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2023 (11) TMI 938 - AT - Income TaxNature of expenditure - remuneration paid to various fields/sales organizers - revenue or capital expenditure - HELD THAT - As in assessee s own case for the AY 2007- 08 2021 (8) TMI 422 - ITAT DELHI which is the order for immediately preceding assessment year, submits that ground no.1 is decided in assessee s favour Disallowance of temple maintenance and puja expenses as well as amount paid to staff recreation clubs - HELD THAT - As for AY 2006-07 wherein the Ld.CIT(A) deleted the above disallowance relying upon the decision of the coordinate bench in assessee s own case for earlier years. There are no changes in the facts and circumstances of the case pointed out before us. As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench which is been relied upon by the Ld.CIT(A), we do not find any infirmity in his order in deleting the above disallowance. Allowance of deduction u/s 80IA as relying assessee own case 2006-07. Power charges paid by the assessee to Keshav Power Ltd. are allowable as deduction to the assessee. It is also demonstrated that the rates paid to Keshav Power Ltd. are comparable and beneficial to the assessee. The issue has been decided in the favour of the assessee for AY 2006-07 and the Ld. DR fairly agreed that there is no change in the facts and circumstances of the case. Disallowance u/s 14A r.w.r. 8D - Mandation of recording satisfaction - Suo moto addition made by assessee - HELD THAT - Since the share capital and reserve and surplus are more than the investments there cannot be any disallowance u/s 14A read with Rule 8D(2)(ii).We hold that there cannot be any disallowance u/s 14A read with Rule 8D while computing the income under normal provisions of the Act by the AO in the absence of recording any satisfaction as to why the suo moto disallowance made by the assessee is incorrect. Disallowance made u/s 14A r.w.r. 8D while computing the book profits u/s 115JB - HELD THAT - We find that the issue is squarely covered by the decision of Vireet Investments Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI wherein it has been held that the computation under clause (f) of Explanation 1 to section 115JB(2) is to be made without resorting to the computation as contemplated u/s 14A read with Rule 8D of the Income Tax Rules, 1962. Thus, respectfully following the Spl. Bench decision, we restore the issue of disallowance u/s 14A while computing the book profits u/s 115JB to the AO with a direction to decide the issue afresh Disallowance of expenditure incurred on advertisement in newspapers requesting the Debenture warrant holders to convert their warrants to equity shares of the company - whether such expenditure is capital or Revenue in nature? - HELD THAT - CIT(A) following the decision of Broke Bond India Ltd. 1997 (2) TMI 11 - SUPREME COURT held that such expenditure is capital in nature. The Hon ble Supreme Court in the case of CIT Vs. Broke Bond India Ltd. (supra) held that the expenditure incurred by a company in connection with issue of shares with a view to increase a share capital is directly related to the expansion of capital base of the company and expenditure is capital expenditure. We hold that the Ld.CIT(A) has rightly held that the advertisement expenditure is capital in nature. Thus, reject the ground of appeal of the assessee. Nature of expenditure - Capital or revenue expenditure - Expenditure in respect of laying transmission line and tower was allowed as Revenue expenditure following the decision of Saw Pipes Ltd. 2007 (1) TMI 101 - DELHI HIGH COURT and Dot Manufacturing India Pvt. Ltd. 2008 (8) TMI 19 - HIGH COURT DELHI Addition u/s 37(1) - payment made to AP TRANSCO for the purpose of laying service lines - crystallization of liability - year of assessment - HELD THAT - We observe that the Ld.CIT(A) held that the said expenditure was crystallized in the FY 2007-08 relevant to the AY 2008-09 and, therefore, cannot be allowed as deduction in the current assessment year i.e. 2009-10. Since, we have held that the said expenditure is Revenue expenditure allowable as deduction u/s 37(1) of the Act the claim of the assessee for deduction of this amount should be considered in the AY 2008-09 as the liability is held to be crystallized in the said assessment year. Thus, we direct the AO to consider the claim of the assessee in the AY 2008-09. Disallowance of depreciation on UPS and printers - HELD THAT - The issue is covered in favour of the assessee by the Hon ble Delhi High Court in the case of CIT Vs. BSES Yamuna Powers Ltd. 2010 (8) TMI 58 - DELHI HIGH COURT which decision was applied by the Ld.CIT(A) in holding that claim for depreciation allowance at 60% on UPS printers is held to be justified.
