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TMI Blog2019 (10) TMI 709X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO during the course of assessment proceedings and the AO after examining the exempt income vis-a-vis expenses relatable to the same are already disallowed. In regard to propose exercise of revision with respect to working of disallowance made under section 14A of the Act Read with Rule 8D of the Rules relates to interest expenses paid for borrowings for R D expenses. We noted from the above details in respect to expenses related to Nano project and disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules relates to interest expenses paid for borrowings for R D expenses already examined by the AO during the course of assessment proceedings under section 143(3) of the Act. We noted that the provisions of section 263 of the Act for revising the assessment can be invoked only in a case wherein twin conditions i.e. order being erroneous and prejudicial to the interest of Revenue are cumulatively satisfied. This proposition has been settled by the Hon ble Supreme Court in the case of Malabar Industries Co. Ltd. vs. CIT [ 2000 (2) TMI 10 - SUPREME COURT] and CIT vs. Gabriel India Ltd. [ 1993 (4) TMI 55 - ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the facts in appellant s case are different; 1.3 erred in not appreciating that the proceedings under section 263 of the Act are invalid and bad in law; 1.4 erred in assuming jurisdiction under section 263 of the Act even when Assessing Officer ('AO') had already examined the issues during assessment proceedings, 1.5 erred in not appreciating that the appellant had disclosed all facts before AC and hence order under section 263 of the Act is invalid and bad in law; 2. Without prejudice- Disallowance of Nano project related expense which were revenue in nature of ₹ 43,82,54,995/- being treated as Capital in nature. 2.1 erred in directing the AO to treat normal/recurring expenses such as salary, staff welfare expenses, travelling and conveyance, hotel expenses, etc. amounting to ₹ 43,82,54,995 relating to Nano project as capital work in progress, 2.2 erred in concluding that the Nano project was not an extension of the existing business of appellant and the expenses should be allowable as revenue expenditure, 2.3 erred in not appreciating tha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Assessing Officer. According to CIT(LTU) this is not in order as the Nano Project altogether a new plant set up in Singur during the relevant period and it is not an expansion of the existing one. Therefore, he proposed to disallow the above noted expenses. According to him, the assessment order passed is erroneous in so far as it is prejudicial to the interest of the Revenue. Subsequently, vide notice dated 23.02.2016, CIT (LTU) issued another notice stating that while working out the disallowance of expenses relatable to exempt income under section 14A of the Act, the AO failed to consider the interest expenses of ₹ 113.69 crores paid on borrowing for R D expenses. On this point also, the assessment order is to be revised. The assessee replied to the show cause notice vide letter dated 09.03.2016, but he has not accepted the contentions of the assessee and finally passed the revision order under section 263 of the Act dated 29.03.2016 stating that the expenses relating to Nano Project and expenses relating to exempt income have not been properly examined. For this, he observed in Para 6.1 and 6.2 as under: - 6.1 the undersigned has gone through th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or R D expenditure. The entire investment, income from which is not liable to tax, made by the company is attributable to the self-generated funds and hence, no borrowing cost is attributable to the same. All borrowings are made towards specific purpose and none of the borrowing is made towards making such investments, income from which is not liable to tax. Since no expenditure has been incurred by the company in relation to such investments, Rule 8D is not applicable. The assessee officer has discarded the decision of the Bombay High Court in the case of Godrej Boyce Mfg. Co. Limited, (328 ITR 81) mandating him to establish the fact that expenditure has been incurred to earn exempt income. 8.2 I have carefully considered the issue and perused the records. The fact of the matter is that the assessee s submissions mainly challenged the Assessing Officer s wisdom in bringing assessee s case within the ambit of disallowance under section 14A. CIT s jurisdiction under section 263 does not grant revisionary powers in respect of issues which are not prejudicial to the interest of revenue. The fact of the matter is that the Assessing Officer reached the right conclus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter dated 8.01.2013 vide item No. 1 as under Details of expenses incurred on transfer of Nano Plant from Singur to Sanad We submit to your goodself that the expense incurred on relocation of nano plant from Singur to Sanad have been debited to CWIP. The relocation expenses had been debited to Profit and Loss account in FY 2009-10 (AY 2010-11) and have been added back in the computation of income of that year. We enclose wherewith the relevant annexure of the Tax Audit Report for the assessment year 2010-11 as Annexure . 8. The assessee has given complete details of re-location expenses amounting to ₹ 144,10,49,109/-. Again, submissions were filed on 18.01.2013 regarding non-applicability of the section 14A of the Act as well as the expenses incurred for shifting of Nano plant from Singur to Sanad which read as under: - 1. Submissions alongwith cop of documents justifying non applicability of section 14A in our case is enclosed as Annexure-1. 2. In connection with your goodself s query regarding receipts from People Financial Service, we have to submit to your goodself ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es are enclosed as Annexure 1 in assessee s paper book at page 67. It can be seen from the details of the expenses that these are normal day to day expenses relating incurred during the course of business for the Nano project at Singur. However due to unavoidable circumstances, the Nano project had to be abandoned in Singur and relocated to Sanad, Gujarat. Subsequent to the abandonment of the Singur project, the company also incurred certain relocation expenses for moving the entire project from Singur to Gujart. The company, however, has claimed only the revenue expenses incurred in relation to day to day operations at Singur, amounting to ₹ 43,82,54,995/- as deduction in its return of income and the relocation expenses have not been claimed as deductible expense. During the course of assessment proceedings these were examined by the assessing officer, the company has further furnished the details on the relocation expenses. Copy of the submissions filed with the assessing officer are enclosed as Annexure 2 in assessee s paper book at pages 68 to 72. In view of these facts, the learned Counsel for the assessee made submissions that the AO had formed an opinion that these are ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s expenses relatable to the same are already disallowed. In regard to propose exercise of revision with respect to working of disallowance made under section 14A of the Act Read with Rule 8D of the Rules relates to interest expenses paid for borrowings for R D expenses. 12. We noted from the above details in respect to expenses related to Nano project and disallowance of expenses relatable to exempt income by invoking the provisions of section 14A of the Act read with Rule 8D of the Rules relates to interest expenses paid for borrowings for R D expenses already examined by the AO during the course of assessment proceedings under section 143(3) of the Act. We noted that the provisions of section 263 of the Act for revising the assessment can be invoked only in a case wherein twin conditions i.e. order being erroneous and prejudicial to the interest of Revenue are cumulatively satisfied. This proposition has been settled by the Hon ble Supreme Court in the case of Malabar Industries Co. Ltd. vs. CIT (2000) 243 ITR 83 (SC) and also by Hon ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. (1993) 203 ITR 108 (Bom). Similarly, where two views are possible and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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