9911796707
|
Home
Forgot password New User/ Regiser ⇒ Register to get Live Demo
2024 (6) TMI 1133 - AT - Income TaxDisallowance of Depreciation on unverified purchases and other expenses - HELD THAT - In assessee's case depreciation on unverified purchases were disallowed for AY 2006-07 to AY 2012-13 and the Co-ordinate Bench has given relief to the assessee towards depreciation unverified purchases capitalized and the issue of depreciation on unverified purchases was remitted back to the AO for fresh examination. We notice, that the disallowance made by the AO towards unverified purchases and expenses is the consequential depreciation on the written down value of the assets. Thus we direct the AO to delete the disallowance of consequential depreciation on unverified expenses and the issue of consequential depreciation on unverified purchases is remitted back to the AO with similar directions. Needless to say that the assessee be given a reasonable opportunity of being heard. This ground of the assessee is partly allowed for statistical purposes. Disallowance of depreciation on goodwill on amalgamation - HELD THAT - As decided in own case for 2010-11 2024 (1) TMI 1295 - ITAT MUMBAI on a careful perusal of the sixth proviso to sec. 32(1) of the Act, we noticed that the same is applicable only in a situation where the amalgamation takes place in the middle of the year i.e. the said proviso states that the aggregate amount of depreciation claimed by the amalgamating companies and amalgamated company for that year should not exceed eligible amount of depreciation of that year. In the instant case the amalgamation has taken place on 1.4.2009 and not in the middle of the year. Hence the sixth proviso to section 32(1) will not apply to the facts of the present case. Accordingly we set aside the reasoning given by the learned CIT(A) for confirming the disallowance of depreciation of goodwill. We noticed earlier that both the tax authorities have not examined the factual aspects relating to the goodwill amount of Rs.21.81 crores and also the depreciation claimed thereon. Hence the assessee also did not get opportunity to put forth its contentions before them - thus this claim of depreciation on good will requires examination at the end of the AO by duly considering all the relevant factual aspects. Accordingly, we set aside the order passed by the learned CIT(A) on this issue and restore the same to the file of the Assessing Officer for examining it afresh - This ground is allowed for statistical purposes. TP Adjustment on letter of comfort (LOC) - assessee has issued a letter of comfort towards credit facilities sanctioned by ANZ Banking Group Ltd. to assessee's subsidiaries -TPO treated the said transaction as international transaction and proceeded to bench mark the same - HELD THAT - As from letter of comfort it is clear that the assessee is giving a comfort to the ANZ bank that the AE would be operated and maintained in such a way to be in a financial position to repay its obligations and not to take any action that would hinder the operations of the AE. The assessee also gives the commitment that assessee's stake in AE will not go below 51%. Therefore we see no merit in the contention that the assessed has to repay all outstanding to the bank if it reduces its capital below 51% in its AE. Our view is further strengthened by the relevant clauses in the letter of offer given by ANZ to the AE i.e.borrower as extracted by the CIT(A) in his order. Considering the terms agreed in the letter of comfort and the terms of the letter of offer we are inclined to hold that what the assessee has given to ANZ towards loan facility granted to its AE is only a letter of comfort and not a guarantee. We notice that Rule 10TA of Safe Harbour Rules for International Transactions defines corporate guarantee as explicit corporate guarantee extended by a company to its wholly owned subsidiary being a non-resident in respect of any short-term or long-term borrowing and does not include letter of comfort, implicit corporate guarantee, performance guarantee or any other guarantee of similar nature. In the facts and circumstances of the present case, we are of the considered view that the letter of comfort given by the assessee cannot be treated as letter of guarantee warranting any TP adjustment. Accordingly the adjustment made by the TPO is hereby deleted. This ground is allowed in favour of the assessee. Admission of additional ground for disposal on merits - Allowability of deduction u/s 10AA of 100% of profits derived from Export Oriented Unit before considering the additions/deletions - HELD THAT - For the year under consideration the assessee has not raised this issue before the lower authorities and therefore respectfully following the above decision of the Tribunal we remit the issue back to AO for examination with a direction to decide keeping in mind the decision of coordinate bench in the case of Reliance Industries Ltd 2020 (12) TMI 165 - ITAT MUMBAI and decide in accordance with law. This ground is allowed for statistical purposes. Allowability of mark to market (MTM) loss u/s 37(1) - AO rejected the assessee's alternate plea that since section 43(5) is not applicable the MTM losses should be allowed under section 28 or 37(1) of the Act - HELD THAT - As in own case for AY 2012-13 2024 (1) TMI 1295 - ITAT MUMBAI nature of these items is not clear and we notice that no tax authority has examined these items. If these transactions have been entered in the course of carrying on of regular business activities and the underlying assets are trading items, the loss arising on their revaluation at the year end is allowable as deduction. It is to be seen that the underlying assets having foreign currency exposure is also revalued as at the year end Accordingly, for the limited purpose of verifying these factual aspects, we restore this issue to the file of the AO for examining this issue in the light of principles laid down in the case of D Chetan Co 2016 (10) TMI 629 - BOMBAY HIGH COURT Thus we restore the issue to the AO with similar directions. The ground raised by the Revenue is disposed of accordingly. Allowability of ESOP expenses - AO disallowed the same holding the said expenses to be notional - HELD THAT - CIT(A) correctly allowed the deduction by placing reliance on the decision of the Special Bench in the case of Biocon Ltd 2013 (8) TMI 629 - ITAT BANGALORE . Weighted deduction u/s 35(2AB) - HELD THAT - As per assessee's own case for AY 2010-11 2024 (1) TMI 1295 - ITAT MUMBAI we uphold the decision of the CIT(A) in allowing weighted deduction towards clinical trial expenses outside the in- house facility. This ground of the revenue is dismissed. Pre-commencement Expenses - assessee while filing the revised return of income claimed pre- production commencement revenue expenditure - HELD THAT - CIT(A) correctly gave relief to the assessee by directing the AO to allow the expenditure as revenue expenditure as per in assessee's own case for AY 2010-11 2024 (1) TMI 1295 - ITAT MUMBAI wherein as held uncontroverted fact is that the business of the assessee in Pithampur SEZ has been set up and further it is an extension of existing business. We notice that the Ld CIT(A) has allowed the claim following the legal principles pronounced by the Courts. Hence, we do not find any infirmity in the decision rendered by Ld CIT(A) on this issue.
