TaxTMI 
TaxTMI 
2018 (4) TMI 691
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....ng the course of assessment that the assessee had discontinued its pigment operation at Kavesar (Thane) from 01.04.1999. However, the assessee continued to claim the expenses of such discontinued factory expenses in the year under consideration. The AO followed the order of his predecessor-in-office for the AY 2000-01 and disallowed the claim of expenditure of Rs. 11,98,226/- and depreciation of Rs. 1,22,102/- in relation to Kavesar Factory. 2.2 In appeal, the Ld. CIT(A) followed the order of his predecessor-in-office for the AY 2003-04 and directed the AO to allow the expenses in respect of power & fuel, electricity, rent, rate and taxes and watch and ward and restrict the disallowance to other expenses and depreciation. 2.3 Before us, the Ld. counsel of the assessee submits that the issue has been decided in favour of the assessee by the order of the ITAT for the AY 2002-03 and AY 2003-04. 2.4 On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 2.5 We have heard the rival submissions and perused the relevant materials on record. We find that the ITAT 'K' Bench, Mumbai in assessee's own case for AY 2003-04 (ITA No. 1525/Mum/2007) has followed the followi....
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....that the purchase of software is a revenue expenditure. In Asahi India Safety Glass Ltd. (supra) it is held that the extent of expenditure cannot be a decisive factor in determining its nature and treatment in books of account not conclusive. The Hon'ble High Court held that the software expenses were not to create new asset or a new source of income but to upgrade the system and thus the software expenditure is revenue expenditure. Facts being identical, we follow the ratio laid down in the above decisions and hold that the expenditure incurred by the assessee towards the purchase of application software is revenue in nature. Thus the 2nd ground of appeal is allowed. 4. The 3rd ground of appeal The CIT(A) erred in not grating deduction of Rs. 14,70,263/- claimed u/s 35D. 4.1 The AO found that the assessee had made a claim of Rs. 14,70,263/- u/s 35D being 1/10th of the expenses in relation to rights issue of shares. The AO followed the order of the CIT(A) and disallowed the above sum of Rs. 14,70,263/- u/s 35D. 4.2 In appeal, the Ld. CIT(A) followed the order of his predecessor-in-office for the AY 2003-04 and confirmed the disallowance made by the AO. 4.3 Before us, the Ld.....
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....had not attributed any expenditure towards earning exempt income u/s 14A. During the course of assessment proceedings, the AO vide order sheet noting dated 14.11.2006 asked the assessee to explain the reasons for not making disallowance u/s 14A in respect of tax-free income and investments. The assessee filed a submission before the AO quantifying the allocable expenses (excluding interest) at Rs. 3,71,000/-. However, the AO was not convinced with the said reply and made a disallowance of Rs. 55,02,480/- u/s 14A. 5.2 In appeal, the Ld. CIT(A) enhanced the disallowance u/s 14A by allocating other expenditure of Rs. 5.21 lacs and depreciation on H.O. assets to the exempt income. 5.3 Before us, the Ld. counsel of the assessee submits that the appellant had sufficient own funds and therefore, the disallowance of interest is not justified. Reliance is placed by her on the decision in Reliance Utilities 313 ITR 340 (Bom), HDFC Bank 366 ITR 505 (Bom). The Ld. counsel further refers to the order of the ITAT in assessee's own case for the AY 1999-2000 to AY 2003-04. 5.4 On the other hand, the Ld. DR relies on the order of the Ld. CIT(A). 5.5 We have heard the rival submissions and perus....
