TMI Blog2021 (11) TMI 412X X X X Extracts X X X X X X X X Extracts X X X X ..... he Ld. CIT(A) warranting our interference. Disallowance on account of interest on delayed payment and TDS written off - HELD THAT:- The assessee duly explained to the Ld. CIT(A) that the TDS deducted by other parties was shown receivable by the assessee. However, due to non-supply of the requisite documents- TDS certificates etc by the concerned deductor, the assessee could not claim the TDS refund. Therefore, said amount was written off in the books of assessee. The Ld. CIT(A) observed that since the assessee company could not recover the TDS refund, hence, the same was rightly written off in the books of accounts. He accordingly deleted the disallowance so made by the Ld. AO, The Ld. DR could not point out any infirmity in the Ld. CIT(A)'s findings on this issue, warranting our interference. Therefore, this issue is decided in favour of the assessee. Ground no. 2 of this revenue's appeal is dismissed. Disallowance of interest expenditure invoking the provisions of section 36(1)(iii) - interest on loans and advances given to its subsidiaries - HELD THAT:- As explained that in the F.Y relevant to A.Y 2004-05 i.e. year under consideration, the assessee had acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that own funds of the assessee were much more than the investments made, therefore, the presumption would be that the assessee used its own funds for making this investments - HELD THAT:- CIT(A) has rightly deleted the disallowance made by the AO on this issue applying settled proposition of law. In view of above, we do not find any merit in ground no. 3 of this revenue's appeal - ITA Nos. 2584 to 2588 & 2506/Kol/2019 - - - Dated:- 26-10-2021 - Sanjay Garg, Member (J) And Dr. M.L. Meena, Member (A) For the Appellant : Manish Kanojia, CIT, DR and Ranu Biswas, Addl. CIT, DR For the Respondents : A.K. Tibrewal, AR ORDER Per Bench The captioned are filed appeals by the department relevant to the assessment years 2004-05 to 2007-08 and 2009-10 and one appeal is by the assessee relevant to the assessment year 2007-08. 2. Since common issues are involved in all the appeals, hence, the same have been heard together and they are being disposed off by this common order. 3. First we take up the department's appeal-ITA No. 2584/Kol/2019 for the A.Y 2004-05. ITA No. 2584/Kol/2019 for the A.Y 2004-05. 4. In this appeal the department has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n ₹ 10,000/ J. Registration of Lease Deed ₹ 30,500/ K. Interest on TDS ` ₹ 45,319/ L. TDS Written off ₹ 73,143/ M. Travelling Conveyance ₹ 13,33,954/ N. Personal expenses for Mumbai Office ₹ 56,000/ O. Interest expenses u/s 36(1)(iii) ₹ 2,97,23,922/ ₹ 3,47,75,467/ 7. Though the Ld. AO had made various disallowances of expenditure as noted above, but the Deptt. through this ground has contested the action of the Ld. CIT(A) in deleting the disallowance of expenses aggregating of ₹ 3,47,75,467/- only. It is not coming out from ground no. 1 as to which items of deletion of disallowance of expenses by the Ld. CIT(A) has been contested. However, we find that the Ld. CIT(A) has given his categorical findings about each head of expenditure. The relevant part of the order of Ld. CIT(A) in this respect is reproduced here under:- 06. FI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugned assessment year 2004-05, and this fact has also been recorded by the Ld. AO at the 2nd paragraph of page-3 of the impugned assessment order. It has been submitted by the appellant that the company is in real estate business, and that the business had already been set up and commenced long back. In furtherance of its object of real estate, as submitted by the appellant, the Appellant Company entered into a Joint Venture Agreement with Maharashtra Development Corporation (MIDC) on 12th May, 2003. On further facts, it has been submitted that for better management of the Joint Venture Business, the Appellant Company took on rent an office at Mumbai and employed various staff, and that several expenditures were incurred in the upkeep and maintenance of such Office at Mumbai. The Appellant Company claimed all those revenue expenses incurred at Mumbai Office as its business expenditure, and that the Ld. AO disallowed them only on the ground that during the previous year there were no revenue from any activities other than rental income from property situated at Gurgaon, Delhi. Drawing attention to the details of rent received by the Assessee Company, it was submitted by the appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment of TDS : ₹ 45,319 i. Travelling Conveyance ₹ 13,33,954 j. Personnel Expenses at Mumbai Office : ₹ 56,000 Total : ₹ 39,26,776/- 4. Having carefully examined the issue and the various observations and findings made by the Ld. A.O when disallowing each expenditure, I observe that most of the disallowances have been made by the Ld. A.O on grounds that these amounts represent expenditure claimed when business has not commenced, and/or that they are capital in nature and therefore cannot be allowed as revenue expenses. The Ld. A.O has considered the following payments to be of capital nature, as they were incurred before the commencement of business. (1) Payments to DSK Legal- ₹ 2,85,000/- (2) Payment to Niharika Bissaria for research work- ₹ 2,25,000/- (3) Rent paid for Mumbai Office - ₹ 12,06,482/-.