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of <h1>Tribunal Decisions on Expense Disallowances and Deductions</h1> <h3>M/s. Kirloskar Oil Engines Ltd. Versus The DCIT, ACIT, Pune And Vice-Versa.</h3> M/s. Kirloskar Oil Engines Ltd. Versus The DCIT, ACIT, Pune And Vice-Versa. - TMI Issues Involved:1. Disallowance of expenses under section 14A.2. Disallowance out of aircraft expenses.3. Disallowance of prior period expenses.4. Disallowance of bad debts and irrecoverable balances written off.5. Disallowance out of club expenses.6. Disallowance out of vehicle expenses.7. Disallowance out of lease rent on cars.8. Disallowance out of telephone expenses.9. Disallowance out of repairs expenditure.10. Disallowance of loss on forward contract cancellation.11. Disallowance out of advertisement and publicity expenses.12. Disallowance of liquidated damages.13. Disallowance out of sales and service charges.14. Disallowance out of legal and professional fees.15. Disallowance of provision for leave encashment.16. Computation of book profits under section 115JB.17. Disallowance of remuneration/commission paid to Directors.18. Disallowance of administrative and managerial expenses for earning tax-free dividends.19. Disallowance of penal interest.20. Disallowance of interest paid not for business purposes.21. Disallowance of interest relatable to investment in bonds and shares.22. Disallowance of liaison expenses.23. Disallowance out of debenture related expenses.24. Disallowance of CENVAT credit.25. Deletion of addition on account of lease rental income.26. Re-assessment proceedings under section 147.27. Disallowance of club expenses.Detailed Analysis:1. Disallowance of Expenses under Section 14A:The Tribunal upheld the disallowance of Rs. 25,000/- under section 14A for the assessment year 2001-02, as the assessee did not press this ground. Similar disallowances were upheld for subsequent years with minor variations in amounts.2. Disallowance out of Aircraft Expenses:The Tribunal upheld a disallowance of 15% out of aircraft expenses for non-business use, following earlier years' decisions.3. Disallowance of Prior Period Expenses:For the assessment year 2001-02, the Tribunal allowed the deduction of Rs. 42,70,888/- for prior period expenses, except for Rs. 1,41,890/- on account of sales tax and Rs. 9 lakhs on account of TDS. Similar principles were applied in subsequent years.4. Disallowance of Bad Debts and Irrecoverable Balances Written Off:The Tribunal directed the Assessing Officer to verify the write-off of Rs. 19,02,884/- due from Mysore Kirloskar Ltd. and allowed the deduction of Rs. 30 lakhs out of Rs. 93,66,115/- claimed for debit balances written off, disallowing the rest.5. Disallowance out of Club Expenses:The Tribunal allowed the deduction of club entrance fees, treating it as revenue expenditure, following the Gujarat High Court's decision.6. Disallowance out of Vehicle Expenses:The Tribunal deleted the disallowance of 2% of vehicle expenses for non-business use, holding that incidental personal use by officers was treated as perquisites.7. Disallowance out of Lease Rent on Cars:The Tribunal deleted the disallowance of 2% of lease rent on cars, following the same reasoning as for vehicle expenses.8. Disallowance out of Telephone Expenses:The Tribunal deleted the disallowance of Rs. 1 lakh out of telephone expenses, following the same reasoning as for vehicle expenses.9. Disallowance out of Repairs Expenditure:The Tribunal allowed the deduction of Rs. 44,27,538/- for repairs and maintenance, treating it as revenue expenditure.10. Disallowance of Loss on Forward Contract Cancellation:The Tribunal allowed the deduction of Rs. 46,583/- for loss on forward contract cancellation, treating it as revenue expenditure.11. Disallowance out of Advertisement and Publicity Expenses:The Tribunal remitted the issue back to the Assessing Officer to verify the nature of expenses and upheld a 5% disallowance out of guest expenses, presentation articles, and general expenses.12. Disallowance of Liquidated Damages:The Tribunal allowed the deduction of liquidated damages, holding that they were paid for breach of contract and not for any infraction of law.13. Disallowance out of Sales and Service Charges:The Tribunal upheld the disallowance of Rs. 18,85,000/- for sales and service charges, as the assessee failed to establish the factum of liability.14. Disallowance out of Legal and Professional Fees:The Tribunal dismissed the ground as not pressed.15. Disallowance of Provision for Leave Encashment:The Tribunal allowed the deduction of Rs. 2,11,90,000/- for leave encashment, following the Supreme Court's decision in Bharat Earth Movers.16. Computation of Book Profits under Section 115JB:The Tribunal held that the book profits under section 115JB could not be taxed till unabsorbed losses of the amalgamating company were adjusted, remitting the issue back to the Assessing Officer for verification.17. Disallowance of Remuneration/Commission Paid to Directors:The Tribunal upheld the CIT(A)'s deletion of the disallowance, noting that the remuneration/commission was within the limits prescribed under the Companies Act.18. Disallowance of Administrative and Managerial Expenses for Earning Tax-Free Dividends:The Tribunal upheld the CIT(A)'s decision to restrict the disallowance to Rs. 25,000/-.19. Disallowance of Penal Interest:The Tribunal upheld the CIT(A)'s deletion of the disallowance, treating the penal interest as compensatory in nature.20. Disallowance of Interest Paid Not for Business Purposes:The Tribunal upheld the CIT(A)'s deletion of the disallowance, noting that the advances were made for business purposes.21. Disallowance of Interest Relatable to Investment in Bonds and Shares:The Tribunal upheld the CIT(A)'s deletion of the disallowance, noting that the borrowings had come down and there was no nexus established between borrowings and investments.22. Disallowance of Liaison Expenses:The Tribunal remitted the issue back to the Assessing Officer for verification.23. Disallowance out of Debenture Related Expenses:The Tribunal upheld the CIT(A)'s deletion of the disallowance, treating the expenses as revenue in nature.24. Disallowance of CENVAT Credit:The Tribunal deleted the disallowance of Rs. 18,90,099/- for un-utilized CENVAT credit, following the Supreme Court's decision in Indo Nippon Chemicals.25. Deletion of Addition on Account of Lease Rental Income:The Tribunal upheld the CIT(A)'s deletion of the addition, noting that the income was offered in a subsequent year.26. Re-Assessment Proceedings under Section 147:The Tribunal upheld the CIT(A)'s deletion of the addition made in re-assessment proceedings, noting that the income did not accrue to the assessee in the year under consideration.27. Disallowance of Club Expenses:The Tribunal upheld the CIT(A)'s deletion of the disallowance, treating the expenses as revenue in nature.
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