Search Results For: business expenditure


Chambal Fertilisers And Chemicals Ltd vs. JCIT (Rajasthan High Court)

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DATE: July 31, 2018 (Date of pronouncement)
DATE: August 23, 2018 (Date of publication)
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S. 40(a)(ii): Education cess is not part of tax. Accordingly, the same is allowable as a deduction and disallowance u/s 40(a)(ii) cannot be made. CBDT Circular referred

That on a plain reading of the above provision of section 40(a) (ii), it is evident that a sum paid of any rate or tax is expressly disallowed by this sub-clause in two cases : (i) where the rate is levied on the profit or gains of any business or profession, and (ii) where the rate or tax is assessed at a proportion of or otherwise on the basis of any such profits or gains. It is evident that nowhere in the said section it has been mentioned that education cess is not allowable. Education cess is neither levied on the profits or gains of any business or profession nor assessed at a proportion of, or otherwise on the basis of, any such profits or gains.

CIT vs. Travancore Cochin Udyoga Mandal (Supreme Court)

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DATE: August 17, 2017 (Date of pronouncement)
DATE: September 9, 2017 (Date of publication)
AY: 1992-93
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S. 37(1): in order to decide whether disputed lease rent is deductible in the year of fixation or in the year the dispute attains finality, the nature of fixation of rent, its payment, recovery etc. and whether it is statutory or contractual, have bearing. The Tribunal is required to bring the facts on record

The question as to whether the fixation of rent and its payment is statutory or contractual and, if so, its effect while claiming deduction under the Income Tax Act and, if so, in which year of assessment is a mixed question of law and fact. In our considered opinion, in order to decide the issue of deduction, the nature of fixation of rent, its payment, recovery etc. and whether it is statutory or contractual, has some bearing over the question

CIT vs. Axis Pvt. Equity Ltd (Bombay High Court)

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DATE: January 30, 2017 (Date of pronouncement)
DATE: February 3, 2017 (Date of publication)
AY: 2007-08
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S. 28/29: There is a distiction between "setting up of business" and "commencement of business". All expenditure after "setting up" is deductible business expenditure even if the business has not commenced. A business is "set up" when steps are taken to recruit employees and take premises etc

A similar issue viz. distinction between setting up of business and commencement of business had come up for consideration before this Court in Western India Vegetable Products Ltd. vs. Commissioner of Income Tax 1954 Vol. 26 ITR Page 151. This Court had held that business is said to have been set up when it is established and ready to be commence. However, there may be an interval between a business which is set up and a business which is commenced. However, all expenses incurred during the interregnum between setting up of business and commencement of business would be permissible deductions

Reliance Infrastructure Ltd vs. CIT (Bombay High Court)

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DATE: December 20, 2016 (Date of pronouncement)
DATE: December 21, 2016 (Date of publication)
AY: 1983-84
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S. 40(a)(ii): Foreign taxes are not hit by the bar in s. 40(a)(ii) and are deductible on the real income theory. After the insertion of the Explanation to s. 40(a)(ii) by the FA 2006, foreign taxes are not deductible only to the extent they are eligible for relief u/s 90 & 91. Amounts not eligible for DIT relief are deductible. The Explanation is declaratory and has retrospective effect

It is not disputed before us that some part of the income on which the tax has been paid abroad is on the income accrued or arisen in India. Therefore, to the extent, the tax is paid abroad on income which has accrued and/or arisen in India, the benefit of Section 91 of the Act is not available. In such a case, an Assessee such as the applicant assessee is entitled to a deduction under Section 40(a)(ii) of the Act. This is so as it is a tax which has been paid abroad for the purpose of arriving global income on which the tax payable in India. Therefore, to the extent the payment of tax in Saudi Arabia on income which has arisen / accrued in India has to be considered in the nature of expenditure incurred or arisen to earn income and not hit by the provisions of Section 40(a)(ii) of the Act. (q) The Explanation to Section 40(a)(ii) of the Act was inserted into the Act by Finance Act, 2006. However, the use of the words “for removal of dobuts” it is hereby declared “…….” in the Explanation inserted in Section 40(a)(ii) of the Act, makes it clear that it is declaratory in nature and would have retrospective effect. This is not even disputed by the Revenue before us as the issue of the nature of such declaratory statutes stands considered by the decision of the Supreme Court in CIT Vs. Vatika Township (P) Ltd. 367 ITR 466 and CIT Vs. Gold Coin Health Foods (P) Ltd. 304 ITR 308

Nimesh N. Kampani vs. ACIT (ITAT Mumbai)

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DATE: June 16, 2016 (Date of pronouncement)
DATE: September 8, 2016 (Date of publication)
AY: 2009-10
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S. 37(1): Expenditure incurred by a director in engaging lawyers to defend himself against cases filed for violation of the law by the Company of which he is a director is not personal expenditure but is allowable as business expenditure

Mr. Nimesh Kampani has been mentioned as one of the accused among several others, for non-payment of these fixed deposits by Nagarjuna Finance Limited. The Andhra Pradesh Government had since filed suit against directors of Nagarjuna Finance Limited including Mr. Kampani. To defend himself, Mr. Kampani has appointed various advocates to represent his case before various courts viz, District Court, High Court of Andhra Pradesh, Supreme Court of India. As the expenditure is incurred to protect his business interest the same is required to be allowed u/s. 37(1) of the Act. Accordingly we direct the A.O. to allow legal expenses of Rs.40,72,750/-

ACIT vs. Jindal Power Limited (ITAT Raipur)

