2012 (5) TMI 656 - AT - Income Tax

Summary

Issues involved:
The judgment involves issues related to addition of expenses on repairs & maintenance of rented premises, addition of unsecured loans u/s. 68 of the Act, treatment of interest paid as an allowable expenditure, and deletion of disallowance of remuneration paid to directors.

Addition of expenses on repairs & maintenance of rented premises:
The assessee claimed deduction for repairs & maintenance expenses incurred for studios hired to producers of TV serials and advertisement films. The AO treated the expenses as capital expenditure, included in the block of assets, and disallowed a portion. However, the Tribunal found that the expenses had a direct nexus with the earning of income and were revenue expenditure. The entire amount was held to be revenue expenditure, and the addition made by the AO was deleted.

Addition of unsecured loans u/s. 68 of the Act:
The AO made an addition u/s. 68 for unsecured loans where the assessee failed to provide adequate evidence. The CIT(A) refused to admit additional evidence supporting the genuineness of the credits. The Tribunal set aside the order and directed the AO to decide the issue afresh after allowing the assessee a reasonable opportunity to be heard and present evidence.

Treatment of interest paid as an allowable expenditure:
The assessee incurred interest liability due to a demand raised by Aarey authorities, which was held to be allowable as a deduction for the current year. The Tribunal upheld the deletion of the addition made by the AO, as the interest liability accrued for the first time in the current year.

Deletion of disallowance of remuneration paid to directors:
The AO disallowed a portion of director's remuneration based on a provision of the Companies Act, which was not applicable to private companies. The CIT(A) ordered the deletion of the addition, stating that the AO's action lacked a valid basis. The Tribunal upheld the deletion of the disallowance, as the AO's reasoning was found to be unjustified.

In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, pronouncing the order on the 16th day of May, 2012.