(4) Payment to studio Praxis for Architectural Consultancy fees and (5) ₹ 43,200/- Brokerage paid to Knight Frank India Pvt. Ltd. ₹ 3,24,000/-. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office, and they cannot be rejected merely as the business was not bringi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenditure. IT: Running expenses incurred for period between setting up and commencement of business, is to be allowed as business expenditure [2013] 37 taxmann.com 239 (Delhi) HIGH' COURT OF DELHI Commissioner or Income-tax v. Samsung India Electronics Ltd. SANJIV KHANNA AND SANJEEV SACHDEVA, JJ. IT APPEAL NO. 131 OF 20101(sic) JULY 9, 2013 Section 37, read with section 35D, of the Income-tax Act, 1961 - Business expenditure - Allowability of [Set up of business/Commencement of business] - Whether running expenses from date of setting up of business till date of commencement of business/commercial operation cannot be said to be capital in nature, said expenses are to be allowed as revenue expenditure - Held, yes [Paras 6 7) [In favour of assessee] FACTS The assessee-company was a joint venture of a Korean and an Indian company incorporated on 3-8-1995. The certificate of setting up the business was issued on 3-9-1995. The commercial operations commenced on 1-10-1995. The assessee claimed deduction of various expenditures under section 37 incurred for the period from 3-8-1995 till 30-9-1995. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce finished products have to be undertaken, but business commences when the first of such activities is taken. (Para 7] Thus, the claim of assessee was to be allowed as business expenditure. CASES REFERRED TO Western India Vegetables Products Ltd. v. CIT [1954] 26 ITR 151(Bom.) (para 4), CWT v. Ramaraju Surgical Cotton Mills Ltd. [1967] 63 ITR 478(SC) (para) 4, Sarabhai Management Corpn. Ltd. v. CIT [1991] ITR 151 (SC) (para 4), CIT v. L.G. Electronics (India) Ltd. [2006] 282 ITR 545/[2005] 149 Taxman 166 (Delhi) (para 7) and CIT v, ESPN Software India (P.) Ltd. [2008] 301 ITR 368/[2009] 184 Taxman 452 (Delhi) (para 7). 7. I also find useful reference to the judgment of the Hon'ble Madras High Court in the case Daimler India Commercial Vehicles (P.) Ltd. v. Deputy Commissioner of Income Tax [2019] 107 taxmann.com 243 [Mad) wherein the Hon'ble Court has made certain pertinent observations which deal with the issue as to when the business is stated to be set up and as to the allowability of the business expenses incurred before commencement of the business. [2019] 107 taxrnann.com 243 (Madras) HIGH COURT OF MADRAS Daimler India Commercia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mbai v. PPFAS Asset Management (P) Ltd. PAWAN SINGH, JUDICIAL MEMBER AND RAMIT KOCHAR, ACCOUNTANT MEMBER IT APPEAL NO. 6687 (MUM) OF 2017 [ASSESSMENT YEAR 2013-14] MARCH 13, 2019 Section 37(1), read with section 3 of the Income-tax Act, 1961 and Regulation 21 of the SEBI (Mutual Fund) Regulations, 1996- Business expenditure - Allowability of (Commencement of business] - Assessee was an asset management company incorporated on 8-8-2011. It was required to obtain SEBI approval for undertaking such business-SEBI approved assessee to act as an asset management company on 17-10-2012-Thereafter on 19-12-2012, assessee-company made an application to SEBI for approval of mutual fund scheme of PPFAS Mutual fund- It received certificate from SEBI granting registration for mutual fund scheme of PPFAS Mutual Fund on 8-4-2013 - For relevant year, assessee filed its return claiming deduction of certain business expenses-Assessing Officer took a view that assessee had received certificate granting registration from SEBI approving scheme of Mutual Fund, from 8-4-2013 which enabled it to commence business and since said approval was granted after end of finan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le disallowances. The appellant has referred to Schedule 12 of the Audited financials [placed at Page No. 17 of the Paper Book] and stated that in such Schedule, and an aggregate sum of ₹ 11,78,195 has been charged to Profit Loss