2011 (8) TMI 1165 - AT - Income Tax

Summary

Issues involved: Cross appeals against the order of CIT(A)-4, Mumbai for the assessment year 2005-06 u/s 143(3) of the Income tax Act, 1961.

Issue 1 - Treatment of subscription paid for website:
The Assessing Officer treated subscription paid for a website for new employees recruitment as capital expenditure, disallowing it. However, ITAT found the expenditure to be revenue in nature as recruitment is an ongoing process, directing the AO to delete the disallowance u/s 37(1) of the Act.

Issue 2 - Disallowance of entertainment expenditure:
The appeal against the disallowance of entertainment expenditure amounting to 10% was dismissed as not pressed.

Issue 3 - Disallowance of write off of advances to employees:
The AO disallowed the write off of advances to employees due to lack of supporting evidence. ITAT observed that genuine write off of advances is revenue expenditure, remitting the matter back to the AO for fresh adjudication upon submission of complete details by the assessee.

Separate Judgement - Revenue's appeal:
- Ground 2 was dismissed as the CIT(A) had allowed the appeal based on a previous decision in favor of the assessee.
- Ground 3, involving the addition of 20% of repair expenses, was dismissed as the AO's disallowance lacked specific discrepancies in vouchers, leading to a generalized and vague observation. The CIT(A)'s deletion of the disallowance was upheld.

In conclusion, the appeal of the assessee was partly allowed, and the revenue's appeal was dismissed by the ITAT Mumbai on 29th August, 2011.