TMI Blog2018 (9) TMI 624X X X X Extracts X X X X X X X X Extracts X X X X ..... rest was paid by assessee to Mr. PD Lakhani however, on behalf of Mr. PD Lakhani the assessee paid same amount to the loan account of Mr. PD Lakhani with the bank. Merely because the same amount has been deposited by the assessee in the bank account of the lender to the assessee but borrower of the bank does not make any difference as assessee has incurred an interest expenditure of ₹ 1 575000/– on which tax was required to be deducted u/s 194A of the act. In view of this, we do not find any infirmity in the order of the learned CIT (A) in confirming the above disallowance. With respect to the advertisement expenditure assessee could not give any explanation why tax has not been deducted on the same amount therefore in absence of any explanation disallowance require to be confirmed - decided against assessee Disallowance u/s 14A - Held that:- No doubt, the assessee may have made the investment in order to gain control of the investee company. However, that does not appear to be a relevant factor in determining the issue at hand. Fact remains that such dividend income is non-taxable. In this scenario, if expenditure is incurred on earning the dividend income, that much of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r during the assessment proceedings before the AO nor during appellate proceedings before the ld CIT(A). It has neither filed any calculation nor any certificate from actuary for calculation of liabilities of gratuity and earned leave. 3. Grounds of appeal raised by assessee are as under:- 1. That the order passed by the ld CIT(A)-2, Faridabad is bad in law and on facts. 2. That the ld CIT(A) erred in confirming the disallowance of legal and professional charges of ₹ 16.60 lacs holding the same to be of capital expenditure. 3. That the ld CIT(A) has erred in confirming the disallowance of ₹ 2372070/- u/s 40(ia) of Income Tax Act, 1961. 4. That the ld CIT(A) has erred in confirming the disallowance of interest and other expenditure of ₹ 380023/- u/s 14A of the Income Tax Act, 1961 and as per Rule 8D(2)(iii) of Income Tax Rules. 4. Despite notice, none appeared on behalf of assessee and therefore the issue is decided on the merits of the case as per information available on record. 5. The learned departmental representative vehemently supported the order of the lower authorities in appeal of the assessee. With respect to appea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al fees paid to an architect is for the purpose of construction of building and is capital in nature. Before the lower authorities, assessee could not show that how the architect fee paid is not a capital expenditure. In view of this ground number 2 of appeal of assessee is dismissed. 10. Ground number 3 is with respect to conformation of disallowance of ₹ 2 372070/ u/s 40 (a) (ia) of the income tax act. Facts leading to above disallowance shows that assessee has debited advertisement and interest expenditure on which tax has not been deducted at source. The learned assessing officer enquired that why disallowance should not be made for failure to deduct tax at source. It was stated by the learned authorized representative that the loan was taken by the company through Mr. Lakhani and interest is directly paid to the bank and not to Mr . Lakhani. The learned AO did not believe the explanation of assessee and held that even if the loan is taken by Mr. PD Lakhani which has been given to the assessee, it is not material that interest has been paid directly by the assessee to the bank. Therefore he disallowed the amount of interest on which no tax has been deducted by the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that investments were made in group companies for promotion of business or commercial expediency and therefore provisions of section 14 A do not apply. The learned assessing officer did not believe explanation and noted that 0.5% of the average investment of ₹ 7 6004625/ is worked out at ₹ 380023/ in terms of rule 8D and therefore same is thus allowed. The matter reached before the learned Commissioner of income tax (Appeals) who confirmed above disallowance. 13. We have carefully considered the contentions raised by the assessee before the lower authorities as well as the arguments of the learned departmental representative. In the present case assessee has made investment in several group companies and stated that provisions of section 14 A of the act does not apply as these are all investment in group companies for the purpose of business expediency of the assessee. It is not the case where the assessing officer has disallowed any interest expenditure u/s 14 A of the act only issue involved is whether 0.5% of the average investment made by the assessee in these companies is required to be disallowed u/s 14 A of the income tax act or not. Such an content ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the income tax authorities. It is noticed that the CBDT has issued Circular No. 3 of 2018 dated 11.07.2018, vide which it has revised the monetary limit to ₹ 20,00,000/- for not filing the appeal before the Tribunal, the said circular reads as under: Subject: Revision of monetary limits for filing of appeals by the Department before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court measures for reducing litigation-Reg. Reference is invited to Board's Circular No. 21 of 2015 dated 10.12.2015 wherein monetary limits and other conditions for filing departmental appeals (in Income-tax matters) before Income Tax Appellate Tribunal, High Courts and SLPs/appeals before Supreme Court were specified. 2. In supersession of the above Circular, it has been decided by the Board that departmental appeals may be filed on merits before Income Tax Appellate Tribunal and High Courts and SLPs/appeals before Supreme Court keeping in view the monetary limits and conditions specified below. 3. Hen cefo rth, app eals /SLP S No Appeals/SLPs in Income-tax matters ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n more than one assessment year, appeals shall be filed in respect of all such assessment years even if the tax effect is less than the prescribed monetary limits in any of the year(s), if it is decided to file appeal in respect of the year(s) in which tax effect exceeds the monetary limit prescribed. In case where a composite order/judgement involves more than one assessee, each assessee shall be dealt with separately. 6. Further, where income is computed under the provisions of section 115JB or section 115JC, for the purposes of determination of 'tax effect', tax on the total income assessed shall be computed as per the following formula- ( A - B) + (C - D) where, A = the total income assessed as per the provisions other than the provisions contained in section 115JB or section 115JC (herein called general provisions); B = the total income that would have been chargeable had the total income assessed as per the general provisions been reduced by the amount of the disputed issues under general provisions; C = the total income assessed as per the provisions contained in section 115JB or section 115JC; D = the total income that woul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich read as under : ( 4) The Appellate Tribunal or Court, hearing such appeal or reference, shall have regard to the orders, instructions or directions issued under subsection (1) and the circumstances under which such appeal or application for reference was filed or not filed in respect of any case. 9. As the evidence of not filing appeal due to this Circular may have to be produced in courts, the judicial folders in the office of Pr. CsIT/CsIT must be maintained in a systemic manner for easy retrieval. 10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: ( a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or ( b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra fires, or ( c) Where Revenue Audit objection in the case has been accepted by the Department, or ( d) Where the addition relates to undisclosed foreign assets/bank accounts. 11. The monetary limits specified in p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ircular No. 3 of 2018 dated 11.07.2018 is hereby amended as under: 10. Adverse judgments relating to the following issues should be contested on merits notwithstanding that the tax effect entailed is less than the monetary limits specified in para 3 above or there is no tax effect: a) Where the Constitutional validity of the provisions of an Act or Rule is under challenge, or (b) Where Board's order, Notification, Instruction or Circular has been held to be illegal or ultra vires, or (c) Where Revenue Audit objection in the case has been accepted by the Department, or (d) Where addition relates to undisclosed foreign income/undisclosed foreign assets (including financial assets)/undisclosed foreign bank account. Where addition is based on information received (from external sources in the nature of law e enforcement agencies such as CBI/ED/DRI/SFIO/Directorate General of GST Intelligence (DGGI). (f) Cases where prosecution has been filed by the Department and is pending in the Court. 4 . The said modification shall come into effect from the date of issue of this letter. 5. The same may be brought to the knowledge of all officers working ..... X X X X Extracts X X X X X X X X Extracts X X X X
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