account, and that the breakup of the same, which had also been placed before the Ld. AO was as follows;(1) Maintenance charges for vacant period ₹ 8,05,069/- (2) Repairs to Building ₹ 72,041/- and Maintenance Charges of HDFC Bank (Tenant)-₹ 3,01,085/- in all totaling the figure of ₹ 11,78,195/-. It was submitted by the appellant that the first two items (₹ 8,05,069/- + ₹ 72,041/-) was not claimed as deduction for computing the assessable income in as much as the same was disallowed by itself while computing its income declared in the return of income (as evidenced at page No. 1 of the Paper Book). It was further submitted that the third item being the sum of ₹ 3,01,085/- could not have been disallowed by the Ld. AO, in as much as the said amount was not claimed as expenditure. It was pointed out further by the appellant that the sum of ₹ 3,01,085/- was debited as an expenditure but was reimbursed by H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here was no provision in sec. 24 of the Act to allow the same, and that the assessee-company was not rendering any services to the tenants. In appeal, it has been argued by the appellant that it received the rental income of ₹ 1,34,55,170/-. And the same had been credited to the Profit Loss Account, as placed at Page 11 of the Paper Book. The tenant wise details of such rental income were also submitted at page 164 of the Paper Book. It was submitted that moreover in addition to rent received, the t company also received hire charges of ₹ 36,07,422/- from the Tenants for providing additional services of hiring Furniture, Equipments and other services which were not the obligation of the Appellant Company as owner of the property. It was pointed out that the rental income of ₹ 1,34,55,170/- has been offered to be taxed under the head Income from House Property and has been assessed to tax as such, and that the receipt of Hire Charges of ₹ 36,07,422/- was offered by the Appellant Company to be taxed under the head Profits and Gains from Business or Profession and has been assessed as such. It was therefore argued that the impugned amount of expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y ledgers were available with the Ld. AO. In any case, a disallowance of 80% of the claims of expenditure is prima facie excessive and uncalled for. I find that this is a case where a statutory audit has been carried out and necessary expenses certified. The Ld. AO has pointed out any specific item of disallowance under the heads of expenditure as claimed by the appellant-company, or any specific voucher which was not amenable for verification. In the said matter of estimated and ad hoc disallowances, various Hon'ble Courts, including the Hon'ble Jurisdictional ITAT have observed as under:- a. The Income Tax Appellate Tribunal of Delhi in the matter of Bharat Bhushan Sawhney vs. ACIT (ITA No. 5729/Del/2011) pronounced on 31.05.2013 held Resultantly, we hold that the addition made by the Assessing Officer and partly confirmed by the Commissioner of Income Tax(A) is not sustainable in the light of discussions made hereinabove. We are unable to see any valid reason to make ad hoc disallowance and addition only on the basis of imaginary allegation without substantiating the fact that there was some element of inflated claim or personnel use by the assessee. Accordingly, s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l as consumable goods was on ad hoc basis and there was no rational behind the same. The Tribunal also rightly recorded that the AO had not pointed out any specific defect in the vouchers and there was no finding that any expenditure was not found to be genuine or not relating to the business. Similarly in the case of your appellant the addition of ad hoc basis in against the provision of law and is unsustainable. f. The High Court of Punjab Haryana in the matter of CIT vs. S.S.P Pvt. Ltd. (ITA No. 535 of 2010) pronounced on 20.07.2011 held The CIT(A) had concluded that the audited books of account along with vouchers were produced by the assessee and thereafter the AO had failed to show that the said expenditure was not for business purposes. Further, the disallowance was made on ad hoc basis without there being any material which would justify that the amount had been spent for personal use of the directors. The aforesaid findings were confirmed by the Tribunal. The findings of the CIT(A) and the Tribunal have not been shown to be perverse or illegal in any manner, by the learned counsel for the appellant so as to persuade this Court to interfere therewith. No substant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncements it appears that such action by the Ld. AO does not warrant confirmation, especially in a situation where the books are audited, and they have not been rejected by the Ld. AO. The Ld. AO has also not made any adverse comment on the books of accounts or the financial statements. I am of the considered view, that the action of the Ld. AO is not sustainable in the emergent facts and circumstances of the case, and therefore the ad hoc disallowance of ₹ 13,33,954/- is ordered to be deleted. This limb of the ground therefore, stands allowed. 