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TMI Blog2012 (5) TMI 189X X X X Extracts X X X X X X X X Extracts X X X X ..... es, the ld. CIT(A) was not justified in deleting the disallowance. - Decided against the assessee by way of remand. Depreciation on copy right expenses @ 25% - Held that:- assessee submitted before the lower authorities and even before us that the amount of Rs.4,47,000/- represented the amount paid to a foreign company, Climator AB towards charges for agreeing to sell their products exclusively to the assessee for a period of one year, the relevant terms and conditions or a copy of the agreement has not been placed before us. - It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. - As is apparent, the order f CIT(A) suffers from lack of reasoning and is not a speaking order. - matter remanded back. Disallowance u/s 14A - Held that:- AO made an estimated disallowance of aforesaid expenses on account of interest and administrative expenses since the assessee earned exempt income, invoking provisions of sec. 14A of the Act. - CIT(A) did not succinctly brought out as to whether or not borrowed funds had indeed been invested in mutual funds or any other expenditure had nexus with ea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in holding that notice u/s 148 has been validly issued. In the facts of the case, notice u/s 148 cannot be issued after the expiry of four years from the end of the relevant assessment if the assessee has duly filed the return of income and disclosed fully and truly all material facts at the time of assessment. It is submitted that notice u/s 148 after expiry of four years from the end of relevant assessment year is invalid. It be so held now. 1.2 The learned Commissioner of Income Tax has erred in not appreciating the fact that the proceedings u/s 147 of the Income tax Act were initiated on the basis of the same facts which were not only available to him but also dealt with during the assessment proceedings before passing the assessment order u/s 143 (3) of the Act resulting into initiation of the proceedings merely on account of change of opinion. It is submitted that reassessment cannot be done on account of change of opinion. It be so held now. 1.3 The learned Commissioner of Income Tax (Appeals) has erred in upholding the validity of order passed u/s. 147 r.w.s. 143(3). It is submitted that where assessment u/s. 143(3) has been made, no action u/s. 147 can be taken aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 147 r.w.s. 143(3). It is submitted that where assessment u/s. 143(3) has been made, no action u/s. 147 can be taken after expiry of four years from the ends of relevant assessment year unless it is on account of failure of the assessee in view of proviso to Section 147. In absence of any failure on part of the assessee, no action u/s. 147 can be taken including passing an order under the said section. It be so held now. The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection. CO no.162/A/09[AY 2005-06] 1. The learned Commissioner of Income Tax (Appeals) has erred in holding that the proceedings u/s. 147 has been validly initiated. In the facts of the case, proceedings u/s. 147 are invalid and void-abinitio and therefore required to have been quashed. It is submitted that it be so held now. 1.1 The learned Commissioner of Income Tax has erred in not appreciating the fact that the proceedings u/s 147 of the Income-tax Act were initiated on the bass of the same facts which were not only available to him but also dealt with during the assessment proceedings before passing the assessment order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vision cannot be allowed. It is submitted that provision of slow moving inventory is in accordance with sound accounting principles which requires to account for such losses. It is further submitted that said amount represents loss in the normal course of business of the appellant and therefore the same is allowable u/s 28 / 37 of the Act. It is submitted that it be so held now. 2.1 The learned Commissioner of Income Tax has erred in not adjudicating the alternate ground of the respondent that the deduction in respect of slow moving inventory of Rs.1,49,490/- is not allowed in the current year, the same shall be allowed in the year in which it is actually written off / written back. It is submitted that the AO be directed to allow the provision in the year in which it is actually written off / written back. The respondent prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of cross objection. ITA no.1440/Ahd/2010 [AY2007-08] 1 The Ld. Commissioner of Income-tax (Appeals)-XIV, Ahmedabad has erred in law and on facts in deleting the addition of Rs.13479223/- made by the AO on account of deduction u/s 80IB. 2 The Ld. Comm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese shelters were different from their components purchased by the company, relying on the decisions in CIT Vs. Tata Locomotive Engineering Co. Ltd 68 ITR 325 and Ship Scrap Traders Vs. CIT 251 ITR 806 , the assessee contended that they were entitled to deduction