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2016 (11) TMI 1669 - ITAT CHENNAINature of expenditure - expenditure towards construction of compound wall, store room, underground sewage, design charges and temporary repairs to the building - revenue or capital expenditure - AO treated the expenditure as capital in nature and allowed depreciation at the rate of 10% - HELD THAT:- Admittedly, the assessee incurred expenditure for construction of compound wall, watch tower, godown, underground drainage, etc. This Tribunal is of the considered opinion that the assessee has constructed compound wall, sewage drain, godown, etc. for permanent use in the business. It cannot be said that the infrastructures created by the assessee are for temporary use of the assessee. Therefore, the Assessing Officer has rightly treated the expenditure as capital in nature and allowed depreciation at the rate of 10%. This Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed. Disallowance u/s 14A r.w.r. 8D - Whether there was no direct expenditure under first limb of Rule 8D(2)? - Referring to limb (ii) of Rule 8D(2), the Assessing Officer found that under Rule 8D(2), disallowance was made - HELD THAT:- For the purpose of limb (ii), the Assessing Officer has to compute the disallowance by following the method prescribed under Rule 8D(2)(ii). Similarly, for the purpose of limb (iii), the Assessing Officer has to take 0.5% of the average of value of investment which resulted in income which would not form part of total income. Therefore, for the purpose of limb (iii) alone, the disallowance cannot be extended beyond the income which does not form part of total income. Rule 8D(2) provides disallowance of average of all the three limbs therein. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.
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