TaxTMI 
TaxTMI 
2016 (9) TMI 1684
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....striction of 1.25% of issue proceeds to 50% under the head fee paid to lead managers in connection with GDR and disallowing selling commission and 1.75% of issue proceeds. 2.1 The Commissioner of Income tax (Appeals), LTU ought to have appreciated that the selling commission and fee paid to the lead managers is at par with the underwriting commission/brokerage paid for the issuance of equity shares. Hence eligible for deduction u/s 35D(2)(c)(iv). 2.2 The basis to arrive at the disallowance amount as 50% of the 'Management and underwriting fees' is arbitrary and unjustified''. 3. The Brief facts of the case are that during the year relevant to the assessment year under consideration the assessee company claimed a sum of Rs.14.21 crore being Euro issue expenditure as revenue in nature. The Assessing Officer disallowed the share issue expenses against which the assessee filed an appeal before the first appellate authority. The Commissioner of Income Tax (Appeals) also partly confirmed the order of the Assessing Officer on this issue and certain expenses were allowed. Subsequently, the assessee as well as the department filed appeal against the order of the Commissioner....
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.... Private Limited. (261 ITR 347). After hearing the appellant, the Assessing Officer has come to the conclusion that out of the claim of Rs.14,21,52,904 u/s 35D made by the assessee, the ld. Assessing Officer observed that only the following amounts are eligible for amortisation u/s 35D(2)(c)(iv) of the Act (i) Legal Fee = Rs.9,55,000/- (ii) Printing &Advertisement of offering circular/ prospectus = Rs.7,04,762/- (iii) Listing fee = Rs.100/- (iv) Underwriting Commission = Rs.2,71,54,138/- -------------------- Total =Rs.2,88,14,900/- --------------------- 1/10 of Rs.2,88,14,900/- = Rs.28,81,490/- The AO has worked out the above amount by following the directions of the ITAT, Chennai, which has in turn followed the decision of Hon'ble Madras High Court in the case of CIT v. Ennar Steel & Alloy P Ltd (261 ITR 347). While arriving at the Underwriting commission of Rs.2,71,54,138 (supra), the Assessing Officer has verified para 6 of the copy of the agreement of GDR issue which states as under:- "The company agrees to pay to the managers on each closing date a management commission' and under....
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....as answered in favour of the assessee. The question raised before the High Court in the above case is as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in equating a proposal to 'expand' the capacity of production with 'extension' of industrial undertaking under section 35D of the Income-tax Act ?" The High Court has decided that ''expansion'' and ''extension'' mean the same. According to the Commissioner of Income-tax (Appeals), in the instant case, taking of business activity of TGSL is considered as extension of business by the assessee within the meaning of section 35D(1)(ii) of the Act and also relied on the judgment of Madhya Pradesh High Court in the case of Shree Synthetics Ltd vs. CIT 303 ITR 451 wherein held that expenditure incurred towards issue of debentures was in the nature of preliminary expenses falling u/s. 35D(1)(ii) and 35D(1) (ii) (c) and it is allowable as deduction in a manner provided u/s. 35D of the Act. 3.5 On the other hand, the ld. Departmental Representative relied on the orders of the Commissioner of Income Tax. 3.6 We have heard both the parties and perused the material on record. We h....
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....in and nothing beyond. In the light of the decision of this Court referred to above, we reject .the reliance placed on the decision of the Madhya Pradesh High Court by the assessee, reported in [1986] 162 ITR 819 (Commissioner of Income Tax vs. Shree Synthetics Ltd). 4.2.1 From the chronology of events, it was noticed that the appellant has filed this appeal on 29.1.2010 much before the decision of the Madras High Court (supra) in appellant's own case which has pronounced its order on 20.6.2012., After the pronouncement of this order, most of the arguments raised before me have been .squarely covered and were answered by the Hon'ble Madras High Court. Now the issue to be answered by me is to see how far the claim of the expenses made by the appellant with regard to Euro Issue are fitting within the ambit of s. 35D(2)(c)(iv). To answer this question, the provisions of the Act u/s 350(2)(c)(iv) vis-a-vis the claim of expenditure of the appellant are reproduced as under: Expenditure heads used Sec. 35D(2)(c)(iv) (i) Underwriting commission, (ii) Brokerage and (iii) Charges for drafting, Typing, Printing, and Advertisement of the prospectus Expenditure heads u....