u/s 80IB of the Act. However, the AO while referring to provisions of sec. 80IB of the Act and decisions in Singh Engineering works Pvt. Ltd. Vs. CIT 119 ITR 891, Lucky Minmat Pvt. Ltd. vs. Commissioner of Income-Tax. 245 ITR 830 (SC), Commissioner of Income-Tax vs. N. C. Budharaja And Co. And Another 204 ITR 412 (SC), CIT Vs Shivalik Poultries (2005) 274 ITR 529 , CIT Vs. Agra Const. Corpn. (2005) 146 Taxman 31 (All) , CIT Vs Minocha Bros. 160 ITR 134(del.) , CIT Vs. NUC Pvt. Ltd., 126 ITR 377 (Bom) , CIT Vs. Bhakhtawar Singh Bal Kishan Bhital 234 ITR 652 (1997) (MP) and R.M.Enterprises vs. ITO (1992) 43 TTJ (BOM) (Special Bench) 165: 42 ITD 23 (SB) describing distinction between manufacture processing, concluded that shelters erected by the assessee were building i.e. immovable property and could at the most be called as processing and not manufacture or production because all the raw material items do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... els made of steel / aluminium sheets and injected with PU foam as per the drawings and specifications laid down by the design department. - GI coils for external and internal angles. - Locking mechanism using locks and rods manufactured to our exclusive design. - Antistatic PVC rolls for making the flooring. - Marine grade / water resistant ply boards for making the base for the antistatic PVC laid on the floor. - GI coils / aluminium coils for manufacturing sun roof - GI /aluminium coils for manufacturing 'Z' sections for fixing the sun roof and for making flashing for AC and Roxtec. - Skid clamps manufactured from steel sheets. - Paints and chemicals including prirmers surfaces, sealant, adhesives, thinner etc. - Extruded aluminium door and jamb profiles, 'C' Rails manufactured strictly as per our designs, specifications and drawings. - Base frames manufactured out of ISMBs ISMCs as per our design and specifications. - Bought out items like insert nuts, hardware items like nuts / bolts, rivets, door closers. 3.1 It was explained that the assessee's manufactured product i.e., "prefabricated building" (telecom shelter) had the tariff heading no.94060069l i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... perty. The purchase order also involves transportation, packing, forwarding and unloading of goods, these facts lead to the conclusion that the product is a movable property. Further as per the decisions cited under Excise Law i.e. Kailash Oil Cake Industries v. CCE 63 ELT 693 (CEGAT) National Radio v. CCE 76 ELT 436 (CEGAT), immovable property or property attached to earth is not 'goods'; and hence excise duty is not leviable thereon. As in the case of the appellant Excise Duty has been paid on the Telecom Shelters sold by it, it can be reasonably said that the process amounts to manufacture and the resultant product is movable property. Further telecom shelter is not a thing which is fastened to the earth like building or dam and the same can be dismantled and installed at a new place. Hence I agree with the contention of the A.R. that the product is not an immovable property, though it has to be fitted by screws for the purpose of operational efficiency. The appellant does carry out mounting and erection or installation activities for operational efficiency purpose. However, there is a fundamental difference between the two things and that is permanency i.e. whether such attac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... skid clamps and many such materials are used to provide a weather proof shelter and once the telecom shelter is prepared, one can not recognize the panels, skid and screws etc. used to prepare the shelters .The final product is known as Telecom Shelter, which is not the same as materials used. The final product is a distinct marketable commodity and it has a separate market of its own. In this regard I would like to hold that the process carried out by the appellant is assembling of different raw materials which are also changed in its shape in the process of assembling. The resultant product of the appellant is a specialized product for the specific industry like telecom service providers' industry which is in itself a highly specialized and technical industry. Such industry visualizes the final product of the appellant with certain utilities specific to its requirements which it could never have been able to fulfill on its own. The correct issue to be addressed is whether such activity of shaping up the final product is manufacture or not. In this regard I would like to rely on the landmark decision of the Apex court in the case of Narne Tulaman Manufacturers Pvt. Ltd. V. Collect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The final product was absolutely different and separate from the input. The change made in the article resulted in a new and different article which was recognized in the trade as a new and distinct commodity. The coffee beans had an independent identity from the raw material from which they were produced. Conversion of the raw berry into coffee beans was a manufacturing activity. The assessee was, therefore, entitled to the