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2013 (9) TMI 149 - AT - Income TaxDisallowance u/s 14A - Held that:- In the assessment year 2001-02, the dividend income was only ₹ 4,91,884 and an amount of ₹ 24,594 was disallowed and was so confirmed by the Income-tax Appellate Tribunal. However, in the later years based on the fact that amount of dividend was earned from only one company to an extent of ₹ 3.30 crores, the coordinate Bench considered that it was reasonable to estimate disallowance at ₹ 2.00 lakhs as the assessee has not borrowed any funds, nor there is any finding that any interest is attributable to earning the dividend income. The facts are similar in this year and large amount of dividend was earned from one company alone. In view of this, respectfully following the decision of the co-ordinate Benches in the assessment years 2004-05 and 2005-06, the disallowance is restricted to an amount of ₹ 2.00 lakhs - Decided partly in favour of assessee. Bad debts – Section 36(1)(vii) - Assessment Year 1990-1991 and Assessment Year 1993-1994 - Prior to 1st April, 1989, every assessee had to establish, as a matter of fact, that the debt advanced by the assessee had, in fact, become irrecoverable. That position got altered by deletion of the word “established”, which earlier existed in Section 36(1)(vii) of the Income Tax Act, 1961 – held that - in the present case, the Assessing Officer has not examined whether the debt has, in fact, been written off in accounts of the assessee. When bad debt occurs, the bad debt account is debited and the customer’s account is credited, thus, closing the account of the customer. In the case of Companies, the provision is deducted from Sundry Debtors. As stated above, the Assessing Officer has not examined whether, in fact, the bad debt or part thereof is written off in the accounts of the assessee – matter remanded for de novo consideration - Following decision of T. R. F. Ltd. v. CIT [2010 (2) TMI 211 - SUPREME COURT] - Decided in favour of assessee. Disallowance u/s 37 - Held that:- Considering the nature of the expenditure as seen from annexure-A to the submissions before the Commissioner of Income-tax (Appeals), even though the expenditure may give an enduring benefit, since no asset has been created by paying licence fees for utilisation of the software, we are of the opinion that the expenditure is allowable as revenue expenditure. The principles laid down in the above cases relied on by the assessee supports the above contentions. Accordingly the Assessing Officer is directed to allow the claim of licence fee on software expenditure claim of ₹ 21,51,151 as revenue expenditure and consequently withdraw the depreciation allowed on the said amount - Decided in favour of assessee. Disallowance of penalty u/s 37 of the Act - Business expenditure - Held that:- Penalty/payments made by the Assessee to the Stock Exchange for violation of their regulation, being risk management oriented, are not an account of an offence which is prohibited by law.Hence, the invocation of explanation to section 37 is not justified. See CIT v. The Stock and Bond Trading Company [2011 (10) TMI 172 - BOMBAY HIGH COURT] - Decided against the Revenue. Depreciation on software - 25% or 60% - Held that:- Assessee has purchased specific software which was not supplied along with the computer. Therefore, the purchase of specific software for use in the business cannot be included as part of computers and since there is no specific item of computer software in the depreciation schedule for the impugned assessment year 2002-03 - AO is correct in treating the computer software as a licence and allowing depreciation at 25 per cent. - The reliance by the assessee on the depreciation schedule in the later year cannot help its case as the said 60 per cent. on computer software has become part of the depreciation schedule from the assessment year 2003-04 onwards. - Decided against assessee.
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