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TMI Blog2016 (5) TMI 1504X X X X Extracts X X X X X X X X Extracts X X X X ..... esumptions and assumptions. He has not given any cogent reason in this regard. Thus, considering the entire facts and circumstances of the present case, we are of the view that the authorities below have not correctly appreciated the facts of the present case and also settled legal position. Accordingly, we set aside the findings of the authorities below on this issue and allow the ground raised by the assessee. Accordingly, we direct the AO to allow the entire expenditure claimed by the assessee under the head repairs and maintenance of the building (old shed), tubewell and cabin. We also direct the Assessing Officer to withdraw the amount of depreciation, if any, allowed to the assessee on the amount spent on repair of tubewell. Addition u/s 14A - HELD THAT:- Assessee had invested a sum of ₹ 10,87,172/- in the shares of various companies. The contention of the assessee is that the investments in shares had been made out of the capital and outstanding reserves of the company and that no separate amount had been borrowed for making the said investments. The assessee further claimed that no substantial expenditure was incurred for earning dividend income. Revenue Authori ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment year 201011, passed under section 250(6) of the Income Tax Act, 1961 (in short the Act ). 2. Ground No.1 of the appeal is general in nature and, hence no comments are being offered. 3. Ground No.2 of the appeal reads as under : 2. That in the facts and circumstances of the case, the Id. Commissioner of Income Tax (Appeals) gravelly erred in upholding the action of the Id. Assessing Officer by treating the expenses of ₹ 25,01,147/- incurred on repair and maintenance of building and tubewell as capital expenditure instead of revenue expenditure. 4. Briefly stated, the facts of the case are that the assessee had debited an amount of ₹ 28,97,246/- to the Profit Loss Account on account of repair and maintenance of building. While examining the ledger account of the assessee, the Assessing Officer noticed that some of the entries were like capital nature, the ledger of these entries are reproduced here-in-below : Repair maintenance of building before Sept. Date Nature of Expenditure Voucher Amount ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the building was repaired. As regards the replacement of tubewell, the assessee submitted that there was already a tubewell installed in the factory and the assessee had to only change the same and has to replace the tubewell. Thus, the assessee claimed that the expenditure of ₹ 28,97,246/- was incurred on account of repair and maintenance of the godown. The Assessing Officer did not find any merit in the contention of the assessee and treated the entire expenditure of capital nature. However, the Assessing Officer allowed the depreciation on the amounts of expenditure spent on tubewell. After allowing depreciation, the Assessing Officer added a sum of ₹ 25,01,147/- to the total income of the assessee. 6. On appeal, the learned CIT (Appeals) upheld the action of the Assessing Officer, However, the learned CIT (Appeals) directed the Assessing Officer to allow depreciation on tubewell @ 15%. 7. Aggrieved by the order of the learned CIT (Appeals), the assessee has come up in appeal before the Tribunal. 8. We have heard the rival submissions and have also perused the materials available on record. The Assessing Officer has observed that u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... building and the expenditure was not incurred for bringing into existence of new assets or to obtain any new or different advantage. It is noticed that in its reply, the assessee has submitted the observations of the Auditors of Principle to whom substantial supplies were made. The assessee referred to para 6.5 of the Principle Auditors observations, which reads as under : 6.5 Substantially meets; Drains open inside production area in the condensate recovery area and loading bay. Flooring is of concrete but damaged floor found in front of the lab area. Gaps/water marks were seen alongwith the ceiling/wall at the loading way. Gaps at the ceiling of condensate recovery area which is adjacent to production area and birds feather were observed on the floor. Scrap material stored alongwith the wall at the loading bay. C boxes, partitions found laying alongwith the wall in production area. Flies were seen in the loading and unloading stations with open drains at the loading bay. Loading/unloading bays are not protected against the entry of pests inside the production area. Gap observed in the ceiling at the loading bay with watermarks of leakages. Barefoote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure incurred on repairs