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2015 (7) TMI 1122 - AT - Income TaxDisallowance of club expenses - Held that - It was brought to our notice by ld. AR that in the immediately preceding assessment year i.e. AY 2004-05, the Tribunal have allowed assessee s claim for club expenditure and against which the department has not filed any appeal before the Hon ble High Court. We also found that the issue is squarely covered by the decision of Hon ble jurisdictional High Court in the case of Otis Elevators Co. (India) Ltd. 1991 (4) TMI 53 - BOMBAY High Court . We have also found that Hon ble Supreme Court in the case of United Glass Mfg. Co. Ltd. 2012 (9) TMI 914 - SUPREME COURT has decided the similar issue in favour of the assessee. Thus we do not find any merit in the action of the AO for disallowing assessee s claim of club expenses - Decided in favour of assessee Disallowance of interest paid on borrowings utilized for purpose of acquisition of 100% share capital of Kanishka Housing Development Co. Ltd. - Held that - The assessee has claimed to have investment for acquiring land for constructing its hospital. On such investment, neither during the year nor in the future years assessee has earned any dividend income. Keeping in view the judicial pronouncements referred by the ld. AR, we restore the matter back to the file of AO for deciding afresh as per law. Disallowance of depreciation on management rights of Nagpur Hospital u/s.32(1)(ii) - Held that - We have considered rival contentions and found from the record that exactly similar issue was restored by the Tribunal to the file of AO in assessee s own case in the preceding year. Respectfully following the order of the Tribunal in assessee s own case, we restore this issue to the file of AO for deciding afresh after considering the decision cited by the ld. AR in support of its contention that assessee is entitled for depreciation of management rights of Nagpur Hospital u/s.32(1)(iii) of the Act Disallowance of interest - Held that - The advance given to Kanishka Housing Development Co. Ltd. was given as a commercial expediency, the same is, therefore, directed to be allowed. With regard to the advance given to Dr. Jay Prasanna, Dr. Bais, Wockhardt Ltd., however, nothing was placed on record to support the contention that advance was given to these persons as a commercial expediency. Accordingly, we confirm the disallowance. Disallowance of provision for leave encashment and provision for gratuity - Held that - No merit for disallowance of employees contribution. See Commissioner of Income Tax Versus M/s. Alom Extrusions Limited 2009 (11) TMI 27 - SUPREME COURT Disallowance of interest expenditure u/s.14A - Held that - It was brought to our notice that assessee s owned funds are more than the investment made during the year, therefore, no disallowance is warranted.For this purpose reliance was placed on the decision of Reliance Utilities & Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT and HDFC Bank Ltd., 2011 (6) TMI 774 - ITAT MUMBAI . Keeping in view the proposition of law laid down in above judicial pronouncements, we restore the matter back to the file of AO for deciding afresh in terms of above judicial pronouncement Disallowance of provision for fringe benefit tax while calculating book profit u/s.115JB - Held that - Provision for fringe benefit tax is an allowable deduction while computing book profit u/s.115JB as per the decision of the Hon ble Delhi High Court in the case of Vintage Distilleries Ltd., 2010 (1) TMI 56 - ITAT DELHI-H .
Issues:
1. Disallowance of club expenditure 2. Disallowance of interest paid on borrowings for acquisition of share capital 3. Disallowance under section 14A for not earning dividend income 4. Disallowance of depreciation on management rights 5. Disallowance of interest on interest-free funds advanced 6. Disallowance of incremental provision of leave encashment 7. Disallowance of provision for leave encashment and gratuity 8. Disallowance of employees' contribution to provident fund 9. Disallowance of interest expenditure under section 14A 10. Disallowance of provision for fringe benefit tax Analysis: 1. The Tribunal considered cross-appeals by the assessee and revenue against the CIT(A) order for the assessment years 2005-06 to 2007-08. The issue of disallowance of club expenditure was decided in favor of the assessee based on previous tribunal decisions and High Court rulings. 2. The next issue involved the disallowance of interest paid on borrowings for acquiring share capital. The Tribunal directed the Assessing Officer to reconsider the matter in light of the absence of dividend income earned by the assessee. 3. Regarding the disallowance under section 14A due to not earning dividend income, the Tribunal referred to various decisions cited by the assessee and directed the AO to review the claim for investment in land for hospital construction. 4. The Tribunal addressed the disallowance of depreciation on management rights and directed the AO to reconsider the issue based on previous tribunal rulings in the assessee's favor. 5. Disallowance of interest on interest-free funds advanced was partially allowed based on commercial expediency, with specific disallowances for certain recipients where commercial expediency was not established. 6. The issue of incremental provision of leave encashment was addressed, with the Tribunal upholding the CIT(A)'s decision to restrict the disallowance to the provision made during the year. 7. The Tribunal also upheld the allowance of provision for leave encashment and gratuity as ascertained liabilities not includible while computing profit under section 115JB, based on various judicial pronouncements. 8. Disallowance of employees' contribution to provident fund was rejected based on relevant court decisions cited by the assessee. 9. The disallowance of interest expenditure under section 14A was remanded back to the AO for fresh consideration based on the assessee's owned funds exceeding investments made. 10. Finally, the disallowance of provision for fringe benefit tax while calculating book profit under section 115JB was deemed allowable based on a decision of the Delhi High Court. In conclusion, the Tribunal allowed the assessee's appeals in part and dismissed the revenue's appeals, providing detailed reasoning and directions for each issue raised.
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