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2018 (6) TMI 1121 - AT - Income TaxCapitalization of interest u/s 36 (i) (iii) on the machinery purchased during the year - Held that:- We note that in the said proviso interest paid in respect of capital borrowed for acquisition of the asset for extension of existing business or profession was only to be disallowed during the relevant assessment year. The part “for extension of the existing business or profession” has been omitted by Finance Act, 2015, w.e.f. 1/04/2016. In the case of the assessee, the assessment involved is for assessment year 2011-12 and therefore, applicability of the proviso to section 36(1)(iii) has to be seen in the provision available during the relevant period of time. Assessing Officer has not examined the issue of extension of existing business profession in the case of the assessee, and therefore, we feel it appropriate to restore this issue to the file of the Assessing Officer for deciding afresh in accordance with law. Needless to mention, the assessee shall be afforded adequate opportunity of being heard on the issue in dispute. The ground No. 1 of the appeal is accordingly allowed for statistical purposes. Disallowance of building repair expenses, on account of website designing and internet expenses and on account of EAPBX repair aggregating - nature of expenditure - Held that:- Had the expenditure incurred on creation of a new room or space in the building, it would have increased the efficiency of the building. But before us, no such evidences have been brought on record by the Revenue, which could establish coming into existence of a new asset or increase in efficiency of the existing asset. In the circumstances, we hold the building repair expenses in the nature of revenue expenditure As in respect of the expenses on website designing and Internet marketing expenses, the Assessing Officer has not brought on record any evidence to establish that the said expenses would qualify for capital expenditure. Repair to EAPBX, which was damaged due to shortcircuiting. On perusal of copy of EAPBX repair account, which is available on 64 of the Paper Book, it is evident that the expenses have been incurred for battery and other parts of EAPBX against Bills raised by Rasana Telecom. In view of the above, we are of the opinion that by way of replacement of the parts of the existing EAPBX, no new asset has been created, and thus the expenditure incurred is revenue in nature. Disallowance of interest under section 40A(2)(b) paid to three persons - Held that:- there is no change in the facts and circumstances as compared to the earlier years and, therefore, in view of the rule of consistency, no disallowance would have been made. Before us, records of earlier years, for verifying the fact, whether the Assessing Officer allowed interest at the rate of 15% to the three parties, are not available, and therefore, we feel it appropriate to restore this issue to the file of the Assessing Officer for verifying the facts of earliers years and then decide the isuue in dispute in the light of rule of consistency laid down. TDS u/s 194C - Disallowance u/s 40(a)(ia) - non-deduction of tax at source on watch and ward expenses - Held that:- We note from the records available for us that this issue of each transactions being less than threshold amount liable for TDS, has not been examined by the lower authorities. Regarding the payment made to M/S Aries Integrated Security, the Ld. counsel has submitted that in view of the proviso to section 40(a)(ia) inserted by the Finance Act, 2012, w.e.f., 01/04/2013, which has been held to be applicable retrospectively in the case of Ansal Landmark Township Private Limited [2015 (9) TMI 79 - DELHI HIGH COURT], no disallowance under section 40(a)(ia) is required. We have observed that the applicability of the proviso to section 40(a)(ia) inserted by the Finance Act, 2012 has not been examined by the lower authorities - restore this issue to the file of the Assessing Officer for verification of facts and decide the issue in accordance with law. Ad-hoc 10% disallowance of various expenses - Held that:- Assessing Officer has not pointed out any specific defects of non-maintenance of vouchers or non-business purpose of the expenses. The Assessing Officer cannot reject the vouchers simply on the reason that same have been prepared internally. In view of the various decisions cited by the Ld. counsel, it is evident that no disallowance can be made on adhoc basis when the Assessing Officer has accepted the books of accounts. Similarly, the expenses on telephone at the residence of the Managing Director of the assessee company has been held to be allowable as business expenditure in the hands of the company. Similarly, the expenditure on use of car by the directors, has also been held to be allowable under section 37(1) of the Act. Ad-hoc disallowance is not justified
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