Case Law Details
Petnet Radio Pharmaceutial Solutions P. Ltd. Vs ACIT (ITAT Delhi)
Disallowance of 25% Repair & Maintenance Expenses: This ground is related to the ad-hoc disallowance of 25% of Repairs and Maintenance expenses amounting to Rs.29,65,966/-. These expenses are routine, regular revenue expenses incurred wholly and exclusively for the purpose of business of the assessee company to ensure that the operations of the company are carried out smoothly. During the relevant AY, the assessee company has incurred repair & maintenance expenditure amounting to Rs 1,18,63,864/-. The major part of this expenditure relates to the amount spent on account of breaking-down of Cyclotron machine (used for production of FDG) for a period of around 2 weeks, which required the assessee company to incur extensive repair & maintenance expenditure so to resume its normal operational activities. A major part of the above expense is paid to Siemens Limited, India; Petnet Inc.; Electro Mech of India and Siemens Petnet Korea Co. Ltd. for purchasing spare parts / accessories and availing services for repairing or maintenance of Cyclotron machine.
However, while passing the assessment order, the AO concluded that the aforesaid legal expenses have not been wholly and exclusively incurred for the business and based on non-compliance of notice issued, to the parties under section 133(6) doubt about the genuineness of the expense and accordingly made an ad-hoc disallowance of Rs. 27,09,764/(30% of the total repair & maintenance) u/s 37 of the Act. The ld. CIT(A) confirmed the addition affirming the order of the Assessing Officer and held that the repair & maintenance expenditure constitute 49% of the total expenses. We find that major parts of the expenses are paid to Siemens Ltd., Petnet Inc., Electro Mech for purchasing of spare parts and accessories. The AO made ad-hoc disallowance of 25% of legal expenses owing to non-compliance by M/s Electro Mech of India to the notices issued u/s 133(6) and the ld. CIT(A) confirmed for the same reason. We find that if the expenses are proved to be un-genuine on verification, the AO ought to have disallowed the entire expenditure. Accepting 75% of expenditure as allowable and the remaining 25% disallowable on ad-hoc basis cannot be considered as a reasonably rational order.
FULL TEXT OF THE ORDER OF ITAT DELHI
The present appeal has been filed by the assessee against the order of ld. CIT(A)-38, New Delhi dated 14.02.2019.
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