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2016 (6) TMI 1329 - AT - Income TaxDisallowance of the expenditure incurred by the Appellant on homologation based on the possibility that the same could be non-business expenditure/inflated expenditure - Held that:- We find the CIT(A) upheld the action of the AO which has already been reproduced in the preceding paragraphs. It is the submission of the assessee that given an opportunity the assessee is in a position to furnish the full details of Homologation charges before the AO. Considering the totality of the facts of the case and in the interest of justice we deem it proper to restore this issue to the file of the AO with a direction to give one more opportunity to the assessee to substantiate with evidence to his satisfaction regarding the Homologation charges. Ground raised by the assessee on this issue is accordingly allowed for statistical purposes. Addition of miscellaneous expenses, staff welfare expenses, advertisement and sales promotion expenses based on the possibility that the same could have been booked for non-business purposes - Held that:- We find the Ld.CIT(A) has already deleted the disallowance out of travelling and telephone expenditure. He has only sustained an amount of ₹ 2,50,000/- out of the miscellaneous expenses and other expenses. No infirmity in the order of the CIT(A). Admittedly, substantial part of petty expenses have been incurred in cash and are not verifiable in nature, therefore, the possibility of booking of expenditure for non business purposes cannot be ruled out. Since the disallowance sustained by the CIT(A) is very nominal considering the huge amount of miscellaneous expenses, staff welfare expenses etc. amounting to ₹ 13.07 crores, therefore, we find no infirmity in the order of the CIT(A) sustaining such disallowance. The submission of the Ld. Counsel for the assessee that no disallowance has been made in earlier year and subsequent year on this issue is not material. It is settled law that every year is separate and distinct and the principle of resjudicata do not apply to income-tax proceedings. In this view of the matter we uphold the order of the CIT(A) and the ground raised by the assessee is dismissed. Addition of car repair charges as a prior period expenditure - Held that:- Since the assessee in the instant case is following mercantile system of accounting and since the liability has crystallized in the preceding assessment year, therefore, the same cannot be allowed as a deduction in the current year. The various decisions relied on by the Ld. Counsel for the assessee are distinguishable and not applicable to the facts of the present case. Accordingly, ground of appeal No.3 is dismissed. Deduction u/s.80IB as allowed by the AO in the rectification order u/s.154 - Held that:- Since in the instant case the assessee is otherwise entitled to deduction u/s.80IB as granted earlier by the AO in the 154 proceedings and since it is also the settled law that proceedings before the appellate Tribunal are continuation of the assessment proceedings, therefore, respectfully following the decision of the Hon’ble Supreme Court cited [1996 (12) TMI 7 - SUPREME COURT] we set aside the order of the CIT(A) and direct the AO to allow the claim of deduction u/s.80IB. Project Assistant Technical charges as deductible expenditure u/s.37(1) - assessee has not been able to prove the basis of such payment, the nature of service rendered by the expatriates and also when the payment were not made in accordance with the project assistant agreement dated 11-12-1994 - Held that:- DRP in assessment order for A.Y. 2007-08 has directed to allow the project assistance technical fees as deductible business expenditure and the revenue has accepted the same and when in subsequent years the tax authorities have accepted the revised agreement entered into in May 2005 with retrospective effect from 01-01-2002 and since the genuineness of the payments has not been doubted by the AO in the body of the assessment order, therefore, we find no reason as to why part of such project assistance technical fee should be disallowed. In view of the above discussion and in view of the reasoning given by CIT(A) we uphold the order of the CIT(A) on this issue. - decided against revenue TPA - agreement with DCAG to pay royalty for technical knowhow received from DCAG - selection of MAM - Held that:- The royalty payment has been benchmarked considering combined transaction approach in TNM method. No separate benchmarking was undertaken to determine the ALP of Royalty. In A.Y. 2007-08 till A.Y. 2011-12 the payment of royalty was held to be at ALP. We therefore find merit in the submission of the for the assessee that in view of the rule of consistency the Cit(A) was justified in rejecting the CUP method adopted by the AO and accepting the TNM method followed by the assessee. Payment of royalty - nature of expenditure - revenue or capital expenditure - Held that:- We find the Hon’ble Bombay High Court in the case of Antifriction Bearings Corporation Ltd. Vs. CIT reported [1977 (11) TMI 37 - BOMBAY HIGH COURT] has held that royalty paid to a Foreign collaborator for provision of technical know-how in a restricted manner for a restricted use during the agreement period, not resulting in absolute transfer of anything or acquisition of any asset of enduring character is a revenue expenditure. Expenses pertaining to the cars allotted to the top executives - allowable busniss expenses - Held that:- No justification for adhoc disallowance on the ground that personal or non business component in the expenses claimed such as sundry expenses, hotel expenses gift articles, employee welfare expenses etc. Similarly, in the case of Bajaj Auto Finance Ltd. [2014 (6) TMI 969 - ITAT PUNE]) has held that in case of a company which is an inanimate person, no adhoc disallowance towards car and telephone expenses for personal use can be made. Similar view has been taken by the Coordinate Benches of the Tribunal in different other cases. We therefore do not find any infirmity in the order of the CIT(A) holding that the expenses pertaining to the cars allotted to top executives of the company are tax deductible since the same were taxed in the hands of the employees. So far as the amount on account of difference between amount of capitalized cars as per tax audit report and expenses on capitalized cars transferred from profit and loss account to fixed assets in the financial statements is concerned, we find merit in the submission of the assessee that the difference relates to balance sheet items and not profit and loss items such as RTO tax, CBU cars and preowned cars. However, the order of the CIT(A) is silent on this issue. We therefore restore this issue to the file of the AO with a direction to verify the same. In case the same is only due to difference in the balance sheet items, then no disallowance is called for. The AO shall verify the records and decide the issue as per fact and law. Ground of appeal No.5 by the Revenue is accordingly allowed for statistical purposes.
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