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DATE: June 23, 2016 (Date of pronouncement)
DATE: July 4, 2016 (Date of publication)
AY: 2008-09
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S. 37(1): Expenditure on Corporate Social Responsibility (CSR), though voluntary, is allowable as business expenditure. Explanation 2 to s. 37(1) inserted w.e.f. 01.04.2015 is not retrospective. It applies only to CSR expenditure referred to in s. 135 of the Companies Act and not to voluntary CSR expenditure

The amendment in the scheme of Section 37(1), which has been introduced with effect from 1st April 2015, cannot be construed as to disadvantage to the assessee in the period prior to this amendment. This disabling provision, as set out in Explanation 2 to Section 37(1), refers only to such corporate social responsibility expenses as under Section 135 of the Companies Act, 2013, and, as such, it cannot have any application for the period not covered by this statutory provision which itself came into existence in 2013. Explanation 2 to Section 37(1) is, therefore, inherently incapable of retrospective application any further. In any event, as held by Hon’ble Supreme Court’s five judge constitutional bench’s landmark judgment, in the case of CIT Vs Vatika Townships Pvt Ltd [(2014) 367 ITR 466 (SC)], the legal position in this regard has been very succinctly summed up by observing that “Of the various rules guiding how legislation has to be interpreted, one established rule is that unless a contrary intention appears, legislation is presumed not to be intended to have a retrospective operation

Mangal Keshav Securities Limited vs. ACIT (ITAT Mumbai)

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DATE: September 29, 2015 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2006-07
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Expl to s. 37(1): Penalties & fines paid to SEBI, BSE etc for breach of regulatory/ procedural requirements are "compensatory" in nature and not for any purpose which is an ‘offense’ prohibited by the law

An ‘offence’ would be the one which will arise as a result to commission of an action which is prohibited by law, and, in all the given situations, no element of any consent of the parties involved can bring any change in its legal consequences. Similarly, any amount paid by the assessee, in the form of compensation, as a consequence of breach of contract between the two parties, cannot be said to be amount paid for any purpose which is an ‘offence’, prohibited by the law. In other words, under the income tax law, one is required to go into the real nature of the transactions and not to the nomenclature that may have been assigned by the parties. Thus, to decide such issues, we are required to see real substance under the Income Tax Law, and not merely its form. Thus, only those payments, which have been made by the assessee for any purpose which is an ‘offence’ or which is ‘prohibited by law’, shall alone would be hit by the explanation to section 37

Multi Act Realty Enterprises Pvt. Ltd vs. ACIT (ITAT Mumbai)

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DATE: August 28, 2016 (Date of pronouncement)
DATE: February 15, 2016 (Date of publication)
AY: 2008-09
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There is a distinction betwen "setting up" and "commencement" of a business. A business is "set up" and expenditure is deductible even if assessee has no customers and no income

The assessee has already purchased residential flat for the purpose of resale/lease, and therefore assessee was apparently ready to do its business. Under these circumstances, it can be said that the business is set up by the assessee during the year under consideration. For the deductibility of expenses incurred after this stage, earning of the business income is not a mandatory condition under the law. The assessee may not have been successful in getting customers or earning the business income, but if the assessee has done requisite preparations and if the assessee can be said to be in a position to cater to its customers, then it can be said that business is set up and it would amount to carrying on the business and accordingly the expenses would stand allowable to the assessee, irrespective of the fact whether actually assessee got any customer and earned any business income during the year or not

DCIT vs. Syncom Formulations (I) Ltd (ITAT Mumbai)

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DATE: December 23, 2015 (Date of pronouncement)
DATE: February 6, 2016 (Date of publication)
AY: 2010-11
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S. 37(1): While receiving of gifts by doctors is prohibited by MCI Guidelines, the giving of such gifts by Pharma companies is not prohibited by any law. CBDT Circular dated 01.08.2012 is prospective

Receiving of gifts by doctors was prohibited by MCI guidelines, giving of the same by manufacturer is not prohibited under any law for the time being in force. Giving small gifts bearing company logo to doctors does not tantamount to giving gifts to doctors but it is regarded as advertising expenses. As regards sponsoring doctors for conferences and extending hospitality, pharmaceuticals companies have been sponsoring practicing doctors to attend prestigious conferences so that they gather contemporary knowledge about management of certain illness/disease and learn about newer therapies. We found that the disallowance was made by the AO by relying on the CBDT Circular dated 01.08.2012 onwards. However, the Circular was not applicable because it was introduced w.e.f.01.08.2012. i.e. assessment year 2013-2014, whereas the relevant assessment year under consideration is 2010-2011 and 2011-2012

Munaf Ibrahim Memon vs. ITO (ITAT Pune)

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DATE: October 30, 2015 (Date of pronouncement)
DATE: November 27, 2015 (Date of publication)
AY: 2009-10
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S. 43B/ 145A: Taxes collected by the assessee, which remain unpaid, have to be added to the income even if the same are not debited to the P&L A/c and claimed as a deduction

In view of the provisions of the Act i.e. section 145A of the Act, we find no merit in the plea of the assessee in not recognizing the VAT attributable to its sales as part of the sale consideration of the goods while computing its Profit & Loss Account. The mandatory provisions of Central Act i.e. section 145A of the Act supersedes the provisions of any State Act i.e. Maharashtra Value Added Tax Act, 2002. Once the assessee recognized the VAT amount as part of the sale consideration, it tantamount to the said entry being routed through the Profit & Loss Account, especially in the cases where the assessee is following mercantile system of accounting

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