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M/s Maharashtra State Film Stage and Cultural Development Corporation Limited Versus Asstt. Commissioner of Income Tax 11 (1) , Mumbai

2016 (2) TMI 88 - ITAT MUMBAI

Disallowance of interest expenditure u/s 43B - Held that:- In the paper book, the assessee has not furnished the “Object clauses” of MMRDA. There should not be any dispute that the object clauses shall determine the nature of MMRDA and only if one examines the object clause, he can decide as to whether it falls in any of the categories prescribed in sec. 43B of the Act. Accordingly, in our view, this issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside .....

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ute with regard to the fact that the fire occurred long back in the year 2002 and even after the said occurrence and damage, the assessee has proved that it has continued to give Studio No.3 on hire and earned income. That very fact shows that the Studio No.3 was not completely damaged by fire. Hence, we are of the view that there is merit in the submissions of the assessee that the expenditure of ₹ 35.37 lakh was incurred only to preserve Studio No.3 by carrying out repair works. Further, .....

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sessee is holding an area of 512 acres of land and it is submitted that there is huge stretch of road therein. We notice that the assessing officer has not brought any material to show that the assessee has built any new road. According to the assessee, it has incurred expenditure to re-surface the existing roads. Hence it is a case of maintenance of existing asset, in which case, the same is allowable as revenue expenditure. Hence the decisions relied upon by Ld CIT(A) are not applicable to the .....

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ing also roads are damaged to erect temporary structure and also due to usage of heavy equipments. Hence, we find merit in the contentions of the ld.AR that the expenditure incurred on re-surfacing of roads is revenue in nature - Decided in favour of assessee - I.T.A. No.8604/Mum/2011 - Dated:- 6-1-2016 - SHRI B.R.BASKARAN, AM AND AMARJIT SINGH, JM For The Appellant : Shri Hari S Raheja For The Respondent : Shri S K Mishra ORDER Per B R Baskaran, AM: The appeal filed by the assessee is directed .....

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ost shooting purpose. The assessment of the assessee was completed by the AO by making various additions and the appeal filed by the assessee before the ld.CIT(A) was dismissed. Aggrieved, the assessee has filed this appeal before us on the issues cited above. 4. The first issue relates to disallowance of interest expenditure u/s 43B of the Act. During the year under consideration, the assessee claimed interest of ₹ 23.34 lakhs payable to M/s Mumbai Metropolitan Region Development Authorit .....

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loans taken from Public Financial Institutions, State Financial Corporation or State Industrial Investment Corporation. All the above Institutions have been defined in Explanation 4 to Section 43B of the Act. The ld. Counsel submitted that MMRDA is a Statutory Body of Government of Maharashtra and it does not fall under any of the categories stated in sec. 43B of the Act. He submitted that the term Public Financial Institution as defined in section 4A of the Companies Act, 1956 is required to b .....

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oration. Accordingly, the ld.AR submitted that the interest accrued on the loan taken form MMRDA is not covered by the provisions of section 43B of the Act. 6. On the contrary, the ld. DR submitted that the assessee itself has disallowed the interest payable to MMRDA u/s 43B of the Act in the earlier years and further an identical disallowance made by the AO in assessment year 2006-07 has also been accepted by the assessee. Accordingly, the ld. DR submitted that the ld. CIT(A) was justified in c .....

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inancial Corporation or State Industrial Investment Corporation or scheduled bank. The expression of the terms Public Financial Institution‟ State Financial Corporation‟ and State Industrial Investment Corporation‟ have been defined as under in Explanation 4 to sec. 43B of the Act: Explanation 4.-For the purposes of this section,- (a) "public financial institutions" shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956); [(aa) " .....

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1956), engaged in the business of providing long-term finance for industrial projects and 86[eligible for deduction under clause (viii) of sub-section (1) of section 36].] We notice that the Ld CIT(A) has confirmed the addition, inter alia, holding that the provisions of sec. 43B shall be applicable to the impugned interest, since the same is payable to a Government Company. The assessee has submitted that MMRDA has been formed under the provisions of Mumbai Metropolitan Region Development Autho .....

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DA shall fall under the category of Public Financial Institutions, Schedule Bank, State Financial Corporation or State Industrial Investment Corporation. If it does not fall in any of the above said categories, then the provisions of sec. 43B cannot be applied to the impugned interest payment. We further agree with the contentions of Ld A.R, that there is no estoppel against the law and hence the fact that the assessee itself has disallowed the interest claim u/s 43B of the Act in the earlier ye .....

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is issue requires fresh examination at the end of the assessing officer. Accordingly, we set aside the order of Ld CIT(A) on this issue and restore the same to the file of the assessing officer with the direction to adjudicate this issue afresh by examining the object clause of MMRDA and whether it shall fall in any of the categories of financial institutions prescribed in sec. 43B of the Act and there after decide about the applicability of the provisions of sec. 43B to the impugned interest pa .....

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partially damaged by a fire that occurred in the year 2002. However, the Studio No.3 was continued to be let out for film shooting purposes. Inviting our attention to pages no.8 to 11 of the paper book, the ld.AR submitted that the assessee has declared the income derived from letting out the Studio No.3 in the assessment years 2007-08 to 2009-10, which fact clearly shows that the Studio No.3 was not fully damaged. The assessee, after expiry of about 7 years from the date of occurrence of the fi .....

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re is merit in the submissions made by the ld.AR. There is no dispute with regard to the fact that the fire occurred long back in the year 2002 and even after the said occurrence and damage, the assessee has proved that it has continued to give Studio No.3 on hire and earned income. That very fact shows that the Studio No.3 was not completely damaged by fire. Hence, we are of the view that there is merit in the submissions of the assessee that the expenditure of ₹ 35.37 lakh was incurred o .....

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xpenditure incurred on re-surfacing of the roads. The assessee had incurred an amount of ₹ 1.44 cr. on resurfacing of the roads and claimed the same as revenue expenditure. But the AO took the view that the expenditure incurred on resurfacing of roads and asphaltic treatment of the roads is capital in nature. Accordingly, he disallowed the claim of the assessee and allowed depreciation at the rate of 10% thereon resulting in net disallowance of ₹ 1.30 cr. The ld. CIT (A) also confirm .....

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assessment years 2009-10 and 2010-11. In all the three years, the repair expenses have been allowed by the assessing officer. 16. The ld. AR submitted that the assessee owns large area of land having an extent of 512 acres of land and hence there is huge stretch of roads inside the land. Since the assessee allows its land and building for film shooting, which is usually carried out by using heavy equipments and also by erecting various temporary structures, it results in frequent damage of road .....

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