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2013 (8) TMI 361 - AT - Income TaxCapital expenditure or Revenue expenditure - Demutualization expenses - CIT treated expenses as capital in nature - Held that:- If expenditure may help in the business of the assessee company and may also help in profit making but since the expenditure was directly related to the expansion of the capital base of the company, the same is capital expenditure - The dilution of 51% of shares of the assessee company to outsiders was achieved by resorting to further issues of share capital to outsiders and hence, this is correct that the expenditure is directly related to expansion of the capital base of the company. It is true that such expansion of the capital base of the company was required to fulfill the requirements of SEBI but still the fact remains that the expenditure has resulted into expansion of the capital base of the assessee company - Following decisions of Brooke Bond India Limited Versus Commissioner Of Income-Tax, West Bengal III [1981 (8) TMI 27 - CALCUTTA High Court] and Punjab State Industrial Development Corporation Limited Versus Commissioner of Income-Tax [1996 (12) TMI 6 - SUPREME Court] - Decided against assessee. Disallowance u/s 14A - CIT confirmed disallowance - Held that:- AO has stated in the assessment order that he is not satisfied with the correctness of the claim of the assessee in respect of expenditure, in respect of exempt income - Because of movement or otherwise in the investments of the assessee company as per which investment in three mutual funds were sold, one such investment was retained and two such investment were increased, it is clear that sufficient time was devoted by the top management of the assessee company to monitor the investment and therefore, it is not acceptable that no expenditure was incurred by the assessee company for earning dividend income. Once it is found that the claim of the assessee is not correct regarding not incurring of expenditure for earning dividend income or any other exempt income, Rule 8D has to be applied and the AO had done the same - Following decision of DCIT Vs. Ashish Jhunjhunwala [2013 (6) TMI 545 - ITAT KOLKATA] - Decided against assessee.
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