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2020 (2) TMI 318 - AT - Income TaxDisallowance of minimum guarantee royalty as capital in nature - HELD THAT:- Apex court’s recent decision in Taparia Tools vs. JCIT [2015 (3) TMI 853 - SUPREME COURT] has settled the law that of a revenue expenditure is otherwise allowable, the mere fact that the same ought to have been split up or claimed lump sum is not the deciding factor. Their lordships yet another landmark decision in Chainrup Sampatram vs. Commissioner of Income Tax [1953 (10) TMI 2 - SUPREME COURT] also held long back that the principles of conservatism consideration of prudence in the accounting treatment require that no anticipated profits be treated as income only if the same are utilized and converse is not true as anticipated losses can be allowed to be deducted from commercial profits at the first sight of reasonable possibility. We wish to make clear in light of the foregoing facts that the assessee had every reason to raise the impugned minimum guarantee royalty claim pertaining to acquisition of music rights in the year of actual payment going by the music industry market trends. We conclude in this backdrop of facts that the Revenue’s latter argument also carries no substance. This issue is accordingly decided in assessee’s favour. Disallowance of advertisement and sales promotion, consultancy, ad hoc head(s) - recording expenditure disallowance(s) from 10% made by the Assessing Officer to 2% in the lower appellate proceedings - HELD THAT:- We find no substance in Revenue’s instant argument seeking to revive the impugned ad hoc disallowance under four head(s). Apart from the fact that the earlier co-ordinate bench’s order(s) have already upheld the CIT(A)’s identical action, we note that the assessing authority itself is very fair in estimating the impugned disallowance @ 10% meaning thereby that assessee’s claim(s) stand accepted in principle @ 90%. We therefore adopt judicial consistency to affirm CIT(A)’s findings restricting all four disallowance(s) items from 10% to 2% only. The Revenue as well as assessee’s corresponding grounds fail therefore as a necessary corollary. Nature of expenses - training and development expenses - Revenue or capital expenditure - HELD THAT:- We find no substance in Revenue’s grievance at the threshold itself since Motor Sales vs. Commissioner of Income Tax (1973) [1971 (10) TMI 20 - ALLAHABAD HIGH COURT] has already decided the issue in assessee’s favour. The CIT(A)’s findings under challenge to this effect are affirmed therefore. Disallowing / shortage of stock / breakage (prerecorded cassettes) - The Revenue fails to dispute the clinching fact that the assessee’s corresponding receipts derived from the corresponding of scrap sales on account of broken cassettes have been accepted. This tribunal’s decision for assessment year 2002-03 has already decided this very issue in assessee’s favour. Rent amount addition - HELD THAT:- Both the learned representatives are ad idem during the course of hearing that the assessee’s claim of impugned downward revision of rent charge and received in case of its sister concern requires necessary factual verification / computation once again in view of the learned lower authorities alleged failure in getting all the settlement records to this effect. We therefore deem it appropriate to restore the same back to the Assessing Officer to decide afresh as per law within three effective opportunities of hearing Addition of turnover mis-match in TDS certificates (in case of CESC and Indea Streamz) as well as part TDS credit - HELD THAT:- After giving our thoughtful consideration, we find that although the Revenue’s instant technical argument deserves to be accepted the fact also remains that the Assessing Officer had not taken into consideration all the foregoing aspect(s) whilst making the impugned disallowance(s) / addition(s). We therefore conclude in this factual backdrop that the instant issue has been rightly restored back to the assessing authority for afresh computation as per law. We make it clear that the issues as to whether the assessee deserves credit of the impugned TDS in the year when it offers the corresponding income for assessment is fairly conceded by the department during the course of hearing. We accordingly affirm the CIT(A)’s findings qua these two former issues. Expenditure on share investments and interest free loans given to sister concern - HELD THAT:- Assessee has not derived any exempt income in the impugned assessment year. Hon'ble jurisdictional high court’s decision in M/s Ashika Global Securities Ltd. [2018 (7) TMI 1425 - CALCUTTA HIGH COURT] holds that the impugned disallowance does not come into play in case of absence of exempt income. Coming to latter aspect of interest free loans to sister concern, we notice that assessee had no interest free funds in the nature of share capital, reserves and surplus of ₹60.26 crores as against interest free loans of ₹24.17 crores; respectively. The CIT(A) has followed hon'ble’s Bombay high court’s decision in CIT vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] that the necessary presumption in such an instance is of utilization of interest free funds only. We accordingly affirm the CIT(A)’s findings under challenge Addition u/s 14A - HELD THAT:- Rule 8D carries prospective effect only from assessment year 2008-09. We notice that the CIT(A) has restricted the impugned disallowance to 1% of the exempt income only; coming to ₹23,230/- in his lower appellate order under challenge. The assessee’s share capital and reserves against the exempt investments read figures ₹84.13 crores and ₹59.99 cores; respectively. The CIT(A) has followed a catena of case law Income Tax Officer Ward-12(1) Kolkata vs. Nupur Carpets Ltd. [2015 (7) TMI 679 - ITAT KOLKATA] that necessary disallowance @ 1% prior to assessment year 2008-09 is just and proper. We therefore decline the Revenue’s instant second substantive grievance as well. Bad debt / business advance disallowance - HELD THAT:- We notice that the Assessing Officer had made the impugned disallowance after holding that there was no evidence of the impugned debt sums to have become actually bad. This this issue is no more res integra in view of in T.R.F. vs. Commissioner of Income Tax [2010 (2) TMI 211 - SUPREME COURT] that sec. 36(1)(vii) no more requires w.e.f 01.04.1989. Administrative expenditure disallowance - HELD THAT:- CIT-DR fails to rebuttal the crucial fact that lower authorities have taken into account the assessee’s non exempt income yielding investment as well. The fact also remains that we are dealing with an indirect head of expenditure wherein some kind of proportional location on estimate basis is always involved. We therefore deem it appropriate that a lump sum disallowance of ₹8 lakh including suo motu figure of ₹ 7 lakh would be just and proper with a rider that same shall not be treated as a precedent in any other assessment year. The assessee gets part relief. Necessary computation to follow as per law. Disallowance its leave encashment provision u/s 43B(f) for want of actual payment - HELD THAT:- As during the course of hearing that hon'ble jurisdictional high court’s decision in Exide Industries Ltd. vs. Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT] quashing the statutory provision itself to be ultra vires stands has stayed by hon'ble apex court. Therefore the instant issue restored back to the Assessing Officer to be decided afresh after final outcome in Exide Industries Ltd. case. This last substantive grievance of assessee is accepted for statistical purpos during the course of hearing that hon'ble jurisdictional high court’s decision in Exide Industries Ltd. vs. Union of India [2007 (6) TMI 175 - CALCUTTA HIGH COURT] quashing the statutory provision itself to be ultra vires stands has stayed on 08.05.2009 in hon'ble apex court. Therefore the instant issue restored back to the Assessing Officer to be decided afresh after final outcome in Exide Industries Ltd. case. This last substantive grievance of assessee is accepted for statistical purposes. es.
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