19. I observe that the appellant has not seriously challenged the balance amount of ₹ 56,000/- which has been disallowed by the Ld. AO as personal expenses, and therefore, the said amount appear not to have been pressed during appeal. The action of the Ld. AO in making such addition of ₹ 56,000/- is, therefore, confirmed. Overall, these Ground No. 1 to 4 stands partly allowed, as discussed against each item of addition/disallowance. 9. A perusal of the above findings of the Ld. CIT(A), it reveals that the ld. CIT(A) separately discussed about each head of all expenses and held that the said expenditure was rel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Mahalakshmi Sugar Mills Co. vs. CIT, 123 ITR 429(SC) have held that interest for delay payment of statutory dues is an allowable deduction u/s. 37(1) of the Act. A similar view has also been taken by Hon'ble Supreme Court In the case of Lachmandas Mathuradas vs CIT, 254 ITR 799(SC). Similarly, the Hon'ble Allahabad High Court in the case of Commissioner of Income-tax v. Ishwari Khetan Sugar Mills (Pvt.) Ltd., 272 ITR 224(All) have held that interest on delayed payment of provident fund is an allowable deduction u/s. 37(1) of the Act. Hon'ble Delhi High Court In the case of Commissioner of Income-tax v. Delhi Automobiles, 272 HR 381(Del) has held that interest payments on delayed sales tax is an allowable deduction u/s. 37(1) of the Act. I find that the Hon'ble Jurisdictional ITAT have also decided the matter in favour of the appellant in the case of M/s. Narayani Ispat Pvt. Ltd. (ITAT Kolkata) : ITA No. 2127/Kol/2014 Date of Judgment/Order : 30/08/2017. The Hon'ble ITAT have held that the allowability of interest on delay payment of service tax and decided in favor of assessee. The operational part of the said judgment is as under: 7. We have hea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed as a deduction, Therefore, It was to be held that deduction of interest levied under sections 139 and 215 would not be allowable under section 37. In the above judgment, the claim of the assessee for interest expenses was denied as it defaulted to make the payment of advance tax as per the provisions of the Act. The advance tax is nothing but Income tax only which the assessee has to pay on his income. In the instant case the default relates to the delay in the payment of advance tax and consequently interest was charged on rile delayed payment of advance tax. In the above judgment the Hon'ble Apex Court held that as income Tax paid by the assessee is not allowable deduction and therefore interest emanating from the delayed payment of income tax (advance tax) is also not allowable deduction. However the facts of the instant case before us are distinguishable as in the case before us the interest was paid for delayed payment of service tax TDS. The interest for the delay in making the payment of service tax TDS is compensatory in nature. As such the interest on delayed payment is not in the nature of penalty in the instant case on hand. The issue of delay i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r considered view, the principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce industries Ltd. (supra) is not applicable in the instant facts of the case. Thus, we hold that the Assessing Officer in the instant case has wrongly applied the principle laid down by the Hon'ble Supreme Court in the case of Bharat Commerce Industries Ltd. (supra). We also find that the Hon'ble Supreme Court in the case of Lachmandas Mathura (Supra) has allowed the deduction on account of interest on late deposit of sales tax u/s. 37(1) of the Act. In view of the above, we conclude that the interest expenses claimed by the assessee on account of delayed deposit of service tax as well as TDS liability are allowable expenses u/s. 37(1) of the Act. In this view the matter, we find no reason to interfere in the order of Ld. CIT(A) and we uphold the same. Hence, this. Ground of Revenue is dismissed. 