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2018 (10) TMI 799 - AT - Income TaxAd-hoc disallowance of employee cost, administrative expenses, depreciation and interest expenses - Held that:- A.O loosing sight of the fact that expenses would also have been incurred by the assessee in earning of royalty income and undertaking marketing and business development activities, therein most arbitrarily related the entire employee cost (Rs. 4,59,46,708/-); 50% of administrative expenses (Rs. 95,26,140/-); Interest cost (Rs. 24,00,419/-);and depreciation (Rs. 49,726/-) to earning of service income by the assessee. As the A.O had without any basis dislodged the claim of the assessee, wherein he had related specific expense to earning of the service income, thus, his view cannot be upheld. Further, we find that the CIT(A) also failed to appreciate that the A.O had whimsically allocated the expenses to earning of the service income by the assessee. The CIT(A) adopting the amount of ₹ 5,79,22,993/- as the expenditure allocable to earning of the service income, as determined by the A.O, had thus on the basis of such misconceived facts drawn adverse inferences in the hands of the assessee. We thus, are unable to persuade ourselves to subscribe to the observations of the lower authorities. Still further, we find that as observed by the CIT(A), disallowances of expenses involving identical facts was made by the A.O in the case of the assessee for A.Y 2009-10 and A.Y 2010-11, which were upheld by the CIT(A). - Decided in favour of assessee. Computing the tax liability of the assessee - not allowing credit for the tax deducted at source - application under Sec. 154 seeking rectification of the said mistake with the A.O, however, the same despite a specific direction by the CIT(A) to dispose of the same, is still pending - Held that:- CIT(A) had vide his order dated 26.05.2016 directed the A.O to dispose off the rectification application of the assessee by way of speaking order in a time bound manner. We are of the considered view, that as the failure on the part of the A.O to comply with the directions of the CIT(A) emerges from the impugned order, and has been assailed by the assessee before us, thus, in all fairness direct that the A.O while giving appellate effect to our order shall allow credit of the TDS, if any, as per law.
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