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2013 (11) TMI 618 - HC - Income TaxDeductibility of expenditure for community development u/s 37(1) - Charity or allowable expenditure – Held that:- Expenses contributed for religious functions, charitable institutions, social clubs and charity such as donating a borewell to the municipality, etc. would not fall within the expenditure contemplated under Section 37(1) of the Act - Expenditure towards the religious funds, charitable institutions, social clubs or for charity do not stand to the test of commercial expediency. In any case, the expenditure under these heads cannot be stated to be exclusively for the purposes of business of the respondent-assessee and to allow it. That apart, the respondent-assessee has failed to place any material, in support of their case so as to claim the aforementioned expenditure under this head as contemplated by Section 37(1) of the Act as being commercial expediency – Decided in favor of Revenue. Nature of expenditure – Capital expenditure or Revenue expenditure – Claimed expenditure incurred by assessee for repairs and removal of machinery to make way for short mix plant installation as revenue expenditure – Held that:- Expenditure in not a revenue expenditure – In the present case, case the machinery was only shifted within the same premises of the factory to make way for short mix plant installation. It is clear from the facts that shifting of the machinery was for installation of a new short mix plant. The expenditure incurred for installation of the new plant would not amount a revenue expenditure and that will have to be treated as capital expenditure. Expenditure incurred for removal of existing machinery to make way for installation thereof. The arrangement, i.e. shifting of old machinery to make way for installation of new machinery, may give the assessee an enduring benefit of better and more efficient production over a period of time. Thus, the expenditure incurred for removal of the existing machinery only to make way for installation of new machinery, therefore, cannot be allowed under Section 37(1) of the Act – Decided in favor of Revenue. Deduction under Sections 80HHC and 80I of the IT Act – Held that:- No details were given about the new plant and machineries installed during the relevant assessment year. On the contrary it has accepted that the plant and machineries purchased were erected in the earlier year of assessment. If such plant and machineries were erected earlier to the present assessment year, those machineries cannot be considered as new machineries in order to claim deduction under Section 80HH & 80 I – Assessee should have made out claim during assessment year when new plants and machineries purchased during relevant assessment year. When the assessee had purchased the new machineries in the earlier assessment year and has installed the same, such unit cannot be treated as new unit for the present assessment year. It was open to the respondent-assessee to establish their claim/case for seeking deduction of such huge amounts before the AO by producing/adducing materials/evidence in support thereof. For the relevant years, they did not either place any materials or adduce any evidence before the authorities below nor did they ask for any such opportunity at any point of time till the present appeals were argued before this Court for final disposal – Decided in favor of Revenue. Bad-debt deduction u/s 36(1)(vii) – Held that:- Debt had become bad and they had written-off in the books of account. It is not in dispute that the books of account for the relevant year were placed before the Assessing Officer. Thus, it is clear that the Tribunal allowed to write off Rs.28,166/- as bad debt for the previous year on the basis of materials placed on record – Decided against the Revenue. Deduction u/s 40A(9) of the Income tax act – Held that:- Donation given by the assessee would not be a donation/contribution contemplated by sub-section (9) of Section 40A of the Act. It cannot be stated that the assessee gave donation or contributed for setting up or formation of, or as contribution to, any fund, trust, company, association of persons, body of individuals, society registered under the Societies Registration Act or other institution - Donation given by the asseesee for the purpose, as reflected in the forgoing paragraph, was wholly and exclusively for the welfare of its employees and also for carrying on business of the assessee more efficiently by having contended labour force - Donation is not covered under Section 40A(9) of the Act. Purchase of paintings is a revenue expenditure or not u/s 37(1) of the Income Tax Act – Held that:- Expenditure incurred by the assessee for atheistic purpose or for having better working environment cannot be treated as capital expenditure – Decided against the Revenue. Depreciation on goodwill u/s 32(1) of the Income tax act – Held that:- Having regard to the intent of the legislature, goodwill was not covered for depreciation under Section 32 of the Act. The definition of actual cost under Section 43(1) of the Act cannot be read to cover goodwill as an asset for which the assessee had to pay and which can be termed as actual cost of the assets to the assessee. The Tribunal apportioned the cost of goodwill to various other assets acquired by the assessee thereby increasing the cost of other assets and allowing depreciation thereon, which is not legally sustainable – Decided in favor of Revenue.
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