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2013 (11) TMI 13 - AT - Income TaxClubbing of income of two partnership firms with the income of assessee - revocable transfer - Held that:- the concept of the partnership firm as governed by the Partnership Act as well as the scheme of taxation of the partnership firms which are recognized as separate entities for income tax purpose and having regard to the taxation purpose, we are of the view that the provisions of section 60 to 63 of the Act cannot be applied to club the income of two partnership firms namely M/s Sea Princess Investment and M/s Sea Princess Realty with the income of the assessee and the ld. CIT(A), in our opinion, was not justified in upholding the action of the A.O. in clubbing the income of the said two partnership firms in the hands of the assessee by invoking the said provisions. - Additions deleted - decided in favor of revenue. Disallowance made of various expenses on the ground that vehicle- wise and party-wise details could not be furnished by the assessee and also for want of the relevant details and supporting evidence – Held that:- Disallowance of vehicle expenses of 10% made by the A.O. without pointing out even a single instance of un- verifiable element involved in the said expenses was not sustainable – Decided in favor of Assessee. Nature of expenditure, Revenue or Capital - Professional fees paid by the assessee to the interior decorators etc., AO treating the same as capital expenditure to the extent of Rs. 26,21,380/- - Held that:- the temporary operational plan implemented by the assessee during the construction period really worked effectively resulting into profit of Rs. 7.60 and Rs. 12.03 in financial year 2005-06 and 2006-07 respectively as against the profit of Rs. 5.41 crores earned by the assessee company in A.Y. 2004-05. As regards the other small items of payment made by the assessee on account of professional fees, we are of the view that going by the nature of the corresponding services availed by the assessee as explained by the ld. counsel for the assessee, the said payments were made to upkeep and maintain the existing systems available in the hotel building and the same being in the nature of expenditure regularly incurred for the purpose of assessee's business of running a Five Star Hotel, the same cannot be treated as capital expenditure especially when it did not result in bringing into existence any new capital asset or any enduring advantage in the capital filed to the assessee – Decided in favor of Assessee. Deduction u/s 36(1)(v) of the Income Tax act – Held that:- Revenue authorities have misconstrued the provisions of section 36(1)(v) of the Act which requires that the contribution is paid by the employer to the gratuity fund and the payment made to the employees out of that fund is not relevant in this context. Since the payment was duly made by the assessee to the gratuity fund during the year under consideration as mentioned by the A.O - Conditions stipulated in section 36(1)(v) of the Act were fulfilled and the assessee was entitled to the deduction on account of gratuity so paid to the fund during the year under consideration – Decided in favor of Assessee. Nature of expenditure, revenue or capital – Repair and maintenance expenditure – Held that:- A perusal of the details furnished by the ld. counsel for the assessee shows that going by the nature and purpose of the impugned expenditure, the same is revenue expenditure as it does not result in bringing into existence any new asset or advantage of enduring nature in the capital field - However, keeping in view that there is no finding recorded either by the A.O. or the ld. CIT(A) specifically on this aspect, it is just and proper to restore this issue to the file of the A.O. to decide the same afresh after verifying the nature and purpose of the impugned expenditure – Decided in favor of Assessee for statistical purpose.
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