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TMI Blog2013 (3) TMI 485X X X X Extracts X X X X X X X X Extracts X X X X ..... lies then the disallowance has to be restricted and is required to be worked as per Rule 8D of Income-tax Rules." 2. The assessee is a company engaged in the business of finance, running restaurants and providing hotel services. During the previous year the assessee earned dividend income which does not form part of the total income under the Income Tax 1961 (the Act). Under Section 14A of the Act any expenditure incurred for the purpose of earning any income which does not form part of the total income under the Act shall not be allowed as a deduction while computing total income. Admittedly there were no direct expenses incurred by the assessee to earn dividend income. The AO however, invoking Rule 8D of the Income Tax Rules,1962. disall ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to deduct TDS and therefore Sec.40(a)(ia) does not apply and the disallowance be deleted." 6. One Mangaldas Mehta & Company Pvt. Ltd. (MMCPL) owned a property at Ahmedabad. The same was entrusted to the assessee for running a heritage hotel. The terms and conditions subject to which the hotel was to be run by the assessee was that 25% of the income from running the heritage hotel subject to a maximum of Rs. 15 lacs will be paid by the assessee to MMCPL. During the previous year the gross collections received by the assessee out of room tariff of the hotel was Rs. 61,31,033/-. As agreed the assessee was to pay 25% of the same to MMCPL, which works to sum of Rs.15,32,758/-. The assessee, therefore, paid a sum of Rs.15 lacs which the maxim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8. Aggrieved by the order of the CIT(A) the assessee has preferred Ground No.3 before the Tribunal. 9. We have heard the rival submissions. The ld. Counsel for the assessee reiterated the stand of the assessee as was put forth before the revenue authorities. Reliance was placed by him on the following decisions: 1. Kamat Hotels India Ltd. vs. ITO 78 ITD 241 (Mad) 2. ITO vs. Sringar Cinema Pvt. Ltd., 20 SOT 420 (Mum). It was also submitted by him that the assessee did not claim the sum of Rs. 15 lacs by debiting the same to the profit and loss account and, therefore, the provisions of section 40(a)(ia) of the Act are not attracted. In this regard he pointed out that the assessee maintains heritage hotel room rent account in which the r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... FURTHER RESOLVED THAT Board will every year in the beginning decide the income sharing with MMCPL & Director Shri Abhay Mangalda be & is hereby authorized to negotiate with MMCPL for the same." It appears to us from the above that it was a business arrangement between the assessee and MMCPL pursuant to which the sum of Rs.15 lakhs was paid by the Assessee to MMCPL and the said payment cannot be termed as rent. This fact is also further strengthened by the accounting treatment given by the assessee as well as MMCPL in respect of the receipts in their books of accounts. The decision in the case of Kamat Hotels India Ltd. (supra) also supports the plea of the assessee. For the reasons given above we hold that the sum of Rs. 15 lacs cannot b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its by 'the amount of expenditure relatable to any income to which, inter-alia, section 10 applies'. Hence, the disallowance made u/s. i4A has to be rightly added to the book profits to arrive at the taxable income u/s. 115JB. Therefore the order of the AO is confirmed. However, this will be subject to relief allowed in respect of the first ground. This ground is dismissed." 14. We are of the view that the order of the CIT(A) on this issue has to be upheld as the addition made under section 14A of the Act would be an expenditure relatable to an income to which section 10 applies and, therefore, clause (f) of Explanation 1 to Section 115JB of the Act would be attracted. While deciding ground No.1 of the assessee we have already set aside th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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