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TMI Blog2018 (6) TMI 826X X X X Extracts X X X X X X X X Extracts X X X X ..... 011 (3) TMI 622 - DELHI HIGH COURT] where it is held that the assessee has not claimed for spread of the expenditure over the concession period - hence do not find any error in the order of the Ld. CIT(A) and therefore appeal of revenue is dismissed. - ITA No. 1439/Del/2015 - - - Dated:- 12-6-2018 - SH. AMIT SHUKLA, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER Appellant by : Sh. Atiq Ahmed, Sr. DR Respondent by : Sh. Gautam Jain, Adv. ORDER Per O. P. Kant, A. M. This appeal by the Revenue is directed against order dated 30/12/2014 passed by the Ld. Commissioner of Income-tax (Appeals)-7, Laxmi Nagar, Delhi [in short the Ld. CIT(A) ] for assessment 2011-12, raising following grounds: 1. In the facts and under the circumstances, the CIT(A) has erred in deleting the disallowance u/s 14A ₹ 1,84,960/- made by the AO by ignoring the mandatory prescribed method for determination of amount of expenditure incurred in relation to exempt income by virtue of notification No. 45/2008 dated 24.03.2008 of the CBDT introduced Rule 8D. 2. In the facts and under the circumstances, the Ld. CIT(A) has erred in deleting the addition of ₹ 96,14,068/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issue observing as under: 5.2 The appellant stated that it had no dividend income and investment was strategic investment and therefore as per judgment of Hon ble High Court CIT Vs. Holcim India (P) Ltd. no disallowance should be made. Further no expenditure was incurred and also the AO did not record any satisfaction before proceeding to make the disallowance. I shall now quote some decisions in respect of section 14A. 5.3. In the case of Godrej A Boyce Mfg Co. Ltd v DCIT Anr. 328 ITR 81 (2010) the Hon'ble Court observed as under: The following principles would emerge from Section 14A and the decision in Watfort: (a) The mandate of Section 14A is to prevent claims for deduction of expenditure in relation to income which does not form part of the total income of the assessee; (b) Section 14A(1) is enacted to ensure that only expenses incurred in respect of earning taxable income are allowed; (c) The principle of apportionment of expenses is widened by Section 14A to include even the apportionment of expenditure between taxable and non-taxable income of an indivisible business; (d) The basic principle of taxation is to tax net income. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... b-rule (2) of Rule 8D of the said Rules. 31. It is, therefore, dear that determination of the amount of expenditure in relation to exempt income under Rule 80 would only come into play when the AO rejects the claim of the assessee in this regard. If one examines sub-rule (2) of Rule 80, we find that the method for determining the expenditure in relation to exempt income has three components. The first component being the amount of expenditure directly relating to income which does not form part of the total income. The second component being computed on the basis of the formula given therein in a case where the assessee incurs expenditure by way of interest which is not directly attributable to any particular income or receipt. The formula essentially apportions the amount of expenditure by way of interest [other than the amount of interest included in clause (i)] incurred during the previous year in the ratio of the average value of investment, income from which does not or shall not form part of the total income, to the average of the total assets of the assessee. The third component is an artificial figure - one half percent of the average value of the investment, income fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the disallowance under Section 14A of the Income Tax Act, 1961 amounting to ₹ 8,61,50,315/- in Assessment Year 2007-08 and ₹ 6,60,93,678/- in assessment year 2008-09 holding that no dividend income was earned by the assessee ignoring the provisions under Section 14A 15. Income exempt under Section 10 in a pcrticular assessment year, may not have been exempt earlier and can become taxable in future years. Further, whether income earned in a subsequent year would or would not be taxable, may depend upon the nature of transaction entered into in the subsequent assessment year. For example, long term capital gain on sale of shares is presently not taxable where security transaction tax has been paid, but a private sale of shares in an off market transaction attracts capital gains tax. It is an undisputed position that respondent assessee is an investment company and had invested by purchasing a substantial number of shares and thereby securing right to management. Possibility of sale of shares by private placement etc. cannot be ruled out and is not an improbability. Dividend may or may not be declared. Dividend is declared by the company and strictly in lega ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... those assets and for claiming depreciation as per Income Tax Act, the assessee must be owner of the asset and accordingly, the assessee has claimed the entire expenses of ₹ 1,20,17,585/- as revenue expenditure. 4.2 According to the Assessing Officer, the concession period was from 12/01/2011 to 11/01/2016 and in view of the concession agreement the expenditure has been considered as deferred revenue, and thus, the benefit of those assets was spread over 5 years. The Assessing Officer accordingly allowed 20% of the total expenditure, which was worked out at ₹ 24,03,517/- in the year under consideration and disallowed balance amount of ₹ 96,14,068/-. 4.3 Before the Ld. CIT(A), the assessee made detailed submission and relied upon the decision of the Hon ble Delhi High Court in the case of City Financial Consumer Finance Ltd reported in 335 ITR 29 (Del) and others decisions. The Ld. CIT(A) after considering the submission of the assessee, deleted the disallowance of ₹ 96,14,068/-. 4.4 Before us, the Ld. DR relied on the order of the Assessing Officer. On the contrary, the Ld. Counsel of the assessee relied on the finding of the Ld. CIT(A) on the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ts keeping in mind the broad picture of whole operation in respect of which the expenditure has been incurred. At the same time, few tests formulated by the Courts were taken note of. One such test which was specifically spelled-out and may be relevant for our purpose was when an expenditure is made not only once and for all, but with a view to bringing into existence of an advantage for which enduring benefit of a trade, the expenditure can be treated as capital in nature and not attributable to revenue . However, cautioned the Court, it would be misleading to suppose that in all cases securing a benefit for business expenditure would be capital expenditure. The Court added the caution in the following words:- There may be cases where expenditure, even if incurred for obtaining advantage, of enduring benefit, may, none-the-less, be on revenue account and the test of enduring benefit may break down. It is not every advantage of enduring nature acquired by an assesses that brings the case within the principle laid down in this test. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that ..... X X X X Extracts X X X X X X X X Extracts X X X X
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