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2015 (5) TMI 399 - ITAT LUCKNOW

2015 (5) TMI 399 - ITAT LUCKNOW - TMI - Disallowance of prior period expenses - CIT(A) allowed part relief - Held that:- Material Bills were correctly disallowed as the details of the amounts were examined and it was noted that these expenses relate to purchase of material etc. As these expenses should have been accounted for on a mercantile basis in year in which these were incurred, the same cannot be allowed as a deduction in the current year. Service Bills received in the current year for se .....

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e accounts of the excess amount of duty drawback. It was explained by the appellant that it was a regular system of accounting followed by him and did not result in any profit or loss over a period of time, thus this amount is allowable. Similar is the case of Insurance claim. Commission payment payment may get settled in the next year whereby on the date of payment there might be a change in the foreign currency rates. It was explained by the appellant that it was a regular system of accounting .....

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e disallowance was made on ad hoc basis without pointing out any defect either in the books of account or in the vouchers maintained by the assessee, no disallowance on ad hoc basis is permissible under the law. We, therefore, delete the addition even sustained by the ld. CIT(A). - Decided in favour of assessee.

Disallowance of postage, telegram and telephone expenses - Held that:- Assessee is a company where expenditures cannot be considered to be of personal in nature. The Assessing .....

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of motor car expenses and depreciation - Held that:- D.R. could not establish that the motor car was utilized for the purpose other than business of the assesseecompany. Therefore, no disallowance on ad hoc basis is sustainable in the eyes of law. Accordingly, we delete the addition - Decided in favour of assessee.

Disallowance of balance written off - CIT(A) deleted addition - Held that:- The appellant at the time of entering the rental agreement had paid ₹ 5,95,500 as an advan .....

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n located during the year under consideration, the impugned expense has to be allowed to the appellant - Decided in favour of assessee.

Disallowance of agricultural income expenses - Held that:- No defect in the order of the ld. CIT(A) as in the books, net loss from agriculture operations has been shown at ₹ 5,56,622, which wrongly included a sum of ₹ 4,21,344/- on account of tease rentals written off, which was not at all related to agricultural activities. If one exclude .....

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ght of the judgment of the Hon'ble Apex Court in the case of CIT vs. Ravindra Nath Nair, [2007 (11) TMI 10 - Supreme Court of India]

Disallowance of bad debts - Held that:- CIT(A) correctly reexamined the claim of the assessee and finding force in the contentions of the assessee that the claim of bad debts of ₹ 1,37,525/- has only been disallowed because of the fact that RBI has not approved this much amount in the settlement of the claims sent to them & it may not be out of .....

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Per Sunil Kumar Yadav: These cross-appeals are preferred by the assessee as well as the Revenue against the respective orders of the ld. CIT(A) for assessment years 2003-04 and 2005-06. 2. Since common issues are involved in these appeals, these were heard together and are being disposed of through this consolidated order. We, however, prefer to adjudicate them one after the other. I.T.A. No. 532/LKW/2013: 3. In this appeal, the Revenue has assailed the order of the ld. CIT(A) on the following .....

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ed in principle but restricted the disallowance without giving any reasons. 3. The Ld. CIT(A) has erred in law and on facts in allowing the relief of ₹ 54,080/- on account of telephone & telex expenses admitting himself that the disallowance was justified in principle but restricted the disallowance without giving any reasons. 4. The Ld. CIT(A) has erred in law and on facts in allowing the relief of ₹ 1,06,834/- on account of motor car expenses and depreciation admitting himself .....

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for a remand report from the AO. 7. The order of the CIT(A), Kanpur being erroneous, unjust and bad in law be vacated and the order of the AO be restored. 4. Apropos ground No.1, it is noticed that the Assessing Officer has made disallowance of expenses claimed by the assessee on the ground that these are prior period expenses. 5. The assessee preferred an appeal before the ld. CIT(A) and furnished explanations item-wise with the submission that these expenses are crystallized in the impugned a .....

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essing Officer and the submissions of the appellant through ld. A.R. relevant part of which has been produced above. My point wise view is given as under:- 1. Material Bills of previous year received and accounted for during the current year amounting to ₹ 50,353: The details of the amounts were examined and it was noted that these expenses relate to purchase of material etc. As these expenses should have been accounted for on a mercantile basis in year in which these were incurred, the sa .....

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. Expenses of Previous years settled during the current year amounting to Rs .10,642: Since the settlement of dispute has taken place in this year, the amount is allowable as a expenditure in this year itself. The AO is directed to allow this as a deduction. Thus addition of ₹ 10,642 is deleted. 4. Short/Excess estimation of expenses amounting to ₹ 1,41,143: This amount relates to duty drawback, foreign commission paid and settlement of insurance claim. The appellant has stated that .....

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s credit was made earlier the necessary entries were passed debiting the accounts of the excess amount of duty drawback. It was explained by the appellant that it was a regular system of accounting followed by him and did not result in any profit or loss over a period of time. In my view this amount is allowable. Similar is the case of Insurance claim. Now coming to the commission payment the same is payable is foreign currency and according to the mercantile method of accounting the same has to .....

