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2013 (4) TMI 228 - AT - Income TaxDepreciation on Testing equipment - Held that:- Respectfully following the Tribunal order passed in another group concern of the assessee, whose facts have not been distinguished by the DR the depreciation should be allowed on the testing equipment provided to laboratories and hospitals free of charge as the said equipments have been provided to the laboratories and hospitals for making profit from the sale of slides. Disallowance towards executive retirement scheme (ERS) - Held that:- It is important to note that section 35DDA has been inserted by the Finance Act, 2001 with effect from 01.04.2001. This section provides for amortization of expenditure incurred under Voluntary Retirement Scheme (VRS). As per this section, the entire amount of expenditure incurred on VRS cannot be allowed as deduction in the first year. Only 1/5th of the same is to be deducted in first year and then equal amounts in four immediately succeeding previous years. The assessee contended that the provisions of section 35DDA are not applicable as ERS is different from VRS. No discussion on the facts of the instant ground in the orders of the authorities below. Since section 35DDA has been inserted by the Finance Act, 2001, which is relevant from assessment year 2001-2002 therefore, set aside the impugned order and remit the matter to the file of A.O. for deciding this issue afresh in the light of section 35DDA, if applicable. Provision of cash discount - Held that:- As dealt with this issue in the appeals for the assessment year 2000- 2001, by which the matter has been restored to the file of A.O. for allowing deduction of cash discount on actual payment basis. Disallowance of payments made to the persons specified u/s 40A(2)(b) - Held that:- In so far as royalty payment is concerned, it is observed that the assessee made payment to Johnson & Johnson, USA after due approval from RBI. If the RBI has given approval to such payment, the AO, without any cogent material, cannot take a stand that such payment was excessive, thus CIT(A) was justified in deleting disallowance to this extent. Now, disallowance at 10% of the value of goods purchased from sister concerns. The onus is on the AO to demonstrate that the payment was excessive. There is no warrant for making any disallowance under this section without pointing out as to how payment was excessive. There is really no mention by the authorities below as to the excessive amount of payment made by the assessee for purchases made from its two sister concerns. Denial of deduction u/s 80- IB on certain items of miscellaneous income - Held that:- DR did not object to the restoration of the matter but requested that the decision be taken by considering the judgment in the case of Liberty India v. CIT [2009 (8) TMI 63 - SUPREME COURT]stating that Duty drawback receipt/DEPB benefits do not form part of the net profits of eligible industrial undertaking for the purposes of Sections 80I/80-IA/80-IB of the 1961 Act . Reduction/denial of deduction u/s 80HHC on the amount of Write back of liabilities and Miscellaneous income with Service charges and Recovery of R & D cost - Held that:- Both the sides raised arguments similar to those advanced qua the assessee's appeal for assessment year 2001-2001. Once again it was requested that these items be considered afresh one by one for their eligibility u/s 80HHC as per the relevant judgments. Disallowance u/s 80HHC on rent - Held that:- The Tribunal, following the judgment in the case of ACG Associate Capsules Private Limited v. CIT [2012 (2) TMI 101 - SUPREME COURT OF INDIA] has held that "netting off" of rent paid should be done against the rent received and only 90% of such net rent income should be considered for disallowance u/s 80HHC - remit the matter to the AO for deciding this issue in accordance with the view taken by the tribunal in its order for the earlier years. Disallowance of expenses for repairs and maintenance for Building and Plant & Machinery - Held that:- As it is seen from the details of expenses disallowed by the A.O. that all are of revenue nature. Amounts has been incurred on items of revenue nature, such as, false ceiling, paneling and monsoon shed of temporary period. CIT(A) was justified in deleting the disallowance. 10% of ad hoc disallowance of traveling expenses - CIT(A) deleted the addition - Held that:- There is no doubt that the assessee is a limited company. In such a situation, there cannot be any question of sustaining any disallowance even by treating the expenditure for non- business purposes. It has been held so by the Hon'ble Gujarat High Court in the case of Sayaji Iron & Engg. Co. (2001 (7) TMI 70 - GUJARAT HIGH COURT), which view has been reiterated in Dinesh Mills Ltd. v. CIT [2002 (10) TMI 10 - GUJARAT HIGH COURT] - against revenue. Disallowance of hotel expenses - CIT(A) deleted this addition - Held that:- No infirmity in the impugned order on this issue. When the guests are entertained by the assessee, it is but natural to arrange for their stay. This ground is, therefore, not allowed. Disallowance of club entrance fee - Held that:- The case is covered by the judgment of of Otis Elevator v. CIT 195 ITR 682 (1991 (4) TMI 53 - BOMBAY HIGH COURT) as per which deduction of such entrance fee paid for club is allowable in the year of incurring. Therefore, the view taken by the CIT(A)approved. AO is directed to ensure that no deduction is allowed for the 4/5th of the total amount in the succeeding years. Disallowance of 10% of professional sponsorship expenses - Held that:- It is amply borne out that the AO accepted the incurring of such expenses towards the promotion of assessee's business. Once the expenditure is held to be for business purposes, there is no question of disallowing 10% of such expenses by treating the same as for non-business purposes - against revenue. Exclusion of excise duty and trade discount from the total turnover for deduction u/s 80HHC - Held that:- Decided in favour of assessee as relying on Laxmi Machine Works case[2007 (4) TMI 202 - SUPREME COURT] that the excise duty is not includible in the 'total turnover' in the formula contained in section 80HHC - against revenue.
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