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TMI Blog2019 (3) TMI 274X X X X Extracts X X X X X X X X Extracts X X X X ..... wance u/s 14A of the Act cannot exceed the exempt income and the judicial pronouncement cited in this regard. The assessee is directed to furnish the details of investment made and also establish with evidence that the investments in instruments generating exempt income to the assessee were not made out of borrowed funds; which shall be considered by the AO while deciding the issue. Nature of expenditure - Disallowance of Professional Fees as capital expenditure - revenue expenditure allowability - genuineness of the payment - HELD THAT:- AO should have first examined the genuineness of the payment claimed to have been made; the purpose of the payments and then decide as to whether the payment of professional fees to ‘Keynote’ is allowable as deduction u/s 37 of the Act. As the facts related to the payments and surrounding circumstances have not been examined, we deem it appropriate to set aside the orders of the authorities below and restore the matter back to the file of the AO for fresh examination and determination of the allowability of the professional fees paid to ‘Keynote’ as deduction u/s 37 of the Act. Addition on account of Carbon Credit - accrual of income - Diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he impugned order dated 29.03.2017. 3. Aggrieved by the order of CIT(A)-6, Bangalore dated 29.03.2017 for Assessment Year 2012-13, the assessee has preferred this appeal before the Tribunal, wherein it has raised the following grounds: 1. The order of the Learned Commissioner of Income Tax Appeals is opposed to law, fact and circumstance of the case. 2. The learned Commissioner of Income Tax (Appeals) has without appreciating the facts pertaining to the cases mentioned in detail, in the statement of facts has routinely confirmed disallowance u/s 14A. 3. The learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that courts have consistently held that before resorting to section 14A disallowance, it must be clearly established by the Assessing Officer that borrowed funds have been deployed in making the investment that yield the exempted Income. In fact the appellate commissioner has failed to consider in proper perspective the following judicial pronouncements which clearly held that only after giving and finding fact that borrowed funds have been utilised to acquire the financial assets yielding tax free income. a. CIT Vs. L T Infr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opinion of the Assessing Officer while confirming the additions. 9. It is basic tenant that before taxing income it is duty of the authorities to give a finding of fact whether any income has really accrued to the assessee. In this case it is borne on facts and also the available financial statement clearly indicate that no carbon credit had been received by the company and no carbon credit accrued to the company during the relevant previous year. Hence, taxing a nonexistent income which neither accrued not received would be, against all cannons of taxation. 4. Ground No. 1 (supra) , is general in nature and therefore no adjudication is called for thereon. 5. Ground Nos. 2 to 4 Disallowance u/s 14A r.w.r. 8D 5.1 In these grounds (supra), the assessee assailed the action of the CIT(A) in upholding the disallowance made by the AO u/s 14A r.w.r. 8D of the Income Tax Rules, 1962 (in short the Rules ) amounting to ₹ 18,52,774/- [viz., ₹ 18,16,744/- u/R 8D(2)(ii) and ₹ 36,030/- u/R 8D(2)(iii)] citing various judicial pronouncements. 5.2 The facts of the matter, as emerge from the record on this issue are that in the course of assessment p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... details to support its claim that the borrowed funds were not utilised to make the investments that earned the exempt income. The assessee has only provided the year end balances of the borrowed funds and not the details of investments made in order to establish that borrowed funds were not used for investments in instruments which earned the assessee exempt income. It is the primary responsibility of the assessee to submit evidence to support its claim; which onus, in our view, has not been not discharged by the assessee. 5.5.2 In the factual matrix, on the issue of disallowance u/s 14A of the Act r.w.r. 8D(2)(ii) and 8D(2)(iii), as laid out above, we are of the view that in the interest of substantial justice, the orders of the authorities below on this issue be set aside and this issue be remanded to the file of the AO for fresh determination of the disallowance after considering the facts of the case and also the legal propositions in the matter; including the propositions that the disallowance u/s 14A of the Act cannot exceed the exempt income and the judicial pronouncement cited in this regard (supra). The assessee is directed to furnish the details of investment made and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /Mad/2011) ( ii) Nimbus Communication Ltd., (132 TTJ 351) (Mumbai, ITAT) ( iii) CIT Vs. Crompton Engg. Co. Ltd., (242 ITR 317) (Mad.) 6.4.1 We have considered the rival contentions / submissions and perused the material on record. From an appraisal of the record before us, we find that the Annual General Meeting (AGM) of the assessee company on 13.09.2010 had approved the proposal of increasing the assessee s authorized share capital. Even before the approval of the AGM, the assessee vide letter dated 08.09.2010 seems to have made an offer to the party concerned to act as Book Running Lead Manager . The payment is made vide letter dated 25.11.2010 (copy placed at page 2 of Paper Book); whereas the invoice for the same is raised by the party on 08.12.2010 (copy on page 3 of Paper Book); much after the payment was made. 6.4.2 In view of the above factual contradictions in the chronological sequence of dates in the documents submitted (supra), we are of the considered opinion that the AO should have first examined the genuineness of the payment claimed to have been made; the purpose of the payments and then decide as to whether the payment of professional fees t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... treated as revenue income and were accordingly exigible to tax. After making the above observations, the AO assumed that the carbon credit receipts for the year under consideration to be at the same level as the earlier year and added an amount of ₹ 1,35,45,905/- to the income of the assessee. 7.2.2 On appeal, the CIT(A), after reproducing the facts of the case, as appearing in the order of assessment, the grounds raised and the statement of facts appended to the Form 35, upheld the action of the AO by stating that no documentary evidence was produced by the assessee and in the absence of documentary evidence to support its contentions, the additions made by the AO are confirmed. 7.3 Before us, it has been submitted that the assessee has not received any carbon credit during the year under consideration; i.e., in the period relevant to Assessment Year 2012-13. It was contended that the AO has to first render a finding of fact as to whether any income was actually received or accrued to the assessee on account of carbon credit in the year under consideration and that taxing a non-existent income which was neither received nor accrued is against all cannons of taxation. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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