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TMI Blog2019 (4) TMI 1103X X X X Extracts X X X X X X X X Extracts X X X X ..... that the assessee has debited a sum of Rs. 2,86,15,199 as per point 11(a) of Audit report towards leaseholdimprovement, repairs and maintenance and renovation expenses. On verification of invoices, the AO has noticed that expenses incurred through 5 invoices amounting to Rs. 27,97,826 [ i.e. two invoice both dtd. 18.12.2009 for Rs. 6,77,327 are for electrical lights and for Rs. 7,04,492 for Luminaire Frame from M/s. Artlite Illumination Pvt. Ltd.,invoice from Iqbal Khan dtd. 3.11.2009 for dismantling work etc., invoice dtd. 10.09.2009 from Arti Interiors for Rs. 2,72,048 and invoice dtd. 25.06.2009 of Rs. 5,24,056 from Taj Hi Tech are for Epoxy Flooring (coating) are capital in nature] as these gives enduring benefit to the assessee. Hence, the assessee was asked to explain as to why these should not be capitalized. It was explained that the expenses were incurred for dismantling and colour work and to make the showroom and workshop more attractive. The assessee being tenant of premises does not become owner of modification carried out. Hence, these expenses are revenue in nature being current repairs and therefore, allowable as business expense. However, the AO was of the view tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der dated 23.03.2007 in I.T.A.No. 430/Del/2005 (copy filed PB-55, Para 9). Further, the CIT (A) has allowed similar expenses in A.Y. 2007-08 vide order dated 15.04.2010 in appeal No. 132/2009-10 (PB-69-70) and the Department has accepted the same. The learned counsel for the assessee also supported his view by placing reliance in the case of CIT v. Madras Auto Service (P) Ltd. [1998] 233 ITR 468 (SC) wherein the assessee acting under lease agreement demolished the old premises and constructed new premises which was belonging to lesser and not to lessee, the expenditure was held to be revenue in nature. The learned counsel for the assessee further submitted expenditure incurred on networking,firefighting cabling, tiling, sanitary and partition was held to be revenue in nature by the ITAT Delhi in ITO v. ACL Wireless Ltd. 2012-TIOL-768-ITAT-DEL and HCL Comnet Ltd. v. DCIT 2012-TIOL- 649-ITAT-DEL 7. Per contra, the ld. Sr. D.R. vehemently contend that expenditure incurred for epoxy tiles gives enduring benefit. She also took us through invoices placed in Paper Book and argued that the expense incurred for installation of lighting, flooring are in the capital in nature. Further, it i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 010 in appeal No. 132/2009-10 (PB- 69-70) and the Department has accepted the same. The learned counsel for the assessee also supported his view by placing reliance in the case of CIT v. Madras Auto service (P) Ltd. [1998] 233 ITR 468 (SC) wherein the assessee acting under lease agreement demolished the old premises and constructed new premises was belonged to lesser and not to lessee, the expenditure was held to be revenue in nature. We find that expenditure incurred on networking,firefightingcabling,tiling, sanitary and partition was held to be revenue in nature by the Co-ordinate Bench of ITAT, Delhi in ITO v. ACL Wireless Ltd. 2012-TIOL-768-ITAT-DEL. In HCL Comnet Ltd. v. DCIT 2012- TIOL-649-ITAT-DEL, it was held that the expenses were incurred for dismantling and colour work and to make the showroom and workshop more attractive. On careful consideration of above facts and case laws, we are of the opinion that expenditure incurred by the assessee on suspended lights, outdoor flooring recessed luminaire frame made of brushed metal and installation of epoxy flooring, tiles is for making the rented premises more attractive and presentable with commensurate as dealer of high end ve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this appeal before the Tribunal. The learned counsel for the assessee submitted that neither M/s. TACL nor its directors/members have any substantial interest in the assessee company because all the shareholders are having less than 20% of shareholding(PB-80-90) with the assessee company, hence, provisions of section 40A(2)(b) are not attracted. Further,without prejudice, the assessee has taken ICD in F.Y. 2006-07 and details of which were filed vide letter dated 18.03.2013. Subsequently on representationfrom the party, the interest rate was revised to 12% to maintain liquidity.The assessee has already given ICD to two companies @11% (PB90-93). Therefore, the AO has disallowed the interest on the ground that payment made is excessive under section 40A(2)(b) of the Act. He completely ignored the facts that rate of interest of 11% from three companies are continuing from earlier year`s when the assessee was paying interest @10% Therefore, increase of interest rate @12% due to market conditions is justified. Hence, interest paid @12% was reasonable and not excessive. 