9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2018 (3) TMI 2023 - AT - Income TaxDisallowance of depreciation on non-compete fee - assessee claims that the depreciation was allowed right from the assessment year 2001-02 to 2005-06 and it was disallowed only during the year under consideration - HELD THAT - As the copies of earlier orders are not available on record. Even on query from the Bench, the Ld.counsel for the assessee could not file copies of the assessment orders. Moreover, it was also not brought to the notice of the earlier Bench with regard to depreciation allowed by the AO from the assessment year 2001-02 to 2005-06. Therefore, this Tribunal is of the considered opinion that the matter needs to be reconsidered by the AO. Accordingly, the orders of both the authorities below are set aside the claim of depreciation on non-compete fee is remitted back to the file of the AO. AO shall examine the earlier record from the assessment year 2001-02 to 2005-06 and the order of this Tribunal for assessment year 2006-07 and thereafter decide the issue afresh in the light of the judgment of M/s Pentasoft Technologies Ltd. 2013 (11) TMI 1057 - MADRAS HIGH COURT after giving a reasonable opportunity to the assessee. Disallowance of depreciation on goodwill - HELD THAT - This Tribunal by placing reliance on the judgment of Delhi High Court in the assessee's own case for assessment year 2005-06 2012 (4) TMI 79 - DELHI HIGH COURT allowed depreciation on the goodwill. Since facts are identical, this Tribunal is of the considered opinion that the decision of co-ordinate Bench of this Tribunal for the assessment year 2006-07 is equally applicable for the year under consideration. Therefore, AO directed to allow depreciation on goodwill. TDS u/s 195 - Addition u/s 40(a)(i) - payment made to non-resident without deducting tax at source - assessee is a resident in India and paid testing fee to Kema, Netherlands for the purpose of testing the transformers manufactured by it - claim of the assessee before this Tribunal is that the technology of testing the transformers was not made available to the assessee, therefore, the payment is not taxable in India - HELD THAT - As transformers manufactured by the assessee are sent to Netherlands for testing and the Netherlands company sent only report. Therefore, the knowledge of testing was not made available to the assessee. Hence, it cannot be considered as fee for technical services. In view of the above, this Tribunal is of the considered opinion that the payment made to Kema, Netherlands is not liable to deduct tax at source. Payment made to Areva T D Finance, France - In the absence of any material to indicate what was paid by the assessee is only reimbursement of expenditure, this Tribunal is of the considered opinion that the CIT(Appeals) is not justified in allowing the claim of the assessee only on the basis of oral submission made before him. If it is a real reimbursement, there should be a communication between the parties with regard to nature of expenditure and reimbursement. In the absence of any material, this Tribunal is of the considered opinion that the matter needs to be re-examined. Accordingly, orders of both the authorities below are set aside and the payment made to Areva T D Finance, France is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter. Payment made to Converteam, USA - As claim of the assessee before this Tribunal is that erection and commissioning charges are integral cost of machinery. However, no material evidence is produced before this Tribunal to indicate that the erection and commissioning charges are integral part of the cost of machinery. No agreement or invoice was produced either before the Assessing Officer or before this Tribunal. This Tribunal is of the considered opinion that the matter needs to be reexamined by the Assessing Officer. Accordingly, the orders of both the authorities below are set aside and the issue with regard to Converteam, USA is remitted back to the file of the Assessing Officer. The Assessing Officer shall re-examine the matter in the light of the material that may be filed by the assessee and thereafter decide the issue afresh in accordance with law, after giving a reasonable opportunity to the assessee. Disallowance of claim for warranties - As per assessee provision was made on the scientific basis. On a query from the Bench how this provision was made and what is the method? - The Ld.counsel could not explain the expenditure incurred on the earlier years. Therefore, this Tribunal is of the considered opinion that the matter needs to be re-examined by the assessee. Accordingly, the orders of both the authorities below are set aside and the issue with regard to disallowance of provision for warranties is remitted back to the file of the Assessing Officer. Additional depreciation claimed by the assessee - On a query from the Bench, the Ld.counsel submitted that the copy of assessment order for assessment year 2006-07 is not readily available even with the assessee. This Tribunal is of the considered opinion that for claiming additional depreciation, the assessee has to establish that the machinery was purchased and installed. If the depreciation could be allowed in the earlier assessment year, the balance depreciation can be claimed in the subsequent year. This Tribunal is of the considered opinion that the matter needs to be re-examined by the Assessing Officer. Accordingly, orders of both the authorities below are set aside and the issue of additional depreciation is remitted back to the file of the AO who shall re-examine the matter and find out whether the assessee, in fact, purchased and installed the machinery in the assessment year 2006-07 and whether the additional depreciation was claimed and allowed at the rate of 10% and thereafter decide the issue afresh. Depreciation at the rate of 60% on UPS allowed.
