2011 (4) TMI 1336 - AT - Income Tax

Summary

Issues involved: The judgment involves issues related to depreciation on leasehold rights, disallowance of depreciation on goodwill, provision for warranty, deduction under section 80HHC on interest income, computation of book profits, and additional depreciation on computers.

Depreciation on Leasehold Rights (ITA No. 965/PN/2009 - Asstt. Year 2003-04 - Assessee's appeal): The issue pertains to the claim of depreciation on leasehold rights. The Tribunal noted that the rights were considered capital in nature and not depreciable assets by the Revenue. The assessee cited various judgments, including one by the Supreme Court, to support their claim for depreciation. The Tribunal decided to set aside the matter to the Assessing Officer (AO) for re-examination in light of the cited judgments.

Disallowance of Depreciation on Goodwill (ITA No. 965/PN/2009 - Asstt. Year 2003-04 - Assessee's appeal): The dispute revolved around the disallowance of depreciation on goodwill, with the AO denying the deduction based on the timing of the agreement. The assessee argued that beneficial ownership was transferred after the relevant amendment to the Income Tax Act. The Tribunal directed the matter to the AO for further examination after the assessee provided supporting documents.

Provision for Warranty (ITA No. 965/PN/2009 - Asstt. Year 2003-04 - Assessee's appeal): The issue concerned the disallowance of provision for warranty. The Tribunal upheld the assessee's position, citing past judgments and the principle that liabilities should be certain and capable of estimation with reasonable certainty. The Tribunal found no reason to disturb the settled position on this matter.

Deduction under Section 80HHC on Interest Income (ITA No. 965/PN/2009 - Asstt. Year 2003-04 - Assessee's appeal): The dispute involved the claim of deduction under section 80HHC on interest income treated as 'income from other sources'. The Tribunal relied on relevant judgments to conclude that such interest receipts do not constitute business receipts and are not eligible for deduction under section 80HHC. The appeal on this ground was dismissed.

Computation of Book Profits (ITA No. 966/PN/2009, Asstt. Year 2003-04 - Assessee's appeal): The Tribunal addressed the computation of book profits concerning provisions for warranty and leave encashment and gratuity. The Tribunal found in favor of the assessee, emphasizing the scientific basis for calculating these provisions and citing relevant court judgments. The grounds related to this issue were allowed.

Additional Depreciation on Computers (ITA No. 1203/PN/2009 - Revenue's Appeal): The sole issue raised by the Revenue was regarding the grant of additional depreciation on computers used in the manufacturing process. The Tribunal considered relevant judgments and concluded that the computers were eligible for additional depreciation under section 32(1)(iia). The appeal by the Revenue was dismissed.