DCIT, NEW DELHI vs. M/S. PVR LTD., NEW DELHI

Issue no. 2 arises out of deletion by the ld.CIT(A) of addition made by the AO on account expenses on leasehold improvements capitalized in books of assesse but claimed as revenue expense in the Computation of Income.– Rs.7,01,45,958/- as net of depreciation. Details of leasehold Expenses of similar nature as in earlier years is made available at Page 15 of the Paper Book. As in previous years the expenses relate to repairs, renovation, refurbishing and improvements of leasehold Multiplex premises for their efficient use and better ambiance in the course of extension of its existing multiplex business. Such expenses pertain to acoustic and civil work such as flooring, ceiling, water proofing, plastering, painting and floor repairing etc. The nature of expenses being directly for driving home and sustaining the benefits of immovable property justify capitalisation in books under the head Fixed Assets. However, in the depreciation chart as per the Act, such expenses were not added in the block of asset and no depreciation claimed thereon. Admittedly same disallowance was made by the AO on similar grounds as in AY 2010-11. This year ld. CIT(A) has deleted addition based on her own orders in earlier years. The issue stands covered issue in favour of assessee by the decision of Hon’ble High Court at Delhi and consolidated order of Tribunal in the case of assessee itself for A.Y 2008-09 to 2010-11 & 2014-15 dated 23.10.2024. Ld. Counsel has shown that ITAs No.5403/Del/2015, 1963/Del/2018, , 2080/Del/2018, CO No.47/Del/2022 & CO No.41/Del/2016 the said order of the Tribunal has been accepted by department as this issue was not pressed by the department in appeal before the Hon’ble High Court. Thus there is no substance in grounds corresponding this issue in respective appeals and same stand rejected.

Third issue arises out of deletion by the ld. CIT(A) of addition of Rs.58,76,780/- u/s 14A of the Act by computing disallowance as per Rule 8D only in respect of investments where exempt income was received rather than on all investments irrespective of exempt income received thereon. During the year, assessee received dividend income of Rs.2,62,30, 705/- on dividend option MFs only. In ITR, assessee computed disallowance as per Rule 8D(2)(iii) at Rs. 15,96,820 after considering investments in all MFs (Both growth & Dividend) and excluding investments in subsidiaries where no dividend was received. During assessment proceedings assessee filed revised calculation of disallowance as per both Rule 8D(2)(ii) & 8D(2)(iii) at Rs.1,27,894/- considering investments only in dividend option MFs. However, the AO computed disallowance as per both Rule 8D(2)(ii) & 8D(2)(iii) at Rs.60,04,674/- considering entire investments including investments in growth option MFs and investments in subsidiaries where no exempt income was received. The AO allocated interest of Rs. 3,33,92,266/- including interest of Rs. 3,30,60,000/- paid on the opening balance of the debenture loan. Ld. CIT(A) accepted revised claim of the assessee at Rs.1,27,894/- and deleted entire additional disallowance ITAs No.5403/Del/2015, 1963/Del/2018, , 2080/Del/2018, CO No.47/Del/2022 & CO No.41/Del/2016 as made by the AO. Department cannot dispute that the disallowance as per Rule 8D is to be computed only in respect of investments where exempt income was received and not on entire investments and the Amendment by Finance Act 2022 is not retrospective applicable as held by Hon’ble Jurisdictional high court in PCIT v. Era Infrastructure (India) Ltd., [2022] 141 taxmann.com 289 (Del.) This issue is covered issue in favour of assessee by the orders of this Tribunal in the case of assessee itself by consolidated order of the ITAT for AY 2008-09 to 2010-11 & 2014-15 dated 23.10.2024 (supra). Even otherwise the subject debenture loan was taken in prior years and there was no increase in the amount of debentures as well as investments made in mutual funds under dividend Scheme in this year. Thus no expenditure can be attributed to corresponding income. Ld. Counsel has also stated that the AO made a similar disallowance under Section 14A in the preceding assessment year i.e. AY 2010-11 and in subsequent years. In computing the disallowance under Rule 8D, the AO did not consider the interest paid on debentures in the calculation under clause (ii), which suggests that the AO admitted that the debenture funds were not utilized for making investments that yielded exempt income. When interest paid on the debentures/borrowed funds allowed as deduction in earlier years, it was not open to the AO to disallow the said expenditure on the same debentures/borrowed funds in current year. Thus corresponding grounds in respective appeals to this issue have no substance and same is rejected.

Issue no. 7 arise out of grounds of CO as plea in alternative and without prejudice claim of the assessee in respect of main grounds of departmental appeal in respect of E tax subsidy and Leasehold improvement expenses. On dismissal of the said main grounds in departmental appeal which are covered in favour of assessee by the decision of the Hon’ble High Court as mentioned therein are dismissed, these Grounds of CO become infructuous.

Before parting, we acknowledge the effort of ld. DR in her sincere attempt to distinguish the judicial decisions relied by ld. CIT(A) on facts but more than facts it is the first principles under the Act which were relevant for determination of aforesaid issues and accordingly the submission made by her do not help department so as to interfere into the conclusions drawn by ld. CIT(A). As a consequence to determination of these issues as above the appeals of revenue are dismissed and appeal of assesse and CO being rendered academic are dismissed. Order pronounced in the open court on 29.10.2025. Sd/- Sd/- (KRINWANT SAHAY) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 29th October, 2025. 9 ITAs No.5403/Del/2015, 1963/Del/2018, , 2080/Del/2018, CO No.47/Del/2022 & CO No.41/Del/2016