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2011 (10) TMI 653 - AT - Income TaxDisallowance u/s 14A - Held that:- Rule 8D is not retrospective in its operation, in the light of decision of Hon’ble Bombay High Court in the case of Godrej & Boyce Mfg. Co. Ltd. [2010 (8) TMI 77 - BOMBAY HIGH COURT ]. Even under section 14A of the Act reasonable expenditure, which was necessary for the purpose of earning tax free income has to be considered for disallowance. In the instant case, as rightly pointed out by the learned Counsel, the expenditure incurred by the assessee was only to run the day-to-day activity and expenditure such as listing fees, filing fees, audit fees, appeal fees, etc., cannot be considered to be having any nexus with the earning of tax free income. Under the circumstances, by respectfully following the decision of the ITAT, ‘F’ Bench (supra), we hold that adhoc disallowance of ₹ 37,512/- made by the Assessing Officer is not in accordance with law. Deduction towards business expenditure - commencement of business - Held that:- It is well settled that in order to claim deduction towards business expenditure it is not necessary that an assessee has to earn business income in the same year so long as it can be shown that the company intends to continue its activities. The expenditure reflected in the assessment year clearly indicate that these are the basic expenditure in order to continue its status as a company and in the absence of proving that the assessee, by its conduct, had taken a decision not to carry on its business forever the minimum expenditure claimed by the assessee cannot be disallowed. We therefore, direct the Assessing Officer accordingly. Prior period expenses - Held that:- We fail to understand the logic behind the plea of learned DR. Heading of section 43B states that certain deductions can be allowed upon actual payment. It is not in dispute that professional tax can be claimed as deduction, irrespective of the method of accounting followed by an assessee, in the year of actual payment. Admittedly, assessee paid the professional tax in the previous year relevant to the assessment year 2005-2006. Under the circumstances, we are of the firm view that the assessee is entitled to deduction of ₹ 19,850/-. Assessing Officer is directed accordingly.
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