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2019 (8) TMI 406

..... ) the amount is added to the income of the assessee only when an allowance or deduction has been made in the assessment for any year. As mentioned elsewhere the income of NDDB was not liable to tax as income tax Act was not applicable to NDDB. In our considered opinion when no allowance or deduction has been allowed to the predecessor there is no question of adding the same when the amounts are written back by the assessee. Addition of income tax borne on interest on supply credit from foreign suppliers - allowable business expenses - HELD THAT:- There is no dispute that the assessee has paid tax on behalf of its foreign suppliers being an income tax liability. By any stretch of imagination the same cannot be allowed as expenditure u/s. 37. The reliance was placed on the decision of DASHMESH TRANSPORT COMPANY PVT. LIMITED VERSUS CIT [1973 (10) TMI 1 - PUNJAB AND HARYANA HIGH COURT] is misplaced in as much as in that case the assessee company took over the assets and liabilities of another company and while discharging the liabilities of that company certain expenditure were incurred which were claimed as legitimate business expenditure.Facts of the case in hand are totally differen .....

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..... he ground that such expenditure is not connected at all and nothing to do with the business of assessee company. In our considered view such observations of the AO do not have any force. The expenditure has been incurred as several employees of the assessee who are members of the BOHO Club which has been established for the re-creation and welfare of the employees. In our considered view such expenditure is eligible for deduction u/s. 37(1). For this proposition of law we draw support the decision of the Hon’ble High Court of Gujarat in the case of Gujarat State Export Corporation [1993 (9) TMI 52 - GUJARAT HIGH COURT] . We decline to interfere with the findings of the CIT(A). Disallowing research and development expenses - HELD THAT:- As decided in own case according to the Revenue the actual research expenses have been incurred by the Mother Dairy Fruits and Vegetables Ltd. whose subsidiary is the present Assessee. The Assessee apparently reimbursed the expenses incurred on scientific research for Mother Dairy Fruits and Vegetables Ltd. The Assessee has been assessed in Gujarat prior to the AY in question and for an earlier AY 2002- 03 where again in reassessment proceeding .....

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..... section 41 (1) of the Act do not apply to the facts of the case. The contention of the assessee was dismissed by the Assessing Officer who was of the opinion that even if the income of NDDB was not taxable still the sundry creditors and provisions are claimed as deduction. The Assessing Officer added the amount of ₹ 7936329/-. Assessee carried the matter before the CIT(A) but without any success. 7. Before us the counsel for the assessee referred to the National Delhi Development Board Act 1987 and pointed out that as per section 44 of the Act NDDB was not liable to pay income tax. It is the say of the counsel that since there was no liability to pay income tax there was no question of any allowances of deduction in the hands of NDDB. The Counsel further stated that since no allowance or deduction has been made in the assessment of NDDB write back of the same cannot be treated as income tax u/s. 41 (1) of the Act. 8. Per contra the DR strongly supported the findings of the Assessing Officer. 9. We have carefully considered the orders of the authorities below and have gone through the NDDB Act 1987 exhibited at pages 513-537 of the paper book. Section 44 of the said Act reads .....

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..... utinising the return of income the Assessing Officer noticed that the assessee has claimed ₹ 114834/- as an expenditure though the same represents the TDS in respect of interest on foreign suppliers credit. As the payment of tax liability is not allowable as expenditure, the Assessing officer made the addition of ₹ 114834/- which was confirmed by the CIT(A). 14. Before us the Ld. Counsel for the assessee stated that the assessee has discharged the tax liability of the payment of TDS of the suppliers and, therefore, the same should be allowed as expenditure u/s. 37 of the Act. In support the counsel relied upon the decision of the Hon ble Punjab & Haryana High Court in the case of Dashmesh Transport Company 93 ITR 275. 15. The DR vehemently stated that the income tax liability discharged by the assessee can never be claimed as legitimate business expenditure u/s. 37 of the Act. 16. We have carefully considered the rival contentions and failed to understand the logic given by the counsel. There is no dispute that the assessee has paid tax on behalf of its foreign suppliers being an income tax liability. By any stretch of imagination the same cannot be allowed as expen .....

