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2019 (4) TMI 204 - ITAT DELHIDisallowance of expenditure / provision made on account of accrued incentive - assessee has made a provision for the performance based incentive of the employees - as submitted payments to be made to the employees for encouraging them to promote business of the assessee - HELD THAT:- The above provision has been made by the assessee on year-to-year basis on the basis of the performance of the employees. The excess provision is always written back to the profit and loss account in the subsequent year, if it is found to be short, further provision is made. This accounting practice is carried on by the assessee consistently. As the expenditure has been incurred for the incentive of the employees of the company raised on their performance for the same year for which the actual services have been rendered by the employees, above expenditure has been incurred by the assessee during the year only and exclusively for the purposes of the business. Expenditure has been made on the basis of the performance of the employees and allocated to each of the employees it is an ascertained provision. According to us it is a definite and accrued liability of the assessee for the year for which the services have been rendered by the employees. It is nothing but additional variable salaries payable to the employees. Same partakes character of salary. - Decided in favour of assessee Disallowance of depreciation on 12 vans - HELD THAT:- On the fact that the assessee has shown the purchase of these vehicles, obtained the temporary registration of these vehicles, shown that after bodybuilding they have been received back by the assessee from 22 to 25/03/2004, and they have been used for the purposes of the shooting during the year, it cannot be said that assessee has not used these vans for the purpose of the business of the assessee. Therefore according to us, assessee has also satisfied user test for allowability of depreciation.- Decided in favour of assessee Addition on account of advances written off - advance given to employees who left - business loss - HELD THAT:- advances were given to employees for the purposes of business, such advances have become bad as employees left the assessee. They are not in the nature of bad debt so, not required to have been credited to Profit and Loss A/c in earlier periods. Conditions of allowability of bad debts do not apply to business losses. We do not find any infirmity in the order of the learned CIT – A and therefore the order of the learned CIT – A is confirmed. Addition of interest payable to Prasahar Bharti for non-deduction of tax - CIT–A has deleted the disallowance since Prashar Bharti is a corporation and not liable to pay income tax on its income as provided under 196 (ii) - HELD THAT:- Though we find that Prasar Bharti has been established under the Prasar Bharti Act. CIT(A) has not given any reason that how interest earned by it is exempt from tax. Provisions of section 10(23BBH) exempts income of Prasar Bharti . Above section was inserted w.e.f. 01.04.2013 (i.e AY 2013-14). Therefore, up to that Assessment Year income of Prasar Bharti was not exempt. Hence, as the impugned assessment year is prior to the date of Assessment Year 2012-13, we are of the opinion that assessee should have deducted tax at source on income of interest paid to Prasar Bharti. We reverse the order of the ld CIT(A) and restore the order of the AO Addition of software expenses - revenue or capital expenditure - AO granted assessee 60% of the depreciation holding that software expenditure is a capital expenditure in nature - HELD THAT:- CIT – A who held that software expenditure incurred by the assessee is an application software for upgradation. The assessee has not incurred any expenditure on acquiring any asset of enduring nature. He further relied upon the decision in case of Ashahi Glass Works Limited [2011 (11) TMI 2 - DELHI HIGH COURT]. In view of this we do not find any infirmity in the order of the learned CIT – A in deleting the above disallowance. Addition on account of provision consumption of debtors - claim of the assessee is that company has given discount to its debtors based on consumption of Airtime during the current year - HELD THAT:- The assessee company sale space in its channels to advertiser usually a unit of sale of space is 10 seconds. The assessee company gave various schemes to its advertiser like consumption incentive, series discount etc. In case of consumption incentive, the advertisers are given an offer that in case if it consumes particular amount of time during the given period for broadcasting and advertising then it will be entitled to the consumption incentive. During the year, assessee has passed on this consumption incentive of ₹ 34059992/–. Learned CIT(A) has held that this is the expenditure in the nature of incentive to the advertiser and the assessee has also shown income against this expenditure. Before the learned CIT – A the assessee demonstrated by producing the copies of the deals of some of the parties and shown that it is not an asset or liability but actual expenditure. As held that assessee is eligible for deduction of the above expenditure. DR could not point out any infirmity in the order of the learned CIT(A). We confirm the order of the learned CIT(A) Disallowance of software expenditure - assessee has not furnished the adequate details before the lower authorities to demonstrate that the software expenditure incurred by the assessee is whether revenue expenditure or capital expenditure? - HELD THAT:- As the assessee has not submitted any details before the lower authorities, this ground of appeal is once again set aside back to the file of the learned assessing officer with a direction to the assessee to substantiate it within 30 days of this order before the assessing officer by submitting the proper evidences in the form of the bill and the nature of the software to demonstrate how they are of the revenue expenditure. In the result ground number 4 of the appeal of the assessee is allowed with above direction. Addition u/s 14A - disallowance of expenses for earning dividend income - HELD THAT:- satisfaction is the mandatory requirement for invoking the provisions Section 14A read with Rule 8D of the Income Tax Rules for making any disallowance. As the learned assessing officer has not recorded any satisfaction about the correctness of the claim of the assessee about the disallowance made by it in its tax audit report, the disallowance made by the learned assessing officer is not sustainable. Disallowance towards leave encashment expenditure - HELD THAT:- Assessee has claimed leave encashment expenditure without making any payment. As the provisions of section 43B (f) of the income tax act is very clear. Therefore, we upheld the disallowances of leave encashment expenditure under section 43B of the income tax act.
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