9911796707
TMI Blog2017 (4) TMI 1469X X X X Extracts X X X X X X X X Extracts X X X X ..... , therefore, they were heard together and are disposed of by this common order for the sake of convenience. ITA No. 2369/Ahd/2010 Assessee's appeal for A.Y. 2007-08. 3. The only surviving grievance of the assessee relates to the disallowance of Rs. 31,87,067/- made by A.O. invoking provision of section 14A read with Rule 8D. 4. In the first round of litigation, this issue was partly decided in favour of the assessee and partly in favour of the revenue. The assessee through the miscellaneous application prayed for recalling the order of the Tribunal so far as it was against the assessee and the Tribunal vide M.A. No. 104/Ahd/2014 held as under:- 4. We have heard the rival submissions and perused the material on record and have also gone through the Miscellaneous Application. With respect to disallowance u/s, 14A in ITA No. 2369/Ahd/2010, it is seen that for the year under consideration being A.Y. 2007-08, the disallowance u/s. 14A has been made by following the provisions of Rule 8D. We further find that Hon'ble Gujarat High Court in Assessee's own case is A.Y. 2006-07 while deciding the Special Civil Application No. 15726 of 2010, has held that provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missioner of Income-tax (Appeals) and another reported in (2007) 288 ITR 1 (SC) would not apply. 9. Facts emerging from the record are quite clear. The assessee had purchased shares of a subsidiary company by investing sum of Rs. 7.86 crores. In view of the Assessing Officer, there had to be disallowance of interest matching to such sum since interest bearing funds were diverted for such purpose. Firstly, we are unable to see the rationale behind such approach. As noted, foundational query of the Assessing Officer to the assessee in this background was that the assessee has not charged interest on such investment in share. The assessee was therefore, asked to show cause why interest' should not be charged on investment. Upon perusal of the order of assessment, we do not find that the case of the Assessing Officer was that investment made by the company in the subsidiary by purchase of shares was in fact, a loan in disguise. When even 'according to the Assessing Officer there was no advance made by the assessee to the subsidiary, the question: of charging interest on the investment made, would not arise. The Assessing Officer in our opinion therefore, clearly misdirected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ospective in nature. However, it has been held therein that the Assessing Officer if is not satisfied with the correctness of the claim of the assessee in respect of the expenditure, prior to the introduction of Rule 8D, is entitled under the law to calculate the amount and determine the amount of expenditure in relation to the income. 5. On thus having heard learned counsel and having considered at length the material on record, we are of the opinion that no interference is desirable. 6. As can be noted from the "elaborate notings of the Assessing Officer itself, the interest free funds with the assessee was to the tune of Rs. 1.56 Crores, even if the outstanding loan of Rs. 2077.06 lacs as on 31st March 1999 is taken into account. Since we are only concerned with a sum of Rs. 18.38 lacs disallowances of which has been made under section 14A of the Act; even if the Tribunal has held that this was a question of mixed funds, the further reasonings given by the Tribunal cannot be ignored nor can earlier version be viewed in isolation. These findings cannot be said to be in consonance with the findings of the Assessing Officer. We also hold that the CIT [A] and the Tribunal both ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he next grievance of the revenue relates to the deletion of the addition of Rs. 68.96 lacs made by A.O. treating the same to be capital expenditure. 14. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has made a payment of Rs. 81.14 lacs towards control system for heat setting and stretching machine. The assessee was requested to show cause as to why the said expenditure should not be treated as capital in nature. The assessee filed a detailed reply vide its letter dated 13.12.2010 to justify its claim of the said expenditure as revenue in nature. The detailed reply of the assessee is incorporated by the A.O. at pages 6 to 10 of his assessment order. However, the said reply did not find any favour with the A.O. who was of the firm belief that a new system was installed after changing the new control system and, therefore, treated the amount of Rs. 68.96 lacs as capital in nature. 15. Assessee carried the matter before the ld. CIT(A) and vehemently contended that no new asset came into existence, the entire expenditure has been incurred for the up-gradation of the control system as the spare parts for the old system as well as technic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... na Spinning Mills (P) Ltd. 293 ITR 201, the A.O. made the addition of Rs. 31.39 lacs. 20. Assessee carried the matter before the ld. CIT(A) and reiterated what has been stated before the lower authorities. 21. After considering the facts and the submissions, the ld. CIT(A) held as under:- 7.1 I have considered the contentions of the A.O. and the submissions made by the appellant. The A.O., while making disallowance of expenditure on account of plaster work and RCC work has not discussed the details of such expenditure. He has simply held that if there has been wear and tear of an item like RCC work, plastering work etc., over a number of years and ultimately they are replaced, then such replacement cannot be recorded as current expenditure. He has again placed reliance on the decision of Delhi High Court in the case of Modi Spinning and Weaving Mills Co. Ltd. (200 ITR 544) and decision of Hon'ble Supreme Court in the case of Saravana Spinning Mills Pvt. Ltd. (293 ITR 201). 