14. Au contraire, the ld. Sr. D.R. supported the orders of lower authorities and contended that the assessee compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxes. 17. Brief facts are that the assessee has disallowed the prior period expenses of Rs. 2,45,794 being rate and taxes raised as demand by the Okhla Industrial Area CETP Society vide letter dated 30.07.2009 on the ground that the demand notice mentioned the apportionment of arrears for which no provision was made by the assessee in earlier years. 18. Being aggrieved, the assessee filed an appeal before the ld. CIT (A). Before CIT (A), it was contended that the these expenses have been crystallized during the year under consideration due to the fact that bills were raised during F.Y. 2009-10 relevant to assessment year 2010-11 and came to knowledge of the assessee during the year under consideration. Reliance was also placed on the decision in the case of CIT v. Exxon Mobile Lubricants Pvt. Ltd. [2010] 328 ITR 17 (Delhi) wherein it was held that where the liability for payment was determined and crystallized in the year under question and therefore, allowable and it cannot be held to be prior period merely because the expenses related to a transaction of earlier years. However, the CIT (A) upheld that disallowance by holding that the assessee has not followed the standard of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior period expenses has been determined and crystallized vide letter dated 30.07.2009, hence, these expenses on account of rate and taxes are allowable as business expenses. In view of this matter, the disallowance of Rs. 2,45,794 sustained by the Ld. CIT (A) are therefore, deleted. This ground of appeal is allowed. 22. Ground No. 5 states that the ld. CIT (A) has erred on facts and as well as in law in confirming the disallowance of Rs. 22,21,381 made u/s. 14A read with Rule 8D especially without recording satisfaction, excluding share application money, establishing link of investment and expenditure and by not considering the average of total assets and not the net assets. 23. Facts apropos of this ground are that the AO noticed that the assessee has received dividend income of Rs. 73,639 during the year under consideration out of which Rs. 516 was received through ECS from M/s. TACL, a group company and balance amount of Rs. 73,123 was dividend from SBI mutual fund, which was reinvested itself. However, no expenses were disallowed u/s.14A of the Act. The assessee has claimed that the amount of dividend of Rs. 516 was received through ECS from M/s. TACL and Rs. 73,123 as divi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that while considering the interest under Rule 8D(2)(ii) interest on term loan pertaining to fixed assets can be considered. With regard to disallowance under Rule 8D(2)(iii) of Rs. 1,08,516 included in disallowance of Rs. 21,21,381 u/s. 14A, it has been contended before us by referring balance sheet(PB-11) that no investment has been made during the year under consideration. The learned counsel for the assessee submitted that for the purpose of computing disallowance under Rule 8D, the share application money of Rs. 2 crores has to be excluded as the same can be regarded as investment yielding tax free income. In support of this contention, the learned counsel for the assessee has relied on the decision of Co-ordinate Bench of tribunal dtd. 20.11.20013 in I.T.A.No. 5096/Del/2011 in the assessee`s own case for assessment year 2008-09 in which assessment was set aside to the file of the AO to exclude the share application money. The AO has worked out disallowance u/s. 14A by excluding the share application money as not a part of investment in shares for the purpose of Rule 8D (PB-153) The revenue has accepted this decision as no appeal has been filed; hence, disallowance made on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat such investments were from interest-free funds and not from borrowed funds. Therefore, we are of the considered opinion that no disallowance on account of interest is called for under Rule 8D (ii) of Income-Tax Rules, 1962. We further find that the auditors in tax audit report has pointed out disallowance u/s. 14A as NIl. We further observe that the Tribunal in assessee`s own case in assessment year 2009-10, in I.T.A.No. 6490/Del/2012 dtd. 07.01.2015 has held that share capital and reserve and surplus has held that these are far exceeded the amount invested in securities; therefore, disallowance of interest was deleted. Therefore, following the said reasoning and order of tribunal , the disallowance of interest of Rs. 20,12, 865 in respect of interest under Rule 8D(2)(ii) are not to be considered as same are directly related to business income. Therefore, disallowance of interest of Rs. 20,12,865 is therefore, deleted. We also observe that tribunal in assessment year 2008-09 has directed the AO to exclude the share application money vide order dated dtd. 20.11.2013 in I.T.A.No. 5096/Del/2011 and the AO has accordingly, excluded the same therefore, no disallowance under Rule 8D ..... X X X X Extracts X X X X X X X X Extracts X X X X
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