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2025 (1) TMI 381 - AT - Income TaxExpenditure incurred on CSR - Allowable business expenditure or not? - HELD THAT - Expenditure incurred on CSR activities may not have direct nexus with the activities of the assessee but it may have indirect and may bring goodwill to the assessee. We observed that similar view was expressed by the coordinate Bench in the case of Ranbaxy Laboratories Ltd. 2009 (6) TMI 126 - ITAT DELHI-I and decided the issue in favour of the assesse. Thus as the assessee has incurred expenditure for the development of their own staff/workers as well as in the general public interest without there being any obligation imposed upon them, ground decided in favour of assessee. Addition on account of Long-Term Capital Gain ( LTCG) on sale of land - determination of cost of acquisition for the land in question - adjustment of impairment loss - HELD THAT - Assessee has not brought on record after acquiring the assets from M/s. Brindavan Beverages, how the cost are allocated and for the purpose of registration, it has booked the value of Rs. 20,93,29,172/-, the combined value for land and building and when such slum sales are being recorded in the books of account the value has to be recorded on the basis of transfer value and if there is any difference between assets acquired and the liability, normally the difference would be charged to goodwill. Nothing has been brought on record to show that what is the value recorded by the assessee in FY 1999-00 after acquisition of the abovesaid factory with the parcel of freehold land and it has only filed fixed assets schedule it contains details of addition on freehold land of Rs. 15,66,92,008/- and also there are several additions in building as well. It is the duty upon the assessee only to show the fixed assets schedule prepared for the purpose of income-tax alone and in which value of respective assets are disclosed in terms of addition and deletions which tallies with the fixed assets schedule prepared for the purpose of Companies Act. No depreciation schedule prepared for the purpose of income-tax for AY 1999-00 to AY 2014-15 are submitted. The reason for demanding depreciation schedule is, the assessee has acquired not only freehold land but also various buildings. The assessee must have declared the buildings separately and claimed depreciation. No depreciation is allowed in freehold land. Therefore, the claim of the assessee due to business impairment loss adjustment has altered the value of freehold land which assessee has subtracted during the year upon sale is not acceptable and considering the fact that the index cost of acquisition has to be calculated from the actual cost of land acquired by the assessee in FY 1999- 00 - Decided against assesee. Disallowance on account of penalty paid for wrong CENVAT utilized - AO disallowed the said expenses holding the same to be in the nature of penalty for violation of any law for the time being in force - HELD THAT - As per the provisions of Section 37, Explanation 1, any expenditure incurred which is offence or prohibited by law shall not be deemed to be incurred for the purpose of business, which shall not be allowed to claim as business expenditure. That be the case, the issue under consideration is not yet settled, unless it is settled as compensation or compounding in nature, the same cannot be allowed to claim as expenditure. Therefore, the above expenditure is not allowable at this stage considering the nature of violation. Decided against assesee. Delayed payment of the Employees contribution to the Provident Fund, ESI and other welfare funds - HELD THAT - We observed that this issue is now settled in the case of Checkmate Service Pvt. Ltd. 2022 (10) TMI 617 - SUPREME COURT Accordingly, in our considered view, this issue is already settled in favour of the Department. Addition made by the AO on account of inventory loss and leakage - HELD THAT - We observed that the same issue arose in assessee s own case for AY 2010- 11 2023 (7) TMI 1150 - ITAT DELHI and the same was dismissed by a coordinate Bench of ITAT and the said order in AY 2010-11 has also been followed in subsequent AYs 2011-12 to 2013-14 and 2017-18. Disallowance of traffic challans and disallowance of deposits from customers to be allowed in favour of assessee as relying on assessee own case 2023 (6) TMI 393 - ITAT DELHI AY 2009-10 and 2023 (7) TMI 1150 - ITAT DELHI AY 2010-11 respectively. 1. ISSUES PRESENTED and CONSIDERED The legal judgment addresses several core issues:
2. ISSUE-WISE DETAILED ANALYSIS Disallowance of Traffic Challans
Disallowance of Deposits from Customers
CSR Expenditure
Long-Term Capital Gain on Sale of Land
Penalty for Wrong CENVAT Utilized
Delayed Payment of Employees' Contribution to Provident Fund and ESI
Inventory Loss and Leakage
3. SIGNIFICANT HOLDINGS Disallowance of Traffic Challans and Deposits from Customers: The Tribunal consistently allowed these disallowances in favor of the assessee, following precedents. CSR Expenditure: The Tribunal held that CSR expenditure could be allowed if it indirectly benefited the business, citing the Ranbaxy Laboratories Ltd. case. Long-Term Capital Gain on Sale of Land: The Tribunal upheld the AO's determination of the cost of acquisition, dismissing the assessee's appeal. Penalty for Wrong CENVAT Utilized: The Tribunal held that the penalty was not allowable as it was not yet settled as compensatory. Delayed Payment of Employees' Contribution to Provident Fund and ESI: The Tribunal followed the Supreme Court's decision, allowing the Department's appeal. Inventory Loss and Leakage: The Tribunal dismissed the Department's appeal, following past decisions in favor of the assessee. Final Determinations: The Tribunal partly allowed the assessee's appeals and partly allowed the Department's appeals, with specific directions for future reconsideration where applicable.
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