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2015 (3) TMI 1393 - ITAT CHENNAIDisallowance of miscellaneous income arising out of scrap sale as deduction from pre-production capital expenditure - HELD THAT:- The interest income earned on the excess borrowed fund was assessed as income of the assessee. However in this case before us, the assessee has generated scrap while relocating and erecting its machinery. Obviously the revenue derived from the sale of such scrap will go to reduce the erection cost which is to be capitalized. It is pertinent to note that the scrap generated is not from the production activity of the assessee but from relocation and erection of the machinery belonging to the assessee. Therefore the miscellaneous income arising out of scrap sale from such activity should be reduced from the pre-production capital expenditure incurred by the assessee. Thus this ground raised by the assessee is allowed in its favour. Disallowance of prior period expenses - HELD THAT:- In mercantile system of accounting, only the expenditure that has crystallized during the relevant assessment year is to be treated as allowable deduction. In this case, it is apparent that the payment made by the assessee had crystallized as expenditure during the relevant assessment year. Therefore, the assessee has rightly claimed the same as allowable deduction. In these circumstances, we hereby direct the AO to allow the claim of the assessee as allowable deduction. It is ordered accordingly. Disallowance of expenses towards prepayment premium and interest recompense - HELD THAT:- As relying on GUJARAT STATE FERTILIZERS & CHEMICALS LTD. [2013 (7) TMI 701 - GUJARAT HIGH COURT] and GUJARAT GUARDIAN LIMITED [2009 (1) TMI 13 - HIGH COURT DELHI] we hereby direct the Ld. Assessing Officer to delete the additions made on account of disallowance being the payment towards interest recompense on CDR scheme. Thus this issue is also held in assessee’s favour.
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