TMI Blog2015 (9) TMI 596X X X X Extracts X X X X X X X X Extracts X X X X ..... as incapable of generating any such income. Accordingly, we hold so. - Decided in favour of assessee for statistical purposes. Addition of vehicle expenses debited to profit & loss account treating the same as expenses for non-business purposes - Held that:- No merit in the orders of the authorities below as this is the case of the Pvt. Ltd. Company which was engaged in carrying on the business. During the year under consideration admittedly the assessee had earned income from leasing of properties. Though no construction activity was carried out by the Assessee but it does not warrant the disallowance of 75% of the expenses for non business purpose. Reversing the order of the CIT(A), we direct the AO to allow the expenditure on account of vehicle expenses, petrol expenses and depreciation on motorcar.- Decided in favour of assessee. Claim of brought forward business losses disallowed - Held that:- The said adjustment was not allowed by the AO which in turn was also not allowed by CIT(A), though ground of appeal was raised by the assessee in this regard. Following the principles of natural justice, we deem it fit to revert this issue back to the file of the AO, to verify the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce as per Rule 8D at ₹ 13,15,993/-. 6. The CIT(A) rejecting the contention of the assessee that it had only advanced share application money and shares were not allotted till date, upheld the order of the AO in disallowing sum of ₹ 13,15,993/-. 7. The assessee is in appeal against the order of the CIT(A). The Ld. A.R. for the assessee pointed out that the said investment was not capable of earning any income and hence there was no merit in making disallowance under section 14A of the Act on account of expenditure relatable to earning of exempt income. Reliance in this regard was placed on the decision of the Mumbai Bench of the Tribunal in Rainy Investment Pvt. Ltd. Vs. ACIT in ITA No. 5491/Mum/2011 relating to Assessment Year 2008-09, order dated 16.01.2013. It was further pointed out by the Ld. A.R. for the assessee that the reliance placed upon by the AO on decision of Special Bench in Cheminvest Ltd. Vs. ITO (supra) was misplaced as the said decision has been overruled by the Hon'ble Allahabad High Court in CIT Vs. Shivam Motors Pvt. Ltd. in ITA No. 88 of 2014 relating to Assessment Year 2008-09, judgment dated 05.05.2014. It was further pointed out by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers the application of the provision as operating to its detriment, is to forfeit its right to exemption from tax in its respect. Qua merits, we find much force in the assessee's argument that 'share application money', to the extent it is actually so, so that it only represents amount/s paid by way of application for allotment of shares, the same cannot be regarded as an investment in shares, or an asset (or asset class) yielding tax-free income, and neither is it capable of yielding any tax-free income. The same would, therefore, in our clear view, have to be excluded in working out the disallowance u/r. 8D. Further, though the Revenue has not disputed the sums reflected as 'share application money' in the assessee's balance-sheet, the AO, to whom the matter is to be in any case restored for working out the disallowance by excluding the same, shall, in the set aside proceedings, also examine the veracity of the assessee's claim with regard to the same being 'share application money'. This is in view of the pertinent questions raised by the Bench in its respect, to which no satisfactory answer was forthcoming during hearing, nor - to be fair ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ult, the assessee's appeal is allowed for statistical purposes. 11. The issue arising before us is identical to the issue before Tribunal in Rainy Investment Pvt. Ltd. Vs. ACIT (supra) and following the same parity of reasoning, we hold that no disallowances under section 14A of the Act is to be made in respect of the investment made by the assessee in share application money. However, relying on the order of the Tribunal we restore this issue back to file of the AO for verifying the claim of the assessee that the such investment is in share application money as on 31.03.2008 and 31.03.2009. In case the stand of the assessee is found to be correct then no disallowance is warranted under section 14A read with Rule 8D of the Rules. 12. In respect of the second aspect of the issue we are in conformity with the finding of the Tribunal in Rainy Investment Pvt. Ltd Vs. ACIT (supra) that the deletion of addition under section 14A on account of share application money was not for the reason that it did not yield any tax free income for the relevant year, but for the reason that it was incapable of generating any such income. Accordingly, we hold so. The ground of appeal raised b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... find no merit in the orders of the authorities below as this is the case of the Pvt. Ltd. Company which was engaged in carrying on the business. During the year under consideration admittedly the assessee had earned income from leasing of properties. Though no construction activity was carried out by the Assessee but it does not warrant the disallowance of 75% of the expenses for non business purpose. Reversing the order of the CIT(A), we direct the AO to allow the expenditure on account of vehicle expenses, petrol expenses and depreciation on motorcar. Ground of appeal no. 1 to 3 raised by the assessee are thus allowed. 16. The issue in ground no. 4 raised by the assessee is against the claim of brought forward business losses. The said adjustment was not allowed by the AO which in turn was also not allowed by CIT(A), though ground of appeal was raised by the assessee in this regard. Following the principles of natural justice, we deem it fit to revert this issue back to the file of the AO, to verify the claim of assessee and allow the adjustment of brought forward losses in accordance with law. Ground of appeal no. 4 raised by the assessee is thus allowed for statistical purp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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