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2016 (8) TMI 1219 - AT - Income TaxDisallowance applying Rule 8D u/s 14A - Held that:- As in the present case there is no satisfaction of the assessing officer based on tangible material that interest bearing funds have been used for investment in tax free income earning securities therefore we reverse the finding of the ld CIT (A) in confirming the disallowance u/s 14A. Disallowing of interest expenditure treating it as capital expenditure - Held that:- According to the details furnished capital work in progress includes amount for purchase of land as well as building under construction and advances to contract and the total capital work in progress is of ₹ 2.88 crores. Assessee has shown that total interest has been paid for working capital finance except a small sum for terms loan. Assessee has submitted that it has not borrowed any sum for acquisition of land as well as for construction and this argument is not controverted by revenue, no interest according to us is in relation to acquisition of this assets is claimed as expenditure by the assessee. In view of fact that assessee has not borrowed any capital for acquisition of an asset which the plot at Noida or construction thereon, we are of the view that the claim of the assessee is not hit by the first proviso 36(1)(iii) and therefore no disallowance on account of interest to be capitalized for that asset can be made. Disallowance of expenditure as capital expenditure - R&D expenditure - Held that:- We do not find that the assessee has purchased any new capital asset or has acquired enduring benefit. It is only an operational benefit that has arisen to the assessee, which does not result, into any capital asset and therefore the expenditure is allowable as revenue expenditure. Even otherwise, the provision of section 35(1) allows deduction with respect to capital expenditure as well as revenue expenditure both on account of research and development expenditure. Therefore, we reverse the finding of the ld CIT(A) with respect of disallowance of research and development expenditure. Purchase of accounting software - Held that:- As it is stated that it is an annual expenditure for the license of the software. Such software license purchase cannot be held to be capital expenditure as it is merely a license to use that software for a particular period not culminating in to any enduring benefit to the assessee. Therefore we reverse the finding of the ld CIT (A) with respect to software expenditure and direct the same to be allowed as revenue expenditure. Repairs and maintenance expenditure - Held that:- The bill of the architect also shows that it was renovation expenditure of the premises. The assessee also incurred repairs expenditure for premises etc. looking to the details of such expenses, which are petty in nature and routine, looking to the total assets of the company as on 31.03.2008 having gross block of ₹ 4.36 crores. The above expenditure has also not resulted in to new asset and further no new construction has been allegedly undertaken by the assessee. Assessee has also explained reasons about why these expenditure are necessary. Thus we reverse the finding of the ld CIT(A) in confirming the disallowance as capital expenditure and not repairs and renovation
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