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2013 (3) TMI 121 - AT - Income TaxExpenditure on furniture and fixture - current repairs - capital or revenue in nature - assessee has to create and maintain the cabins to be given on rent to tenants as business centre. - held that - The A.O. has basically gone on the presumption that the amount incurred being huge is capital in nature and is not current repair and in the previous year such expenses have even capitalised by the assessee. We find the ld. CIT(A) while allowing the claim of the assessee merely relied on the arguments of the assessee that the incurrence of the expenses and the genuineness of payments to various parties are not doubted. According to the ld. CIT(A) the property belongs to MMTC and the assessee has to make some changes in the existing furniture as per the need of the tenant and no new asset has come into existence. - matter remanded back for fresh consideration. Uniform expenses - A.O. doubted the requirement of so many pieces of safari suits. According to him the bills dtd. 2.3.2005 & 21.03.2005 appear to have been prepared on one date at the fag end of the year so as to inflate the expenses. Further the assessee has also failed to deduct the TDS from such payments as stitching charges come under works contract. - held that - The various staff in the business centre are usually provided with uniform. Merely because the stitching charges are more than the cost of the cloths, the same, in our opinion, cannot be a ground for disallowing the expenditure. - Decided in favor of assessee.
Issues Involved:
1. Deletion of addition for expenditure on furniture and fixtures. 2. Deletion of addition for income receivable from certain parties. 3. Deletion of addition for prior period expenses. 4. Deletion of addition for building repair and maintenance expenses. 5. Deletion of addition for repairs and maintenance charges paid to MMTC Ltd. 6. Deletion of addition for miscellaneous expenses on cloth material and stitching charges. 7. Deletion of disallowance of depreciation on computers. Detailed Analysis: 1. Deletion of Addition for Expenditure on Furniture and Fixtures: The Revenue challenged the deletion of Rs. 62,64,813/- incurred on furniture and fixtures, arguing these were capital expenditures. The assessee, engaged in running a business center, claimed these as revenue expenses. The AO disallowed the claim, treating the expenses as capital in nature. The CIT(A) allowed the claim, stating the expenses were genuine and necessary changes were made as per tenant needs, without creating new assets. The Tribunal found the AO and CIT(A) did not properly appreciate the joint venture nature of the business and restored the issue to the AO for fresh adjudication, directing a detailed examination of the joint venture agreement and the nature of expenses. 2. Deletion of Addition for Income Receivable from Certain Parties: The Revenue contested the deletion of Rs. 26,39,000/- as income receivable from Glenmark Laboratories Ltd. and Nutricia (India) Pvt. Ltd., arguing the assessee raised bills but did not recognize the income due to disputes. The AO added the amount, stating the assessee followed the mercantile system. The CIT(A) deleted the addition, noting the AO did not provide sufficient evidence. The Tribunal restored the issue to the AO for reconsideration, allowing the assessee to substantiate its claim with additional evidence. 3. Deletion of Addition for Prior Period Expenses: The Revenue disputed the deletion of Rs. 2,44,800/- for prior period expenses related to a conference, arguing the expenses did not pertain to the relevant financial year. The AO disallowed the claim, while the CIT(A) allowed it, citing a dispute with the creditor and the crystallization of liability in the current year. The Tribunal restored the issue to the AO to verify if the bill was an additional one over and above the previous year's bill. 4. Deletion of Addition for Building Repair and Maintenance Expenses: The Revenue challenged the deletion of Rs. 16,20,415/- for building repair and maintenance, arguing the assessee did not prove the genuineness of expenses and the amounts remained outstanding. The AO disallowed the claim due to lack of details and TDS deduction. The CIT(A) allowed the claim, stating non-payment at year-end cannot be a ground for disallowance. The Tribunal restored the issue to the AO, directing the assessee to provide evidence substantiating the expenses. 5. Deletion of Addition for Repairs and Maintenance Charges Paid to MMTC Ltd.: The Revenue contested the deletion of Rs. 8,74,935/- paid to MMTC Ltd. for AC maintenance, arguing no liability existed as per the agreement and TDS was not deducted. The AO disallowed the claim under section 40(a)(ia). The CIT(A) deleted the disallowance, stating it was a reimbursement of expenses, and MMTC had deducted TDS. The Tribunal upheld the CIT(A)'s order, confirming the payment was a reimbursement and no TDS was required. 6. Deletion of Addition for Miscellaneous Expenses on Cloth Material and Stitching Charges: The Revenue disputed the deletion of Rs. 6,36,337/- for expenses on uniforms, arguing the assessee did not prove the genuineness of bills and the stitching charges were unusually high. The AO disallowed the claim, suspecting inflated expenses. The CIT(A) allowed the claim, stating the AO misunderstood the details and the bills were for cloth purchase, not stitching. The Tribunal upheld the CIT(A)'s order, finding no serious discrepancy. 7. Deletion of Disallowance of Depreciation on Computers: The Revenue challenged the deletion of Rs. 9,43,639/- for depreciation on computers, arguing the existence of computers was not proven. The AO disallowed the claim, suspecting bogus purchases. The CIT(A) allowed the claim, stating the AO could have verified the payments in the subsequent year. The Tribunal upheld the CIT(A)'s order, noting the AO did not add back the purchase amount, indirectly accepting the purchase, and found no evidence showing the assessee did not own or use the computers. Conclusion: The Tribunal restored several issues to the AO for fresh adjudication, emphasizing the need for detailed examination and proper substantiation by the assessee. It upheld the CIT(A)'s orders on certain issues, finding no infirmity in the reasoning provided. The appeals were partly allowed for statistical purposes.
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