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..... 4.1 On the other hand, the ld. Departmental Representative submitted that the only expenditure incurred to earn these income to be reduced from the gross rent or interest not the rent or interest have no nexus with this income. 4.2 We have heard both the parties, perused the material on record and judicial decision cited. The Supreme Court in the case of ACG Associated Capsules (P) Ltd (cited supra) wherein held that ninety per cent of not the gross rent or gross interest but only the interest or net rent, which had been included in the profits of business of the assessee as computed under the head ''Profits and gains of business or profession'', was to be deducted under clause (1) of Explanation (baa) to Sec. 80HHC for determining the profits of the business.'' In view of the above judgment 90% of the net interest which have been included in the profits of the business of the assessee under the head income from business to be excluded for the purpose of applying clause (1) to Explanation (baa) to Sec. 80HHC of the Act. The same is applicable in the case of rent if the rent payment is included as business expenditure of the assessee. With these observations, we remit the issue ....
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....ied on the case law in the case of Development Consultants (P) Ltd v. DCIT[2008] 23 SOT 455. The ld. AR further submitted that the view taken by the ld. TPO and Assessing Officer that view taken by the TPO and AO that transaction means each transaction only and not transactions with AE as a whole has not been supported by any decisions and as such it has no legal sanction If the assessee discovers any omission or any wrong statement filed along with the Form 3CEB he may furnish, a revised working at any time before the completion of TP assessment and revision does not tantamount to non-filing of original form 3CEB. For this, ld. AR relied on the decisions of A.M. Tod Co. India (P) Ltd vs. ITO in ITA No. 492/Mum/ 2006 dated 24.06.2009 and DCIT vs. Quark Systems (P) Ltd (2010) 1 taxmann.com (Chd-ITAT) (SB). In the remand report, regarding this issue, the AO stated that the submission filed by the assessee before the Id.CIT(A) has been carefully considered and cannot be accepted as the submissions were considered by the AO and the TPO also. The Assessing Officer stated that totally agree with the order passed by the TPO-I and therefore the submissions of the assessee cannot be ac....
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.... respect of international transactions. The Chartered Accountant report is based on the Audited books of accounts maintained by the assessee were the international transaction have been incorporated and are authenticated. The report of the Chartered Accountant cannot be ruled out and also factual position has to be considered to correct any mistake in calculating of Arms Length Price(ALP) for valuation, and it is evident that the revised form 3CEB includes the proper comparables in respect of vehicles, parts which are integral product of commercial vehicles. Though ld. Departmental Representative vehemently argued against filing of revised form 3CEB and limitation period, we consider the apparent facts, provisions of law, evidence and the action of TPO in rejecting the revised form 3CEB is not proper as factual comparables certified by the Chartered Accountant in Revised form 3CEB cannot be ignored and we in the interest of justice, remit the disputed issue to the file of the Assessing Officer and to consider Revised form 3CEB filed by the assessee for assessment and calculation of Arms Length Price. Further the ld. Assessing Officer should provide adequate opportunity of hearing t....
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....unal for the assessment year 2000-01 in ITA No. 2445/Mds/2005, vide order dated 27.09.2007 wherein it was held as under:- "6. We* have heard. the parties at length. The short controversy before us is that if the assessee has provided residential flats to its employees, then at what rate depreciation is to be allowed. The CIT(Appeals) has tried to interpret the circular by stating that the Board might have issued the said circular in the context of the employees' quarters built in the factory premises and not to the residential flats which. are away from the Factory. On the perusal of the CSDT Instructions/letter, we find that no such distinction is made. In our opinion, the Circular/letter issued ambiguous language and no second interpretation is required. We, therefore/hold that the AO was not justified in restricting the depreciation to 5% in respect of the five residential flats which are used by the employees of the assessee company. We, therefore, allow ground no.2 in favour of the assessee and on this issue set aside the order of Commissioner of Income Tax (Appeals) . Accordingly, this ground is decided in favour of the assessee. The ground of the assessee is all....
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....issioner of Income Tax (Appeals) order, the assessee assailed an appeal before Tribunal. 8.3 We heard both sides, perused the material on record and judicial decision cited. This issue came for consideration in following cases:- (i) CIT vs. South India Corpn. (Agencies) Ltd 290 ITR 217. (ii) CIT vs. First Leasing Co. of India Ltd 304 ITR 67. (iii) CIT vs. Secure Meters Ltd 321 ITR 611. In all these judgments wherein held that expenditure incurred on issue of debentures whether convertible or non convertible is allowable as Revenue expenditure. Being so, even foreign currency loan is subject to conversion into equity also, the issue expenses will be Revenue expenditure only in view of the above judgments. This ground raised by the assessee is allowed. 9. The fifth ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in treating the exchange gain on FCNN as Revenue Receipts Rs.10,91,36,405/-. 9.1 The Brief facts of the case are that the assessee company issued foreign currency convertible notes (FCCN). The ld. Assessing Officer in the assessment order stated that the proceeds of these notes were retained outside India. This public deposits....
