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2016 (9) TMI 1208 - ITAT KOLKATA

2016 (9) TMI 1208 - ITAT KOLKATA - TMI - Addition u/s 14A - Held that:- The assessee failed to produce cogent material before him to show that they have sufficient funds in their hands at the time of the alleged investments of funds or that the admitted borrowings had never been utilised for investments to earn exempt income, either by preparing or producing separate account of expenditure or to substantiate how much of the composite expenditure incurred was in relation to the exempted income. I .....

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at relevant point of time the assessee did not utilize any borrowed funds for investment to generate the exempt income. Equally it is not possible for us to give a finding that the source of purchasing the shares in DPSC Ltd. was discharged prior to the FY 2007-08, as such, no expenditure towards interest on that aspect could have been incurred by them. We, therefore, find in these set of facts and circumstances that the finding of the Ld. CIT(A) on this aspect is very convincing and the reason .....

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ersonal expenditure on directors the food expenses incurred on them and their family members and personal friends or for any business purpose. It is the expenditure in relation to business purpose alone that could be allowed as expenditure u/s. 37(1) of the Act. Unless and until the assessee removes this doubt in the mind of the lower authorities that the club membership was used solely for the purpose of business and not for the personal purpose of the directors or their family members or perso .....

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orities on this aspect and restore this issue for fresh adjudication of the Ld. AO. This ground of Cross Objection of assessee is allowed for statistical purposes. - Addition u/s. 40(a)(ia) - non deduction of tds on audit fee - delay in deposit of tds - Held that:- The deduction is not available in case the TDS is not deposited in the year of payment. Here the year of payment was 2007-08 ended by 31.03.2007 whereas the deposit of TDS was on 19.09.2008. In view of this mandate of law no such .....

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not be crystallised during the FY 2007- 08 and it is only on receipt of the bills the liability was crystallized and by that time the books of account were closed, as such, in the books of account for the year 2008-09 they are entered as prior period expenses. However, the AO was unmindful of this fact and disallowed such expenses but rightly corrected by the Ld. CIT(A) holding that the liability for the payment to the advocates crystallized during the period relevant to the AY 2008-09 and as su .....

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r irregularity in it - Decided against revenue - Disallowance of advances written off - Held that:- IT(A) discussed this in the light of the written submissions made by the assessee and recorded a finding that the assessee written off this amount being irrecoverable u/s. 36(1)(vii) of the Act and they have not received tax credit certificates relating to Sales Tax, Service tax and work contract tax. The Ld. CIT(A) was convinced himself with the explanation of the assessee that it is a busine .....

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, C.O. No.122/Kol/2013 - Dated:- 24-8-2016 - Shri M. Balaganesh, AM And Shri K. Narasimha Chary, JM For the Revenue: Shri Divakar Chakraborty, JCIT, Sr. DR For the Assessee: None ORDER Per Shri K. Narasimha Chary, JM: This appeal by revenue and cross objection by assessee are arising out of order of CIT(A)-VI, Kolkata vide Appeal No. 236/CIT(A)-VI,Cir-6/2010-11/Kol dated 28.03.2013. Assessment was framed by DCIT, Circle-6, Kolkata u/s. 143(3)/115WE(3) of the Income tax Act, 1961 (hereinafter ref .....

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55,86,009/-. The case was selected for scrutiny and on following the procedure and on considering the annual accounts, Tax Audit Report and other claims made on behalf of the assessee during the assessment proceedings, the AO assessed the business income at ₹ 15,00,145/-. 3. While assessing the income of the assessee u/s. 143(3) of the Act, the AO disallowed the interest expenses claimed by the assessee as exempt and added back ₹ 84,52,516/-, ₹ 89,000/- towards club membership, .....

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14A of the Act read with Rule 8D of the I. T. Rules, 1962 (hereinafter referred to as the Rules ) towards club membership fees, audit expenses disallowed in the earlier year and deleted the addition made by the AO basing on special expenditure to the tune of ₹ 1,36,49,714/-, prior period legal expenses to the tune of ₹ 49,39,764/-, advances written off of ₹ 13,13,117/-, amount towards which TDS was not deducted to the tune of ₹ 28,68,900/- and donation to the tune of  .....

