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2023 (10) TMI 648 - ITAT AHMEDABADNature of expenditure - Contingent liability or not - invocation of performance guarantee by the Department of Telecommunication - internet expenses - Additions u/s 69C r.w.s. 115BBE - CIT(A) confirmed the disallowance on the ground that the said liability was a contingent liability not brought in the books of the Appellant at the time of creation of such contingent liability - HELD THAT:- It is pertinent to note that the bank guarantee was originally for the business purpose with the Department of Telecom which is a mandatory for certain projects. Thus, the observations made by the AO that it is not in respect of business appears to be incurred as the performance guarantee was prior to the period on which the assessee was not fully operationalise his business. Therefore, the benefit of Section 37(1) is allowable to the assessee in light of the decision of Neo Constructo Construction Ltd.[2013 (7) TMI 851 - GUJARAT HIGH COURT] Ground No. 1 is allowed. Labour expenses paid to one staff doing administrative / accounting as well as miscellaneous office work - HELD THAT:- D.R. relied upon the assessment order and the order of the CIT(A). It is pertinent to note that there was no closure declared by the assessee of its entire business but certain business activities were going on from 2008 till 2016 and therefore, one staff expenses related to salary component was genuine by the assessee as revenue expenditure. Hence, the Ground No. 2 is allowed. Addition at the rate prescribed in the Section 115BBE - HELD THAT:- From the perusal of the additions it is pertinent to note that the expenditure claimed by the assessee in respect of performance guarantee as well as labour expenses were both explained by the assessee during the assessment proceedings and therefore, applying Section 115BBE in assessee’s case is not justifiable. Hence, Ground No. 3 is allowed.
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