TaxTMI 
TaxTMI 
2019 (8) TMI 406
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....2010 pertaining to A. Y. 2006-07. 2. This bunch of appeals were heard together and disposed of by this common order for the sake of convenience as common issues are involved in all the years. 3. We have heard the representatives of both the sides on the facts for A. Y.2004-05. 4. First we take up assesee's appeal. Ground No.1 is of general in nature and needs no separate adjudication. 5. Ground No.2 relates to the addition of Rs. 4149824/- being write back of provision and sundry balances of Rs. 3786505/-. 6. During the course of the scrutiny assessment proceedings the Assessing officer noticed that the assessee has written back excess provision of Rs. 4149824/- and sundry credit balances of Rs. 3786505/-. The Assessing Officer noticed that the assessee has not added the same u/s.41(1) for the purpose of computation of its total income. The assessee was asked to show cause as to why the same should not be added u/s. 41(1) of the Act. In its reply the assessee stated that these balances were transferred by NDDB as part of transfer agreement between the assessee and NDDB. It was brought to the notice of the Assessing Officer that the income of NDDB was not taxable under the inco....
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....spect of which the allowance or de has been made is in existence in that year or not; or (b) the successor in business has obtained10, whether in cash or in any other manner whatsoever, any amount in respect of which expenditure was incurred by the firstmentioned person or benefit in respect of the trading liability referred to in clause (a) by way of remission or cessation thereof, the amount obtained successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that pervious year." 11. A perusal of the aforementioned section shows that the amount is added to the income of the assessee only when an allowance or deduction has been made in the assessment for any year. As mentioned elsewhere the income of NDDB was not liable to tax as income tax Act was not applicable to NDDB. In our considered opinion when no allowance or deduction has been allowed to the predecessor there is no question of adding the same when the amounts are written back by the assessee. Ground No. 2 is allowed 12. Ground No.3 relates to the addition of Rs. 114....
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....il expenditure for earning the exempt income, therefore, no disallowance should be made u/s.14A of the Act. The reply of the assessee did not find any favour with the Assessing Officer who proceeded by disallowing 10% of the total exempt income as a reasonable expenditure for earning the exempt income and made the addition of Rs. 1734553/- which was confirmed by the CIT(A). 20. Before us the counsel for the assessee stated that the investments are coming from NDDB with a specific direction that these funds shall only be utilised on research and development. It is the say of the counsel that the assessee has only paid directors meeting fees and no other expenditure have been incurred by the assessee for earning the exempt income. 21. Per contra the DR strongly supported the findings of the Assessing Officer. 22. We have carefully considered the orders of the authorities below. There is no dispute that during the year the assessee has earned an exempt income on account of interest on tax free bonds. It is also not in dispute that all the investments are coming from NDDB. The only expenditure which has been incurred by the assessee is towards the board meeting fees. In our consid....
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....ing charges and travelling expenses. The final figure was a consolidation of expenses incurred under these sub-heads. The Tribunal rightly came to the conclusion that none of these resulted in either creation of a new asset or brought forth a new source of income for the assessee. The Tribunal classified the expenses as being recurring in nature to upgrade or to run the system. Therefore, it could not be said that the expenses brought about in an enduring benefit to the assessee. The extent of the expenditure could not be a decisive factor in determining its nature. The expenditure, in the financial year 1997-98 was for removing deficiencies which were found in the software installed in the earlier assessment year, and out of a sum of Rs. 1.71 crores a sum of Rs. 49 lakhs was incurred to modify, customize and upgrade the software installed, while the balance expenditure was used for development and implementation. The treatment of a particular expense or a provision in the books of account could never be conclusively determinative of the nature of the expense. An assessee could not be denied a claim for deduction which was otherwise tenable in law on the ground that the assessee ....
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....d No.1 is of general in nature and needs no separate adjudication. 34. Ground No.2, 3, 4, 5 and 6 are identical to ground No. 2,3,4,5, and 6 in ITA No.1021/Del/2011 (supra) though the quantum may differ. For a detailed reason given therein all these grounds are accordingly disposed of. ITA No.1113/Del/2011 (Revenue's appeal for A. Y.2005-06) 35. Ground No.1 relates to the deletion of the addition of Rs. 18,38,598/- made on account of lease rent. 36. During the course of scrutiny of assessment proceedings the Assessing Officer noticed that the assessee has claimed lease hold land expenses of Rs. 18,54,739/-. The assessee was asked to specify the period of lease, its nature and justification for claiming this expense. In its reply the assessee stated that it has taken land on lease at Kandla for the lease period of 30 years and at Kolkata for lease period of 30 years. It was further explained that in F. Y.2002-03 the assessee has acquired land at Vadodara on 99 years lease on which a yearly ground rent of Rs. 2200/-is required to be paid. The Assessing Officer was of the firm belief that the lease hold expenses has to be disallowed as capital expenditure and accordingly made the ....
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....h and development expenses. The Assessing Officer's findings are given at pages 9 to 14 of the assessment order. The CIT(A) deleted the disallowance and the finding of the CIT(A) are at para 5.6 of his order. 47. We have considered the assessment order and the order of the first appellate authority. This issue has been considered at length by the Tribunal in assessee's own case in ITA No.2875/Del/2013. The relevant finding of the coordinate bench read as under : 26. The bone of contention is the claim of deduction u/s 35(1) (i),(ii) & (iv) of the Act. The first reason for disallowing the claim of deduction is that research work was carried out by Mother Diary Foods Processing Ltd, Delhi and not by assessee and later on, part of costs were recovered from the assessee company. The Revenue alleges that the assessee itself had not carried out R & D activities. Thus the correlation of expenses incurred with the business of the assessee could not be established which is primarily required for allowance of deduction u/s 35(1 )(i) of the Act. 27. We find the answer to this quarrel is in the decision of the Hon'ble High Court of Bombay in the case of National Rayon Corporation Limited ....