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2013 (9) TMI 573 - ITAT AHMEDABADDisallowance of Village Development Expenses - The village roads, assistance to schools, contributions to local festivals and other village activities surrounding the factory of the assessee was meant to include within its fold to crate expression of care and concern for the society at large and the people of the locality in which the business of the assessee was located in particular, thereof creating an atmosphere in which the business can succeed in a greater measure with the aid of such goodwill - Therefore, the said expenditure in view of the decision of CIT v. Madras Refineries Ltd.[2003 (11) TMI 47 - MADRAS High Court] - Therefore we find no infirmity in the order of Ld. CIT(A) - Decided against Revenue. Disallowance of Contribution made to Refrigerant Gas Manufacturer Association (REGMA) - Held that:- Whatever name called the amount was collected for the purpose of defraying expense of the association - The assessee had no right to any of the sums - No capital asset was being build up in the association from which the assessee can derive any benefit - Therefore, such payment had to be treated as expenditure in the line of business and deductible u/s. 37(1) - It was not the AO’s contention that relevant services were not rendered or that there was any other motive for making such payment - In the circumstances and facts, we find no infirmity in the order of Ld. CIT(A). Disallowance of Professional fees - The expenditure either falls u/s 14A or was incurred for earning income taxable under the head capital gain - assessee claimed exemption u/s Section 28(va)(ii)- Held that:- Disallowance of professional fees paid as consultancy fees for investment advisory services - the assessee company has invested in fixed assets, debentures, advances, ICD and bank deposits, immovable property and shares and mutual funds etc and therefore, it cannot be said that the services rendered by these two persons is in respect of investment in shares - no income is reported by the assessee under the head ‘income from other sources’ being on account of investment other than investment in shares for which this payment of professional fee was said to have been paid by the assessee - Following the decision of Assesse's own case [2012 (8) TMI 37 - ITAT, AHMEDABAD] the entire payment of professional fee has to be considered towards earning of dividend income in the absence of any other income from any other investment being shown by the assessee - Decided against Assessee. Reduction of Export Turnover - Deduction u/s 80HHC - The claim of shortage was further paid as compensation which makes the cost of exports higher, but actually does not reduce the export turnover - This was a normal business practice in all trades where shortage in handling was compensated by payment, but does not mean that goods were not cleared or payment not received for the full amount of export turnover. Disallowance of Extension of Time for Construction of Building - The deferment of the construction plan was for various commercial reasons - It was also evident that if this requisite fee was not paid the allotment of the land may stand cancelled - This clearly established that this amount was paid for retaining the title of the land or either to protect the title of the land - In these circumstances, the amount paid to the authorities was capital expenditure and accordingly, it had to be capitalized with the cost of the asset - Thus, we are in conformity with the orders of the revenue authorities and dismiss this ground raised by the assessee. Inclusion of Sales Tax and Excise Duty in total turnover for the purpose of computation of deduction u/s 80HHC - Held that:- As decided in Commissioner of Income-Tax Versus Lakshmi Machine Works [2007 (4) TMI 202 - SUPREME COURT] excise duty and sales tax were includible in the "total turnover", which was the denominator in the formula contained in section 80HHC(3) as it stood in the material time - direction of CIT(A) for excluding it thus warranted - Decided in favour of Assessee. Disallowance of Dividend Earned - Deduction u/s 80M - Allocation of expenses to an activity was a primary principle to determine the correct income of the assessee which may be sometimes cumbersome, however, inevitable - The assessee ought to have allocated its expenses for earning the dividend income which it failed to do so - Therefore, the revenue had no other option but to make an addition on estimate basis = The learned CIT(A) was gracious to reduce the disallowance from 10% of the dividend earned to 3% - Considering the facts and circumstances of the case and in the interest of justice and equity, we are of the opinion that such disallowance of 1% on the dividend earned will suffice. Accordingly, this ground raised by the assessee was partly allowed.
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