9911796707
TMI Blog2021 (8) TMI 422X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. For assessment year 2005 - 06 , history shows that the coordinate bench disposed off vide order dated 27/9/2013 ITA number 5257/del/2010 filed by the assessee and ITA number 5528/del/2010 filed by the revenue against the order of the Commissioner Of Income Tax (Appeals) LTU , New Delhi dated 30 September 2010 wherein the assessee challenged the order of the learned assessing officer passed u/s 143 (3) of The Income Tax Act [ The Act] dated 31 December 2007. The coordinate bench vide its order has set aside the issue with respect to the assessee‟s claim of depreciation on the leased out power plant and claim of power purchase charges back to the file of the learned assessing officer. 3. Therefore the learned assessing officer passed an order on 17th of February 2014 titled as order giving effect to ITATs order u/s 254 (1) of the income tax act 1961. Thus the issue before the learned assessing officer was with respect to the allowability of power charges and depreciation on power plant for which the issue was set aside to the file of the AO with a direction to make the de novo assessment after considering the additional evidences admitted by the coordinate bench. 4. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... not have purchased power from M/s Keshav Power Ltd and therefore power charges paid by the assessee to that company were also disallowed. The main reason for holding that assessee has not installed power plant before 31st of March 2005 is that the assessee has submitted the evidence of installation of the power plant in the form of letter of the chief electrical inspector wherein inspection was conducted on 26th of March 2005 and such letter was dated 30th of March 2005 and therefore the AO was of the view that in terms of this letter the assessee company could not have complied with the same by 31st of March 2005 itself and hence depreciation cannot be allowed. 10. He further held that the lease deed represented an agreement between two related parties i.e. assessee as well as Keshav power private limited, hence, presumably it is not at arm‟s-length and further the lease agreement was signed on 24th of March 2005 making it effective from 15th of March 2005. 11. Therefore the learned assessing officer was of the view that the entire decision of leasing out of the power plant was to make a claim of depreciation on the power plant and it is purely a device of tax avoidance. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... officer was also repeated in the second assessment order passed by the learned assessing officer. 15. The assessee aggrieved with the same preferred an appeal before the learned CIT - A. This time the learned CIT - A allowed the claim of the assessee granting the depreciation on the power plant stating that assessee being a lessor of the power plant, has satisfied all the conditions of being the owner of the asset and having put to use the assets by assessee in the leasing business during the financial year 2004 - 05. Thus, he allowed the claim of depreciation on power plant on the ground that assessee is a lessor, carrying on the business of leasing, the asset is owned by the lesser and it has put to use the assets of the power plant in the leasing business during the financial year 2004 - 05. On the allowability of the power charges of Rs. 35 lakhs paid to Keshav Power Limited, he held that the power plant could not have been put to any operation from 15th of March 2005 to 29th of March 2005 and therefore the power charges paid for the period from 15th of March 2005 to 29th of March 2005 paid by the assessee to Keshav Power Ltd are held to be unreasonable and excessive as no pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and thereafter referred to the order of the learned CIT (A). He took us to paragraph number 6.2 of Appellate order and submitted that lease transactions cannot be held to be sham as the learned assessing officer accepted the same nature of the transaction in the subsequent year. He submitted that the lease deed was only for 15 days during the year which was disputed by the learned assessing officer holding it to be a sham and tax avoidance instrument whereas same lease agreement has been accepted by the learned assessing officer in subsequent years. He further submitted that in this assessment year the learned assessing officer has disallowed the depreciation i.e. assessment year 2005 - 06 whereas in subsequent assessment year on the leased assets i.e. power plant, assessing officer has granted depreciation according to the income tax act. He therefore submitted that the action of the learned assessing officer treating the lease agreement is sham is devoid of any merit. 20. He further referred paragraph number 6.3 of Appellate order wherein the learned CIT - A carried out detailed enquiry by issuing commission u/s 131 of the act to Commissioner Of Income Tax Trichy who got the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rthought. He also referred to the consent of the shareholder to lease out the assets of the company. He further submitted that there is nothing wrong which prevented the assessee in entering a lease agreement subsequently by making it effective retrospectively just by a week‟s time because when lease deed was entered in to the understanding of the parties were already there. 