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ating to earlier/prior period. 2. Whether on the facts and circumstances of the case, Ld. CIT(A) erred in allowing the deduction under the head Advances written off in respect of the amount of tax recoverable from Govt. Department amounting to ₹ 6,60,101/-. 6. So also, challenging the dismissal of the appeal in respect of the disallowance u/s. 14A of the Act read with Rule 8D(2)(ii) of the Rules to the tune of ₹ 80,59,865/-, disallowing club membership to the tune of ₹ 89,000/- .....

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. 2. That on facts as well as on law, the Learned CIT(A) - VI, Kol has erred in disregarding the amount of disallowances made under section 14A amounting to ₹ 2,00,000 offered by the cross objector on its own in the computation of total income. 3. That on facts as well as on law, the Learned CIT(A) - VI, Kol has erred in not appreciating the fact of the cross objector that no direct expenditure was incurred in relation to the earning of exempt income during the year under appeal. 4. That o .....

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ng year for non deduction of tax at source, even though the TDS was duly deducted and deposited by the Cross objector into the account of Central Government in the year under appeal and accordingly claimed in the return of income. 6. That, your cross objector begs your leave to urge any additional ground of appeal or to modify any ground of appeal before or at the time of hearing. 7. We have heard Ld. DR. None appeared on behalf of the assessee in spite of opportunities given. In these circumsta .....

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ns raised by the assessee to the additions before the Ld. CIT(A) as we could delineate the same from the order of Ld. CIT(A), the following issues are emanating for consideration: (i) Are the authorities below justified in making an addition of ₹ 80,59,865/- u/s. 14A of the Act read with Rule 8D(2)(ii) of the Rules? (ii) Are the authorities below justified in disallowing the club membership fees to the tune of ₹ 89,000/-? (iii) Are the authorities below justified in disallowing the a .....

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borne out from record that the total interest paid by the assessee during the AY in question is ₹ 2,73,43,890/-, average investment is ₹ 11,85,30,225/- and according to the order of the Ld. CIT(A) the exempt dividend income is ₹ 1,20,67,940/- whereas according to the assessee, it is only ₹ 22,02,178/-. Assessee offered a sum of ₹ 2 lacs towards expenses incurred for earning exempt income whereas the AO computed the same at ₹ 86,52,516/-. It could be seen from .....

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7; 80,59,865/- u/s. 14A of the Act read with Rule 8D(2)(ii) of the Rules. For this purpose and on this aspect, the contention of the assessee was that the shares from which they derived the dividend income were acquired out of their own funds except a part of the shares in DPSC Ltd. According to them, in all, they held 13,67,818 shares of DPSC Ltd. out of which 68,702 shares were acquired with the borrowed fund of ₹ 218.28 lacs and such loan was obtained in FY 2005-06 from five lenders, an .....

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xclusive capital funds having any direct nexus of its origin and being invested as investments earning exempted income. The Ld. CIT(A) satisfied himself that the offering of ₹ 2 lacs by the assessee was without any basis and no documents supporting the same are produced. As a matter of fact, as rightly observed by the Ld. CIT(A) there may not always be a direct and immediate nexus between any capital or the borrowing funds with the investments. It cannot be ruled out that the loans taken f .....

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and no part of the borrowed funds is directly or indirectly could have been utilised for generating the exempt income. Obviously, the assessee did not produce any scrap of papers before us for this purpose. 10. In so far as the plea of the assessee that the investments in DPSC Ltd. were made through the loans obtained in the FY 2005-06 and such loan was completely discharged in FY 2005-06 and 2006-07 is concerned equally there is no documentary evidence before us and the bald statement of asses .....

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vailable in the hands of the assessee at the relevant point of time without taking benefit of any loan. If those shares were purchased from the amount taken in loan, even for instance, five or ten years ago, it is for the assessee to show by the production of documentary evidence that such loaned amount had already been paid back and for the relevant assessment year, no interest is payable by the assessee for acquiring those old shares. In the absence of any such materials placed by the assessee .....

