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2013 (11) TMI 773 - AT - Income TaxCapital expenditure or revenue expenditure - Corporate Debt Restructuring expenses - Held that:- Expenditure incurred should be allowed proportionately during the period during which the assessee will continue to get the benefit in respect of reduction in interest liability because of restructuring. Therefore, we hold that the impugned expenditure is not capital expenditure but revenue expenditure but the same should be allowed proportionately during the period during which the assessee will get benefit in the present year as well in future in the light of this judgement of Hon’ble Apex Court rendered in the case of Madras Industrial Development Corporation Ltd. (1997 (4) TMI 5 - SUPREME Court) and hence, we set aside the order of Ld. CIT(A) on this issue and restore the matter back to the file of the A.O. for a fresh decision in the light of above discussion after providing adequate opportunity to the assessee. - Decided against Revenue. Disallowance of provisions for 'take or pay rental' charges - ascertained liability or not - Held that:- Payment on account of shortfall in quantity can be offset within any of the five subsequent years against excess quantity which may be lifted by GCPTCL and, therefore, the liability to pay in respect of shortfall in quantity will crystallize only after the lapse of five years and till then, even if this amount is paid, it is in the nature of advance payment only and not an expenditure incurred. Under this factual position, we do not find any merit in the main contention of the assessee and therefore, the same is rejected. Regarding the alternative contention, we find force in the submission of the Ld. A.R. because once the liability is disallowed in the present year, no income is taxable in the subsequent year when the amount is credited in the P & L account by writing back the liability already disallowed. Hence, the A.O. is directed to verify this aspect in the next year and if it is found that on the write back of this liability in the next year, any amount was taxed then to this extent, income should be reduced in such next year - Decided partly in favour of Revenue. Disallowance of interest to UTI - Contigent liability - Held that:- UTI has not agreed with the CDR package regarding payment of lower rate of interest ultimately, the assessee had to pay agreed rate of interest, without any benefit from the CDR package. Under these facts, it cannot be said that liability has not accrued and not crystallized. Hence, this disallowance is deleted - Decided against Revenue. The A.O. should verify the fact as to whether the amount of Rs.95.54 lacs debited by the assessee in the present year is the proportionate amount of Rs.1886.82 lacs paid by the assessee in assessment year 1999-2000 for 20 years and whether any deduction was allowed in that year and subsequent years on this basis that the same is deferred revenue expenditure. He should also verify this aspect as to whether this issue was decided by the Tribunal or by Ld. CIT(A) against the assessee in any earlier year as has been noted by Ld. CIT(A) in the present year. After verifying all these facts and after providing reasonable opportunity of being heard to the assessee, the A.O. should pass necessary order as per law. Disallowance u/s 14A - Nexus between the investment and interest bearing borrowed funds - Held that:- Since the own funds of the assessee are much more than the investment and there is no nexus established by the A.O. between the investment and interest bearing borrowed funds, it cannot be said that any interest expenditure is incurred by the assessee for earning exempt dividend income and hence, no disallowance can be made u/s 14A out of interest expenditure. Regarding other expenditure, it cannot be said that there is no expenditure incurred by the assessee at all for earning dividend income because admittedly, the assessee was holding these investments in Dmat account and, therefore, there must be some expenditure incurred in respect of such Dmat account. Normally, we restore this type of matter to the file of the A.O. for deciding the disallowance of expenditure on a reasonable basis but in the facts of the present case, considering the smallness of the mount, we feel that this will be a futile exercise and hence, we hold that a disallowance of Rs.50,000/- will meet the ends of justice - Decided partly in favour of Revenue.
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