TaxTMI 
TaxTMI 
2016 (6) TMI 1421
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....TAT had allowed the appeal of the assessee holding that the revenue effect would be minimal whether the expenditure is treated as revenue or capital but not appreciating that the investment was in tools and not towards consumables and that investment in tools is a capital outlay. 3. The CIT(A) erred in deleting the disallowance of interest Rs. 13,45,687 following the decision of the ITAT for the AY 2008-09 without appreciating the fact that the issue has not reached a finality as the decision of the ITAT has not been accepted and an appeal u/s 260A is preferred against such decision 4. The CIT(A) erred in deleting the disallowance of interest Rs. 13,45,687 following the decision of the ITAT for the AY 2008-09 without appreciating the fact that the ITAT allowed the appeal holding that when there is no nexus between the interest beaming funds and the interest free advances, the presumption to be drawn is that the advances are out of the non-interest bearing funds without appreciating the fact that the assessee was reducing its profit margin by paying huge financial charges on loans taken from banks while simultaneously advancing interest free advances to its sister concerns out....
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....rd to the past experiences and the claims made from time to time. iv. That the CIT(A) ought to have appreciated that the provision can only be a specified percentage of the sales which is arrived at on a rational basis. v. That the CIT(A) failed to appreciate that the Appellant added back the unutilized amount of provision at the end of the financial year 2008-09 and a fresh provision was created at the end of the year for machinery under installation. vi. Without prejudice to the above and in any case the CIT(A) ought not to have disallowed the provision for the year as the net amount under the head was in fact an addition of Rs. 12,62,535/- to the income and not a claim for deduction. vii. That the order passed by the Commissioner of Income Tax (Appeal)-I to the extent questioned herein is otherwise bad and inoperative in law. Each of the foregoing grounds is without prejudice to the other and the Appellant craves leave to add to, amend or delete all or any of the foregoing either before or at the time of hearing of the appeal" 4. Briefly, facts of the case are that the assessee is a company engaged in the business of manufacture and sale of machine tool. Return of....
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....also not disputed that the assessee is following the said method of accounting for the past 14 years and no disallowance has been made in the previous years. As rightly pointed out by the learned counsel for the assessee, the Revenue effect would be very minimal whether the expenditure is treated as revenue in nature or treated as capital in nature and depreciation allowed thereon. Therefore, taking the totality of the facts into consideration, we hold that revenue ought to have allowed the revenue expenditure claimed by the assessee. This ground of appeal is accordingly allowed." The CIT(A) had followed the order of the Tribunal in the assessee's own case for assessment year 2008-09 and it is also not the case of the revenue that the decision was reversed by the Hon'ble High Court. In the circumstances, following the rule of consistency, we dismiss the ground of appeal raised by the revenue. 9. Ground Nos.3 and 4 relate to disallowance of interest of Rs. 13,45,687/- on the ground that interest-free loan was granted to sister concerns of M/s.Excel Foundries Ltd., and M/s.Bangalore Agrotech Ltd., The CIT(A) deleted the addition following the order of the Tribunal in the ass....
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....igh Court of Karnataka. In the circumstances, following the rule of consistency, we dismiss the ground of appeal raised by the revenue. 10. Ground Nos.5 and 6 relate to disallowance of salary expenses of R&D activity of Rs. 1,37,34,846/-. The AO disallowed the same holding them to be capital in nature and allowed depreciation. The CIT(A) after considering details of salary expenses found to be revenue in nature allowed the same. The revenue had not brought any evidence controverting the findings of the CIT(A). In the circumstances, the grounds of appeal raised by the revenue are dismissed. 11. Ground No.7 relates to addition on account of work-inprogress of Rs. 34,57,802/-. During the course of assessment proceedings, the AO found that there are negative balances aggregating to Rs. 17,28,941/- in respect of certain production orders. The AO observed that in order to bring negative work-inprogress to zero, double amount should be debited to production account and therefore, made addition of Rs. 34,57,802/- On appeal before the CIT(A), the CIT(A) restricted the addition to Rs. 17,28,941 by holding as follows: "8.3 I have carefully considered the appellant's submissions nd th....