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2018 (1) TMI 758 - AT - Income TaxDisallowance of staff welfare expenses u/s 40A(9) - Held that:- It is not disputed by revenue that the expenditure on staff welfare has been allowed by AO himself in various earlier years while re-varying also in set aside fresh proceedings. From the record it emerges that no specific item of expenditure is pointed out to be not covered by sec. 40A(9), no such indication is given by auditors and ld. CIT(A)’s finding on facts and law have not been dislodged by revenue. Adverting to the plea of set aside as raised by revenue, it can be acceded as no lawful justification exists to support it. In pat so many years even after re-verification AO himself has allowed such expenditure. - Decided in favour of assessee. Disallowance made on account of publicity and public relation expenses - Held that:- As it is not disputed that it was incurred for sending Gujarat Earthquake relief in the form of a truckload of food items consequent to chittorgarh district Collectors Clarion Call. The amount being for social good and for discharge of corporate social responsibility is allowable as business expenditure u/s 37(1). Depreciation claimed in respect of intangible assets in the form of right in relation to power from APGPCL - Held that:- We hold that to ascribe 2/3rd value of the APGPCL investment to intangible commercial rights of cost effective power supply rights an 1/3rd value to the tangible rights a share holder will be a reasonable estimate ascribable to these constituents. The AO will accordingly word out the eligible depreciation on intangible rights u/s 32(I)(ii) on 2/3rd value of APGPCL investment and 1/3rd to share holder rights and work out the block of asset of intangible rights for depreciation and 1/3rd to value of APGPCL shares. The allowances, claim of LTCG on sale of shares whenever sold will be worked out accordingly. Depreciation in respect of assets retired from active used - Held that:- As decided in assessee's own case the expression "used for the purposes of the business" as found in section 32 when used with respect to discarded machinery would mean that the user in the business was not in the relevant financial year/ previous year but in the earlier financial years. The discarded machinery would not be actually used in the relevant previous year as long as it was used for the purposes of business in the earlier years. The Tribunal was correct in directing the assessing officer to recomputed depreciation after reducing the scrap value of the assets which had been discarded and written off in the books of account for the year under consideration from the written down value of the block of assets. Actual user of the machinery was not required with respect to discarded machinery ad the condition for eligibility for depreciation that the machinery being used for the purpose of the business would mean that the discarded machinery was used for the purpose of the business in the earlier years for which depreciation had been allowed. Addition on a/c of enabling assets written off - Held that:- This claim allowed as relying on assesse's own case. Addition made on account of Mine Development Expenses - Held that:- Assessee has been canvassing its claim for allow ability of expenditure by repeatedly emphasizing that undisputedly its mining activity had commenced prior to 1/4/1970, consequently this expenditure is legally not covered by sec. 35E but u/s 37(I). Ld. Counsels raises deep concern on the fact that despite such observations which are in conformity with the facts on record, the claim is being set aside unnecessarily which is not in conformity with judicial discipline and causing the assessee deemed harassment as proposition which requires due considerations. We find substance in the contentions of ld. Counsel for the assessee about judicial discipline. However, the issue of applicability of sec. 35E or 37(I) in earlier years has been restored back. Addition on a/c of undervaluation of closing stock of ore - Held that:- Taking a consistent view, this issue is also restored to the file of the assessing officer for decision afresh for valuing the stock Claim u/s 80IA - Held that:- Taking a consistent view, we restore this issue to the file of the Assessing Officer for re- computing the reduction of deduction u/s 80IA. The Assessing Officer would restrict the apportionment to the extent of Director’s fee, charity and donations. The Ground is partly allowed as discussed hereinabove for statistical purpose. Donation given to Nandi Foundation as an expenditure u/s 37(1) OR 80G - Held that:- We do not see any merit into the contention of the ld. Counsel for the assessee that the donation of Nandi foundation for providing mid- day-meal under the Government of Rajasthan Scheme, is allowable as business expenditure. Section 37(1) operates in a different field. In our view there has to be direct nexus between the amounts spent and the business of the assessee. In the present case, there is no evidence suggesting that the expenditure is laid out or expended wholly and exclusively for the purpose of business of the assessee. Therefore, this ground of the Revenue’s appeal is allowed. The finding of the Ld. CIT(A) on this issue is set aside and that the Assessing Officer is restored. Addition on a/c of waiver of electricity duty - Held that:- Essentially such waiver of electricity duty is related to setting up and expansion of industry hence capital in nature as per notification issued by the State Government. Under these undisputed facts, we do not see any reason to disturb the finding of the Ld. CIT (A), same is hereby affirmed. This ground of the revenue’s appeal is dismissed. Disallowance as exchange rate difference on loan - Held that:- We find merit into the contention of the Ld. Counsel for the assessee that after capitalization, the ECB had changed its nature and assumed character of circulating capital. Such treatment is in consonance with the accepting accounting principles and accounting standards. As such loss on account of exchange difference is a revenue charge and is allowable deduction under section 37(1) of the Act. In view of these un rebutted facts in our considered view, the ratio of the judgment of the Hon’ble Apex Court rendered in the case of CIT vs. Woodward Governor (2009 (4) TMI 4 - SUPREME COURT ) is squarely applicable on the present case.
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