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2015 (6) TMI 722 - AT - Income TaxTreatment to Agricultural income - CIT(A) held that the expenditure incurred for earning agricultural income has to be set off against the income from agricultural operations and the resultant loss from agricultural operations was treated as the net disallowance u/s 14A - Held that:- The finding recorded by the ld. CIT(A) has not been controverted by the ld. D.R. by bringing any positive material on record, we, therefore, find no reason to interfere with the findings recorded by the ld. CIT(A) holding that the assessee had earned agricultural income of ₹ 8,01,175/-. With regard to lease rent expenditure of ₹ 26,59,140/- incurred by the assessee, the ld. CIT(A) has disallowed the same on the plea that the expenditure was incurred for earning exempt income. We also find that the lease rent was paid to the directors of the assessee company for leasing the lands to the assessee which deserves to be disallowed u/s 14A of the Act to the extend attributable to earning of exempt income. Revenue ground with regard to additional evidence accepted by the ld. CIT(A) without giving opportunity to the A.O is not acceptable as the A.O. has not given sufficient opportunity to the assessee, insofar as the documents were asked at the fag end of the assessment proceedings, therefore, the assessee could not furnish the same before the A.O. These documents were filed before the ld. CIT(A) who has sent all these documents to the A.O. for his remand report. The A.O. has examined all these documents and sends his remand report. Accordingly, there is no violation of Rule 46A.- Decided against revenue. Disallowance u/s 40(a)(ia) - assessee did not comply with the TDS provisions - expenditure incurred on ship management fees - CIT(A) deleted the addition - Held that:- A.O. has himself certified that the assessee company has complied with the applicable TDS provisions in respect of the expenditure amounting to ₹ 60.42 crores which were genuine and there was no contravention of TDS provisions while making payment for such expenses, we do not find any infirmity in the order of ld. CIT(A). We accordingly do not find any reason to interfere with the finding of ld. CIT(A) deleting the disallowance of expenses incurred on ship management.- Decided against revenue. Disallowance of losses from activity of horse breeding and owning and maintaining race horses - CIT(A) partly allowed the assessee’s claim - Held that:- The activity of breeding of horses is similar to that of poultry or piggeries etc. where the animals are bred for the purpose of selling. Section 74A is not applicable for such breeding activity. The ld. CIT(A) also found that during the remand proceedings, the A.O. reported that income and expenditure pertaining to breeding activity and racing activity were found to be captured under two different accounting codes in respect of both the assessment years. The ld. CIT (A) also found that an amount of ₹ 1.94 crores is recovered on account of livery expenses from other horse owners, who have utilized the stables and other services of the stud farm of the assessee. After considering the remand report and corroborative evidences filed before him, the ld. CIT(A) reached to the conclusion that only the business loss in respect of horse breeding activity amounting to ₹ 1,89,92,554/- was liable to be set off against business income whereas loss of ₹ 1,18,63,894/- is from horse racing activity not eligible for set off against business income in view of provisions of section 74A of the Act. The findings recorded by the ld. CIT(A) are as per material on record, thus we do not find any reason to interfere in the findings of ld. CIT(A) and accordingly we confirm the same. - Decided against revenue. Disallowance of lease rent paid to the directors of the company - Held that:- the assessee company paid lease rent to the directors. The lease rent was paid in respect of land used for agricultural income which is exempt. Since the expenditure was incurred for earning exempt income, the ld. CIT(A) has correctly disallowed the claim u/s 14A of the Act. Accordingly, the additional ground raised by the assessee is dismissed.
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