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2014 (1) TMI 544 - AT - Income TaxDisallowance of amortization expenses u/s 35D of the Act Expenditure incurred on FCCB bonds Held that:- If the expenditure has been incurred for the purpose of business of the assessee and if it is not in the nature of capital expenditure or personal expenditure, the same is allowable under Section 37 - Merely because in the accounts the assessee has set off all these expenditure against the share premium or assessee has not debited any amount in its profit and loss will not prevent the assessee to claim expenditure which is otherwise allowable under the Income tax Act - If Section 35D is applicable to the instant case, expenditure on issue of debentures which is otherwise allowable u/s 37, will be allowable in full and the expenditure need not be amortised Relying upon CIT Vs East India Hotel [2001 (8) TMI 102 - CALCUTTA High Court] and CIT Vs Thirani Chemicals Ltd 2005 (12) TMI 86 - DELHI High Court] - expenditure on issue of bonds allowable under Section 37 Decided in favour of Assessee. Disallowance of loss on account of foreign exchange fluctuation Held that:- Profit and loss arising on exchange fluctuation in respect of loan taken will constitute capital or revenue expenditure depending on the purpose for which the loan has been utilized Following ONGC Vs CIT [2010 (3) TMI 81 - SUPREME COURT] - loss on exchange fluctuation in respect of loans acquired for revenue purpose is an allowable deduction matter remitted back to the AO Decided in favour of Assessee. Exclusion of Annual Maintenance Charges u/s 80IB of the Act Held that:- The decision of the AO and the CIT(A) upheld - AMC is a separate stream of income and is not connected to the main activities of manufacture and sale of goods by the assessee - This service is rendered after the sale of goods has been completed - The AMC services can be provided independent of the sales also thus, providing Annual maintenance Services cannot be considered as connected in the first degree with the activity of manufacture and sale of goods - Section 80IB is available only for profit derived from business of manufacture of goods and therefore it is not applicable to income derived from any ancillary activities/ services Thus, AMC charges should be excluded for the purpose of computing relief under Section 80IB Decided against Assessee. Disallowance u/s 14A of the Act Indirect interest expenditure Held that:- The entire borrowals on which interest expenditure has been incurred has been applied for the purpose of the business, then no part of the borrowals can be taken to be indirectly applied for investments - if the entirety of borrowals can be established to have been utilised for the purpose of business and therefore could not have been used for the purpose of investment, then there can be disallowance even in respect of indirect interest expenditure - This point has not been examined by the lower authorities Thus, the matter remitted back to the AO for fresh adjudication Decided in favour of Assessee.
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