15. I have carefully considered the submissions of the appellant and the observations made by the Ld. AO in the impugned order. I have also perused the various judicial decisions relevant in the matter. In the appellate proceedings, the Ld. AR of the appellant argued that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore eligible for a deduction. In the case of Sutlej Cotton Mills Ltd. v, CIT, the Hon'ble Supreme Court has held that what is material is the factors or the circumstances which cause loss and the nature and character of loss. The Hon'ble Apex Court also opined that if the loss occurred during the course of carrying on the business, it is incidental to and, hence, allowable. Admittedly, in my carefully considered view, the assessee-company suffered loss during the course of carrying on its business. Therefore, same is allowable. In the circumstances, I hold that the disallowance made by the Ld. AO of the impugned amount of ₹ 73,173/- was unsustainable, and, therefore, the same is deleted. This limb of the ground accordingly stands allowed. 14. The assessee duly explained to the Ld. CIT(A) that the TDS deducted by other parties was shown receivable by the assessee. However, due to non-supply of the requisite documents- TDS certificates etc by the concerned deductor, the assessee could not claim the TDS refund. Therefore, said amount was written off in the books of assessee. The Ld. CIT(A) observed that since the assessee company could not recover the TDS refund, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under:- Name of the Subsidiary Op. Balance Cl. Balance Interest Recd Bengal Intelligent Parks(P)Ltd 1,93,39,426 15,79,48,315 1,09,03,286 Boulevard Services (P) Ltd 2,41,99,194 7,59,35,078 71,01,080 BIP Developers (P) Ltd 2,22,00,632 8,28,43,920 63,37,109 BIP Estate Services (P) Ltd 31,81,111 8,86,122 3,39,930 UIH Real Estate Investment Management Co. (P) Ltd 8,95,000 International Biotech Park (P) Ltd 1,92,17,107 Total (A) 6,89,20,363 37,77,25,542 2,46,81,405 Merlin Resources (P) Ltd 46,98,263 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... already made a investment of ₹ 46.57 crores in the said project. The said company along with its subsidiaries were also granted a license by the Director Town Country Planning, Haryana to develop a commercial centre. Seeing the huge potential for development of the said company, the appellant also invested in the said company and made advances for furtherance of its business. The appellant company ultimately acquired the said company M/s. Energetic Construction Pvt. Ltd. in the FY 2007-08, when it became a fully owned subsidiary of the Appellant Company. The financials of the of the said M/s. Energetic Construction Pvt. Ltd. for the AY 2004-05 and onwards are enclosed at Page Nos. 212 to 332. In these facts and circumstances the sums advanced to M/s. Energetic Construction Pvt. Ltd. were for the purpose of business. 10.3 Therefore the proviso to sec. 36(1)(iii) is not applicable to the facts of this case and the Assessing Officer was not justified in disallowing interest of ₹ 2,97,23,922/- paid to HDFC Ltd. 17. Considering the above submissions of the assessee, the ld. CIT(A) deleted the disallowance so made by the Ld. AO on this issue observing as under:- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee company and also assignment of receivables from the aforesaid properties owned by the assessee-company and its subsidiary companies. c. Drawing attention to the Audited Balance Sheet it would contended by the appellant that the Loans advanced to various parties mainly subsidiary companies (Schedule 7 of the audited Balance Sheet) as on 31st March 2003 and 2004 are as under:- Name of the Subsidiary Op. Balance Cl. Balance Interest Recd Bengal Intelligent Parks(P)Ltd 1,93,39,426 15,79,48,315 1,09,03,286 Boulevard Services (P) Ltd 2,41,99,194 7,59,35,078 71,01,080 BIP Developers (P) Ltd 2,22,00,632 8,28,43,920 63,37,109 BIP Estate Services (P) Ltd 31,81,111 8,86,122 3,39,930 UIH Real Estate Investment Management Co. (P) Ltd 8,95,00 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... memorandum and articles of association enclosed in the Paper Book at page nos. 334 to 374. The appellant company made the said investment to gain from the business prospects of the said M/s. Energetic Construction Pvt. Ltd. as the said company had entered into a joint venture with its subsidiary companies for the development of a commercial centre namely World Trade Centre on the land measuring 11.47 acres. The said M/s. Energetic Construction Pvt. Ltd. had already made an investment of ₹ 46.57 crores in the said project. The said company along with its subsidiaries were also granted a license by the Director Town Country Planning, Haryana to develop a commercial centre. Seeing the huge potential for development of the said company, the appellant also invested in the said company and made advances for furtherance of its business. The appellant company ultimately acquired the said company M/s. Energetic Construction Pvt. Ltd. in the FY 2007-08, when it became a fully owned subsidiary of the Appellant Company. The financials of the of the said M/s. Energetic Construction Pvt. Ltd. for the AY 2004-05 and onwards are enclosed at Page Nos. 212 to 332. In these facts and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexus. between the advancing of funds and business interest of the assessee. Some business objective should be sought to have been achieved by extending such interest free advances when the assessee firm/company itself is borrowing funds for running its business. 