TMI Blog2020 (3) TMI 592X X X X Extracts X X X X X X X X Extracts X X X X ..... enses claimed by the assessee, then he would have disallowed the entire expenditure. But he has not done so. Now the controversy arises whether the expenditure claimed by the assessee representing the capital expenditure which are eligible for depreciation. It is the admitted fact that there was no allegation of the revenue to the effect that some asset came into existence out of such expenditure. Further more, we find that major expenses were incurred by the assessee in the name of three parties which were providing services to the assessee as discussed above. On perusal of the same expenses, we find that these expenditure are incurred in routine and therefore no benefit of enduring nature is arising. Similarly, we also note that the expenses incurred on IT consumables are also routine expenses which doesn not bring any fixed asset into existence. See NJ. INDIA INVEST (P.) LTD. [ 2013 (7) TMI 738 - GUJARAT HIGH COURT]. Disallowance u/s 14A r.w.r. 8D - HELD THAT:- As own fund of the assessee exceeds the amount of investment. This fact was also not disputed by the Ld. DR appearing for the Revenue. Accordingly we presume that the investment was made by the assessee out of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ition of ₹ 6,77,67,630/- made on account of disallowance of interest in respect of interest free advances. 2. That the ld.CIT(A) erred in law and on facts in deleting the addition of rs.7,05,498/- made on account of Capital Expenditure (Information Technology Expenses). 3. That the ld.CIT(A) erred in law and on facts in restricting the addition to ₹ 2,610/- from ₹ 13,514 made u/s.14A r.w Rule 8D. 4. That the ld.CIT(A) erred in law and on facts in deleting the addition of ₹ 15,53,966 made on account of income corresponding to TDS and not applying the provisions of sec.199 read with Rule 37BA. 5. The appellant craves to leave, to amend and/or to alter any ground or add a new ground which may be necessary. 2. The first issue raised by the Revenue is that the ''Ld. CIT (A)'' erred in deleting addition made by the AO for ₹ 6,77,67,630/- only on account of diversion of interest bearing funds. 3. The facts in brief are that the assessee in the present case is a limited company and engaged in the business of development sale of plots of land and commercial complexes. The assessee in the year under consideration has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ;'Ld. CIT (A)'' the Revenue is in appeal before us. 5. Both the Ld. DR and Ld. AR before us relied on the order of the authorities below as favorable to them. 6. We have heard the rival contentions of both the parties and perused the relevant materials available on records. Admittedly, the amount of interest free advances stand at ₹ 56,47,30,250/- whereas the own funds of the assessee stands at ₹ 1,15,36,49,790/- only. Undoubtedly, the own interest free funds of the assessee exceeds the amount of interest free advances as discussed above. Therefore, we are of the view that no disallowance of interest expenses on account of diversion of the fund is warranted. In this regard, we find support and guidance from the judgement of Hon ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 wherein it was held as under:- The principle therefore would be that if there are funds available both interest-free and overdraft and/or loans taken, then a presumption would arise that investments would be out of the interest-free fund generated or available with the company, if the interest-free funds were sufficient to meet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... observed that assessee has not provided supporting bills of the impugned expenses to substantiate it claim as revenue expenditure. 8.4 In view of the above, the AO treated the Information Technology Expenditure as capital in nature which are eligible for depreciation. Accordingly, the AO allowed depreication on such expenditure amounting to ₹ 1,32,295/- and added the balance amount of ₹ 7,05,498.00 to the total income of the assessee. Aggreived assessee preferred an appeal to the ''Ld.CIT (A)''. 9. The assessee before the ''Ld.CIT (A)'' claim to have furnished the copies of the ledger of Infromation technology showing the following expenses. Sr.No. Particulars Amount (in Rs.) 1. Facility management cost 7,24,066 2. Network costs 62,187 3. IT consumables 51,540 Total 8,37,793/- 9.1 The assessee further furnished ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re us vehemently supported the order of the authorites below as favourable to them. 11. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the AO in his assessment order has recorded the findings that the assessee has not furnished the supporting evidences to justify the disputed expenditure as revenue in nature. However, we find that the disallowance have been made by the AO treting the same as capital in nature. Thus, it is implied that the AO has not doubted on the genuineness of the expenses claimed by the assessee. Had the AO been doubted on the genuineness of the expenses claimed by the assessee, then he would have disallowed the entire expenditure. But he has not done so. 11.1 Now the controversy arises whether the expenditure caimed by the assessee representing the capital expenditure which are eligible for depreciation. It is the admitted fact that there was no allegation of the revenue to the effect that some asset came into existence out of such expenditure. Further more, we find that major expenses were incurred by the assessee in the name of three parties which were pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... '' erred in restricting the addition made by the AO for ₹ 13,514/- to ₹ 2,610/- under the provision of section 14A r.w.Rule 8D of the Act. 12.1 The assessee in the year under consideration has claimed to have received exempted income amounting to ₹ 4,83,31,975.00. However, the AO found that the assessee has not made any disallowance of the expenses against such income. Therefore he invoked the provision of section 14A r.w. Rule 8D of Income Tax Rules and made the disallowance as under: Sr.No. Particular Amount 1. Direct Expenses Nil 2. Interest Expenses ₹ 10,904/- 3. Administrative Expenses ₹ 2,610/- Total ₹ 13514/- In view of the above, the AO made disallowance of ₹ 13,514/- and added to the total income of the assessee. 13. Aggreived assessee preferred an appeal to the ''Ld.CIT (A)'' who ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon ble Gujarat High Court in the case of UTI Bank Ltd. reported in 32 Taxmann.com 370 where the headnote reads as under : If there are sufficient interest free funds to meet tax free investments, they are presumed to be made from interest free funds and not loaned funds and no disallowance can be made under section 14A . In view of the above proposition, we hold that no disallowance of interest expense claimed by the assessee can be made on account of investment as discussed above. Hence, we do not find any infirmity in the order of the ld. CITA. Hence the ground of appeal of the Revenue is dismissed. 16. The last issue raised by the Revenue is that the ''Ld.CIT (A)'' erred in deleting the addition made by the AO for ₹ 15,53,966/- representing the income as shown in the TDS certificate. 17. The AO during the assessment proceeding found that there were certain entries in the form 26AS showing the TDS deducted by several parties amounting to ₹ 1,16,238/- only which was not claim by the assessee in its income tax return. Accordingly, the AO was of the view that the assessee has not offered the corresponding income representing such TDS ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... end and/or withdraw any ground of appeal either before or during the course of eharing of the appeal. 22. The only issue raised by the assessee is that ''Ld.CIT (A)'' erred in confirming the disallowance of ₹ 1,56,601/- on account of late payment of employees contribution to P.F. 23. At the outset, the Ld.AR for the assessee agreed that the assessee is not eligible for deduction on account of late payment of employees Contributiuon by the order of the Hon ble Gujarat High Court in the case of CIT versus GSRTC reported in 366 ITR 170 wherein it was held as under: In view of the above and considering section 36(1)(va), read with sub-clause (x) of clause (24) of section 2, it is to be held that with respect to the sum received by the assessee from any of his employees to which provisions of sub-clause (x) of clause (24) of section 2 applies, the assessee shall be entitled to deduction in computing the income referred to in section 28 with respect to such sum credited by the assessee to the employees account in the relevant fund or funds on or before the 'due date' mentioned in Explanation to section 36(1)(va). Consequently, it is held that t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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