TMI Blog2017 (8) TMI 114X X X X Extracts X X X X X X X X Extracts X X X X ..... eminvest Ltd Vs. CIT (2015 (9) TMI 238 - DELHI HIGH COURT) held that where no exempted income was earned by the assessee in the relevant assessment year no disallowance could be made under section 14A of the Act. Further, at the same time in view of the decision of the jurisdictional High Court in Joint Investments P. Ltd. vs. CIT (2015 (3) TMI 155 - DELHI HIGH COURT) disallowance of expenditure u/s 14A of the Act cannot exceed the amount of tax exempt income, as such disallowance of expenditure as against the exempt income cannot be sustained. We, therefore, direct the AO to limit the disallowance to the tax exempt income. - ITA No.-4736/Del/2012, ITA No.-2823/Del/2013 And ITA No.-4941/Del/2012 - - - Dated:- 21-4-2017 - SHRI G.D. AGRAWAL, HON BLE PRESIDENT AND SHRI K.N. CHARRY, JUDICIAL MEMBER For The Assessee : Sh. Ravi Jain, CIT DR For The Revenue : Sh. Anil Bhalla, CA Sh. S.K. Jain, DR ORDER PER BENCH: ITA No. 4736 and 4941/Del/2012 are directed against the order dated 25.06.2012 in appeal no. 161/2010-11 whereas ITA No. 2823 of 2013 is against the order dated 27.02.2013 in appeal no. 183/Del/2011-12 passed by the Commissioner of Income Tax (A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional basis in view of AS-19, the same was reduced in the computation of income. However, the AO rejected the same and added the same back to the income of the assessee. 5. In respect of the same year the assessee had an income of ₹ 52,15,095/- which does not form part of total income and the average investment value for earning such income was ₹ 15,96,57,16,500/-. The assessee s contention is that for earning this income they have incurred an expenditure of ₹ 5,21,510/- which is 10% of the income. AO rejected such estimate of 10% as the expenditure relatable to earning of the exempt income and proceeded to calculate the same under Rule 8D(2) of the Rules and disallowed the sum of ₹ 7,98,28,582/-. 6. Thus, the AO made an addition of ₹ 7,93,07,072/- u/s 14A of the Act and ₹ 28,59,91,766/- while denying the deduction of the lease equalization charges. 7. Aggrieved by such additions the assessee carried the matter in appeal and by way of an order dated 25.06.2012 Ld. CIT (A) allowed the appeal in so far as the addition in respect of 14A of the Act is concerned but confirmed the addition in respect of the lease equalization charges. 8. Ch ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the year 2008-09. Per contra, Ld. DR vehemently relied on the assessment orders in respect of both the years and also on the order of the Ld. CIT (A) in respect of the AY 2008-09. He prayed to dismiss the ITA No. 4941/Del/2012 and to allow ITA No. 2823/Del/2013. 11. We have carefully gone through the record. Ld. AR vide page 8 of the synopsis demonstrated before us in a tabular form how the lease equalization charges are dealt with. As could be seen from the order of the ld. CIT(A) in respect of the AY 2009-10, a similar exercised was undertaken before him. Ld. AR submitted that in case of a lease for 15 years on an initial rent of ₹ 1000/- with a stipulation of increase of lease amount at 2.5% every year the rent will be ₹ 1,000/- for the first year, whereas it is ₹ 1,413/- in the 15th year. Total lease amount receivable in these 15 years is ₹ 17,932/-. For the purpose of arriving the straight line lease amount, this ₹ 17,932/- is divided by 15 and the result is 1,195/- for every year. Therefore, for the first year actual lease accrued is ₹ 1,000/-, whereas the amount that is credited to the profit and loss account by following AS-19 is S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very analogy we reject the approach the authorities in respect of these lease equalization charges for the AY 2008-09. We, therefore, find that ITA No. 4941/Del/2012 has to be allowed and ITA No. 2823/Del/2013 has to be dismissed. ITA No. 4736/Del/2012 14. As stated above, this appeal is preferred by the Revenue in respect of the deletion made by the CIT in respect of the amount added by the AO by application of Section 14A read with Rule 8D of the Rules. According to AO with the average investment of ₹ 15,96,57,16,500/- the assessee earned a sum of ₹ 52,15,095/- and the contention of the assessee that the expenditure incurred was only at 10% i.e. 5,21,510/- cannot be accepted. AO dealt with this matter in paragraph no. 3 and according to us it cannot be said that AO has not recorded any reasons or satisfaction. Vide paragraph no. 3.6 of his order the AO recorded a satisfaction to the follows effect: 3.6 I am also satisfied within the meaning of Rule 8D(1) of the IT Rules that the claim of the assessee company that it had only incurred expenditure of ₹ 5,21,510/- for earning the income which do not form part of the total income to the tune of &# ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
