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TMI Blog2015 (7) TMI 906X X X X Extracts X X X X X X X X Extracts X X X X ..... r sections 36 and 37 of the Act. On a reference, the Hon’ble Court held that the amounts were advanced by the assessee was allowable as revenue expenditure, that the amounts advanced were for business purposes,that the advances made proved irrecoverable, that the consequent loss was a business loss and not a capital loss. Respectfully, following the above judgment, we decide ground no.1 in favour of the assessee. Excess remuneration paid to Director - AO found that the auditor in form no.3CB, vide note no.3,had reported that the assesee had paid ₹ 36,40,038/- in excess of limits prescribed under the Companies Act - Held that:- The assessee had made excessive payment of remuneration to the Director, but same was approved by the central government, as required by the Companies Act. In these circumstances, we are of the opinion that there was no contravention of the provisions of the Act. Therefore, reversing the order of the FAA, we decide ground in favour of the assessee. Depreciation on expenditure treated as revenue expenditure by the assessee but held as capital expenditure in earlier years - Held that:- If the AO capitalised certain revenue expenditure and allowed de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h, 2011, U/s. 309 (5B) of the Companies Act,1956 permitted waiver of recovery of excess remuneration of ₹ 36,40,038 paid to the Directors, which tantamounts to sanctioning the excess remuneration paid to the Directors. 3. Depreciation on expenditure treated as revenue expenditure by the appellant but held as cap earlier years The C.I.T. (A) erred in not giving necessary direction to the A.O. to allow due depreciation on expenses like Repairs and Maintenance, Soft Ware Expenses, treated by the appellant as revenue expenditure, but held as capital expenditure by the I.T.A.T. or C.I.T.(A) or A.O. in earlier years and in current year as well. Assessee-company, engaged in business of manufacturing of Blister Packing machines, filed its return of income on 30.09.2008 declaring total income of ₹ 4.20 Crores. Later on a revised return was filed on 24.11.2008 declaring income of ₹ 4.13 Crores. The Assessing Officer (AO) completed the assessment u/s.143(3) of the Act, on 10.12.2010,determining the income of the assessee at ₹ 4,65,79,200/-. 2. First ground of appeal is about provision of bad advances, amounting to ₹ 15,91,570/-. During the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the case of IVM World Trade Corporation(186 ITR 412) delivered by the Hon ble Bombay High Court. He also referred to the case of Sadan Roadways Ltd. (288 ITR 15)of Hon ble Madras High Court. Departmental Representative(DR) relied upon the order of the FAA, 5. We have heard the rival submissions and perused the material before us. We find that the assessee had made a claim u/s.37 of the Act stating that expenditure incurred by it on account of upgradation of ERP software was revenue expenditure, that it had advanced a sum of ₹ 15.91 lakhs to BT but the work was not executed to the satisfaction of the assessee. The incurring of expenditure is not doubted by both the Revenue Authorities.It is also a fact that amount was not written off as per the provisions of section 36 of the Act.So,the narrow issue before us as to whether the advance payment made to BT should be allowed or not.As per the AO and the FAA it was an expenditure of capital nature and the assessee claims it to be business loss.We find that BT was asked to upgrade the EPP Software and it could not perform the job satisfactorily. Therefore, the advance payment made to BT has to be treated a business loss. In our o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paid to the Directors was an allowable expenditure. After considering the submissions of the assessee and the assessment order, the FAA held that assesse s own auditor had reported the payment of excess remuneration, that a copy of sanctioned letter granted by the Central Government for excessive remuneration paid was filed before him.The FAA called for a remand report from the AO with regard to the additional evidence submitted by the assessee in form of the sanction letter of the Central government. After considering the remand report, dated 11.02.11,the FAA held that the provisions of section 309(5A) and 309(5B) of the Companies Act were applicable to the case under consideration, that the assessee was not entitled to get deduction of the excessive remuneration paid, that the excessive remuneration was not allowable u/s. 37(1) of the Act, that it was paid over and above the prescribed limits of the Companies Act.He confirmed the disallowance made by AO. 8.Before us, the AR argued that the Central government had allowed payment of excess remune - ration to the Directors,that sanction letter was made available to the FAA,that provisions of Explanation to section 37(1) were not ..... X X X X Extracts X X X X X X X X Extracts X X X X
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