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....isallowance of Rs. 3,93,57,213/- made by the AO. 6.3 Before us, the Ld. counsel of the assessee submits that the appellant follows exclusive method of accounting for MODVAT. Reliance is placed by her on the decision in Indo Nippon Chemical Co. Ltd. 261 ITR 275 (SC), Mahavir Alluminium Ltd. 297 ITR 77 (Del), Mahalaxmi Glass Works Pvt. Ltd. 318 ITR 116 (Bom) and DCIT v. Hitech Plast Containers (I) Ltd. 2009 31 SOT 112 (Mum). The Ld. counsel further drew our attention to a recent decision dated 07.07.2017 by the Hon'ble Bombay High Court in CIT v. M/s Diamond Dye Chem Ltd. (ITA No. 146 of 2015). 6.4 On the other hand, the Ld. DR relies on the order passed by the Ld. CIT(A). 6.5 We have heard the rival submissions and perused the relevant materials on record. There is no dispute that the purchases made by the assessee are accounted for net of MODVAT credit. In M/s Diamond Dye Chem Ltd. (supra), the Hon'ble Bombay High Court held: "5. We have considered the submissions. It is not disputed that the assessee was liable to excise duty. The assessee got credit in the excise duty already paid on the raw materials purchased by it and utilized in the manufacturing of excisable goods. The....
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....he Act. 7.4 On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 7.5 We have heard the rival submissions and perused the relevant materials on record. It is found that the assessee is not the owner of the leased cars. It has not claimed depreciation u/s 32 in respect of the said cars. In the facts of the case, there is merit in the contentions of the Ld. counsel that the principal amount of lease rentals of Rs. 13,53,519/- be allowed as a deduction u/s 37(1) of the Act. Therefore, we delete the addition of Rs. 13,53,519/- made by the AO. Thus the 7th ground of appeal is allowed. 8. The 8th ground of appeal The CIT(A) erred in disallowing professional fees of Rs. 6,29,003/- by treating it as capital expenditure. Without prejudice to the aforesaid the CIT(A) has erred in not allowing depreciation thereon. 8.1 The assessee had incurred an expenditure of Rs. 6,29,003/- towards professional fees. The AO disallowed it on the basis that these expenditures were incurred in relation to a capital asset of an enduring nature. 8.2 In appeal, the Ld. CIT(A) upheld the disallowance made by the AO on the reason that these were capital expenditure. 8.3 Before us, the ....
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.... 9.3 Before us, the Ld. counsel of the assessee submits that the above issue has been decided by the ITAT against the assessee by their order for the AY 1998-99 to AY 2003-04. 9.4 On the other hand, the Ld. DR supports the order passed by the Ld. CIT(A). 9.5 We have heard the rival submissions and perused the relevant materials on record. In CIT v. Ravindranathan Nair (K) [2007] 165 TAXMAN 282 (SC), it is held: "21. At the outset, we may state that, in the present case, we are dealing with the law as it stood during assessment year 1993-94. At that time section 80HHC(3) of the Income-tax Act constituted a Code by itself. Subsequent amendments have imposed restrictions/qualifications by which the said provision has ceased to be a Code by itself. In the above formula there existed four variables, namely, business profits, export turnover, total turnover and 90 per cent of the sums referred to in clause (baa) to the said Explanation. In the computation of deduction under section 80HHC all four variables had to be taken into account. All four variables were required to be given weightage. The substitution of section 80HHC(3) secures profits derived from the exports of eligible goo....
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....d 7th for AY 2004-05. Facts being identical, our decisions for AY 2004-05 apply mutatis mutandis to AY 2005-06 in respect of the above grounds of appeal. 12. Then we are left with only the 5th ground of appeal which reads as under: The CIT(A) erred in confirming the disallowance on account of bad debts of Rs. 29,65,202/-. 12.1 The assessee had claimed an amount of Rs. 1,51,11,932/- on account of bad debts written off under the head 'operating and other expenses'. During the course of assessment proceedings, the AO asked the assessee to furnish the documentary evidence for write off of debts which were raised in the current and the last financial year i.e. FY 2003-04 and FY 2004-05. The assessee filed the said details before the AO. However, the AO was not convinced to the same and he held that "the assessee's contentions that the amounts are not recoverable may be acceptable in respect of debts which are more than two to three years old. However, the same cannot be said of the debts which pertain to sales of last financial year or in some cases to sales of current year itself." The AO also noted that the assessee failed to file the supporting documents/confirmations. On the a....