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TMI Blog2007 (9) TMI 450X X X X Extracts X X X X X X X X Extracts X X X X ..... round, now we have to look into the legal aspects of the issue. It is a settled proposition that for claiming the expenditure, onus lies on the assessee to prove that such expenditure has been incurred for the purposes of the business and this position is applicable both for claims made under sections 36(1)( iii ) 37(1) of the Act. From the perusal of the Balance Sheet as on 31-3-1992, it is observed that there is an increase in the share capital as well as reserve and surplus as compared to previous year to the tune of Rs. 6.92 crores and 2.67 crores respectively. There is also an increase of Rs. 58 crores approx. in the secured loans and un-secured loans. Correspondingly, there is an increase in the fixed assets to the tune of Rs. 15 crores and increase in the net current assets to the tune of Rs. 44 crores. Thus, the business assets have increased by Rs. 59 crores as against increase in the interest bearing funds by Rs. 58 crores. Hence, the logical conclusion which can be drawn is that the borrowed funds have been utilised for investment in business assets. The increase in the investment in the year under consideration is to the tune of Rs. 5.53 crores which apparently stands s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... preciation of Rs. 3,11,377 on residential premises at Bakhtawar on the ground that the flat is not being utilised for its business. 4. The CIT(A) erred in confirming the addition of Rs. 2,00,000 as lease rentals for the assessment year 1989-90 on certain machinery whose installation had been disputed in the assessment year 1989-90 and for which full year's lease rentals had been accounted and offered for tax during the year under reference. 5. The CIT(A) erred in confirming the disallowance of Stamp Duty on issue of Rights shares amounting to Rs. 1,49,400 by considering the same as capital in nature." 4. The learned counsel appearing on behalf of the assessee was fair enough in pointing out that the issue raised in Ground No. 1 was covered against the assessee by the decision of the Hon'ble Supreme Court in the case of Britania Industries Ltd. v. CIT [2005] 278 ITR 546 . Accordingly, this ground of the assessee is dismissed. 5. Ground No. 2 was not pressed, hence, the same is dismissed as not pressed. 6. With regard to the issue raised in ground No. 3, the learned counsel was fairly pointed out that this issue was covered against the assessee by the decision of the Trib ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e restore this issue to the file of Assessing Officer to decide the same in accordance with the conclusions arrived at in assessment year 1989-90 by the Tribunal. Thus, this ground of the assessee stands allowed for statistical purposes. 10. With regard to the issue raised in ground No. 5, the ld. Counsel fairly accepted that this issue was also covered against the assessee by the decision of the Hon'ble Apex Court in the case of Brooke Bond India Ltd. v. CIT [1997] 225 ITR 798 . Accordingly, this ground of the assessee is also dismissed. 11. In the result, assessee's appeal in ITA No. 1371/Mum./05 for assessment year 1990-91 stands partly allowed for statistical purposes. 12. Now, we shall take up revenue's appeal in ITA No. 642/Mum./05 for assessment year 1990-91, wherein the revenue has raised the following ground:-- "On the facts and in the circumstances of the case as well as in law, the learned CIT(A) has erred in directing the Assessing Officer to allow investment allowance of Rs. 4,79,435 on certain assets which were installed during 1990-91 though the assets were capitalized in assessment year 1989-90, without appreciating the fact that conditions specified in se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hon'ble Supreme Court in the case of Britania Industries Ltd. (supra). Accordingly, this ground of the assessee is dismissed. 19. Ground No. 2 was not pressed, hence, the same is dismissed as not pressed. 20. With regard to the issue raised in ground No. 3, the ld. Counsel fairly accepted that this issue was also covered against the assessee by the decision of the Hon'ble Apex Court in the case of Brooke Bond India Ltd. (supra). Accordingly, this ground of the assessee is dismissed. 21. Ground No. 4 is identical to ground No. 3 of assessee's appeal in ITA No. 1371/Mum./05 for assessment year 1990-91, hence, the same is also dismissed on similar lines. 22. In the result, assessee's appeal in ITA No. 1372/Mum./05 for assessment year 1991-92 stands dismissed. 23. Now, we shall take up assessee's appeal in ITA No. 1373/Mum./05 for assessment year 1992-93, wherein the assessee has raised the following grounds:-- "1. The Commissioner of Income-tax (Appeals) [hereinafter referred to as the CIT(A)] erred in confirming disallowance of Rs. 36,000 under section 37(4) on account of Rent for Guest House." 