TMI Blog2013 (9) TMI 119X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. Disallowance of service tax under section 43B of the Act. - Held that:- as per the law prevailing during the previous year, the liability to pay the same arises only on receipt by the assessee. Since the liability to pay service tax does not exist in the present case, the service tax cannot be said to be 'payable' and therefore provisions of section 43B of the Act could not also be invoked - Following the decision in Chowringhee Sales Bureau P. Ltd. v. CIT [1974 (6) TMI 5 - CALCUTTA High Court], Asst. CIT v. Real Image Media Technologies P. Ltd. [2007 (12) TMI 263 - ITAT MADRAS-C] decided in favor of assessee. Capital expenditure or revenue expenditure - Held that:- In the absence of any contrary material placed on record by the Revenue against the above factual matrix, we are of the view that the Assessing Officer was not justified in treating the maintenance of software expenses as capital expenditure and the learned Commissioner of Income- tax (Appeals) has rightly deleted same. However, it has been agreed by learned counsel for the assessee that if the said expenditure is treated as revenue expenditure, the depreciation is not allowable and he agreed for the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iate time and hence not correct to say that dividend income can be earned by incurring no or nominal expenditure. Thus, it was difficult to accept that a company can earn substantial dividend income without incurring any expenses whatsoever including management or administrative expenses as investment decisions are generally taken in the meetings of the board of directors for which administrative expenses are incurred. The Assessing Officer further observed that the term "expenditure" occurring in section 14A would take in its sweep not only direct expenditure but also all forms of expenditure regardless of whether they are fixed, variable, direct, indirect, administrative, managerial or financial. With the said observations, the Assessing Officer while applying the provision of section 14A read with rule 8D of the Income-tax Rules, 1962 also relied on the decision of the Special Bench of the Income-tax Appellate Tribunal in the case of ITO v. Daga Capital Management P. Ltd. [2009] 312 ITR (AT) 1 (Mum), computed the disallowance at Rs. 99,56,933 as per working given at pages 5 and 6 of the assessment order. On appeal, the assessee while relying on the decision of the hon'ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uo motu disallowed the expenditure of Rs.1,13,676 against the exempt income. He further submits that in view of the ratio of the decision in Godrej and Boyce Mfg. Co. Ltd. [2010] 328 ITR 81 (Bom) the assessee has worked out the disallowance of Rs. 31,69,778 as appearing at paragraph 4.3 of the appellate order and the learned Commissioner of Income-tax (Appeals) after considering has accepted the same. He, therefore, submits that the order passed by the learned Commissioner of Income-tax (Appeals) does not call for any interference. We have carefully considered the submission of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that following the decision of Godrej and Boyce Mfg. Co. Ltd. [2010] 328 ITR 81 (Bom) some disallowance is called for on reasonable basis. The Assessing Officer while making the disallowance under section 14A has worked out the disallowance as per rule 8D of the Income-tax Rules, 1962 which according to the decision in the case of Godrej and Boyce Mfg. Co. Ltd. [2010] 328 ITR 81 (Bom) is not applicable for the assessment year 2007-08. However, before the learned Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g of return, observed in respect of other disallowance that service tax had not become payable, 43B is not applicable and hence he deleted the entire disallowance of Rs.90,08,661. At the time of hearing the learned Departmental representative supports the order of the Assessing Officer. On the other hand learned counsel for the assessee while relying on the order of the learned Commissioner of Income-tax (Appeals) submits that the assessee has not debited the amount of service tax in its profit and loss account. He further submits that since the assessee has paid a sum of Rs.41,97,663 before the due date of filing of return, therefore, the said amount cannot be disallowed. With regard to other disallowance of Rs.48,10,998 he submits that the service tax cannot be said to be payable and, therefore, the provisions of section 43B could not be invoked and in support the reliance was also placed in Pharma Search v. Asst. CIT [2012] 53 SOT 1 (Mum), Asst. CIT v. Real Image Media Technologies P. Ltd. [2008] 306 ITR (AT) 106 (Chennai) and Goetze (India) Ltd. v. CIT [2009] 32 SOT 101 (Delhi). We have carefully considered the submission of the rival parties and perused the material avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s provided by IL and FS Infotech Ltd. and IL and FS Financial Services Ltd., and hence such expenditure being revenue in nature incurred for the purposes of business is allowable and in support copy of invoices were also filed. The learned Commissioner of Income-tax (Appeals) after considering the same deleted the disallowance made by the Assessing Officer. At the time of hearing the learned Departmental representative supports the order of the Assessing Officer. On the other hand learned counsel for the assessee relied on the order of the learned Commissioner of Income-tax (Appeals). We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that before the Assessing Officer it was submitted by the assessee that the assessee has made payment for maintenance of software and technical support services provided by the above two companies and in support, the assessee has also filed purchase details of software expenses along with name and address, amount and TDS deducted, etc. However, the Assessing Officer without considering the same has treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Officer while calculating the book profit under section 115JB of the Act has taken net profit as per profit and loss account Rs. 7,97,91,844 and added disallowance under section 14A of Rs. 99,56,933 and thus he worked out the total book profit Rs. 8,97,48,777. On appeal it was submitted that as per clause (f) of Explanation 1 to section 115JB of the Act only the amount of expenditure relatable to income exempt under section 10 can be added. The assessee had not earned any exempt income as evident from the profit and loss account. It was further contended that the disallowance under section 14A made while computing profit under section 28 was on a different footing from computing book profit under section 115JB as the wordings of both sections are different, hence, the addition under section 14A while working out book profit is not correct. The learned Commissioner of Income-tax (Appeals) after considering the assessee's submission directed the Assessing Officer to restrict addition to the disallowance under section 14A, i.e., Rs. 31,69,778. At the time of hearing the learned Departmental representative submits that the learned Commissioner of Income-tax (Appeals) was not justif ..... X X X X Extracts X X X X X X X X Extracts X X X X
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