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2006 (4) TMI 447 - AT - Income TaxDisallowance of custody charges paid to NSDL - Deductions - Donation to certain funds, charitable institutions, etc. Disallowance of custody charges paid to NSDL - HELD THAT:- The expenditure has been incurred in the normal course of business. The dematerialisation had helped significantly in reducing the administrative costs. Even if certain expenses results into some benefit to the shareholders, the expenditure incurred in respect of or in connection with the shareholders, is allowable as revenue expenditure as held in the case of CIT v. Tirrihannah Co. Ltd. [1991 (4) TMI 45 - CALCUTTA HIGH COURT] and in Karjan Co-operative Cotton Sales Ginning & Pressing Society v. CIT [1992 (1) TMI 39 - GUJARAT HIGH COURT]. The expenditure can even be considered in the nature of part of listing requirements. The CBDT by its circular letter F. No. 10/67/65-TT(A-I) opined that expenses incurred by company on getting its shares listed in stock exchange should be considered as laid out wholly and exclusively for the purpose of business and therefore admissible as business expenditure u/s 37(1). The guidelines of SEBI mandate that the shares to be traded in stock exchange can only be in dematerialized form. Thus, the charges paid to NSDL having not brought into existence any capital asset and is for the purpose of efficient functioning of the business are to be held as business revenue expenses and allowable as such. Deduction u/s 80G in respect of donations made - HELD THAT:- In the present case, donation is stated to have been paid out of "Keonics Unit", the profit of which is exempt u/s 10A of the Act. While computing the profit of Keonics Unit, the donation paid is added back as the same is not allowed to be deducted while computing profit u/s 10A of the Act. Thus, the disallowance in computing the income of Keonics Unit is as per the statutory provision of Act the donation being not considered as expenditure incurred wholly and exclusively for the purpose of business. Thus, it cannot be said that the donation paid has been allowed as "deduction" under the Act. The donation cannot even be considered as "expenditure incurred" for the purpose of earning income, which is exempt under the Act. There is no stipulation in section 80G to the extent that the donation has to be paid only out of taxable income of the year. The appellant has not claimed a double deduction. The provisions of section 14A would not be applicable to a deduction u/s 80G as—(a) section 14A is limited in its operation to Chapter IV only whereas deduction under section 80G falls under Chapter VI-A; (b) donation made does not constitute expenditure. Section 14A applies to expenditure only. Section 80G would be available even when the said donations are made out of capital or gilts received or exempted income or income of earlier years. Thus, the donation qualifies for deduction u/s 80G. The Assessing Officer is directed to allow the same as per the provisions of section 80G. Disallowance of maintenance expenditure incurred on leased buildings - We have considered the relevant facts and the arguments advanced. From the details of expenditure given, we find that it amounts to less than Rs. 20 per sq. ft. of the premises taken on lease. At the end of the lease period, the assessee cannot recoup anything from the expenditure incurred. Explanation to section 32 will apply provided the expenditure is capital in nature. Thus, merely because the sum is substantial, though not so substantial, looking to the operation of the assessee, the amount cannot be considered as capital expenditure. Even the grounds of appeal mentions that the expenditure incurred are ‘maintenance expenditure’. Such maintenance expenditure does not partake the characteristics of acquisition of any capital asset. The expenditure is incurred after the building had been occupied and which requires normal maintenance expenditure, which cannot be classified as capital expenditure. We accordingly do not find any merit in this ground. The deletion of disallowance is accordingly upheld. In the result, the appeal of assessee is partly allowed and that of Revenue is dismissed.
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