9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (5) TMI 1447 - AT - Income TaxDepreciation claimed on goodwill - cost of goodwill acquired from MSN Singapore by way of demerger - HELD THAT - Since it is submitted that MSN Singapore has not claimed/has been allowed depreciation under the Indian Income tax Act, the depreciation claimed by the assessee on the amount of goodwill should be allowed on its original cost as per the law discussed by us. However, we notice that the above said facts narrated by the assessee are not emanating from the orders passed by the tax authorities, meaning thereby, the tax authorities did not examine the facts submitted by the assessee, which became the foundation in support of the claim of depreciation made by the assessee. Hence, we are of the view that the facts narrated by the assessee needs to be verified at the end of the assessing officer. Accordingly, we restore this issue to the file of the assessing officer for the limited purpose with following directions - (a) If MSN Singapore has not claimed/has not been notionally allowed depreciation under sec. 32 of Indian Income tax Act for any of the years, then the assessee is eligible to claim depreciation on the cost of goodwill acquired from MSN Singapore by way of demerger. (b) If MSN Singapore has claimed and/or has been allowed depreciation u/s 32 of Indian Income tax Act for any of the years, then the AO may compute depreciation on goodwill in accordance with the law. Accordingly, this issue is disposed of. Disallowance of Provision for Expenses - assessee had provided for outstanding expenses as at the yearend in books of accounts. Since no TDS was deducted, it voluntarily disallowed 30% of Provision for outstanding expenses u/s 40(a)(ia) - HELD THAT - What is required to be examined is, whether the relevant liability has been incurred or not. The said liability may pertain to whole of the year also. So long as the liability towards expenses has been incurred by the assessee and if the payment has not been made, then the same has to be provided for in the books, even if it relates to more than one month. For example, it may be usual practice to pay rent for an office premises in the succeeding month. Hence, usually, the March month rent would be paid in the month of April and hence the provision for outstanding rent is made for the month of March, i.e., for one month. It may so happen that the assessee might not have paid rent, say for October to March for some reason. Then the provision for outstanding rent for six months has to be provided for as per the accounting principles, since the liability to pay rent for six months has been incurred. Hence the period for which provision was made is not a relevant factor. Incurring of liability irrespective of duration of period is relevant. Accordingly, the various observations made by DRP, in our view, would fail. The provision for outstanding expenses claimed by the assessee is an ascertained liability only. Accordingly, we are of the view that the Ld DRP was not justified in confirming the disallowance made by the AO. Accordingly, the addition of 70% of expenses made by the AO is liable to be deleted. We order accordingly. Non-granting of TDS - TDS credit was not given by the AO for the reason that the TDS certificates are not in the name of assessee, but it was in the name of amalgamated/demerged company - HELD THAT - Resulting company in case of demerger and transferee company in the case of transfer, are eligible to claim TDS credit, even if the TDS certificates are in the name of demerged company/transferor company. In the instant case, the assessee has offered the relevant income, even though the TDS certificates were in the name of amalgamated/demerged company. Accordingly, following the above said decisions POPULAR COMPLEX ADVISORY PVT. LTD. 2023 (8) TMI 1485 - ITAT KOLKATA , ADANI GAS LTD. 2016 (1) TMI 940 - ITAT AHMEDABAD and ULTRATECH CEMENT LTD 2022 (1) TMI 923 - ITAT MUMBAI we direct the AO to allow TDS credit to the assessee after verifying that the relevant income has been assessed by the AO in this year. Deduction of foreign taxes u/s 37(1) - HELD THAT - AO did not discuss this issue at all. We restore this issue to the file of the AO with the direction to examine the claim of the assessee in accordance with the decision rendered in RELIANCE INFRASTRUCTURE LTD. 2016 (12) TMI 1293 - BOMBAY HIGH COURT .
Issues Involved:
1. Depreciation on Goodwill 2. Disallowance of Provision for Expenses 3. Non-granting of TDS Credit 4. Charging of Interest under Section 234B 5. Deduction of Foreign Taxes under Section 37(1) Issue-wise Detailed Analysis: 1. Depreciation on Goodwill: The assessee, SPN India, acquired the broadcasting business of its wholly-owned subsidiary MSM Singapore through a demerger effective from April 1, 2014. The assets acquired included goodwill valued at Rs. 61.148 crores. The assessee claimed depreciation on this goodwill. The AO, however, allowed depreciation only on the written down value (WDV) computed by deducting notional depreciation since AY 2006-07, resulting in a significant reduction of the claimed depreciation. The Ld DRP upheld this view, stating that the goodwill amount should be taken as NIL. The Tribunal examined the applicability of the 6th proviso to sec. 32(1) and Explanation 5 to sec. 32(1) and concluded that these provisions were not applicable to the facts of the case. The Tribunal noted that MSM Singapore was not assessed under the Indian Income tax Act for its business profits, and therefore, there was no occasion for MSM Singapore to claim depreciation. Consequently, the Tribunal directed the AO to verify whether MSM Singapore had claimed or been allowed depreciation under the Indian Income tax Act. If not, the assessee should be allowed depreciation on the original cost of goodwill. 2. Disallowance of Provision for Expenses: The assessee provided for outstanding expenses amounting to Rs. 156.38 crores and claimed it as a deduction. The AO disallowed the entire provision, considering it as unascertained liabilities. The Ld DRP confirmed this disallowance. The Tribunal emphasized that under the mercantile system of accounting, the provision for all known expenses and losses must be made, even if the exact amount is not known. The Tribunal cited the Supreme Court's rulings in Bharat Earth Movers vs. CIT and Rotork Controls India P Ltd vs. CIT, which support the concept of making provisions for accrued liabilities. The Tribunal held that the provision for outstanding expenses is an ascertained liability and deleted the disallowance made by the AO. 3. Non-granting of TDS Credit: The assessee claimed TDS credit of Rs. 8,13,81,645/-, which was not granted by the AO because the TDS certificates were in the name of the amalgamated/demerged company. The Tribunal referred to decisions from coordinate benches, which held that the resulting company in a demerger or the transferee company in a transfer is eligible to claim TDS credit even if the TDS certificates are in the name of the demerged/transferor company. The Tribunal directed the AO to allow TDS credit after verifying that the relevant income has been assessed in the hands of the assessee. 4. Charging of Interest under Section 234B: The issue of charging interest under Section 234B was restored to the file of the AO for computation in accordance with the law. 5. Deduction of Foreign Taxes under Section 37(1): The assessee claimed deduction for foreign taxes under Section 37(1), which the AO did not discuss. The Tribunal restored this issue to the AO with directions to examine the claim in accordance with the decision of the Bombay High Court in Reliance Infrastructure Ltd vs. CIT and Bank of India vs. ACIT. Conclusion: The Tribunal allowed the appeals of the assessee, directing the AO to verify specific facts and recompute the depreciation on goodwill, allow the provision for outstanding expenses, grant TDS credit, compute interest under Section 234B, and examine the claim for deduction of foreign taxes as per relevant judicial precedents.
|
