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2014 (7) TMI 426 - ITAT MUMBAIForeign Travel Expenses - Expenditure incurred for non-business purpose – Held that:- On hearing both the parties and on perusal of the relevant material, it would be reasonable to remand the issue to the file of the AO to examine the same and to take a fresh decision in the light of the information furnished – thus, the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Expenses on guest house and residential flats – Held that:- Assessee mentioned that the confirmation given by Shri Sharma is supported by the “guest house register” - issue can also be remanded to the file of the AO to examine the expenditure incurred on guest houses and residential flats owned by the employees - the expenditure incurred on employees may be fully allowed as it is incurred for the business purposes - it is not clear from the record that why the assessee has to incur on the residential flats allotted to the employees of the company - the matter is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Valuation of closing stock – Held that:- On hearing both the parties and on perusal of the material on record, the issue needs to revisit the file of the AO and the closing stock valuations have to be redone in the light of the provisions of section 145A of the Act – thus, the issue is remitted back to the AO for fresh adjudication – Decided in favour of Assessee. Disallowance of 50% of license fees – Held that:- As decided in assessee’s own case for the earlier assessment year, it has been held that nature of the expense is that under an agreement the assesee became a licensee member of RPG Enterprises Ltd and was entitled to use its trade mark “RPG” and also have full access to various organizational facilities developed by RPG Enterprises - there was no rationale explanation for the benefit which the assessee received by making payment - In the past 50% of disallowance had been made and the AO made disallowance of 50% of the expenses – thus, the order of the CIT(A) is upheld – Decided against Revenue. Disallowance u/s 14A of the Act – Dividend income – Held that:- CIT (A) was rightly of the view that Rule 8D is applicable only from AY 2008-2009 – Relying upon M/s. Cheminvest Ltd vs. ITO [2009 (8) TMI 126 - ITAT DELHI-B] - even if no exempt income is earned, a proportion of the expenditure incurred is attributable to managing the said investments and therefore section 14A of the Act would definitely be applicable - while adjudicating the issue, the CIT (A) has rightly considered the decisions of the ITAT as well as the judgments of the higher judiciary and the direction given by the CIT (A) to calculate the disallowance u/s 14A of the Act at 5% of the dividend income is fair and reasonable – Decided against Revenue.
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