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2013 (11) TMI 1279 - ITAT COCHINComputation of Depreciation on Machinery - Non-deduction of Non-Refundable Deposits - Held that:- it cannot be said that the dealers have contributed money for purchase of these machineries - the question of adjustment of security deposit against the cost of assets for the purpose of computation of depreciation does not arise - With regard to the amount of security deposit collected from the customers, we notice from the agreement that it remains the liability of the assessee till the agreement is cancelled - So long as the agreement remains in force, the security deposit will remain as the liability of the assessee - it is clearly provided in the agreement that the dealer shall hold the machineries in trust - The question of refund/adjustment of deposit arises only on the event of the dealer choosing to give up/discontinue the Car Radial Business - It cannot be said that the dealers have contributed money for purchase of the machineries – thus, the question of adjustment of security deposit against the cost of assets for the purpose of computation of depreciation does not arise Depreciation on machinery – Expenses incurred on clubs – Depreciation on Let Out Property - Deduction u/s 80IA - Held that:- The expenditure incurred towards entrance fee/subscription can be termed as business expenditure and the cost of services can be allowed only if the commercial expediency in incurring the same was proved - the details furnished by the assessee required verification at the end of the AO - the depreciation claimed on let out properties - the order of Ld CIT(A) on this issue and restore the addition made by the AO - deduction u/s 80IA of the Act on the D.G. power generation units I & II by considering the same as an “undertaking” for the purposes of sec. 80IA of the Act - Both the parties agreed that this issue has been decided in favour of the assessee. Claim of Amount Written as Irrecoverable - Write off of irrecoverable advance paid for purchase of machineries – Held that:- The advance written off is a loss of capital, hence not allowable as deduction – Following Swadeshi Cottom Mills Co. Ltd. Vs. CIT [1966 (9) TMI 32 - SUPREME Court] - compensation payable for breach of contract to purchase capital asset is a capital expenditure – and CIT vs. Mysore Sugar Co. Ltd. [1962 (5) TMI 3 - SUPREME Court ] - loss of capital nature is not deductible while calculating business income - The advances given for acquisition of Capital assets was liable to disallowed as ‘Capital loss’ and the advances given for acquisition of revenue items was allowable u/s 37 of the Act as current expenses. Setting off of Long Term Capital Loss - Loss on sale of equity shares and Mutual fund units against long term capital gain earned on sale of land – Held that:- In order to claim exemption u/s. 10(38) of the Income Tax Act, the assessee had to prove that they have complied with the conditions stated therein - Since the compliance had not been proved the exemption u/s. 10(38) of the Income Tax Act cannot be granted to the assessee - once income which included loss was exempt, the same cannot be taken for computation - exemption u/s. 10 was granted not as per claim of the assessee but as per fulfilment of conditions stipulated - Sec. 70 provided for set off of loss from one source against income from another source under the same head of income - The very scheme of such set off implied that the source in respect of which a loss had occurred, was such that, had there been profit instead of loss they would have been chargeable to tax - In the assessee’s case Long Term Capital Gain on sale of land was taxable whereas Long Term Capital gain on sale of share on which SIT had been paid was exempt. Addition of Deferred Tax Liability – Computation of book profit u/s 115JB of the Act - Held that:- Both the parties agreed that the provisions of sec. 115JB have been amended by Finance Act, 2008 with retrospective effect from 1.4.2001, as per which “the amount of deferred tax and the provision thereof” was liable to added to the net profit for the purpose of computation of book profit. Weighted Deduction on scientific research expenditure - Weighted deduction @ one and one half times of the expenditure - Held that:- The issue was not examined by the assessing officer – Accordingly the instant claim made by the assessee was required to be examined by the assessing officer – issur remanded back with the direction to examine the claim of the assessee and take appropriate decision in accordance with the law. Deduction of Quality Loss Claim from Export Market - Held that:- The assessee was not entitled to claim deduction relating to Quality claims - Following M/s MIL Controls limited Vs. CIT [2011 (6) TMI 495 - Kerala High Court ] - The assessee was putting forth claim for deduction of expenditure relating to “Quality Claim” only for the reason that the said claim was disallowed in the hands of M/s PTL Enterprises Ltd, even though the said company had accepted the liability for the same - the disallowance was made in the hands of M/s PTL Enterprises Ltd for the reason that the said assessee failed to furnish any proof.
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