Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2019 (7) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2019 (7) TMI 1567 - AT - Income TaxDisallowance u/s 14A r.w. Rule 8D - CIT(A) deleted the disallowance made towards interest expenditure under Rule 8D(2)(ii) of the IT Rules and restricted the disallowance on administrative expenditure - HELD THAT:- As pointed out by the assessee before the CIT(A) that interest free funds in the form of share capital and reserves & surplus stands at ₹ 235.34 Crores which is in excess of the investments of ₹ 227.91 Crores made by it. It was also demonstrated that the significant investments were made in the earlier years out of its own interest free resources. The CIT(A) after taking note of the various facts as reproduced above came to the conclusion for non applicability of Rule 8D(2)(ii). No substantive fallacy has been pointed out on behalf of the Revenue in the action of the CIT(A) except placing reliance upon the order of the AO. We find that the action of the CIT(A) is in tune with law and judicial precedents. Without repeating the contents of the CIT(A), we endorse the same. Applicability of Rule 8D(2)(iii) - No merit in the plea of the Revenue for applicability of Rule 8D(2)(iii) where the specification of the nature of the expenditure is available and such expenditure can be reasonably identified toward revenue from taxable operations and revenue from income which is exempt. We however find substance in the plea of the assessee partially. ₹ 61,565/- on account of insurance expenses has not apparent connection with the investment giving rise to tax free income. Thus, such expenses cannot find part of disallowance u/s 14A - The claim of personnel expenses disputed by the assessee to be attributable to collection of rent only is however without any cogent evidence. The assessee is engaged in the multiple business viz. trading of commodities, deriving rent income and also generating exempt income. Having regard to the various stream of income generated by the assessee, the personnel expenses, to our mind, can be fairly estimated to be 1/3rd of the total costs. The assessee thus gets relief of ₹ 11,33,744/- on this score. The total relief thus works out to ₹ 11,95,309/- against the disallowance of ₹ 19,49,768/- confirmed by the CIT(A). Adjustment made under clause (f) to Section 115JB shall be reduced by the AO in line with the disallowance sustained under the normal provisions - The claim of the assessee that no adjustment is called for while computing book profit is violative of Explanation 1(f) referred to Section 115JB of the Act and thus cannot entertained. No blanket exemption can read in the special bench decision in Vireet’s case [2017 (6) TMI 1124 - ITAT DELHI] in this regard. Ground No.2 of Cross Objection is thus partly allowed. Disallowance of legal expenditure - HELD THAT:- Payment made to ELP for obtaining search report for acquisition of shares is towards new capital investment and which cannot give Appellant any benefit of revenue in nature. By making such investment, Appellant is not going to earn any revenue receipt hence such expenditure is capital expenditure and addition made by Assessing Officer to that extent is upheld. Balance payment it is for retainership wherein Appellant can obtain legal advice as and when required for direct tax, indirect tax or any other legal matter. The said amount is payable every year and recurring in nature and same does not give Appellant any enduring benefit. By obtaining such services, Appellant can obtain legal assistance on day-to-day basis and as per provisions of Section 37(1) of the Act; it is revenue expenditure and not capital expenditure. Thus, addition made by Assessing Officer is restricted to ₹ 1,10,300/-. This ground of appeal is partly allowed. Professional fees component - HELD THAT:- CIT(A) has observed that such expenditure has been incurred for legal assistance taken by the assessee on day-to-day basis for the purposes of business. Such expenditure in our view has been rightly treated as revenue expenditure by the CIT(A). The Ground No.2 of the Revenue’s appeal thus is without any merit. Expenses towards professional fees for search report for acquisition of Delhi Golf Link Properties Pvt. Ltd., - HELD THAT:- CIT(A) observed that the aforesaid expenditure is towards acquisition of new capital investment. This being so, the CIT(A) has rightly treated the same to be capital expenditure. Disallowance towards belated employees’ contribution to PF and ESIC u/s 36(1)(va) - HELD THAT:- CIT(A) has rightly concluded the issue against the assessee in the light of the decision of the Hon’ble Gujarat High Court in the case of Gujarat State Road Transport Corporation [2014 (1) TMI 502 - GUJARAT HIGH COURT] . We thus see no merit in Ground No.3 of the cross objection raised on behalf of the assessee. Disallowance of legal expenditure treated as capital expenditure - HELD THAT:-
|