TMI Blog2016 (7) TMI 1001X X X X Extracts X X X X X X X X Extracts X X X X ..... e negative balance in the bank, after making investment in mutual funds, inferred that borrowed funds were utilized. However, it is settled proposition of law that where common pool of funds were utilized for making investment should be inferred that investments are out of own funds. The AO has not rendered any finding whether the claim of the assessee is incorrect. When the assessee-company had not incurred any expenditure, the question of disallowance u/s 14A does not arise as per law laid down by the Hon’ble Karnataka High Court in the case of Canara Bank vs. Asst.CIT (2014 (6) TMI 929 - KARNATAKA HIGH COURT ). Therefore, this ground of appeal is remitted back to the file of the AO for fresh adjudication in accordance with law. - ITA No.1549/Bang/2012 - - - Dated:- 30-6-2016 - SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER and SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER For The Appellant : Shri Padamchand Khincha, CA. For The Respondent : Shri Sunil Kumar Agarwal, JCIT(DR). ORDER Per INTURI RAMA RAO, AM : This is an appeal filed by the assessee directed against the order of the CIT(A)-I, Bangalore, dated 31/08/2012 for the assessment year 2008-09. 2. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed depreciation claim on leasehold property and also made disallowance of ₹ 7,91,394/- under the provisions of sec.14A treating the expenses incurred towards earning of exempt income. 4. The factual matrix leading to the impugned additions is as under: As stated earlier, assessee-company is in the business of development, and maintenance of infrastructure facilities for software and related sectors. For this purpose, it had taken land on lease for a period of 66 years from Software Technological Park of India (STPI). In consideration of granting the leasehold rights, assessee-company had developed 42,665 sq.ft. of space for use by STPI in terms of agreement entered into by it with STPI. The cost of development of this space was treated as cost of leasehold rights treating as intangible asset, depreciation was claimed on this. It is the contention of the assessee-company that leasehold rights is nothing but a commercial right falling within the definition of intangible assets as defined u/s 32(1)(ii) of the Act. In support of this, assessee-company has relied on the decision of the Tribunal in the case of Ashoka Info (P) Ltd., vs. ACIT (123 TTJ 77 and Skyline Ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ined by the appellant relating to the immovable landed property, therefore, the appellant is not eligible for any depreciation. In view of this, the nature of the asset held by the appellant is akin to the nature of immovable property and does not qualify for any depreciation the detailed reasons given by the A.O in his assessment order and the Remand Report are justifiable. Hence the action of the AO is confirmed. The alternative claim of the appellant that the expenditure should be allowed as revenue expenditure is also rejected as the said expenditure was not incurred during the period under consideration. However, in respect of disallowance u/s 14A, the CIT(A) directed the AO to consider disallowance under rule 8D(2)(iii) of the IT Rules, 1962. 6. Being aggrieved, assessee-company is before us in the present appeal. 6.1 Learned AR of the assessee-company contended that leasehold right on land constitutes an intangible asset as defined under the provisions of section 32(1)(ii) of the Act. Therefore, the claim of depreciation is allowable in light of the Hon ble Supreme Court s judgment in the case of CIT vs. Smifs Securities Ltd. (348 ITR 302)(SC). As regards disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) know-how, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April, 1998, Owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed .................................. Thus, the term intangible assets has been defined being knowhow, patents, copy rights, trade marks, license, franchises or any other business or commercial rights of similar nature. Obviously, leasehold rights on land do not fall in the category of above categories. It does not fall even in residuary category of any other business or commercial rights of similar nature. Because the term rights of similar nature qualifies that even to fall under residuary clause, it should be in the nature of above know-how, patents, copy-rights, trade marks license or franchise. Applying the rule of ejusdem generis even to fall within the residuary category it should be in the nature of rights enumerated above. Further, definition of the term immovable property is given in sec.3(26) of the General Clauses ..... X X X X Extracts X X X X X X X X Extracts X X X X
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