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2017 (7) TMI 172 - ITAT DELHIAddition on account of rent - Held that:- When the lessor company admitted of leasing out and also simultaneously handing over the possession of the premises on 1.4.2005, the mere fact that the lease deed was recorded a little later on 1.8.2005, cannot per se lead to disallowance of rent for a period of four months as has been done by the authorities below. When the assessee placed a copy of the letter of the lessor company to the effect that the premises were, in fact, handed over to the assessee on 1.4.2005, it was incumbent upon the authorities either to accept this proposition or rebut the same with some cogent reasons. No such rebuttal has been done in the instant case. In our considered opinion, the user of the premises by the assessee for a full period of one year coupled with the fact of having made payment of rent for similar period, clearly entitle the assessee to deduction of the rent for the whole of the year. The impugned order is set aside to this extent. Disallowance u/s 14A - Held that:- AR has placed on record a copy of the consequential order passed by the AO pursuant to the restoration of the matter by the ld. CIT(A) for computing disallowance u/s 14A on some reasonable basis. As per this order dated 30.3.2013, the AO has computed the fresh disallowance at ₹ 2 lac. In our considered opinion, the sustenance of disallowance at this level is quite reasonable, which does not require any further interference. Disallowance of remaining expenses - Held that:- AO made disallowance of ₹ 16.12 crore simply by means of a mathematical exercise carried out by him. If he found the expenditure incurred by the assessee to be on higher side, it was incumbent upon him to specifically point out as to which expenses were not incurred for the purposes of business. No such exercise worth the name has been carried out. In our considered opinion, the ld. CIT(A) was fully justified in deleting this addition made by the AO on ad hoc basis. This ground is, therefore, not allowed. Disallowance of depreciation allowable on licence to use software @ 60% and not at 25% - Held that:- Once it is found that the software used by the assessee were of standard nature to be used in computer hardware and not meant for any independent usage, such software qualify for depreciation @ 60%. Appendix I to the Income-tax Rules under the broader head ‘III – Machinery and plant’ at Sl. no. (5) provides : ‘Computers including computer software’. Rate of depreciation at 60% has been prescribed against this item. When we consider Appendix I to the Income-tax Rules containing rates of depreciation available for the purposes of income-tax, it becomes manifest that the computer software which are necessary and integral for the working of hardware are eligible for depreciation @ 60%, as was claimed by the assessee. We, therefore, approve the view taken by the ld. CIT(A) in deleting this disallowance. This ground is not allowed. Expenditure on development of website is a revenue expenditure. Disallowance on account of expenses towards Telecom web support - Held tht:- There is some calculation mistake in the assessment order in respect of the amount paid by the assessee to these two parties. Since the very nature of the expenditure is that of revenue, there is no need to go deep into such a calculation mistake as the entire amount on this score is deductible as revenue expenditure. CIT(A) was justified in deleting this disallowance. Addition being Web page updation charges - Held that:- We find it as an undisputed fact that this expenditure was incurred by the assessee on web page updation. When the Hon’ble jurisdictional High Court in Indian Visit.com (P) Ltd. (2008 (9) TMI 8 - DELHI HIGH COURT) has held the expenditure incurred on development of website as revenue, it is, but natural that the expenditure incurred on website updation, cannot assume the character of a capital expenditure. We, therefore, uphold the impugned order on this issue. Annual maintenance cost is undoubtedly revenue expenditure and qualifies for deduction in entirety. Deduction on account of ‘Repairs to furniture and fixtures - Held that:- From the details of such repair and maintenance of furniture and fixtures, it can be seen that there are certain items of the capital nature, such as, payment towards purchase of LCD TV frame, etc. Such expenditure cannot be considered as a revenue expenditure. In view of the fact that the AO has not specifically dealt with the details of expenses for which he made disallowance, we consider it expedient to set aside the impugned order on this score and remit the matter to the file of AO for making an itemwise analysis of the nature of expenses claimed by the assessee under this head and, thereafter, make disallowance, to the extent permissible as per law. Disallowance of receipt of advances - Held that:- The assessee was following matching principle in recording income as well as expenses under the mercantile system of accounting. Paper book indicates that not only the income pertaining to the succeeding year, but, received in the year under consideration was taken as deferred revenue income, but, the expenditure incurred during the year not pertaining to the year under consideration, was also similarly accounted for. This unearned income of ₹ 1.55 crore was taken as income for the succeeding year and accepted by the Revenue as such in the assessment u/s 143(3) of the Act. In view of the fact that this income did not pertain to the year under consideration, we hold that the ld. CIT(A) was justified in deleting this disallowance.
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