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2017 (6) TMI 1374 - AT - Income TaxDisallowance of expenses debited during the year on estimate basis - Addition of some of the expenses claimed are disproportionate and also that some of the expenses are not vouched and verifiable - HELD THAT:- CIT (Appeals) observed that variation in expense of one head in a year as compared to earlier year cannot be the basis to make an addition, especially when overall gross profit and net profit was showing an increasing trend. He noted further that when books of accounts were duly audited and AO did not point out any specific defects in the books of accounts and no expenses had been found to be of non-business nature, the ad-hoc disallowance of Rs.2 lakhs made by the AO was not warranted. We fully concur with the finding of the ld. CIT (Appeals) as even an estimation of disallowance needs some basis to justify the action of the AO in this regard as just and reasonable. It is an established proposition of law that even discretion is to be exercised judiciously. While examining the action of the AO in making the ad-hoc disallowance in question, CIT (Appeals) has noted that books of accounts were duly audited and no specific defects were found therein by the AO nor was any allegation that expenses had been incurred for non-business purposes. He has further noted that the assessee has shown better trading result during the year in comparison to last three years and there was increasing trend. The first appellate order is thus reasoned one and does not need any interference by the Tribunal. The same is upheld. Ground No. 1 is accordingly rejected. Disallowance being the amount of revenue expenditure under various heads of expenditure capitalized in the books of accounts as intangible know-how and new brand development, which the assessee in its return of income had claimed as revenue expenditure - HELD THAT:- The Hon’ble Supreme court in the case of Empire Jute Company [1980 (5) TMI 1 - SUPREME COURT] has been pleased to hold that it is only when an enduring advantage is in the capital field that the expenditure would be disallowable. If advantage of enduring benefit is in the Revenue field it would be on the Revenue account. The Hon’ble jurisdictional High Court of Delhi in the case of CIT Vs. Siti Financial Consumer Fin. Ltd. [2011 (3) TMI 622 - DELHI HIGH COURT] has been pleased to hold that advertisement and publicity expenses even when substantial, having been incurred to facilitate business, no advantage in capital field is resulted. Again in the case of CIT Vs. Usha Iron & Ferro Metal Corporation Ltd. [2007 (5) TMI 170 - DELHI HIGH COURT] the to hold that the expenditure incurred by the assessee towards improving its business was for the expansion of its existing business. Merely because the assessee treated the amount as a capital expenditure in its books, it would not be bound by as there is no estoppels against the law and just assessment is the object of the Legislature under the provisions of the I. T. Act. The first appellate order on the issue is comprehensive and reasoned one to which we fully concur with. The same is upheld. Ground No. 2 is accordingly rejected.
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