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TMI Blog2019 (12) TMI 627X X X X Extracts X X X X X X X X Extracts X X X X ..... rcraft has been used for non-business purposes - Commissioner of Income Tax (Appeals) has restricted the expenditure to 25% - HELD THAT:- We observe that the issue of allowability of expenditure and depreciation on Aircraft was considered by the Tribunal in the past. The Tribunal [ 2017 (9) TMI 1832 - ITAT PUNE] for assessment year 2004-05 has restricted the disallowance of expenditure on Aircraft to 15%. Since, the facts in assessment year under appeal and reason for disallowance is identical, respectfully following the order of Tribunal in assessee‟s own case, we deem it appropriate to modify the findings of Commissioner of Income Tax (Appeals) on this issue and restrict the disallowance to 15%. Disallowance of Expenses u/s. 14A - HELD THAT:- The provisions of the Act or the Rules framed there under does not specify the manner of recording satisfaction u/s. 14A of the Act. The recording of satisfaction is subjective. The assessee has not made any suo-moto disallowance u/s. 14A for earning exempt income. After examining the assessment order we observe that the AO has recorded satisfaction before applying the provisions of Rule 8D. Hence, we do not find any merit in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not find any reason to interfere with the findings of Commissioner of Income Tax (Appeals) on this issue. Accordingly, the same is upheld and ground No. 5 of the appeal is dismissed. - ITA Nos. 61 & 406/PUN/2015, 79/PUN/2015 - - - Dated:- 21-11-2019 - Shri D. Karunakara Rao, AM And Shri Vikas Awasthy, JM Assistant Commissioner of Income Tax, Circle 14, Pune Versus Kirloskar Oil Engines Limited, Assessee by : Shri C.H. Naniwadekar Revenue by : Shri S.B. Prasad ORDER Vikas Awasthy, The appeal by the assessee in ITA No. 61/PUN/2015 and cross appeal by the Revenue in ITA No. 79/PUN/2015 are directed against the order of Commissioner of Income Tax (Appeals)-V, Pune dated 27-10-2014 for the assessment year 2010-11. The assessee has filed another appeal in ITA No. 406/PUN/2015 for assessment year 2010-11 assailing the same order of Commissioner of Income Tax (Appeals) on the issue of disallowance u/s. 14A of the Income Tax Act, 1961 (hereinafter referred to as the Act ). Since, the issues raised in all these three appeals are emanating from same set of facts, these appeals are taken up together for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Department submitted that the commission has been paid to Shri Atul Kirloskar to the tune of ₹ 1.80 crores for single day in office. He was appointed Director of the company on last day of Financial Year 2009-10. In respect of ground No. 2 of the appeal, the ld. DR pointed that the assessee has failed to produce the details of persons who have utilized the Aircraft. In the absence of any information from assessee, the Assessing Officer was justified in making disallowance of 1/3rd of total expenditure claimed on use of Aircraft. The ld. DR further pointed that the Department in cross appeals has also raised grounds relating to payment of commission to the Directors and disallowance of depreciation on Aircraft as ground Nos. 4 and 6, respectively. 5. We have heard the submissions made by representatives of rival sides and have perused the orders of authorities below. The first ground in appeal by the assessee is against disallowance of commission paid to Shri Atul Kirloskar u/s. 40A(2) of the Act. It is an undisputed fact that in earlier assessment years disallowance on account of remuneration to the Directors were made by the Assessing Officer. The issue travelled u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ommissioner of Income Tax (Appeals) on this issue and restrict the disallowance to 15%. Accordingly, ground No. 2 of the appeal is partly allowed in the terms aforesaid. 