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allowable u/s 43B are only allowed on payment basis. Even if the liability would have been made in the earlier years the same would have been disallowed. Thus payment of bonus, customs and tax are covered within the provisions of section 43B of the Income Tax Act, 1961 .Accordingly the addition of ₹ 73,316 is deleted. Overall the AO is to allow the amounts [15,693+10,642+ 1,41,143+ 73,316]= ₹ 2,40,794. The addition of ₹ 50,353 is confirmed. Thus this ground no 11 is partly all .....

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an appeal was filed before the ld. CIT(A) with the submission that the Assessing Officer has made ad hoc disallowance on account of motor car expenses, postage, telegram and telephone expenses and out of travelling expenses amounting to ₹ 1,06,834/- and ₹ 54,080/- respectively without pointing out any defect in the maintenance of the books of account. The ld. CIT(A), re-examined the explanations furnished by the assessee and having noted that the Assessing Officer has not pointed ou .....

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wance to ₹ 33,148/-, against which the Revenue as well as the Assessee are in appeal. 10. Since the disallowance was made on ad hoc basis without pointing out any defect either in the books of account or in the vouchers maintained by the assessee, no disallowance on ad hoc basis is permissible under the law. We, therefore, delete the addition even sustained by the ld. CIT(A). Accordingly ground No.5 of the assessee in I.T.A. No.468/LKW/2013, which is on the same issue, is also disposed of .....

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re the Tribunal. 13. Having carefully examined the orders of the lower authorities in the light of the rival submissions, we find that the assessee is a company where expenditures cannot be considered to be of personal in nature. The Assessing Officer has made ad hoc disallowance having noted that these expenditures were incurred for non-business purposes, without pointing out any defect. Even before us, nothing has been stated by the Revenue that a particular expenditure has been incurred for n .....

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n amounting to ₹ 56,914/- on account of personal use without bringing anything on record. When the matter travelled to the ld. CIT(A), the ld. CIT(A) has restricted the disallowances to ₹ 60,000/-, against which assessee as well as the Revenue are in appeal before the Tribunal. 15. During the course of hearing, the ld. D.R. could not establish that the motor car was utilized for the purpose other than business of the assesseecompany. Therefore, no disallowance on ad hoc basis is sust .....

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ve been written off, as the possession of the rental property was finally released during the year under consideration and the rental to be adjusted, which had been paid in advance, should have been debited to the rent account instead of balances written off. The ld. CIT(A) re-examined the issue in the light of assessee s submissions and being convinced with it, he deleted the addition. The relevant observations of the ld. CIT(A) are reproduced hereunder for the sake of reference:- I have consid .....

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r, the impugned advance needed to be adjusted during the year under consideration. The accounting treatment whether the same should be allowed under "rent1 or "balances written off" does not affect the allowability of such expenses. As the property has been located during the year under consideration, the impugned expense has to be allowed to the appellant. The addition made is hereby, deleted. 17. Though the Revenue has preferred an appeal before the Tribunal challenging the orde .....

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er years. Copies of the ledger account were also filed before the ld. CIT(A) to prove the genuineness of the claim. The ld. CIT(A) re-examined the claim of the assessee and being convinced with it, he restricted the disallowance to ₹ 29,418/-. The relevant portion of the order of the ld. CIT(A) is extracted hereunder for the sake of reference:- I have considered the facts and circumstances of the case and the submissions of the appellant. It is seen that in the books, net loss from agricul .....

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,418 only needs to be disallowed. The A.O. would do so. 19. Aggrieved, the Revenue has filed an appeal before the Tribunal, but could not point out any defect in the order of the ld. CIT(A). Having noticed that the ld. CIT(A) has adjudicated the issue in a proper manner, we subscribe the same. I.T.A. No. 468/LKW/2013: 20. This appeal is preferred by the assessee against the order of the ld. CIT(A), inter alia, on the following grounds:- 1. BECAUSE the CIT(Appeals) has erred in law and on facts i .....

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completely the job work receipts being eligible for deduction under section 80HHC of the Act and restricting the same on adhoc basis. 3.1 BECAUSE, without prejudice to the aforesaid, the addition sustained is high and excessive too and the same deserved to be deleted. 4. BECAUSE the computation of deduction under section 80HHC is not correct and the same deserves to be allowed on the basis adopted by the appellant in its return filed for the year under consideration. 5. The CIT(Appeals) has erre .....

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facts in upholding the disallowances of a) ₹ 24,000/- Out of telephone and telex expense; and b) ₹ 60,000 Out of motor car expenses and depreciation on vehicles on the ground of personal user. 8. BECAUSE looking to the fact that the appellant is a body corporate and a listed company, no disallowance on the ground of personal user could have been made. 9. BECAUSE in any case the disallowance as referred to above letter much too high and excessive. 10. BECAUSE order appealed against is .....

