TaxTMI 
TaxTMI 
2015 (4) TMI 150
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....epairs and maintenance. It was also found that the assessee itself has disallowed a sum of Rs. 201,800/- treating as capital expenditure and claimed depreciation on it. It was explained that these expenditures were not incurred for the purchase of any kind capital assets and since not asset of enduring benefit has been acquired, these expenditures cannot be capitalized as capital assets. The explanation of the assessee was not accepted by the assessing officer who 3213, 2714/M/2009 3 and 4129/Mum/2008 treated a sum of Rs. 4,48,144/- as capital expenditure and allowed depreciation as per the provisions of law. 3. The assessee carried the matter before the ld CIT(A) and explained that the expenditures were incurred on networking which are revenue in nature. It was further pointed out that the assessee has deducted tax at source on some of the payments which itself shows that the expenditure are revenue in nature. The ld.CIT(A) was convinced by the submissions made by the assessee. However, while deleting the addition made by the AO, the ld.CIT(A) confirmed the addition of Rs. 30,000/- being the license purchased for window. Aggrieved by this the assessee is before us. 4. We have ca....
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....ooks of account of the assessee are audited and there is no mention in the audit report that there is any discrepancy in the accounting of expenditure. The ld.CIT(A) finally concluded by holding that prior period expenditure cannot be allowed in this year. The ld. CIT (A) was convinced that the AO was justified in disallowing the expenditure on the ground that the assessee has not claimed the expenditure in the original return nor in the revised return. Aggrieved by this the assessee is before us. 6. Before us, the ld.counsel reiterated what has been stated before the lower authorities. The ld. counsel brought to our notice the noting appended to the financial statement and pointed out that in the financial statement itself the assessee has explained how the financial irregularities have perpetrated by the Chief Finance Officer and an employee. The said note is exhibited at pages 34 and 35 of the paper book. The ld. Counsel further brought to our notice Exs.178 to 190 and explained that the detailed expenditure of each transaction was explained to the AO during the course of assessment proceedings itself. The ld. counsel further stated that every item of expenditure has been expla....
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....e of Badridas Daga V/s CIT reported in 34 ITR 10) (SC) has held that "the losses which have been suffered by the assessee as a result of misappropriation by an employee have (1) which was incidental to the carrying on the business and should therefore be deducted in computing the profit of the business." 10. It would not be out of place to mention here that a FIR has also been lodged against the Chief Finance Officer which was brought to the notice of the AO which clearly shows that the defalcation has taken place. 11. Considering all these facts in totality in the light of judicial decisions mentioned hereinabove. In our considered opinion, since fraud and financial irregularities were detected during the year under consideration. The claim of such financial irregularities has to be allowed during the year under consideration itself. We find that the complete details of transactions were submitted by the assessee before the AO. The AO did not care to verify the same. The assessment order pertains to assessment year 2005-06 and we are entering in the assessment year 2015-16. Ten years have since been lapsed, it would be gross injustice to the assessee, if we restore this issue to....
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....s a trading asset or as part of circulating capital embarked in business. But, if on the other hand, the foreign currency is held as a capital asset or as fixed capital, such profit or loss would be of capital nature." 6.5 Considering the facts of the case in the light of ratio laid down by the Hon'ble Supreme Court, we set aside the finding of the ld. CIT(A) and direct the AO to delete the addition of Rs. 1,43,000/- Ground No.3 of the appeal is allowed. 17. In the result, the appeal filed by the assessee is allowed. I.T.A. No.3213/Mum/2009 (By Revenue) The Revenue has take four substantive grounds in this appeal. 18. Ground No.1 relates to deletion of Rs. 4,88,86,386/- added back by the AO under section 40(a)(ia) of the Act. 19. During the course of assessment proceedings, the assessee was asked to reconcile the expenses debited in the profit and loss account with TDS done on it. The assessee filed reconciled 3213, 2714/M/2009 11 and 4129/Mum/2008 statement. The AO noticed that the TDS has not been made for certain expenditures totaling to Rs. 4,88,86,386/-.The AO proceeded by disallowing the same u/s 40(a)(ia) of the Act. 20. Before the ld.CIT(A), the assessee once again ....
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....ssessee explained that NPIL incurred advertisement expenditure and the assessee reimbursed the same and hence NPIL has to deduct tax at source and if the assessee is required to make TDS it would amount to double taxations since, expenditure is subject to TDS by NPIL. After considering the entries of the statement, the ld.CIT(A) found that the assessee has simply made reimbursement and therefore not required to make further TDS. The ld.CIT(A) deleted the entire addition. 26. Before us, the ld. DR supported the assessment order, the ld. counsel of the assessee reiterated the same facts what has been stated before the lower authorities. It is an undisputed fact that the advertisement expenses have been incurred by the NPIL. It is also an undisputed fact that the assessee has simply credited it to the account of NPIL as reimbursement of the expenditure. It is further found that NPIL has made TDS on the advertisement expenses. All that being the facts of the matter, we do not find any reason to interfere with the finding of the ld CIT(A). The ground No.3 is accordingly dismissed. 27. Ground No.4 relates to deletion of Rs. 21,84,331/- added by the AO being an amount of expenditures pa....