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TMI Blog2018 (6) TMI 1522X X X X Extracts X X X X X X X X Extracts X X X X ..... the employees of a company as well as residence of vicinity, the same are integrally related to the business activities of the assessee - Decided against the Revenue. Addition on account of Club Membership Fee - Held that:- The approach of the assessee in spreading out the membership fee receipts over the period of membership cannot be faulted and as such the Ld. CIT (Appeals) was justified in deleting the addition made by Assessing Officer. - Decided against the Revenue. Addition invoking the provisions u/s 14A read with Rule 8D - Held that:- when the assessee has come up with categoric plea that the entire investment have been made out of its own interest free funds available and the incurred expenses have been suo moto disallowed and the AO has not pointed out any defect in the computation made by the assessee company, provision s contained u/s 14A read with Rule 8D are not attracted which can only be invoked if the AO is not satisfied with the claim of the assessee. Sustaining the addition under Rule 8D(2)(iii) by Ld. CIT(A) on account of administrative expenses to earn the exempt income is concerned, again, we are of the considered view that when the AO as well as Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,46,421/- made by the AO on account of Club Membership Fees. 4. Ld. CIT(A) erred in law and on facts of the case in deleting the addition of ₹ 69,46,01,000/- made by the AO on account of interest u/s 14A r.w. Rule 8D(2)(iii) of the Income Tax Act, 1961. 5. The appellant craves leave, modify, add or forego any grounds (s) or appeal at any time before or during the hearing of this appeal. 3. Since both the aforesaid Cross Appeals have been emanated from the single order passed by the Ld. CIT(A)-3, impugned by Assessee as well as Revenue, the same are being disposed of by way of consolidated order to avoid repetition of discussion. 4. Briefly stated the facts necessary for adjudication of the controversy at hand are: - the Assessee is into the business of Real Estate Development, Power Generation and Golf Course Operation. As per the scheme of amalgamation approved by Hon ble High Court of Delhi vide order dated January 11, 2012, 15 companies have been amalgamated into the DLF Home Developers Ltd. The Assessing Officer noticed that the assessee company has debited an amount of ₹ 6,19,050/- as prior period expenses, which has been disallowed by the AO, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not be disallowed by the AO, hence, Ld. CIT(A) has rightly deleted the same. So, Ground no. 1 determines against the Revenue. Ground no. 2 9. So far as the question of deletion of addition of ₹ 27,00,000/- made by the AO on account of School Running Expenses is concerned, undisputedly, the children of employees of the assessee are studying in the school situated on the land purchased by the assessee company. When we examine school running expenses, in the light of the global concept of business it includes care and concern for the society at large, particularly for the people of the locality where business is located. Moreover, AO has not disputed the genuineness of the expenses nor it is the case of the AO that the expenses used by the assessee are for its personal purposes. 9.1 In these circumstances, we are of the considered view that expenditure made by the assessee for running the school for the employees of a company as well as residence of vicinity, the same are integrally related to the business activities o f the assessee and have rightly been treated by Ld. CIT(A) having been incurred wholly and exclusively for the purpose of business, hence, Ground no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case, the respondent- assessee was running a coaching institute and was receiving upfront fee for providing coaching, which was spread over one year or two years. Keeping in view the factual position, Tribunal has rightly appreciated and applied the law as elucidated in the case of Dinesh Kumar Goel (supra). We do not think any substantial question of law arises. 25.4 It is further noted that SLP of Revenue against order of Hon ble High Court has been dismissed by Hon ble Supreme Court as per copy of order placed on record. Keeping in mind the facts of the case and respectfully following the ratio laid down by Hon'ble Delhi High Court in the case M/s. D LF Commercial Developers Ltd (Supra), we are of the op inion that the approach of the assessee in spreading out the membership fee receipts over the period of membership cannot be faulted and as such the Ld. CIT (Appeals) was justified in deleting the addition made by Assessing Officer. Accordingly, this ground of Revenue is rejected. 12. So, in view of the matter, we find no illegality or perversity in the findings of the Ld. CIT(A) in deleting the addition of ₹ 3,46,46,421/- on account of non-refundab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of expenses of ₹ 8,21,883/-, is not correct nor the AO has disputed the fact that the assessee was having own sufficient interest free funds available with it to make the investment in the year under assessment. 16. When the assessee was having sufficient interest free own funds to the tune of ₹ 2,95,937/- lacs no disallowance can be made under Rule 8D(2)(ii) as the assessee has not incurred any expenses on account of payment of interest. 17. Hon ble High Court of Bombay in case cited as CIT-2, Mumbai vs. HDFC Bank Ltd. - (2014) 49 taxmann.com 335 (Bombay) while dealing with the identical issue held that when the assessee s own funds and other non-interest bearing funds were more than investment in tax free securities, no dis allowance on account of interest payment under section 14A can be made. 18. Furthermore, the AO has not recorded his dissatisfaction as to the computation made by the assessee company that no expenditure has been made by the assessee company during the year under assessment to earn the interest free income rather proceeded mechanically by extracting the bare language of Rule 8D . Hon ble Apex Court in Godrej Boyce Manufacture Company L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... scertain the true and correct picture of its income and expenses. 40. Consequently on the aspect of administrative expenses being disallowed, since there was a failure by the AO to comply with the mandatory requirement of Section 14 A (2) of the Act read with Rule 8D (1 ) (a) of the Rules and record his satisfaction as required thereunder, the question of applying Rule 8D (2) (iii) of the Rules did not arise. The question framed in ITA 549 of 2015 is answered accordingly. 20. Following the decision rendered by Hon ble Apex Court in Godrej Boyce Manufacture Company Ltd. (supra) and Hon ble Delhi High Court in ITT Media Ltd. (supra), we are of the considered view that the finding returned by AO as well as Ld. CIT(A) that some kind of expenditure necessarily has to be incurred who earned the dividend income are not sustainable when the AO/ CIT(A) are required to bring on record that such and such disallowance have been made under Rule 8D(2)(ii) ( iii) particularly when the assessee has sou moto made disallowance of expenses of ₹ 8,21,883/- which has not been found incorrect by the AO as well as Ld. CIT(A) by returning specific findings. 21. Moreover, w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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