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furnish the relevant evidence to justify that the liabilities are crystallized during the impugned assessment year. The ld. CIT(A) accordingly confirmed the disallowance having observed that the expenses relate to the purchase of materials, etc. should have been accounted for on mercantile basis in the year in which these were incurred and the same cannot be allowed as deduction in the current year. Even before us, nothing has been placed to justify that the bills for the materials purchased in .....

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th Nair, 295 ITR 228 (SC) Since the ld. CIT(A) has issued a direction to the Assessing Officer to re-compute the deduction under section 80HHC of the Act pursuant to the judgment of the Hon'ble Supreme Court, we find no infirmity therein. Accordingly, we confirm the same. 25. Grounds No.6, 8 & 9 are general in nature and hence need no independent adjudication. I.T.A. Nos. 533/LKW/2013 & 469/LKW/2013: 26. The grounds raised by the Revenue in I.T.A. No. 533/LKW/2013 are as under:- 1. T .....

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ricted the disallowance without giving any reasons, 3. The Ld. CIT(A) has erred in law and on facts in allowing the relief of ₹ 2,47,894/- on account of telephone & telex expenses admitting himself that the disallowance was justified in principle but restricted the disallowance without giving any reasons, 4. The Ld. CIT(A) has erred in law and on facts in allowing the relief of ₹ 99,125/- on account of motor car expenses and depreciation admitting himself that the disallowance wa .....

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were merely introduced to clarify the mode of calculation of expenses incurred in relation to exempted income. 7. The order of the CIT(A), Kanpur being erroneous, unjust and bad in law be vacated and the order of the AO be restored. 27. The grounds raised by the assessee in I.T.A. No. 469/LKW/2013 are as under:- 1. The CIT(Appeals) has erred in law and on facts in upholding disallowance of ₹ 2,79,096/-, out of travelling expenses incurred by the directors of the appellant company on foreig .....

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reciation on vehicles on the ground of personal user. 4. Because the "CIT(Appeals)" has erred in law and on facts I upholding disallowance of ₹ 24,000/- as had been made in the assessment out of expenditure, by invoking the provisions of section 14A of the Act. 5. BECAUSE looking to the nature of investment and the income yielded there from (with reference to which the provisions of section 14A had been invoked) no such expenditure as has been disallowed in the assessment, can be .....

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disallowance of prior period expenses amounting to ₹ 96,037/-, against which an appeal was filed before the ld. CIT(A) with the submission that the assessee has furnished complete details of the prior period expenses and other bills have been received in this year or liability has been crystallized. The ld. CIT(A) re-examined the issue item-wise and being convinced with the explanations of the assessee, he deleted the addition. The relevant observations of the ld. CIT(A) are reproduced her .....

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ears. Since the service bills have been received in this year, the expenditure is allowable in this year. Thus addition of ₹ 44,235 is deleted. 2. Expenses of Previous years settled during the current year amounting to ₹ 2525: Since the settlement of has this year, the amount is allowable as a expenditure in this year itself. The AO is directed to allow this as a deduction. Thus, addition of ₹ 2,525 is deleted. Settlement of claims of the creditors crystallized during the year .....

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grounds No.1 & 2 in I.T.A. No. 469/LKW/2013, it is noticed that the Assessing Officer has made disallowance of ₹ 9,54,155/- on account of travelling expenses. 31. The assessee preferred an appeal before the ld. CIT(A) with the submission that the Assessing Officer has made disallowance on ad hoc basis without pointing out any defect therein. The ld. CIT(A) re-examined the claim of the assessee and he restricted the disallowance to 10% of the expenditure claimed on foreign travelling. .....

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ld. CIT(A) on this issue. 33. Apropos ground No.3 in I.T.A. No. 533/LKW/2013 and ground No.3(a) in I.T.A. No. 469/LKW/2013, the Assessing Officer has made disallowance of telephone and mobile expenses at ₹ 2,97,894/- on the ground that the expenses are incurred for the purposes other than business, against which an appeal was filed before the ld. CIT(A) and the ld. CIT(A) has also observed that no log book of expenditure on telephones have been maintained. He, however, restricted the disa .....

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rit in the disallowance confirmed by the ld. CIT(A). We, accordingly set aside the order of the ld. CIT(A) and delete the addition of ₹ 50,000/-. 35. Apropos ground No.4 in I.T.A. No. 533/LKW/13 and ground No.3(b) in I.T.A. No. 469/LKW/2013, it is noticed that the Assessing Officer has made disallowance of motor car expenses amounting to ₹ 1,99,125/- and disallowance of depreciation amounting to ₹ 3,28,652/- on such motor cars for the reason that these vehicles were used for pe .....

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T.A. No. 533/LKW/2013, it is noticed that the Assessing Officer has made disallowance of bad debts amounting to ₹ 1,37,525/-, against which an appeal was filed before the ld. CIT(A) with the submission that the claim of bad debts of ₹ 1,37,525/- has only been disallowed because of the fact that RBI has not approved this much amount in the settlement of the claims sent to them. It was further contended before the ld. CIT(A) that it may not be out of context to mention that the bad deb .....

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