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2014 (2) TMI 1110 - AT - Income TaxDenial of deduction in respect of accrued leave salaries – Held that:- The decision in Commissioner of Income-tax Versus West Coast Paper Mills Ltd.[1991 (3) TMI 386 - BOMBAY HIGH COURT] followed - There was no reason for not allowing the claim on the basis of changed method so far as the change was concerned and on the earlier method if the liability in regard thereto had not already been allowed as deduction – thus, the assessee was entitled to the deduction in the year – the AO is directed to allow the claim of leave salary – Decided in favour of Assessee. Recovery of Guest House Expenses under Rule 6D of the Rules – Held that:- As decided in assessee’s own case for the previous assessment years, the user of guest house facilities provided by the company to the employees of the company in connection with discharge of their official duties does not alter the basic character of the expenditure - Ultimately such expenses are connected with the travelling by such employees and, therefore, should be treated accordingly, irrespective of the fact that such employees stayed in the guest house of the company - the AO is directed to allow the deduction of amount received from parent departments as expenditure in the nature of travelling expenses and in accordance with Rule 6D of the IT Rules – Decided in favour of Assessee. Disallowance made under Rule 6B of the Rules – Expenditure on Calendars and Diaries – Held that:- The decision in Commissioner Of Income-Tax Versus Allana Sons Private Limited [1993 (4) TMI 13 - BOMBAY High Court] followed - presentation articles bearing the logo of the assessee would fall within the ambit of Rule 6B as expenditure in the nature of advertisement – Decided against Assessee. Disallowance of Annual General Meeting Expenses – Held that:- As decided in assessee’s own case for the previous assessment years - the definition of entertainment expenditure was inserted by the Finance Act, 1983 with retrospective effect from 1. 4. 1976 - the expenditure incurred on serving tea, coffee and soft drinks is covered by the Explanation 2 to section 37(2A)/(37(2) - In the Explanation 2 it is stipulated that the expenditure on provision of hospitality of every kind by the assessee to any person whether by way of provision of food or beverages or in any other manner, whatsoever, would be entertainment expenditure – Decided against Assessee. Disallowance of expenditure u/s 37(2A) of the Act – Expenses on tea and coffee served to visitors –Held that:- As decided in assessee’s own case for the previous assessment years, the Tribunal made a disallowance of 25% of entertainment expenses on this ground would be reasonable –thus, the AO is directed to restrict the disallowance to 25% of the expenses - Decided partly in favour of Assessee. Disallowance u/s 37(2A)of the Act - Business meetings and conferences of the employees – Expenditure on food at employees get together – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that as per Explanation 1 to section 37(2A), the entertainment expenditure includes the amount of any disallowance in the nature of entertainment allowance paid to the employee - the entertainment expenditure also includes the expenditure incurred by the employee for the purpose of business or profession – Decided against Assessee. Disallowance u/s 40A (5) of the Act - Deemed perquisites – Held that:- The disallowance was estimated by it on account of non-availability of information readily at the time of furnishing of the returns, that the auditors had also not quantify the disallowance u/s. 40A(5) – the quantification of the expenses incurred towards maintenance of property, sweeper, wages, repairs, depreciation, soft furnishings etc. were correct - The decision in Lubrizol India Limited Versus Commissioner Of Income-Tax [1990 (7) TMI 45 - BOMBAY High Court] followed – the estimate of disallowance u/s. 40A(5) as made by the CIT(A) is proper and has to be upheld – Decided against Assessee. Expenditure on Partly Convertible Debenture – Held that:- The decision Brooke Bond India Limited Versus Commissioner of Income-Tax [1997 (2) TMI 11 - SUPREME Court] followed - the expenditure incurred by a company in connection with the issue of shares with a view to increase its share capital was directly related to the expansion of the capital base of the company and was a capital expenditure even though it might incidentally help in the business of the company and in the profit making, that the action of the AO was as per the provisions of law – Decided against Assessee. Disallowance of Tata Steel Rural Development Society (TSRDS) expenditure – Disallowance of Annual Contribution to Steel Plants' Sports Board and Tata Sports Club - Contributions to various Institutions - Contribution to the society for sports and stadium – Contribution made to Beldih and United clubs Held that:- The decision in TELCO ITA/6003 to 6008/Mum/98 followed – the payments were made keeping in mind business expediency viz. , to have a motivated work force – thus, the expenditure in question has to be allowed as a deduction u/s. 37(1) – MOU makes the facts and circumstances of the case peculiar – thus, the deduction is to be allowed – Decided in favour of Assessee. Disallowance u/s 35D of the Act - Fees paid to consultants for feasibility studies – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the expenditure incurred on report for increasing production capacity and future development – thus, the expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure –Decided in favour of Assessee. Disallowance of allowances - Investment Allowance and Extra Shift Allowance on Town Division assets, investment allowance on various items Plant and Machinery and Investment Allowance on items