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2014 (10) TMI 472 - AT - Income TaxAnnual web hosting charges treated as prior period expenses Held that:- The main contention of the assessee is that the bill was raised on 17.4.2006, therefore, the liability of prior period was crystallized during the financial year relevant to the AY, as per mercantile system of accounting, the claim of expenditure was allowable and the authorities below grossly erred in making disallowance and addition on this issue as decided in Saurashtra Cement And Chemical Industries Limited Versus Commissioner Of Income-Tax [1994 (10) TMI 30 - GUJARAT High Court] - if any liability, though relating to earlier year depends upon making a demand and its acceptance by the assessee and such liability has been actually claimed and paid in the later previous year, it cannot disallowed as deduction merely on the basis that the accounts are maintained on mercantile basis and that it is related to a transaction of previous years - the revenue authorities grossly erred in disallowing the claim of expenditure incurred by the assessee during relevant previous year pertaining to the liability relating to earlier year the AO is directed to verify and examine the claim of the assessee Decided in favour of assessee. Addition u/s 14A r.w Rule 8D Held that:- The authorities below have not dealt with the issue of disallowance u/s 14A of the Act as per letter and spirit of the relevant statutory provisions and as per decision of Maxopp Investment Ltd. & Others Versus Commissioner of Income Tax [2011 (11) TMI 267 - Delhi High Court] - the issue of disallowance u/s 14A of the Act requires thorough verification and examination at the end of AO and hence assessment order as well as order is set aside and the issue is restored to the file of AO with a direction that the AO shall adjudicate the issue afresh by affording due opportunity of hearing for the assessee without being prejudiced with the observations and findings of the assessment order as well as impugned order Decided in favour of revenue. Capitalization of the advertisement expenses Held that:- The AO has not doubted the genuineness and truthfulness of the claim of the assessee pertaining to the expenses for glow sign board and hoardings in view of decision of CIT vs Liberty Group Marketing Division [2008 (4) TMI 219 - PUNJAB AND HARYANA HIGH COURT] - the AO was not justified in making the disallowance and addition and on the other hand, CIT(A) rightly deleted the addition by holding that the expenses for hoardings and glow sings are expenditure of revenue in nature because the same neither bring any enduring benefit for the assessee and the advantage consists merely in facilitating the assessee's trading operations, supporting the management and conduct of assessee's business to be carried out on more efficiently or more profitably leaving fixed capital of the assessee untouched Decided against revenue. Horticulture expenses at plant and colony Held that:- CIT(A) rightly was of the view that as the main purpose of expenditure on horticulture was to facilitate the operations by providing better environment which is of revenue in nature, hence, the same is allowable u/s 37 of the Act - there are other several expenses which are incurred for decorating the building and for providing general security, beautification and required environment for day to day activities of manufacturing unit of the assessee, the kind of expenses are incurred for the purpose of business and the same cannot be disallowed. Security services at the staff colony Held that:- Following the decision in Empire Jute Co. Ltd. vs CIT [1980 (5) TMI 1 - SUPREME Court] - the expenditure incurred for welfare of employees and even general public interest is allowable as revenue deduction - the CIT(A) was right in deleting the addition. Computer peripherals supply expenses Held that:- The AO treated the expenditure as capital in nature and made an addition, after allowing depreciation @15%, by holding that the assessee has not furnished details/evidence to support the claim - the CIT(A) granted relief for the assessee on perusal of the details furnished before him but the CIT(A) has not given any finding about the nature of expenditure and facts emerging from details/evidence submitted before him, neither and remand report has been called from the AO the matter is to be remitted back to the AO for adjudication. Software purchase and development expenditure Held that:- CIT(A) rightly held that the expenditure incurred on software licence fee, purchase/development of miscellaneous software and hosting and maintenance of website and charges for internet band with connectivity are expenditure revenue in nature and there is no valid reason to interfere with the same, hence, order of CIT(A) is upheld - the issue of horticulture expenses in plant and staff colony, security, charge for staff colony and software development expenses is decided in favour of the assessee and it is partly dismissed on above four issues and on the issue of computer supplies part ground of the revenue is deemed to be allowed by restoring the issue to the file of the AO with the directions - Decided in favour of revenue.
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