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2015 (6) TMI 599 - AT - Income TaxJustification for claiming Royalty expense as revenue expenditure - Held that:- The assessee has received on the job training with the stated aim of improving its efficiency and effectively expand its growth with the enhancement of team efficiency and capability for the growth of the business sphere of the educational institution. The incurring of expenses has not been doubted. No effort let alone a cogent discussion in the order has been made by the AO nor any arguments have been advanced by the Revenue to justify how it has been concluded that the expenses were unreasonable and excessive. In the absence of any justification for making a 5% disallowance of the total expenses for royalty, we find no good reason to vary the finding arrived at in the impugned order. The finding of the CIT(A) in absence of any material to the contrary accordingly is upheld. - Decided against revenue. Similarly qua the advertisement expenses it is seen that the fact on record is that advertisement have been inserted for propagating the business of the assessee is not in doubt. The mere fact that the booking of advertisement expenses has been done through the associate concern instead of the assessee directly by itself does not create any ground for making a disallowance. There is no evidence that in the magazines of the assessee there is a variance in the rates for the assessee as compared to outsiders. There should be some evidence on the basis of which the action of the AO can be held to be justified to show that the expenses are unreasonable or excessive. In the absence of any such evidence, an adhoc disallowance of 5% has rightly been rejected by the CIT(A). Being satisfied by the reasoning and finding, the departmental ground is dismissed.- Decided against revenue. Disallowance of proportionate interest expenditure in respect of the advance made to the sister concern - Held that:- admittedly no loan from any bank has been raised by the assessee for advancing loans to its sister concerns as the funds so advanced are generated from assessee’s own revenues. These facts are not disputed by the Revenue. Accordingly in the face of these admitted facts, we find that there is no legal precedent on the basis of which the claim of the Revenue can be held to be justified on facts. Infact legal precedent is to the contrary. The purchase of a specific property on instalment payment from which business of the assessee has been conducted is a matter of record. The business purpose of the purchase of the specific property is accepted by the AO as part of the payments towards M/s Anant Raj Industries and only proportionate disallowance is made on the ground that had the amounts not been advanced to the sister concern, the same would have reduced the interest component of the purchase price. The Courts have repeatedly held that the tax authorities cannot sit in the chair of the businessman and dictate how the business is to run. See SA Builders Ltd. [2006 (12) TMI 82 - SUPREME COURT] - Decided in favour of assessee.
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