investment allowance under section 32A. The word "manufacture" has not been defined in the Income-tax Act. In the absence of a definition, the word "manufacture" has to be given a meaning as is understood in common parlance. It is to be understood as meaning the production of articles for use from raw or prepared materials by giving such materials new forms, qualities or combinations whether by hand labour or machines. If the change made in the article results in a new and different article then it would amount to manufacturing activity. As held in the case of Aspinwall and Co. Ltd. 251 ITR 323 (SC) manufacturing implies a complete transformation in the original article so as to produce a commercially different aside or commodity and the net product s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ovider and their product was different from the one considered by Bombay High Court in Hutchison's case. Inter alia, the ld. AR relied on a decision of the Hon'ble Supreme Court in the case of Commissioner of Central Excise Vs. Solid and Correct Engineering Works, 2010- 5 SCC 122 and submitted the product manufactured by the assessee was not an immovable property. The ld. AR added that assembling various raw material amounts to manufacture or production and relied upon decisions in CIT vs. Tata Engineering. Locomotive Co. Ltd. 68 ITR 325 (Bom) , Chirenjeev Wind Energy Ltd. vs. ACIT (Chennai Bench) (2010) 4 ITR (Trib) 9 , Shilp Scrap Traders vs. CIT 251 ITR 806 (Bom) approved by SC in case of Vijay Shipbreaking Ltd. in 314 ITR 309 , CIT vs. Maheshchandra Sharma 308 ITR 222 (P H) and CIT vs. Anand Affiliated 221 CTR 167 (P H) as also in ITO vs. Arihant Tiles and Marble Private Ltd., 320 ITR 79(SC) 6. We have heard both the parties and gone through the facts of the case as also the decisions relied upon. The issue before us is as to whether or not the telecom shelter erected by the assessee at the site of mobile telephone service providers is an article or thin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd insert nuts are accurately placed both on the door panel and the right side wall panel to fix the hinges. This is a very precise operation and requires extreme skills for doing it. Then holes are made in the door frame and the door profile to fix the security nuts to ensure that the shelter door cannot be removed even if the hinges are unscrewed. A lock wedge is then fitted inside the door and the door locks are tested for operating smoothly. (i) The sunroof sheets are joined together and made into one big cover for the entire shelter to provide an extra waterproof roof over the shelter. To provide proper slope on the top, sunroof sheet extended polyethylene (EPE) sheets are placed in proper order to ensure that the water does not collect on roof of the shelter. (j) The Crails to mount the equipment required in the shelter are cut to the required length and riveted on the walls and ceiling of the shelters as may be required. Therefore cable trays to carry the various cables to the electric equipment are fitted just below the roof (k) A rain shade is fitted above the door outside the shelter and a steel ladder to get into the shelter. (l) Plastic guard film of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... whether poultry shed could be treated as plant within the meaning of sec. 43 of the Act. The issue and context in these decisions were, apparently, altogether different. The construction of dam or sheds could not be equated with manufacture or production of telecom shelters. In the instant case, admittedly the telecom shelters erected by the assessee are liable to sales tax and excise duty .Simply because these shelters are attached to earth or permanently fastened to any thing attached to earth with screws i.e fixed to a foundation imbedded in earth, does not imply that these become immovable property nor these shelters are liable to registration or payment of stamp duty under the relevant enactments. The term "attached to the earth" has nowhere been defined in the General Clauses Act, 1897. Section 3 of the Transfer of Property Act, however, gives the following meaning to the expression "attached to the earth" : "(a) rooted in the earth, as in the case of trees and shrubs; (b) imbedded in the earth, as in the case of walls and buildings; (c) attached to what is so imbedded for the permanent beneficial enjoyment of that to which it is attached." It is apparent from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er of Property Act. (iii) The fixing of the plants to a foundation is meant only to give stability to the plant and keep its operation vibration free. (iv) The setting up of the plant itself is not intended to be permanent at a given place. The plant can be moved and is indeed moved after the road construction or repair project for which it is set up is completed. 