Issues Involved:
1. Disallowance of remuneration paid to field/sales organizers. 2. Disallowance of temple maintenance and puja expenses. 3. Disallowance of expenditure reimbursed to staff recreation clubs. 4. Disallowance of deduction claimed under section 80IA. 5. Disallowance of power charges paid to M/s KPPL. 6. Disallowance under section 14A read with Rule 8D. 7. Nature of advertisement expenditure for converting warrants to equity shares. 8. Disallowance of depreciation on UPS and printers. 9. Disallowance of expenditure for laying transmission towers and lines. Summary: 1. Disallowance of Remuneration Paid to Field/Sales Organizers: The Tribunal dismissed the Revenue's appeal regarding the disallowance of remuneration paid to field/sales organizers, following the decision in the assessee's own case for AY 2007-08, where it was held that such remuneration is allowable. 2. Disallowance of Temple Maintenance and Puja Expenses: The Tribunal upheld the deletion of disallowance of temple maintenance and puja expenses, consistent with its earlier rulings for AY 2006-07 and AY 2007-08, confirming that these expenses are allowable. 3. Disallowance of Expenditure Reimbursed to Staff Recreation Clubs: The Tribunal upheld the deletion of disallowance of expenses reimbursed to staff recreation clubs, following its earlier decisions for AY 2006-07 and AY 2007-08, recognizing these as allowable expenses. 4. Disallowance of Deduction Claimed Under Section 80IA: The Tribunal upheld the deletion of disallowance of deduction claimed under section 80IA, following its earlier decisions for AY 2006-07 and AY 2007-08, confirming the assessee's eligibility for the deduction. 5. Disallowance of Power Charges Paid to M/s KPPL: The Tribunal upheld the deletion of disallowance of power charges paid to M/s KPPL, following its earlier decisions for AY 2006-07 and AY 2007-08, where it was established that the power charges were validly incurred under a power purchase agreement. 6. Disallowance Under Section 14A Read with Rule 8D: The Tribunal held that no disallowance under section 14A read with Rule 8D is warranted if the assessee has sufficient interest-free funds, following the Supreme Court's decision in South Indian Bank Ltd. vs. CIT. It also noted that the AO did not record any dissatisfaction with the assessee's suo moto disallowance, as required by the Supreme Court's decision in Maxopp Investment Ltd. vs. CIT. The issue of disallowance under section 14A while computing book profits under section 115JB was restored to the AO for reconsideration in light of the Special Bench decision in ACIT vs. Vireet Investments Pvt. Ltd. 7. Nature of Advertisement Expenditure for Converting Warrants to Equity Shares: The Tribunal upheld the disallowance of advertisement expenditure for converting warrants to equity shares, treating it as capital expenditure, following the Supreme Court's decision in CIT vs. Broke Bond India Ltd. 8. Disallowance of Depreciation on UPS and Printers: The Tribunal upheld the deletion of disallowance of depreciation on UPS and printers, following the Delhi High Court's decision in CIT vs. BSES Yamuna Powers Ltd., which allowed depreciation at 60%. 9. Disallowance of Expenditure for Laying Transmission Towers and Lines: The Tribunal upheld the deletion of disallowance of expenditure for laying transmission towers and lines, treating it as revenue expenditure, following the Delhi High Court's decision in CIT vs. Saw Pipes Ltd. However, it directed the AO to consider the claim of Rs. 43,23,650/- in the AY 2008-09, as the liability was held to have crystallized in that year. Conclusion: The appeals of the Revenue for AY 2008-09 to 2010-11 were partly allowed, and the appeals of the assessee for AY 2008-09 to 2010-11 were also partly allowed as indicated. The appeal of the Revenue for AY 2011-12 was dismissed, and the appeal of the assessee for AY 2011-12 was allowed.
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