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TMI Blog2022 (3) TMI 1311X X X X Extracts X X X X X X X X Extracts X X X X ..... s and not towards capital account as it only facilitates smooth and efficient running of a business enterprise and does not add to the profit earning apparatus of a business enterprises and accordingly CIT (A) was justified in deleting the disallowances of entrances fee made by the Assessing Officer. Expenses on the basis of purchase of packing material, loose tools etc., in the year of purchase - HELD THAT:- As decided in own case [ 2021 (7) TMI 1019 - ITAT BANGALORE] Assessee submitted before Assessing Officer that; (i) packing material shown as purchases as on 31-3-2005 was actually purchased in earlier months and such packing material was consumed during process; (ii) on account of some computer problem, bills were posted on 31-3-2005, and (iii) entire packing material left after end of year became obsolete and, therefore, it was not shown in closing stock. The Assessing Officer rejected account books of assessee and made certain addition to his income. The Tribunal held that:- (i) it was not case of revenue that purchases as debited as on 31-3-2005 were not genuine, and (ii) assessee was following a consistent method of valuing closing stock by including packing material ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to earning of exempt income is very much on the higher side and should the provisions of Section 14A of the Income tax Act, 1961 read with Rule 8D of the Income tax Rule 1962 be invoked from this assessment year itself then the amount that ought to be disallowed on this account would be ₹ 2,422,351/- and not ₹ 6,814,466/- as worked out by the Assessing Officer 2. The Learned CIT(A) erred in confirming the disallowance made by the Assessing Officer of a sum of ₹ 37,284/- being an expenditure towards cost of club services considering the same as non-business expenditure. It is submitted that the expenditure has been incurred to promote the business of the company and there is no enduring benefit and therefore the same ought to have been allowed by the Learned CIT(A). 3. The Learned CIT(A) erred in confirming the disallowances made by the Assessing Officer stating that the telecommunication expenses of ₹ 2,911,762/- is towards delivery for software outside India. Without prejudice it is further submitted that the Learned CIT(A) ought to have only considered the telecommunication charges attributable to delivery of software outside India and / or on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the own funds available with the assessee in both the years are in far excess of the value of investments. Accordingly, as per the decision rendered by Hon ble Karnataka High Court in the case of Micro Labs Ltd. (supra), no disallowance out of interest expenditure is called for. Accordingly, we set aside the order passed by Ld. CIT(A) on this issue in both the years under consideration and direct the A.O. to delete disallowance made u/s 14A of the Act in both the years under consideration. 2.2 There is nothing on record placed by revenue in order to take a contrary view. Respectfully following the aforesaid decision of the Tribunal, we allow this grounds raised by the assessee. 3. Ground No. 2-Cost of Club Services 3.1 The coordinate bench of this Tribunal on identical facts in Assessee s own case for A.Y. 2004-05 (supra) and AY 2002-2003 2003-04 in ITA No.790 791/Bang/2008 order dated 4.3.2021 decided this issue as under: 6. As far as the above ground is concerned, the law is well settled that entrance fee and membership fees paid where the employees become members is allowable as a business expenditure and was allowed as deduction in Assessee s own cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tems at 18.8% of the amounts charged to the profit and loss account. In determining this percentage, the AO took the basis as ratio of Inventory of finished goods in relation to consumption of raw materials.The action of the AO resulted in an addition of ₹ 2,65,15,000/- to the total income of the assessee as value of closing stock. 14. On appeal by the assessee, the CIT(A) deleted the addition made by the AO by following the order of the CIT(A) on identical issue for Assessment Year 2000-01 and 2001- 02. At the time of hearing, it was brought to our notice that identical issue was decided by the Tribunal in Assessment Year 2000-01 in ITA No.3959/Mum/2004 order dated 08.03.2020 and the Tribunal held as follows: We have given a careful consideration to the rival submissions and are of the view that the order of the CIT(A) on this issue has to be upheld. Admittedly the method of accounting followed by the Assessee was consistent and accepted in the past by the Revenue authorities. There is no reason why the same should be disturbed. The decision in the case of Abdul Latif (supra) supports the plea of the Assessee. In the said decision, the facts were that the Assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hrough the facts of the case, we do not find any infirmity In the order of the learned CIT(A) granting relief to the assessee as the provision was made on the sales effected during that year. It is ordered accordingly. 8.2 There is nothing brought on record by the revenue to take a contrary view. Respectfully following the aforesaid decision of the Tribunal, we dismiss this grounds raised by the revenue for both years under consideration. 9. Ground no. 5 Deduction u/s. 10A The coordinate bench of this Tribunal on identical facts in Assessee s own case for AY 2005-06 2006-07(supra) decided this issue as under: 7.1. Telecommunication expenses amounting to ₹ 6,61,168/- being excluded from export turnover: The grievance of assessee is that the authorities below excluded telecommunication expenses from the export turnover. It is the plea of the Ld.Counsel that the aforesaid expenses are not required to be excluded from export turnover or in the alternative, the same should be reduced from total turnover also. The Ld. Counsel submitted that this issue has been considered by coordinate bench of this Tribunal for assessment year 2006-07 by order dat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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