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2010 (10) TMI 813 - AT - Income TaxDisallowance u/s.14A - Rule 8D - Held that:- The issue is similar to A.Y.2002.2003 appeal filed by the assessee wherein it has been held that prior to assessment year 2008-09, Rule 8D was not applicable. However, the disallowance is warranted under section 14A of the Act - Since facts are identical therefore it is covered by the order of ITAT in assessee’s own case, we follow the same. The AO is directed accordingly Capital or revenue expenditure - Disallowance made by the AO has been examined by the CIT(A) and found that ₹ 41362/is only capital in nature which on account of purchase of converter. Balance amount of expenditures pertain to revenue account - After considering the discussions made by the ITAT in AY 2002-03 no error in the order of the CIT(A).We confirm the order of the CIT(A) Regarding Research & Development expenses - initially the assessee started to incur R&D expenditure on behalf of third party but finally on subsequent events after the end of the previous year, the assessee treated those expenditures for its business purposes - can such expenditure is allowable under section 35(2AB) or under section 37(1) in the first year itself? - Held that:- As that ultimately products developed by incurring R&D expenditures were registered in the name of assessee, which is related to assessee’s business and accordingly in fact used by assessee for its business purposes - Once it is found that the expenditures are allowable same are allowable under respective provisions as in the case under consideration under section 35(2AB) or under section 37(1) as the case may be, in accordance with law - The AO shall provide reasonable opportunity of hearing to the assessee Addition u/s 41(1) - Held that:- The issue is covered in favour of the assessee by the order in the case Dsa Engineers (Bombay) VS ITO [2009 (3) TMI 646 - ITAT MUMBAI] where in it was held that if the assessee has not written off the liabilities reflected in sundry creditors account it was not open to the AO to make addition invoking section 41(1) of the Act without proving that there was cessation of liabilities. As find that in this case AO invoked section 41(1) merely on the ground that the liabilities were three years old thus the order of the AO is not sustainable. In favour of assessee.
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