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2018 (4) TMI 740 - AT - Income TaxDisallowance of lease rent paid on leasehold land - deemed owner of the property - Period of holding of lease - Held that:- Respectfully following the decision of Hon’ble Supreme Court, in the case of CIT vs Sun Pharmaceuticals Industires Ltd (2009 (12) TMI 1001 - SUPREME COURT ), we are of the considered view that the lease rentals paid on leasehold land cannot be regarded as capital in nature merely for the reason that the period of lease agreement is more than 12 years. Therefore, we direct the AO to delete additions made towards lease rent paid on leasehold land. Disallowance of repairs and maintenance expenses paid to WIPRO for offshore services - addition on the ground that the assessee has made payment for services rendered outside India to the assesse’s group companies - Held that:- No merit in the arguments of the assessee for the reason that the AO has brought out clear facts to the effect that the payment made by the assessee to WIPRO is for services rendered to the parent company of the assessee in UK. Therefore, it is evident from the fact that such payment is not for the purpose of assessee’s business, but for the business of assessee’s parent company. Therefore, we are of the considered view that the AO was right in disallowing offshore payment made to WIPRO. - Decided against assessee Disallowance of foreign travel expenses - Held that:- The assessee has failed to controvert the findings of lower authorities that foreign travel expenses have been incurred to meet the requirement of the entire shell group and such expense has no relevance to assessee’s business in India. The AO, as well as the CIT(A) has brought out clear fact that the assessee has incurred foreign travel expenses on behalf of its employees to visit foreign countries where it has no business connection. Therefore, we are of the considered view that the AO was right in disallowing foreign travel expenses and such disallowance has rightly upheld by the Ld.CIT(A). - Decided against assessee Disallowance of repairs and maintenance expenses on plant and machinery - AO disallowed expenses incurred by the assessee for the year under consideration is comparatively higher than the expenditure incurred in the previous financial year - Held that:- Expenditure incurred under the head ‘repairs and maintenance to plant & machinery’ is in accordance with its business value as revenue from operation has increased substantially during the year. Such expenditure has been incurred in respect of day to day operations of the retail outlets. The AO has not brought out any instance of discrepancy in expenditure incurred under the head ‘repairs and maintenance to plant & machinery’ before making adhoc disallowance of 25% of such expenses - AO has disallowed such expenditure only on the basis of increase in expenses without considering the increase in revenue from operations. Therefore, we are of the considered view that the AO was incorrect in making adhoc disallowance without recording any factual finding of incorrectness in claim of the assessee - Decided against revenue Disallowance of other repairs & maintenance expenses - revenue v/s capital expenditure - Held that:- AO has brought out facts which states that the expenditure incurred by the assessee is in the nature of capital expenditure. The CIT(A) has brought out the facts which states that the expenditure is in the nature of annual maintenance contract. Therefore, we are of the considered view that the issue needs to be re-examined by the AO in the light of claim of the assessee that all expenditure incurred towards IT support services are in the nature of annual maintenance contract. If expenditure incurred by the assessee are in the nature of annual maintenance contracts, then such expenditure certainly are in the nature of revenue expenditure and the AO is directed to allow the same as claimed by the assessee - ground raised by the revenue is allowed for statistical purpose.
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