TMI Blog2017 (1) TMI 571X X X X Extracts X X X X X X X X Extracts X X X X ..... ses his option to substitute the market value of the asset instead of the actual cost price, under Section 55(2)(i), deduction of any type of expenditure whether it is connection with the transfer or in connection with improvement to the capital assets, is allowable. Accordingly, we direct the AO to allow the legal expenses incurred and paid by Runwal Developers, while computing capital gains in the hands of assessee. Disallowance made u/s. 14A read with Rule 8D - Held that:- Assessee had invested INR 1,333.10 lakhs in Equity shares from which it had earned exempt income of ₹ 1.66 lacs. The said investments were made out of the Own Fund i.e. Share Capital and Reserves. As of 31 st March 2008, these are stated at INR 13,264.7 lacs and Investment of INR.1333.10 lakhs is only 10.08 % of the Net Worth. As per the decision of Jurisdictional High Courts in case of HDFC Bank Ltd., [2014 (8) TMI 119 - BOMBAY HIGH COURT] and Reliance Utilities & Power Ltd.[2009 (1) TMI 4 - BOMBAY HIGH COURT] if assessee is having sufficient own funds, no disallowance of interest is warranted. We also found that against the exempt income of ₹ 1.66 lakhs the assessee suo-moto worked out the dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rred in not directing the Assessing Officer to delete the addition of ₹ 4,42,01,504/- made under section 145A on account of Excise Modvat on closing stock of Raw Material and spares. He further erred in not appreciating the fact that where section 145A of the Act is invoked, corresponding effect should be given to the opening stock, purchase and sales made during the year and net result of these adjustment on the profit of the year would be Nil. 2. The learned CIT(A) erred in not directing the Assessing Officer (' AO') to adopt value of ₹ 13,26,03,000/- being fair market value of the property as determined by the DVO as on 6 May 2008 being the full value of consideration of Mulund property sold by the appellant. 3. The learned CIT(A) erred in not granting deduction of ₹ 5.70 crores being amount paid by Runwal Developers towards out of court settlement and legal cost, as cost of improvement while computing the long term capital gains, without appreciating the fact that the said sum was deducted by the buyer from the balance consideration due on sale of Mulund property to the appellant. 4. The learned CIT(A) erred in confirming the di ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developers in 2006 for a total consideration of INR 85 crores, out of which land admeasuring 25,425 sq.mtr was transferred in A.Y.2007-08 for a consideration of INR 75 crores. The same had been offered for tax in AY 2007-08 under the head Long-term Capital Gains which was also accepted in the assessment order u/s.143(3). The balance plot of land admeasuring 7438.10 sq.mtr has been transferred in the year under consideration i.e. AY 2009-10 for the balance amount INR 10 crores. The subject matter of the plot i.e., 7438.10 sq. mtr immovable property was under dispute. Buyer (Runwal Developers) paid INR 4.30 crores (INR 10 crores INR 5.70 crores towards cost of settlement and legal cost) to the assessee company as full and final settlement of the consideration. The issue involved is what is the fair market value of the plot of land admeasuring 7438.10 aq.mtr should be considered for the purpose of Section 50C. 7. We have considered rival contentions and found from record that there is no dispute on the year of taxability by the assessee as well as the tax department. So far as invocation of Section 50C is concerned, the AO was correct in invoking the same. Since Stamp Duty val ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he clear title of the property to Runwal Developers. Since Runwal Developers had been given general power of attorney to represent matter in the Court, it had settled the matter out of court. Therefore, the cost incurred by Runwal Developers on account of out of court settlement and legal cost, the same has been adjusted from the balance sales consideration i.e. INR 10 crores. Hence. the payment made by Runwal Developers would be considered as constructive payment being made by the assessee. Therefore, the same should be considered as deductible while computing the capital gains. 13. As per our considered view Even if an assessee exercises his option to substitute the market value of the asset instead of the actual cost price, under Section 55(2)(i), deduction of any type of expenditure whether it is connection with the transfer or in connection with improvement to the capital assets, is allowable. Accordingly, we direct the AO to allow the legal expenses incurred and paid by Runwal Developers, while computing capital gains in the hands of assessee. 14. Next grievance of assessee relates to disallowance made u/s. 14A read with Rule 8D. We have considered rival contentions and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ration disallowed (to be recovered) Nil c. Mr. K.N. Subramanian vide letter no.A71767636/2010-CL-VII dated 21st July, 2010. (i) Remuneration Allowed as per the MCA NIL (ii) Remuneration disallowed (to be recovered) Rs.59,77,968/- 17. We also found that in light of rejection of applications in the case of Mr. Arvind Walia and Mr. K N Subramaniam as mentioned above, Assessee Company filed a Review Application' vide letter dated 27th January 2011 and disposal of the same is still awaited. Total remuneration paid during the year also included the Management Incentive Bonus Plan and long Term Management Incentive Bonus Plan for earlier year(s) as per the Company policy uniformly followed by the Assessee over the years. During the year under consideration, Assessee was impacted by the down turn in auto industry with reduced margins and increased finance costs. However, assessee company could still achieve increase in terms of volume mainly on account of various cost saving a ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
