2014 (2) TMI 274 - AT - Income Tax

Disallowance of Interest on old outstanding advances Advances given for bonafide business consideration and commercial expediency Held that - Following the decision of the assessee as decided in earlier year the Matter remitted back to the AO for fresh consideration. Disallowance of 1/10th of renovation expenses Allowability of deferred revenue expenses Held that - For allowability of deferred revenue expenditure, there cannot be different decision in every year - The Revenue should either accept the assessee s claim of deferred revenue expenditure and accordingly allow the spread-over of deduction in number of years or reject the assessee s claim and allow the deduction for expenditure in the year in which expenditure was incurred the order set aside and the matter remitted back to the AO for fresh adjudication and the Decision of CIT Vs. Industrial Finance Corporation of India Ltd. 2009 (9) TMI 877 - DELHI HIGH COURT . Restriction on account of consultancy charges Held that - The Assessing Officer disallowed the entire claim of consultancy charges on the ground that the assessee is not liable to make any payment to International Caterers Pvt.Ltd. because they have not provided any services - Jurisdictional High Court agreed with International Caterers Pvt.Ltd. and held that they provided the services to the assessee and the assessee is liable to make the payment of consultancy charges to them - the decision of Hon ble Jurisdictional High Court is binding upon the assessee as well as the revenue authorities for computing the assessee s liability in respect of consultancy charges the CIT(A) rightly allowed the deduction of consultancy charges the matter remitted back to the AO to allow the deduction of consultancy charges Decided in favour of Assessee.

Summary

Issues involved:
1. Disallowance of interest on outstanding advances
2. Disallowance of renovation expenses as deferred revenue expenditure
3. Restriction of depreciation on car
4. Disallowance of consultancy charges to International Caterers Pvt. Ltd.

Issue 1: Disallowance of interest on outstanding advances
The appellant contested the disallowance of interest on old outstanding advances, arguing that the advances were for business purposes. Both parties agreed to restore the matter to the Assessing Officer based on a similar issue in the previous year. The Tribunal set aside the orders and directed the Assessing Officer to readjudicate the issue.

Issue 2: Disallowance of renovation expenses as deferred revenue expenditure
The appellant claimed 1/10th of renovation expenses as deferred revenue expenditure, citing the principle of matching concept. The Tribunal noted the Revenue's inconsistent stance over the years and referred to a High Court decision allowing spreading over such expenses. The Tribunal set aside the previous orders and instructed the Assessing Officer to reevaluate the issue considering the High Court decision.

Issue 3: Restriction of depreciation on car
The appellant raised a discrepancy in the depreciation percentage allowed by the Assessing Officer. The Tribunal acknowledged the typographical error but found the issue not seriously contested by the appellant. Consequently, the ground was treated as not pressed.

Issue 4: Disallowance of consultancy charges to International Caterers Pvt. Ltd.
The Assessing Officer disallowed consultancy charges paid to a company, which was later challenged by the appellant. The Tribunal admitted an additional ground raised by the appellant and directed the Assessing Officer to allow the deduction based on a High Court decision. The Tribunal set aside the previous orders and instructed the Assessing Officer to reconsider the matter in light of the High Court decision.

In conclusion, the Tribunal partially allowed the appellant's appeal and allowed the Revenue's appeal for statistical purposes. The decision was pronounced in open court on 14th June 2013.