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TMI Blog2015 (8) TMI 759X X X X Extracts X X X X X X X X Extracts X X X X ..... The assessee has sufficient interest free funds to cover the investments. - Decided against revenue. Disallowance relating to 'Conversion Charges paid to MCD - revenue v/s capital expenditure - CIT(A) deleted the addition - Held that:- The assessee had paid amounts for one time conversion charges and for parking charges at the two outlets, the benefits of which might accrue to the assessee for indefinite period of time yet these were incurred to enable the profit making structures to work more efficiently leaving the source or the profit making structure untouched and moreover, the expenditure were in the nature of levies/taxes paid by an assessee to a government authority for making available the required infrastructure to run the business efficiently and effectively. Therefore, on the facts & circumstances of the case and following Judicial pronouncements, we do not find infirmity in the order of Ld. CIT(A). We are of the considered opinion that Ld. CIT(A) had rightly deleted the additions. See CIT Vs. J. K. Synthetics Ltd (2008 (12) TMI 21 - DELHI HIGH COURT) and Bikaner Gypsums Ltd. Vs. CIT (1990 (10) TMI 2 - SUPREME Court ) - Decided against revenue. Website development expens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relief. 3. Aggrieved with the relief granted by the first appellate authority, the revenue has filed this appeal on the following grounds for the Assessment Year 2008-09. "1. "Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition of ₹ 18,11,964/- made on account of proportionate notional interest on diversion of interest bearing loan amounts for non business purposes. 2. "Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the disallowance relating to 'Conversion Charges paid to MCD as revenue expenditure, ignoring the fact that the expenses towards 'Conversion Charges' and 'Regularization Charges' were meant for utilizing the property for use other than it was actually allotted and to provide benefits of enduring nature and therefore, cannot be hold as revenue expenditure, 3. Whether on the facts and circumstances of the case, the Ld. CIT(A) has erred in holding that the 'Website development expenses' is revenue in nature ignoring the facts that development of a website gives benefits of enduring nature. 4. Whether on the facts and circumstances of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wo investments, it is pertinent to note here that appellant had a bank balance in the form of FLC account (deposit account linked to current account where in excess funds in current account are temporarily parked for earning interest) amounting to ₹ 1,80,50,000/- as on 1.4.2007. The amount invested in other Companies has been made out of the bank balance appearing which is part of the Capital and accrued earnings of the appellant which as on the beginning of the year stood at ₹ 5.23 cr which evidences that the appellant had sufficient funds of its own to make these investments. The appellant is running a proprietary entity and all his business and personal investments are reflected in the financial statements prepared. Copy of Dena Bank Current/ Saving Bank Accounts showing clearly the source of the funds which are basically from the opening bank balance and routine business transactions is placed on record. That further on the perusal of the ledger account of SBL Plastics Private Limited, it shall be observed that the amount of ₹ 25 lacs has been invested in shares on 27.03.2008 i. E. just few days before the close of the financial year. That the assessing office ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany, if the interest free funds were sufficient to meet the investments. The interest was deductible. In the case of appellant, the funds available at the beginning of the year were invested and no loan funds were raised or used. The loans taken in earlier years have been utilized for the specific use and there is no nexus available or proved by the Assessing Officer to justify the claims of notional interest disallowance. That the subject has been discussed in detail by the Hon'ble Supreme Court in the case of S. A. Builders Limited v CIT (A) and others [2007J 288 ITR 1 (SC). That the Hon'ble Apex Court in this case while deciding the case in favour of the assessee has opined that "The assessee borrowed the funds from the banks and lent some of it to its sister concern (a subsidiary) on interest free loan. The test in such a case is whether this was done as a measure of commercial expediency. To claim a deduction, it is enough to show that the money is expended, not of necessity and with a view to direct and immediate benefit, but voluntarily and on grounds of commercial expediency and to facilitate the carrying on the business. The High Court as well as the Tribun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y. Before the ld CIT(A) it has been clearly brought out with evidence that the investments were not made out of borrowed funds. The ld CIT(A) accepted these factual contention and in the absence of any contrary evidence we find no infirmity in the same. In any event the presumption as laid down by Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd (supra) is squarely applicable in this case. Share in Kalra Hospital Pvt. Ltd. and Lara medicines Pvt. Ltd. were purchased in the earlier year and investment in SBL Plastics was made at the fag end of the year. The assessee has sufficient interest free funds to cover the investments. Thus we uphold this finding of the ld CIT(A) and dismiss ground No.1 of the revenue. 