Issues Involved:
1. Disallowance of depreciation on unverified purchases and other expenses. 2. Disallowance of depreciation on goodwill on amalgamation. 3. Transfer Pricing Adjustment on letter of comfort. 4. Initiation of penalty proceedings under section 271(1)(c). 5. Allowability of mark-to-market (MTM) loss under section 37(1). 6. Disallowance of sales promotion expenses. 7. Allowability of ESOP expenses. 8. Weighted deduction under section 35(2AB). 9. Pre-commencement expenses. 10. Deduction under section 10AA. 11. Deduction of Education Cess (withdrawn). Detailed Analysis: Disallowance of Depreciation on Unverified Purchases and Other Expenses: The assessee's appeal on the disallowance of depreciation on unverified purchases and other expenses was based on the disallowance made in earlier assessment years. The Tribunal referred to its previous decisions, where it had remitted the issue back to the AO for fresh examination. Consequently, the Tribunal directed the AO to delete the disallowance of consequential depreciation on unverified expenses and remitted the issue for fresh examination. Disallowance of Depreciation on Goodwill on Amalgamation: The Tribunal noted that the issue of depreciation on goodwill arising from the amalgamation had been remitted back to the AO in earlier years for fresh examination. The Tribunal directed the AO to re-examine the issue for the current year as well, following the same directions. Transfer Pricing Adjustment on Letter of Comfort: The Tribunal examined whether the letter of comfort issued by the assessee to ANZ Bank constituted a financial guarantee warranting a TP adjustment. It concluded that the letter of comfort did not create any legal obligation on the assessee to repay the bank and thus did not warrant a TP adjustment. The Tribunal deleted the adjustment made by the TPO. Initiation of Penalty Proceedings under Section 271(1)(c): The Tribunal noted that the initiation of penalty proceedings was consequential and did not warrant separate adjudication. Allowability of Mark-to-Market (MTM) Loss under Section 37(1): The Tribunal referred to its previous decisions and the Hon'ble Bombay High Court's ruling in the assessee's own case, which held that MTM losses on outstanding derivatives contracts were allowable as deductions. The Tribunal restored the issue to the AO for fresh examination with similar directions. Disallowance of Sales Promotion Expenses: The Tribunal noted that the issue of disallowance of sales promotion expenses was covered against the assessee. Consequently, it upheld the disallowance made by the AO. Allowability of ESOP Expenses: The Tribunal referred to its previous decisions and the Special Bench ruling in the case of Biocon Ltd., which allowed the deduction of ESOP expenses. The Tribunal upheld the CIT(A)'s decision allowing the deduction of ESOP expenses claimed by the assessee. Weighted Deduction under Section 35(2AB): The Tribunal referred to its previous decisions and the Hon'ble Gujarat High Court's ruling in the case of Cadila Pharmaceuticals Ltd., which allowed weighted deduction for expenditure incurred on clinical trials outside the in-house R&D facility. The Tribunal upheld the CIT(A)'s decision allowing the weighted deduction for such expenses. Pre-commencement Expenses: The Tribunal referred to its previous decisions and upheld the CIT(A)'s decision allowing the pre-commencement revenue expenditure incurred at Pithampur SEZ Plant-II and Nagpur SEZ as revenue expenditure. Deduction under Section 10AA: The Tribunal admitted the additional ground raised by the assessee regarding the deduction under section 10AA and remitted the issue back to the AO for examination, following the coordinate bench's decision in the case of Reliance Industries Ltd. Deduction of Education Cess: The assessee withdrew the additional ground regarding the deduction of education cess, and the Tribunal dismissed it as withdrawn. Conclusion: The Tribunal allowed the assessee's appeal for statistical purposes, partly allowed the revenue's appeal in ITA No. 1241/Mum/2021, dismissed the revenue's appeal in ITA No. 1242/Mum/2021, and allowed the assessee's cross-objection in C.O.No.1/Mum/2022.
|
