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2014 (12) TMI 226 - AT - Income TaxSurcharge on sales tax and turnover tax – Held that:- The State Government has made any amendment to the Act so as to write back the entire profit of the assessee to the State Government - the assessee quantified the liability - If it is paid within the due date, the payment of the same is to be allowed in terms of sec. 43B - assessee follows the mercantile system of accounting and is entitled to deduct sales tax from the profit and gains of the business which had accrued during the financial year relevant to the assessment year subject to the provisions of section 43B - while computing the profit and gains of the business, whether the assessee is entitled to a particular deduction or not will depend on the provisions of law relating thereto and not on the view which the assessee might take of its rights nor can the existence or absence of entries in its books of account be decisive or conclusive in the matter - Since the assessee is following the mercantile system of accounting, the assessee is fully justified in claiming deduction towards surcharge on sales tax and turnover tax which is payable in the financial year corresponding to the relevant AY – relying upon Kedarnath Jute Manufacturing Company Limited Versus Commissioner of Income-Tax (Central), Calcutta [1971 (8) TMI 10 - SUPREME Court] – Decided in favour of assessee. Laboratory expenses – Held that:- The assessee had incurred expenses for purchasing and handing over the equipment to the Government Chemical Examination Laboratory at Trivandrum, Ernakulam and Calicut - the contentions of the assessee cannot be accepted because the nexus of expenditure with the business cannot be a reason to allow the expenditure - The expenses incurred should be wholly and exclusively laid out or expended for the purpose of business - The expenditure incurred by the assessee shall be for carrying on the business of the assessee, i.e., to enable the assessee to earn profit in that business - It is not enough that the disbursements are made in the course of or arise out of or concerned with profits made out of the business. But it means also is to be for the purpose of earning profit from the business – a mere liability to satisfy the obligation by the assessee is not "expenditure", it only when the assessee satisfies the obligation to incur expenses for the purpose of business, it is business expenditure - though the expenses were incurred by the assessee, it cannot be said that they were incurred for the purpose of business or earning goodwill – Decided against assessee.
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