TMI Blog2023 (9) TMI 544X X X X Extracts X X X X X X X X Extracts X X X X ..... has not satisfied the conditions laid down in proviso of section 36(1)(iii). Accordingly, we find merit in the submission of the ld. DR regarding disallowance of interest claimed as revenue expenditure should be capitalized. In view of the above, ground Nos.1.1 1.2 are rejected. Assessee has claimed that if interest is capitalized, then the assessee is eligible for depreciation on such capitalized portion of interest - We note that 2,35,579 sq.ft. was leased out on different dates as per column 04 of lease commencement and as per col.no.5 of PB page No. 26 , the assessee has raised invoice for rent on different dates, accordingly the assets were put to use for the business of assessee during the year as the date mentioned therein out of 2,35,579sq. ft. the 15075 sq. ft were leased out on 11.07.2017 as per the letter dated 01.09.2023. Therefore the assessee is eligible for depreciation as per section 32(1) r.w.s. 43(1) of the Act. We direct the AO to grant depreciation on interest capitalized as per law and for subsequent years also.We allow ground No.1.3 in the above terms. Disallowance u/s. 14A even when there is no exempt income received by the assessee - We have go ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 14A of the Income Tax Act, 1961. 2.2. On the facts and circumstances of the case, the National Faceless Appeal Center (NFAC), erred in not appreciating the fact that the assessee company has not earned any dividend during the year. 2.3. On the facts and circumstances of the case, the learned, National Faceless Appeal Center (NFAC), erred in not appreciating the fact that the assessee company has not incurred any expenditure towards exempt income and the investment made were out of surplus funds in prior years. 2.4. On the facts and circumstances of the case, the learned National Faceless Appeal Center (NFAC), erred in not considering the principles set out in the order passed by the Honorable Income Tax Appellate Tribunal, Bangalore in the assessee's own case in respect of similar ground of appeal in previous years. The appellant seeks leave to add to, to amend, alter or delete any of the foregoing grounds as and when considered necessary/at the time of hearing. 2. The brief facts are that the assessee is engaged in the business of construction and leasing out of commercial premises. Assessee filed return of income on 30.10.2017 declaring loss of R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y section 14A of the Act should not be made applicable. The assessee submitted that during the year assessee has not received any exempt income, therefore no disallowance can be made and relied on some judgments. The AO proceeded to calculate disallowance u/R 8D(2)(i) of Rs. 2,68,39,060 and u/R 8D(2)(ii) of Rs. 46,67,496 resulting in total disallowance of Rs. 3,15,06,556 and completed the assessment. Aggrieved, the assessee filed appeal before the CIT(Appeals). 7. The CIT(Appeals) after considering the detailed submissions and relying on certain judgments, dismissed the appeal of the assessee. Aggrieved, the assessee is in appeal before the Tribunal. 8. The ld. AR of the assessee reiterated the submissions made before the lower authorities. He further submitted that the total area of building was 7,52,521 sq.ft. out of which 5,16,942 sq.ft. was constructed and let out in the preceding AY and the rest of Rs. 2,35,579 sq.ft. was completed in the impugned AY on different dates. Major portion was completed in the previous AY for which interest has been capitalized and income from rent from MFAR Manyata Tech Park Greenheart Phase IV had been offered for tax in the AY 2017-18. Only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on which such asset was first put to use, shall not be allowed as deduction. (emphasis supplied). Explanation.--Recurring subscriptions paid periodically by shareholders, or subscribers in Mutual Benefit Societies which fulfil such conditions as may be prescribed, shall be deemed to be capital borrowed within the meaning of this clause; 1.2. The above Proviso is clear and unambiguous. It means that the interest for the period upto date of putting an asset to use will be capitalized. The admitted fact is that some part of the building was not let out at all during the year or let out for the first time for part of the year. The assessee had submitted list of tenants with date of commencement of tenancy. This showed since when the property was put to use. Assessing Officer disallowed the interest related to capital borrowed for construction of such portions only. The Supreme Court held in Innamuri Gopalam and Maddala Nagendrudu v State of A. P., 1964 2 SCR 888, 1963 14 STC 742 SC , If the provision is unambiguous and if from the provision the legislative intent is clear, the court need not call into aid the other rules of construction of statutes. The other rules of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act : Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001. Explanation. For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to have always applied in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has not been received during the previous year relevant to an assessment year and the expenditure has been incu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eceived during the year, it amounts to holding that Rs. 20,000/- would be allowed as deduction against non-exempt income of Rs. 1.5 Lakh even though this expense was not incurred wholly and exclusively for the purpose of earning non-exempt income. Such an interpretation defeats the legislative intent of both section 14A as well as section 37 of the Act. 2.5. In the present case, appellant invested Rs. 71.20 crore in equity shares of different companies which did not yield any dividend true, but it very much could yield dividend which is not includible as part of total income under the Act. 2.6. Appellant has submitted copy of Supreme Court's judgment in Oil Industry Development Board v. PCIT in support of his claim. It is seen that in this order Supreme Court has simply refused to grant special leave in view of its earlier judgment in CIT v. Essar Teleholdings Ltd 3 SCC 253. As stated in Para 2 and 3 of the judgment in CIT vs. Essar Teleholdings Ltd (2018) 3 SCC 253, the only two questions answered in the judgment were: (i) Whether sub section (2) and sub section (3) of Section 14A inserted with effect from 01.04.2007 will apply to all pending assessments? (ii) Whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... conditions laid down in proviso of section 36(1)(iii). Accordingly, we find merit in the submission of the ld. DR regarding disallowance of interest claimed as revenue expenditure should be capitalized. In view of the above, ground Nos.1.1 1.2 are rejected. 13. In ground No.1.3, the assessee has claimed that if interest is capitalized, then the assessee is eligible for depreciation on such capitalized portion of interest. We note that 2,35,579 sq.ft. was leased out on different dates as per column 04 of lease commencement and as per col.no.5 of PB page No. 26 , the assessee has raised invoice for rent on different dates, accordingly the assets were put to use for the business of assessee during the year as the date mentioned therein out of 2,35,579sq. ft. the 15075 sq. ft were leased out on 11.07.2017 as per the letter dated 01.09.2023. Therefore the assessee is eligible for depreciation as per section 32(1) r.w.s. 43(1) of the Act. We direct the AO to grant depreciation on interest capitalized of Rs. 3,28,69,300 as per law and for subsequent years also. Accordingly, we allow ground No.1.3 in the above terms. 14. Ground Nos. 2.1 to 2.4 raised by the assessee are in regar ..... X X X X Extracts X X X X X X X X Extracts X X X X
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