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2022 (6) TMI 1460 - AT - Income TaxDisallowance u/s 35(2AB) - research and development expenditure - assessee had itself admitted that there was a difference in the claim of Research Development expenditure and that the assessee had claimed excess deduction u/s. 35 (2AB) - As per CIT contentions put forth by the appellant were not disposed off by the AO, thus AO is directed to restrict the disallowance after necessary verification as specifically brought out in the contentions of the appellant - HELD THAT - AR has filed the working of disallowance U/sec. 35(2AB) of the Act which explains the nature of expenditure, actual expenses debited to profit loss account, claim made in the return of income and the assessee claim before the DSIR and the revised claim. The workings tally with the net disallowance restriction directed by the CIT(A) to A.O. DR could not controvert the above findings of restoration to the file of A.O. and we do not find merit in this ground of appeal of the revenue and is dismissed. Depreciation on computer software - HELD THAT - ITAT in the Assessee own case in A.Y. 2010-11 2020 (1) TMI 1200 - ITAT MUMBAI has observed that the computer software is eligible for depreciation @60%. We find there is nothing remains in the ground of appeal as it become in fructuous due to grant of higher depreciation on software and the ground of appeal of the revenue is dismissed. Grant of depreciation on assets transfer in the merger and the said companies have not claimed depreciation on the assets held by them - HELD THAT - We find the Hon ble Tribunal In 2020 (1) TMI 1200 - ITAT MUMBAI has considered the facts, provisions of the Act and judicial decisions and directed the A.O. to allow the depreciation. In the present case the facts are identical and CIT(A) has relied on the earlier years decision and granted the relief. We up held the same as decided in favour of the assessee. Addition u/s 145A of the Act with respect to modvat credit - HELD THAT - The Honble Tribunal in 2021 (10) TMI 505 - ITAT MUMBAI as perused Tax Audit report of the assessee and find that it is the claim of the assessee that the impact of grossing up of tax, duty, cess etc. by restating the values of purchases and inventories by inter alia including the effect of CENVAT credit will be Nil, subject to Sec. 43B that the duty, taxes, cess etc. is paid before the due date of filing of the return of income. As the ld. D.R had submitted that the aforesaid working of the assessee would require to be verified, we therefore, in all fairness restore the matter to the file of the A.O for readjudication. Allowance of consultancy charges as revenue expenditure and allow deduction u/s 35DD - HELD THAT - We find that the similar issue has been decided in the assessee favour by the Honble Tribunal in 2021 (10) TMI 505 - ITAT MUMBAI for A.Y.2003-04 dated 510-2021 as held that it is a clear case of simple professional services rendered by Accenture to the assessee which at any cost cannot be considered as a capital in nature. We find that the said expenditure has to be considered as wholly and exclusively as deduction u/s. 37(1) - We hold that the provisions of Section 35DD of the Act as alleged by the ld. CIT(A) cannot be made applicable in the instant case as admittedly the same only refers to expenses incurred pursuant to amalgamation. Hence, we direct the ld. AO to grant deduction of the said expenditure u/s. 37(1) - Decided in favour of assessee. Correct head of income - Treating rental income from RP House and centre point under the head IFHP OR IFOS - HELD THAT - We find the Honble Tribunal 2021 (10) TMI 505 - ITAT MUMBA has held that the transfer of ownership has to be completed over a period of 4 years and therefore the assessee continues to remain the owner of part property of the RP House. Further it was decided that the income from RP House and Centre Point is assessable as Income From House Property. CIT(A) has considered the factual aspects and made a reasonable observations and granted the relief. We find the revenue could controvert on the findings of the CIT(A) on this disputed issue. Accordingly, we follow the judicial precedence of ratio of the ITAT decision and dismiss the ground of appeal of the revenue. Deduction of eligible profits u/s 80HHC of the Act while calculating the book profits u/s 115JB - HELD THAT - We find that in the assessee s own case for the A.Y 2003-04, the Hon ble Tribunal has allowed the assessee s ground of appeal in 2021 (10) TMI 505 - ITAT MUMBA as held that deduction u/s. 80HHE had to be worked out on the basis of adjusted book profit u/s. 115JA of the Act and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. - Decided against revenue. Allowance of set off of losses /depreciation of tools division on account of demerger - HELD THAT - As relying on own case 2021 (10) TMI 505 - ITAT MUMBAI to hold that the ld. CIT(A) had rightly directed the ld. AO to allow set off of losses of amalgamating company in the hands of the assessee - Decided against revenue. Allow depreciation on computer software @ 60% rate after due verification and recomputed the computer and computer software as on block WDV and allow ground of appeal for statistical purpose. Disallowance of interest on loan taken for purchase of a capital asset(Shares of RPIL) - AR submits that if the barrowed funds are used for investment in shares held for controlling interest, interest is allowable U/sec 36(1)(iii) of the Act and such expenditure is incurred out of commercial expediency - HELD THAT - We find the CIT(A) has followed the assessee own case for A.Y.2002-03 2003-04 and confirmed the disallowance of interest. Further on appeal by the assessee to the Honble Tribunal, for both the assessment years ITAT has decided in favour of the assessee as per the observations discussed in the above paragraphs. The Ld.DR has accepted the decisions of the Honble Tribunal. Accordingly, we set aside the decision of the CIT(A) on this disputed issue and direct the assessing officer to delete the disallowance of interest and allow the ground of appeal. Capital gains on sale of RP house to be taxed over 4 years. Grant the depreciation on the block of building - HELD THAT - As decided in 2021 (10) TMI 505 - ITAT MUMBAI block of building continued, depreciation thereon should be eligible to the assessee. Accordingly, we direct the ld. AO to grant depreciation. Nature of receipts - treatment of sales tax deferral loan - revenue receipt or capital receipt - HELD THAT - We are of the opinion that the Assessing officer should also be provided an opportunity to verify and examine the facts in the additional ground raised by the assessee. Hence to meet the ends of justice with out going in to merits of the case restore this disputed issue for limited purpose to the file of the Assessing officer to decide on merits and allow the ground of appeal for statistical purposes.