8. Ground No.2 is on the issue whether conversion charges paid to MCD is revenue expenditure or capital expenditure. The first appellate authority is dealt with the issue at Page 18 to 20 of this order. 9. The 'C' Bench of the ITAT Delhi in ITA No.5158/Del/2012 for the Assessment Year 2008-09 order dated 08.02.2013 in the case of the DCIT Vs. Haldiram Products Pvt. Ltd, considered the jurisdictional high court decision in the case of CIT Vs. J ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... granted relief. The main ground on which the first appellate authority granted relief was that the assessee had obtained finance from the reputed agencies i. E. G. E. Capital Services India and has also obtained insurance from United India Insurance Co. Ltd. and that the assessee had declared substantial income/ revenue from the use of these equipment and hence the existence of the equipment cannot be denied. Aggrieved the revenue is in appeal before us. 14. The ld DR pointed out that the bills produced as evidence of purchase of the medical equipment were obtained by the assessee were from Kabariwalas, who dealt with old vehicles and old machinery and machine parts, motor parts, tractor parts, iron and steel scrap and electrical parts etc. He took us to the pages of the paper book filed by the assessee, where the copies of various, invoices and bills were placed and pointed out that, life saving sophisticated medical equipment, cannot be under any stretch of imagination, be purchased from such parties, who deal with scrap and second hand machineries etc. He referred to the statements recorded from the persons who have issued these bills and submitted that these persons had denie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued bills and took payment through a/c payee cheques. He pointed out that these suppliers have never stated that the cash was withdrawn after encashing the cheques and that it was returned to the assessee. He submitted that the statement was not specific to the assessee. He argued that neither the existence of the machinery nor the value thereof can be disputed. He prayed for relief. 16. In reply the ld DR pointed out that the assessee have never asked for cross examination of the supplies and under those circumstances it is well settled, that lack of cross-examination, does not result in the statements recorded not having evidentiary value. He pointed out that these parties from whom the assessee stated that it had acquired life saving medical equipment, had admitted that they have en-cashed cheques and returned the cash to the persons giving the cheque after deducting the commission. He further submitted that there was neither proof of installation nor any evidence that GE Capital having inspected the machinery. He prayed that the finding of the AO be restored. The ld counsel for the assessee joined the issue and submitted the statement was a general statement and not specif ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubmitted that for re-examination of the bills of the fixes assets purchases, summons were issued to the concerned suppliers but no compliance has been made till date. As the date of time-baring i. E., 31.12.2011 is very near, it is not possible to pursue the case and garner the requisite facts. Rejoinder letter is also very detailed and needs lot of time for rebuttal. 4. Therefore you are most humbly requested to extend the time limit for submitting remand report. As time-barring date is closer, you are kindly requested to extend the time limit upto 20.01.2011 for submitting the remand report." 20. Similar report was given on 16.03.2012 by the AO to the ld CIT(A). Thus the argument of the ld counsel for the assessee that these statements have no evidentiary value as no opportunity to cross examine has been provided, has force. The evidentiary value of these statements has to be viewed from this angle. The suppliers are the revenues witnesses and even if they are not, if the revenue has to rely on their statements, then it should give the assessee an opportunity for cross examination. In coming to this conclusion we rely on the following case laws:- "i) 125 ITR 713 (SC) Kishnicha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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