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2024 (1) TMI 1000 - AT - Income TaxCorrect head of income - income earned out of sale of property - business income or capital gains - DR has submitted that the assessee has not filed any details as to when the asset was converted into stock-in-trade, therefore, AO has treated income as business income - HELD THAT:- We find that the assessee has not filed any details before the Assessing Officer or ld. CIT(A) or even before the Tribunal as to when the asset was converted into stock-in-trade. Therefore, the assessee has furnish the details, such as how long the asset was treated as long term capital gain and when the assessee has converted the property into stock-in-trade and accordingly up to conversion of the property, the AO has to treat it as capital asset and after conversion of the property, it has to be treated as business asset. In this case, neither the assessee nor the AO properly computed the property of the assessee. Thus, we set aside the orders of the ld. CIT(A) on this issue and remit the matter back to the file of the Assessing Officer to examine and compute the property u/s 45(2) of the Act keeping in view of the above observation and decide the issue afresh in accordance with law after affording reasonable opportunity of being heard to the assessee. Thus, the ground raised by assessee is allowed for statistical purposes for all the assessment years under appeal. Disallowance u/s 14A - contention of the assessee is that the disallowance made u/s 14A should not be in excess of the exempted income of the relevant assessment years - HELD THAT:- By referring to various case law including the decision in the case of Joint Investments Private Ltd. [2015 (3) TMI 155 - DELHI HIGH COURT], the decision in the case of Maxopp Investment Ltd. [2018 (3) TMI 805 - SUPREME COURT] the Hon’ble Madras High Court has held that the disallowance u/s 14A of the Act should be restricted to the extent of exempt income earned during the previous year. Respectfully following the judgement of Envestor Venture Ltd. [2021 (1) TMI 922 - MADRAS HIGH COURT] we direct the Assessing Officer to restrict the disallowance to the extent of exempted income earned by the assessee. Thus, the ground raised by the assessee is allowed. Disallowance made u/s 14A of the Act when the assessee has not earned any dividend income from investments made in earlier years - In this circumstances, in the case of CIT v. Chettinad Logistics (P) Ltd. [2017 (4) TMI 298 - MADRAS HIGH COURT] the Hon’ble Jurisdictional High Court has observed and held that when there was no dividend income earned in the relevant assessment year, the disallowance made by the Assessing Officer in view of the provisions of section 14A of the Act read with Rule 8D was completely contrary to the provisions of that section as Rule 8D only provides for a method to determine the amount of expenditure incurred in relation to income, which does not form part of total income of the assessee. Against the decision of the Hon’ble High Court, the Department preferred Special leave Petition, which was dismissed by the Hon’ble Supreme Court M/S CHETTINAD LOGISTICS PVT. LTD. [2018 (7) TMI 567 - SC ORDER]. In view of the above decision in the case of CIT v. Chettinad Logistics (P) Ltd. (supra), the disallowance made by the Assessing Officer stands deleted. Nature of expenses - Disallowance of fee paid to ROC - whether the fees paid to Registrar of Companies for enhancing the working capital of the company should be treated as revenue expenditure or capital expenditure? - HELD THAT:- We have perused the order of Punjab State Industrial Development Corporation Limited [1996 (12) TMI 6 - SUPREME COURT] wherein, as held that “the fee paid to the Registrar for expansion of the capital base of the company was directly related to capital expenditure incurred by the company and although incidentally that would certainly help in the business of the company and may also help in profit making, it still retains the character of capital expenditure since the expenditure was directly related to the expansion of capital base of the company and thus it was not an expense in the nature of revenue”. Respectfully following the above CIT(A) has rightly confirmed the disallowance made by the AO and dismissed the ground raised by the assessee. Thus, we find no infirmity in the order passed by the ld. CIT(A). The ground raised by the assessee is dismissed.
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