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2018 (11) TMI 266 - ITAT PUNEAddition invoking the provisions of section 14A r.w. Rule 8D - non recording of satisfaction before invoking the provisions of section 14A & Rule 8D - Held that:- The preliminary satisfaction to be recorded by Assessing Officer, before making disallowance under section 14A of the Act read with Rule 8D of the Rules, is missing in the case; in the absence of the same, there is no merit in the disallowance made by the Assessing Officer. We find support from the ratio laid down by the Hon'ble Supreme Court in Godrej & Boyce Manufacturing Co. Ltd. Vs. DCIT & Anr. [2017 (5) TMI 403 - SUPREME COURT OF INDIA] Satisfaction recorded by the AO in Para No.5.1 is extremely based on the suspicion and surmises. The satisfaction arrived at by the AO with reference to the entries in the books of account of the assessee and also having regard to the correctness of the claim of the assessee. In that sense of the matter, the satisfaction recorded by the AO is extremely generic and which falls short of the legal requirement for assuming jurisdiction u/s.14A of the Act. - Decided in favour of assessee. Nature of expenses - Foreign Travel Expenses of Employees - revenue or capital expenditure - Held that:- n the issue of capitalization of the expenditure, in view of the assessee’s submission that the expenses incurred for the purpose other than the purchase of machinery, needs to be verified by the AO, we find this issue needs to be remitted back to the file of AO for verification of correctness of the facts relating to this claim. AO is directed to verify the expenses in this regard after granting reasonable opportunity of being heard to the assessee. - Decided in favour of assessee for statistical purposes. Classification issues qua the depreciation rates - held that:- AO classified certain items as Furniture and allowed depreciation at the rate applicable to Furniture and certain items as Plant and Machinery and allowed depreciation at the rate applicable to them by applying functional test. Eventually, in the assessment made u/s.143(3) r.w.s. 153A of the Act, the AO made addition of ₹ 1,44,126/- being difference in depreciation @10% and 15% on some items under block of Plant and Machinery treating the same as Furniture. Before the CIT(A), the assessee submitted that this issue has been decided in favour of the assessee for the A.Yrs. 2006-07, 2007-08 and 2008-09. The CIT(A) after considering the submissions of the assessee and the order of CIT(A) for the A.Y. 2008-09 allowed the appeal of the assessee. Thus we find this issue has already been adjudicated by us against the Revenue and in favour of the assessee while dealing with the appeal of the Revenue. Provision for Leave Encashment disallowance - Held that:- We find this issue stands decided against the assessee by virtue of the order of Tribunal in the assessee’s own case for the A.Y. 2009-10. Disallowance of Demat charges as claimed as expenditure incurred for earning income from capital gains - Held that:- We find this issue is also a decided issue in favour of the assessee by virtue of the order of Tribunal in the assessee’ own case for the A.Y. 2009-10 we respectfully following the order of the Tribunal in assessee’s own case for A.Y. 2004-05 allow the claim of the Portfolio Management fees as an allowable expenditure. The ground raised by the assessee is accordingly allowed. Disallowance of expenditure relating to laying of water pipelines - revenue or capital expenditure - Held that:- We are of the opinion that the expenditure incurred on laying of the water pipeline involving the land owned by Maharashtra Government constitutes Revenue expenditure Disallowance on account of selling and distribution expenses - Held that:- scope of the CBDT Circular cannot be extended to the pharmaceutical companies without having any enabling Notification or Circular for Medical Council of India. Consequently, the present assessee being a pharmaceutical company is outside the scope of the said circulars of MCI and the CBDT. Considering the settled nature of the issue and following the rule of consistency, this ground raised by the assessee needs to be allowed in favour of the assessee. Disallowance of rent paid for Bungalow located at 70, Koregaon Park, Pune - expenditure allowable u/s.37(1) - Held that:- Expenditure on account of rent paid on the house property is allowable in favour of the assessee. We allow the expenditure on account of rent paid in favour of the assessee and remit the issue pertaining to depreciation with identical directions. Disallowance of bogus purchases - Held that:- We are of the opinion that the matter should be remanded to the file of CIT(A) for considering the above decision of the Tribunal in the case of Chhabi Electricals Pvt. Ltd. (2017 (6) TMI 514 - ITAT PUNE) after due verification of the facts of the present case. Accordingly, the ground raised by the assessee on merits is allowed for statistical purposes. MAT computation - Disallowance on account of Wealth Tax paid - Held that:- The wealth tax payment constitutes an ascertained liability for MAT purposes. Considering the favourable decision in favour of the assessee, we allow Ground raised by the assessee.
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