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2013 (7) TMI 993 - AT - Income TaxAddition incurred by the Assessee as his share for the repair of Khodginim road - Held that - Supreme court in the case of L.H sugar factory and oil mills (1980 (8) TMI 1 - SUPREME Court ) where in it is held that when a road is constructed in order to facilitate transport of sugarcane to sugar factory and the outflow of the manufactured sugar to the market, such construction facilitates the business operation of the assessee and enables the assessee to conduct the business more efficiently and profitably. Though the advantage may be of long duration as the roads would last long, nevertheless, it would not be an advantage in the capital field, as no tangible or intangible asset was acquired by the assessee, nor was there any addition to, or expansion of the profit-making apparatus of the assessee. - Decided in favour of assessee Depreciation on the purchase of UPS - Held that - The facts relating to this ground are that the Assessee has claimed Depreciation @ 60% treating it to be part of computer while the AO allowed Depreciation @ 15%. The Assessee went in appeal. CIT(A) decided in favour of the Assessee. After hearing the rival submissions, we noted that this issue is duly covered by the decision of Hon ble Delhi High Court in the case of CIT vs. Orient Ceramics and Industries 2011 (1) TMI 26 - DELHI HIGH COURT . No contrary decision was brought to our knowledge.Respectfully following the decision of the Hon ble Delhi High Court, we confirm the order of CIT(A). Thus, this ground stands dismissed. Disallowance made u/s 14A r/w Rule 8D - Held that - Respectively following the decision of the jurisdictional High Court in the case of Godrej & Boyce Mfg. co. Ltd. Vs. DCIT & another 2010 (8) TMI 77 - BOMBAY HIGH COURT we delete the disallowance made u/s 14A r.w. Rule 8D Non deduction of tds u/s 195 - disallowance towards the payment of the sales commission to the non-resident agents - Held that - In the present case, it is significant to note that assessee is an established iron ore exporter and has been exporting iron ore to the same countries year after year for substantially long time. It is also observed that the assessee has been transacting with known business concerns and therefore, there was no real necessity for an agent to render any service for promoting sales with such concerns with whom the assessee has been transacting for long. As far as Mitusi & Co., Japan, is concerned, it is pertinent to note that assessee has been exporting iron to this concern for substantially long time,which should normally not require any sales promotion. Considering the facts of the case as discussed above, the assessee has not been able to substantiate the claim for payment of commission to non-resident agents by adducing specific and tangible evidence to demonstrate that services were rendered by the sales agents to justify commission payment as claimed by the assessee. Therefore, in view of the above, it is held that the commission payment which is claimed to have been paid to non-resident agents cannot be allowed as business expenditure u/s 37 of the I.T. Act, and therefore, the disallowance made by the Assessing Officer is accordingly confirmed.
Issues Involved:
1. Disallowance under Section 14A of the Income Tax Act read with Rule 8D of Income Tax Rules. 2. Allowability of expenditure on repair of Khodginim road. 3. Depreciation on purchase of UPS. Issue-wise Detailed Analysis: 1. Disallowance under Section 14A of the Income Tax Act read with Rule 8D of Income Tax Rules: The Assessee appealed against the disallowance made by the Assessing Officer (AO) under Section 14A read with Rule 8D, which pertains to the expenditure incurred in relation to income not forming part of the total income. The AO noted the Assessee had received dividend income of Rs. 17,55,205 but had not disallowed any expenditure under Section 14A. The AO rejected the Assessee's claim that no expenditure was incurred for earning the dividend income and applied Rule 8D to compute the disallowance, resulting in a disallowance of Rs. 65,60,054. The Assessee contended before the CIT(A) that the interest did not relate to the money invested in mutual funds but to loans taken for plant and machinery. The CIT(A) directed the AO to rework the disallowance as per Section 14A and Rule 8D, acknowledging calculation mistakes. The Tribunal emphasized that the AO must record satisfaction regarding the correctness of the Assessee's claim before applying Rule 8D. The Tribunal found that the AO had not recorded any satisfaction regarding the accounts of the Assessee and had directly applied Rule 8D, which is not permissible. Citing the decision in the case of Sesa Goa Ltd. vs. JCIT, the Tribunal deleted the disallowance made under Section 14A, reiterating that the AO must first ascertain a proximate connection between the expenditure incurred and the income not forming part of the total income. 2. Allowability of expenditure on repair of Khodginim road: The Revenue appealed against the CIT(A)'s decision to allow the expenditure of Rs. 25,35,800 incurred by the Assessee on the repair of Khodginim road. The AO had disallowed this expenditure, holding that it was not incurred for business purposes and was not revenue expenditure. The Assessee argued that the expenditure was necessary for the efficient operation of its business, as the road was crucial for transporting iron ore from its mines. The CIT(A) allowed the expenditure, relying on the decisions of the Hon'ble Supreme Court in L.H. Sugar Factory vs. CIT and the Madras High Court in CIT vs. Coats Vyella India Ltd. The Tribunal upheld the CIT(A)'s decision, noting that the road was public property, not owned by the Assessee, and the expenditure was incurred to facilitate the Assessee's business operations. The Tribunal confirmed that the expenditure was revenue in nature and not capital expenditure, aligning with the decision in the case of Chowgule & Co. Ltd. vs. ACIT. 3. Depreciation on purchase of UPS: The Revenue contested the CIT(A)'s decision to allow depreciation at 60% on the purchase of UPS, which the AO had allowed at 15%. The Assessee claimed the higher depreciation rate, treating the UPS as part of the computer system. The Tribunal noted that the issue was covered by the decision of the Hon'ble Delhi High Court in CIT vs. Orient Ceramics and Industries, which supported the Assessee's claim. The Tribunal upheld the CIT(A)'s decision, confirming the higher depreciation rate for the UPS. Conclusion: The Tribunal allowed the Assessee's appeal regarding the disallowance under Section 14A and upheld the CIT(A)'s decisions on the expenditure for road repair and the higher depreciation rate for the UPS. The Revenue's appeal was dismissed.
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