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TMI Blog2014 (2) TMI 935X X X X Extracts X X X X X X X X Extracts X X X X ..... n and the service tax payable for financial year 2007-08 was duly paid on such recovery within the stipulated period - No such verification has been made either by the A.O. or by the ld. CIT(A), the matter should be restored to the file of the A.O. for such verification – The issue has been restored for fresh adjudication. Expenditure incurred for protecting the ownership of hoardings – Held that:- The displaying of hoardings being the business of the assessee, the expenditure incurred for right to display is thus business right of the assessee – If the expenditure incurred for protection of business rights, is revenue in nature – If the expenditure is incurred for acquisition of right to display will fall in the definition of capital expenditure – Relying upon the decision in the case of Dalmia Jain & Co. [1971 (7) TMI 2 - SUPREME Court] - In deciding whether a particular expenditure is capital or revenue in nature, what the courts have to see is whether the expenditure in question was incurred to create any new asset or was incurred for maintaining the business of the company - If it is the former it is the capital expenditure; if it is the latter, it is the revenue expenditur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iness expediency in providing such substantial credits by the assessee to its group concerns especially when its total turnover for the year under consideration was only Rs. 1.28 crores. When he required the assessee to offer its explanation in the matter, it was submitted on behalf of the assessee that its entire turnover was related to the sister concerns and there was no alternative but to allow credit to the said concerns. It was also pointed out by the assessee that the outstanding amount of Rs. 51 lacs was on account of sales bills raised in March, 2009 and the same was duly realized in the immediately succeeding year. This explanation of the assessee was not found acceptable by the A.O. According to him, there was no business expediency for such long term credits offered by the assessee to its group concerns especially when it was operating on substantial borrowed funds. He held that this arrangement was done by the assessee to reduce the burden of tax and accordingly holding that the entire interest expenditure could not be fully attributed to the business requirement of the assessee, he made a disallowance of Rs.162243/- being 25% of the total interest expenditure claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s sister concerns and that allowing of such credit being norm of the trade, no disallowance out of interest expenditure is warranted/justified, it is observed that a similar issue involved in the case of the assessee has already been decided by the Tribunal for A.Y. 2007-08 vide its order 11-10-2013 (supra) sustaining the disallowance of 25% made out of interest expenditure to the extent of 10% for the following reasons given in para 6 of its order:- 6. We have considered the submissions made by the ld. representatives of both the parties. Though there seems to be some force in the contention of the ld. A.R. that some business exigency was involved for the interest expenditure claimed. However, as observed by the A.O. certain manipulation by the assessee to reduce its taxable income cannot be ruled out. In view of the overall facts and circumstances of the case, we find that the disallowance at the rate of 25% made by the A.O. was excessive. Hence, keeping in view of the overall facts and circumstances of the case, the disallowance made under this head is reduced and confirmed to 10% of the total interest expenditure claimed. 6. Although every assessment year is different ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the same following the directions given by the tribunal for AY 2005-06. Since the issue involved in this ground is identical to that involved for A.Y. 2005-06, hence following the similar line, the matter in this issue is remitted back to the file of the AO for deciding a fresh in terms and directions given vide the order of the ITAT dt. 13.07.2010 for AY 2005-06. 8. As the issue involved in the year under consideration as well as all the material facts relevant thereto are similar, we respectfully follow the order of the Tribunal for A.Y. 2007-08 and restore this issue to the file of the A.O. for deciding the same afresh as per the same direction as given in A.Y. 2007-08. Ground No. 2 of the assessee s appeal is accordingly treated as allowed for statistical purpose. 9. The issue raised in ground No. 3 of the assessee s appeal relates to the disallowance of Rs. 5,87,582/- made by the A.O. and confirmed by the ld. CIT(A) u/s 43B of the Income Tax act, 1961 on account of service tax payable. 10. From the relevant details furnished by the assessee during the course of assessment proceeding, it was noticed by the A.O. that the opening balance of service tax payable amounting ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its P L account. In the present case the appellant has not demonstrated as to which amounts were received and which were not received from their clients, nor has it demonstrated whether the amounts were/were not routed through it P L account. The appellant has merely furnished statement of service tax giving opening balance, service tax billed and service tax paid. In these circumstances, the addition made by the Assessing Officer is confirmed. 12. We have heard the arguments of both the sides and also perused the relevant material available on record. The ld. Counsel for the assessee has invited our attention to the copy of service tax payable account for F.Y. 2007- 08 placed at page 54 of the paper book to show that the service tax in question was payable by the assessee for the financial year 2007-08 and as per the relevant Service Tax Rules, the same was payable after recovery from the receiver of the service. He submitted that such recovery was made by the assessee during the year under consideration and the service tax payable for financial year 2007-08 was duly paid on such recovery within the stipulated period. He contended that the case of the assessee on this issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of the assessee, the expenditure incurred for right to display is thus business right of the assessee. Thus the expenditure incurred for protection of business rights, in our view, is revenue in nature. However, the expenditure incurred for acquisition of right to display will fall in the definition of capital expenditure. The Hon ble Supreme Court in the case of Dalmia Jain Co. (supra) has held that in deciding whether a particular expenditure is capital or revenue in nature, what the courts have to see is whether the expenditure in question was incurred to create any new asset or was incurred for maintaining the business of the company. If it is the former it is the capital expenditure; if it is the latter, it is the revenue expenditure. It has also been so held by the Hon ble Allahabad High Court in the case of Plastic Products Ltd. (supra). In CIT v/s O.P.N. Arunachala Nadar : (1983) 141 ITR 620, the Hon ble Madras High Court has held that legal expenses incurred by the assessee to protect the source of his income or the title to his business or to preserve or maintain his business assets to be regarded as expenditure incurred wholly and exclusively for the purpose of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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