2017 (12) TMI 367 - HC - Income Tax

Payment of registration fee to be equitable to an intangible asset - Held that - We find that the finding of the Tribunal is not supported by reasons especially on the factual aspect as to what is the effect of payment of the registration fee for acquiring such a licence. That apart the assessee s alternate claim that it should be treated as a revenue expenditure has also been negatived by the Assessing Officer. We find that the Assessing Officer has not given independent reason as to why the alternate submission of the assessee is not accepted. Therefore we find that the finding of the Tribunal in paragraph 13 on the second issue in our considered opinion has been rendered without going into the commercial aspect of the effect of the registration fee paid by the assessee which even according to the Assessing Officer is a huge expense. Remand the matter to the Assessing Officer for fresh consideration.

Summary

Issues:
1. Remitting the issue of donation made under section 35AC back to the Assessing Officer.
2. Claim for depreciation on registration fees and related payments as intangible assets under section 32(1)(ii).

Issue 1: Remitting the issue of donation made under section 35AC back to the Assessing Officer:
The appellant, a company in the pesticide manufacturing business, claimed a deduction of ?2.5 crores for a donation made to a Trust under section 35AC of the Income Tax Act, 1961. The Trust denied receiving the full amount, alleging fraud by unknown persons and bank officials. The President of the Trust confirmed receiving only ?2 crores. The Assessing Officer completed the assessment, denying the donation claim. The Commissioner of Income-tax (Appeals) upheld the decision without an independent finding. The Tribunal remanded the issue to the Assessing Officer for fresh consideration, citing a similar case precedent. The High Court approved the remand but disapproved the conditions set by the Tribunal, directing an open remand for independent re-examination by the Assessing Officer.

Issue 2: Claim for depreciation on registration fees and related payments as intangible assets under section 32(1)(ii):
The appellant claimed that registration fees paid for exporting products constituted intangible assets eligible for depreciation under section 32(1)(ii). The Tribunal granted relief based on a Supreme Court decision. However, the High Court found the Tribunal's decision lacking reasoning on the effect of registration fee payment and rejected the alternate claim of treating it as revenue expenditure. The Assessing Officer did not provide independent reasons for rejecting the alternate submission. Consequently, the High Court remanded this issue to the Assessing Officer for fresh consideration, allowing the appellant to raise all relevant issues, including the revenue expenditure plea.

In conclusion, the High Court upheld the Tribunal's decision to remand both issues to the Assessing Officer for independent re-examination, emphasizing an unqualified remand to consider all aspects thoroughly. The Court found that the substantial questions of law raised by the Revenue were fact-dependent and required a comprehensive review by the Assessing Officer.