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2016 (3) TMI 962 - AT - Income TaxDisallowance of depreciation on customer rights - Held that - Respectfully following the order of Tribunal in assessee s own case, we direct the AO to allow assessee s claim of depreciation on customers rights as once it is seen that the expenditure has been incurred for acquiring the business, we cannot hold that acquisition of customer rights are bogus. We, therefore, hold that the expenditure as such was genuine.Once the expense has been accepted by us to be genuine, it would fall within the inclusions of section 32(1)(ii). - Decided in favour of assesse Disallowance u/s 14A - Held that - Assessee is in the business of stock broking having taxable brokerage of income. Most of the expenses were incurred for the purpose of business and the expenditure incurred for investment in shares was suo motu offered for disallowance. So far as disallowance of interest is concerned, we found that interest income earned by the assessee was more than the interest expenditure and since the interest income is positive no interest disallowance can be made.- Decided in favour of assesse Disallowance of claim of bad debts - Held that - The issue is covered in favour of assessee vide order of the Tribunal in assessee s own case for A.Y.2007-08 upholding the action of CIT(A) for deleting disallowance of bad debts. Also see CIT Vs. Shreyas S. Morakhia 2012 (3) TMI 103 - BOMBAY HIGH COURT .- Decided in favour of assesse Disallowance of depreciation on VSAT (Very Small Aperture Terminal) - Held that - Respectfully following the order of the Tribunal in assessee s own case for earlier AYs we confirm the action of CIT(A) for deleting the disallowance of depreciation on VSAT.- Decided in favour of assesse Disallowance of Vanda loss - Held that - Respectfully following the order of the Tribunal in assessee s own case for earlier AYs we confirm the action of CIT(A) for deleting the disallowance - Decided in favour of assessee Disallowance of mark to market loss - Held that - CIT(A) has deleted disallowance by relying on the order of special bench of the Tribunal in the case of CIT Vs. Bank of Baharain 2010 (8) TMI 578 - ITAT, MUMBAI . The issue is covered in favour of the assessee vide decision of the Hon ble Supreme Court in the case of CIT Vs. Woodward Governor 2009 (4) TMI 4 - SUPREME COURT - Decided in favour of assessee Disallowance on depreciation on goodwill - Held that - Explanation 3 to Section 32(1)(ii) the commercial or business right which is similar to a licence or franchise is declared to be an intangible asset, therefore, the right of membership, which includes right of nomination, is a licence or akin to a licence which is one of the items which falls in Section 32(1)(ii). See CIT Vs. Smiff Securities 2012 (8) TMI 713 - SUPREME COURT - Decided in favour of assessee
Issues Involved:
1. Disallowance of depreciation on customer rights. 2. Disallowance under Section 14A. 3. Disallowance of bad debts. 4. Disallowance of depreciation on VSAT. 5. Disallowance of Vanda loss. 6. Disallowance of mark to market loss. 7. Disallowance of depreciation on goodwill. 8. Disallowance on foreign exchange loss. 9. Indexed cost of stock exchange card. Issue-wise Detailed Analysis: 1. Disallowance of Depreciation on Customer Rights: The assessee claimed depreciation on customer rights acquired through business acquisitions. The Assessing Officer (AO) disallowed this claim, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)]. However, the Tribunal found that the issue was covered by its previous order in the assessee's own case for the assessment year 2007-08, where it was held that the acquisition of customer rights was genuine and eligible for depreciation under Section 32(1)(ii). Consequently, the AO was directed to allow the depreciation. 2. Disallowance under Section 14A: The AO disallowed expenses under Section 14A related to exempt income, which included interest and administrative expenses. The CIT(A) directed the AO to exclude bank guarantee commission from interest expenses but upheld the disallowance of other interest and administrative expenses. The Tribunal found that interest income exceeded interest expenditure, thus no interest disallowance was warranted. The matter of other expenses was remanded back to the AO for fresh consideration, following the Tribunal's directions in a similar case involving the assessee's group concern. 3. Disallowance of Bad Debts: The AO disallowed the assessee's claim of bad debts, which was subsequently deleted by the CIT(A). The Tribunal upheld the CIT(A)'s decision, referencing its previous order in the assessee's own case for the assessment year 2007-08 and the decision of the Special Bench in the case of CIT Vs. Shreyas S. Morakhia, which was affirmed by the Bombay High Court. 4. Disallowance of Depreciation on VSAT: The AO disallowed depreciation claimed on VSAT, treating it as part of the computer. The CIT(A) deleted this disallowance, following earlier orders. The Tribunal confirmed the CIT(A)'s action, citing its previous orders in the assessee's own case for multiple assessment years. 5. Disallowance of Vanda Loss: The AO treated the Vanda loss as speculative and disallowed it. The CIT(A) deleted this disallowance, and the Tribunal upheld the CIT(A)'s decision, referencing its previous order in the assessee's own case for the assessment year 2007-08 and similar decisions in other cases. 6. Disallowance of Mark to Market Loss: The AO disallowed mark to market loss, but the CIT(A) deleted this disallowance, relying on the Special Bench decision in the case of CIT Vs. Bank of Bahrain and the Supreme Court decision in CIT Vs. Woodward Governor. The Tribunal upheld the CIT(A)'s action. 7. Disallowance of Depreciation on Goodwill: The AO did not allow depreciation on goodwill; however, the CIT(A) deleted the disallowance, following his earlier order. The Tribunal upheld the CIT(A)'s decision, referencing its previous order in the assessee's own case for the assessment year 2007-08 and the Supreme Court decision in CIT Vs. Smiff Securities. 8. Disallowance on Foreign Exchange Loss: For the assessment year 2008-09, the AO disallowed foreign exchange loss. The Tribunal directed the AO to delete this disallowance, referencing its previous order in the assessee's own case for the assessment year 2007-08. 9. Indexed Cost of Stock Exchange Card: The Tribunal directed the AO to recompute the indexed cost, following its previous decision in the case of M/s Parag Parikh Financial Advisory Services Ltd., where it was held that the holding period of equity shares allotted pursuant to demutualisation or corporatisation of a recognised stock exchange should include the period for which the assessee was a member of the stock exchange prior to such demutualisation or corporatisation. Conclusion: The Tribunal's consolidated order addressed multiple issues, largely favoring the assessee by directing the AO to allow claims or recompute disallowances based on previous judicial pronouncements and consistent application of legal principles. Appeals were allowed in part, with specific directions for each issue.
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