TMI Blog2017 (2) TMI 641X X X X Extracts X X X X X X X X Extracts X X X X ..... order to arrive at such estimation we have perused the explanation furnished by the assessee to the Assessing Officer, which has been reproduced in the assessment order. The assessee that no significant activity is required in monitoring the investments inasmuch as the investments have been made in preference shares of subsidiary company and that the earnings from mutual fund is also on account of deployment of funds in the in-house mutual fund schemes. On this basis, the assessee estimated a portion of the cost of person looking after the banking matters as an expenditure disallowable u/s 14A of the Act. In our considered opinion, it would be in the fitness of things that on an estimated basis a sum of ₹ 5,00,000/- is considered as o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts to JM Morgan Stanley Securities Pvt. Ltd. on account of research reports is fully allowable as revenue expenditure. - Decided in favour of assessee - ITA NO. 1600/MUM/2013 - - - Dated:- 31-1-2017 - SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER For The Assessee : Shri Vispi T. Patel For The Revenue : Shri M.C. Omi Ningshen ORDER PER G.S. PANNU, AM : The captioned appeal by the assessee is directed against the order of CIT(A)-4, Mumbai dated 11.01.2013, pertaining to the Assessment Year 2006-07, which in turn has arisen from the order passed by the Assessing Officer, Mumbai dated 08.12.2008 under section 143(3) of the Income Tax Act, 1961 (in short the Act ). 2. The appellant befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 18,62,864/-. The said disallowance has further been affirmed by CIT(A), against which the assessee is in appeal before us. 3. Before us, the learned representative for the assessee pointed out that before the CIT(A) assessee had made detailed submissions, which has also been reproduced in the impugned order. It is pointed out that the action of the lower authorities in making the disallowance based on Rule 8D of the Rules is quite misplaced as the said rule is operative only w.e.f. Assessment Year 2008-09 as held by the Hon'ble Bombay High Court in the case of Godrej Boyce Mfg Co ., 328 ITR 81 (Bom) . 4. On the other hand, the ld. DR appearing for the Revenue has pointed out that even if Rule 8D of the Rules is not appl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,00,000/- is considered as overhead expenditure incurred in relation to earning of the exempt income. Therefore, on this aspect assessee partly succeeds. 6. The second dispute in this appeal arises from the action of Assessing Officer in holding that the expenditure of ₹ 3,23,75,167/- debited in the Profit Loss Account as Research expenses was partly capital in nature. The Assessing Officer has treated 10% of such expenses as revenue expenditure and the balance of ₹ 2,91,37,651/- has been added back to the total income as being capital in nature. This action of Assessing Officer has further been affirmed by the CIT(A), against which assessee is in appeal before us. 7. From the relevant discussion in the orders of the aut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee over a period of more than one year, therefore, the same is to be considered as capital in nature. While holding so, the income-tax authorities have allowed 10% of expenses as revenue expenditure and only the balance of ₹ 2,91,37,651/- has been added back to total income as capital expenditure. 9. Before us, the learned representative pointed out that the said expenditure was incurred to enable the assessee to carry on its activities in a profitable manner and, therefore, it related to revenue field and that it could not be considered as capital expenditure. It has been emphasised that neither in the past and nor in the subsequent years such an expenditure has been disallowed on the ground that it was capital in nature. In any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orts obtained by the assessee are for use in carrying on assessee s business of investment banking, involving advising its clients for raising of funds, financial restructuring, mergers acquisitions and project advisory, etc. Therefore, the benefits to assessee are purely in the field of generation of business and profits thereof. The plea of Revenue that the benefit of research may extend beyond the year under consideration is of no significance so long as it is clear that such benefit is in the revenue field and not in the capital field. The aforesaid legal premise has been duly approved even by the Hon'ble Supreme Court in the case of Empire Jute Co. Ltd., 124 ITR 1 (SC) . In fact, the action of Assessing Officer in accepting that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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