2012 (11) TMI 1327 - AT - Income Tax

Summary

Issues Involved:
1. Deduction of Gratuity Premium Payment
2. Depreciation on Intangible Assets
3. Disallowance of Loan Amount Written Off

Summary:

1. Deduction of Gratuity Premium Payment:
The Assessing Officer (AO) disallowed the deduction of Rs. 4,57,215/- paid towards Group Gratuity Life Insurance Scheme, citing the lack of approval from the Commissioner of Income-tax as required u/s 36(1)(v) of the IT Act. The AO also rejected the claim u/s 37. The CIT(A) allowed the deduction, referencing previous ITAT and High Court decisions, which held that payments towards an unapproved gratuity fund could be deducted u/s 37. The ITAT upheld the CIT(A)'s decision, dismissing the revenue's appeal.

2. Depreciation on Intangible Assets:
The AO denied the depreciation claim on intangible assets amounting to Rs. 58,78,633/-, asserting that the additional amount paid was to compensate the shareholders of the amalgamating company and not for any 'intangible assets'. The CIT(A) allowed the claim, supported by previous ITAT decisions in the assessee's own case and other relevant case laws. The ITAT upheld the CIT(A)'s order, dismissing the revenue's appeal on this issue.

3. Disallowance of Loan Amount Written Off:
The AO disallowed the write-off of Rs. 2,27,52,698/- as a bad debt or u/s 37, arguing that the debt did not arise from the assessee's business activities but was an investment in a subsidiary. The CIT(A) confirmed the AO's decision, rejecting the assessee's reliance on the Tainwala Chemicals and Plastics India Ltd. case. The ITAT upheld the CIT(A)'s order, referencing the VST Industries Ltd. case, and dismissed the assessee's appeal.

Conclusion:
Both the appeals by the revenue and the assessee were dismissed. The ITAT upheld the CIT(A)'s decisions on all issues, maintaining the disallowance of the loan write-off and allowing the deductions for gratuity premium payment and depreciation on intangible assets.