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TMI Blog2013 (8) TMI 827X X X X Extracts X X X X X X X X Extracts X X X X ..... this regard were made before A.O. or by before Tribunal. Under the circumstances, therefore, there is no basis to modify the findings in respect of this amount, which stands added back similarly - Decided against assessee. Disallowance of interest - CIT confirmed disallowance - Held that:- A bare reference to the balance-sheet, would show that the assessee-company is a profitable company - It is thus not understand as to how it could be said that the amount invested by the assessee in shares and securities, at the year-end, is out of borrowed funds, which, apart from secured loans, which are for fixed assets, are by way of unsecured loans - No case for disallowance, looking at the financials in any manner, is thus made out. The impugned disallowance is accordingly directed for deletion - Decided in favour of assessee. Disallowance under section 14A - Held that:- Rule 8D, though not mandatory for the current year, yet cannot be said to be unreasonable, so that the same can only be said to be form a reasonable basis for the disallowance u/s. 14A(1). Having said that, how the Revenue could invoke r. 8D(2)(ii), disallowing interest expenditure there-under; having already disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt locations in Punjab by it in consortium with JPPL, for which the Consortium had bid to build and operate such power plants, entering into agreement/s for the purpose with Punjab State Electricity Board (PSEB). The sums were expended by it for and on behalf of the 'project owner', and were to be reimbursed on the sale of power to PSEB from the nine power projects allotted by it to the Joint Venture (JV) consisting of the assessee and JPPL. However, as subsequently the projects could not be setup, the said amount remain to be received; the company having not received any amount apart from Rs.21 lacs from JPPL in the first year (fy 2001-02) in which the bulk of the expenditure, i.e., Rs. 57.92 lacs, stood incurred. The same was thus written off in accounts as irrecoverable, and constituted a valid deductible business expenditure, i.e., in computing the assessee's business income for the current year. This formed the assessee's case before the authorities below. 4.1 Before us, the assessee's case was that there was in fact no joint venture (JV) but only a consortium (of partners) to come together for development and running the power projects in Punjab. Copy of the Power Purchase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's prayer as not meriting acceptance. The power of the appellate authority to admit additional evidence, which is to be judicially exercised, considering all the fact and circumstances of the case, is increasing circumscribed by law as to procedure, getting more stringent as the appellate proceedings advance from one stage in the hierarchy to another. Case law on the matter is legion, and for which we may refer to two decisions by the hon'ble jurisdictional High Court, viz. CIT vs. Kamal C. Mehboobbani (Smt.) [1995] 214 ITR 15 (Bom.) and Velji Deoraj and Co. vs. CIT [1968] 68 ITR 708 (Bom.). As afore-stated, no case for admission of additional evidence stands made out, i.e., on facts. On the contrary, the assessee accepts to still not have the entire material, i.e., on which it wishes to rely upon, with it, and which is claimed would be produced before the assessing authority. We, accordingly, decline to admit the 'additional evidence'. In fact, as shall be presently seen, i.e., while discussing the assessee's case on merits, the same would not materially impact the merits of its case. 5.2 We may now examine the assessee's case on its merits. The appellant and its associate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing paid on behalf of JPPL, was written off in accounts on finding the same as no longer recoverable, as JPPL was not interested in participating in the project (refer PB pages 33-37). The expenditure incurred was debited by the assessee in its accounts to the account of JPPL. The same were for setting up of the project on behalf of the consortium. How, we wonder, could the same could be claimed either under section 36(1)(vii), which is also subject to the condition of s. 36(2)(i), and or even u/s. 28. The consortium is a different entity, which had bid for, and had accordingly been allotted the power projects by PSEB on built, own and operate basis, entering into agreements (PPAs) for nine such projects. Even if no Special Purpose Vehicle (SPV), as, say, a company was incorporated for the purpose, the same would only be an Association of Persons (AOP), a separate taxable entity though. The expenses, which stand now written off, i.e., on the JV or the project owner being no longer interested in executing the projects/s, was, firstly, only and on behalf of the JV or the AOP aforesaid. The assessee was merely financing the expenditure for the time being as a promoter of a member of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wever, convert what is essentially a capital expenditure to of revenue nature. Capital expenditure, it may be appreciated, is incurred as much for business purposes as is the revenue expenditure. However, it is only the latter which is deductible in computing the business income, while specific allowances, as u/ss.32, 35, 35D, etc. are provided for under the Act in respect of the former. In the instant case, the transaction not fructifying has led to a loss of capital, so that the Revenue's stand is in agreement with the settled position of the law. Reference in this context may be made to the decisions by the hon'ble apex court in the case of Hasimara Industries Ltd. v. CIT [1998] 230 ITR 927 (SC), whereat, again, the claim of loss of deposit as a business loss u/s.28 of the Act was pressed. In the facts of that case, the assessee had deposited Rs.20 lacs with the licensor company for the purpose of securing a license under which the assessee had acquired to work the licensor's cotton mills. The deposit, it was held, was made, clearly, for acquisition of a profit-making asset, to carry on the business in cotton. The loss of such deposit, on it remaining unpaid, following the liqui ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the amount actually written off and added back in assessment (Rs.49,65,556/-), leaving a balance, so that there are amounts in the sum of Rs.1.41 lacs apart from the write off in respect of the JV afore- referred. However, there is no reference to these amounts nor any details thereof, either in the assessment order or in the impugned order. Even no submissions in this regard were made before them or by the ld. AR before us. Under the circumstances, therefore, we have no basis to modify the findings in respect of this amount, which stands added back similarly. Our decision would therefore be in respect of the entire impugned amount of Rs. 49.65 lacs. We decide accordingly. 6. The assessee's second ground is in respect of disallowance for the sum of Rs.2,87,061/- on account of interest. The assessee's accounts bore an interest expenditure at the impugned amount of Rs.2,87,061/-, as well as investments to the tune of Rs.376.32 lacs, as also earnings by way of short term capital gain on sale of equity shares at Rs.13.64 lacs, the A.O. disallowed the interest inferring the application of the borrowed funds for investments in equity shares yielding capital gains, so that the same ca ..... X X X X Extracts X X X X X X X X Extracts X X X X
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