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2016 (6) TMI 495 - ITAT CHENNAI

2016 (6) TMI 495 - ITAT CHENNAI - TMI - Disallowance of professional and consultancy fees paid to PWC towards “equity expansion” - Held that:- The nature of service rendered by M/s. PWC to the assessee company such as preparation of information memorandum, identification of potential investors, assistance in value analysis, assistance in structuring the consideration and the transaction, assistance in negotiations and coordinating the completion of the transaction would eventually be attributabl .....

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sary to interfere with the orders of the Revenue. Consequently, this issue is decided against the assessee.

Disallowance U/s.14A r.w.r 8D - Held that:- Assessing Officer had invoked the provisions of section14A r.w.r 8D because the assessee had invested in shares, the dividend income of which, is exempt from tax and thereby computed the disallowance by adopting 0.5% of the average of the opening and closing balance of investment in the relevant assessment year which works out to ͅ .....

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ll these four appeals are filed by the assessee aggrieved by the separate orders of the learned Commissioner of Income Tax (Appeals)-8, Chennai all dated 20.10.2015 in ITA No.44/2009-10. 03/2006-07, 45/2008-09 & 43/2009-10, passed under section 143(3) r.w.s 254 & 250(6) / 143(3) r.w.s 250(6) of the Act. 2. The assessee has raised several grounds in its appeals, however, the cruxes of the issues are as follows:- ITA No.10/Mds/2016 (Assessment Year : 2002-03): i) The learned Commissioner o .....

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14A r.w.r 8D. ITA No.11/Mds/2016 (Assessment Year : 2004-05): i) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who had held that interest earned on ICD, FD with banks, discounting charges and IT refund will be taxable under the head income from other source and therefore such income will not be eligible for deduction under section 36(1)(viii) of the Act. ITA No.12/Mds/2016 (Assessment Year : 2006-07): i) The learned Commission .....

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deduction under section 36(1)(viii) of the Act. ITA No.13/Mds/2016 (Assessment Year : 2007-08): i) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who had disallowed the claim of depreciation on the building rented out by the assessee. ii) The learned Commissioner of Income Tax (Appeals) has erred in confirming the order of the learned Assessing Officer who had disallowed 0.5% of the average investments towards expenditure attr .....

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before us. ITA No.10/Mds/2016 : (Assessment Year: 2002-03): Ground No.1: Disallowance of professional and consultancy fees paid for Rs. 6,83,000/- to PWC towards equity expansion 4. During the course of assessment proceedings, it was observed by the learned Assessing Officer that the assessee has paid ₹ 6,83,000/- to M/s. PWC in connection with equity expansion activity of the assessee. The learned Assessing Officer relying in the decision of the Hon ble Apex Court in the case of CIT Vs. .....

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ncurred expenditure of ₹ 6,83,000/- towards equity expansion, such expansion has not taken place and therefore the decision cited by the learned Assessing Officer will not be applicable in the case of the assessee. The learned Authorized Representative also relied in the decision of the Hon ble Apex Court in the case of CIT Vs. General Insurance Corporation reported in 286 ITR 232 wherein it was held that expenditure incurred towards issuance of bonus shares will be revenue expenditure bec .....

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port of the Revenue and further stated that the nature of consultancy service rendered by the consultants were for the expansion of the equity capital base of the assessee company. 4.3 We have heard the rival submissions and carefully perused the materials available on record. The nature of service rendered by M/s. PWC to the assessee company such as preparation of information memorandum, identification of potential investors, assistance in value analysis, assistance in structuring the considera .....

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the expansion of capital. What matters is the nature of expenditure incurred and not the benefit that is derived out of the expenditure. Considering the nature of expenses, it is apparent that the expenditure is incurred for the purpose of expansion of capital and therefore cannot be treated as revenue expenditure. Hence, we do not find it necessary to interfere with the orders of the Revenue. Consequently, this issue is decided against the assessee. Ground No.2. Disallowance U/s.14A r.w.r 8D: .....

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ry to interfere with the orders of the Revenue. Accordingly, this ground is also held against the assessee. ITA No.11/Mds/2016 (Assessment Year : 2004-05): Interest earned on ICD, FD & IT Refund as income from other sources : 6. The assessee had derived interest income as follows:- i) Interest on ICD Rs.6,34,019 ii) Interest on FD with banks Rs.58,568 iii) Discounting charges Rs.31,71,471 iv) IT Refund Rs.25,355 Total Rs.38,89,413 6.1 The assessee had also claimed deduction under section 36( .....

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to the income earned by the assessee from long term housing finance. The learned Assessing Officer relied in various decisions of the higher judiciary while arriving at his conclusion, some of which are cited herein below for reference:- i) CIT Vs. Cambay Electrical Supply Indl. Company Ltd. Vs. 134 ITR 84 (SC) & CIT Vs. Sterling Food reported in 237 ITR 597 & Pandian Chemicals reported in 233 ITR 497 (Mad) wherein the expression derived from and attributable to was vividly explained. i .....

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missioner of Income Tax (Appeals) following the decision of the Tribunal in the assessee s own case in ITA No.1048 & 787/Mds/2000 dated 29.02.2008 confirmed the order of the learned Assessing Officer. 6.3 The learned Authorized Representative could not controvert these facts. Since the Tribunal has already decided the issue in the assessee s own case inconformity with the order of the learned Assessing Officer, who had meticulously analyzed the issue and by relying in the various decisions o .....

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