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2019 (11) TMI 1046 - AT - Income TaxDisallowance to 10% of the total expenses on adhoc basis by the CIT(A) - Business connection - Earlier AO has disallowed these expenses on the ground that they do not have any business connection with the assessee - Held that:- the CIT(A), inter alia, observed that such expenditures were incurred by the assessee in order to maintain cordial and harmonious industrial relations amongst the works for better and smooth running of business without direct benefit to any individual employee or any specific group of employees, the assessee company being located in remote area & naxal affected area where are no recreational facilities in & around the nearby locality; providing the officer and staff of the company in the form of tea, snacs, stitching of official uniform, subsidy given to canteen , puja expenses, etc. Hence, from the above findings of the CIT(A), we are of the view that the CIT(A) has not disputed the nature of expenses incurred by the assessee. - Entire expenditure allowed. Deduction u/s 80-IA - captive power plant - scope of the word "derived from" - reason/justification of valuation of power produced on the basis of JSEB rate - Held that:- even at the time of framing of assessment order and making addition, the AO was not sure about the cost of production of power and he assumed the same at ₹ 2.5 per unit with a rider that same may be revised later if the assessee furnishes details of cost of production of power alongwith necessary evidence. - the CIT(A) was right in granting part relief to the assessee but was not correct in confirming part addition considering the factum of 2 paise per unit for working out eligible profits u/s. 80IA of the Act. - Claim of the assessee allowed. Disallowance of expenses related to exempted unit - AO has apportioned 45.68% of the claim of the assessee pertaining to Director sitting fees and business head office expenses pertaining to exempt unit - Held that:- the Directors sitting fees of ₹ 1,60,000/- and head office expenses of ₹ 72,00,000/- need to be apportioned on the basis of turnover of the assessee and the authorities below has done on the same line. Regarding sales promotion expenses, no allocation of marketing expense is required to be made as no marketing efforts are required for sale of products of such captive units. Decided partly in favor of assessee. Claim of expenditure - whether unascertained liability and a provision - the assessee claimed that the claim is not a provision but crystallised liability. It was also submitted that the rebate and claim account has been debited for rate differences, shortage of material at customer end, loss to customer due to delay in supply of caustic, poor quality of the product for which deductions have been made by the customers. - Held that:- CIT(A) after considering the remand report and the credit note issued by Hindalco, proving that the liability was ascertained in financial year 2005-06, deleted the addition. - order of CIT(A) sustained - Decided against the revenue. Additions u/s .40(a)(ia) - non deduction of TDS u/s 194J instead of 194C - Held that:- if there was any difference of opinion between the assessee and the AO regarding relevant provisions of TDS, then also it cannot be said that the assessee has not complied with the provisions of TDS. - Decided against the revenue.
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