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2011 (5) TMI 530 - AT - Income TaxExpenditure incurred towards testing fee paid to M/s CSA International Chicago Illionos, USA - non-deduction of TDS under section 40(a)(i) - Held that:- AO has not brought anything on record to substantiate his observation of the testing and certification provided to the assessee by CSA having been utilized for the assessee's business activity in India - The assessee has shown that this testing and certification was necessary for the export of its product; that it was utilized for such export; and that it was not utilized for its business activities of production in India - Now, when the assessee has, in so many words, stated so, it has discharged its burden - The department, on the other hand, while not denying the utilization of the testing and certification for the export, has not at all shown anything to prove its allegation of the testing and certification having been utilized in the assessee's production activity in India - It cannot be asked to prove a negative - The burden in this regard was entirely on the department, which burden, the department has miserably failed to discharge - Held that the CIT(A) has erred in confirming the disallowance u/s 40(a) - Decided in favour of assessee. Disallowance of pre-operative expenses - Appellant company is engaged in the manufacture of various electrical products and having its head office at Delhi, corporate office at Noida and manufacturing units at various places, viz., Badli (Delhi), Noida (UP), Baddi (Himachal Pradesh), and various branch offices throughout the country - Held that:- All the units are interdependent and having, interconnection of management, financial, administration and other aspects of the business - The unit at Haridwar was set up only to increase the capacity expansion of its manufacturing activities and does not carry any distinct or separate business - A perusal of the director's report and the other documents, clearly show that there is complete interlacing and intermixing of the funds of the assessee in all its units, besides there being a common management - Thus,CIT(A) has erred in confirming the disallowance of pre-operative expenses incurred by the assessee at its Haridwar unit, treating the same as capital expenditure. Disallowance of amount written off at the rate of 1/10th of the expenditure on increase in authorized capital, as the same is allowable under section 35D(2)(c)(iv)- Held that:- Under section 35D only those expenses are allowed to be amortized which have been incurred by the assessee who is resident in India, before the commencement of his business or after the commencement of its business in connection with the extension of his industrial undertaking or in connection with his setting up a new industrial unit and the expenditure of such nature as specified in sub-section (2) of section 35D. The assessee could not place any material on record to claim amortization under section 35D of the Act - Decided against the assessee. Disallowance being expenditure incurred for issue of 4 per cent fully convertible debenture which was later converted into equity shares of the assessee company.- Held that:- As decided in CIT v. East India Hotels Ltd. [2001 (8) TMI 102 - CALCUTTA High Court] the expenses incurred in raising loan by convertible debentures would be admissible as a revenue expenditure, for the reason that conversion of debentures results into repayment of loan and issuance of shares and that it is irrelevant to consider the object with which the loan was obtained - Decided in favour of assessee.
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