TaxTMI 
TaxTMI 
2021 (2) TMI 1059
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....terest bearing funds and the interest free advances, the presumption to be drawn is that the advances are out of non-interest bearing funds without taking into consideration that the assessee is paying huge financial charges on the loan borrowals and recorded a perverse finding? (iii) Whether the Tribunal on the facts and circumstances of the case was correct in directing the Assessing Officer to allow the salaries as an allowable expenditure without appreciating the fact that the salaries to the employees are towards R & D for creating own design and therefore it is not in the nature of revenue expenses? (iv) Whether the Appellate Authorities were correct in holding that the deposit of property tax amounts to crystallized liability without appreciating the difference between the taxes actually paid under Section 43B of the Act and taxes deposited as per the directions of the Court, when the liability to tax is disputed by the assessee and recorded a perverse finding?". 2. Facts leading to filing of this appeal briefly stated are that the assessee is a company which is engaged in the business of manufacture and sale of machine tools. For the Assessment Year 2008-09, the assess....
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....ed by the assessee and the amount of salaries which were paid to its employees towards research and development activities was for the purpose of acquiring the intangible asset and therefore, the same was rightly treated as capital in nature by the Assessing Officer. However, the Tribunal, without assigning any reasons, has held that the salaries of the employees of the assessee engaged in research and development are revenue in nature. It is also submitted that the purpose of expenditure has to be looked into and purpose of payment of money was to clear an intangible asset and any expenditure incurred for intangible asset is capital in nature. 4. It is also urged that the benefit of deduction under Section 43B of the Act is available to an assessee on actual payment. In this connection, our attention has been invited to paragraph 8 of the order passed by the Assessing Officer as well as paragraph 29 of the order passed by the Tribunal. It is submitted that the Tribunal ought to have appreciated that the liability in the instant case is not crystalised as the assessee itself was disputing the liability. It is further submitted that the amount of Rs. 37,50,000/- which was deposite....
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....4,00,000/- as advances to interest free loans to its sister concerns. It is also pointed out that similar submissions were made before the Tribunal which is recorded in paragraph 16 of the order and the aforesaid fact was not disputed by the departmental representative before the Tribunal. It is also pointed out that in case the assessee has its own funds, the legal presumption arises that the assessee has advanced interest free loans to its sister concerns from its own funds and therefore, the question of discharging the onus does not arise. It is further submitted that the nature of expenditure has to be determined in order to decide whether the same is revenue or capital in nature. In this connection, our attention has been invited to paragraph 22.1 of the memorandum of appeal which was filed before the Commissioner of Income Tax (Appeals) in which it is pointed out that a sum of Rs. 1,31,05,337/- was paid by the assessee on account of salaries due to the employees and only a sum of Rs. 40,00,000/- was paid to a Singapore Company which was its subsidiary concern. 6. While referring to the third substantial question of law, it is pointed out that the revenue has only questioned....
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..... MODIPON LTD. & ANR. (2018) 400 ITR 1 (SC). 6. We have considered the submissions made on both sides and have perused the record. We may proceed to deal with the substantial questions of law ad seriatum. So far as the claim of the assessee for write off of expenditure relating to loose tools, the Assessing Officer has disallowed the claim for expenditure of the assessee amounting to Rs. 4,41,08,588/- on the ground that despite opportunity being given, the assessee has failed to produce the complete details of the materials received including inventory of materials, date, time and delivery of the loose tools. The assessee company has also failed to produce the material receipt register. Though it has been contended by the assessee before the tribunal as recorded in para11 of the order passed by the tribunal that assessee had produced the C.D. containing the details as requested by the Assessing Officer at the time of hearing. However, the tribunal has not recorded any finding with regard to aforesaid contention of the assessee and in para 14 has recorded the finding in favour of the assessee. In view of the reasoning assigned by the Assessing Officer in his order for disallowing t....