TMI Blog2018 (3) TMI 301X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment year 2006-07 and 2007-08. The ld. AR submitted that the order passed by the Tribunal for the assessment year 2006-07 has been upheld by the Hon'ble Delhi High Court and, further, the SLP filed by the Revenue has been dismissed. This position has not been controverted by the ld. DR. In view of the fact that the ld. CIT(A) deleted the addition by relying on the Tribunal order, respectfully following the precedent, we uphold his decision on this issue. Disallowance on account of brokerage/demat charges - Held that:- It is palpable that section 48(1) of the Act provides for deducting expenditure incurred wholly and exclusively in connection with the transfer of shares from the full value of consideration received in the computation of income under the head ‘Capital gains.’ Since the brokerage of ₹ 5.45 lac was paid in connection with shares, the same has, inter alia, to be allowed as deduction in the computation of capital gain in terms of section 48(1) of the Act. As regards the payment of demand charges of ₹ 80,030/- we find that the same cannot be allowed as deduction in the computation of business income as the investment activity in shares carried on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , 1961 (hereinafter also called the Act ). 3. Briefly stated, the facts of these grounds are that the assessee is engaged in various activities including real estate development, leasing of constructed properties, running and maintenance of golf course and power generation etc. Tax free dividend income of ₹ 97,211/- was shown along with exempt profit from partnership firm amounting to ₹ 51,35,895/-. The assessee was called upon to explain the reasons for not offering any disallowance u/s 14A. It was submitted on behalf of the assessee that the investments were made out of own funds and, as such, there could be no disallowance of interest. The Assessing Officer did not agree with the assessee s contention and invoked the provisions of Rule 8D after recording satisfaction that: The contention of the assessee that no expense was incurred in earning tax free income was not substantiated by any factual evidence in this regard. Applying the provisions of Rule 8D, the Assessing Officer computed disallowance u/s 14A to the tune of ₹ 15,77,74,000/-. The ld. CIT(A) observed on page 14 of the impugned order that investment in shares etc. stood at ₹ 46,033.76 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unds had gone into investment in those two companies in respect of which the AO made disallowance of interest. It was also argued that income from operations of the company was ₹ 418.04 crore and the assessee had also raised capital of ₹ 7.90 crore, apart from receiving interest free deposit of ₹ 10.03 crore. The assessee submitted before the first appellate authority that the balance-sheet of the assessee adequately depicted that there were enough interest free funds at its disposal for making investment. The ld. CIT(A) got convinced with the assessee s submissions and deleted the addition. Before the Tribunal, it was contended on behalf of the Revenue that the shareholders funds were utilized for the purchase of its assets and hence the assessee was left with no reserve or own funds for making investment in the sister concern. Thus, it was argued that the borrowed funds had been utilized for the purpose of making investment in the sister concern and the disallowance of interest was rightly called for. The Tribunal, on appreciation of facts, recorded a finding that the assessee had sufficient funds of its own for making investment without using the interest bear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position in the context of section 14A, the Hon'ble Karnataka High Court in CIT Anr vs. Microlabs (2016) 383 ITR 490 (Kar) has held that when investments are made from common pool and non-interest bearing funds are more than the investment in tax free securities, no disallowance of interest expenditure u/s 14A can be made. This view has been taken by following the judgment of the Hon'ble Bombay High Court in CIT vs. HDFC Bank Ltd. (2014) 366 ITR 515 (Bom) . It is further observed that this issue is no more res integra in view of the recent judgment delivered by the Hon'ble Supreme Court in Godrej Boyce Manufacturing Company Ltd. vs. DCIT (2017) 394 ITR 449 (SC), in which it has been held that when interest free funds in the form of share capital and reserves are more than investments, then no disallowance of interest can be made u/s 14A. 8. Adverting to the facts of the instant case, we find that the assessee s share capital along with reserve and surplus is many times higher than the amount invested in shares etc. yielding exempt income. Applying the ratio of the above referred decisions, we are of the considered opinion that no disallowance can be sust ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the order passed by the Tribunal for the assessment year 2006-07 has been upheld by the Hon'ble Delhi High Court and, further, the SLP filed by the Revenue has been dismissed. This position has not been controverted by the ld. DR. In view of the fact that the ld. CIT(A) deleted the addition by relying on the Tribunal order, respectfully following the precedent, we uphold his decision on this issue. This ground is not allowed. 13. Ground No.3 is against the deletion of disallowance of ₹ 28,36,740/- made by the Assessing Officer on account of disallowance of brokerage expenses. The Assessing Officer noticed that the assessee was recognizing income on the basis of Percentage of completion method . Invoking the matching principle, the Assessing Officer held that the brokerage paid was also to be correlated with the revenue declared from various projects. This resulted into an addition of ₹ 28,36,740/-. The ld. CIT(A) deleted the addition. 14. Having heard the rival submissions and perused the relevant material on record, it is noticed that similar issue was raised in DLF Ltd. s case, which is assessee s sister concern. Vide order dated 11.03.2016, whose copy has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... smissed. 17. Ground No.5 of the Revenue s appeal is against the deletion of addition of ₹ 10 lac made by the Assessing Officer on account of disallowance of expenditure on project not commenced. The assessee paid a sum of ₹ 10 lac to IL FS for pre-feasibility study for integrated Indo- Japanese Enclave Project which was claimed as deduction. The Assessing Officer held that such amount was to be treated as cost of project and, hence, capitalized. He, therefore, made disallowance of ₹ 10 lac which the ld. CIT(A) deleted in the first appeal. 18. Having heard both the sides and perused the relevant material on record, we find that similar issue came up for consideration before the Tribunal in the afore-noted case of DLF Ltd. The Tribunal, after considering all the relevant arguments, has confirmed the deletion of addition in the first appeal. Relevant discussion has been made in paras 212 to 216 of the Tribunal order. Since the facts and circumstances of the instant ground are similar to those already considered and decided by the Tribunal, respectfully following the precedent, we uphold the impugned order on this score. This ground fails. 19. Ground No.6 i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ade by the Assessing Officer on account of partial disallowance of deduction u/s 80IAB of the Act. 22. Briefly stated, the facts of this ground are that the assessee claimed deduction of ₹ 584.93 crore u/s 80IAB in respect of profit from Hyderabad SEZ Project. It was observed that the following expenses were debited to the Profit Loss Account which were not fully/partly allocated in the computation of profits of Hyderabad SEZ Project:- a. Establishment charges Rs.2712.36. lacs b. Finance charges Rs.8575.81 lacs c. Other expenses Rs.4242.01 lacs d. Depreciation Rs.753.80 lacs 23. As regards the Establishment expenses, the Assessing Officer found that there was Establishment cost of ₹ 4.92 crore in respect of senior management. The same, in his opinion, was required to be allocated to the SEZ activity in the ratio of turnover of this activity to other activities. Finance charges of ₹ 8575.81 lac were allocated by the assessee exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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