was for the purpose of business to be carried on more efficiently and more profitably while leaving the fixed capital untouched, and therefore, the expenditure should be treated as incurred on revenue account. As regards the tubewell, which was installed in the factory, it is stated that the tubewell had dried and the assessee had to replace the same by lowering it further. No new tubewell was installed. Thus, no new asset came into existence. The existing tubewell was replaced. There is no material on record to controvert the above contention of the assessee. In our opinion, the expenses incurred towards deepening of existing tubewell are certainly in the nature of revenue. Furthermore, from the details submitted by the assessee, it is clear that the expenditure in question was incurred for maintenance of tubewell. The process of deepening is linked with its user. We may also observe here that the findings given by the learned CIT (Appeals) are also without any substance. The learned CIT (Appeals) has observed that the assessee must have certainly got done some work of capital nature. He further observed that the amount claimed to h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee had made investments of ₹ 10,87,172/- in the shares of various companies. The Assessing Officer took the view that the income earned, if any, from these investments, would be in the nature of dividend, which is exempt. The assessee could not specify the expenditure incurred in relation to the investments made by it and so the Assessing Officer computed disallowance in accordance with Rule 8D of the Income Tax Rules, 1962, r.w.s.14A of the Act. The Assessing Officer disallowed ₹ 76,075/-. 12. On appeal, the learned CIT (Appeals) confirmed the disallowance and, hence the assessee is in appeal before the Tribunal. 13. We have heard the rival submissions. Shri Mohit Dhiman, learned counsel for the assessee submitted that the investments were not made out of interest bearing loans but out of capital and reserves of the company. He further pointed out that the capital of the company was at ₹ 3,31,00,140/-. The interest free share application money was at ₹ 6,06,500/- and reserve and surplus were at ₹ 2,63,61,069/-. According to the learned counsel for the assessee, when these interest free funds were available and the rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... corded any reasons in the assessment order to hold that any expenditure had been incurred on earning the exempt income and that the Assessing Officer had rejected the claim of the appellant without giving any reasons for the same. We have already dealt with this issue. The conclusion, therefore, that the Assessing Officer had mechanically applied rule 8D of the Income-tax Rules, 1962 is well founded. The Tribunal reiterated these facts and the same position. As held by a Division Bench of this court in I. T. A. No. 320 of 2013 titled as CIT v. Abhishek Industries Ltd. decided on January 27, 2015, ( [2016] 380 ITR 652 (P H)) section 14A requires the Assessing Officer to record satisfaction that the interest bearing funds have been used to earn tax-free income and that the satisfaction must be based upon credible and relevant evidence. It was further held that the onus to prove that interest bearing funds were used lies squarely on the Revenue. The issue, therefore, in this regard was based only on the facts. The least that must be said in favour of the respondents is that the findings of fact recorded by the Commissioner of Income-tax (Appeals) and by the Tribunal are not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r. The Assessing Officer did not find any merit in the reply of the assessee and he, therefore, disallowed an amount of ₹ 2,16,136/- under section 36(1)(iii) of the Act. 17. On appeal, the learned CIT (Appeals) upheld the order of the Assessing Officer and, hence the assessee is in appeal before the Tribunal. 18. We have heard the rival submissions. Shri Mohi Dhiman, learned counsel for the assessee submitted that the assessee advanced a sum of ₹ 63,05,285/- to M/s Sodeme France for purchase of machinery. However, the seller did not deliver the machinery and the said company became bankrupt and the assessee had filed a suit in the Court of Liquidator in France and the suit was dismissed as the said company was declared as bankrupt. According to the learned counsel for the assessee, it was bad debt and till date no amount has been recovered from the said company. He further pointed out that there is no scope for recovery, it was futile to burden the assessee with interest. 19. The learned counsel for the assessee relied on the decision of the Hon'ble Jurisdictional in the case of CIT Vs. Suraj Dev Dada (2014) 367 ITR 78 (P H), wh ..... X X X X Extracts X X X X X X X X Extracts X X X X
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