TMI Blog2011 (2) TMI 1423X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 80M stating that there would be no positive income on the basis of his appellate order. 1.2) The learned CIT(A) ought to have given his decision on the allowability of the deduction so that this question does not arise in future, when there is any positive income by any chance. 2) Deduction u/s. 35D : 2.1) Learned CIT(A) has erred in deciding the above deductions are not allowable and have become infructuous. 2.2) Learned CIT(A) has erred in deciding that these deductions are not allowable for the year just because in one year he has allowed the expenditure to be capitalised to the cost of the plant. He has failed to realize that the deduction for this year is based on the deductions determined in various earlier years and on different items. 4. With reference to ground No. 1, it was the submission that learned CIT(A) has not decided the issue on the reason that there would be no positive income on the basis of appellate order, whereas there was positive income and the assessee was eligible deduction u/s. 80M of the Act. As seen from the assessment order, the Assessing Officer also has not considered the issue and there was no discussion in the order. In view o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing out house property income for six month period. Learned CIT(A) following the order in the case of Chandrakala Ruia held that municipal rateable value should be taken to fix the annual letting value in the absence of letting out the property. The revenue is aggrieved on the above direction of learned CIT(A). 10. At the outset it was submitted that Hon'ble ITAT in Chandrakala Ruia for A.Y. 1996-97 in ITA No. 251/Mum/2000 vide order dated 15.9.2004 has decided the issue as under and supported the finding of learned CIT(A). We have considered the rival submissions and perused the materials on record. Regarding the reliance placed by learned DR of the revenue on the Judgement of Hon'ble Madras High Court in the case of N. Natraj Vs. DCIT (supra), we find that the reliance of learned DR is misplaced because in this case, it was found that initial lease was to a firm, in which the wife and the daughter of the karta of the assessee HUF were partners and after three months only, the building was occupied by tenants at much higher rent and under these facts, it was held that first letting to the firm was rightly not regarded by the Assessing Officer as a reliable record fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught out by the Assessing Officer. No doubt these transactions are entered into by sister companies; but their financial status is independent of each other. So I do not agree with the observation of the Assessing Officer that the expenses towards installation, erection, etc. were redundant. I do not think that the claim can be allowed as a revenue expenditure and as the expenses disputed now were necessary for conducting the sale and lease back, I held that they are to be capitalized as installation expenses towards cost of the assets sold. I direct Assessing Officer to compute profit/loss on sale of these machinery after adding ₹ 21,30,34,000 as claimed by the appellant. 13. Learned DR supported order of the Assessing Officer, whereas learned counsel for the assessee supported the order of learned CIT(A). 14. On examining the record and perusing the arguments, we are of the opinion that there is no need to defer from the findings of learned CIT(A). As rightly held by him machinery has to be installed and even though transaction was considered as sale and lease back the sale could not have taken place had there been no installation of these machineries. Moreover, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f occupation by the tenants and submitted that the payment is collusive payment and relied on the decision of Hon'ble Madras High Court in the case of Smt. Rugmani Verma, 222 ITR 357 and Hon'ble Supreme Court decision in the case of R.M. Arunachalam ETC. vs. CIT, 227 ITR 222. 18. Learned counsel for the assessee submitted that learned DR cannot raise any new issue in the arguments as there was no issue before the Assessing Officer that these payments are collusive nature. Since, this is not the case of the Assessing Officer, the learned DR cannot raise new issue and relied on the principles established by Hon'ble Special Bench in the case of Mahindra and Mahindra, 313 ITR 263 (AT)(SB). Further it was submitted that in the case of the tenants the same was considered and treated as capital receipts by the ITAT and placed on record order of ITAT in ITA No. 241/Mds/98 in the case of Essar Services Limited. It was his submission that the payment of compensation was not doubted. Following the principles established by Hon'ble Bombay High Court in the case of Miss Piroja C. Patel, 242 ITR 582, compensation paid for eviction of tenants is to be considered as cost of impr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls (HRC) Divisions ₹ 3,08,14,26,000/- A similar issue came for my consideration for the A.Y. 1994-95 and in my appellate order in ITA no. 74/97-98, I have discussed the issue in detail (pages 1 to 15). On the same lines, I direct the Assessing Officer to allow the claim for this assessment year as revenue expenditure. 5) Disallowance of Floating Rate Notes (Bonds) expenses ₹ 19,27,24,518.4 6) The appellant claimed to have an expenditure of ₹ 19,27,24,508 on issue of floating rate note (bonds). It was stated that the expenditure had been incurred for raising loans to carry on the business of the appellant company and hence allowable as revenue expenditure. Further it was submitted that the expenses on issue of bonds should have been allowed as revenue expenditure as these bonds are not convertible into shares and hence decision of the Supreme Court in the case of India Cements Ltd., 60 ITR 52 would apply. The Assessing Officer has disallowed the above expenditure on the ground that these are capital in nature as relates to HRC business which has not started commercial production. I have already hold in my Appellate order in ITA no. 74/97/98 that the HRC is ..... 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