22. He further referred to the provisions of Section 32 Of The Income Tax Act and submitted that assessee is in the leasing business as already stated and the asset was leased out to another party and therefore on these lees doubt assets which is used for the purpose of the leasing business of the assessee is entitled to claim depreciation thereon. He further referred to the decisions of the honourable Supreme Court wherein assets leased out in the leasing business of the assessee are entitled to depreciation. 23. With respect to the use of coal and water for the purposes of production of the power by the lessee he submitted that assessee is a manufacturer of cement with a turnover of more than 5000 crores and coal and water are important input materials required for cement production which were also us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he whole transaction is a perfect case to apply the ratio laid down by the decision of the Supreme Court in McDowell & Co Ltd versus commercial tax Officer 154 ITR 148. She further relied upon the several judicial precedents mentioned by the learned assessing officer. vii. With respect to the claim of payment of power charges by assessee of Rs. 35 lakhs she referred to the power purchase agreement and submitted that in the financial year ended on 31st of March 2005, that company when did not produce a single unit of power, there are no goods to be supplied by that company to the assessee, therefore any payment made by the assessee to that company cannot be said to be payment for purchase of power. viii. She further submitted that there is no justification for payment of Rs. 35 lakhs by the assessee to that lessee which is also not supported by any clause of the agreement. She submitted that power purchases price was to be paid for minimum commitment, however, when there is no production of power there was no supply of power by the lessee to the assessee, there cannot be any payment of power purchase price by assessee to the lessee and hence even part payment allowed by the lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee, power purchase agreement and the lease agreement are required to be looked into together. vi. Assessee has offered the lease rent of the plant to taxation which has been taxed by the revenue. For this proposition he referred to the profit and loss account of the assessee company wherein in other income the lease rent is shown as income. 28. During the course of hearing the bench raised a query about the annual accounts of Keshav power Ltd for the year ended on 31st of March 2005 and also how the power was produced by That Company. The bench also asked about the use of coal and water and its consumption which is specifically doubted by the LD AO. The coordinate bench also referred to the balance sheet of Keshav power Ltd for the year ended on 31st of March 2006 wherein were held disclosing the details of the previous year, the power income was shown at Rs. 35 lakhs however the units of power generated was shown as Nil. 29. On the next date of hearing the learned authorised representative i. submitted balance sheet of the Keshav power Ltd for assessment year 2005 - 06 (i.e. year ended on 31st of March 2005) ii. With respect to the consumption of coal and powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rgument. Therefore he submitted that the assessee is entitled to the depreciation and also the claim of the power purchase price of Rs. 35 lakhs in full. 30. We have carefully considered the rival contention and perused the orders of the lower authorities. 31. As per ground number 1 of the appeal of the learned assessing officer the grievances that the learned assessing officer has disallowed depreciation of Rs. 139,738,163/- on the power plant in respect of newly installed building, plant and machinery comprising of a captive thermal power plant which was not put to use in the financial year 2004 - 05 according to the assessee and therefore no depreciation is allowable to the assessee for this year i.e. assessment year 2005 - 06. The basically the fact shows that assessee has constructed a power plant in the financial year 2004 - 05. Assessee has shown that in its main object in the memorandum of Association of the assessee company, there is a clause of leasing business as the main business. Accordingly the wanted to lease this power plant. Therefore on 21 December 2014 and notice of the board of meeting was given to the Kolkata, Mumbai, Chennai and National stock exchange whe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt date is stated to be 15th day of March 2005. Further power purchase agreement also entered into between these parties on 24th day of March 2005 where the effective date is 15th day of March 2005 wherein the power purchase price was to be paid at the rate of Rs. 1.75 per KWHP based on the Load factor. Further the minimum commitment to be paid by the assessee to lessee was from 15th of March 2005 to 31st of March 2006 minimum off take commitment of 4 million units per month and thereafter it was 152 million units for fully. Based on this, the amount payable for 15th of March 2005 till 31st of March 2005, by the assessee is Rs. 35 lakhs. This sum is paid by the assessee to the lessee, the lessee has offered this for taxation. Similarly