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.... asset. Moreso over, the interest paid by the assessee on the deposit amount is taken on revenue account. Hence, the entire gains on exchange fluctuation which has no nexus with the capital assets representing plant and machinery already existing, section 43A is not applicable and the entire gain should be treated as revenue receipt and added to the total income. Against this, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 9.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the facts of the case and the submissions of the ld.AR. and gone through the decisions relied on by the Id.AR and-the Assessing Officer. The assessee has reaped the gains out of the exchange fluctuation for the amount un utilized during the year. The ld. Commissioner of Income Tax (Appeals) in his considered opinion, any gain out of foreign exchange needs to be offered to taxation and if there is any loss the same can be claimed by following the specified accounting standards. The Supreme Court in the case of CIT v. Canara Bank Ltd reported in 63 ITR 328 relied on by the AO, has taken similar view holding that foreign exchange gains are assessable....
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....ax (Appeals) is of the view that until the amounts are used for purchase of any capital asset, the nature Of the amount will remain as revenue only. The decision in the case of EID Parry Ltd (supra) relied on by the assessee is distinguishable in facts. In the case of EID Parry Ltd, the funds raised in UK where in fact utilized for the purchase of plant and machinery and only the balance amount was repatriated to India for a specific purpose at Ennore Unit, Tamilnadu for which the funds were raised. The decision therefore will not 'come to the rescue of the assessee. Even the decision of CIT vs. Woodward Governor India P Ltd (312 ITR 254) relied on by the assessee is also of no help to him. In this decision, the Supreme Court has allowed the loss arisen out of exchange fluctuation to be claimed as expenditure u/s. 37(1) treating it as revenue. It amounts to say that when the loss out of exchange fluctuation was allowed as expenditure the gain should be offered as income for taxation. The ld. Commissioner of Income Tax (Appeals) uphold decision taken by the AO is in order and uphold the addition and dismissed the ground of the assessee. Aggrieved by the order, the assessee filed....
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....Departmental Representative relied on the orders of Commissioner of Income Tax (Appeals). 12.3 We heard both the parties and perused the material on record. In our opinion filing of stay petition cannot disentitle the Department from charging interest u/s. 220(2) of the Act. Accordingly, we do not finding any merit in the argument of the ld. Authorised Representative. This ground of the assessee is dismissed. 13. In the result, the appeal of the assessee in ITA No. 2837/Mds/2014 of assessment year 2006-2007 is dismissed. 14. ITA No. 2838/Mds/2014 of assessment year 2007-2008:- The first ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance of balance 50% of additional depreciation in the current year in respect of the assets acquired in the 2nd half of preceding year Rs.3,34,33,504/-. 14.1 As discussed in assessment year 2005-2006 in ITA No. 2836/Mds/2014 at para 6.1, this ground of the assessee is allowed. 15. The second ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance of additional deprecation on leased assets Rs.2,61,84,817/-. 15.1....
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....llowed only in the case of new plant and machinery and not WDV value on subsequent years. The assessee also relied on the decision Cosmos Films Ltd (supra) where the Tribunal has allowed the claim of assessee for 50% of additional depreciation u/s. 32(i)(iia) in respect of new Plant & Machinery installed at the new eligible industrial undertaking where Plant & Machinery were put to use for less than 180 days in the year of installation and the assessee had claimed only 50% of the additional depreciation and the balance amount was claimed in the next year. Respectfully following the Tribunal decisions, we direct the Assessing Officer to allow additional depreciation claimed by the assessee. This ground of the assessee is allowed''. Accordingly, the ground of the assessee is allowed. 17. The fourth ground raised by the assessee is that the Commissioner of Income Tax (Appeals) erred in confirming the disallowance of depreciation on Aircraft of Rs.21,70,15,709/-. 17.1 The ld. Assessing Officer observed that during the current year, the assessee had claimed depreciation to the tune of =.21, 70,15,709/- towards the capitalization of Aircraft. In order to ascertain its usage wholly an....
