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2009 (12) TMI 912 - AT - Income TaxDisallowance u/s 35D - fee paid to Registrar of Companies for increasing authorized share capital - HELD THAT:- This issue is squarely covered against the assessee by the decision of the Hon’ble Apex Court in the case of Punjab State Industrial Development Corporation Ltd. [1996 (12) TMI 6 - SUPREME COURT]. In this case it was held that amount paid by the company to ROC as filing for enhancement of capital base of company cannot be allowed as revenue expenditure. Respectfully following the precedent, we uphold the order of the ld. CIT(A) on this issue and decide the issue against the assessee. Disallowance of expenditure on acquisition of fire extinguishers - Nature of expenses - CIT(A) confirm the disallowance upholding that the expenditure was capital in nature - HELD THAT:- We find that expenditure on fire extinguishers did not bring into existence any asset or an advantage which is enduring benefit of trade so as to be classified in capital field. It is meant to be utilized in the event of accident/occurring of any fire as a preventive measure. What is material to consider is the nature of the advantage in a commercial sense and it is only where the advantage is in the capital field that the expenditure would be disallowable on an application of this test. If the advantage consists merely in facilitating the assessee’s trading operations or enabling the management and conduct of the assessee’s business to be carried on more effectively or more profitably while leaving the fixed capital untouched, the expenditure would be on revenue account, even though the advantage may endure for an indefinite future.” Examining the present issue on the touchstone of above exposition, we do not see any reason why the expenditure should not be allowed as revenue expenditure - Decide the issue in favour of the assessee. Expenditure for club services - CIT(A) upholding that the expenditure for club services as expenditure not for the purpose of business but is of personal nature - HELD THAT:- As we are of the opinion that use of club services for the promotion of business in the modern age cannot be denied. Further the expenditure in comparison with the turnover of the assessee is a very miniscule amount. For assessment year 2002-03 ld. CIT(A) himself deleted the half of the disallowance. Furthermore the proposition that these expenditure incurred by the assessee company are personal in nature is not sustainable on the anvil of Sayaji Iron Engg and Company [2001 (7) TMI 70 - GUJARAT HIGH COURT]. In this case it was held that “when the vehicles belonging to assessee company are used by its directors for personal or other purposes, it would be wrong to hold that vehicles are personally used by company because a limited company by its very nature cannot have any ‘personal use’ of cars by directors.” Advertisement and publicity expenses - nature of expenditure that provide benefit of enduring nature and need to be amortised over a period of 5 years and in rejecting the claim of the assessee that it is a revenue expenditure allowable in entirety in the current year itself - HELD THAT:- The nature of expenditure does not fall under the ambit of preliminary expenses as envisaged u/s 35D. When the expenditure was incurred and there is nexus between the expenditure and the assessee’s business, we do not see any reason whey the entire expenditure should not be allowed in full during the concerned year The case law in Salora International [2008 (8) TMI 138 - DELHI HIGH COURT] supported the case that when expenditure has actually been incurred and there was direct nexus between the expenditure and assessee business, the expenditure has to be allowed in full and not deferred by spreading over certain number of years. Therefore, it is clear that it was assessee’s claim that certain expenditure on advertisement were actually expenditure u/s 35D. Hence, we set aside the orders of authorities below and decide the issue in favour of the assessee. Disallowance on account of commission paid to Direct Selling Agents and stamping fee - Spreading over of expenses - as per AO assessee has been financing the hire purchase of vehicles and homes etc. and the period of such financing is ranging from less than one year to more than one year upto 5 years and in view of the fact that the financing is spread over a period of five years allowed only 1/3rd of this expenditure and disallowed 2/3rd thereof - HELD THAT:- Neither of the authorities below have disputed either to nature of services rendered by agents or how the liability to pay the commission is computed. It has also not disputed that how the brokerage is payable and is linked to what. The only case made out by the revenue is that expenditure should be spread over a certain period of time. In our opinion, there is no cogency in the case made out by the revenue. It is an accepted position that assessee’s treatment in its accounts books is not determinative of the actual nature of the transaction. It is also admitted that there is nexus between the expenditure and the assessee’s business. Under such circumstances, there is no reason why the expenditure incurred would not be allowed as a whole. Thus we find that expenditure which have been made in the concerned years were paid to the selling agents for sourcing the customers from whom the assessee had generated the income by way of granting of loan finances. The amount paid as commission is not refundable in any circumstances. Undisputedly income in this regard has been accounted for in the current years also - we find that the expenditures on commission and stamping fee have to be allowed in full in the impugned assessment years as deferral of the same over a number of year is not sustainable. Leasehold Improvement expenses - whether allowable revenue expenses? - As per AO in the earlier years also the assessee company has done lease hold improvements but has capitalized the same and claimed 10% deprecation on it - HELD THAT:- We find that the ld. CIT(A) has given a categorically finding that the assessee has duly produced all the necessary details and that the assessee has duly identified the capital portion of the expenditure incurred and the amount on the improvements expenses which were of revenue in nature. We also find that it is a settled law that powers and duties of the CIT(A) are co-terminus with that of AO. Hence, in our considered opinion, there is no need to interfere with the finding of the ld. CIT(A). Accordingly, we uphold the same. In the result, the appeals filed by the assessee are allowed and appeals filed by the revenue are dismissed.
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