Home Case Index All Cases Income Tax Income Tax + AT Income Tax - 2014 (12) TMI AT This
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2014 (12) TMI 1109 - AT - Income TaxDisallowance on expenses on adhoc basis under manufacturing, trading and other expenses Held that:- The A.O. disallowed on ad-hoc basis 10% of the total expenditure for the reason that the assessee could not furnish item-wise details of purchase and sale of goods - the books of account were accepted by the AO and no adverse inference in maintenance thereof was pointed out - the entire expenses incurred during the year was duly vouched and supported by necessary documents - The AO could not have made any ad-hoc disallowances without pointing out even a single instance of inflation of expenditure - the gross margin was worked out on the basis of books of account which were duly audited and accepted as correct and complete - The gross profit with regard to sale and purchase of goods in the trading division was at rate of 31.57% and there were various in direct expenses in the nature of high rental for retail outlets in prominent location - This had pushed down the net profit rate - CIT (A) has categorically found gross profit earned from the trading division of the assessee is reasonable and has also examined the vouchers of purchase and sale of goods made by the assessee on a sample basis and has found same is to be correct the order of the CIT(A) is upheld Decided against revenue. Restriction of addition u/s 14A r.w. Rule 8D Held that:- The dividend which is exempt from taxation is earned on account of investment made in share in the earlier years - The additional shares allotted to the assessee's company in the current AYs were on account of amalgamation of subsidiary companies - Therefore, no portion of the interest expenses incurred was in relation to investments in shares - the AO has not established any nexus between the investment and the borrowed funds - the assessee had enough interest free funds in the form of reserves and surplus and there was no relation between the interest expenditure and the dividend income - therefore, disallowance of interest expenditure, by invoking the provision of Section 14A, was uncalled for and the order of the CIT(A) I s upheld Decided against revenue. Disallowance of repair and maintenance expenses related to building and office equipment Capital expenses or not Held that:- The assessee had acquired the land at Ballabgarh in the year 1979 on which factory building was constructed and, accordingly, capitalized in the books on the year ending 31.3.1981 for an aggregate amount of ₹ 85,99,124/- since then the building was put to use in the course of business carried on by the assessee and for the continuous use of the building for a long period of over 20 years, the factory building had naturally required certain repairs and alterations for uninterrupted and smooth operations of the business in the building - Considering the life of the building and the total amount of expenditure of ₹ 6,84,504/- incurred on repair of the factory during the year was nominal compared to the total construction cost of building of ₹ 85,99,124/- in the year 1981 the expenditure cannot be said to be capital in nature - an expenditure incurred on repair of building for the purposes of business, which is not capital in nature is allowable deduction u/s 30 or 37(1) in Ramaraju Surgical Cotton Mills [2007 (8) TMI 39 - SUPREME COURT OF INDIA] it has been held that if a repair expenditure does not fall within the meaning of 'current repair' under section 30, but does not result in acquisition of any new capital asset, can be allowed as revenue expenditure under the residuary provision of section 37(1). The assessee is engaged in the business of manufacturing/ publishing and sale of city maps, manufacturing and trading of furnishing items, etc. - the assessee is not engaged in the business of manufacturing software or rendering services, through use of softwares - The softwares, if any, acquired by the assessee during the relevant year or up-gradation of existing software acquired in the earlier year, were merely application of softwares which enabled the assessee to execute tasks in the field of accounting, purchases, inventory maintenance, etc. and, thus, facilitating smooth carrying on of the business operations - such application of software did not result in creation of any new profit-earning apparatus or source of income for the assessee - the assessee only acquired license to use the softwares, it did not amount to have any ownership right in such software, and that the assessee cannot even be said to have acquired any capital asset to consider such licence fee paid as capital expenditure - the expenditure incurred on up-gradation of existing softwares or payment of license fee for new softwares for additional users cannot be said to be capital in nature Decided in favour of assessee.
|