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2019 (3) TMI 322 - HC - Income TaxAdmit following substantial questions of law arise for consideration. (A) Whether on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal was justified in holding that the Assessing Officer had not fulfilled the pre-requirements of invoking the provisions to Explanation-3 to section 43 (1) of the Income Tax Act, 1961, and thereby allowing full claim of depreciation of ₹ 61,48,20,284/- on intangible assets worth ₹ 500 crore? (B) Whether the Income Tax Appellate Tribunal was justified in allowing carry forward of unabsorbed business losses and depreciation in the facts of this case? (C) Whether the Income Tax Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) allowing interest expenses of ₹ 40,99,56,735/- on Deep Discount Bonds (DDBs) ? (D) Whether the Income Tax Appellate Tribunal was justified in confirming the order of the Commissioner (Appeals) allowing interest expenses of ₹ 2,65,24,193/- on Optionally Fully Convertible Premium Notes (OFCPNs) ? (E) In the light of the Circular No. 2 of 2002 dated 20.3.2002 of the CBDT, whether the Income Tax Appellate Tribunal was justified in law and on facts in confirming the order of the Commissioner (Appeals) that income of Optionally Fully Convertible Premium Notes (OFCPNs) of other companies of ₹ 1,79,56,195/- was not taxable in the hands of the assessee on accrual basis ?
Issues Involved:
1. Interpretation of provisions of the Income Tax Act, 1961 regarding depreciation on intangible assets. 2. Allowance of carry forward of unabsorbed business losses and depreciation. 3. Allowance of interest expenses on Deep Discount Bonds (DDBs) and Optionally Fully Convertible Premium Notes (OFCPNs). 4. Taxability of income from OFCPNs of other companies based on Circular No. 2 of 2002. Analysis: Issue A: The primary issue in this case revolves around whether the Income Tax Appellate Tribunal was justified in allowing the full claim of depreciation on intangible assets worth a significant amount. The court was called upon to determine if the Assessing Officer fulfilled the pre-requirements for invoking the provisions of Explanation-3 to section 43(1) of the Income Tax Act, 1961. The appellant argued that substantial questions of law were formulated in previous orders, indicating the acceptance of the appeals. Issue B: Another crucial point of contention was the allowance of carry forward of unabsorbed business losses and depreciation. The Income Tax Appellate Tribunal's decision to permit this in the specific circumstances of the case was challenged. The court had to assess the justification behind the Tribunal's decision and determine its legal validity. Issue C: The case also involved the confirmation of the order of the Commissioner (Appeals) regarding the allowance of interest expenses on Deep Discount Bonds (DDBs). The Income Tax Appellate Tribunal's decision to uphold this allowance was questioned, requiring a detailed examination of the facts and legal provisions involved. Issue D: Similarly, the Tribunal's confirmation of the order allowing interest expenses on Optionally Fully Convertible Premium Notes (OFCPNs) was under scrutiny. The court needed to assess the justification behind this decision and determine its compliance with the relevant legal framework. Issue E: Lastly, the taxability of income from Optionally Fully Convertible Premium Notes (OFCPNs) of other companies was examined in light of Circular No. 2 of 2002 dated 20.3.2002 of the CBDT. The court had to determine whether the Income Tax Appellate Tribunal's decision to confirm the order that such income was not taxable in the hands of the assessee on accrual basis was legally sound and aligned with the circular's provisions. This comprehensive analysis of the judgment highlights the intricate legal issues surrounding the interpretation and application of the Income Tax Act, 1961 in the context of depreciation, business losses, interest expenses, and taxability of income from specific financial instruments.
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