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TMI Blog2014 (3) TMI 530X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised the following grounds:- 1. The ld. CIT(A) has erred in law and on facts in directing the Assessing Officer to restricting disallowance to Rs. 3,73,714/- out of total disallowance of Rs. 14,64,083/- without appreciating facts that the working given by the assessee and accepted by the CIT(A) is not accordance with Rule 8D of the IT Rules. 2. The ld. CIT(A) has erred in law and on facts in deleting the disallowance of Rs. 2,07,399/- made by the Assessing Officer u/s. 36(1)(vii) without appreciating facts that the Assessee has not fulfilled the conditions laid down in section 36 of the I.T. Act. 3. The ld. CIT(A) has erred in law and on facts in directing the Assessing Officer to delete the addition and work out the capital gain/loss on sale of property of Kamaldeep Flat amounting to Rs. 16,87,364/- holding that the sale consideration of property is in conformity with section 45 without appreciating facts that the assessee has failed to prove its claim with any supporting evidences during the assessment proceedings. 1st ground is with respect to restricting disallowance u/s. 14A to Rs. 3,73,714/- . 4. On perusing the Balance Sheet, A.O noticed that Assessee had made inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctively on record with the Ld. AO and total disallowance should have been Rs. ,373,714/- only (Rs.66,939 + Rs.3,06,775) if section 14A read with Rule 8D is correctly applied. 3.4. On careful consideration of observation of Assessing Officer and contention of appellant, it is seen that appellant has made investments in associate concerns and mutual funds but has not established any nexus between utilization of interest-free funds and such investments. Further, appellant has even not substantiated its claim that no other expenditure was incurred for making such investments. Considering this, Assessing Officer was justified in invoking the Rule 8D for the purpose of making disallowance under Section 14A of the Act. Even Hon'ble Bombay High Court in case of Godrej & Boyce Manufacturing Company Limited 328 ITR 81 has held that provisions of Rule 8D are applicable from A.Y. 2008-09. However, the argument of appellant that that AO has considered the value of net current assets and entire investments (income from which is exempt or taxable) for arriving at average value of total assets and investments for calculating the disallowance, which is against the provisions of law as per form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said facts, we are of the view that in all fairness and to meet the ends of justice, the A.O should be granted an opportunity to examine the working of disallowance u/s. 14A which has been accepted by CIT(A). We therefore remit the issue to the file of A.O for the limited purpose of verification of the calculation of disallowance u/s. 14A of the Act as upheld by CIT(A). If the calculation as worked out by CIT(A) is found correct and is as per law, the disallowance u/s. 14A be confirmed only to be extent to which was accepted made by CIT(A). We therefore remit the issue to the file of A.O. with the aforesaid direction. In the result, this ground of Revenue is partly allowed for statistical purposes. 2nd ground is with respect to deleting the disallowance of Rs. 2,07,399/- under section 36(1)(vii). 8. During the course of assessment proceedings, A.O noticed that Assessee had debited Rs. 2,07,399/- to the Profit and Loss account under the head "deferred revenue expenses written off." The Assessee was asked to justify the claim. Assessee interalia submitted that during the year under consideration, it was in the process of implementing smart card based system for solution to smart ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through the facts of the case and the submission of the appellant, it becomes clear that the AO has not appreciated the point that the appellant company has written off one fifth of the expenses amounting to Rs. 10,36,995/- which belonged to card processing division which were capitalized as deferred revenue expense and taking a reasonable period of five years for these expenses, 1/5 was written off in the books of account. The same is allowable u/s 37 of the I T Act. In view of the above discussion, the A.O. is directed to delete the same. The ground of the appeal is allowed. 9. Aggrieved by the order of CIT(A), the Revenue is now in appeal before us. 10. Before us, the ld. D.R. took us through the findings of A.O. and reiterated that the Assessee is not entitled to the claim. He further submitted that Assessee is also not entitled to deduction u/s. 37 of the Act. He thus supported the order of A.O. The ld. A.R. on the other hand supported the order of CIT(A). He further pointed out that in the grounds of appeal raised before Tribunal, Revenue has not disputed the disallowance u/s. 37 but has not contested the disallowance u/s. 36(1)(vii) of the Act. 11. We have heard the rival ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g computation of income for the Asst year 2008-09 and various submissions as explained in above paragraph. The property sold was kept as investment and was given on Rent in the earlier years. The appellant has further submitted that the income from the rentals for the property referred as above have been taxed under the head "Income from House property" in respective years. The property has been held as investment and used for purpose of rentals or for capital appreciation. As the sold property was kept as investment no depreciation on sold property was ever claimed since date of its acquisition in books. So, the difference of sale consideration and indexed cost of the investment in property during the year has been treated as capital gains u/s 45 of Income Tax Act, 1961, and shown in Income Tax Return as Capital gain/loss on sale of assets. After going through the Balance Sheet of the appellant, it is seen from of records that the claim and treatment of the sale consideration of the property is in conformity with the section 45 of the Income Tax Act, 1961. Therefore, the addition made by the A.O. has been done without appreciating the facts of the case, the provisions of the IT Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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