9911796707
TMI Blog2014 (4) TMI 1252X X X X Extracts X X X X X X X X Extracts X X X X ..... orresponding assessment order passed u/s 143(3) dated 23.12.2009 are that the assessee company is in the business of manufacturing of suiting etc. It was noted by the Assessing Officer that during the year, the assessee has earned dividend income of interest on UTI amounting to Rs. 44,85,867/- and Rs. 48,39,914/- respectively. In respect of the said income, the assessee had claimed exemption u/s. 10(34) and u/s. 10(35) of I.T. Act. The objection of the Assessing Officer was that as per the provisions of section 14A, no deduction was to be allowed in respect of the expenditure incurred by the assessee in relation to the aforementioned income because that income had not formed part of the total income. In addition to the invocation of section 14A, the Assessing Officer has also invoked Rule 8D of I.T. Rules. The assessee's reply was that the investment for earning the said exempted income was from the internal accrual of the company. The assessee's reply before the Assessing Officer was as under: "3.2. The assessee has replied to this query vide its letter dated 14.12.2009. It is stated that during the year under consideration, dividend of Rs. 44,85,867 and interest of tax free UT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24/-. The assessee has cited in support of the argument, the decision of Hero Cycles and the decision of late Vinod Kumar Chiraniya 129 TTJ 41. The Ld. CIT(A) was not convinced and affirmed the action of the Assessing Officer in the following manner: "After giving careful consideration to the submissions made and the facts brought on record as also the law in this regard, I find that the provisions of section 14A have rightly been invoked by the AO in this case. In view of the express provision of section 14A of the Act, expenditure has to be worked out even if the same is not admitted by the tax payer. Moreover, as rightly pointed out by the AO, there is no law that if there are internal accruals, the investment in exempted income earning transactions has necessarily to be presumed from such internal accruals. Therefore, this plank of the appellant in the absence of demonstrative evidence has to be rejected. Further in view of the express provisions of the Act such expenditure has to be worked out as per the provisions of the Rule 8D. Therefore this ground is rejected." 4. In the light of above, factual background, we have heard both the sides. It is worth to note at the outs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... made. 7. The Ld. CIT(A) has affirmed the action of the Assessing Officer in the following manner: "After giving careful consideration to the submissions made and the facts of the case, I am of the considered opinion that the appellant has acquired the benefits of enduring nature on account of such expenditures as noted above. The AO has rightly pointed out that the expenditure incurred on water proofing treatment/process is not in the nature of repairs but in the nature of value addition to the existing assets and the resultant benefit is enduring in nature. Similarly, installation of new corrugated sheets cannot be considered as repairs as the new assets were acquired, the benefit of which would spill over several years. Accordingly, it is held that the AO has rightly capitalized these expenditures." 8. Having heard the submission of both the sides, we are of the view that such type of expenditure pertaining to waterproofing and related to corrugated sheets were nothing but Revenue expenditure. It is wrong to presume that an independent asset was created by the assessee. Our attention was drawn on an order of ITAT 'B' Bench pronounced in assessee's own case for AY 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee's explanation was that a sum of Rs. 4,96,00,000/- was invested in the said subsidiary company out of the internal accruals of the current financial year. Although the investment was made to earn income as per assessee's explanation, but no income was earned during the year. The Assessing Officer has noted that if the assessee had huge reserves and surplus then what was the need to take term loan and to pay the interest on the loan. The assessee had paid interest of Rs. 1,91,35,167/-. So, the objection was that on one hand, the assessee was paying huge interest on borrowings, but on the other hand huge amount was invested in equity shares of subsidiary company. Therefore, as per Assessing Officer, interest to the extent of investment in subsidiary company was to be disallowed at the rate on which the assessee was paying interest. It was found by the Assessing Officer that the assessee was paying interest at the rate of 9.5% on the borrowings, therefore applying the same rate of interest on the invested amount, the Assessing Officer had calculated disallowance of Rs. 66,97,495/-. 2.2 The Ld. CIT(A) was of the view that the investment made for purchase of shares was assessee' ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
