TMI Blog2022 (1) TMI 823X X X X Extracts X X X X X X X X Extracts X X X X ..... 2017 (6) TMI 1124 - ITAT DELHI] . In any case of the matter, learned Commissioner (Appeals) has held that expenses directly relatable to earning of exempt income can be disallowed under Explanation 1(f) to section 115JB(2) of the Act. In view of the aforesaid, we uphold the decision of the learned Commissioner (Appeals) by dismissing the ground raised. Disallowance of legal and professional fees - HELD THAT:- The nature of new business is not a decisive test for determining whether or not there is an expansion of an existing business. What is important is that the control of all business, the existing one as well as the new venture, must be in the hands of one establishment or management or administration. The funds utilized for such business activities must have come from the common source as reflected in the balance-sheet of the company. Therefore, if separate business activities are under common management and funds utilized have come from the common management, the pre-operative expenditure is allowable. In case of CIT vs Euro India Ltd [ 2013 (10) TMI 429 - DELHI HIGH COURT] has observed, where the feasibility report is procured for expansion of existing business and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as discussed hereinbefore. The assessing officer must also examine the applicability of ratio laid down by the Hon ble Gujarat High Court in case of PCIT vs Torrent Private Ltd (supra). assessee s appeal is allowed, for statistical purpose. - I.T.A. No.4444/Mum/2019 And I.T.A. No.4500/Mum/2019 - - - Dated:- 14-12-2021 - Shri Saktijit Dey (Judicial Member) And Shri S. Rifaur Rahman (Accountant Member) For the Assessee : Smt. Aarti Vissanji, AR For the Respondent : Smt. Padmaja Siripurapu [CIT(DR)] / Shri Vijaykumar Menon, Sr DR ORDER PER SAKTIJIT DEY (JM) Captioned cross appeals arise out of order dated 03-04-2019 of learned Commissioner of Income-tax (Appeals)-6, Mumbai for the assessment year 2015- 16. ITA 4444/Mum/2019 (Appeal by revenue) 2. Grounds raised by the revenue are as under:- 1. On the facts and circumstances of the case and in law, the Ld CIT(A) has erred in directing the A.O to exclude appreciating the facts that the assessee has earned exempt dividend income by incurring establishment and administrative expenditure on strategic investment. 2. On the facts and the circumstances of the case and in law, the Ld. CIT(A) ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or assessment years 2013-14 and 2014-15, learned Commissioner (Appeals) directed the assessing officer to disallow only those expenditure which are directly relatable to earning of exempt income, in terms of Explanation 1(f) to section 11JB(2). Further, he held that no disallowance under section 115JB(2) can be made by resorting to section 14A r.w.r. 8D(2). 5. We have considered rival submissions and perused materials on record. Insofar as ground 1 is concerned, in our view, it is totally misconceived. A careful reading of first appellate authority s order clearly reveals that he never directed the assessing officer to exclude strategic investments from the total investments for computing disallowance under rule 8D(2)(iii). He has only directed the assessing officer to exclude those investments, which have not given rise to tax free income as well as the investments on which the assessee had not earned any exempt income during the year. Thus, in our considered opinion, ground 1 does not arise out of the order of learned Commissioner (Appeals), hence,does not merit consideration. Accordingly, dismissed. 6. As far as ground 2 relating to disallowance under section 14A r.w.r. 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee. Thus, she submitted, the expenditure incurred is in the nature of revenue expenditure; hence, has to be allowed. Finally, she submitted, expenditure incurred for procuring feasibility report for expansion of business has to be allowed. In support of such contention, learned counsel relied upon the following decisions:- 1. Jai EngineeringWorks Ltd vs CIT(2008) 166 Taxman 10 (Del) 2. CIT vs Euro India Ltd (2014) 4 taxmann.com 173 (Del) 12. The learned departmental representative strongly relied upon the observations of the assessing officer and learned Commissioner (Appeals). 13. We have considered rival submissions and perused materials on record. We have also applied our mind to the decisions relied upon. Undisputedly, the legal and professional expense claimed by the assessee was disallowed on the reasoning that they are pre-operative expenses before commencement of business activity. From the assessment order itself it is evident that the assessee is engaged in various business activities, such as, providing business investment and promotion of new companies in various fields, etc. It is the contention of the assessee that while carrying out the business activity ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the company, however, due to the continuous loss suffered by the subsidiary, the assessee cannot recover any money from the investment. Therefore, the value of investment is written off in the books of account. The assessing officer observed, while computing income under the normal provisions of the Act, the assessee itself has not claimed the write off of the amount of ₹ 39,70,12,410/-. However, while computing book profit under section 115JB of the Act, the assessee has not added back the amount. Referring to the Memorandum to Finance Act, 2009, the assessing officer observed that since the assessee is still holding the shares, there cannot be actual write off of shares. Liability still exists for Tata Industrial Services Ltd and disposal of assets has not happened to treat the same as write off. He observed, even if any gain / loss occurs on disposal of shares, the assessee can route the proceeds through profit loss account for computing book profit. He observed, the subsidiary is still active and filing returns of income regularly. Thus, ultimately, he concluded that the write off is merely diminution in value of investment squarely falling under Explanation 1(i) to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities, learned departmental representative submitted, the very fact that the assessee has not claimed the deduction while computing income under the normal provisions of the Act makes it clear that it is not an allowable deduction. Therefore, the assessee should have added it back to the book profit computed under section 115JB of the Act. Reiterating the stand taken by the departmental authorities, the learned departmental representative submitted, since the assessee has invested in shares of the subsidiary and still holds such shares, the writing off of the value of shares has actually resulted in diminution in value. Hence, is covered under Explanation 1(i) to section 115JB(2). Further, he submitted, though, the assessee claims to have written off the value of shares in its books, however, it needs to be verified what accounting treatment has been given in the books of the subsidiary. 18. We have considered rival submissions and perused materials on record. We have also applied our mind to the decisions relied upon. As far as the factual aspect of the issue is concerned, there is no dispute that the write off of ₹ 39.70 crores was added back by the assessee itself ..... 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