5. The Hon'ble Supreme Court has also delved into the case where there would be mixed fund at the disposal of the assessee. It further clarifies that under Section 36(1)(iii) the ultimate use of the fund is important. It may not be relevant as to whether the advances have been extended out of the borrowed funds or out of mixed funds which include borrowed funds. The test to be applied in such cases is not the source of the funds but the purpose for which the advances are extended. Having analyzed the facts emerging in the case at hand, 1 observe that the appellant-company was eligible to claim the interest paid of ₹ 2,97,23,922/- to the concerned bank as a eligible business expense, and the action of the td, A.O in disallowing the same cannot be sustained. Such addition by the Ld. A.O is therefore deleted, and the ground of appeal stands allowed. Being aggrieved by the above action of the Ld. CIT( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IT(A) has erred in granting relief to the assessee on account of expenses incurred on Travelling Expenses (11,22,040/-), car Hiring Charges (5,56,674/-), Salary to Mumbai Staff (54,23,326/-), Rent of Mumbai Office of (20,58,768/-), Staff Welfare (Mumbai)(4,19,535/-), Niharika Bisaria Research (3,50,000/-) and Praveen P. Shah (3,35,000/-) accumulating ₹ 1,02,65,343/- for setting up and maintenance of Mumbai office, disallowed during assessment considering it to be Capital in nature. 2. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of expenses incurred on Energetic Construction (2,00,000/-), MR Vomado (7,50,000/-). Bangalore Property (40,000/-), Allianze Bajaj (35,000/-) and Medicas Investor relation (55,559/- accumulating ₹ 10,80,559/- for setting up and maintenance of Bangalore office, disallowed during assessment considering it to be Capital in nature. 3. That on the facts and circumstances of the case and on law, the Ld. CIT(A) has erred in granting relief to the assessee on account of Fin Management Advisory of ₹ 1,65,300/- and MOU of ₹ 12,500/- disal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve been agitated by the appellant in this ground of appeal. I observe that the appellant-company has agitated the various disallowances/additions totaling ₹ 5,42,39,750/- made under different heads as follows: (1) 'Travelling expenses' of ₹ 11,22,040/-, (2) Car Hire' of ₹ 5,56,674/-, (3) 'Salary of Staff of ₹ 54,23,326/-; (4) 'Rent on Mumbai office' of ₹ 20,58,768/-, (5) 'Staff Welfare: of ₹ 4,19,535/-,'(6) Niharika Bisaria for real estate research' of ₹ 3,50,000/- (7) 'Paid to. Praveen P. Shah for CIS work' of ₹ 3,35,000/-, (8) BIP brochure of ₹ 30,000/- (9) 'Energetic Construction' of ₹ 2,00,000/-, (10) 'Legal Fees' of ₹ 7,50,000/- (11) 'Construction Design' of ₹ 40,000/-, (12) 'Lease Hire charges of ₹ 35,000/-, (13) 'Professional charges' of ₹ 55,559/-. (14) 'Consultancy fees of ₹ 1,65,300/-, '(15) Universal Legal' of ₹ 12,500/-, (16) 'Rate Taxes' of ₹ 25,124/-,(17) 'Repair of Mumbai office' of ₹ 1,28,421/-, (18) Misc. expenses of ₹ 11,42,480 ₹ 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame are therefore directed to be deleted. These specific limbs of the Ground of appeal stand allowed. b. Disallowance of Salary to Staff at Mumbai Rent charges paid at Mumbai Office of ₹ 54,23,326/- and ₹ 20,58,768/- respectively: I this matter also, the Ld. A.O, I observe has made the impugned disallowances on grounds that there' were no incomes from the Mumbai Office, and the payments of salary and rent for the Mumbai Office was not justified. I observe that all these expenses were incurred in the setting up and maintenance of the Mumbai Office and they cannot be rejected merely as the business was not bringing positive incomes. Here I observe that the Ld. A.O has admitted to the fact of the date of agreement and the commencement of business, and therefore in my considered view of the matter, there is an inherent contradiction in. the view of the Ld. A.O that the business had not commenced and therefore the expenses ought to be capitalized. As this matter has been dealt extensively and adjudicated in favour of the appellant for the A.Y 2004-05 being decided simultaneously, herein I only record that along similar lines, the claims of-expenditure in this year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the order of the Ld. CIT(A) on these issues and the same (gr. 1 to 3) of revenue's appeal are dismissed. Ground no. 4:: 25. Vide ground no. 4 the revenue has contested the action of the Ld. CIT(A) in respect of deletion of disallowance made by the Ld. AO out of 'interest expenditure' and 'loan processing fees' on account of interest free loans and advances given to its subsidiaries. 