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2015 (5) TMI 600 - ITAT MUMBAI

2015 (5) TMI 600 - ITAT MUMBAI - TMI - Disallowance u/s 35D - assessee is not an industrial undertaking as it is dealing in the business of finance and leasing - Held that:- This is a recurring issue in the case of the assessee coming from the earlier years. In the A.Y. 1991-92, the Tribunal has set aside this issue to the file of the AO observing that the issue as to whether or not the activities of the assessee amounted to the assessee being an industrial undertaking has not been examined at a .....

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ilar directions. - Decided in favour of assessee for statistical purposes.

Disallowance u/s 14A - Assessee claimed deduction u/s 10(23)G on gross basis, whereas the AO held that in view of insertion of section 14A w.r.e.f. 01.04.1962 only the net income has to be included for the purpose of deduction against the gross interest and is to be reduced from the total income - Held that:- From the perusal of the accounts, it is prima facie seen that assessee’s net worth including reserve an .....

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ention of the assessee - Decided in favour of assessee for statistical purposes.

Disallowance u/s 14A while computing the book profit u/s 115JA - Held that:- This issue had also come up for consideration before the Tribunal in assessee’s own case wherein after taking note of the decision of Hon’ble Delhi High Court in the case of CIT Vs. GOETZ India Ltd. [ 2013 (12) TMI 607 - DELHI HIGH COURT ] held that the amount disallowance u/s 14A under the normal provisions of the act is requir .....

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OTIS Elevator, reported in [1991 (4) TMI 53 - BOMBAY High Court ]. In the A.Y. 2002-03, the Tribunal following the decision of Hon’ble Supreme Court in the United Glass Mgf. [2012 (9) TMI 914 - SUPREME COURT] has held that, club membership fee for employees incurred by the assessee is allowable u/s 37(1). Accordingly, we hold that such expenses are allowable as business expenditure, which has rightly been deleted by the Ld. CIT(A). However, the order by the Revenue authorities do not indicate if .....

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the Ld. CIT(A). - Decided in favour of assessee.

Disallowance of depreciation on leased assets - CIT(A) allowed the claim - Held that:- it is an undisputed finding of fact that, the assets has been leased under operating lease and such lease transaction have been found to be genuine transaction. In such a case, the claim of depreciation on these assets is to be allowed in view of the decision of Hon’ble Supreme Court in the case of ICDS Ltd.[2013 (1) TMI 344 - SUPREME COURT] This view .....

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a, JM: These are the cross appeals filed by the Assessee as well as Revenue against the order dated 14.05.2001 passed by Ld. CIT(A)-8, Mumbai for the quantum of assessment u/s 143(3) for the A.Y. 1998-99. 2. We will first take up, assessee s appeal wherein various grounds of appeal have been taken challenging the impugned order on following issues:- i) Ground no. 1 and 2 relates to disallowance of deduction u/s 35D of ₹ 601353/-. ii) Ground no. 3 is alternative to ground no. 1 and 2, where .....

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sallowance u/s 35D are that assessee had claimed deduction u/s 35D, which has been disallowed by the AO on the ground that, similar issue had come up for consideration in the A.Y. 1997-98, wherein it was held that assessee is not an industrial undertaking as it is dealing in the business of finance and leasing. The Ld. CIT(A) too has confirmed the said disallowance relying upon the earlier order of the Ld. CIT(A) for the A.Y. 1997-98. 4. Before us, learned counsel submitted that right from the A .....

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s a recurring issue in the case of the assessee coming from the earlier years. In the A.Y. 1991-92, the Tribunal has set aside this issue to the file of the AO after observing and holding as under:- We have carefully considered the rival submissions. We see considerable force in the contention of the learned counsel of the assessee that in the absence of a specific definition. The word industrial undertaking should be interpreted in its popular meaning and that if should not be confined to only .....

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ot relied upon any specific material produced before the authorities below in this context. We are therefore of the view that this issue has to be examined and the facts of the assessee s case have to be brought out by the Assessing Officer in the first instance. We therefore, remit this issue to the file of the Assessing Officer with the directions to decide this issue afresh in the light of our order after allowing the assessee reasonable opportunity of being heard in the matter. Thus consiste .....

