2016 (1) TMI 647 - AT - Income Tax

Disallowance u/s 14A - Held that - In the present case the assessee has earned exempt dividend income of 2, 715/-. The assessee has not admitted any expenses to earn the above dividend income. The Assessing Officer disallowed the expenses to the tune of 2, 33, 324/- by invoking section 14A r.w.r. 8D. By taking into consideration of the facts and circumstances of the present case and keeping in view of thedecision of n the case of Joint Investments Pvt. Ltd. v. CIT 2015 (3) TMI 155 - DELHI HIGH COURT we are of the opinion that the Assessing Officer is not justified in making excessive disallowance. Therefore we restrict the disallowance made by the Assessing Officer to the extent of exempt income earned by the assessee and accordingly the ground raised by the assessee is allowed. - Decided in favour of assessee Disallowance under section 36(1)(va) - employees contribution of PF has not been remitted within the due dates under the PF Act - CIT(A) deleted the disallowance - Held that - It is not disputed by the Revenue that the assessee has not paid the employees contribution received by it before the due date of filing of the return. The Hon ble Jurisdictional High Court in the case of CIT v. Nexus Computer (P) Ltd. 2008 (8) TMI 304 - MADRAS HIGH COURT has held that the PF and ESI contribution paid belatedly but prior to due date of filing of return could not be disallowed under section 43B of the Act. Therefore we direct the Assessing Officer to delete the addition made on this issue. Accordingly the ground raised by the Revenue is dismissed. - Decided in favour of assessee Disallowance of expenditure claimed as revenue in nature under section 37 - Held that - Assessee has not constructed any annexe to the existing building. Further the Revenue could not prove that there is an addition to the rooms/restaurant of the existing building or created any annexe to the building as contended by the ld. DR. Under the above facts and circumstances we find that the ld. CIT(A) has rightly followed the decision of the Hon ble Jurisdictional High Court in the case of CIT v. Ooty Dasaprakash (1998 (2) TMI 77 - MADRAS High Court) wherein observed that the expenditure incurred by the assessee for the relevant assessment years in repairing and modernising the hotel and replacing the existing components of a portion of the building furniture and fittings could not at all be stated to be of enduring in nature in the nature of being a capital expenditure; but definitely such an expenditure would fall under the category of revenue expenditure in nature to be allowed . No infirmity in the order passed by the ld. CIT(A) and accordingly the ground raised by the Revenue is dismissed. - Decided in favour of assessee

Summary

Issues:
1. Disallowance under section 14A of the Income Tax Act, 1961.
2. Disallowance under section 36(1)(va) towards payment to PF.
3. Allowability of current repairs under section 37 of the Act.

Issue 1: Disallowance under section 14A of the Income Tax Act, 1961:
The case involved cross-appeals against the order of the ld. CIT(Appeals)-III, Chennai, regarding the assessment year 2008-09. The primary issue was the confirmation of an addition of Rs. 2,33,324 made under section 14A of the Act concerning the earning of a dividend of Rs. 2,715. The Assessing Officer computed the disallowance under section 14A r.w. Rule 8D, considering the specialized attention required to monitor investments. The ld. CIT(A) confirmed the disallowance. The Tribunal, referring to the Hon'ble Delhi High Court's decision, restricted the disallowance to the extent of the exempt income earned by the assessee, allowing the assessee's appeal.

Issue 2: Disallowance under section 36(1)(va) towards payment to PF:
The Revenue's appeal challenged the deletion of disallowance under section 36(1)(va) of the Act related to PF contributions not remitted on time. The ld. CIT(A) allowed the ground based on precedents and the Hon'ble Jurisdictional High Court's decision. The Tribunal, following the High Court's ruling, directed the Assessing Officer to delete the addition, dismissing the Revenue's appeal on this issue.

Issue 3: Allowability of current repairs under section 37 of the Act:
The Revenue's appeal also contested the treatment of capital expenditure as revenue in nature under section 37 of the Act. The Assessing Officer classified a portion of the expenditure as capital, relating to renovation of a hotel property. The ld. CIT(A) treated the expenditure as revenue, aligning with the Hon'ble Jurisdictional High Court's decision. The Tribunal upheld the ld. CIT(A)'s decision, emphasizing that the repair works did not involve creating a new asset, thus dismissing the Revenue's appeal on this issue.

In conclusion, the Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, addressing the issues of disallowance under section 14A, disallowance under section 36(1)(va) towards PF payment, and the treatment of capital expenditure as revenue in nature under section 37. The judgments were based on detailed analysis, legal precedents, and factual considerations, ensuring a fair and reasoned outcome in each issue.