TMI Blog2012 (11) TMI 59X X X X Extracts X X X X X X X X Extracts X X X X ..... it was not examined earlier - matter remitted back to the file of A.O. for its verification and to decide it as per law - in favour of assessee for statistical purposes. Contribution of sponsorship expenses for the construction of Mehasul Bhavan (Collector Office) - Revenue v/s capital - Held that:- As decided in Shri Venkata Satyanarayana Rice Mill Contractors Co. vs. CIT [1996 (10) TMI 2 - SUPREME COURT] any contribution made to the welfare fund was not opposed to public policy and that the same was motivated purely by commercial consideration, and that the deduction was allowable under section 37(1) - as in the present case assessee has paid Rs.20 lakhs for construction of Mehsul Bhavan but the assessee is not the owner of the Asset and has also not acquired any capital asset. The expenses have been incurred for the purpose of business, thus to be allowed as revenue expenditure - in favour of assessee. Write off of obsolete meters - CIT(A) deleted the disallowance - Held that:- The assessee has explained that the three phase electro meters were lying idle since long in the inventory & were was found that they were susceptible to tempering by the customers. The assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... exempt income cannot be ruled out. Considering the volume of share transactions he disallowed the expenditure of 1.15% (1.5% of Rs. 5,26,02,435/-) i.e. Rs.7,89,000/-. He also disallowed interest of Rs. 2,79,851/-. Thus he made aggregate disallowance u/s.14A of Rs.10,68,851/-. 5. Aggrieved by the order of A.O. assessee preferred appeal before the CIT (A). 6. CIT (A), relying on the decision of ITAT Chennai Bench in the case of Southern Petro Chemicals Inds. Vs. CIT 93 TTJ 161, held that proportionate management expenses are required to be deducted for computing dividend income. Further, relying on the decision of Rhythm Exports (Pvt.) Ltd., v/s ITO 12 SOT, 429 (Mum.), where it was held that the expenditure incurred in relation to earning income which is exempt should be taken out and in case the assessee fails to do so A.O. has no option but to take the same on proportionate basis. Following the aforesaid decisions he upheld the order of A.O. 7. Aggrieved by the order of CIT (A), assessee is now in appeal before us. 8. Before us the Ld. A.R. submitted that sub-section 2 and 3 was inserted to sec. 14A by the Finance Act, 2007 w.e.f. 1-4-2007. It was further submitted that su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of Hon ble Delhi High Court we are of the view that no disallowance with respect to administrative expenses can be made in the present case. We thus delete the disallowance. 12. The third ground of the assessee is with respect to the inter-corporate deposit (ICD) write off of Rs.75 lakhs. 13. The assessee had placed inter-corporate deposit (ICD) of Rs.1 crore with M/s. M.S. Shoes Ltd. in F.Y. 1993-94. The said company is stated to have defaulted in payment of principal as well as interest from F.Y. 1994- 95. Accordingly the assessee filed Recovery Suit in Delhi High Court. The assessee had written off this amount as bad debt in A.Y.1997-98, as the recovery suit was pending. However, during the year 2003-04, the assessee stated that they reached a settlement with the said company and recovered Rs.25 lakhs in full and final settlement against the claim. The claim of the assessee was rejected by the A.O. for the reason that the assessee had financed money as inter-corporate deposit to a company. According to A.O. the deposit given by the assessee was in the nature of investment for the reason that the assessee is not a non-banking financing company. The A.O. was of the view t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re different and cannot be applied in the assessee s case. In the case of CIT vs. East India Charitable Trust (supra) the facts were different as in that case the trust had some capital gain on sale of shares and utilized the sale proceeds inter alia for making fixed deposits with some banks and public sector undertakings. In these circumstances it was held that the investment or deposit was an asset in that case, it was not case of transfer and therefore, the facts are different and it cannot be applied to the facts of the present case. He thus submitted that the order of A.O. and CIT (A) be upheld. 19. We have heard the rival contentions and perused the material on record. It is an undisputed fact that the assessee has placed deposit with M/s. M. S. Shoes Ltd., of Rs.1 crore in F.Y. 1993-94 and the said company defaulted in payment of principal as well as interest from F.Y. 1994-95. In the year 2003-04 the assessee reached settlement with the said company and recovered Rs.25 lakhs which was claimed as bad debt after writing it off in the books of accounts. The A.O. had not allowed the expenditure for the reason that the assessee is not in the business of non-banking financing c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the decision of Hon ble Supreme Court in the case of Godhra Electricity Co., 225 ITR 746, CIT vs. Madras Refineries Ltd., 266 ITR 170 and Addl. CIT vs. Kubersigh Bhagwadas (118 ITR 379) (MP). CIT (A) after considering the submissions of assessee, deleted the addition by holding as under:- 4.2. I have considered the facts of the case and the submissions of the appellant along with the case laws as relied upon. I am inclined to agree with the views of the appellant. I am of the view that by incurring such expenditure, the appellant has not acquired any capital asset, but the same was incurred in the interest of its business. By following the decisions as relied upon, I hold that the disallowance made in this count was not justified addition. The A.O. is directed to delete the disallowance so made. 23. Aggrieved by the action of CIT (A), the Revenue is now in appeal before us. 24. Before us the Ld. D.R. submitted that the expenditure incurred was not for business purposes. He thus relied on the order of the A.O. 25. On the other hand the A.R. submitted that the expenditure is a business expenditure. He also placed on record at page 21 to 26 copy of the decision in the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ging any material to the contrary on record. In view of these facts and respectfully following the decision of Hon ble Apex Court in the case of ACIT vs. Gujarat Narmada Valley Fertilizers Co. Ltd., we are of the view that no interference is called to the order of CIT (A) and we thus dismiss this ground of Revenue. 28. Second ground is with respect to the deletion of disallowance of write off of obsolete meters amounting to Rs.1,42,57,030/-. 29. During the course of assessment proceedings A.O. observed that assessee has claimed loss on account of obsolete meters amounting to Rs.4,75,23.425/-.The assessee explained and justified the write off by stating that they were three phase electro mechanical meters which contain mechanical counters and it were susceptible to tampering by the consumers. Use of these meters had resulted in a huge loss of revenue to assessee. In view of these facts, the inventory of meters and other items amounting to Rs.4,75,23,425/- which was net of its realizable value was written off and the assessee claimed it as expenditure. It was further submitted by the assessee that with the introduction of temper-proof electronic meters, the electro-mechanical m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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