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ficer will examine the claim u/s 37(1) after hearing the assessee and decide in accordance with the law. Thus ground no. 3 is allowed for statistical purposes. 7. In ground 4 and 5, the assessee has challenged the disallowance u/s 14A, on the ground that deduction u/s 10(23)G has been computed at ₹ 85,66,405/- instead of claim of the assessee at ₹ 2,88,26,805/- and further reducing the deduction u/s 10(33) at ₹ 89,83,946/- as against claim of the assessee at ₹ 1,54,81,590 .....

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10(33) on account of dividend income of ₹ 1,54,81,589/- without deducting the interest. He required the assessee to submit the working of the expenses allocated for earning of the dividend income which was worked out by the assessee and net dividend income of ₹ 89,83,946/- was arrived at and only this amount was allowed as deduction by the AO. 8. The Ld. CIT(A) has confirmed the said disallowance on the ground that the similar issue had arisen in the earlier years, wherein the Ld. C .....

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ss compulsion and not for earning dividend. Therefore, there was no intention for earning of exempt income from such investment. In any case, if the assessee has surplus funds, then no disallowance of interest can be made. In support of his contention, he strongly relied upon the decision of Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. reported in [(2009) 313 ITR 340 (Bom)]. This decision has been again reiterated by the Hon ble Bombay High Court in the case .....

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d into, if the assessee has claimed that it has made investment out of its own surplus funds. 11. We have heard the rival contention and also perused the relevant material placed on record. From the perusal of the accounts, it is prima facie seen that assessee s net worth including reserve and surplus is more than the average investments. In such a situation, the applicability of decision of the Hon ble Bombay High Court in the case of HDFC Bank Ltd. (supra) and Reliance Utilities and Power Ltd. .....

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d 5 are treated as allowed for statistical purposes. 12. In ground no. 6 to 8, the disallowance u/s 14A has been challenged, while computing the book profit u/s 115JA. This issue had also come up for consideration before the Tribunal in assessee s own case. The Tribunal after taking note of the decision of Hon ble Delhi High Court in the case of CIT Vs. GOETZ India Ltd. [(2014) 361 ITR 505], wherein it has been held that the amount disallowance u/s 14A under the normal provisions of the act is r .....

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Now we will take up revenue s appeal being, ITA No. 4783/Mum/2001, wherein various ground have been raised which are being discussed hereunder, in brief. 14. In ground no. 1 the revenue has challenged the deletion of disallowance of club expenses of the executives of ₹ 15,30,456/-. It has been admitted by both the parties and this issue had come up for consideration in assessee s own case for the earlier years wherein it stands decided in favour of the assessee by the Tribunal in A.Ys. 19 .....

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In the A.Y. 2002-03, the Tribunal following the decision of Hon ble Supreme Court in the United Glass Mgf. has held that, club membership fee for employees incurred by the assessee is allowable u/s 37(1). Accordingly, we hold that such expenses are allowable as business expenditure, which has rightly been deleted by the Ld. CIT(A). However, the order by the Revenue authorities do not indicate if any part of the impugned expenditure includes expenditure by way of entrance fees, which, where so, .....

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1-02. 17. As in the earlier years, the assessee has claimed a sum of ₹ 19,76,12,033/- as interest capitalized in the books, but was claimed as deduction u/s 36(1)(iii) in the computation of income. The Assessing Officer disallowed the said claim after detailed discussion mainly on the ground that, after capitalization, the amount of interest has merged with the cost of the assets and after insertion of Explanation 8 to section 43, the various case laws as relied upon by the assessee will n .....

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e A.Y. 1999- 2000 to 2001-02, wherein the Tribunal observed and held as under:- The next issue relates to the disallowance of interest claimed u/s 36(1)(iii) of the Act on the reasoning that part of interest has to be capitalized. The AO disallowed part of interest claim by holding that they relate to the amounts borrowed for acquisition of Capital assets. However, this issue has been decided in favour of the assessee by the Tribunal in the assessee's own case in earlier years viz., ITA No.2 .....

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he asset till the date on which such asset was first put to use, shall not be allowed as deduction." Hence, consistent with the view taken by the co-ordinate bench of Tribunal in the earlier years, we hold that the assessee is entitled to claim interest expenditure u/s 36(1)(iii) in respect of capital borrowed for acquiring capital assets in these years and accordingly uphold the order of the Ld. CIT(A) on this issue. Thus, consistent with the precedence in assessee s own case and also the .....

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