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2019 (6) TMI 1642 - AT - Income TaxNature of expenses - expenses of contribution for scheme deficiencies - revenue or capital expenditure - AO disallowed the claim of expenses / loss only on the basis that the assessee has treated it as to have goodwill among the investors and therefore, he treated this expense as capital in nature - CIT-A deleted the addition - HELD THAT:- As noted that this issue is squarely covered by the decision of Empire Jute Co. Ltd. Vs. CIT [1980 (5) TMI 1 - SUPREME COURT], L.H Sugar Factory & Oil Mills Pvt. Ltd. [1980 (8) TMI 1 - SUPREME COURT], CIT vs. Malayalam Plantations Ltd. [1964 (4) TMI 9 - SUPREME COURT], and Sassoon J. David & Co. Pvt. Ltd[1979 (5) TMI 3 - SUPREME COURT] as held that payment of statutory dues and taxes imposed as a pre-condition to commence or for carrying on of a business ; it may comprehend many other acts incidental to the carrying on of a business. However wide the meaning of the expression may be, its limits are implicit in it. The purpose shall be for the purpose of the business, that is to say, the expenditure incurred shall be for the carrying on of the business and the assessee shall incur it in his capacity as a person carrying on the business. Hon’ble Karnataka High court in the case of CIT v. Canara Bank Ltd. [2014 (1) TMI 1586 - KARNATAKA HIGH COURT] allowed the claim of the assessee. Hence, we are of the view that the CIT(A) has rightly allowed the claim of the assessee after discussion in detail as reproduced above. We, accordingly, affirmed the order of the CIT(A) on this issue. - Decided against revenue. Disallowance of elated expenses holding the same as penal in nature and also not incurred for the purpose of the business - HELD THAT:- Money went out of scheme to the investors by excess allowance or otherwise by excess withdrawals by the investors carried out by concerned scheme. The above narrated expenses/ deductions in no way can be said that these are in the nature of penal expenses as described in explanation 1 to section 37(1) of the Act. We have gone through the agreement entered into between LIC Mutual Fund Trust Co. Ltd. and Jeevan Bima Sahyog Asst. Management Company Ltd.. We noted that the expenditure claimed by assessee on account of fraudulent encashment of warrant, on account of incorrect accounting made for security, shortfall in systematic withdrawal of plan, double interest booked and difference in unit creation has already been disallowed by CIT(A) and for this assessee is not in appeal. We noted that for the balance amount of ₹ 91,15,800/- there is no application of explanation 1 to section 37(1) - Decided against revenue.
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