6.21 Thereafter, while referring to the decisions in Sirpur Paper Mills Ltd. v. Collector of Central Excise, Hyderabad (1998 (1) SCC 400) , M/s. Narne Tulaman Manufacturers Pvt. Ltd. Hyderabad v. Collector of Central Excise, Hyderabad 1989 (1) SCC 172,(SC) , Triveni Engineering Industries Ltd. Anr. v. Commissioner of Central Excise 2000 (120) ELT 273 (SC) , the Hon ble Apex Court concluded as under:. .In the instant case all that has been said by the assessee is that the machine is fixed by nuts and bolts to a foundation not because the intention was to permanently attach it to the earth but because a foundation was necessary to provide a wobble free operation to the machine. An attachment of this kind without the necessary intent of making the same permanent cannot, in our opinion, constitute perman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to have taken place is whether the commodity which is subjected to the process of manufacture can no longer be regarded as the original commodity but is recognised in the trade as a new and distinct commodity. The Hon ble Supreme Court in the case of CIT v, Sesa Goa Ltd. reported in 271 ITR 331 while considering the question under section 32A(2)(b)(iii) for grant of investment allowance dealt with the question of production in a case where the assessee s undertaking was engaged in the business of excavating, mining and processing mineral ore. Mineral ore was not excluded by the Eleventh Schedule. The only question was whether such, business was one of manufacture or production of ore. The Hon ble Supreme Court held as under :- The reasoning given by the High Court, in the decisions noted by us earlier, is, in our opinion, unimpeachable: This court had, As early as in 1961, in Chrestian Mica Industries Ltd. v. State of Bihar {1961] 12 STC 150, defined the word production , albeit) in connection with the Bihar Sales. Tax Act, 1947. The definition was adopted from the meaning ascribed to the word in the Oxford English Dictionary as meaning amongst other things that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the material as a result of application of art or a mechanical manipulation. The material, which is thus fashioned into a new product, may be distinct in form or in use. In the light of these features of the word manufacture, we reiterate that the assembling of various material used by the assessee into an altogether different finished product i.e telecom shelters, recognized in the trade as a new and distinct commodity, amounts to the manufacture or production ,eligible for deduction u/s 80IB of the Act. 6.7 The decision of Hon ble Bombay High Court in case of Hutchison Max Telecom Pvt. Ltd. (supra) is not applicable to the facts of the case of the assesseee as the said decision related to a telecom service provider and the product was telecom tower constructed by that assessee whereas in the instant case, the assessee supplied telecom shelters to such mobile service provider and their product was altogether different from the one considered by the Hon ble Bombay High Court in the Hutchison's case. Thus, reliance by the ld. DR on the said decision is totally out of context. 7. In view of the foregoing, especially when the Revenue have not placed before us any material, con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness and the foreign visit was undertaken for attending board meetings in Germany by the directors and for procuring orders from foreign countries, I do not find any justification for disallowance of these expenses. The A.O. in his remand report has stated that the disallowance of foreign traveling expenses be enhanced from Rs.4.31 lakhs to Rs.10.38 lakhs which is the total foreign traveling expenses. But as I find that the traveling expenses have been incurred wholly and exclusively for business purpose, I do not find any justification for enhancement in this regard. Thus the disallowance is deleted considering the nature of expenses and relying on the cases cited by the A.R. 10. The Revenue is in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO while the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 11. We have heard both the parties and gone through the facts of the case. Indisputably, the assessee did not furnish the relevant details sought by the AO in respect of purpose of visit of director/employees and evidence of actual work done by them abroad, despite sufficient ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... expenses incurred by the assessee at each of these places so visited abroad nor the ld. AR even referred to us any evidence regarding purpose of visit at each of the places visited abroad. The ld. AR merely invited our attention to page 34-64 of the paper book, wherein only copy of ledger account is placed and reiterated that the expenditure is for the purpose of business. Not an iota of evidence has been referred to before us that the foreign visit of the director or his wife or employees was wholly and exclusively for the purpose of business of the assessee company. One of the requirements of the provisions of section 37(1) of the Act is that the expenditure must have been laid out wholly and exclusively for the purpose of business. The Hon ble Supreme Court in case of CIT v. Chandulal Keshavlal Co. [1960] 38 ITR 601 , pointed out that it is for the assessee who claims deductions of the expenditure