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2013 (11) TMI 278 - AT - Income TaxNature of expenditure - revenue or capital - expenditure incurred during the construction - capital work-in-progress - extension of the existing business. - Held that:- Even the Assessing Officer has not mentioned as to what is the new project established by the assessee. If there is an expansion of existing business or increase in the capacity of the existing plant, then the expenditure incurred thereon, has to be treated as revenue expenditure as held by the Tribunal in assessee’s own case in the last several years. - matter remanded back for re-examination. Interest u/s 234B - Held that:- no interest under section 234B can be levied on account of such retrospective amendment in section 115JB Disallowance of leave of encashment expenses u/s 43B - Held that:- matter remanded back to AO for re-adjudication. Disallowance u/s 40(a)(ia) – Non-deduction on TDS on interest – Held that:- CBDT has examined the receipt of interest as per the provisions of section 10(15)(iv)(c) of the Act. Therefore, where the utilization is for purchase outside India of raw material, components or Plant & Machinery, so long as exemption granted is valid, the interest received by the other party is not covered by the IT Act and by virtue of exemption granted by the Central Govt., the question of TDS on the above amount does not arise at all. Since there is no requirement of TDS, question of disallowance under section 40(a)(ia) for non deduction of tax also does not arise - Once the interest income is not taxable in the hands of the recipient and was exempted by the Government of India, then there is no question of TDS on the interest paid and consequently, no disallowance under section 40(a)(i) is called for. Disallowance of depreciation, consequent to adjustments made by AO reducing the cost of plant & machinery to the extent of waiver of amounts, since the borrowed fund was utilized for acquisition of plant and machinery - Assessee company has taken long term advances from a foreign customer, CMC Trading AG, Switzerland in an earlier year. The advance was to be repaid through export of steel manufactured by the company and the outstanding advance was subject to interest payment by the company. These advances were funded by the foreign banks and therefore CMC has assigned all the rights arising out of the above contracts to these banks – Held that:- Reliance has been placed upon the decision of the Coordinate Bench in the case of Akzo Nobel Coatings India (P.) Ltd. vs. DCIT (LTU), Bangalore [2013 (1) TMI 311 - ITAT BANGALORE] - Disallowance of depreciation cannot be sustained - Assessee on the one hand gets the waiver of monies payable on purchase of machinery and claims such receipt as not taxable because it is capital receipt. On the other hand the assessee claims depreciation on the value of the machinery for which it did not incur any cost. Thus, the assessee stand to benefit both ways. As per the law as it prevails as on date, it is held that the revenue is without any remedy – Decided in favor of Assessee. Applicability of Rule 8D, read with section 14A of the Income Tax Act – Held that:- Rule 8D cannot be made applicable prior to the assessment year 2008-09 – Reliance has been placed upon the judgment in the case of Godrej & Boyce Mfg. Co. Ltd. v/s DCIT,[2010 (8) TMI 77 - BOMBAY HIGH COURT].
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