TMI Blog2017 (6) TMI 1374X X X X Extracts X X X X X X X X Extracts X X X X ..... -business nature, the ad-hoc disallowance of Rs.2 lakhs made by the AO was not warranted. We fully concur with the finding of the ld. CIT (Appeals) as even an estimation of disallowance needs some basis to justify the action of the AO in this regard as just and reasonable. It is an established proposition of law that even discretion is to be exercised judiciously. While examining the action of the AO in making the ad-hoc disallowance in question, CIT (Appeals) has noted that books of accounts were duly audited and no specific defects were found therein by the AO nor was any allegation that expenses had been incurred for non-business purposes. He has further noted that the assessee has shown better trading result during the year in compariso ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re is no estoppels against the law and just assessment is the object of the Legislature under the provisions of the I. T. Act. The first appellate order on the issue is comprehensive and reasoned one to which we fully concur with. The same is upheld. Ground No. 2 is accordingly rejected. - ITA No. 2585/Del/2012 - - - Dated:- 27-6-2017 - Shri I.C. Sudhir, Judicial Member And Shri O.P. Kant, Accountant Member For the Assessee : Shri Anil Kumar Chopra, F.C.A.; Shri V. K. Garg, Adv.; For the Department : Shri Amrit Lal, Sr. D.R. ORDER PER I. C. SUDHIR, J. M. : The Revenue has questioned first appellate order on the following grounds :- 1. Whether ld. CIT (Appeals) was correct on facts and circumstances of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ross profit ratio for the assessment years 2008-09 (in question), 2007-08 and 2006-07 was 24%, 19% and 17% respectively and net profit for these assessment years was 12%, 10% and 7% respectively. The ld. CIT (Appeals) observed that variation in expense of one head in a year as compared to earlier year cannot be the basis to make an addition, especially when overall gross profit and net profit was showing an increasing trend. He noted further that when books of accounts were duly audited and Assessing Officer did not point out any specific defects in the books of accounts and no expenses had been found to be of non-business nature, the ad-hoc disallowance of Rs.2 lakhs made by the Assessing Officer was not warranted. We fully concur with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eing satisfied with the explanation of the assessee has deleted the disallowance. 4.1 In support of the ground the ld. Sr. DR submitted that assessee itself had admitted that the expenditure incurred were capital in nature. Heavy expenses were incurred on brand building. The action of the Assessing Officer, thus cannot be held erroneous in treating said expenses as capital in nature on the ground that these expenses give benefit of enduring nature and further the assessee itself had recognized the same to be on capital account in its books of account. 4.2 The ld. AR, on the other hand, placed reliance on the first appellate order. He submitted that assessee is in the business of manufacture and sale of country liquor and Indian made f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... year the assessee had capitalized a sum of Rs.1,79,77,181/- under the head tangible / know-how and brand development in the books and had claimed depreciation thereon. However, after realizing that the expenses so capitalized are of Revenue in nature, the assessee vide its revised return claimed the same as revenue expense and consequently reduced the depreciation claimed thereon. The ld. CIT (Appeals) has noted the following material facts :- i) The appellant is in the business of manufacture and sale of country liquor and Indian made foreign liquor. ii) In the course of its business and for the marketing for its products the appellant incurs various expenses which are claimed and allowed as revenue expense. iii) As per the excis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the findings of the ld. CIT (Appeals) also because similar recurring expenses incurred in earlier years have been allowed as Revenue expenses. The decisions relied upon by the ld. CIT (Appeals) also strengthen the finding arrived at by him under the facts and circumstances of the present case on the issue. The Hon ble Supreme court in the case of Empire Jute Company Vs. CIT (supra) has been pleased to hold that it is only when an enduring advantage is in the capital field that the expenditure would be disallowable. If advantage of enduring benefit is in the Revenue field it would be on the Revenue account. The Hon ble jurisdictional High Court of Delhi in the case of CIT Vs. Siti Financial Consumer Fin. Ltd. (supra) has been pleased to hol ..... X X X X Extracts X X X X X X X X Extracts X X X X
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