9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2013 (7) TMI 729 - AT - Income TaxDisallowance of the royalty on sales paid as capital expenditure - Held that - Payment towards royalty which was dependant on the quantum of the items manufactured was a revenue expenditure - the quantum of royalty depends upon the sales. - the royalty is paid at a certain percentage of sales it cannot be said that it gives an enduring benefit to the assesse relying upon the judgement of CIT Vs Kanpur Cigarettes (P) Ltd. (2005 (3) TMI 61 - ALLAHABAD High Court) and Mewar Sugar Mills Ltd. Vs CIT (1972 (9) TMI 12 - SUPREME Court) - royalty payments paid based on sales are allowable as deduction u/s. 10(2)(xv) - royalty payment based on sales are of revenue in nature court direct the AO to allow the claim of the assesse. Disallowance of 50% being expenses incurred through the credit card by employees for subscription, hotel, lodging and other expenses - Held that - CIT(A) has allowed the claim of expenditure to the extent of 50%, therefore there is no reason to tamper with the findings of the CIT(A) - Nothing has been brought on record to show the nature of the membership , whether the assessee has taken corporate membership in the various clubs or the individual directors/employees are members of these clubs as no such details are available on record ground dismissed appeal decided partly in favour of assessee
Issues:
1. Disallowance of royalty on sales as capital expenditure. 2. Disallowance of expenses incurred through credit card by employees. 3. Disallowance under section 14A of the Act. Issue 1: Disallowance of Royalty on Sales as Capital Expenditure The appellant contested the disallowance of royalty on sales paid to an associated concern as capital expenditure. The Assessing Officer considered the royalty payment as capital expenditure due to its enduring benefit nature. However, the appellant argued that since the royalty depended on sales, it should be treated as revenue expenditure. The tribunal referred to precedents, including the Allahabad High Court and the Supreme Court, to support the view that royalty based on sales is revenue in nature. Consequently, the tribunal directed the Assessing Officer to allow the claim of the assessee. Issue 2: Disallowance of Expenses Incurred through Credit Card by Employees The dispute involved the disallowance of expenses incurred through credit cards by employees for subscription, hotel, and other expenses. The Assessing Officer considered these expenses as personal and disallowed the entire sum. The appellant argued that the expenses were for business purposes, supported by details in the audit report. The tribunal, after considering the submissions, upheld the lower authorities' decision to restrict the disallowance to 50%, based on the lack of complete details regarding club fees. Issue 3: Disallowance under Section 14A of the Act Regarding the disallowance under section 14A of the Act, the Assessing Officer observed that the assessee claimed exempt dividend income without disallowing proportionate expenses. The tribunal acknowledged that Rule 8D was prospective from A.Y. 2008-09 but directed the Assessing Officer to make a reasonable disallowance considering the exempt income. As the appellant failed to substantiate the claim of no expenditure for earning exempt income, the tribunal upheld the direction for a reasonable disallowance, allowing the appeal for statistical purposes. In conclusion, the tribunal partially allowed the appeals concerning the disallowance of royalty on sales and disallowance under section 14A, while dismissing the appeal related to expenses incurred through credit cards. The decisions were based on legal precedents, factual submissions, and the nature of expenditures incurred by the assessee.
|