of P&M of Tubes Division – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the main works and the township formed an integral part of the whole industrial complex, one of which cannot exist without the other - the plant and machinery installed even for providing the necessary facilities to the employees which does not apparently have any connection with the manufacturing activity is directly needed for the running of the priority industry - investment allowance is admissible to the assessee on the plant and machinery in the Town Division, particularly when on the items like light and fan installations the assessee had itself not claimed any investment allowance - additional depreciation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division – Decided in favour of Assessee. Deduction u/s 35(1)(iii) of the Act - Contribution to Xavier Labour Relations Institute – Held that:- contribution to XLRI is allowable on the same principles that we have followed in allowing the earlier grounds, but same is subject to production of evidence of payment of contribution by the assessee – thus, the matter remitted back to the AO for verification – Decided partly in favour of Assessee. Bad and doubtful debts written off – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the write off of the debt as bad has to be construed as a bonafide write off - It was based on commercial providence – the deduction claimed is allowed – Decided in favour of Assessee. Restriction of claim made u/s. 80HHC of the Act – Held that:- The decision in Karimjee (P.) Ltd. Versus Deputy Commissioner of Income-Tax And Another [2002 (9) TMI 5 - SUPREME Court] followed - the assessee should be allowed to have an opportunity to create the reserve for the additional amount – thus, the matter remitted back to the AO for adjudication – Decided partly in favour of Assessee. Allowability of deduction on account of provision for leave salaries – Allowability of 20% of initial contribution as deduction - Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the department had not challenged the order of the Tribunal before the Hon'ble High Court while filing appeal for that AY – the whole of initial contribution to the ASF was deductible u/s. 36(1 )(iv) in computing the business income of the assessee in the year of contribution itself, that there was no provision in the Act which stipulated disallowance of a part of the contribution to ASF and spreading over the balance amount over a period of five years - Decided against Revenue. Deduction on account of guarantee amount paid to Ahmedabad Advance Mills Ltd. (AAML) – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the assessee in terms of the agreement entered into a commercial transaction and thereby incurred expenses in first three years, that commercial expediency compelled the assessee to make the payment, that the sums paid by the assessee to AAML were admissible as deduction - the transactions with the AAML were in the revenue field – Decided against Revenue. Payment for holiday plan at hotels as guest house expenses u/s 37(4) of the Act – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the assessee had employed more than 100 whole time employees during the previous year and the hotels were used exclusively for the benefit of the employees while on leave - the assessee's case was covered by the second proviso to section 37(4) and the expenditure incurred could not be called as expenditure incurred on the maintenance of a guest house – Decided against Revenue. Allowability of remuneration to chairman and MD – Held that:- FAA held that the assessee had denied having provided any furniture or air conditioners at the residence of the CMD, that the power was supplied to the CMD from its own resources, that the car was provided to him for official purposes only, that the assessee had provided accommodation to the CMD but rent was collected from him - the assessee had admitted that accommodation let out to him was maintained by it - the estimation made by the AO towards perquisites was deleted - the FAA has given a categorical finding of fact that certain facilities were not provided to the CMD and rent was collected from him – Decided against Revenue. Contribution to Tata Services for maintenance of Horniman Circle gardens as an advertising campaign – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the contribution was towards beautification of the garden – the assessee along with the other companies was allowed to put up their logos in and around the garden - the expenditure was incurred on advertisement campaign – Decided against Revenue. Investment allowance and Extra shift allowance on town division, Investment allowance on P& M installed at stock yard and Investment allowance on various items of P&M – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that The investment allowance is admissible to the assessee on the plant and machinery in the Town Division, particularly when on the items like light and fan installations the assessee had itself not claimed any investment allowance - additional depredation, extra shift allowance and investment allowance are admissible to the assessee on the plant and machinery in the Town Division – Decided against Revenue. Investment Allowance on P&M of stock yard – Held that:- As decided in assessee’s own case for the previous assessment years, it has been decided that the claim of the assessee on account of investment allowance on railway sidings at stock yard allowed - in absence of any contrary material brought to notice against the decision of the Tribunal- there was no infirmity in the order of the CIT(A)allowing the investment allowance on the plant and machinery installed by the assessee in the stock yard – Decided against Revenue.
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