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2018 (3) TMI 301

n and not the average of all investments. Adverting to the facts of the instant case, it is seen that the disallowance has been made in ignorance of the above mandate of law as approved by the Hon’ble Delhi High Court in ACB India Ltd. vs. ACIT [2015 (4) TMI 224 - DELHI HIGH COURT]. We, therefore, set aside the impugned order and direct the computation of correct amount of disallowance under clause (iii) of Rule 8D(2) accordingly. - It is made clear that if the disallowance under clause (iii) of Rule 8D(2) exceeds the amount of exempt income, then, the disallowance should be restricted to such income alone. If, however, this exercise results in some further relief to the assessee, the same should be granted. - Non-refundable membership fee - Held that:- CIT(A) has deleted the addition by relying on the orders passed by the Tribunal in the assessee’s own case for 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 .....

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eet adequately if the impugned order on this score is set aside and the matter is restored to the file of Assessing Officer for deciding this issue afresh as per law, after allowing a reasonable opportunity of being heard to the assessee. We order accordingly - ITA No.1388/Del/2013 And ITA No.960/Del/2013 - Dated:- 1-3-2018 - SHRI R.S. SYAL, VICE PRESIDENT AND MS SUCHITRA KAMBLE, JUDICIAL MEMBER For The Assessee : Shri R.S. Singhvi, CA For The Department : Ms Rachna Singh, CIT, DR ORDER PER R.S. SYAL, VP: These two cross appeals - one by the assessee and the other by the Revenue - are directed against the order passed by the CIT(A) on 19.12.2012 in relation to the assessment year 2008-09. 2. The first ground of the Revenue s appeal and the first effective ground of the assessee s appeal is against disallowance u/s 14A of the Income-tax Act, 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 exem .....

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t in CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom), has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders funds, presumption stands established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings could be disallowed on the basis that the investments were made out of interest bearing funds. In that case, the AO recorded a finding that a sum of ₹ 213 crore was invested by the assessee out of its own funds and ₹ 1.74 crore out of borrowed funds. Accordingly, disallowance of interest was made to the tune of ₹ 2.40 crore. The assessee argued that no part of interest bearing funds 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 f .....

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Consequently the interest was held to be deductible in full. 6. From the above judgment, it is manifest that there can be no presumption that the shareholders fund of a company was utilized for purchase of fixed assets. If an assessee has interest free funds as well as interest bearing funds at its disposal, then the presumption would be that investments were made from interest free funds at its disposal. Similar view has been taken by the Hon'ble Dehi High Court in CIT vs. Tin Box Company (2003) 260 ITR 637 (Del), holding that when the capital and interest free unsecured loans with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. 7. Applying the above proposition 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 .....

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fundable membership fees. However, only a sum of ₹ 8,14,58,880/- was recognized as income. The Assessing Officer made addition for the remaining amount of ₹ 1,28,58,591/- by relying on the view taken by him for the assessment years 2006-07 and 2007-08 in assessee s own case. The ld. CIT(A) deleted the addition by relying on the orders passed by the Tribunal in the assessee s own case for the assessment years 2006-07 and 2007-08. The Revenue is aggrieved against such deletion of addition. 12. After hearing the rival submissions and perusing the relevant material on record, it is observed that the ld. CIT(A) has deleted the addition by relying on the orders passed by the Tribunal in the assessee s own case for 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 issu .....

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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 by the assessee is not of the trading nature. We, therefore, uphold the impugned order on this score. Both the grounds stand dismissed. 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 .....

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remaining amount of brokerage should be adjusted against the income in succeeding years. We are unable to appreciate this stand point of the Assessing Officer. Obviously, when an expenditure has been incurred on account of brokerage for letting out of property, the same has to be allowed as deduction in the year of incurring/payment itself. It is not permissible to allow expense on account of brokerage to the extent of income earned during the year and then carry forward such unabsorbed expenditure to the succeeding years for set off against the future income. We, therefore, approve the view taken by the ld. CIT(A) on this score. This ground is not allowed. 21. The last ground of the Revenue s appeal is against the deletion of addition of ₹ 10,99,46,632/- made 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 o .....

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