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2018 (9) TMI 624 - AT - Income TaxDisallowance of legal and professional fees - nature of expenses - capital or revenue expenditure - Held that:- No infirmity in the order of learned CIT (A) who has held that legal and professional expenditure incurred by the assessee were incurred in relation to construction of a building is a capital expenditure, which was not used for the purpose of the business during the year under consideration. The assessee during appellate proceedings have admitted for allowance of depreciation on the above amount therefore it is apparent that the expenditure incurred by the assessee in the form of legal and professional fees paid to an architect is for the purpose of construction of building and is capital in nature. Before the lower authorities, assessee could not show that how the architect fee paid is not a capital expenditure. - decided against assessee TDS u/s 194A - Disallowance u/s 40(a)(ia) - advertisement and interest expenditure on which tax has not been deducted at source - Held that:- Mr. Lakhani borrowed the sum, from bank it was deposited with the company, and interest was paid by assessee to Mr. PD Lakhani however, on behalf of Mr. PD Lakhani the assessee paid same amount to the loan account of Mr. PD Lakhani with the bank. Merely because the same amount has been deposited by the assessee in the bank account of the lender to the assessee but borrower of the bank does not make any difference as assessee has incurred an interest expenditure of ₹ 1 575000/– on which tax was required to be deducted u/s 194A of the act. In view of this, we do not find any infirmity in the order of the learned CIT (A) in confirming the above disallowance. With respect to the advertisement expenditure assessee could not give any explanation why tax has not been deducted on the same amount therefore in absence of any explanation disallowance require to be confirmed - decided against assessee Disallowance u/s 14A - Held that:- No doubt, the assessee may have made the investment in order to gain control of the investee company. However, that does not appear to be a relevant factor in determining the issue at hand. Fact remains that such dividend income is non-taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of the expenditure, which is attributable to the dividend income, has to be disallowed and cannot be treated as business expenditure. Keeping this objective behind section 14A in mind, the said provision has to be interpreted, particularly, the word 'in relation to the income' that does not form part of total income. Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle, which is engrained in section 14A - we reject the contention raised by the assessee before the lower authorities and confirm the finding of the learned CIT (Appeals) in confirming the disallowance on account of expenditure at the rate of 0.5% of average value of investment on investments u/s 14A - Decided against assessee
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