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2017 (6) TMI 1172 - AT - Income TaxDisallowance of expenditure by way of contribution made towards construction of hospitals by the Medicare Relief Society, Community Health Centre - Held that:- It is stated by the assessee that where the contribution is made by the assessee, the hospitals keeps certain beds reserved for the employees of the assessee and the treatment is also given on priority basis. Under these facts, we do not see any reason to take a different view as taken by the Co-ordinate Bench in assessee’s own case pertaining to the AY 2009-10. Disallowance of claim of expenditure - Held that:- AO is directed to delete the disallowance of expenses i.e. Staff Welfare Expenses, Charges General Expenses, Gift Expenses, and Promotion Expenses. Now, coming to the Taxi Hiring Expenses, we find that the assessee had claimed that the expenditure was made for business purposes from the details furnishedbefore the Assessing Officer. It is noticed that the expenditure related to taxi hiring for DRM Railway and other railway employee is also booked, it is not clear whether such railway employee were on official duty and such taxi was hired in inspecting the railway siding in the absence of the material. We are of the considered view that Ld. CIT(A) has rightly confirmed the disallowance of 10% of the expenditure. This ground of assessee appeal is partly allowed. Addition invoking the provision of section 14A - Held that:- In the present case the Ld. CIT(A) has recomputed the disallowance by applying rule 8D. He has disallowed interest expenditure of ₹ 2,38,454/- and administrative expenses of ₹ 6,89,497/-. The grievance of the assessee is that the no interest expenditure is related to the exempt income. As it is claimed that the entire investment in mutual funds have been made from own fund. The Ld. CIT(A) has not given any reason as to why the contention of the assessee is not acceptable. Revenue has not placed any material rebutting the claim of the asessee. Therefore, out of disallowance of ₹ 9,27,956/- a sum of ₹ 2,38,454/- is deleted and ₹ 6,89,497/- is sustained. This ground is partly allowed. Expenditure in 20 annual installments of compensation paid to the farmers - Held that:- There is no dispute with regard to the fact that the AO himself had allowed expenditure in 20 equal installments in AY 2008-09. In the year under appeal, the Revenue has not demonstrated the change into the facts and the reason for changing the stand. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. Disallowance on account of construction of road - Held that:- The facts remains that the assessee had contributed to the Rajasthan Government for construction of new railway over bridge. This facilitated the transportation of raw materials to the factory and flow of finished goods to the market. It is also stated that by this the distance is also reduced. The contribution is purely for business purposes. The Ld. CIT(A) has given a finding that the construction of ROB with approach road resulted in enabling the assessee to carry out its business efficiently and profitably. It did not result in any advantage in the capital field and therefore the expenditure is revenue in nature. As the assessee has not acquired any material asset. We do not see any fault in this finding of the Ld. CIT(A) as there is no dispute with regard to the fact that the assessee has not acquired any capital asset giving enduring benefit. It was a contribution towards construction of railway over bridge which facilitated the smooth flow of traffic including the transportation of goods by the assesssee. Therefore, this ground of the Revenue’s appeal is dismissed. Disallowance unexplained outstanding liabilities - Held that:- CIT(A) deleted the disallowance by observing that liability included liability of ₹ 1,28,60,330/- towards land tax which was already disallowed by the assessee u/s 43B in Assessment Year 2007-08. Out of the remaining liability certain amount were paid by the assessee in subsequent years part of the liability of approximately of ₹ 29.65 lacs was written back in the AY 2011-12, 2012-13. Under these facts, the Ld. CIT(A) was of the view that these liabilities were not ceased to the regulatory has not brought any material except the observation of the AO that these liabilities were outstanding more than 3 years. However, the assessee has administrative that measure part of the liabilities has been written back and offered for tax in other years. Under these fact, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed, this appeal of the revenue is rejected. Disallowance on account of payment of demurrage - Held that:- We find that the Ld. CIT(A) has given a finding on fact that there is no clause by which the demurrages was required to be paid by the C & F Agent not by the assessee. It is also not brought on record by the revenue that the assessee had claimed such expenditure from C & F agent. Under these facts, we are of the view that the Ld. CIT(A) has rightly followed the decision of the Hon’ble Delhi High court in the case of Mahalaxmi Sugar Mills Co. Ltd. Vs. CIT [1984 (5) TMI 6 - DELHI High Court] and Nanhoomal Jyoti Prasad Vs. CIT (1979 (8) TMI 38 - ALLAHABAD High Court). We do not see any merit into the ground of revenue’s appeal, same is hereby affirmed. This ground is dismissed Disallowance on account of railway siding expenses - Held that:- In the present case, it is not the case of replacement of old machinery by new machinery and repair of rented buildings. In the present case the expenditure is incurred on the day to day maintenance of the railway tracks at the railway siding. Therefore, we do not see any reason to interfere into the order of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue’s appeal is dismissed. Disallowance out of taxi hiring charges from 20% to 10% - Held that:- There is no dispute with regard to the fact that the expenditure as claimed should be expended wholly and exclusively for the purpose of the business. In the present case, the AO has noted that there was no supporting evidence in the assessee’s appeal. We have affirmed the view of the Ld. CIT(A) by confirming the disallowance of expenditure of account of taxi hiring to the extent of the 10% of the total expenditure. Therefore, for the same reasoning, this ground of the revenue’s appeal is dismissed. Disallowance under section 36(1)(iii) - Held that:- We have given our thoughtful consideration to the rival contentions, we find merit into the observation of the Ld. CIT(A), that the AO has not justified in making disallowance for the same item by invoking the provision of section 14A and also the provision of section 36(1)(iii). Moreover, the assessee has demonstrated that the entire investment into mutual funds was made out of interest free funds. Under these facts, we do not see any reason to interfere into the finding of the Ld. CIT(A), same is hereby affirmed. This ground of Revenue’s appeal is dismissed. Disallowance holding that the expenditure incurred by the assessee towards establishment of clinker grinding unit at Aligarh is capital expenditure - Held that:- We find that the ld. CIT (A) has given a finding of fact that a new Unit has been established and the expenses incurred in establishing a new Unit are capital in nature and accordingly disallowed the claim of the assessee. The ld. Counsel for the assessee insisted that it is an extension to the earlier unit. We do not see any merit into the contention of the assessee as admittedly even if the assessee’s new projects are in the same line of business, expenses relating to new projects are capital in nature and not allowable as revenue as held by the Hon’ble Bombay High Court in case of J.K. Chemical Ltd.(1992 (10) TMI 18 - BOMBAY High Court). We, therefore, find no infirmity in the order of ld. CIT (A), the same is affirmed
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