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TMI Blog2019 (8) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... d on the decision of DASHMESH TRANSPORT COMPANY PVT. LIMITED VERSUS CIT [ 1973 (10) TMI 1 - PUNJAB AND HARYANA HIGH COURT] is misplaced in as much as in that case the assessee company took over the assets and liabilities of another company and while discharging the liabilities of that company certain expenditure were incurred which were claimed as legitimate business expenditure.Facts of the case in hand are totally different, therefore, the addition of ₹ 114834/- is sustained. Disallowance u/s.14A - HELD THAT:- There is no dispute that during the year the assessee has earned an exempt income on account of interest on tax free bonds. It is also not in dispute that all the investments are coming from NDDB. The only expenditure which has been incurred by the assessee is towards the board meeting fees. In our considered opinion 100% of such board meeting fee expense need to be disallowed. We accordingly direct the AO to disallow the entire expenditure incurred on board meeting fees towards earning of exempt income. In addition further disallowances of ₹ 1,00,000/- towards the administrative expenses should meet the ends of justice. We direct accordingly. Nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... HAT:- As decided in own case according to the Revenue the actual research expenses have been incurred by the Mother Dairy Fruits and Vegetables Ltd. whose subsidiary is the present Assessee. The Assessee apparently reimbursed the expenses incurred on scientific research for Mother Dairy Fruits and Vegetables Ltd. The Assessee has been assessed in Gujarat prior to the AY in question and for an earlier AY 2002- 03 where again in reassessment proceedings such expenses were sought to be disallowed, the High Court of Gujarat decided the issue in favour of the Assessee by its order [ 2012 (7) TMI 593 - GUJARAT HIGH COURT] - ITA No.1113 & 505/DEL/2011, ITA No.1021 & 1022/DEL/2011, Cross Objection No.58/DEL/2011 (IN ITA NO.505/Del/2011) - - - Dated:- 5-8-2019 - Sh. N. K. Billaiya, Accountant Member And Sh. Laliet Kumar, Judicial Member For the Appellant : Sh. S. D. Kapila, Advocate, Sh. R. R. Maurya, Advocate, Sh. Parvesh Sharma, Advocate And Sh. Bhuvan Mahajan, Advocate For the Respondent : Ms. Ashima Neb, Sr. DR ORDER PER N. K. BILLAIYA, AM: ITA No.1021/Del/2011 is the appeal by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat as per section 44 of the Act NDDB was not liable to pay income tax. It is the say of the counsel that since there was no liability to pay income tax there was no question of any allowances of deduction in the hands of NDDB. The Counsel further stated that since no allowance or deduction has been made in the assessment of NDDB write back of the same cannot be treated as income tax u/s. 41 (1) of the Act. 8. Per contra the DR strongly supported the findings of the Assessing Officer. 9. We have carefully considered the orders of the authorities below and have gone through the NDDB Act 1987 exhibited at pages 513-537 of the paper book. Section 44 of the said Act reads as under :- Not withstanding anything contended in the income tax Act, 1961 or any other enactment for the time being enforce relating to tax on income tax, profits or gains, the National Delhi Development Board was not liable to pay income tax or any other tax in respect of its income profits or gains derived. 10. Section 41 (1) of the IT Act reads as under :- 41. 8 [ 9 (1) Where an allowance or deduction has been made in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of ₹ 114834/- which was confirmed by the CIT(A). 14. Before us the Ld. Counsel for the assessee stated that the assessee has discharged the tax liability of the payment of TDS of the suppliers and, therefore, the same should be allowed as expenditure u/s. 37 of the Act. In support the counsel relied upon the decision of the Hon ble Punjab Haryana High Court in the case of Dashmesh Transport Company 93 ITR 275. 15. The DR vehemently stated that the income tax liability discharged by the assessee can never be claimed as legitimate business expenditure u/s. 37 of the Act. 16. We have carefully considered the rival contentions and failed to understand the logic given by the counsel. There is no dispute that the assessee has paid tax on behalf of its foreign suppliers being an income tax liability. By any stretch of imagination the same cannot be allowed as expenditure u/s. 37 of the Act. The reliance was placed on the decision of Hon ble Punjab Haryana High Court is misplaced in as much as in that case the assessee company took over the assets and liabilities of another company and while discharging the liabilities of that co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowances of ₹ 1,00,000/- towards the administrative expenses should meet the ends of justice. We direct accordingly. Ground No.4 is partly allowed. 23. Ground No.5 relates to the addition of ₹ 183156/- incurred by the assessee on purchase of software treating the same as capital expenditure. While scrutinising the return of income the Assessing Officer noticed that the assessee has incurred certain expenditure in respect of software expenses being IBM software E-TDS software, MS office 2003, application software, GET software. The Assessing Officer was of the opinion that by incurring these expenses the assessee has acquired enduring benefit and, therefore, these are of capital in nature. The Assessing Officer accordingly treated the same as capital expenditure and allowed depreciation as per eligible rate. Assessee carried the matter before the CIT(A) but without any success. 