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2018 (10) TMI 1398 - AT - Income TaxDisallowance of deduction claimed u/s 43B - duties so paid include excise duty, custom duty on import/ purchase of inputs/components and also amount of duty paid in PLA account - AO disallowed claim on the ground that deduction under Section 43B of the Act is allowable only where the amount claimed as deduction on actual payment basis is charged to the P&L Account - whether he assessee is in the nature of advance payment of duty, liability in respect of which has not accrued/ crystallized ? - Held that:- ITAT under similar set of facts has decided an identical issue after discussing in detail and following the decision cited before it including the decision of special Bench of the ITAT in the case of DCIT vs. Glaxo Smith Klin Consumer Health Care Ltd. [2007 (7) TMI 334 - ITAT CHANDIGARH] holding that the excess amount of excise duty reflected in the account-current is nothing but actual payment of excise duty even though mentioned as advance payment and hence allowable as deduction under sec. 43B of the Act in the year of payment. The special bench has further clarified that the allowing of deduction on payment basis could not result in double deduction under any circumstance. We thus respectfully following the above decision set aside the matter to the file of the Assessing Officer to decide the issue afresh after affording opportunity of being heard to the assessee as per the decision cited above in the case of assessee itself for the assessment year 2006-07. Customs duty included in closing inventory - Held that:- It is clarified by the Assessee that the amount of ₹ 69,12,41,610/- represents customs duty included in closing stock and ₹ 50,28,051/- represents customs duty on tools imported by the Assessee which were made available by it to its contract manufacturers, also. described as vendors in the question of law framed on the same issue in subsequent AY 2001-02. In view of the decision in Berger Paints Limited v. CIT [2004 (2) TMI 4 - SUPREME COURT] question (ix) is answered in the affirmative i.e. in favour of the Assessee and against the Revenue. In this regard, the observations of the ITAT in para 41 of the impugned are reiterated, viz. that the AO should, while giving effect to the ITAT’s order, ensure that no double deduction is allowed. Therefore, he will ensure that the deduction allowed in this year under Section 43B of the Act is included in the income of the next year when such opening stock is disposed of. Nature of receipt - subsidy - revenue or capital - Held that:- Subsidy given to the assessee post accomplishment of the project or expansion there, without any obligation to utilize the subsidy only for repayment of term loans undertaken by the assessee for setting up new units/expansion of existing business, or to liquidate the cost incurred in creating the capital asset or its expansion, is only in the nature of the revenue receipt and is liable to be brought to tax. We, therefore, uphold the addition on this count. Disallowance of royalty paid - nature of expenditure - Held that:- The amount of royalty considered by the Assessing Officer as capital expenditure should be allowed as a revenue expenditure, and at the same time, depreciation allowed by the Assessing Officer on this amount should be taken back. Disallowance of expenditure incurred on Corporate Social Responsibility - Held that:- The words, “for the purpose of business” should not be limited to the meaning of “earning profit alone”. It is also important to note that the purpose has to be seen from the point of view of the businessman and should not be seen with reference to narrow objective of earning profits immediately. Certain expenditure may not reap profits immediately, but may be advantageous in the long run, by creating goodwill and brand image. These submissions of the Ld. AR are supported by the Income Tax statute. But at the same time, it can be seen that Explanation 2 has been inserted in section 37 of the Act by the Finance (No.2) Act, 2014 w.e.f. 1.04.2015 to provide that CSR expenses referred in section 135 of the Companies Act, 2013 shall not be deemed to be incurred for the purpose of business. The aforesaid Explanation inserted w.e.f. 1.04.2015. Therefore, in the present assessment year the said explanation will not be applicable. Hence, the expenditure has to be allowed because ultimately the assessee was publicizing its product at the prominent places by maintaining them such as parks and this has direct impact on the sales promotions of the assessee company. Disallowance of club expenditure - Held that:- The aforesaid expenditure has been incurred for business purposes on the grounds of commercial expediency and there is no element of any personal benefit being granted either to the employee or director. The Tax Auditors have amply clarified this position vide clause 17(b) of the Tax Audit Report. The aforesaid expenditure is, thus, allowable as deduction. See COMMISSIONER OF INCOME-TAX VERSUS SAMTEL COLOR LIMITED [2009 (1) TMI 26 - DELHI HIGH COURT]. Adjustment on account of payment of royalty for use of brand name - Held that:- There is a direct nexus between the revenue of the taxpayer and the payment of royalty. Therefore, the Revenue cannot dispute the benefit derived by the taxpayer from payment of such royalty. Not allowing credit of TDS Certificates - Held that:- Assessee has submitted the TDS certificates which has to be considered by the Assessing Officer. Therefore, we restore this issue to the file of the Assessing Officer and direct the Assessing Officer to verify the additional TDS certificates produced by the Assessee and thereafter allow the credit of the same. Needless to say, the assessee be given the opportunity of the hearing by following the principles of the natural justice. Hence, Ground No. 18 is partly allowed for statistical purpose. error in computation of interest u/s 234B - Held that:- The Assessing Officer is, directed to recompute interest under section 234B of the Act, as aforesaid. As per section 234C of the Act, interest is required to be calculated on the basis of returned income and not on the basis of assessed income. The Assessing Officer erred on facts and in charging interest u/s 234C on assessed Income instead of returned Income as per the provisions of Act. The aforesaid issue is now covered in favour of the assessee by the Delhi Bench of the Tribunal in assessee’s own case for AY 2007-08 and 2008-09. Therefore, we remand back this issue to the file of the Assessing Officer and direct the Assessing Officer to recomputed interest under section 234C of the Act, as aforesaid - Appeal of assessee is partly allowed for statistical purpose.
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