2010 (9) TMI 1167 - AT - Income Tax

Issues Involved:
1. Disallowance of Rs. 11,151/- on account of trademarks.
2. Disallowance of Rs. 50,000/- being Stamp Duty paid on leased flat.
3. Disallowance of Rs. 8,53,076/- being the unutilized Modvat credit u/s 145A.
4. Disallowance of the Appellant's claim for commission payment of Rs. 13,45,256/-.
5. Treatment of software expenses of Rs. 1,96,350/- as capital in nature.
6. Consideration of miscellaneous income as part of the turnover for the purpose of deduction u/s 80HHC.

Summary:

1. Disallowance of Rs. 11,151/- on account of trademarks:
The A.O. treated the expenditure for trademark renewal as capital expenditure. The Tribunal held that since the expenditure was for the renewal of an existing trademark, it is revenue in nature, citing CIT vs. Finlay Mills Limited and CIT vs. Century Spinning Weaving And Manufacturing Company Ltd. The A.O. was directed to allow the amount.

2. Disallowance of Rs. 50,000/- being Stamp Duty paid on leased flat:
The A.O. and CIT(A) misunderstood that the assessee took the flat on lease, whereas the assessee had leased out the flat. The Tribunal noted that the stamp duty for registering the lease agreement should be allowed as revenue expenditure, referencing Cinceita, Richardson Hindustan, and Hoechst Pharma. The A.O. was directed to allow the same.

3. Disallowance of Rs. 8,53,076/- being the unutilized Modvat credit u/s 145A:
The Tribunal restored the issue to the A.O. to examine it afresh and make adjustments to the opening stock, purchases, and closing stock on a gross basis u/s 145A, following Mahalakshmi Glass Works and Mahavir Aluminium. The ground was considered allowed.

4. Disallowance of the Appellant's claim for commission payment of Rs. 13,45,256/-:
The A.O. disallowed the commission due to lack of details. The Tribunal found that the assessee provided sufficient evidence of services rendered by M/s. Namokar Enterprises and the payment of commission. The issue was restored to the A.O. to verify the quantum of commission payment. The ground was considered allowed.

5. Treatment of software expenses of Rs. 1,96,350/- as capital in nature:
The A.O. and CIT(A) treated the software expenses as capital expenditure. The Tribunal held that the expenditure for MS Windows 98 and MS Word 2000 is revenue in nature, referencing Amway India Enterprise vs. CIT and Varinder Agro. The A.O. was directed to allow the same and withdraw any depreciation granted. The ground was considered allowed.

6. Consideration of miscellaneous income as part of the turnover for the purpose of deduction u/s 80HHC:
The Tribunal noted that the issue requires examination by the A.O. to determine the nature of the miscellaneous income, referencing CIT vs. K. Ravindranathan Nair and CIT vs. Amber Exports India. The issue was restored to the A.O. for further examination. The ground was considered allowed.

Conclusion:
The appeal was considered allowed for statistical purposes. The order was pronounced in the open court on 24th September 2010.

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