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644/Kol/2012 for AY 2008-09 of Kolkata ITAT; ii) ISG Traders Ltd. Vs. CIT in ITA No. 264/Kol/2003 reported in (2011-TOIL- 621-HC-Kol-IT; iii) Technopak Advisors (P) Ltd. Vs. Addl. CIT reported in (2012) 18 taxmann.com 146 (Del.); iv) Cheminvest Ltd. Vs. ITO reported in (2009) 121 ITR 318 (Del)(SB); v) Sonata Information Technology Ltd. Vs. DCIT reported in 2012-TIOL-721- ITAT-MUM: vi) Sanchayita Mercantile (P) Ltd. Vs. ACIT (2008) 25 SOT 57 (Mum) and vii) CIT Vs. RKBK Fiscal Services Pvt. Ltd. ( .....

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alleged investments of funds or that the admitted borrowings had never been utilised for investments to earn exempt income, either by preparing or producing separate account of expenditure or to substantiate how much of the composite expenditure incurred was in relation to the exempted income. In the absence of any evidence on this aspect matter cannot be decided merely on the statement made by the assessee that they had separate own fund utilised in the investment or that the borrowings with w .....

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the shares in DPSC Ltd. was discharged prior to the FY 2007-08, as such, no expenditure towards interest on that aspect could have been incurred by them. We, therefore, find in these set of facts and circumstances that the finding of the Ld. CIT(A) on this aspect is very convincing and the reasons are cogent and do not warrant any interference at all. We confirm the same and dismiss the ground nos. 1, 2 and 3 of the assessee s Cross Objection. Issue No. (ii): 12. Now coming to the claim of the a .....

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ere organised and that some customers were also present. On this score of question of fact, the Ld. CIT(A) sought evidence. The CIT(A) confirmed this addition not on the ground that it is a capital expenditure but the confirmation is on the question of fact. The Ld. CIT(A) expressed the opinion that the assessee has not filed any evidence whether the expenditure was the personal expenditure on directors the food expenses incurred on them and their family members and personal friends or for any b .....

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er, such an expense cannot be allowed to be deducted. Hence, we find it necessary to direct the Ld. AO to verify this fact with reference to the material to be produced by the assessee and to give a finding as to the tax liability of the assessee in respect of the expenditure incurred to secure the access to the club. We, therefore, set aside the finding of the lower authorities on this aspect and restore this issue for fresh adjudication of the Ld. AO. This ground of Cross Objection of assessee .....

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40(a)(ia) of the Act for the AY 2007-08. However, during the FY 20-07-08, at the time of making payment of audit fees, the assessee deducted the tax at source and deposited the same on 19.09.2008 and claimed ₹ 1,41,216/- as deduction in the AY 2008-09 for the payment made in the AY 2007-08. Section 40(a)(ia) reads as under: [any interest, commission or brokerage, [rent, royalty,] fees for professional services or fees for technical services payable to a resident, or amounts payable to a co .....

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2007 whereas the deposit of TDS was on 19.09.2008. In view of this mandate of law no such deduction is allowable and the AO has rightly disallowed such an expense and the Ld. CIT(A) has rightly confirmed the same. We do not propose to interfere with such a finding of Ld. CIT(A), as such, we confirm the same and dismiss the ground no. 5 of assessee s Cross Objection. 14. Now coming to the allowability of legal expenses incurred in the year 2008 paid in the FY 2008-09 is concerned, it is borne on .....

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8-09 they are entered as prior period expenses. However, the AO was unmindful of this fact and disallowed such expenses but rightly corrected by the Ld. CIT(A) holding that the liability for the payment to the advocates crystallized during the period relevant to the AY 2008-09 and as such, a sum of ₹ 31,55,362/- was to be allowed as expenditure pertaining to AY 2008-09 and the bills relating to ₹ 8,10,657/- though issued in the AY 2009-10 but the services were rendered during the AY .....

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