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2016 (1) TMI 1458 - MADRAS HIGH COURTDeduction u/s 35D - Amortisation of certain preliminary expenses - Appellant claimed amortization of GDR expenses as per Section 35D of the Act only to the extent of 2.5% of capital expenditure-project cost against the actual GDR expenses - HELD THAT:- Section 35D enables amortization of specified preliminary expenses, which are otherwise not admissible deductions. Expenditure on issue of shares for public subscription is one such expenditure. Section 35D of the Act applies in two circumstances; (i) pre-business expenses, i.e. expenses incurred before the commencement of business and (ii) expenses incurred in connection with the extension of industrial undertaking or in connection with setting up a new industrial unit by an establishment which is already in business. The assessee had claimed deduction in respect of successive units over a period of time; one unit during 1995-96, another unit during 1996-97 and yet another unit during 1997-98. There is also a finding that there is no proof to show that Euro Issue had been used for the capital expansion over a period of so many years. On these findings, the assessing officer has chosen to grant deduction only in respect of one unit, namely, for the unit established in 1995-96 to the extent of ₹ 10,39,812/- and disallowed the deduction in respect of other units. Therefore, we find no reason to differ the findings of the Tribunal. Deduction of bad debts disallowed u/s 36 - contention of the learned counsel for the assessee is that as part of the debt had to be written off, the same should have been allowed as revenue expenditure, and that the Assessing Officer has chosen to treat the same as capital loss, which is not correct in law - HELD THAT:- The claim for deduction on account of bad debt did not satisfy the eligibility creteria as enunciated in the decision reported in Sarangpur v. CIT [1982 (6) TMI 23 - GUJARAT HIGH COURT]. Applying the correct legal position, the Assessing Officer has given a finding that the alleged debt was not part of assessee's stock in trade and that as it has not been incurred while purchasing or selling the goods, in which the company was dealing with, and therefore, the expenditure involved cannot be treated as a debt and therefore, it is not an admissible deduction. Therefore, there is no reason to interefere with the findings of the Tribunal. Deduction disallowed as claimed u/s 37(4) - assessee claimed deduction in respect of expenditure on maintenance of guest house, rent paid on guest house and depreciation on assets in the guest house building - AO disallowed the deduction - HELD THAT:- This finding was confirmed by the Income Tax Appellate Tribunal, relying upon the decision of the Supreme Court reported in Britania Industries Ltd. vs. CIT [2005 (10) TMI 30 - SUPREME COURT], in which, it was held that depreciation rent repairs under Sections 30 and 32 of the Act and maintenance expenses are not allowable in respect of guest house. Deduction disallowed as claimed under Section 80HHC - HELD THAT:- Tribunal felt that, a) with regard to interest income, insurance claim and other income, there is no discussion about the nature of this income; b) whether these are operational income arising out of manufacturing activity on account of which the assessee is doing business or not; and c) with regard to other head of claim also, there is no discussion. This omission by Assessing Officer as well as Commissioner of Income Tax (Appeals) has been specifically pointed out by the Tribunal and the Tribunal has remitted the issue back to the file of the Assessing Officer, with a direction to find out the nature of the income, and if the income is found to be operational income, then, 90% is to be excluded while computing deduction under Clause (baa) to Explanation to Section 80HHC and this 90% will be excluded out of the gross receipts while computing the export profit for the purpose of deduction under this provision. Therefore, the order of the Tribunal in remanding this issue for consideration on issues pointed out does not suffer from any infirmity and therefore, there is no ground to interfere with the same. Assessee appeal dismissed.
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