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....h the seat capacity of ten (10) and the said aircraft has been registered under the passenger category. 2) As per the Aircraft Rule 1937, Part-IV Rule 30, the assessee has to register its aircraft in India even though the same has been used for the purpose of its personal or sole corporate purpose. 3) As per the Aircraft Rule 1937, Part-IX Rule 67, the assessee has to maintain the following Log Books. For better clarity, the Rule 67 of the Aircraft Rule 1937 is reproduced as under:- (a) a journey log book; (b) an aircraft log book; (c) an engine log book for each engine installed in the aircraft; (d) a propeller log book for every variable pitch propeller installed in the aircraft; (e) a radio apparatus log book for aircraft fitted with radio apparatus; (f) any other log book that may be required by the Director-General. (2) The Director-General may require that a technical log or flight log be provided in respect of an aircraft and be maintained in such manner as may be specified by him (3) Log books shall be of such type and shall contain such information, entries and certification as may be specified by the Director-General. Log books and logs shall be....
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....of Income Tax (Appeals) confirmed the disallowance made by the Assessing Officer and dismissed the ground of the assessee. Aggrieved by the order, the assessee filed an appeal before Tribunal. 17.3 Before us, the ld. Authorised Representative submitted that during the assessment year, the assessee company has procured an aircraft and put to use wholly and exclusively for the purpose of its business. The aircraft is being used by the assessee's senior management personnel for making the trips relating to its business and the assessee's customers (including prospective customers). The assessee has made the depreciation claim u/s 32 on the aircraft to the extent of =.21,70,15,709/-. The assessee company had furnished the reasons to the ld. Assessing Officer why it is necessitated for it to buy an aircraft on its own. But the assessing officer has disallowed the depreciation claim of the assessee stating that the assessee has not furnished the log books to establish that the aircraft is being used wholly and exclusively for the purpose of assessee's business. The ld. AR submitted that the log book details were never been called by the assessing officer. Therefore, the assessin....
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....owance of exempted income u/s. 14A of the Act. The action of the Assessing Officer applying Rule 8D is not correct as the provisions of Rule 8D are introduced effective from 24.03.2008 and applicable from the assessment year 2008-09 and we rely on the decision of Jurisdictional High Court in the case of Simpson and Co. Ltd. v. DCIT in Tax Case (Appeal) No. 2621 of 2006 dated 15.10.2012 and direct the Assessing Officer to disallow 2% of exempt income as disallowance u/s. 14A of the Act. This ground of the assessee is partly allowed''. Accordingly, this ground of the assessee is partly allowed in view of the above order of the Tribunal. 20. The seventh ground raised by the assessee is with regard to addition of Rs.7,95,069/- on account of difference in Arm's Length Price. 20.1 The Brief facts of the issue are that the case was referred to the Transfer Pricing Officer, for the purpose of determining the Arm's Length Price with reference to the 'international transaction carried out by the assessee with its associated enterprises during the F.Y. 2006-07 as per the provisions of sec 92C of the Act. In response to the same, the TPO passed order vide C.R.No.A-103/TPO-I/A.....
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.... ld. AR. As per the provisions of Sec. 43B of the Act certain expense are to be allowed only on the basis of actual payments. The payments falling u/sec. 43B(f) in the assessee's case are to be disallowed since they were not paid. It is also true if certain expenditure is not an allowance as per the statutes the same is true even in the case of payments applicable u/s 35(2AB), Therefore, Assessing Officer is right in making the disallowance. With regard to alternate plea taken by the appellant that the !disallowed amount may be allowed in the year in which it is paid is not acceptable since no expenditure can be allowed as allowable expenses if the same is not incurred during that year. Therefore, the alternate argument of the assessee is also not acceptable. The ld. Commissioner of Income Tax (Appeals) dismissed the ground of the assessee. Aggrieved by the order, the assessee assailed an appeal before Commissioner of Income Tax (Appeals). 21.3 We heard the rival submissions, perused the material on record. According to ld. Authorised Representative the provisions of Sec. 43B will not apply in computation of weighted deduction u/s. 35D of the Act. In our opinion, the provision of ....
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....ngs, the ld. Commissioner of Income Tax (Appeals) considered the facts and the submissions of the ld. AR and gone through the decisions relied by the ld. AR and the ld. Assessing Officer. It was held by the various courts including the Apex Court, the cession of liabilities should become the income of the assessee and the same should be brought to tax u/s 41 (1) of the-Act. The argument of the assessee that since the cessation is in respect of capital creditors therefore it should go to block of assets is not acceptable. The decision of the AO in bringing to tax such income after giving credit to the depreciation already claimed by the assessee is in order and dismissed the ground of the assessee. Aggrieved by the order, the assessee filed an appeal before Tribunal. 23.3 We heard the rival submissions, perused the material on record. The provisions of Sec. 43(1) of the Act cannot be applied in respect of capital receipts written back. The trading liability written back is only to be considered as income of the assessee in terms of Sec. 43(1) of the Act. Hence, this ground of the assessee is allowed. 24. The last ground raised by the assessee is with regard to disallowance of expe....
