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2019 (2) TMI 705 - AT - Income TaxNature of receipt - Income recognition - Consumer Security Deposit and Service Line deposits - whether the amount received from the customers for service line is revenue in nature as the same is part of the selling of electricity during normal business operation and does not qualify to be capital receipt? - Held that:- As decided in assessee's own case we find substance in the submission of the assessee as there is no dispute on the facts of the case. Discussing these submissions of the assessee and meeting out the observations of the Assessing Officer, we are of the view that the Learned CIT(Appeals) following the ratios laid down in the cited decisions has rightly come to the conclusion that the amounts received for installation of service lines are to be treated as capital receipts in the hands of the assessee. In result, the Learned CIT(Appeals) was justified in deleting the addition made on account of service line deposits from customers. The same is upheld - The issue is covered against the revenue in Hoshiarpur Electric Supply Co. vs. CIT [1960 (12) TMI 6 - SUPREME COURT]. Allowability of legal claims - deduction of expenditure u/s 37 - Held that:- As decided in assessee's own case e find that the Learned CIT(Appeals) has deleted the addition made on account of disallowance of legal claim on the basis that the Assessing Officer has not highlighted a single instance that the charges were of penal nature. We find that the Assessing Officer has made the disallowance on estimate basis at 25% of the expenditure claimed. No basis has been assigned for making such ad hoc disallowance. Noting these material aspects, we are of the view that the Learned CIT(Appeals) has rightly deleted the disallowance in absence of any instance that there was any penalty which would fall under the Explanation to Sec. 37 of the Income-tax Act, 1961 - Assessee appeal allowed.
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