TMI Blog2015 (7) TMI 834X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) confirmed the disallowance under Rule 8D(2)(iii) is therefore set aside. In view of our observations made above, the disallowance under section 14A is restricted to the suo-moto disallowance of ₹ 2 lakh offered by the assessee and the remaining disallowance over and above the disallowance offered by the assessee himself is therefore ordered to be deleted. - Decided in favour of assessee. Remission of loan liability - CIT(A) in holding it as capital receipt and not chargeable to tax - Held that:- CIT(A) has discussed the nature of the loan amount and has held that the waiver was not in respect of any benefit in kind or of any perquisite. The waiver was of the principle loan amount in cash. The assessee had not claimed any deduction in respect of loss, expenditure or trading liability in relation to the loan amount. The waiver was of the principle amount of loan for capital asset. He, thereafter, relying upon the decision of the Hon'ble Jurisdictional High Court, in the case of "Mahindra & Mahindra Ltd. vs. CIT" [2003 (1) TMI 71 - BOMBAY High Court] held that the waiver of the loan amount was a capital receipt not taxable as business income of the assessee. - Decided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lating to the working of suo-moto disallowance of ₹ 2 lakh offered by the assessee. The AO had straightway applied Rule 8D of the Act. It had also been contended that the assessee had not incurred any direct, indirect or any other administrative expenses for earning of exempt income. The suo-moto disallowance of ₹ 2 lakh offered by the assessee was reasonable. The assessee also demonstrated and explained before the CIT(A) the one to one relation of the borrowed funds and their utilization towards business of the assessee to prove that the interest of ₹ 3,99,96,656/- was incurred wholly and exclusively for the purpose of business of the assessee and that the same cannot be considered for disallowance u/s 14A. The assessee further submitted that the administrative expenses incurred by the company were for carrying on its hospitality business activity and no part of those expenses could be considered as relatable to earning of exempted income. The Ld. AR further submitted that all the investments were made out of own funds. That the assessee had issued fresh Equity Shares to the shareholders at a premium for opening new hotels and banquet halls, however, the funds wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the assessee for the relevant period, observed that the assessee had huge surplus funds in the balance sheet as on 31.03.09. The Tribunal further considered the utilization of the loan amount by the assessee and thereafter has observed that the surplus funds of the assessee were sufficient to cover the investments. The assessee had submitted the details of the allocable expenses for earning of exempt income before the AO. It was then observed by the Tribunal that once all the details relating to the allocable expenses for earning of exempt income along with entire accounts of the assessee were submitted before the AO, the AO was required to record his satisfaction having regard to the accounts of the assessee that the claim of the assessee in respect of expenditure debited was not correct or that there could have been certain other expenditure which could have been incurred in relation to earning of exempt income. The Tribunal further observed that the AO in the case had straightway applied Rule 8D without considering the suo-motoworking/computation given by the assessee in relation to disallowance under section 14A. The Tribunal ultimately held that once the AO fails to comply t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... current assets of the assessee had increased to ₹ 72,19,41,777/- as against of ₹ 11,32,40,029/- as on 31.03.07. The Ld. D.R., from the balance sheet has tried to explain that there is an increase in the fixed assets of the assessee and the assessee has also used its funds in repayment of the loan amount and hence it cannot be said that the entire surplus was used by the assessee for making investments. However, after considering the overall facts and circumstances and the explanation of the assessee regarding the utilization of the loan amount and also considering that there is sufficient increase in own/surplus funds of the assessee and there being no decrease in the loan liability and also considering the quantum of investment made in relation to reserve and surplus fund available, we do not find any infirmity in the order of the Ld. CIT(A) while deleting the disallowance on account of indirect expenditure under Rule 8D(2) of the Act. We further find that most of the investments made by the assessee during the year are in mutual funds which do not require any specific incurring of expenditure which are generally done through agents. Otherwise, there is no considerable ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - disallowable under section 14A. The appellant craves leave to add to, amend or withdraw the aforesaid ground of appeal. 11. Ground No.1 is relating to the action of the Ld. CIT(A) in deleting the disallowance on account of indirect expenditure. In view of our observations made above, we have already held that the disallowance under section 14A is restricted to the disallowance of ₹ 2 lakh which has been suo-moto made by the assessee. This ground of the Revenue is therefore dismissed. 12. Vide ground No.2, the Revenue has agitated the action of the Ld. CIT(A) in holding that the remission of loan liability of ₹ 2,10,73,487/- was capital receipt and not chargeable to tax. During the year under consideration, the assessee company was allowed rebate on loan liability of ₹ 30510355/- from Inter Continental Hospital (hereinafter referred to as SCH) and SC Hotels Resorts India Pvt. Ltd. The entire rebate on loans was credited to the P L account under the head 'other income' and the same was offered for tax. During the assessment proceedings, the assessee furnished the details and rebate on loan to the AO and submitted that out of total rebate allowed, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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