to satisfy the department for which the amount is spent. In Ram Bahadur Thakur Ltd. v. CIT [2003] 261 ITR 390(Kerala) it has been held that where the expenditure was incurred wholly and exclusively for the purpose of trade and business of the assessee, is required to be determine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... revenue expenditure, the assessee pleaded. Alternatively, the assessee claimed depreciation u/s 32 of the Act @ 25% treating the same as an intangible asset. However, the AO did not accept the submissions of the assessee and concluded that copyright expenses were capital in nature and are entitled for depreciation as laid out in sec. 32(1) (iii) of the Act. The AO also observed that it was not the duration but the character of the expense that determined whether an expense was capital expense or revenue one and copyright expense, as the assessee itself admit ted provided exclusivity rights to the assessee company and therefore, it was a capital expense. Accordingly, the expense of Rs.2,23,500/ - was disallowed and after allowing depreciation of Rs.55,875/ - @ 25%, an addition of Rs.1,67,625/ - was made to the income of the assessee. 13. On appeal, the learned CIT(A) directed the AO to allow depreciation @ 25% on Rs.4,47,000/- with the following observations: - 4.1 Before me the A.R. made submissions as under: "In this regards, the appellant submits to your good honour that that exclusivity right was granted to the appellant only for one year and therefore it does not have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A) is cryptic and grossly violative of one of the facets of the rules of natural justice, namely, that every judicial/quasi-judicial body/authority must pass reasoned order, which should reflect application of mind by the concerned authority to the issues/points raised before it. The application of mind to the material facts and the arguments should manifest itself in the order. Section 250(6) of the Income Tax Act, 1961 mandates that the order of the CIT(A) while disposing of the appeal shall be in writing and shall state the points for determination, the decision thereon and the reason for the decision. The requirement of recording of reasons and communication thereof has been read as an integral part of the concept of fair procedure. The requirement of recording of reasons by the quasi-judicial authorities is an important safeguard to ensure observance of the rule of law. It introduces clarity, checks the introduction of extraneous or irrelevant considerations and minimizes arbitrariness in the decision-making process. We may reiterate that a decision does not merely mean the conclusion . It embraces within its fold the reasons forming basis for the conclusion. [Mukhtiar Sin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... )(iia) of the Act as claimed by the appellant and thereby to delete the addition made by him of Rs.2,44,495/-. Thus, this ground of appeal is allowed. 18. The Revenue is now in appeal before us against the aforesaid findings of the learned CIT(A). The learned DR supported the order of the AO. On the other hand, the learned AR on behalf of the assessee supported the findings of the learned CIT(A). 19. We have heard both the parties and gone through the facts of the case. Since we have already concluded that the assessee is manufacturing prefabricated telecom shelters, entitled to deduction u/s 80IB of the Act and the ld. DR has not placed before us any material controverting the aforesaid findings of the ld. CIT(A), we are not inclined to interfere. Therefore, ground no. 2 in the appeal of the Revenue for AY 2007-08 is dismissed. 20. As regards ground nos.1 to 1.3 in CO no.159/A/09, ground nos.1 and 1.1 in CO no.160 162/Ahd/09,and ground nos.1 to 1.2 in CO no.161/Ahd/09 relating to validity of reopening of the respective assessments, though the ld. AR initially tried to argue the issue in the light of his written submissions; after discussion, the learned AR on behalf of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 140,490.00 34 However the learned AO disallowed the same on non availability of any evidence regarding the irrecoverability of the alleged loss. In this connection, the appellant submits that the as no orders related to the materials were received the same were written off to the profit and loss account. The said loss being incidental to the carrying of business shall be allowed and hence the said disallowance being untenable needs to be deleted. 35 It is submitted that such provision of slow moving inventory is in accordance with sound accounting principles which requires the appellant to account for such losses. In view thereof, it is submitted that the same must be allowed as business loss u/s 28. 36 Without prejudice to the above said contention, it is submitted that in case your goodself does not allow the same in the current year, we request your goodself to direct AO to allow the same in the year in which it is actually written off / written back. 6.2 I have considered the submissions of the AR carefully. As the amount is a provision, the same can not be allowed as deduction. Hence the disallowance is confirmed. 