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2017 (5) TMI 472 - AT - Income TaxDetermination of nature of expenditure incurred for renovation of factory building - eligibility for deduction in terms of section 30(a)(ii) - capital expenditure or revenue expenditure - Held that:- The amount spent cannot be said to be a capital expenditure as made out by the revenue. The expenditure might have secured some enduring benefit to the assessee because of the renovation. However, the test of enduring benefit per se is not a certain or conclusive test and cannot be applied blindly and mechanically with regard to the particular facts and circumstances of the given case. The assessee has spent money on replacement of flooring, plastering, doors, plumbing etc. Such amount incurred in strengthening of existing layout cannot be regarded as a capital expenditure. The expenditure on repairs of the building is merely incurred to refurnish and renovate the existing structure and is not in the nature of creation of a capital asset. No structural changes is shown to have been made by the assessee while incurring such expenditure. A repair ordinarily involves renewal and restoration of the existing wear and tear. Such expenditure, in our view, is in the nature of current repair in spite of major expenses alleged to have been incurred - Decided against revenue. Contravention of section 145A while valuing the closing stock for determination of taxable income - unutilized CENVAT credit not been included in the valuation of closing stock of raw-material - Held that:- no reason to interfere with the order of the CIT(A). The CIT(A) has found the entire exercise to be revenue neutral. Secondly, to give effect to section 145A, both the opening stock and closing stock are required to be simultaneously brought in parity as a matter of legitimate expectation. See case of Dy.CIT vs. Balvant Lallubhai Rotliwala [2016 (3) TMI 444 - ITAT AHMEDABAD ] where on similar facts, addition made under s.145A was deleted by the ITAT. The guidance note issued by the ICAI also supports the case of the assessee for the proposition that there is no impact on ultimate profit by resorting to exclusive method of accounting for the purpose of valuation of stock as adopted by the Assessee. The Revenue has not brought on record anything contrary to the assertions made by the CIT(A) in favour of assessee Disallowance of bad debt - .AR submitted in the alternative that the aforesaid claim ought to have been allowed as ‘business loss’ under s.28 - Held that:- The assessee has not been able to prove that the impugned amount was given as advance for business purpose except for bald assertions made to this effect. Therefore the nature of alleged advance given is not known. Hence, whether the debt was attributable to trade or commerce of the assessee is not known at the first place. The claim towards bad debts has been therefore rightly rejected by the Revenue. The alternative ground towards business loss also does not merit acceptance for the similar reason. The loss is required to be proved to be emanating from business of the assessee. Secondly, the loss is required to be proved to have been crystallized during the year. No material or evidence has been brought on record to this effect. - Decided against assessee. Disallowance under s.14A computation - Held that:- The disallowance under s.14A is restricted to the extent of dividend income earned.
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