TMI Blog2016 (4) TMI 304X X X X Extracts X X X X X X X X Extracts X X X X ..... A - Held that:- Looking to the huge base of capital and free reserve and surplus vis-à-vis minor investment it can be easily inferred that most probably non-interest bearing funds have been invested in the Investments. Accordingly, we delete the addition made u/s 14A Decided in favour of assessee - ITA No.1996 /Ahd/2012, ITA No.2140 /Ahd/2012 - - - Dated:- 2-3-2016 - Shri Rajpal Yadav, JM, Manish Borad, AM. For The Assesseet : Shri Vartik Choksi, AR For The Revenue : Shri Kamlesh Makwana, Sr.DR ORDER PER Manish Borad, Accountant Member. These two cross appeals one by the assessee and the other by the Revenue are directed against the order of ld. CIT(A)-6, Ahmedabad, dated 26.7.2012. Assessment was framed on 20.12.2010 u/s 143(3) of the Income-tax Act, 1961 (in short the Act) for Asst. Year 2007-08 by ACIT, Circle-1, Ahmedabad. 2. First we take up assessee s appeal in ITA No.1996/Ahd/2012 for Asst. Year 2007-08. The assessee has raised following grounds in this appeal :- 1. On the facts and in the circumstances of the appellant s case, the ld. CIT(A) has erred in confirming disallowance of ₹ 12,10,000/- made by the Assessing Officer on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t also as prior period expenses but the same have been claimed because the expenses have crystallized during the year under appeal and the same should have been allowed. 8. Ld. AR further submitted that similar issues in assessee s own case was decided in its favour by the co-ordinate bench in ITA Nos.2919 2920/Ahd/2007 for Asst. Years 2003-04 and 2004-05 vide order dated 7.5.2010. 9. On the other hand ld. DR supported the orders of lower authorities. 10. We have heard the rival contentions and perused the material on record. The issue in this ground is whether the expenses of ₹ 4,08,471/- claimed as expenditure in Asst. Year 2007-08 being crystallized in the year under appeal even if the expenditure relates to Asst. Year 2006-07. We find from the record that these expenses relate to brokerage/commission and professional fees and assessee has claimed that these expenses have crystallized in the year under appeal and the same, therefore, have been claimed as expenditure. We further find from annexure -9 to form no.3CD attached with the audit report u/s 44AB, details of prior period expenditure have been shown and all these expenditure are of revenue nature which hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1976, and therefore t4he additional demand created in the relevant assessment year ought to have been allowed as a deduction. On a reference at the instance of the Revenue: Held, that the assessee had realized sales tax from its customers and whatever amount had been realized had been paid over to the sales tax authorities. The demand of sales tax was over and above the admitted amount of tax liability which had been created pursuant to the assessment order passed on November 2, 1976. Therefore, the liability to pay the amount of ₹ 15,498 came into existence and accrued for the first time on November 2, 1976. Thus, the claim for ₹ 15,498 representing sales tax liability and penal interest on it for the earlier years was allowable as deduction for the assessment year 1978-79. The Hon ble Gujarat High Court in the case of Saurastra Cement Chemical Industry Ltd. (supra) held that expenditure relating to earlier years, liability arising in relevant assessment year is deductible expenditure. Considering the facts of the case in the light of the above decisions, it is clear that the liability of the assessee for the expenditure crystallized during the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... meager and the source of funds in these investments is out of its capital and free reserve. 12. On the other hand, ld. DR supported the orders of lower authorities. 13. We have heard the rival contentions and perused the material on record. The issue in this ground is against disallowance of ₹ 5,88,998/- u/s 14A of the Act. We find force in the contentions of assessee that rule 8D of IT Rule was inserted from Asst. Year 2008- 09 and before this insertion the duty is cast upon the Assessing Officer for determining the amount of expenditure under the provisions of section 14A in relation to such income which does not form part of the total income. From going through the assessment order we find that Assessing Officer has just mentioned the amount of exempt income at ₹ 30 lacs and about investment as on 31.3.2007 at ₹ 2,01,09,000/-, No specific details has been culled out by the Assessing Officer from the books of account to satisfy himself that certain interest bearing funds have moved to the application of funds in the investments nor any other administrative expenditure has been specifically pointed out to have been incurred for earning exempt income. Theref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest, there is nothing on record to indicate that there has been in fact any actual expenditure incurred by the assessee for earning tax free income of Rs.i4 crores. It is also to be noted that out of the total amount of exempt income of ₹ 14 crores, the assessee could point out that 6.12 crores (rounded oil) was earned by 'S' project which was under construction for which no expenditure had been claimed and for the remaining income of ₹ 7.88 crores which consists of dividend and tax free interest, no part of expenditure appears to have been made towards the investment activity as emerging from the material. According to the respondent, the total investment from the huge surplus is comparatively small and investment made was effortless, without any burden of administrative expenses. In view of fact that no expenditure was incurred for earning exempted income and that being the question of fact, disallowance of 1% of interest expenditure artificially or on the basis of assumption rightly has not been sustained by the Tribunal. The revenue's appeal therefore, requires no further entertainment and hence dismissed. 14. Applying the facts of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the above extent. The appellant craves, to leave, to amend or alter any ground or add a new ground which may be necessary. 18. This appeal was presented on 26/9/2012. On 10.12.2015 the CBDT has issued Instructions bearing No. 21/2015 prohibiting its subordinate authorities from filing of the appeal to the Tribunal against the order of the CIT(A) where the tax effect by virtue of the relief given by the CIT(A) is less than ₹ 10 lakhs. The instructions have been made applicable with retrospective effect, meaning thereby, these instructions are applicable on pending appeals also. The tax effect on deletion of this total addition would be less than ₹ 10 lakhs. The present appeal deserves to be dismissed being treated to be filed in violation of CBDT Instructions. The case does not fall within the ambit of exceptions provided in the instructions. It is further observed that since, while hearing the appeal, such factors were not considered, therefore, in case, on re-verification at the end of the AO, it came to the notice that the tax effect is more or it falls within the ambit of exceptions provided in the Instruction, then the Department will be at liberty to approach ..... X X X X Extracts X X X X X X X X Extracts X X X X
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