the lease rent of Rs. 918,715 was paid by the lessee to the assessee and same has been offered to taxation by assessee and claimed as deduction by the lessee. Boiler which is the main component of the power plant, for this provisional order u/s nine of the Indian boilers act 1923 was issued on second of March 2005 by the Deputy Chief Inspector of Tiruchirapally. This permission was granted for six months from second of March 2005 to 1 September 200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht in executed in the lease agreement as well as the power purchase agreement and therefore even in the leasing business when the assets are leased out the assessee is entitled to depreciation thereon. The learned assessing officer brushed aside the passing of the resolution et cetera holding that they are merely statutory formalities. Thus, the depreciation was disallowed by the learned assessing officer on both the counts that the power plant has not commissioned on or before 31st of March 2005 and the claim of the leasing business by the assessee is merely a statutory formality. Further the payment of power purchase price by the assessee to Keshav Power Ltd was also disallowed by the AO amounting to Rs. 35 lakhs Under the pretext that when the power has not been proved produced by Keshav Power Ltd, it could not have been sold to the assessee, therefore there could not have been any purchase of power by the assessee and therefore the power purchase price paid by the assessee of Rs. 35 lakhs cannot be allowed as deduction. 32. On appeal before the learned CIT - A, he held on both these counts as Under:- "6.2 The Ld. AO, in the current assessment year, had disallowed the depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide letter dated 20.3.2014. The enquiry got conducted by the CIT, Trichy shows that the 27 MW power plants were in operation since FY 2004-05. Further, other evidences in the form of Boiler Test Report and Certificate dated 2nd March 2005 and the letter from the Tamil Nadu Pollution Control Board regarding consent for establishment and consent for operation of new power plant at the time of installation of 27 MW plant were also acknowledged. Further, it was also found out that the KPL maintains electricity generation records, which were found to be in order. Furthermore, it was also ascertained that KPL is raising bills towards cost of electrical energy supplied to DCBL every month and is maintaining separate set of books of accounts, which were found to be regularly audited. Further, KPL has also been found to be regularly submitting online sales Tax returns and has obtained the Sales Tax Assessment order up to the year 2012-13. In respect of lease rental, it is informed that the KPL has been deducting and paying TDS every month. Lastly, the enquiry report shows that in respect of payment for contractors and Salaries for operation and maintenance of the power plant, TDS is being ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Board of Directors dated 28.12.2004 do not prove the allegation as to why the appellant company made the lease deed dated 24.03.2005 effective from 15.03.2005 and as to why the same may not be treated as an 'after thought'. It was also observed by him that such additional evidences are merely statutory requirements, which indicate the consent of the shareholders to lease out the assets, but do not explain as to why the same was leased out w.e.f. 15.03.2005. Regarding the Board's decision to approve and taking into the power purchases agreement with KPL prepared on 24.03.2005, the AO was of the view that in the absence of competitive rates, such lease to the related person, i.e. KPL cannot be held at arm's length basis. 6.5.2 On careful consideration of the above facts, I observe that the id. Ld AO has not addressed the crux of additional evidences filed by the appellant before the ITAT. His only reservation with regard such additional evidences was that the same do not explain as to why the lease agreement dated 24.03.2005 was made effective from 15.03.2005. This, in itself, cannot be a valid reason for disregarding the additional evidences and for disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en 'put to use'. The appellant company evidently is the 'owner' (and the lessor) of the plant and machinery and the equipments comprised in the said power plant. It‟s Memorandum of Association and objects clause allows it to enter into the leasing business. The factum of lease of the power plant has been established by the AO in the subsequent assessment years by allowing depreciation allowance on lease of such assets. In the business of an operating lease, the starting point of the business is entering into a contract by the lessor with the lessee, in terms of which it is to make available, in an unconditional and unrestricted manner, access to the said assets to the lessee, upon the lessee making due payments to the lessor in terms of the lease agreement. Once the lease agreement is signed, the possession of the lease agreement had been handed over to the lessee and the lessor derives the right to receive lease charges in respect of the leased out assets, the business of 'leasing' commences. In the case of the appellant company, evidently, the appellant had entered into a lease agreement dated 24.03.2005 with M/s KPL, which was duly registered on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r plant has satisfied all the conditions, namely; (i) being the owner of the assets and (ii) having put to use the assets in the leasing business during the F.Y.2004-05. In view of this, I hold that its claim of depreciation allowance was bonafide and allowable as per law. The Ground No.l is accordingly, allowed in favour of the appellant." 