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2017 (1) TMI 1047 - AT - Income TaxDisallowance of Sale Promotion expenses and Travelling expenses @10% of the total expenditure - Held that:- It is quite clear from the manner in which the disallowance was initially made by the Assessing Officer and, thereafter partly confirmed by the CIT(A), that the same is based on mere surmises without bringing out any specific instances of expenditure having been incurred for non-business purposes, inspite of the fact that the complete details were made available by the assessee in the course of the proceedings. In this view of the matter, we deem it fit and proper to set-aside the action of the CIT(A) and direct the Assessing Officer to delete the entire disallowance since the decision of the CIT(A) is based on some conjectures and surmises - Decided in favour of assessee Disallowance u/s 14A - Held that:- As noticing that the interest-free funds available with the assessee in the shape of Share capital and Free Reserves being more than investments in question, a presumption can be drawn that such investments have been made out of such interest free funds, and accordingly no disallowance under section 14A of the Act is merited out of the interest expenditure. As a consequence, the disallowance made under section 14A by applying Rule 8D(2)(ii) of the Rules is hereby deleted. - Decided in favour of assessee Disallowance on account of expenses computed the same in terms of Rule 8D(2)(iii) - Held that:- The disallowance computed by the Assessing Officer is quite excessive inasmuch as the exempt income is merely to the extent of ₹ 4,86,505/-, whereas the disallowance out of expenses has been made to the tune of ₹ 6,30,407/-. Considering the entirety of facts and circumstances, we deem it fit and proper to retain the disallowance to the extent of the exempt income and balance of the disallowance is directed to be deleted. TDS u/s 195 - disallowing remuneration paid to consultants by invoking section 40(a)(i)on non deduction of tds - DTAA - period of stay - Held that:- No reason to disagree with the stand of the assessee that the payments in question are liable to be taxed under the respective Articles of Indo-Japan & Indo-Italy DTAA governing Independent Personal services. Once it is held that the payments fall under the Article governing Independent Personnel services, the same can be taxed in India only, if the two individuals have stayed in India for more than 183 days during the previous year relevant to the assessment year under consideration. In so far as the duration of stay is concerned, there is no dispute that the two individuals have stayed in India for a period of less than 183 days during the previous year relevant to the assessment year under consideration. Thus, such payments are not liable to be taxed in India and there is no fault on the part of the assessee in not deducting tax at source on such payments. Therefore, the lower authorities were not justified in invoking section 40(a)(i) of the Act to disallow the impugned expenditure - Decided in favour of assessee Disallowance of interest u/s. 36(1)(iii) - no loan was taken by the assessee during the year - Held that:- It is relevant to note here that before the CIT(A) it has been specifically pleaded by the assessee that ‘there is no extension of business during the year and even if the loan is taken for acquiring the purpose of acquiring capital assets unless they are used for expansion of existing business, interest expenses should be allowed’. The aforesaid stand of the assessee is supported by the phraseology of section 36(1)(iii) of the Act, as it stood for the assessment year under consideration and in the absence of any factual repudiation to the same, we find no reason to interfere with the ultimate conclusion of the CIT(A) in deleting the addition.- Decided in favour of assessee Disallowance of prior period expenses - Held that:- Such expenses were in-fact relatable to the previous year relevant to the assessment year under consideration and in the details submitted to the Assessing Officer it was erroneously typed as 21/08/2008, whereas the relevant date was 21/3/2009, corresponding to the assessment year under consideration. Also ctually no deduction was claimed, as such expenses were duly capitalized. The CIT(A) correctly noted the submissions and deleted the addition on the ground that no deduction was claimed to the P&L Account as the expenses were capitalized.- Decided in favour of assessee Addition of the repair and maintenance expenses - Held that:- There is no material to controvert the finding of the CIT(A) that an amount of ₹ 18,24,489/- already stands capitalized by the assessee. Therefore, the CIT(A) justifiably deleted the said addition as otherwise it would have amounted to double disallowance. So far as the balance addition of ₹ 43,17,791/- is concerned, the finding of the CIT(A) is that the same has been incurred on repairs. Even the details of the repairs to buildings reveal that the same have been incurred on repairs and maintenance of existing assets, for instance replacement of fencing, repair of tile work in the administrative block, whitewash and partition, dismantling of old damaged wall, etc. None of the items of expenses have been shown to result in acquisition of any new asset. Considered in the light of the material on record, we find that the CIT(A) made no mistake in holding that the expenses are in the nature of routine repairs and not in the nature of capital - Decided in favour of assessee Rework the adjustment u/s. 145A - Held that:- The assessee could not have foreseen at the time of filing of the return of income the impact of the adjustment under section 145A of the Act, because the same was made by the assessing authorities in the assessment for assessment years 2005-06, 2006- 07 and 2008-09. It is only after the appellate authorities upheld the stand of the Assessing Officer for the said assessment years that the consequential claim of the assessee would spring up. Therefore, under these circumstances, it was quite germane for the assessee to have raised such a plea before the CIT(A), who justifiably admitted the same. In our considered opinion, the CIT(A) has made no mistake in directing the Assessing Officer to consider the plea of the assessee and rework the adjustment under section 145A as per law.- Decided in favour of assessee
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