ADDL CIT RG 2(3), MUMBAI vs. SHARYANS RESOURCES LTD, MUMBAI

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ITA 8643/MUM/2011Status: DisposedITAT Mumbai16 October 2015AY 2008-094 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal allowed the assessee's appeal on repair expenses, following a previous decision. For Section 14A, the issue was restored to the AO for fresh examination, considering the assessee's submissions and case laws.

What were the facts?

The assessee claimed repair and maintenance expenses as revenue expenditure, which the lower authorities treated as capital. The Revenue disputed the exclusion of average investment in unquoted shares for Section 14A disallowance.

What were the issues?

Whether repair and maintenance expenses are capital or revenue expenditure, and how to compute disallowance under Section 14A concerning investments in unquoted shares.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “E”, MUMBAI

Before: SHRI R.C. SHARMA & SHRI SANJAY GARG

For Appellant: Shri Vijay Mehta, A.R
For Respondent: Shri Neil Philip, D.R
Hearing: 07.10.2015Pronounced: 16.10.2015

Per Sanjay Garg, Judicial Member:

1.

The above titled cross appeals one by the assessee and the other by the Revenue have been preferred against the order of the Ld. Commissioner of Income Tax (Appeals) [hereinafter referred to as the CIT(A)] dated 25.10.2011 relevant to assessment year 2008-09 and the same are taken together for disposal by this common order. First we take up the appeal of the assessee ITA No.8591/M/2011.

2 & ITA No.8643/M/2011 M/s. Sharyans Resources Ltd. ITA No.8591/M/2011 2. The sole issue taken by the assessee in its appeal is relating to the disallowance of Rs.4,25,669/- towards repair and maintenances treated as capital expenditure by the lower authorities. At the outset, the Ld. A.R. of the assessee has submitted that the above issue is squarely covered in favour of the assessee by the decision of the Tribunal in the own case of the assessee for assessment year 2003-04 vide ITA No.44/M/2007 dated 21.11.2008 wherein the Tribunal has observed that since the assessee has been engaged in the business of project management, leasing and financing and real estate and the properties in question were taken on lease with mutual understanding with the lesser that the assessee would have the right to sub lease the premises and also to make alterations and changes in the premises as per the requirement of the subtenant/occupier and whereas the assessee had received much higher rent than that was paid by the assessee to the owner and further that the rents received by the assessee have been assessed as business income, therefore any expenditure incurred for earning of the above income was allowable expenditure. The facts and circumstances for the year under consideration being identical and the expenditure incurred being also on the same properties, we do not find any reason to depart from the earlier decision of the Tribunal in the own case of the assessee. This issue is thus covered in favour of the assessee by the above stated decision of the Tribunal and the same is accordingly allowed in favour of the assessee. The disallowance made by the lower authorities on this issue is ordered to be deleted. Now coming to the appeal of the Revenue ITA No.8643/M/2011.

3.

The Revenue vide its grounds of appeal has agitated the action of the Ld. CIT(A) in directing the Assessing Officer (hereinafter referred to as the AO) to 3 & ITA No.8643/M/2011 M/s. Sharyans Resources Ltd. exclude the average value of investment made in relation to unquoted shares while computing the disallowance under section 14A read with rule 8D(2)(iii) of the Income Tax Act.

4.

The Ld. D.R. has submitted that there is no provision under the Income Tax Act providing that the average value of investment in relation to unquoted shares is to be excluded while computing the disallowance under rule 8D(2)(iii).

5.

The Ld. A.R. of the assessee, on the other hand, has contended that in fact the investment in unquoted shares was in relation to the own subsidiaries and the group companies of the assessee. The investment made in those subsidiaries and group companies were strategic investments and not for the purpose of earning of any exempt income. He has further submitted that the assessee had suo-moto disallowed a sum of Rs.2,69,711/- on account of administrative expenses and that the AO while applying rule 8D has not recorded his satisfaction to the effect that the suo-moto disallowance made by the assessee was not correct. The Ld. A.R. has further stated that even no dividend has been earned by the assessee from the above stated investments. The Ld. A.R. has relied upon the decision of the Hon’ble Delhi High Court in the case of ACB India Ltd. Vs. ACIT” dated 24.03.2015 in of the Hon’ble Bombay High Court in the case of “CIT vs. Delight Enterprises” dated 26.02.2009 in ITA No.110/2009 and further of the Hon’ble Allahabad High Court in the case of “Shivam Motors Pvt. Ltd. Dated 05.05.2014 in ITA No.88/2014. The Ld. A.R. has further submitted that the strategic investments cannot be added in the average value of investment for the purpose of computing the disallowance under rule 8D. He, in this respect, has relied upon the decision of the Hon’ble Delhi High Court in the case of

6.

Considering the above submissions of the Ld. Representatives of the parties, in our view, the issue requires a fresh examination at hands of the AO. We therefore, restore this issue to the file of the AO with a direction that the AO will consider the correctness of the suo-moto disallowance made by the assessee and will record an objective satisfaction in this regard. He is also directed to consider the above stated propositions and the relevant case laws produced by the assessee in support of its contentions and to pass a speaking order thereafter in accordance with law. This appeal of the assessee is treated as allowed for statistical purposes.

7.

In the result, the appeal of the Revenue is hereby dismissed and that of the assessee is allowed in the terms indicated above.

Order pronounced in the open court on 16.10.2015.

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