33. Thus on the basis of the above finding of the learned CIT - A, the claim of the depreciation of the assessee was allowed. Looking at the report of the inspector who has granted the permission to for commissioning of the power plant, he referred to the conditions of the supplier to be fulfilled, there was no condition which was required to be fulfilled of the inspector. Further the inspection was carried out on 26th of March 2005 and the balance inspection fees was paid on 29th of March 2005 and thereafter on 30th of March 2005 the commission certificate was issued to the assessee. Therefore it is apparent that on 26th of March 2005 power plant of the assessee was ready for commissioning. The assessee has entered into a power purchase agreement on 24th of March 2005 and as well as the lease agreement also on the same date and both have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The report of the Inspector did not say that power plant was not ready to be commissioned on or before 31st of March 2005 in fact it certifies that on 30th of March 2005 the power plant is ready to be commissioned. Further, so far as the claim of depreciation is concerned in the hence of the assessee even if the plant is ready to be used on or before 31st of March 2005, assessee is entitled to depreciation on that in assessment year 2005 - 06. Further the assessee has shown that assessee has the business of leasing as one of the main objects of the business, assessee has carried out the leasing business by leasing the plant and machinery i.e. power plant to Keshav Power Ltd. It is not that as on the date of leasing of the power plant it was not in existence. In fact on 26th of March 2005 it was inspected by the Inspector. Based on this he issued a certificate on 30th of March 2005 that plant is ready for commissioning. The lease deed was entered into on 24th of March 2005 which is just two days before the date of inspection by the Inspector, therefore, it is certain that the plant was in existence as a complete asset at least on 26th of March 2005. Therefore, the assessee has le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing financial year 2004 - 05 relevant to assessment year 2005 - 06. Accordingly ground number 1 of the appeal of the learned assessing officer is dismissed. 34. The second ground of appeal of the assessing officer and ground number 1 - 2 of the appeal of the assessee with respect to allowability of the power charges paid by the assessee to Keshav Power Ltd. As per the facts stated above, the assessee has paid power charges for the period 15th of March 2005 to 31st of March 2005 amount in all to Rs. 35 lakhs for purchase of power. The learned assessing officer disallowed the same holding that the power plant has not commissioned on or before 31st of March 2005, as the water and coal is not supplied by the assessee to Keshav Power Ltd, there is no detail of production of power by that company, the power charges paid by the assessee to Keshav Power Ltd are disallowed. 35. The learned Commissioner of income tax (appeals) decided the issue as Under: 6.7 Regarding the Ground No.2 of the appeal regarding the disallowance of power charges of Rs. 35 lakhs in terms of the said lease agreement, I find that the Ld. AO has acknowledged the fact that the appellant had received lease charges ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rges for the period 15.03.2005 to 29.03.2005 paid to M/s KPL are held to be unreasonable and excessive, as no power could have been generated out of the said captive power plant prior to 30.03.2005. In view of the above, the AO is directed to allow the power charges on proportionate basis only for 2 days out of the total period of 16 days, for which such charges were paid. The appellant gets part-relief accordingly. Regarding the other grounds of appeal, in view of the above discussion, no specific adjudication is called for thereon." 36. We have carefully considered the rival contentions and orders of the lower authorities. We find that looking to the annual accounts of Keshav Power Ltd the income of power supply has been offered as income of Rs. 35 lakhs, the lease rent has been claimed as an expenditure of Rs. 918,750 and also claim certain operation and maintenance charges et cetera as well as lease deed expenses expenditure. The annual accounts of that company shows that the company has entered into a power sale agreement for sale of power produced by it to the assessee. Under the terms of the agreement, the entire power produced and generated by the Keshav Power Ltd is to be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wer Ltd, such payment made by the assessee does not become allowable in the hence of the assessee. It is immaterial whether such income is offered to taxation by the Keshav Power Ltd. In the result we reverse the order of the learned CIT - A, restores the order of the learned assessing officer disallowing the power purchase price of Rs. 35 lakhs and allow ground number 2 of the appeal of the AO and dismiss ground number 1 - 3 of the appeal of the assessee. 