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....ed on by the AO clarifies the issue. The Hon'ble Delhi Bench has observed that the proposition that the DTAA will prevail over the Act is not infallible. If an amendment in the Act comes subsequent to DTAA like in the case of DTAA with USA which was entered In 20.12.90, the principle of DTAA will prevail over the Act is no relevance. Therefore, the argument of the assessee is rejected. Further, it is to be noted as admitted by the assessee that as per Explanation 4 to s. 9(1 )(vi) computers software is treated as royalty w. e. f. 1.6.76. The other line of argument of the assessee that the disallowance u/s 40(a)(i) / 40(a)(ia) will not be applicable to amount already paid but attracts only the amount payable is also not tenable. So far as TDS provisions are concerned the word 'payable' used here is more relevant. When the amount is already paid the question of making of TDS on that amount does not arise. Therefore, the legislature have deliberately used the word 'payable' in this context since these are TDS provisions. The respite is given for the situation of amount having been paid already in the form of amendment to s. 201 w.e.f. 01.07.2012 whereby no such dis....
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.... on the decision Cosmos Films Ltd (supra) where the Tribunal has allowed the claim of assessee for 50% of additional depreciation u/s. 32(i)(iia) in respect of new Plant & Machinery installed at the new eligible industrial undertaking where Plant & Machinery were put to use for less than 180 days in the year of installation and the assessee had claimed only 50% of the additional depreciation and the balance amount was claimed in the next year. Respectfully following the Tribunal decisions, we direct the Assessing Officer to allow additional depreciation claimed by the assessee. This ground of the assessee is allowed. 26.2 Accordingly, this ground of the assessee is allowed. 27. The second ground raised by the assessee is with regard to disallowance of additional depreciation on assets eligible for 100% depreciation and put to use for less than 180 days Rs.5,41,42,948/- 27.1 This issue is covered by the order of the Tribunal in assessee's own in ITA No. 2086/Mds/2010 for assessment year 2006-2007 vide order dated 16.02.2016 at para 5.4 as under:- ".4 We heard the rival submissions and perused the material on record and judicial decisions cited by the ld. Authorised Repr....
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....n as sale of spare parts to Rs.6,93,253/- and Guarantee commission Rs.99,87,682/- total aggregating to Rs.106,80,935/-. Regarding addition towards sale of spare parts, the ld. Authorised Representative submitted that the assessee is entitled for volume discount. Regarding guarantee commission it is submitted that there cannot be an TP adjustment in view of the order of Tribunal in the case of Redington India Ltd vs. ACIT 155 ITD 873 (Chennai). 30.2 We have heard both the sides. In our opinion the plea of the assessee is justified. Accordingly, we hold that the assessee is entitled for volume discount in respect of sale of spare parts. Regarding guarantee commission as it was held by the Co-ordinate Bench of the Tribunal in the case of Redington India Ltd (cited supra) that the corporate guarantee issued for benefit of AE does not involve any cost to the assessee and does not have any bearing profit, income and loss of assets of the assessee. Therefore, it was outside the ambit of international transaction to which ALP adjustment can be made. Accordingly, this ground of the assessee is allowed. 31. The sixth ground raised by the assessee is with regard to addition of capital credi....
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....on record and judicial decisions cited. The ld. Authorised Representative submitted that the assessee is in receipt of exempted income and no expenditure has been incurred for earning income. In assessee's own case the Co-ordinate Bench of Tribunal has considered 2% disallowance of exempted income u/s. 14A of the Act. The action of the Assessing Officer applying Rule 8D is not correct as the provisions of Rule 8D are introduced effective from 24.03.2008 and applicable from the assessment year 2008-09 and we rely on the decision of Jurisdictional High Court in the case of Simpson and Co. Ltd. v. DCIT in Tax Case (Appeal) No. 2621 of 2006 dated 15.10.2012 and direct the Assessing Officer to disallow 2% of exempt income as disallowance u/s. 14A of the Act. This ground of the assessee is partly allowed''. Accordingly, this ground of the Revenue is dismissed. 39. The next ground raised by the Revenue is that the ld. Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer to allow weighted deduction u/s. 35(2AB) of the Act for the entire period from 01.04.2004 to 31.03.2005 as against the allowance made by the Assessing Officer for the period from 21.09.2004....
