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2020 (7) TMI 370 - ITAT RANCHIAddition u/s 40(a)(ia) - Selection of AY - HELD THAT:- This ground raised by the Revenue does not relate to assessment year 2008-09. Ld. Counsel for the assessee informs the Bench that this ground relates to assessment year 2007-08. We have examined the assessment order and order of ld. CIT(A) and noted that there is no any discussion about addition u/s 40(a)(ia) therefore, this ground does not relate to A.Y. 2008-09, hence we dismiss ground No. 1 raised by the Revenue. Addition claimed under the head rebate and claim - Since the customers have deducted the amount while releasing the payment, hence all such deductions have been provided in the books of account of the company as expenses under the head rebate and claim. - HELD THAT:- the Ld. A.O. has erred in disallowing the ascertained sales liability of ₹ 78,00,190/-supported by proper vouchers and details of such liability. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the revenue is dismissed. Contribution to club, Other staff welfare Exp. and Other workers` welfare expenses - HELD THAT:- AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Therefore, we delete the following adhoc expenses sustained by the ld CIT(A) on Contribution to club, Other staff welfare and other workers` welfare expenses . Addition on account books and periodicals - HELD THAT:- ld CIT(A) has sustained the addition @10% of subscription expenses on adhoc basis of ₹ 1,34,909/-. We nota that in assessee`s case under consideration the assessment is made by AO under section 143(3) of the Act and books of accounts of the assessee were not rejected by the assessing officer. We have already taken a view in para No.18 of this order that ad hoc disallowance should not be done by AO therefore we delete the adhoc addition sustained by CIT(A).Hence, we dismiss the appeals of Revenue and allow the cross objections filed by the assessee. Addition on account of Gardening Expenses - HELD THAT:- The company is also an ISO 9000/OHSAS 18001 certified company which requires neat and green environmental around the factory premises and therefore, the company maintains garden, do plantation etc in the company premises for smooth and healthy environment at the work place. Regarding expenses under the head gift to others, the ld Counsel has argued before the Bench that the gift given on account of marriages of contract workmen sons and daughter. The Entertainment expenses has incurred on customers, supplier and other business associates who visits to factory premises and take snacks, food etc. in the guest house. Regarding contribution to education and health and occupational health care expenses the ld counsel has argued that factory place is naxal affected place and no provision of medical health care and schooling of children of the employees and for this purpose the company incurs expenses under this head.Regarding guest house expensesthe assessee has argued that company is located in very remote area and fooding and lodging facilities are not available within 30 kms. of its facory, therefore, company operates a guest house for its business associates who may stay and take food. We delete the following adhoc disallowances sustained by the ld CIT(A) Gift to others, Entertainment Expenses, Contribution for education and health care expenses,Guest House expenses AND Community welfare expenses. Deduction u/s 80-IA for its unit for a captive power plant - addition made on allocation of expenses to Power plant unit - HELD THAT:- As argued that the company maintains separate books of accounts for 80-IA plant and other plants and all the expenses related to concerned plant are booked appropriately in the books of the same plant and these books of accounts are audited by the Statutory Auditors and certified by the management of company. It has also been argued that the apportionments of certain expenses made by the learned A.O. between 80-IA and other plants is totally baseless and assumptive therefore another opportunity should be given to the assessee to explain the allocation of expenses to Power plant unit before the assessing officer. We have gone through the order of ld CIT(A) and note that there is no any infirmity in the order passed by him. That being so, we decline to interfere in the order passed by the ld. CIT(A), his order on this issue, is hereby upheld and the ground of appeal raised by the Revenue is dismissed. Disallowance of various expenses on ad hoc basis - HELD THAT:- AO has not passed any order u/s 144 of the Act. The AO thus without rejecting the books of account of the assessee has gone for estimation on suspicion and conjectures that the assessee may be inflating its expenses. While scrutinizing the expenditure if the expenses claimed are not having any nexus to the business of the assessee or if there is deficiency in the vouchers or there is no bills supporting the incurrence of an expenditure, at the most expenses to the extent that are not supported by the vouchers can be held to be non-genuine and can be disallowed by the AO; and item-wise the AO could have disallowed the expenditure rather than going for adhoc disallowance of percentage basis of the expenses claimed by the assessee which action of the AO is arbitrary in nature and cannot be sustained. Eligible profits u/s. 80IA - HELD THAT:- As relying on M/S GODAWARI POWER & ISPAT LTD.[2013 (10) TMI 5 - CHHATTISGARH HIGH COURT] CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. Consequently, the findings of the CIT(A) granting relief to the assessee are confirmed and the addition partly confirmed pertaining to the electricity duty being devoid of merits is directed to be deleted. Allowable revenue expenses - HELD THAT:- If expenditure is made for acquiring or bringing into existence an asset or advantage for the enduring benefit of the business, it is properly attributable to capital and is of the nature of capital expenditure. But if it is made for running the business or working it with a view to produce the profits, it is a revenue expenditure. The aim and object of the expenditure would determine the character of the expenditure whether it is a capital expenditure or a revenue expenditure. In the assessee case the following expenditure are Revenue in nature because these expenses are for running the business or working it with a view to produce the profits Installation of Isolator breakers of improved rating, Installation of two lighting transformers.Therefore, we direct the assessing officer to treat the above mentioned expenses as revenue expenditure.
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