TMI Blog2016 (6) TMI 1421X X X X Extracts X X X X X X X X Extracts X X X X ..... loan was granted to sister concerns - CIT(A) deleted the addition following the order of the Tribunal in the assessee s own case for assessment year 2008-09 wherein it was held that in absence of nexus between interest-bearing funds and advance-free advance, no disallowance was called for - HELD THAT:- No finding by the AO that there is nexus between the interest bearing funds of the assessee and the interest-free advances of the sister concerns. The only reason for the disallowance is that the assessee is paying interest on the loans taken by it, while it has given interest free advances to sister concerns, when there is no nexus between the interest bearing funds and the interest free advances, the presumption to be drawn is that the advances are out of the non interest bearing funds of the assessee as held by the Hon'ble supreme Court in the case of Reliance Utilities and Power Ltd. [ 2009 (1) TMI 4 - BOMBAY HIGH COURT ] therefore, it has to be presumed that the interest free advances are out of the own funds of the assessee and, therefore, no disallowance of interest is called for. The assessee's contention of the commercial expediency of advancing the loans is not a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment year 2009-10. 2. The revenue raised the following grounds of appeal in ITA No.211/Bang/2014: 1. The order of the Learned CIT (Appeals) is opposed to law and the facts and circumstances of the case. 2. The CIT(A) erred in deleting the disallowance of ₹ 3,17,10,684 following the decision of the ITAT for the AY 2008-09 without appreciating the fact that the issue has not reached a finality as the decision of the TAT has not been accepted and an appeal u/s 260A is preferred against such decision and that the ITAT had allowed the appeal of the assessee holding that the revenue effect would be minimal whether the expenditure is treated as revenue or capital but not appreciating that the investment was in tools and not towards consumables and that investment in tools is a capital outlay. 3. The CIT(A) erred in deleting the disallowance of interest ₹ 13,45,687 following the decision of the ITAT for the AY 2008-09 without appreciating the fact that the issue has not reached a finality as the decision of the ITAT has not been accepted and an appeal u/s 260A is preferred against such decision 4. The CIT(A) erred in deleting the disallowance of in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . That the CIT(A) erred in holding that the provision created for erection and commissioning are only on an estimated basis and are contingent in nature. He has further failed to appreciate the settled legal position that if a business liability has definitely arisen in an accounting year, the deduction based on rational/reasonable estimates ought to be allowed in respect of the said year, although the liability may be exactly quantified and discharged at a future date. iii. That the CIT(A) ought to have appreciated that the provision was scientifically based and arrived at having regard to the past experiences and the claims made from time to time. iv. That the CIT(A) ought to have appreciated that the provision can only be a specified percentage of the sales which is arrived at on a rational basis. v. That the CIT(A) failed to appreciate that the Appellant added back the unutilized amount of provision at the end of the financial year 2008-09 and a fresh provision was created at the end of the year for machinery under installation. vi. Without prejudice to the above and in any case the CIT(A) ought not to have disallowed the provision for the year as the ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... short span of life as depreciation and as expenses and others whi ch have a long span of l i fe as depreciable capital asset. Claiming deduction on ad hoc basis at 50% is not permissible and allowable as deduction under the Income-tax Act. The Hon'ble ITAT, Bangalore for the assessment year 208-09 decided the issue as under: 14. Having heard both the parties and having considered their rival contentions, we find that the Revenue has not disputed the incurring of expenditure by the assessee in purchase of the tools. The only reason for the disallowance is that it is not revenue in nature but is of capital in nature. It is also not disputed that the assessee is following the said method of accounting for the past 14 years and no disallowance has been made in the previous years. As rightly pointed out by the learned counsel for the assessee, the Revenue effect would be very minimal whether the expenditure is treated as revenue in nature or treated as capital in nature and depreciation allowed thereon. Therefore, taking the totality of the facts into consideration, we hold that revenue ought to have allowed the revenue expenditure claimed by the assessee. This ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. This ground of appeal is accordingly allowed for the above reasons. 5.4 It is seen that the position in this regard is same in the year under appeal when compared with the assessment year 2008-09. Therefore, respectfully following the decision of the Hon ble ITAT, Bangalore for the assessment year 2008-09 in the appellant s own case, the appellant s claim is allowed and the disallowance of ₹ 13,45,687/-0 made by the AO is deleted. The CIT(A) had followed the order of the Tribunal in the assessee s own case for assessment year 2008-09 and it is also not the case of the revenue that the decision was reversed by the Hon ble High Court of Karnataka. In the circumstances, following the rule of consistency, we dismiss the ground of appeal raised by the revenue. 10. Ground Nos.5 and 6 relate to disallowance of salary expenses of R D activity of ₹ 1,37,34,846/-. The AO disallowed the same holding them to be capital in nature and allowed depreciation. The CIT(A) after considering details of salary expenses found to be revenue in nature allowed the same. The revenue had not brought any evidence controverting the findings of the CIT(A). In the circumstances, the gro ..... 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