9911796707
TMI Blog2025 (4) TMI 1482X X X X Extracts X X X X X X X X Extracts X X X X ..... "1. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) grossly erred in confirming the addition of Rs. 6,205/- made by the Assessing Officer on account of Club Expenses. 2. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) grossly erred in confirming the addition of Rs. 3,92,660/ out of Rs. 4,22,752/-made by the Assessing Officer on account of Prior Period Expenses. 3. That on the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) grossly erred in confirming the addition of Rs. 11,90,861/- being loss on account of closure of a store and renovation on shifting of another store ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d expenses 4,22,752/- 4. Disallowance of loss on sale of fixed asset 11,90,861/- 5. Disallowance taxability of interest receipt on Income Tax refund 8,37,408/- 3.1 Aggrieved, the assessee filed appeal before the ld. CIT(A) and did not get any relief. 4. The Ld. Authorized Representative (hereinafter, the 'AR') submitted that the club expenses of Rs. 6,205/- incurred for business purposes. The same should be allowed under section 37 of the Act. The Director of the assessee company had entertained certain guests for business purposes only. It was contended that this expenditure was minuscule for a turnover of Rs. 45 Crores and there was no element of personal expenditure embedded therein. 4.1 For prior period expenses of Rs. 3, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee paid US $ 31,200/- and withholding tax/TDS of US $ 7,800/-. The expenditure of US $ 39,000/- was allowed in the preceding AY as per the claim @ prevailing rate of US $ in that year. However, the said expenditure got finally materialized and debited to the assessee's bank account on 05.04.2013, therefore, the exchange rate difference of Rs. 3,66,911/- on the said expenditure of US $ 39,000/- was claimed in the subsequent/relevant year, which was disallowed holding that the claim pertained to prior period expenditure. The Ld. AR contended that the said claim could not be termed as prior period as the assessee had accounted the same following the principle of mercantile system of accounting. The encashment of cheque was not in ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d this expenditure of Rs. 6,205/- by nomenclature of the expenditure only. We do not see any justification therein. Therefore, the same is allowed as business expenditure. 7. As far as the disallowance of exchange rate difference of Rs. 3,66,911/- is concerned, we find merit in the submissions/arguments/contentions of the Ld. AR that the said expenditure was not crystalized in the preceding year as the encashment of said cheque happened in the relevant year. The exchange rate fluctuation resulting foreign exchange gains or losses typically arise from cross border transactions which are denominated in foreign currencies. Such import and export transactions may be capital and revenue in nature; goods and services, acquisition and disposal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been held that the expenditure incurred for the purpose of the assessee's own business undisputedly abandoned by the assessee, if revenue in nature and incurred wholly and exclusively for the purpose of assessee's business is allowable under section 37(1) of the Act if no new asset has come into existence. The only requirement which has to be seen is that the expenditure is of revenue nature and not capital nature. There are series of decisions wherein the Hon'ble High Courts and Hon'ble Supreme Court that has laid down the principle that if an expenditure is incurred for doing the business in a more convenient and profitable manner and has not resulted in brining any new asset into existence then such expenditure is allowable business ..... X X X X Extracts X X X X X X X X Extracts X X X X
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