7. In the result, the appeal of assessee in ITA No. 61/PUN/2015 is partly allowed. ITA No. 406/PUN/2015, (Assessee s Appeal) 8. The assessee in appeal has assailed the order of Commissioner of Income Tax (Appeals) by raising following ground : 1.0 Disallowance of Expenses u/s. 14A ₹ 4,36,58,306/- The leaned CIT(A) erred on facts and in law in disallowing ₹ 4,36,58,306/- u/s. 14A of the Act. The learned CIT(A) also erred I stating in the order that Rule 8D is mandatorily applicable to the facts of the case. The assessee company did not incur any expenditure other than salary for earning dividend. The CIT(A) could not point out any other expenditure directly attributable for earning the tax free income and no nexus of the expenditure with the tax free income was established. The learned CIT(A) also failed to appreciate that the AO has not arrived at his satisfaction regarding the expenditure incurred in relation to such income having regard to the books of accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at subsidy received from Maharashtra Govt. under Package Scheme of incentive, 2001 is capital receipt while during the course of scrutiny, the AO observed that major amount of subsidy received by the assessee company is by way of reimbursement of taxes paid i.e. VAT to the State Govt. and hence a taxable revenue receipt? 6. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the expenditure incurred by the assessee on Aircraft Running and depreciation would be restricted to 25% of the total Aircraft expenses when no details have been provided by the assessee even during the appellate proceedings? 7. Whether on the facts and circumstances of the case and in law, the CIT(A) was justified in holding that the provision of warranty during it is a covered issue for the AY 2009-10 whereas there no addition on this issue in the AY 2009-10? 8. For the facts and such other reasons as may be urged at the time of hearing, the order of the Ld. Commissioner of Income-tax (Appeals) may be vacated and that of the Assessing Officer be restored. 9. The appellant craves leave to add, alter, amend, substitute o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2009-10. We find no infirmity in the findings of Commissioner of Income Tax (Appeals) on this issue. Accordingly, the same is upheld and ground No. 2 of the appeal is dismissed. 16. In ground No. 3 of the appeal, the Revenue has assailed the order of Commissioner of Income Tax (Appeals) in deleting the addition of ₹ 4,36,58,306/- made u/s. 14A of the Act. The assessee has received dividend income of ₹ 7.76 crores and has claimed interest expenditure aggregating to ₹ 13,64,32,000/-. The Assessing Officer made disallowance of ₹ 4,36,58,306/- u/s. 14A r.w. Rule 8D. The ld. AR contended that the assessee was having own funds much more than the investments made. The ld. AR referred to Balance sheet of assessee as on 31-03-2010. An examination of the Balance sheet reveal that own interest free funds of assessee comprising of Share Capital and Reserve and Surplus are to the tune of ₹ 680 crores as against investment of ₹ 200 crores. The Hon‟ble Bombay High Court in the case of Commissioner of Income Tax Vs. Reliance Utilities and Power Ltd. reported as 313 ITR 340 has held that where the assessee is having both interest bearing fun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the appeal of assessee in ITA No. 61/PUN/2015 we have decided this issue by following the earlier order of Tribunal. Accordingly, the ground No. 6 of the appeal by the Revenue is dismissed. 20. The ground No. 7 of the appeal is against allowing provision for warranty. The ld. AR stated at the Bar that in assessment year 2009-10 provision was made on similar lines and the same was disallowed by the Assessing Officer. The assessee carried the issue in appeal. The Commissioner of Income Tax (Appeals) granted relief to the assessee holding that the provision was created on scientific basis. Further, reliance was placed on the decision of Hon‟ble Supreme Court of India in the case of Rotork Contrals India Pvt. Ltd. reported as 314 ITR 62 and the decision of Tribunal in the case of ACIT Vs. Dana India Pvt. Ltd. in ITA No. 1805/PN/2012 for assessment year 2006-07 decided on 22-10-2013. The findings of Commissioner of Income Tax (Appeals) was accepted by the Department and were not agitated in appeal before the Tribunal. This factual position has not been controverted by the Department. The First Appellate Authority has granted relief to the assessee by following its or ..... X X X X Extracts X X X X X X X X Extracts X X X X
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