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TMI Blog2018 (10) TMI 352X X X X Extracts X X X X X X X X Extracts X X X X ..... claim - Decided in favour of assessee. - ITA No.427/Bang/2017 - - - Dated:- 24-9-2018 - SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER For The Appellant : Shri C.H. Sundar Rao, CIT(DR-I)(ITAT), Bengaluru. For The Respondent : Shri A.C. Raju, CA ORDER Per N.V. Vasudevan, Judicial Member This is an appeal by the Revenue against the order dated 19.12.2016 of the CIT(Appeals)-12, Bengaluru relating to assessment year 2011-12. 2. Gr.No.1, 6 7 raised by the revenue are general in nature and does not call for any specific adjudication. 3. Gr.No.2 3 raised by the Revenue reads as follows:- 2. On facts of the case, Whether the Ld.CIT (A) is right in concluding that the provision of section 14A r.w.r. 8D is not applicable in this case when the AO has clearly held that the assessee has failed to prove the source of investment in the State Govt. undertaking. 3. On facts of the case, the Ld. CIT (A) ought to have appreciated that the assessee has failed to show that the fund received from the Govt. of Karnataka has been utilized in making the investment in the State Govt. undertaking. 4. The Assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of investment, income from which does not or shall not form part of the total income, as appearing in the balance sheet of the assessee, on the first day and the last day of the previous year. Further, the term total assets has been defined to mean total assets as appearing in the Balance Sheet excluding the increase on account of revaluation of assets but including the decrease on account of revaluation of assets. 7. In the present case, admittedly, there was no direct expenses and therefore there was no necessity of invoking rule 8D2(i) of the Rules. There was interest expenses and other expenses and therefore disallowance had to be made in terms of Rule 8D(2)(ii) (iii) of the Rules of interest expenses and other expenses. In terms of Rule 8D(2)(ii) (iii) of the Rules, the average value of investments had to be worked out. The question is while working out average value of investments, should one include the investments which yielded dividend income during the relevant previous year or all investments irrespective of the fact whether the investments yielded dividend income or not during the relevant previous year. The plea of the Assessee was that only investments whic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has taken into consideration the investment of ₹ 103 crores made this year, which has not earned any dividend or exempt income. It is only the average of the value of the investment from which the income has been earned which is not falling within the part of the total income that is to be considered. This is why the question of satisfaction is provided in section 14A and rule 8D(1), that relates to the accounts of the assessee. Thus, it is not the total investment at the beginning of the year and at the end of the year, which is to be considered but it is the average of the value of investments which has given rise to the income which does not form part of the total income which is to be considered. A question may arise as to why the term average of the value of investment is then used. The term average of the value of investment would be to take care of cases where there is the issue of dividend striping. In any case, as we have already held that the assessee has not incurred any expenditure by way of interest during the previous year, which is not directly attributable to any particular income, the findings of the ld. CIT(A) on the issue stand confirmed and consequently ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ture by relying on the decision of Hon'ble Supreme Court in the case of PSIDC Vs. CIT (1997) (225 ITR 792) (SC) in the case of M/s Brook Bond India Ltd Vs. CIT (1997)(225 ITR 798)(SC). 5. On facts of the case, the Ld. CIT (A) ought to have appreciated that the AO has relied on the decision of Hon'ble Supreme Court in the case of PSIDC Vs. CIT (1997) (225 ITR 792) (SC) in the case of M/s Brook Bond India Ltd Vs. CIT (1997)(225 ITR 798)(SC) in giving the above finding. 15. The AO noticed from the Schedule-L of the profit and loss account of the assessee that an amount of ₹ 61,00,000/- had been claimed as expense on account of 'Stamp Duty to GOK'. The assessee furnished the breakup of the same vide its reply dated 19.12.2013 which is as under:- Date Particulars Amount 31/03/2011 To Stamp duty-Share cap - 110 crores - 30-03-2011 Provision during the year 11,00,000 31/03/2011 To Stamp duty- Bonds - 110 crores - 25-01-2011 Provision during the year 25,00,000 19/11/20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessment order that the assessing officer had disallowed the expenditure of ₹ 61 lakh under section 37 considering it as capital expenditure. Bonds are debt instruments issued at interest. Bonds are different from share capital as bonds have the nature of liability incurred for raising funds for a company at interest and do not enhance the capital structure of the assessee in the same manner as equity share capital. There is no legal authority to consider expenditure made for raising funds through bonds as capital expenditure. The expenditure of ₹ 50 lakhs made for stamp duty in relation to bonds is deleted. 19. Aggrieved by the order of the CIT(A), the revenue has raised Gr.No.4 5 before the Tribunal. 20. We have heard the rival submissions. It was brought to our notice that identical issue was considered in Assessee s own case by this Tribunal for AY 2010-11 in ITA No.888 889/Bang/2017 vide order dated 28.6.2017 and the Tribunal held as follows:- 07. The next ground raised by the Revenue is with respect to the expenditure on issuance of bonds for ₹ 25,00,000/-. The assessee claimed stamp duty expenses amounting to ₹ 2500000/- unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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