23 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eferred to above, which are relied upon by the A. R. and the observations of the assessing officer in the assessment order, I am not inclined to accept the contentions put forth by the AR of the appellant. In the case of ITO vs. Daga Capital Management (312 ITR (AT) 1) Mumbai Special Bench held that the onus is on assessee to prove that expenditure was incurred to earn taxable income and further in view of Rule 8D onus and apportioning expenditure have become academic. 5.2.1. The appellant did not furnish the year(s) of investment in mutual funds. They could not substantiate the claim that in the year(s) of investment, they had non-interest-bearing funds, which were utilized for the said investment. 5.2.2. Rule 8D was introduced w.e.f. 24-03-2008. However, as held in the case cited at 312 ITR (AT) 1 (supra), when sub-section (1) of Sec. 14A itself is clarificatory, resultantly sub-section (2) and (3) providing mechanism to do cannot be construed as substantive and hence prospective. 5.2.1. Further, the similar issue arose in the appellant's own case for A.Y. 2004-05. My predecessor vide his order, referred to above, decided the same by holding as under:- I have con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed w.e.f 24.3.2008 cannot be regarded as retrospective because it enacts an artificial method of estimating expenditure relatable to taxfree income. It applies only w.e.f AY 2008-09. For the assessment years where Rule 8D does not apply, the AO will have to determine the quantum of disallowable expenditure by a reasonable method having regard to all facts and circumstances, the Hon ble High Court concluded. 28.2. Hon ble Supreme Court in their decision dated 6.7.2010 in CIT v. Walfort Share Stock Brokers (P.) Ltd., 326 ITR 1 , inter alia, observed that for attracting section 14A of the Act there has to be a proximate cause for disallowance, which is its relationship with the tax exempt income. Hon ble Apex Court observed in the context of provisions sec.14A of the Act in the following terms: 17. The insertion of section 14A with retrospective effect is the serious attempt on the part of the Parliament not to allow deduction in respect of any expenditure incurred by the assessee in relation to income, which does not form part of the total income under the Act against the taxable income (see Circular No. 14 of 2001, dated 22-11-2001). In other words, section 14A clarifies th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ught under one of the above heads and is chargeable to tax. If an income like dividend income is not a part of the total income, the expenditure/deduction though of the nature specified in sections 15 to 59 but related to the income not forming part of total income could not be allowed against other income includible in the total income for the purpose of chargeability to tax. The theory of apportionment of expenditures between taxable and non-taxable has, in principle, been now widened under section 14A. Reading section 14 in juxtaposition with sections 15 to 59, it is clear that the words "expenditure incurred" in section 14A refers to expenditure on rent, taxes, salaries, interest, etc. in respect of which allowances are provided for (see sections 30 to 37) 28.3. We also find that Hon ble Kerala High Court in their decision dated 17.6.2010 in the case of CIT Vs. Smt. Leena Ramachandran in ITA.No. 1784 of 2009 , held in the context of provisions of sec.14A of the Act as under: 4. On facts we find that the interest paid by the assessee during the previous year for the funds borrowed for acquisition of shares in the company was at the rate of 24% p.a. and the total i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is solely dependent on the business of the leasing company. In fact, the whole transaction was a total fiasco in as much as, as against Rs.17,44,310/- paid towards interest on borrowed funds serviced at the rate of interest of 24% p.a., the dividend income received by the assessee during the previous year was a meagre sum of Rs.3 lakhs. This only shows that the business carried on by the leasing company was not very substantial to justify the assessee's investment through borrowed funds. Therefore, in our view, the principle of commercial expediency gone into by the Supreme Court does not apply to the facts of this case. Therefore, we hold that the Tribunal in principle rightly held that the utilisation of borrowed funds for acquisition of shares will not entitle the assessee for claiming deduction of interest paid on such borrowed funds. However, we hold that the Tribunal was not justified in allowing the claim in excess of Rs.2 lakhs. For the same reasoning applied by the Tribunal, the assessee is not entitled to deduction of any amount towards interest paid on funds borrowed by way of fixed deposits taken for acquisition of shares in the company, which helped the assessee only t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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