TMI Blog2013 (3) TMI 121X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenses. Further the assessee has also failed to deduct the TDS from such payments as stitching charges come under works contract. - held that:- The various staff in the business centre are usually provided with uniform. Merely because the stitching charges are more than the cost of the cloths, the same, in our opinion, cannot be a ground for disallowing the expenditure. - Decided in favor of assessee. - ITA No. 5269 & 5273/Mum/2009 - - - Dated:- 20-1-2012 - SHRI R.K. PANDA AND SHRI VIJAY PAL RAO, JJ. Appellant by Shri D.S. Sunder Singh Respondent by Shri Rakesh Joshi ORDER PER R K PANDA, AM The above two appeals filed by the Revenue are directed against the separate orders dated 18.06.2009 of the ld. CIT(A) - XXX, Mumbai relating to A.Yrs. 2005-06 2006-07 respectively. For the sake of convenience these appeals were heard together and are being disposed of by this common order. ITA No. 5269/Mum/2009 for A.Y. 2005-06 (By Revenue) 2. Grounds of appeal No. 1 9 being general in nature are dismissed. 3. Ground of appeal No. 2 by the Revenue reads as under:- The CIT(A) erred in deleting the addition of Rs. 62,64,813/- being the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... income of the assessee and allowed depreciation @ 5% on the above amount. 3.2 In appeal, the ld. CIT(A) allowed the claim of the assessee on the ground that there is no dispute regarding incurrence of the expenses. The genuineness of payments made to various parties is also not doubted. Further, the property belongs to MMTC and the assessee has to make some changes in the existing furniture as per the need of tenant. No new asset has come into existence. He accordingly held that the expenditure is revenue in nature. 3.3 Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before us. 4. The ld. D.R. while relying on the order of the A.O. submitted that huge amount of expenses has been debited under the head repairs and maintenance which is capital in nature. The conduct of the assessee in showing the expenses incurred during the preceding assessment years as capital in nature justifies the treatment of amount as capital in nature. Referring to the copy of ledger account of repairs and maintenance (copy of which is placed at paper book pages 52 to 58) he drew the attention of the Bench to various expenses debited under that head. He submitted that the ld. C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT v. Sanco Trans Ltd. - 284 ITR 51 9. CIT v. A.M. Singhvi 302 ITR 26 10. CIT v. Porrits and Spencer (A) Ltd. - 257 ITR 49 11. CIT v. Volga Restaurant - 170 CTR 186 12. CIT v. Hi Line Pens (P) Ltd. 30 ITR 618 13. Pravara Sahakari Sakhar Kahkhana Ltd. V. CIT 94 ITR 321 6. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the facts as stated by the ld. Counsel for the assessee that it is a joint venture between MMTC and the assessee for running a business centre for which MMTC has contributed the floor space and the assessee incurred various other expenses has not been properly appreciated by the A.O. or the ld. CIT(A). The A.O. has basically gone on the presumption that the amount incurred being huge is capital in nature and is not current repair and in the previous year such expenses have even capitalised by the assessee. We find the ld. CIT(A) while allowing the claim of the assessee merely relied on the arguments of the assessee that the incurrence of the expenses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was of the opinion that any income deemed to accrue or arise during the year will have to be taken under the head income from business. The A.O. therefore rejected the claim of the assessee and made an addition of Rs. 26,39,000/-. 7.2 Before the ld. CIT(A) it was submitted that the A.O. had not provided sufficient time and opportunity to prove that the matter is under litigation. Based on the arguments of the assessee, the ld. CIT(A) deleted the addition on the ground that the A.O. without going into the facts and bringing any material on record made the disallowance. Aggrieved with such order of the ld. CIT(A), the Revenue is in appeal before us. 7.2 The ld. D.R. submitted that when the assessee is following mercantile system of accounting the income should have been credited and the assessee could have claimed the same as bad debts. Since the assessee has not fulfilled the conditions laid down in section 36(1)(vii) r.w.s. 36(2) the assessee is not entitled to the claim. 7.3 The ld. Counsel for the assessee, on the other hand, filed certain court orders as additional evidence and requested the Bench to admit the same. Referring to the court orders he submitted that due to s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Goetze India Ltd. V. DCIT reported in 115 ITD 119 wherein it has been held that the expenses are allowable where the bills for certain prior period expenses were received during the present assessment year. It was also submitted that the assessee has a dispute with Jay Kay Dee Industries Ltd. regarding the bill amount for which the bill has been received belatedly during the financial year by the assessee. Based on the arguments advanced by the assessee, the ld. CIT(A) deleted the addition on the ground that there was a dispute with the creditor and liability crystallised in the year under consideration only. 8.3 The ld. D.R. submitted since the expenditure related to the preceding assessment year and since the assessee was following mercantile system of accounting and since no provision was made in the preceding assessment year therefore the assessee cannot claim the same during the current assessment year. Referring to the decision of Hon ble Delhi High Court in the case of Delhi Tourism TDC Ltd. V. CIT reported in 285 ITR 114 (Del) he submitted that the expenses relating to preceding year paid during the year is not to be allowed. 