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2012 (10) TMI 396 - AT - Income TaxDisallowance of FCCB issue expense – accrual of expenditure - CIT(A) disallow on the ground that the expenditure pertains to the earlier year – Held that:- When the bills were raised in the year under consideration and the assessee received the bills only in the year under consideration, then there was no occasion for the assessee to book the said expenditure in the absence of the bill raised by the 3rd party. Further, the assessee has not claimed this expenditure in the earlier years and booked the same only in this year after the bills were received and payments were made. Expenditure is required to be booked only when it is crystallised by way of raising the bill by the other party. Issue decides in favour of assessee Disallowance of repair & maintenance expense – Capital v/s revenue in nature – Held that:- Except the expense in relation to erection and commission of effluent treatment plant, all other expenditure does not bring any new asset in existence but incurred only in respect of the existing is assets. When the expenditure is incurred in respect of existing asset, then the same is allowable as revenue in nature u/s 37 (1). Product development expenses u/s 35(2AB) – Disallowance was made by the authorities below by following the order for the A.Y. 2005–06 - Held that:- Assessee has furnished the bifurcation of expenditures in the note attached to the return of income itself. The assessee also filed details before AO. Tribunal has principally decided the issue in favour of the assessee for the assessment year 2005-06. There is no confusion or dispute on the bifurcation of amount for the year under consideration. Issue decides in favour of assessee Addition u/s 41(1) – AO’s ground is that some of the creditors are outstanding for a period of more than 3 years – Held that:- AO invoked Sec. 41(1) merely on the ground that the liabilities were three years old. Following the decision in case of Dsa Engineers (2009 (3) TMI 646 - ITAT MUMBAI) 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 Sec. 41(1) without proving that there was cessation of liabilities. Issue decides in favour of assessee Disallowance u/s 14A – Expense incurred in relation to earn exempt income – Assessee contended that his own funds and surplus are more than the investment made in the shares - Most of the dividend income received by the assessee is from foreign companies and the same is not exempt income – Held that:- Following the decision in assessee’s own case 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. The A.O. must adopt a reasonable basis or method consistent with the facts and circumstances of the case. Issue remand back to AO. Depreciation on royalty payment – Held that:- Following the earlier order of this Tribunal that the royalty in payment has been made to acquire the brands and it is evident that such payment forms part of the cost of acquisition of brands and therefore, forms part of the total cost of the asset. Issue decides in favour of assessee Disallowance u/s 43B for delayed payment of PF and ESI – Held that:- Since payment are made within grace period of 5 days. Therefore, allowed the claim of the assessee by observing that the payment made within the grace period is allowable u/s.43B. Issue decides in favour of assessee Deduction u/s 35(1)(iv) – Whether both land and building excludes from the purview of Sec. 35(1)(iv) - AO argues that the buildings used for R&D are also excluded from the purview of Sec. 35(1)(iv) – Held that:- We see no merit in the above contortion because, firstly, when the legislature specifically excludes only the land from the purview of Sec. 35(i)(iv) it would be improper to enlarge the scope of the expression ‘land’ to include ‘building’. And assessee sought deduction on building and not on land. Issue decides in favour of assessee
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