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2015 (6) TMI 1084 - AT - Income TaxAllowability of FCB issue expenses - Held that:- CIT(A) granted relief to the assessee relying on the binding Hon'ble Supreme Court’s decision in the case of India Cements Ltd vs CIT [1965 (12) TMI 22 - SUPREME Court ], which is relevant for the proposition that the expenditure incurred for obtaining the loan is meant for securing the use of money for a certain period and is always treated as revenue expenditure irrespective of the purpose for which the funds are raised. The expenses which are incurred for obtaining the loan is a revenue expenditure and the Hon'ble Madras High Court judgment in the case of South India Corporation (Agencies) Ltd [2006 (8) TMI 153 - MADRAS High Court], is relevant. Disallowance of preference share issue expenses u/s 35D - Held that:- In view of the decision of the Hon'ble ITAT for A.Y.2006-07, it is clear that the assessee was not eligible for deduction u/s 35D for A.Y 2006-07. However, the appellant has completed the refurbishment and installation works during the previous year relevant to the subject assessment year. In fact, the rig was surveyed by the American Bureau of Shipping on 27.05.2006 and certificate of classification was also issued on 26.06.2006. Hence, the appellant is eligible for deduction in respect of the Rig Aban VII which is complete in all respects. The appellant had also been awarded a contract to drill in the East Coast of India by Hindustan Oil Exploration Ltd. Accordingly, the appellant got the rig moving from Texas Shipyard towards India. The fact that it was sold subsequently to a different company would not blot out the factum of completion of extension of the industrial undertaking of the appellant. Hence, I am of the considered opinion that the appellant is eligible for deduction u/s 350 in respect of the total expenditure incurred towards share issue. Disallowance u/s 14A - Held that:- We are of the opinion that the Revenue has brought nothing on record to say that the provisions of Rule 8D are applicable to the year under consideration and the said disallowance of 5% of the exempt income is on the lower side. Further, the Hon'ble Bombay High Court in the case of Godrej Agrovet [2014 (8) TMI 457 - BOMBAY HIGH COURT ] has approved 2% disallowance of the exempt income for the years prior to assessment year 2008-09. Therefore, the findings of the CIT(A) is fair and reasonable and does not call for any interference. Disallowance u/s 40(a)(i) on payments made to non-residents - Held that:- Bombay High Court judgment in the case of DIT vs Ishikawjima Harima Heavy Inds. Co. Ltd, [2013 (1) TMI 214 - BOMBAY HIGH COURT] the impugned payments are neither royalty nor FTS and therefore, not taxable in India. The said judgment was delivered prior to the aforementioned amendment to section 9(1) of the Act. The Assessing Officer is directed to pass a speaking order on this issue after considering the above decision and after granting reasonable opportunity of being heard to the assessee as per the principles of natural justice. Accordingly, this ground is allowed for statistical purposes.
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