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....otification has come into effect on 21.09.2004 but it is to be applicable for the full previous year relevant to assessment year 2005-2006. Accordingly, we confirm the findings of the ld. Commissioner of Income Tax (Appeals) on this issue. This ground of the Revenue is dismissed. 40. The next ground raised by the Revenue is that the ld. Commissioner of Income Tax (Appeals) erred in deleting the addition made on account of disallowance of warranty provision of Rs.2,27,00,000/-. 40.1 In the assessment proceedings, the ld. Assessing Officer stated that the warranty claim consists of two components namely warranty cost of Rs. 30,59,71,000/- and provisions of Rs.2,27,00,000/-. Relying on the decision of the Hon'ble Madras High Court in the case of M/s Rotork Control India Ltd & Others (293 ITR 311), the ld. Assessing Officer has denied the benefit. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 40.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the facts of the case, submissions of the ld.AR and gone through the decisions relied on by the Id.AR and the AO. The AO disallowed the provisi....
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....ring the apparent facts, we confirm the disallowance of the Assessing Officer and dismiss the assessee ground''. Accordingly, this ground of the Revenue is allowed. 41.3 In the result, the appeal of the Revenue in ITA No. 2825/Mds/2014 of assessment year 2005-06 is partly allowed for statistical purpose. 42. ITA No. 2826/Mds/2014 of assessment year 2006-2007:- The first ground raised by the Revenue is that the ld. CIT (A) erred in directing the Assessing Officer to verify and allow the additional depreciation on the computer system installed in the factory premises without appreciating the fact that the computer system is entitle for higher depreciation @ 60% and cannot be considered as the part of the plant and machinery for claiming additional depreciation. 42.1 We heard the rival submissions and perused the material on records. We are of the opinion that this issue came for consideration before this Tribunal in assessee's own case for the assessment year 2006-07 in ITA No. 2086/Mds/2010, dated 16.2.2006 wherein it was observed at para 6.4 as under:- "6.4 We heard the rival submissions and perused the material on record and judicial decisions cited. Prime fa....
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....e is not included in Chapter XII of the Act, then it has to be taxed at the normal rates. Assessee's plea is not that the income is exempt from tax. The conversion of FCCN to shares has resulted in an income to the non-resident and can be seen as an "other income" envisaged in section 195 of the I. T Act. The assessee should have disallowed tax u/s. 195 which it has failed to do. Hence, the amount of Rs.42,26,91,504/- is an expenditure attracting provisions of section 40(a)(i) of the I. T Act and ld. Assessing Officer added to the returned income. Aggrieved by the order, the assessee filed an appeal before Commissioner of Income Tax (Appeals). 43.2 In the appellate proceedings, the ld. Commissioner of Income Tax (Appeals) considered the facts of the case and the submissions of the ld. AR. The AO has disallowed the amount of Rs. 42.26 crores u/s 40(a)(i) for not subjecting the amount for TDS. This is the amount of increase in asset value to the non-residents on conversion of FCCN to shares and the resultant conversion to Indian rupee. The AO has taken such benefit to the non-residents on the accrual basis. Opposing the action of the AO, the assessee has contended that ther....
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....sessing Officer applying Rule 8D is not correct as the provisions of Rule 8D are introduced effective from 24.03.2008 and applicable from the assessment year 2008-09 and we rely on the decision of Jurisdictional High Court in the case of Simpson and Co. Ltd. v. DCIT in Tax Case (Appeal) No. 2621 of 2006 dated 15.10.2012 and direct the Assessing Officer to disallow 2% of exempt income as disallowance u/s. 14A of the Act. This ground of the assessee is partly allowed''. Accordingly, we confirm the order of the Commissioner of Income Tax (Appeals). The ground of the Revenue is dismissed. 46. The next ground raised by the Revenue is that the ld. Commissioner of Income Tax (Appeals) failed to appreciate that the wealth tax paid in respect of business assets is not a allowable expenditure even as per the explanation to section 40(a)(iia) of I. T. Act. 46.1 We heard the rival submissions, perused the material on record. Similar issue came for our consideration in assessee's own case in ITA No. 2086/Mds/2010 for assessment year 2006-07, vide order dated 16.02.2016 wherein held it was held that Wealth Tax liability is not business expenditure. Accordingly, this ground of the R....