24. Before us the counsel stated that these are routine software expenditure which needs to be incurred every year in the up-gradation of the software are of revenue in nature and should be allowed as such. Reliance was placed on the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble Jurisdictional High Court (supra) we direct the Assessing Officer to delete the disallowance in respect of the software expenditure. Since the entire expenditure has been allowed the Assessing Officer shall add back the deprecation allowed on such expenditure. Ground No.5 is allowed. 28. Ground No.6 relates to the disallowance of expenditure on account of shifting of machines by treating the same as capital expenditure. The Assessing Officer noticed that the assessee has incurred expenditure of ₹ 395649/- on shifting its plant and machinery lying at OPS Chalthan which were shifted to OPS Palanpur. The assessee explained that since the plant and machinery were shifted dismantling was required alongwith loading transportation and un-loading of machines and, therefore, the expenditure incurred on such activity should be allowed as revenue expenditure. The Assessing Officer was of the opinion that such expenditure are capital in nature since the assessee would derive enduring benefit and treated the same as capital expenditure and allowed depreciation. Such action of the Assessing Officer was confirmed by the CIT(A). 29. Bef ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the firm belief that the lease hold expenses has to be disallowed as capital expenditure and accordingly made the addition of ₹ 18,54,739/-. The assessee carried the matter before the CIT(A). After considering the facts the CIT(A) found that similar disallowance was made in A.Y.2002-03 and the issue has already been decided in favour of the assessee by the Tribunal and therefore, deleted the addition. 37. Before us the DR strongly supported the findings of the Assessing Officer. 38. Per contra the counsel for the assessee reiterated that the similar disallowance have deleted by the Tribunal in A.Y.2002-03. 39. A perusal of the assessment order show that the Assessing Officer himself has followed the assessment order for A. Y.2002-03 and since in that year the Tribunal has deleted the additions. We do not find any reason to interfere with the finding of the CIT(A). Ground No.2 is dismissed. 40. Ground No.3 relates to the deletion of the addition of ₹ 43690/-. 41. The Assessing Officer noticed that the assessee has incurred club membership fee on behalf of its employees of BOHO Club, Anan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... out R D activities. Thus the correlation of expenses incurred with the business of the assessee could not be established which is primarily required for allowance of deduction u/s 35(1 )(i) of the Act. 27. We find the answer to this quarrel is in the decision of the Hon ble High Court of Bombay in the case of National Rayon Corporation Limited 140 ITR 143 wherein the Hon'ble High Court has held that for claiming the deduction u/s 35(1)(i) of the Act, research must have been carried on by the assessee itself is not borne out by phraseology of the statutory provision. The assessee can claim the deduction even if the research is carried on by some other person on behalf of the assessee. 28. Second quarrel is in respect of contribution made by the assessee to Delhi University and Nagpur University. 29. The Assessing Officer was of the opinion that u/s 35(1) (ii) of the Act, the deduction of any sum paid to scientific research association is allowable if such association s object is undertaking of scientific research or to a university, college or other institution to be used for scientific research subject to fulfilment of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il Application No. 9826 of 2009 (Dhara Vegetable Oil and Foods Co. Ltd. v. The Deputy Commissioner of Income Tax). 6. The said decision appears to have been accepted by the Revenue. In that view of the matter this Court is not inclined to frame any question on this issue as well. 49. Respectfully following the decision of the coordinate bench and the Hon ble High Court we decline to interfere with the findings of the CIT(A) appeal filed by the revenue accordingly dismissed. ITA No.505/Del/2011 (Revenue s appeal for A. Y. 2006-07) 50. The only grievance of the revenue is that the CIT(A) erred in deleting the addition made u/s. 35 (I) (ii) and u/s. 35 (1) (i) (iv) of the Act. A similar addition has been deleted by us in ITA No.1113/Del/2011 (supra). For our detail discussion therein we decline to interfere. 51. In the result, the appeal filed by the revenue is accordingly dismissed. Cross Objection No.58/Del/2011 (cross objection by the assessee for A. Y.2006-07) 52. The only grievance of the assessee relates to the addition of ₹ 568968/- being expenditure ..... X X X X Extracts X X X X X X X X Extracts X X X X
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