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2023 (7) TMI 1157 - AT - Income TaxNature of expenses - Infrastructure development expenses - revenue or capital expenditure - assessee has taken the property on the lease of 99 years, which was as good as ownership and expenses incurred on the development of this property should be capitalized by AO - CIT(A) deleted addition - HELD THAT:- We find that AO has erred in taking the property as ownership property of the assessee. CIT (A) has given a finding of fact that from the agreement of Infrastructure Development produced, assessee company entered into a separate infrastructure development agreement with Sri City Pvt. Ltd. to maintain common facilities and amenities outside the owned property of the assessee company, hence AO has clearly erred. CIT (A) placed reliance on the decision of LH SUGAR FACTORIES AND OIL MILLS PRIVATE LIMITED [1980 (8) TMI 1 - SUPREME COURT] as observed that in a case where the advantage consists merely in facilitating the assessee's business operation or enabling management to conduct business in a more efficient manner, leaving the fixed capital untouched, then such expenditure would be on revenue account, even though the advantage may endure for an indefinite time - Decided against revenue. TDS u/s 195 - disallowance made u/s 40(a)(i) - non deduction of TDS on Foreign Remittance - HELD THAT:- AO has not examined the applicability on TDS provisions based on the information available on record. He noted that the provisions of section 40(a)(i) of the Act requires to disallow the expenses on account of non-deduction of TDS on which tax is deductible at source under Chapter XVII-B. Ld. CIT (A) rightly observed that such provisions do not empower to disallow the expenses on non-availability of Form 15CA and CB. Accordingly, we find that CIT (A) has taken a correct view in the matter. Apex Court in the case of GE India Technology [2010 (9) TMI 7 - SUPREME COURT] which also supports the case of the assessee. Accordingly, we uphold the order of the CIT (A) on this issue. Disallowance of loss on foreign currency fluctuation - HELD THAT:- CIT (A) duly examined the issue and has found that the net impact of foreign exchange fluctuation was NIL under the profit and loss statement. This finding of ld. CIT (A) has not been disputed by the Revenue. Hence, we do not find any infirmity in the order of ld. CIT (A) and we uphold the same. Addition on account of other expenses particularly when the expenses are not fully verifiable - HELD THAT:- AO has made ad hoc disallowance of 2% of the total expenses without mentioning any specific defects. Ld. CIT (A) has appreciated that there was very little discrepancies to such expenses. However, he also sustained addition of 1% of total expenses. We note that assessee is a corporate entity and ad hoc disallowance of expenditure without pointing out any specific defect is not permissible. Hence, we set aside the orders of the authorities below and decide the issue in favour of the assessee. Disallowance of legal expenses as related to plant (Capital Expenditure) - CIT (A) observed that the amount charged towards drafting agreements, resolutions and rendering legal consultancy services relating to plant which was purely professional services in nature - HELD THAT:- CIT (A) has given a finding that the amount was charged towards drafting agreements, resolutions and rendering legal consultancy services relating to plant which is purely professional services in nature. CIT (A) has rightly applied the judgment of CIT vs. United Breweries Ltd [2010 (1) TMI 86 - KARNATAKA HIGH COURT] - Hence, we find that the ld. CIT (A) has passed a reasonable order which does not require any interference on our part. Appeal of the assessee is allowed.
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