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2014 (12) TMI 601 - AT - Income TaxDeletion of 10% of total manufacturing, trading and other expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee had furnished item wise details of the trading division along with vouchers for purchase - The details furnished by the assessee as per the CIT (A) direction was forwarded to the AO for his comments - the AO did not raise any objection to the assessee’s case on merits but technical objections were raised by placing reliance on Rule 46A of the I.T. Rules, 1962 - the books of account were accepted by the AO and no adverse inference in maintenance was pointed out - the gross margin was worked out on the basis of books of account which were duly audited and accepted as correct and complete - The gross profit with regard to sale and purchase of goods in the trading division was at rate of 31.57% and there were various in direct expenses in the nature of high rental for retail outlets in prominent location - This had pushed down the net profit rate - CIT (A) rightly held that gross profit earned from the trading division of the assessee is reasonable and has also examined the vouchers of purchase and sale of goods made by the assessee on a sample basis and has found it to be correct – Decided against revenue. Deletion made u/s 14A r.w. Rule 8D – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the assessee had acquired the land at Ballabgarh in the year 1979 on which factory building was constructed and, accordingly, capitalized in the books on the year ending 31.3.1981 - repair expenses at the factory building only facilitated smooth functioning of the existing operations carried out at the factory – the expenditure cannot be to be capital in nature - an expenditure incurred on repair of building for the purposes of business, which is not capital in nature is allowable deduction under section 30 or 37(1) of the Act – as decided in CIT v. Sarvana Spinning Mills P. Ltd. [2007 (8) TMI 16 - SUPREME COURT OF INDIA] has held that if a repair expenditure does not fall within the meaning of ‘current repair’ u/s 30, but does not result in acquisition of any new capital asset, can be allowed as revenue expenditure under the residuary provision of section 37(1) – Decided against revenue. Notional administrative expenses u/s 14A disallowed – Held that:- The total administrative expenses was to the tune of ₹ 21.53 crores, in which, the disallowance was restricted by the CIT (A) was only to the extent of ₹ 3.58 lakhs being salary paid to Sri Sunil Harsh - no portion of the administrative and interest expenses can be disallowed - since the expenditure incurred had no direct relation with the earning of exempt income, it is only salary paid to the aforesaid persons which can be disallowed, if at all, on some reasonable basis’ - since the assessee itself had admitted that Sri Sunil Harsh was responsible for looking after the financial matter, such as raising of funds, investment in share, bond and mutual fund and that when a person was directly responsible to looking after and taking care of investment, it was only natural that the salary of Sri Sunil Harsh was part of administrative expenses which had direct bearing to the earning of exempt income, namely, dividend income - CIT (A) was justified in disallowing the sum of ₹ 3.58 lakhs being salary paid to Sri Sunil Harsh under rule 8D(2)(iii) – Decided against assessee. Consultancy expenses disallowed – Held that:- The assessee being a promoter of Eicher Limited and with a view to acquire full control over of the company, decided to acquire the shares of Eicher Limited from public shareholders and to delist the same from Stock Exchanges - the acquisition of shares in its subsidiary company [Eicher Limited] was to strengthen its controlling interest in that company in furtherance of its business only - interest expenditure incurred on borrowed funds utilized for acquiring controlling interest in companies would be allowable business deduction since the acquisition of controlling interest in a company is in furtherance of the business purposes of the assessee - the consultancy expenses incurred by the assessee with a view to acquire the shares of Eicher Limited from the public shareholders to establish its holding in that company has to be regarded as being incurred for the purpose of its business only which is allowable deduction u/s 37(1) of the Act – Decided in favour of assessee.
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