Issues Involved:
1. Disallowance of provision for contingencies. 2. Disallowance of depreciation on non-compete fee. 3. Disallowance of depreciation on goodwill. 4. Disallowance under Section 40(a)(i) for payments made to non-residents without deducting tax at source. 5. Disallowance of claim for warranties. 6. Additional depreciation claimed by the assessee. 7. Depreciation on UPS. Issue-wise Detailed Analysis: 1. Disallowance of Provision for Contingencies: The first issue was the disallowance of Rs. 1,06,65,000/- provision for contingencies. The assessee's counsel did not press this ground of appeal, leading to its dismissal as not pressed. 2. Disallowance of Depreciation on Non-compete Fee: The assessee claimed depreciation on a non-compete fee of Rs. 83,05,664/-. The Tribunal had previously allowed this in the assessee's case for the assessment year 2006-07, relying on the Madras High Court judgment in M/s Pentasoft Technologies Ltd. However, the copies of assessment orders from 2001-02 to 2006-07 were not available. The Tribunal remitted the issue back to the Assessing Officer to examine earlier records and decide afresh following the Madras High Court's judgment. 3. Disallowance of Depreciation on Goodwill: The assessee's counsel argued that depreciation on goodwill was allowed by the Tribunal for the assessment year 2006-07 and by the Delhi High Court for the assessment year 2005-06. The Tribunal, following its previous decision and the Delhi High Court's judgment, directed the Assessing Officer to allow depreciation on goodwill for the current year. 4. Disallowance under Section 40(a)(i) for Payments Made to Non-residents without Deducting Tax at Source: - Payment to Kema, Netherlands: The Tribunal found that the payment for testing transformers did not constitute a fee for technical services as per the Double Taxation Avoidance Agreement between India and the Netherlands. Hence, it was not liable for tax deduction at source. - Payment to Areva T&D Finance, France: The Tribunal noted the lack of documentation to support the claim that the payment was a reimbursement of expenses. The issue was remitted back to the Assessing Officer for re-examination. - Payment to Converteam, USA: The Tribunal found no evidence that erection and commissioning charges were integral to the machinery cost. This issue was also remitted back for re-examination by the Assessing Officer. 5. Disallowance of Claim for Warranties: The Tribunal noted that the assessee's counsel could not explain the method for the provision of warranties. The issue was remitted back to the Assessing Officer to re-examine the method and compare it with past expenditures. 6. Additional Depreciation Claimed by the Assessee: The Tribunal highlighted the need for the assessee to establish the purchase and installation of machinery in the assessment year 2006-07. The matter was remitted back to the Assessing Officer to verify the facts and decide afresh. 7. Depreciation on UPS: The Tribunal upheld the lower authority's decision to allow depreciation at the rate of 60% on UPS, following a previous decision in the case of Sundaram Asset Management Co. Ltd. Conclusion: Both the appeals of the assessee and the Revenue were partly allowed for statistical purposes, with several issues remitted back to the Assessing Officer for re-examination and fresh decisions. The order was pronounced on 23rd March 2018 at Chennai.
|