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..... Assessing Officer to disallow the entire expenditure incurred on board meeting fees towards earning of exempt income. In addition further disallowances of ₹ 1,00,000/- towards the administrative expenses should meet the ends of justice. We direct accordingly. Ground No.4 is partly allowed. 23. Ground No.5 relates to the addition of ₹ 183156/- incurred by the assessee on purchase of software treating the same as capital expenditure. While scrutinising the return of income the Assessing Officer noticed that the assessee has incurred certain expenditure in respect of software expenses being IBM software E-TDS software, MS office 2003, application software, GET software. The Assessing Officer was of the opinion that by incurring these expenses the assessee has acquired enduring benefit and, therefore, these are of capital in nature. The Assessing Officer accordingly treated the same as capital expenditure and allowed depreciation as per eligible rate. Assessee carried the matter before the CIT(A) but without any success. 24. Before us the counsel stated that these are routine software expenditure which needs to be incurred every year in the up-gradation of the software are .....

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..... e Jurisdictional High Court (supra) we direct the Assessing Officer to delete the disallowance in respect of the software expenditure. Since the entire expenditure has been allowed the Assessing Officer shall add back the deprecation allowed on such expenditure. Ground No.5 is allowed. 28. Ground No.6 relates to the disallowance of expenditure on account of shifting of machines by treating the same as capital expenditure. The Assessing Officer noticed that the assessee has incurred expenditure of ₹ 395649/- on shifting its plant and machinery lying at OPS Chalthan which were shifted to OPS Palanpur. The assessee explained that since the plant and machinery were shifted dismantling was required alongwith loading transportation and un-loading of machines and, therefore, the expenditure incurred on such activity should be allowed as revenue expenditure. The Assessing Officer was of the opinion that such expenditure are capital in nature since the assessee would derive enduring benefit and treated the same as capital expenditure and allowed depreciation. Such action of the Assessing Officer was confirmed by the CIT(A). 29. Before us the counsel for the assessee stated that since .....

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..... sidering the facts the CIT(A) found that similar disallowance was made in A.Y.2002-03 and the issue has already been decided in favour of the assessee by the Tribunal and therefore, deleted the addition. 37. Before us the DR strongly supported the findings of the Assessing Officer. 38. Per contra the counsel for the assessee reiterated that the similar disallowance have deleted by the Tribunal in A.Y.2002-03. 39. A perusal of the assessment order show that the Assessing Officer himself has followed the assessment order for A. Y.2002-03 and since in that year the Tribunal has deleted the additions. We do not find any reason to interfere with the finding of the CIT(A). Ground No.2 is dismissed. 40. Ground No.3 relates to the deletion of the addition of ₹ 43690/-. 41. The Assessing Officer noticed that the assessee has incurred club membership fee on behalf of its employees of BOHO Club, Anand. The Assessing Officer was not convinced with the claim of this expenditure and made the additions. 42. The CIT(A) found that the Assessing Officer has not brought any material to suggest that the expenditure in question was not laid down in connection with the recreation facilities provid .....

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..... s 35(1)(i) of the Act, research must have been carried on by the assessee itself is not borne out by phraseology of the statutory provision. The assessee can claim the deduction even if the research is carried on by some other person on behalf of the assessee. 28. Second quarrel is in respect of contribution made by the assessee to Delhi University and Nagpur University. 29. The Assessing Officer was of the opinion that u/s 35(1) (ii) of the Act, the deduction of any sum paid to scientific research association is allowable if such association s object is undertaking of scientific research or to a university, college or other institution to be used for scientific research subject to fulfilment of certain conditions. 30. The Assessing Officer was of the opinion that though the assessee has furnished proof of approval under the I.T. Act, 1922, but has failed to produce any evidence under the provisions of ITAT Rules, 1962. * 31. We find that a similar dispute was co9nsidered by the the then Hon'ble High Court of Gujarat in the case of the appellant in the case of Special Civil Application No. 9876 of 2009 in order dated 10.07.2012 and at para 17 of its order the Hon'ble High C .....

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