2024 (4) TMI 1154 - HC - Income Tax

Applicability of Section 14A to assessments which would be governed by Section 115JB - HELD THAT - Issue stands conclusively answered against the appellant in light of the judgment rendered by us in CIT v. Moon Star Securities Trading Finance Co. 2024 (3) TMI 667 - DELHI HIGH COURT Depreciation on non-compete fee - HELD THAT - Deprecation on non-compete fee is an issue which is no longer res integra and stands answered by our Court in Sharp Business System 2012 (11) TMI 324 - DELHI HIGH COURT in favour of the appellant. ITAT has essentially followed the principle of consistency insofar as the case of the respondent assessee is concerned. We consequently find no justification to interfere with or disturb the ultimate conclusions rendered by the ITAT notwithstanding it having failed to notice or consider the judgment rendered in Sharp Business System.

Summary

Issues:
1. Applicability of Section 14A of the Income Tax Act to assessments governed by Section 115JB.
2. Computation of expenditure for exempt income under Section 115JB.
3. Allowability of depreciation on non-compete fee.

Analysis:

Issue 1: Applicability of Section 14A to Section 115JB
The court referred to the judgment in CIT v. Moon Star Securities Trading & Finance Co. where it was held that Section 14A does not apply to assessments under Section 115JB. The court emphasized that Explanation 1 of Section 115JB does not mandate importing disallowances under Section 14A for MAT computation.

Issue 2: Computation of Expenditure for Exempt Income under Section 115JB
The court relied on various precedents to establish that disallowances under Section 14A cannot be added back to book profit under Section 115JB. The court highlighted that the provisions of Section 115JB and Section 14A stand separately, and no correlation exists between them for determining taxable income.

Issue 3: Allowability of Depreciation on Non-Compete Fee
The court noted that the issue of depreciation on non-compete fee was previously addressed in Sharp Business System v. Income Tax-III, where it was held in favor of the appellant. However, in the present case, the ITAT considered past acceptance of depreciation claims and upheld consistency in treatment, leading to the dismissal of the appeal.

In conclusion, the court found no grounds to interfere with the ITAT's conclusions, as they were consistent with past decisions and legal interpretations. The appeal was dismissed, and the court reiterated that the settled law, as established in prior judgments, would govern similar issues in future adjudications.