Issues Involved:
1. Disallowance under Section 35(2AB) of the Income Tax Act. 2. Depreciation on computer software. 3. Depreciation on assets transferred due to merger. 4. Addition under Section 145A regarding Modvat credit. 5. Treatment of consultancy charges under Section 35DD. 6. Classification of rental income. 7. Deduction under Section 80HHC for MAT purposes. 8. Set-off of losses/depreciation due to demerger. 9. Short-term capital gains on sale of computers. 10. Disallowance of interest on loan for purchase of equity. 11. Capital gains on sale of RP house property. 12. Depreciation on RP house property. 13. Taxability of gain on repayment of Sales Tax deferral loan. Detailed Analysis: 1. Disallowance under Section 35(2AB): The CIT(A) directed the AO to restrict the disallowance to Rs. 5,11,35,563/- after necessary verification. The Tribunal upheld this decision, noting that the CIT(A) had correctly restored the issue to the AO for verification. 2. Depreciation on Computer Software: The CIT(A) upheld the AO's decision to allow depreciation at 25% instead of 60%. The Tribunal found that the issue was covered in favor of the assessee by earlier Tribunal decisions, which allowed 60% depreciation on computer software. Thus, the Tribunal directed the AO to allow depreciation at 60%. 3. Depreciation on Assets Transferred Due to Merger: The CIT(A) directed the AO to allow depreciation as claimed by the assessee, following earlier Tribunal decisions. The Tribunal upheld this decision, noting that similar issues in earlier years were decided in favor of the assessee. 4. Addition under Section 145A Regarding Modvat Credit: The CIT(A) directed the AO to restrict the disallowance to net unutilized Modvat credit. The Tribunal upheld this decision, following earlier Tribunal decisions and noting that the addition should be limited to the net unutilized Modvat credit. 5. Treatment of Consultancy Charges under Section 35DD: The CIT(A) allowed the consultancy charges as revenue expenditure, following earlier appellate orders. The Tribunal upheld this decision, noting that similar issues in earlier years were decided in favor of the assessee. 6. Classification of Rental Income: The CIT(A) treated rental income from RP House as "Income from Other Sources" and from Centre Point as "Income from House Property." The Tribunal upheld this decision, noting that the ownership of RP House vested with the assessee for four years, and thus, the rental income should be assessed as "Income from House Property." 7. Deduction under Section 80HHC for MAT Purposes: The CIT(A) directed the AO to deduct profits eligible under Section 80HHC from book profit for calculating MAT. The Tribunal upheld this decision, following earlier Tribunal decisions and the Supreme Court's decision in CIT vs. Bhari Information Technology Systems (P) Ltd. 8. Set-off of Losses/Depreciation Due to Demerger: The CIT(A) allowed the set-off of losses/depreciation of the tools division. The Tribunal upheld this decision, noting that the assessee had fulfilled all conditions under Section 72A and relevant rules. 9. Short-term Capital Gains on Sale of Computers: The CIT(A) confirmed the AO's calculation of short-term capital gains. The Tribunal directed the AO to allow depreciation at 60% after due verification and recompute the gains, allowing the ground for statistical purposes. 10. Disallowance of Interest on Loan for Purchase of Equity: The CIT(A) confirmed the disallowance of interest. The Tribunal set aside this decision, directing the AO to delete the disallowance, following earlier Tribunal decisions in favor of the assessee. 11. Capital Gains on Sale of RP House Property: The CIT(A) upheld the protective taxation of capital gains. The Tribunal noted that this issue was decided against the assessee for earlier years, making the ground infructuous and dismissing it. 12. Depreciation on RP House Property: The CIT(A) upheld the disallowance of depreciation. The Tribunal directed the AO to grant depreciation, following earlier Tribunal decisions. 13. Taxability of Gain on Repayment of Sales Tax Deferral Loan: The CIT(A) did not admit this additional ground. The Tribunal admitted the ground and restored the issue to the AO for examination, allowing it for statistical purposes. Conclusion: The Tribunal dismissed the revenue's appeal and partly allowed the assessee's appeal for statistical purposes, following earlier Tribunal decisions and legal precedents.
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