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2019 (6) TMI 428 - AT - Income TaxDisallowance of provision for leave encashment u/s 43B(f) - HELD THAT:- A decided in M/S. S.R. BATLIBOI & CO [2012 (3) TMI 585 - ITAT KOLKATA] set aside the orders of the authorities below on this point and restore the matter back to the file of the AO with the direction that he will readjudicate this issue as per decision of the Hon’ble Apex Court in the case of M/s. Exide Industries Ltd. [2009 (5) TMI 894 - SC ORDER] Disallowance on account of software expenses - nature of expenses - revenue or capital expenditure - HELD THAT:- It is observed that the payment was made for maintenance/hosting services and there was no acquisition of right in software as spelt out in Para 7(a) of Software Maintenance & Support Agreement dated 1stJuly, 2009. We find that the AO has misunderstood the facts of the case. The payment made by the assessee has not resulted in any enduring benefit and are only for annual maintenance and support services. The same services has been availed by the assessee in future years also which suggests that the same were availed on annual basis and was not a one-time payment. Hence, we do not find any possible reason to treat the expense as capital expenditure since the payment is made only for maintenance and support services, necessary for using the application efficiently. - Decided against revenue Disallowance of commission expenses - allowable business expenses or not? - HELD THAT:- A.O. has made various allegations and the assessee has submitted rebuttal to each such allegation during the appellate proceedings. It is observed that the A.O. has not brought any corroborative evidence in support of his allegation except making only such allegation. On perusal of statement by third parties no adverse inference could be drawn. In absence of any evidence of payments being not genuine, we do not find any justification in the action of the A.O. in treating the impugned commission payments as not being expended wholly and exclusively for the purpose of business. In view of the facts narrated above, we note that the addition made on account of commission payments rightly deleted by ld CIT(A) - Decided against revenue. Addition of warranty expenses - unrecovered warranty cost - HELD THAT:- We note that pursuant to the agreement entered into between the Caterpillar and the assessee, the assessee is entitled to claim reimbursement of warranty expenses from Caterpillar claimed by its custom. The assessee incurred total warranty cost claimed as reimbursement from Caterpillar out of which warrant only claim of ₹ 15,17,74,140/- was accepted by the Caterpillar. Balance warranty claim of ₹ 82,02,019/- was denied by the Caterpillar and was not reimbursed to the assessee. The assessee in its books of accounts has not debited the full amount of warranty expenses but what has been debited is only the unrecovered warranty cost of ₹ 82,02,019/-. In this regard, we find no merits in the contention of the AO that the assessee has violated the principle of accounting by only recording the expense without any credit. Since the unrecovered warranty cost represented business expense of the assessee, the same was debited to Profit and Loss Account and in view of the above, since the expenditure is incurred for business purpose, warranty expenses should be allowed. - Decided in favour of assessee.
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