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2013 (7) TMI 1054 - ITAT CHENNAIDisallowance of claim made under work-in-progress adjusted against opening reserves - Held that:- Assessee has incurred expenses for developing maps under manual process and has been charging such expenditure as revenue expenditure under material consumption based on number of copies sold every year. In the year under review , the assessee has switched over from manual map making process to digital map making process and the balance amount relating to manual map making process lying under work-in-progress 10 was written off against opening reserves, following the guidelines issued by ICAI in AS 26. It was the finding of the Commissioner of Income Tax (Appeals) that the expenditure incurred by the assessee as a revenue expenditure which was accounting under the head ‘material consumption’ in the normal course and as these expenses were incurred directly in connection with business, the claim of the assessee is in order. The Department could not rebut any of these findings of the Commissioner of Income Tax (Appeals). In the circumstances, we find no good reason to interfere with the findings of the Commissioner of Income Tax (Appeals) in deleting the disallowance made by the Assessing Officer. Disallowance of bad debts and non-recoverable advances - Held that:- We direct the Assessing Officer to allow the claim of the assessee as these debts were written off by the assessee in its books of account. Disallowance of expenses relating to medical devices division at Waluj, Aurangabad under section 37 - Held that:- Merely because there was no revenue by way of sales, it cannot be said that the assessee has not carried on any business in the relevant assessment year. It is not in dispute that these expenses were not incurred for the purpose of business. The only ground on which the disallowance made is that the assessee sold its medical devices division during the assessment year and there is no income from such division till its sale during the assessment year and therefore, it is not allowable expenditure which in our opinion is not justified. In the circumstances, we direct the Assessing Officer to delete the disallowance made. We reverse the order of the Commissioner of Income Tax (Appeals) on this issue. This ground of appeal of the assessee is allowed Not allowing the carry forward loss/depreciation relating to amalgamating company namely TTK Medical Devices Ltd. in the hands of the assessee. Addition on account of bad debts written off as these debts represent rental advance and deposits as nonrecoverable - Held that:- We find that the Assessing Officer while completing the assessment has disallowed thse deposits as part of other debts. There is no finding by the Assessing Officer that these amounts written off represent rental advance and deposits written off as non-recoverable which are not eligible to be allowed as bad debts under section 36(2)(i). In the circumstances, we feel that the Assessing Officer has to re-examine these debts afresh. Addition made under section 41(1) on account of cessation of liability - Held that:- No valid reason to interfere with the decision of the Commissioner of Income Tax (Appeals) in deleting the addition especially, when the assessee had reversed and paid these creditors in subsequent assessment years and proving that there is no cessation of liability. Expenditure incurred towards payment of logo charges is revenue in nature. Clearing and forwarding agent charges fixing rate at 3.2% on sales, we find no infirmity in the order of the Commissioner of Income Tax (Appeals) in holding that the depot service charges incurred by the assessee @ 3% on sales are reasonable and not excessive. In the circumstances, we affirm the order of the Commissioner of Income Tax (Appeals) on this issue. This ground of appeal of the Revenue is rejected.
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