26. Both the learned representatives before us submitted that this issue is identical as discussed in ground no. 3 of the revenue's appeal (ITA No. 2584/Kol/2019) for the A.Y 2004-05: 27. In view of findings given above, while deciding the identical issue vide ground no. 3 of revenue's appeal for A.Y 2004-05, this issue is accordingly decided in favour of assessee and the order of the Ld. CIT(A) on this issue is accordingly upheld. Ground no. 4 of revenue's appeal(ITA No. 2585/Kol/2019 for the A.Y 2005-06) is dismissed. Ground no. 5: 28. Vide ground no. 5 the revenue has contested the action of the Ld. CIT(A) in granting relief to the assessee on account of undisclosed income of ₹ 13,70,962/- added by the ld. AO on the basis of data bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in granting relief to the assessee on account of Contractual payment of ₹ 26,68,993/- disallowed by the A.O. u/s. 40(a)(ia) following the observation made by the Auditor. 4. The appellant craves the leave to make any addition alteration, modification etc. of the grounds either before the appellate proceedings, or in the course of appellate proceedings. Ground nos. 1 2: 31. Both the learned representatives submitted before us that this issue raised vide ground no. 1 2 is relating to claim of various expenditure incurred by the assessee for business purposes and relating to disallowance of interest expenditure. This issue has already been discussed by us in earlier paras of this order while adjudicating the identical issue for the AYs. 2004-05 and 2005-06(supra). Since the facts and issues are identical our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 2 of revenue's appeal are dismissed. Ground no. 3 32. Vide ground no. 3 the revenue has contested the action of the ld. CIT(A) in granting relief of ₹ 26,68,993/- disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -ITA No. 2506/Kol/2019 for the A.Y 2007-08 ITA No. 2506/Kol/2019 for the A.Y 2007-08 39. In this appeal, the assessee has taken following grounds of appeal:- 1. That, on the facts and circumstances of the case, Ld. Commissioner of Income Tax (Appeals) erred in confirming the addition of ₹ 2,00,00,000/- arbitrarily made by the Assessing Officer under section 2(22)(e) of the Income Tax Act, 1961 on mere suspicion and surmises. 2. That, the Ld. Commissioner of Income Tax (Appeals) having admitted the additional ground raised by the Appellant Company erred in confirming the addition of ₹ 4,92,76,605 made by the Assessing Officer which was voluntarily offered to tax by the assessee under misconception of law relating to the provisions of section 2(22)(e) of the Act. Ground no. 1 40. The issue taken by the assessee in this appeal is relating to addition made by the Ld. AO u/s. 2(22) (e) of the Income Tax Act on account of deemed dividend. 41. At the outset, the ld. Counsel for the assessee has invited our attention to para 13(3) of the impugned order of the Ld. CIT(A), wherein the Ld. CIT(A) has observed that the action of the ld. AO appears to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the learned representatives of the parties have submitted that this issue is relating to claim of interest expenses incurred by the assessee for business purposes. This issue has already been discussed in earlier paras of this order while adjudicating the identical issue for the AYs. 2005-06, 2006-07, 07-08 and 08-09 respectively (supra). Since the facts and issues are identical our findings given above mutatis mutandis will apply to this issue also. Ground nos. 1 2 of revenue's appeal are dismissed. Ground No. 3 46. The revenue is aggrieved by the action of the ld. CIT(A) in deleting the disallowance made by the Ld. AO u/s. 14A of the Income Tax Act, 1961 on account of expenditure incurred for earning of tax exempt income. 47. The Ld. CIT(A) while decided this issue has observed that own funds of the assessee were much more than the investments made, therefore, the presumption would be that the assessee used its own funds for making this investments.. Relevant part of findings of the Ld. CIT(A) is reproduced as under:- 3. After examining the matter, I observe that he Ld. A.O made this impugned disallowance on similar grounds as the earlier ground No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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