37. Accordingly for assessment year 2005 - 06, ITA number 1044/del/2015 filed by the assessee is dismissed and appeal of the learned assessing officer in ITA number 1036/ Del/ 2015 is partly allowed. Assessment year 2006 - 07 38. For assessment year 2006 - 07 both the parties filed a cross appeal against the order of the Commissioner of income tax (appeals) taxpayers unit, New Delhi dated 8/10/2010. 39. The assessee has raised the following grounds of appeal in ITA No. 5258/Del/2010 for Assessment Year 2006-07:- "1 That on the facts and in the circumstances of the case, the Learned CIT (Appeals) after upholding the action of the Assessing Officer in disallowing depreciation for Assessment Year 2005-06, has erred both on fac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance of gardens. 3. On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow depreciation @ 25% instead of 10% by treating the water works and water installation system as part of building. 4. On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow deduction u/s. 80IA of Rs. 6,68,55,000/-. 5. On the facts and circumstances of the case and in law, the CIT(A) has erred in directing the AO to allow depreciation on assets comprising the leased power plant." 41. Facts shows that the assessee filed its return of income on 29/11/2006 declaring total income of Rs. 613,939,734/- as per normal computation wherein deduction u/s 80 IA of the act was claimed of Rs. 63,915,000. Was also determined at Rs. 107,92,43,796/-. The assessment order u/s 143 (3) of the act was passed on 23/12/2008 against which the assessee preferred an appeal before the learned Commissioner of income tax (appeals) who passed an order on 8/10/2010 against which the appeal is been filed by both the parties. 42. We have heard the learned authorised representative and the learned departmental representative. Both the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out to Keshav Power Ltd at the competitive rate which are neither excessive not unreasonable, therefore there is no reason that why this power purchase expenditure incurred by the assessee should be disallowed. Accordingly we direct the learned assessing officer to delete the disallowance of Rs. 97,849,164/- being power purchased by the assessee from Keshav Power Ltd. Thus ground number 2 of the appeal is allowed. 45. Ground number 3 is general in nature and same is dismissed. 46. Accordingly appeal filed by the assessee in ITA number 5258/del/2010 for assessment year 2006 - 07 is partly allowed. 47. Now we come to the appeal of the learned assessing officer in ITA number 5529/del/2010 wherein several grounds of appeal raised. 48. First ground of appeal is against the deletion of the disallowance of Rs. 45,15,026 paid to various sales organizations for rendering of marketing services with regard to sale of non-levy cement. The learned assessing officer allowed this expenditure for the reason that the issue is covered in favour of the assessee by the order of the coordinate bench in assessee‟s own case for assessment year 2001 - 02 and there are no changes in the facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the decision of the coordinate bench in assessee‟s own case for assessment year 1986 - 1987. Therefore we do not find any infirmity in the order of the learned CIT - A. Accordingly ground number 3 of the appeal of the learned assessing officer is dismissed. 53. Ground number 4 is with respect to the direction of the learned CIT - A to allow the deduction u/s 80 IA of the income tax act of Rs. 66,855,000. This issue has this been decided in favour of the assessee by the coordinate bench in assessee‟s own case for assessment year 2003 - 2000 for and 2004 - 2005 in ITA numbers 4342/del/2006 and in ITA number 4796/del/2007. Both the parties agreed that there is no change in the facts and circumstances of the case. We have also not been shown any reason to deviate from the orders of the coordinate bench in earlier years. In view of this we confirm the order of the learned CIT - A and dismiss ground number 4 of the appeal of the learned AO. 54. Ground number 5 and 6 of the appeal, the learned authorised representative as well as the learned departmental representative did not press any argument, therefore, those are dismissed. 55. In the result appeal of the LD AO is d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ef due to the company in consequence of the foregoing grounds and any other relief, to which it is entitled under the law, may be directed to be granted to it. 6. That the above grounds of appeal are without prejudice to one another." 59. The revenue has raised the following grounds of appeal in ITA No. 4166/Del/2014 for Assessment Year 2007-08:- "1. On the facts and circumstances of the case and in taw Ld. CIT(A) has erred in deleting the addition of Rs. 94,47,701/- made by AO on account of disallowance of remuneration paid to various field/sales organizers. 2. On the facts and circumstances of the case and in law. Ld. CIT(A) has erred in deleting -the addition of Rs. 19,67,307/- made by AO on account of "disallowance of temple maintenance and pooja expense. 