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2014 (10) TMI 468 - AT - Income TaxRecovery of Guest House Expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the user of guest house facilities provided by the company to the employees of the company in connection with discharge of their official duties does not alter the basic character of the expenditure - such expenses are connected with the travelling by such employees and it should be treated accordingly, irrespective of the fact that such employees stayed in the guest house of the company – the AO is directed to allow the deduction of amount received from parent departments as expenditure in the nature of travelling expenses ;and in accordance with Rule 6D of the IT Rules – Decided in favour of assessee. Expenses on Business Meetings and conferences – Held that:- The expenditure incurred on the employees at a place other than office or factory requires to be treated as entertainment expenditure - The hotel or restaurant cannot be treated as “any other place of their work - the sweep of the words entertainment expenditure found in Explanation is wide and broad to cover every expenditure on provision of hospitality of every kind to employees also, provided the expenditure is not incurred in office or factory or any other place of their work where an employee normally discharges his duties - the hotel cannot be equated with the other place of their work – assessee did not place any evidence to establish the fact expenditure incurred on business meetings and conferences contained the rent paid for the halls in the hotels – the matter is remitted back to the AO to examine and allow if the assessee is able to furnish the evidence of rent paid to the hotels or restaurants which was included in the business meetings and conferences expenditure – Decided against assessee. Annual General Meeting Expenses – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the expenditure incurred on serving tea, coffee and soft drinks is covered by the Explanation 2 to section 37(2A)/(37(2) - In the Explanation 2 it is stipulated that the expenditure on provision of hospitality of every kind by the assessee to any person whether by way of provision of food or beverages or in any other manner, whatsoever, would be entertainment expenditure - The sweep of the words entertainment expenditure found in the Explanation 2 to section 37(2A)is wide and broad to cover every expenditure on provision of hospitality of every kind to any person other than the employees at the place of their work - the Explanation 2 to subsection (2A) of section 37 was not there in the statute when the judgment in the case of Bangalore Turf Club was delivered – relying upon Commissioner Of Income-Tax, Karnataka I Versus Mysore Paper Mills Limited [1976 (4) TMI 5 - KARNATAKA High Court] - the expenditure incurred at the general body meeting is covered by the Explanation 2 to section 37(2A) - the expenditure incurred on serving tea, coffee & soft drinks to the shareholders at the Annual General Meeting is treated as entertainment expenditure – Decided against assessee. Expenditure on Techno Feasibility Reports – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure - the expenditure has to be allowed as a deduction being a revenue expenditure – Decided in favour of assessee. Contribution made to Tata Steel Rural Development Society disallowed – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that with the increase in the number of people residing in Jamshedpur, the assessee found it difficult to cope with all the services of civic amenities and it has, therefore, encouraged senior officers of the company and other leading citizens in Jamshedpur to set up voluntary organisations registered under the Societies Act or other charitable institutions to undertake activities in the field of sports, education, medical relief, cultural promotions, etc.- AO rejected the assessee’s claim that these contributions were made to discharge its obligations towards civic amenities and, therefore, it was an item of business expenditure incurred wholly and exclusively in the ordinary course of business - since the major beneficiaries of the expenditure were the company’s employees, it was an item of labour welfare expenditure - the payments were made keeping in mind business expediency viz.,to have a motivated work force.In the light of the peculiar facts in assessee’s case, the expenditure in question has to be allowed as a deduction u/s. 37(1)- The provisions of section 40A(9) would not apply because the payments were not made by the assessee in his capacity as an employer – Decided in favour of assessee. Contribution to Tata Sports Club – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the contributions were covered by section 40A(9) of the Act, that Section 40A(9) was enacted with a view to discouraging creation of certain irrevocable trusts ostensibly for the welfare of the employees and transfer to such trust substantial amounts by way of contribution - the contributions were given to Tata Sports Club in the capacity of an employer for the benefit of the employees as well as others - the annual contribution to Steel Plants Sports Board was an independent organisation managing the affairs of the board ‘with its own budget - the purpose of creation of the association was to create and train athletes of national standard - the objective had no relevance in carrying on the business of the assessee - the contribution made by the it was an application of income – Decided in favour of assessee. Contributions made to various institutions of Jamshedpur – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that significant contributions made by the were to Jamshedpur Notified area Committee,Merry Hospital, Jamshedpur, Trade Workers’ Union, Loyola School, All India Football Association, it was evident that the assessee had given a general and vague explanation about the issue before him, that it did not establish the direct nexus between the contributions and the business, that in the absence of such a nexus, it could not be presumed that the contributions were made for the purpose of the business, that the contributions made by the assessee were on the nature of application of income, that the contributions were hit by the provisions of section 40A (9) of the Act - the issue of payment of contributions to various Institutions at Jamshedpur in favour of the assessee – Decided in favour of assessee. Contribution made to Institute for Miners & Metal Workers’ Education – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that the payment by the assessee was not towards any expenditure but same was by way of contribution - assessee did not avail any services in lieu of the payment during the year- there was no direct nexus between the expenditure incurred and the benefits derived by the assessee - payment was in the nature of contribution or donation and was not allowable as business expenditure. Delayed contribution to approved superannuation fund disallowed – Held that:- Following the decision in Commissioner of Income Tax Versus M/s. Alom Extrusions Limited [2009 (11) TMI 27 - SUPREME COURT] - The omission of the second proviso to section 43B of the Income-tax Act, 1961, by the Finance Act,2003,operated, retrospectively, with effect from April 1,1988 and not prospectively from April 1, 2004 - as per the amended section if employer’s contribution is deposited in the funds before the due date of filing of return,as envisaged by the provisions of section 139(1)of the Act – the contribution to the fund was made before the due date of filing of return – Decided in favour of assessee. Expenses on relining inner walls of blast furnace – Held that:- The expenditure was incurred by the assessee for relining furnaces - AO had disallowed the expenditure for the first time treating it as capital expenditure - principles of res judicata do not apply in income tax proceedings -But, rule of consistency demands that if same facts and circumstances exit then without bringing distinguishing features of a transaction, stand taken earlier should not be disturbed - AO has not discussed as how the facts for the year were different from the earlier year with regard to the relining of the furnaces - The nature of job done by the assessee did not bring in to existence any new asset and it was not capable of bringing any enduring benefit to the assessee - Relining was an expenditure of revenue nature – the order of the FAA is upheld – Decided against revenue.
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