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2010 (8) TMI 635 - AT - Income TaxDisallowance – Revenue or capital expenditure – Depreciation on R&D – Bad debts – Condonation of delay - In the case of buyback of shares however there is no permanent change in the capital structure of the company - On comparing provisions of Sec 77A and Sec 81 of the Act it is found that many conditions for issue of bonus share are parameteria with provisions relating to buyback of shares - In my considered opinion therefore the expenditure incurred on buyback of shares was not a capital expenditure as there was neither permanent change in the capital structure of the company nor benefit of enduring nature was received by the appellant - The A.O. is therefore directed to deleted the disallowance of Rs.28,21,321 - This ground of revenue is dismissed Regarding depreciation - The AO held that since the assessee was always allowed deduction for capital expenditure towards purchase of R&D assets u/s. 35, the assessee could not be allowed deduction once again in respect of depreciation of these assets as and by way of revenue expenditure - Tribunal by its order dated 9.9.2005 in ITA No. 363/K/2005 for AY 2000-01 – Accordingly this ground of the appeal is dismissed According to the AO, the payment was not permissible because the payments represented penalties paid at check posts for infraction of law - Each local authority has its own set of rules regarding documentation and the truck drivers being semi literate, the deficiencies can be found in the documents - In this view of the matter and also in the absence of any contrary material brought on record by the revenue authorities at the time of hearing - This ground of appeal of the revenue is also dismissed Regarding write off of bad debts - Though the appellant was not in the business of granting of loans, the loan advanced to Marvel was in the course of appellant’s business and therefore it was a trade loan or advance - The A/R explained that the appellant could not take steps for execution of the decree & recover the decretal amount because Marvel was declared as a sick company by BIFR and therefore appellant lost all hopes of recovery of the decretal amount through legal process - the Madhya Pradesh High Court in the case of Mrs. Geeta Sanohi vs. CIT ( 277 ITR 388) - Even though the decree was issued by the Court in 1994 the appellant could not obtain any payment from Marvel for 8 years because no legal proceedings were possible after the debtor was declared sick by BIFR – Decided in the favour of the assessee Regarding short term capital loss - It is a settled legal proposition that a deeming provision of the taxing statue should be strictly construed - The facts of this case were not disputed by the revenue authorities at the time of hearing and since the Ld. CIT(A) has given relief to the assessee by placing reliance on the decision of ITAT on similar facts – Decided in the favour of the assessee Regarding club subscription fees - The terms of appointment of Sri S. K. Alagh, as MD were in conformity with provision of Schedule XIII to the Companies Act 1956 which permitted companies to provide perquisite to the working director; by way of membership fees of upto two clubs - The Madras High Court in the case of CIT Vs. Sundaram Industries Ltd. (1999 -TMI - 15776 - MADRAS High Court) and Bombay High Court in the case of Otis Elevator Co. (India) Ltd. Vs. CIT (1991 -TMI - 21958 - BOMBAY High Court) – Accordingly decided in the favour of the assessee
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