3. On the facts and circumstances of the case and in law Ld. CIT(A) has erred in deleting the addition of Rs. 12,00,177/- made by AO on account of disallowance of expenditure reimbursed by the assesses to-staff recreation clubs. 4. On the facts and circumstances of-the case and in law ld CIT(A) has erred in deleting the addition of Rs. 8,49,41,000/- made by AO on account of disallowance of deduction claimed u/s' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 23;s own case for earlier years and the learned departmental representative could not point out any major difference in the facts and circumstances of the case. Therefore for the similar reasons we dismiss ground number 1 of the appeal of the learned AO. 63. Ground number 2 and 3 are with respect to the deletion of the disallowance by the learned CIT - A with respect to the temple maintenance and Pooja expenses as well as amount paid to staff recreation clubs. This is identical to ground number 2 raised by the assessee assessing officer for assessment year 2006 2007 wherein the learned CIT - A deleted the above disallowance relying upon the decision of the coordinate bench in assessee‟s own case for earlier years. There are no changes in the facts and circumstances of the case pointed out before us. As the issue is squarely covered in favour of the assessee by the decision of the coordinate bench which is been relied upon by the learned CIT - A, we do not find any infirmity in his order in deleting the above disallowance. Accordingly ground number 2 - 3 of the appeal are dismissed 64. Ground number 4 of the appeal of the assessee is with respect to the allowance of deducti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year 2006 - 07. Accordingly ground number five of the appeal of the learned assessing officer is dismissed. 66. Ground number 6 of the appeal is with respect to the disallowance made by the learned assessing officer u/s 14 A of the income tax act of Rs. 95,600,000 which has been reduced by the learned assessing officer to the extent of Rs. 5,123,311 and therefore the learned assessing officer is aggrieved. The briefly stated the facts shows that during the year the assessee has earned dividend income of Rs. 2 .68 crores and long-term capital gain exempt of Rs. 21.55 crores. The learned assessing officer questioned the assessee to explain why disallowance u/s 14 A read with rule 8D shall not be made. The assessee objected to the same, the learned assessing officer rejected the contentions of the assessee and held that there cannot be a situation where the assessee has not incurred any expenditure for earning exempt income therefore such expenditure is required to be disallowed. Accordingly he noted that assessee has already made disallowances of Rs. 5 lakhs in the computation of income and the computation as per rule 8D comes to Rs. 9.56 crores and therefore he made a further disa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the total addition by Suo Motu disallowance made by the assessee. Therefore it is apparent that the learned assessing officer has not recorded any satisfaction with respect to the correctness of the claim of the assessee of incurring expenditure of Rs. 5 lakhs for earning of exempt income. Such is the mandate of honourable Delhi High Court in case of CIT V Taikisha engineering Co Ltd (supra). In view of this we dismiss ground number 6 of the appeal of the learned assessing officer. This also takes care of ground number 1 - 3 of the appeal of the assessee. Thus ground number 6 of the appeal of the learned AO is dismissed and ground number 1 - 3 of the appeal of the assessee are allowed. 70. Ground number 4 of the appeal of the assessee is against the order of the learned CIT - A in confirming the disallowance of Rs. 5,123,311/- u/s 14 A for the purpose of computation of the book profit u/s 115 JB of the income tax act. The ground number 6.1 of the appeal of the learned assessing officer is against the order of the learned CIT - A the learned assessing officer made disallowance u/s 115 JB on account of Section 14 A amounting to Rs. 95,600,000 which was reduced by the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of accounts of the assessee. In fact the investment made are out of the own fund and cash surplus generated year-on-year basis. The fact also shows that the accumulated interest free surplus available with the assessee in the form of share capital and free reserve exceeds the investment made in shares and securities and therefore there cannot be any disallowance on account of interest expenditure. Therefore the only moot question remains is that the motive the amount of the administrative expenditure incurred by the assessee for earning of the exempt income. The assessee itself has SUO Moto considered a sum of Rs. 5 lakhs as expenditure incurred by it for earning the exempt income. As the issue involved before us is pertaining to assessment year 2007 - 08 which is related to the period prior to 15 years from today, this is the last assessment year where the provisions of rule 8D are not applied, therefore in the interest of justice we uphold that a sum of Rs. 5 lakhs which is also admitted by the assessee by making a disallowance Under the provisions of Section 14 A incurred by the assessee for earning of the exempt income, is also required to be added to the book profit of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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