7.2 I have gone through the details of such expenditures submitted by the appellant during the course of hearing of appeal proceedings. The appellant has also submitted copies of bills for such expe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of the Hon'ble Supreme Court in the case of Saravana Spinning Mills (P) Ltd. (supra) relied upon by the A.O. In our considered opinion, the decision of the Hon'ble Supreme Court relied upon by the A.O. if considered in the light of the facts of the case in hand, is more in favour of the assessee then the revenue. The Hon'ble supreme Court in the said case has laid down the ratio that "the basis test to find out as to what would constitute current repairs is that the expenditure must have been incurred to "preserve and maintain" an already existing asset, and the object of the expenditure must not be to bring a new asset into existence or to obtain a new advantage". A similar view has been taken by the Hon'ble High Court of Gujarat in the case of Hotel Oasis (Surat) (P.) Ltd. in Tax Appeal No. 289 of 2012. 23. The Hon'ble Jurisdictional High Court of Gujarat in the case of Manoj B. Mansukhani in Tax Appeal No. 941 of 2010 was, interalia, seized with the following question of law:- (C) Whether the Appellate Tribunal is right in law and on facts in reversing the order passed by CIT(A) and thereby deleting the addition made on account of disallowance of capital expenses amountin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of amount expended on current repairs to machinery, plant or furniture used for the purposes of business, irrespective of whether the assessee is the owner of the assets or has only used them. The expression "current repairs" denotes repairs which are attended to when the need for them arises from the viewpoint of a businessman. The word "repair" involves renewal. However, the words used in Section 31 (i) are "current repairs". The object behind Section. 31 (i) is to preserve and maintain the asset and not to bring in a new asset. In our view, Section 31 (i) limits the scope of allowability of expenditure as deduction in respect of repairs made to machinery, plant or furniture by restricting it to the concept of "current repairs". All repairs are not current repairs. Section 37(1) allows claims for expenditure which are not of capital nature. However, even Section 37(1) excludes those items of expenditure which expressly falls in Sections 30 to 36. The effect is to delimit the scope of allowability of deductions for repairs to the extent provided for in Sections 30 to 36. To decide the applicability of Section 31 (i) the test is not whether the expenditure is revenue or capital in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the opinion that the views of the A.O. are not correct. The ld. CIT(A) observed that such incentives are paid to the wholesalers when the minimum meters mentioned for the entire period of the claim is achieved by them. The ld. CIT(A) concluded by holding that the dealers are getting incentives not on the basis of sales made by them but on the basis of orders placed with the appellant. Hence, no TDS required to be made by the assessee company of such payment. The ld. CIT(A) accordingly directed the A.O. to delete the impugned addition. 30. The ld. D.R. strongly supported the findings of the A.O. Per contra, the ld. counsel for the assessee relied upon the findings of the ld. CIT(A). Strong reliance was place on the decision of the Hon'ble Jurisdictional High Court of Gujarat in the case of Gujarat Tea Processors & Packers Ltd. 28 taxmann.com 187. 31. We have given a thoughtful consideration to the orders of the authorities below. We find force in the contention of the ld. Senior Counsel. The Hon'ble High Court of Gujarat on identical set of facts had considered the following and held accordingly:- "Trade discount- Assessment Year 2006-07- Assessee was a manufacturer and selle ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is directed to delete the addition of Rs. 3,71,819/-. This grievance is accordingly allowed. 40. In the result, the appeal filed by the Assessee is partly allowed. ITA No. 2001/Ahd/2012 Revenue's appeal for A.Y. 2009-10 41. The first grievance relates to the deletion of the addition of Rs. 89.71 lacs being interest on the investment made in subsidiary company. 42. This issue has been considered by us in detail in assessee's appeal in ITA No. 2369/Ahd/2010 for A.Y. 2007-08. For our detailed discussion therein, this grievance of the revenue is dismissed. 43. The next grievance relates to the deletion of the addition of Rs. 2.78 crores made by the A.O. u/s. 40(a)(ia) of the Act. 44. A similar issue has been considered by us in ITA No. 2504/Ahd/2011 for A.Y. 2008-09 qua ground no. 4 of that appeal. For our detailed discussion therein, this grievance is dismissed. 45. In the result, the appeal filed by the revenue is dismissed. C.O. No. 191/Ahd/2013 for A.Y. 2009-10 46. The cross objection of the assessee relates to the disallowance made u/s. 14A read with Rule 8D. 47. A similar issue has been considered by us in ITA No. 2313/Ahd/2011 for A.Y. 2008-09 wherein we have ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
