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2012 (10) TMI 369 - AT - Income TaxAddition on account of provisions of warranty expenses - CIT(A) deleted addition - Held that:- The assessee provided for the warranty expenses based on technical evaluation and past experience, warranty stood attached to the sale price of the product and a reliable estimate of the expenditure towards such warranty is allowable. Moreover, the ITAT have allowed a similar claim in the AYs 2001-02,2003-04 & 2005-06 - as the Revenue have not placed before us any material controverting the aforesaid findings of the ld. CIT(A) nor brought to our notice any contrary decision, so as to enable us to take a different view in the matter, no reason to interfere - in favour of assessee. Trading addition - assessee failed to adduce evidence in support of reasons for increase in expenses - CIT(A) deleted the addition - Held that:- The AO nowhere recorded any findings that the books of account maintained by the assessee were incorrect, rendering it impossible to deduce the profit and despite that he proceeded to estimate the profit and turnover , invoking the principles of best judgment. The CIT(A)on the other hand, concluded that the action of the AO to make estimated trading addition without pointing out any defects in the books of accounts, is totally unjustifiable and therefore, deleted the addition - The mere fact that the percentage of loss or gross profit is high or low in a particular year does not necessarily lead to inference that there has been suppression - in favour of assessee. Disallowance of capitalization of advertisement expenses - AO allowed only 1/5th claim treating the expenditure as deferred revenue - Held that:- The benefits arising therefrom are expected to be derived over a period of time, stretching sometimes over several accounting years, the assessees have been amortising the same over the expected time period over which the benefits are likely to accrue therefrom. Accordingly, only a proportion of such expenditure is amortised in the Profit and Loss Account. The expenditure which is treated as deferred revenue in the books, almost in all cases comprises of items, the benefits derived wherefrom are ephemeral and transitory in nature in as much as these are incurred as a part of a continuous process and need to be expended in order to generate and increase the brand recall and sustain it in the minds of customers. Moreover, the deferred revenue expenditure is essentially revenue in nature and the decision to treat the same as deferred revenue only represents a management decision taken in view of the magnitude of the expenditure involved - in favour of assessee. Addition on account of service charges received in advance - CIT(A) deleted the addition - Held that:- The assessee provided annual maintenance service to its customers in respect of their products for a time span of one year or six months & the time span for such service sometimes fell in between two financial years, accordingly, the services charges received were classified between current year fees and the fees received for next year, and the latter were accordingly, shown as income for the relevant financial year - there is nothing to suggest that the assessee has fully contributed to its accruing by rendering services so as to entitle him to receive the entire amount in the year under consideration. In view of the foregoing, especially when the Revenue have not placed any material nor brought to a contrary decision so as to enable us to take a different view in the matter not inclined to interfere - in favour of assessee. Purchase of stamp papers, stamp duty and registration charges for stores taken on lease - revenue or capital expenditure - Held that:- Following the view taken in Gobind Sugar Mills Ltd.Gobind Sugar Mills Limited Versus Commissioner Of Income-Tax, Central I, Calcutta [1978 (8) TMI 65 - CALCUTTA HIGH COURT ] that the expenditure incidental to the acquisition of the lease would also be an expenditure of capital nature - primary and dominant object of the assessee in incurring the said expenditure was to acquire benefits of a right to property under leaseholds no hesitation in upholding the findings of the CIT(A) - against assessee.
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