TMI Blog2021 (10) TMI 619X X X X Extracts X X X X X X X X Extracts X X X X ..... movable properties located at Hyderabad are stock-in-trade of the assessee. Thus, once the immovable properties located at Hyderabad have been held as stock-in-trade, they cannot be treated as capital asset in terms of section 2(14)(i) of the Act. Thus, any expenditure related to stock-in-trade has to be considered as revenue expenditure. - Decided in favour of assessee. Disallowance u/s 14A of the Act r.w.r. 8D - suo-moto disallowance made by assessee - HELD THAT:- As total administrative and management expenses claimed by the assessee is little more than ₹ 13 lakhs; whereas, the assessee has disallowed an amount of ₹ 7.84 lakhs under section 14A of the Act. Admittedly, the disallowance computed by the assessing officer only relates to administrative expenditure under rule 8D(2)(iii). Therefore, when the assessee has disallowed more than 50% of the total expenditure claimed, no further disallowance is called for. Assessee s claim that the disallowance should be restricted to ₹ 2 lakhs as held by the Tribunal in assessment year 2006-07, we are unable to accept such contention. Firstly, in assessment year 2006-07, rule 8D was not applicable. Secondly, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough, by virtue of an order of the Hon ble Andhra Pradesh High Court, a part of Nizam s immovable properties was given to the assessee; however, the subject properties were under legal dispute as some of them were acquired by government or government agencies and the assessee is not in possession of the properties. He found, part of the legal expenses is relating to dispute between assessee and one Dr. P.S. Prasad appointed as power of attorney holder to look after Nizam s property acquired by the assessee. Though, the assessee claimed that the properties in question have been treated as stock-in-trade and the compensation received has been offered as business receipt; however, the assessing officer was unconvinced. He held that since the assessee has no possessory right over the properties and the legal expenses incurred by the assessee are for acquiring/improving title over the property, they cannot be treated as revenue expenditure. Accordingly, he disallowed the legal expenses of ₹ 1,34,89,610/-. When the dispute came before learned Commissioner (Appeals), he observed that in respect of interest acquired by the assessee in couple of properties at Hyderabad and Pune, the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 6. DCIT vs B Kumar Gowda (2017) 396 ITR 386 (Kar) 5. Strongly relying upon the observations of the assessing officer, learned departmental representative submitted, the subject properties were never in the possession of the assessee. He submitted, when the assessee is neither the owner of the properties nor was in possession, the properties cannot be treated as stock-in-trade of the assessee. He submitted, in any case, what the assessee had acquired is an interest in capital asset. Therefore, any expenditure incurred to acquire or improve upon the title of such capital asset would also be of capital nature. Thus, the assessee cannot be allowed the deduction claimed. He submitted, when the appellate authority has not discarded the reasoning of the assessing officer regarding the nature and character of the property, he should not have allowed a part of the expenditure. 6. We have considered rival submissions and perused materials on record in the light of decisions relied upon. Undisputedly, the issue arising for consideration is, whether the legal expenses incurred by the assessee along with service-tax component computed thereon aggregating to ₹ 1,35,89,61 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bject properties are held as stock-in-trade. In view of the aforesaid, we hold that the legal expenses claimed by the assessee, being in the nature of revenue expenditure, are allowable. Accordingly, we delete even the partial disallowance sustained by learned Commissioner (Appeals). Accordingly grounds in assessee s appeal are allowed and ground 1 in revenue s appeal is dismissed. 8. The only other surviving issue as per ground 2 and 3 of revenue s appeal and the grounds raised in the cross objection relate to disallowance made under section 14A of the Act r.w.r. 8D. 9. Briefly the facts are, in course of assessment proceedings, the assessing officer noticed that in the year under consideration, the assessee has earned exempt income by way of dividend amounting to ₹ 34,30,88,643/-. Whereas, the assessee has suo motu disallowed an amount of ₹ 7,84,584/- under section 14A of the Act. Being of the view that the assessee has not computed the disallowance in terms of Rule 8D, the assessing officer proceeded to compute disallowance by applying rule 8D and worked out a disallowance of ₹ 1,43,59,665/- under rule 8D(2)(iii). Since, the assessee has already disallowe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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