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2017 (1) TMI 1608 - AT - Income TaxTaxability of amount received from Insurance Companies against damages - Additions u/s 41 or 45(1A) - CIT(A) was convinced with the assessee that taxability of the Insurance Claim as capital gains is not permissible as the amendment to Section 45(1A) is with effect from 1.04.2000 and is applicable from assessment year 2000-01 and, therefore, not relevant for the year under consideration. However, the ld. CIT(A) kept silent on the issue of taxability of the same u/s. 41 of the Act as observed by the A.O. - Held that:- A perusal of the order of the authorities below do not show whether the damages have been charged to the Profit and Loss account or not. There is no reference to that effect in the orders of the authorities below. If the assessee has claimed the damages due to wind storm and charged the same to its profit and loss account then any claim received from the Insurance claim shall be deemed to be profit and gains of business or profession and accordingly chargeable to Income Tax as the income of that previous year. - Matter remanded back. Disallowance of Lease Rent - sale and lease back transaction - AO observed that, sale and lease back transaction with Arvind Mills Ltd. was nothing but a financial transaction and accordingly lease rentals constituted capital payment and hence not allowable. - Held that:- following the earlier decision of tribunal, deduction allowed - Decided in favor of assessee. Enhancement of the income out of Lease Rent expenses payable to ICICI - Method of accounting - Claiming of expenditure of ₹ 7,84,86,179/- in the Income Tax Return - The assessee strongly contended that the company had incurred expenditure on lease rental, legal and consultancy fees and retrenchment compensation which is enduring benefit and, therefore, it has been treated as deferred revenue expenditure to be written off in subsequent years and an amount of ₹ 1,87,03,288 has been debited to the Profit and Loss account of the year under consideration. - Held that:- Considering the aforementioned ratios laid down by the Hon’ble Supreme Court and the Hon’ble Jurisdictional High Court, in our considered opinion, whatever expenditure has been accrued during the year under consideration has to be allowed to be written off. We, therefore, direct the A.O. to examine the accrual of expenditure for the year under consideration and allow the same in the light of the aforementioned rulings. - Decided partly in favor of assesseee. Disallowance for power expenses of earlier years - crystallization of liabiltiy - Held that:- It is only the payment schedule was to start from May next but this does not mean that the power expenses have to be disallowed for the year under consideration. Since the liability has crystallized during this year itself, expenditure to be allowed - Decided in favor of assessee.
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