8.4 The ld. Counsel for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r which such expenses were made to these parties. Further the assessee failed to furnish the complete address of the said parties or their PAN details. He further noted that the amounts are still outstanding as on the balance sheet date i.e. 31.3.2005 and were appearing in the list of sundry creditors. Therefore, the A.O. was of the opinion that the assessee has not incurred any expenses for repairs and it has managed to receive the bill from such party for claiming the expenses. Further according to the A.O. no confirmation was produced despite being called for. No TDS was deducted from such payments. Therefore he disallowed the amount of Rs. 16,20,415/- and held that the same is neither allowable as revenue nor as capital expenditure. 9.2 Before the ld. CIT(A) it was submitted that the assessee follows mercantile system of accounting and therefore the expenses were booked on the basis of incurring of the expenses. It was submitted that for claiming the expenses it is not necessary to make the payment to the concerned party during the year only. It was submitted that payment to the concerned parties were made after deducting the TDS. Therefore the allegation of the A.O. is bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - The CIT(A) erred in deleting the addition towards the repairs and maintenance charges of Rs. 8,74,935/-paid to MMTC Ltd. Mumbai without appreciating the fact that there was no liability as per the agreement with MMTC Ltd. for making such a payment and the genuineness of these expenses had not been proved by the assessee in the proceedings before the Assessing Officer. The CIT(A) also failed to note that the assessee had not deducted the TDS in respect of these expenses and hence the disallowance u/s. 40(a)(ia) was correctly made. 10.1 Facts of the case in brief are that from the details of repairs and maintenance of Air conditioners, the A.O. noted that the assessee company has paid repairs and maintenance charges to MMTC amounting to Rs. 8,74,935/-. Since the assessee failed to deduct the TDS from such payment, the A.O. held that the same is not allowable as expenditure in view of the provisions of section 40(a)(ia). 10.2 Before the ld. CIT(A) it was submitted that the assessee has paid an amount of Rs. 8,74,935/- to MMTC Ltd. It was submitted that the actual amount of repairs and maintenance was paid by MMTC Ltd. to Blue Star Ltd. With whom MMTC has made the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dering the huge amount of stitching charges of Rs. 1,66,250/- and Rs.1,71,250/- incurred on cloth purchased of Rs. 1,95,500/- 11.1 Facts of the case in brief are that from the details furnished by the assessee the A.O. noted that the assessee had claimed huge expenses towards uniform expenses paid to Ishu Sales Agencies Pvt. Ltd. and M/s Isha Enterprises and M/s Shriram Textile Mill for making the safari suits for its employees. In quantity it is near about 665 pieces for Isha Enterprises and 685 for Ishu Sales Agencies totalling to 1350 pieces. Further those are at the fag end of the year. The assessee also failed to furnish the bill of Shriram Textiles towards purchase of cloth. Since the assessee company is not having so many employees, the A.O. doubted the requirement of so many pieces of safari suits. According to him the bills dtd. 2.3.2005 21.03.2005 appear to have been prepared on one date at the fag end of the year so as to inflate the expenses. Further the assessee has also failed to deduct the TDS from such payments as stitching charges come under works contract. The A.O. further noted that against the purchase of cloth worth Rs. 1,57,000/-, stitching charges paid a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lls. The ld. D.R. also could not point out seriously any discrepancy in the order of the ld. CIT(A). Accordingly the ground raised by the Revenue is dismissed. 12. Ground of appeal No. 8 by the Revenue reads as under:- The CIT(A) erred in deleting the disallowance of depreciation of Rs. 9,43,639/- claimed on computers without appreciating the fact that the assessee had not produced any evidence to show that the alleged computers were purchased and put to use during the relevant previous year. 12.1 Facts of the case in brief are that during the course of assessment proceedings the A.O. noted that the assessee has purchased computers worth Rs. 11,78,333/- before 30th September, 2004 and Rs. 7,88,800/- after 30th September, 2004 from one M/s Computer Associates and claimed depreciation on the above. He further noted that the amounts were not paid to the concerned party and the same was shown under sundry creditor. The A.O. deputed his Ward Inspector for field enquiry who reported that M/s Computer Associates do not maintain any books of account. Further the proprietor of the concern also stated that income-tax returns have not been filed so far for the last 2 years. The Ward ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er addition on account of bogus purchase. This shows that he has accepted the purchase indirectly. Further when the A.O. had doubted about the genuineness of the purchase and has deputed his Ward Inspector to the place of the supplier, he could have either conducted a survey or atleast deputed his Inspector to find out the existence of the computers at the premises of the assessee. Therefore merely because M/s Computer Associates, the supplier of the computers, do not maintain any books of account or because the payment was not made before the end of the year, the same in our opinion, cannot be a ground for disallowing the depreciation. Nothing has been brought on record by the A.O. to show that the assessee does not own the computers or that the assesse has not put the computers to use. In this view of the matter we uphold the order of the ld. CIT(A) and the ground raised by the Revenue is dismissed. 13. In the result, appeal filed by the Revenue in ITA No. 5269/Mum/2009 for A.Y. 2005-06 is partly allowed for statistical purpose. ITA No. 5273/Mum/2009 for A.Y. 2006-07 (By Revenue) 14. Ground of appeal No. 1 being general in nature is dismissed. 15. Grounds of appeal No. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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