenue's appeal) & ITA No.4394/Del/2014 (AY 2010-11 - Assessee's appeal) 42. The Revenue raised the following grounds of a....
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....de by AO on account of disallowance of depreciation claim by the assessee @60% on UPS and Printers instead of 15%." The assessee raised the following grounds: 1. "That on facts and in circumstances of the case, the Ld.CIT(A) has erred in partially upholding the action of the AO in making the disallowance u/s 14A of the Act despite the fact that the AO has not recorded his satisfaction on the amount of suo-moto disallowance made by the appellant which as per law he was required to do. 2. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in holding that the suo-moto disallowance of Rs. 50,00,000/- made by the appellant company u/s 14A of the I.T. Act, 1961 in its return of income is without any reasonable basis. 3. That on the facts and in the circumstances of the case, the Ld.CIT(A) has erred in upholding the disallowance made u/s 14A of the I.T. Act, 1961 to the extent of Rs. 5,55,65,481/- (net of suo-moto disallowance made by the appellant). 4. That the Ld.CIT(Appeals), while determining the amount of disallowance u/s 14A of the Income Tax Act, 1961 has failed to appreciate that: (i) Entire amount of int....
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....y the AO on account of disallowance of temple maintenance and pooja expenses. 3. On the facts and circumstances of the case and in law, Ld.CIT(A) has erred in deleting the addition of Rs. 1,63,98,000/- made by the AO on account of disallowance of deduction claimed u/s 80IA. 4. On the facts and circumstances of the case and in law, Ld.CIT(A) has erred in directing the AO to rework the disallowance made by the AO at Rs. 84,17,000/- under the normal provisions on account of disallowance u/s 14A r.w. Rule 8D." The assessee raised the following grounds: 1. "(A) That on the facts and in the circumstances of the case the Ld.CIT(Appeals) has grossly erred in law in holding that for computing disallowance u/s 14A of the Act, only interest on term loans and debentures need to be excluded for the purpose of disallowance under Rule 8D(2)(ii) even though net owned funds of the appellant were far in excess of investments in shares/mutual funds. (B) That the Ld.CIT(A) has grossly erred in law in not accepting the contentions of the appellant that the strategic investments made in subsidiary companies and in shares of companies from which no dividend was rece....
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....ct 1961 ("the Act"). It also needs to be mentioned as a fact that the assessee had capitalized the expenditure but claimed it as a deduction on revenue a/c while computing its income. Reliance was placed on the judgements of the Supreme Court in Kedarnath Jute Mfg. Co Ltd. vs CIT (1971) 82 ITR 363 (SC) and Sutlej Cotton Mills Ltd. vs CIT (1979) 116 ITR 1 (SC) for the proposition, that entries in the books of accounts were not determinative of the nature of expenditure incurred. 1978 In support of the submissions made the assessee company relied on numerous decisions adverted to in Para 12.2 of the Assessment Order. b) Per the AO (Paras 11 to 12.5 of the Assessment order} The AO sought to distinguish the Judgements relied upon by the Assessee vide Para 12:4 of the order, more so of the jurisdictional High Court in the case of CIT vs Saw Pipes Ltd. (2008) 300 ITR 35 (Delhi) on the ground, that in that case, the expenditure was incurred after the new unit had been set up, whereas in the case of the assessee the expenditure was incurred prior to the set up. On the alternative argument of the assessee, that depreciation be a....