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2018 (3) TMI 1204 - AT - Income TaxAddition on account of mutation of land - Held that - These payments are in the nature of land revenue charges of lands which prima facie appears to be related to agricultural land. If these expenses are incurred related to agricultural land then in our opinion such land revenue charges paid are not in any manner incurred wholly and exclusively for the purpose of the business as income from agricultural activity is exempted from Income-tax. The letters issued by the land revenue authorities demanding land revenue have been written in Bengali language & script and no English translation has been filed thus we are not able to decide with certainty whether the land in respect of which payment has been made is agricultural land. The Ld. CIT(A) has also not discussed these documents in his order before arriving at conclusion that these expenses are revenue in nature. In such circumstances we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh. Allowability of software expenses - nature of expenditure - Held that - In the instant case we find that the issue before us is in respect of the custom duty of SAP software purchased by the assessee. No details have either been provided by the lower authorities or by the assessee as how the expenditure incurred on purchase of SAP has been dealt by the Assessing Officer. Further there are no facts available on record as in which fields of the business activity the said SAP software has been used by the assessee. For determining whether the expenditure incurred on the software is capital expenditure of revenue expenditure in view of the decision in the case of Asahi India Safety Glass Limited (2011 (11) TMI 2 - DELHI HIGH COURT ) above facts are crucial and in absence of which the issue cannot be decided judiciously. Thus restore the issue to the file of the Assessing Officer for deciding afresh in accordance with law. Addition u/s 14A - Held that - By no stretch of imagination can Section 14A or Rule 8D be interpreted so as to mean that the entire tax exempt income is to be disallowed. The window for disallowance is indicated in Section 14A and is only to the extent of disallowing expenditure incurred by the assessee in relation to the tax exempt income . This proportion or portion of the tax exempt income surely cannot swallow the entire amount as has happened in this case. See Joint Investment Pvt. Limited Vs CIT 2015 (3) TMI 155 - DELHI HIGH COURT Claim of refund of dividend distribution tax paid by the company amalgamated with the assessee - Held that - If the Assessing Officer had not adjudicated the issue the CIT(A) should have directed him to dispose off the application of the assessee. Though the issue in dispute is not part of the income assessment of the assessee however in the interest of natural justice we direct the Assessing Officer to dispose off the application of the assessee dated 18/04/2012 seeking a refund of excess payment of dividend distribution tax in accordance with law. Accordingly ground No. 1 of the assessee is allowed for statistical purposes. Not allowing credit of dividend distribution tax paid - Held that - This issue of credit of the dividend distribution tax paid by M/s Greenfield Commercial Private Limited has been raised first time before us and no facts are available on record. We are of the opinion that if the tax has been paid by the assessee than it is eligible for getting credit of the tax paid in accordance with law and the Revenue cannot hold the amount in unjust manner with it. Though the issue is not emanating from the impugned order in the interest of justice we direct the Assessing Officer to consider the request of the assessee for allowing credit of the dividend distribution tax paid by M/s Greenfield Commercial Private Limited in accordance with law. Amount paid to DLF Golf Club towards membership as refundable security - allowable business expenditure - Held that - The amount of security deposit has been admitted by the assessee as refundable which in our opinion cannot be allowed as revenue expenditure accordingly we uphold the finding of the Ld. CIT(A) on the issue in dispute and dismiss the ground of appeal of the assessee.
Issues Involved:
1. Addition/disallowance on account of mutation of land. 2. Addition/disallowance on account of SAP software license. 3. Addition/disallowance under section 14A. 4. Refund of excess Dividend Distribution Tax. 5. Credit for Dividend Distribution Tax paid by an amalgamated company. 6. Disallowance of payment towards corporate membership of a club. Detailed Analysis: 1. Addition/Disallowance on Account of Mutation of Land: The Revenue contended that the Ld. CIT(A) erred in deleting the addition of ?13,15,248/- made by the AO on account of mutation of land. The AO had disallowed these expenses, considering them as capital expenditure related to land acquisition. The Ld. CIT(A) allowed the deduction, considering them as land revenue expenses. However, the Tribunal found that the Ld. CIT(A) did not provide substantial reasoning or consider the receipts of land revenue expenses. The Tribunal restored the issue to the AO for fresh consideration, directing the assessee to provide necessary documents, including English translations of letters from land revenue authorities. 2. Addition/Disallowance on Account of SAP Software License: The Revenue challenged the Ld. CIT(A)'s decision to treat the SAP software license expenses as revenue expenditure instead of capital expenditure. The AO had treated the expenses as capital expenditure, allowing depreciation at 25%. The Ld. CIT(A) considered the expenses as revenue in nature, citing that computer software is a necessary business tool. The Tribunal noted the need for detailed facts to determine whether the expenditure was capital or revenue in nature and restored the issue to the AO for fresh adjudication, considering the principles laid down by the Hon’ble Delhi High Court in the case of Asahi India Safety Glass Limited. 3. Addition/Disallowance Under Section 14A: The Revenue disputed the Ld. CIT(A)'s decision to restrict the disallowance under section 14A to the amount of dividend income earned (?6,08,000/-) instead of the ?50,35,000/- computed by the AO. The Tribunal upheld the Ld. CIT(A)'s decision, referencing the Hon’ble Delhi High Court's ruling in the case of Joint Investment Pvt. Limited, which stated that disallowance under section 14A cannot exceed the dividend income earned. 4. Refund of Excess Dividend Distribution Tax: The assessee sought a refund of ?44.05 lakhs of excess Dividend Distribution Tax (DDT) paid due to amalgamation. The Ld. CIT(A) dismissed the claim, stating it did not arise from the assessment order. The Tribunal directed the AO to dispose of the assessee's application for refund of excess DDT, emphasizing the need for the AO to address the issue in accordance with law. 5. Credit for Dividend Distribution Tax Paid by an Amalgamated Company: The assessee claimed that the AO did not allow credit for ?17,11,365/- of DDT paid by M/s Greenfield Commercial Pvt. Ltd., which amalgamated with the assessee company. The Tribunal noted that the issue was raised for the first time before them and directed the AO to consider the assessee’s request for credit of the DDT paid by the amalgamated company, in accordance with law. 6. Disallowance of Payment Towards Corporate Membership of a Club: The assessee contested the disallowance of ?4,00,000/- paid to DLF Golf Club towards corporate membership, which was treated as a refundable security deposit. The Tribunal upheld the disallowance, agreeing with the AO and Ld. CIT(A) that refundable security deposits cannot be allowed as revenue expenditure under section 37 of the Act. The Tribunal distinguished this case from the CBDT Circular regarding telephone security deposits and the Supreme Court decision in CIT Vs. United Glass Manufacturing Company Limited. Conclusion: The appeals of the Revenue and the assessee were partly allowed for statistical purposes, with directions for fresh consideration by the AO on specific issues. The Tribunal emphasized the need for detailed examination and adherence to legal principles in determining the nature of expenses and tax credits.
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