24. With regard to ground No. 1, the learned counsel appearing on behal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aw, the learned CIT(A) has erred in directing the Assessing Officer to allow deduction under section 80M of the Income-tax Act on the whole of intercorporate dividend without deducting interest expenses of Rs. 61,99,000 and other expenses of Rs. 1,68,052 incurred for earning dividend income in spite of the fact that assessee failed to discharge the onus of correlating the sources of investment from asset from which dividend income was earned." 31. Brief facts, relating to ground No. 1, are that the assessee claimed interest expenses at Rs. 1091.29 lakhs. The Assessing Officer required the assessee to explain the borrowed funds which were utilised for investment in shares/units/debentures/bonds. The assessee submitted a fund flow statement for accounting year beginning from 1-1-1985 and pointed out that in each of these years, incremental funds of the assessee exceeded the investments made during the year, hence, borrowed funds were not uitilised for this purpose. It was further pointed out that borrowings were made for specific purposes and were utilised for those specific purposes only. The Assessing Officer, however, noted that assessee's funds were mixed and the amount inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o submitted details of incremental cash flow which included internal accruals and contended that even these incremental cash flows were higher than the amount of investment made in that specific year. The ld. Counsel further contended that in a case of mixed funds where net owned funds were far more in excess of investments made in securities/investments yielding securities then, the presumption was in favour of assessee implying that such investments were made out of net own funds. For this proposition, the ld. Counsel relied on the following decisions:-- 1.Hotel Savera's case (supra) 2.CIT v. South India Corporation (Agencies) Ltd. [2007] 209 CTR (Mad.) 233 3.Shree Digvijay Cement Co. Ltd.'s case (supra ) 4.CIT v. Tin Box Co. [2003] 260 ITR 637 (Delhi) 5.CIT v. Radico Khaitan Ltd. [2005] 194 CTR (All.) 451 6.Reckitt & Colman of India Ltd. v. CIT [1982] 135 ITR 698 (Cal.) 7.Tata Chemicals Ltd. v. Dy. CIT [2000] 72 ITD 1 (Mum.) 8.Oceanic Investment Ltd. v. CIT [1997] 57 TTJ (Mum.) 549 9.Torrent Franchisers Ltd.'s case (supra) 10.Ashok Bros. v. ITO [2002] 76 TTJ (Hyd.) 427 11.R.S. Avtar Singh & Co. v. Dy. CIT [1997] 60 ITD 211 (Delhi) The learned counsel furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nor in favour of the revenue and appropriate decision has to be taken on the facts of each case and in the present case, no doubt, the assessee's funds are mixed but by submitting the fund flow statements and incremental cash flow statements for each year which show that incremental cash flows including internal accruals were more than the amount invested by the assessee, the assessee in our opinion, has discharged its onus of proving that the investments were made out of net own funds available with the assessee. Further, from the perusal of the Balance Sheet as on 31-3-1992, it is observed that there is an increase in the share capital as well as reserve and surplus as compared to previous year to the tune of Rs. 6.92 crores and 2.67 crores respectively. There is also an increase of Rs. 58 crores approx. in the secured loans and un-secured loans. Correspondingly, there is an increase in the fixed assets to the tune of Rs. 15 crores and increase in the net current assets to the tune of Rs. 44 crores. Thus, the business assets have increased by Rs. 59 crores as against increase in the interest bearing funds by Rs. 58 crores. Hence, the logical conclusion which can be drawn is that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) (Bom.) [2002] 254 ITR 204 94-95 14 CIT v. General Insurance Corpn. of India (No. 1) (Bom.) [2002] 254 ITR 203 96-97 15 Maharashtra Apex Corpn. Ltd. v. CIT (Kar.) [2006] 286 ITR 585 98-100 38. The issue raised in this ground is directly covered in favour of the assessee by the decision of the Special Bench of the Tribunal in the case of Punjab State Industrial Development Corpn. Ltd. ( supra) wherein it was held that for the purpose of granting deduction under section 80M, only actual expenditure incurred is to be taken into consideration and there is no question of taking expenditure on estimation or presumption basis. Accordingly, this ground of the assessee is also accepted. 39. In the result, appeal filed by the revenue in ITA No. 643/Mum./05 for assessment year 1992-93 stands dismissed. 40. To sum up, assessee's appeal in ITA No. 1371/M/05 for assessment year 1990-91 stands partly allowed for statistical purposes and appeals in ITA No. 1372 and 1373/M/05 for assessment years 1991-92 & 1992-93 stand dismissed and revenue's appeal in ITA No. 642/M/05 for assessment year 1990-91 stands allowed for statistical purposes and appeal in ITA No. 643/M/05 for assessment ye ..... X X X X Extracts X X X X X X X X Extracts X X X X
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