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2017 (2) TMI 557 - AT - Income TaxDisallowance u/s 14A - Held that:- AO has failed to find out as to how the balance expenditure of ₹ 60.77 lacs claimed by assessee was incorrect or had any nexus with earning of exempt income. The AO also did not examine the stand of the assessee that administrative expenses of ₹ 10,70,000/- were in respect of a thin strength of employees who were working for providing IT enabled BPO Services and were not involved in the activity of making investment in shares or mutual funds. We also find substance in the observation of the ld. CIT(A) that the AO has disregarded the fact that he had also disallowed individual expenses embedded in the claim of ₹ 60.77 lakhs separately, such as disallowance of depreciation of ₹ 56,86,641/-, disallowance of rental expenses ₹ 8,23,166, disallowance of bad debts ₹ 2,66,243 and disallowance of advances and security deposits written off ₹ 13,99,056/-. - Decided against revenue Disallowance of depreciation - Held that:- Expression “used for the purpose of business” would mean & imply that the use of asset would be relevant in previous financial years with respect to the discarded assets forming part of the block. Furthermore, the nature of assets in the present case comprises of general items such as furniture & fixtures & office equipments which were “ready for use”. Such passive user is also entitled for depreciation in view of various decisions of jurisdictional High Court relied by the ld. AR, noted supra. Following the above decisions, and having found no contrary material, we do not find any justification to interfere with the conclusion reached by the ld. CIT(A) on this issue. - Decided against revenue Advances and security deposits written off - Held that:- We find that it is not in dispute that substantial material was placed before the AO that the said advances/securities were outstanding for last 5-10 years. The nature of these payments, i.e., towards advances and securities for getting VPN and utility connections, as noted above, is also not doubted by the Assessing Officer. In such state of affairs, if the assessee decided to write off the said advances/securities given in ordinary course of business, in its books of accounts, the claim of assessee cannot be discarded simply because substantial evidences were not placed to prove its efforts of their recovery or that the said debts became irrecoverable, by way of stepping into the shoes of business. - Decided against revenue
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