2015 (10) TMI 1457 - AT - Income Tax

Disallowance of proportionate amount of premium paid on redemption of non-convertible debentures - Held that - This issue is decided by the Tribunal in assessee s own case in A.Y. 1992-93 following the decision of the Hon ble Supreme Court in the case of Madras Industrial Investment Corpn. Ltd. 1997 (4) TMI 5 - SUPREME Court allowed proportionate claim of the premium payable on the debentures to be spread over to the period of debenture. Respectfully following the findings of the Tribunal in assessee s own case, we direct the AO to allow proportionate claim of the premium payable in line with the findings of A.Y. 1992-93. - Decided in favour of assessee Disallowance of depreciation on the written down value of foreign visitors expenditure - Held that - This issue has been decided by the Tribunal in assessee s own case in A.Y. 1992-93 wherein the Tribunal has held that the expenditure incurred on foreign visitors form part of the cost of the project therefore would be eligible for depreciation as per Sec. 32 of the Act. - Decided in favour of assessee Taxability of Receipt of non compete fees - Held that - Once the Tribunal has accepted that the total sale consideration is inclusive of non-compete fees and once the Tribunal has decided the issue on a total consideration treating it as a slum sale, the issue relating to non-compete fees became infructuous and should have been treated as otiose - Decided in favour of assessee Disallowance of VRS expenses - Tribunal has set aside the matter only with a direction to see that the amount claimed is as per actuarial valuation certificates - Held that - After giving a thoughtful consideration, we find force in the contention of the Ld. Senior Counsel. In the assessment year 1993-94, the Tribunal has restored the issue with a direction to see that the amount claimed is as per actuarial valuation certificate. However, during the year under consideration, the liability for payment of pension is only incremental liability and there is no need for verification by actuarial valuation certificate. To this extent, we modify the findings of the Tribunal.- Decided in favour of assessee

Summary

Issues:
1. Rectification of additional grounds unadjudicated in appeal ITA No. 498/M/2003.
2. Disallowance of proportionate amount of premium paid on redemption of debentures.
3. Disallowance of depreciation on foreign visitors' expenditure.
4. Taxability of non-compete fees of Rs. 31.45 crores.
5. Disallowance of VRS expenses of Rs. 3.90 crores.

Analysis:
1. The assessee filed a Miscellaneous application highlighting unadjudicated additional grounds in appeal ITA No. 498/M/2003. The Tribunal acknowledged the mistake and decided to consider the additional grounds. The first additional ground related to the disallowance of proportionate premium on debentures, which was allowed based on the Tribunal's previous decision in the assessee's case for A.Y. 1992-93. The second additional ground involved disallowance of depreciation on foreign visitors' expenditure, which was also allowed following the Tribunal's earlier ruling for the same assessment year.

2. The issue of non-compete fees amounting to Rs. 31.45 crores was contested, with the AO treating it as business income under section 28 of the Act. The CIT(A) upheld this treatment, but the Tribunal found the taxability of non-compete fees under section 28(va) to be prospective from 1.4.2003. The Tribunal, however, decided to remove certain paras from the order as the issue became irrelevant post the total consideration treatment. The Tribunal modified its findings accordingly.

3. The last grievance related to the disallowance of VRS expenses of Rs. 3.90 crores. The Tribunal had previously directed verification based on actuarial valuation certificates, but the Ld. Senior Counsel argued that only incremental liability existed in the current year, not requiring such certificates. The Tribunal agreed with this contention and modified its findings, allowing the Miscellaneous application filed by the assessee.

This comprehensive analysis covers the rectification of unadjudicated grounds, the treatment of premium on debentures and foreign visitors' expenditure, the taxability of non-compete fees, and the disallowance of VRS expenses, providing a detailed overview of the judgment.