2020 (7) TMI 155 - AT - Income Tax

Depreciation on Non-compete Fee @25% - HELD THAT - Respectfully following the consistent view of the Tribunal 2019 (6) TMI 542 - ITAT MUMBAI we direct the A.O. to allow deprecation on non compete fee @ 25% by treating it as an intangible asset. Disallowance of depreciation on adoption of wrong actual cost of various fixed assets - HELD THAT - As decided in own case 2019 (6) TMI 542 - ITAT MUMBAI Co-ordinate Bench has restored this issue back to the file of Assessing Officer after placing reliance on the earlier order of Tribunal in assessee s own case for assessment year 2006-07. Disallowance of interest under section 36(1)(iii) - AO held that the investments have been made by utilizing borrowed interest bearing funds in the aforesaid subsidiary companies AND the investment is unrelated to the business of assessee - HELD THAT - We find that in assessment year 2012-13 disallowance under section 36(1)(iii) of the Act was made by the Revenue on identical set of facts. The Co-ordinate Bench of the Tribunal following the order of Tribunal in assessee s own case in preceding assessment years deleted the disallowance 2019 (6) TMI 542 - ITAT MUMBAI - Decided in favour of assessee. Addition of unutilized CENVAT u/s 145A - exclusive method followed by the assessee was not in accordance with provisions of section 145A - HELD THAT - We find that the addition on account of unutilized CENVAT credit was made in assessee s case in assessment year 2012-13 for similar reasons. The Tribunal restored the issue back to the Assessing Officer. TP Adjustment - corporate guarantee commission and interest on loan extended to subsidiary Piramal Glass UK ltd. - HELD THAT - As in assessee's own case 2019 (6) TMI 542 - ITAT MUMBAI DRP has directed the Assessing Officer to compute interest at LIBOR plus 3%.Tribunal has directed to compute interest on interest free loan advanced to the AE at LIBOR plus 200 basis points. Insofar as adjustment on account of corporate guarantee commission is concerned, the Tribunal has directed the Assessing Officer to compute the corporate guarantee fee @ 0.5% - We respectfully following the decision of the Co-ordinate Bench partly allow ground. Disallowance made under section 14A r.w.r 8D - HELD THAT - DRP has directed the Assessing Officer to delete the disallowance. However, it appears that the Assessing Officer has failed to give effect to with the directions of the DRP on this issue. The ground of the appeal are restored to the Assessing Officer to give effect to the directions of the DRP on the issue of disallowance under section 14A r.w.r. 8D. Disallowance under section 14A of the Act for the purpose of computing profit book profits under section 115JB - HELD THAT - Since we have already restored the issue of disallowance under section 14A r.w.r. 8D to the Assessing Officer for giving effect to the order of DRP, the ground No.XI is also restored back to the Assessing Officer for reconsideration in line with the decision of Special Bench in the case of ACIT vs. Vireet Investments Pvt. Ltd. 2017 (6) TMI 1124 - ITAT DELHI - The ground of the appeal is allowed for statistical purpose. Short credit of TDS - HELD THAT - This issue is restored back to Assessing Officer for re-verification. The Assessing Officer is directed to allow TDS credit as per actual records. The ground of appeal allowed for statistical purpose. Short interest under section 244A - HELD THAT - This ground is consequential. Therefore, the same is dismissed. Order being pronounced after ninety (90) days of hearing - COVID-19 pandemic and lockdown - HELD THAT - Taking note of the extraordinary situation in the light of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. See case of DCIT vs. JSW Limited 2020 (5) TMI 359 - ITAT MUMBAI

Issues Involved:
1. Disallowance of depreciation on non-compete fees.
2. Disallowance of depreciation on adoption of wrong actual cost of various fixed assets.
3. Disallowance of interest under section 36(1)(iii) of the Income Tax Act.
4. Addition on account of unutilized CENVAT credit under section 145A of the Income Tax Act.
5. Transfer pricing adjustments on international transactions.
6. Disallowance under section 14A of the Income Tax Act.
7. Addition of disallowance under section 14A for computing book profit under section 115JB of the Income Tax Act.
8. Short grant of tax deducted at source (TDS).
9. Short grant of interest under section 244A of the Income Tax Act.

Issue-wise Detailed Analysis:

1. Disallowance of Depreciation on Non-Compete Fees:
The Tribunal adjudicated grounds I and II together as they are interconnected. Ground I, regarding depreciation on non-compete fees allocated over various fixed assets, was dismissed as it was decided against the assessee in previous years. Ground II, concerning depreciation at 25% on non-compete fees, was allowed based on the Tribunal's consistent view in earlier years, treating non-compete fees as an intangible asset.

2. Disallowance of Depreciation on Adoption of Wrong Actual Cost of Various Fixed Assets:
The issue was restored to the Assessing Officer (AO) for de-novo adjudication, following the Tribunal's decision in the assessee's own case for the assessment year 2012-13. The AO had disallowed depreciation by treating the transaction as one of amalgamation and taking the written down value of transferred assets from the transferor company.

3. Disallowance of Interest under Section 36(1)(iii) of the Income Tax Act:
The Tribunal deleted the disallowance of interest on investments in subsidiary companies, as the investments were considered for business purposes. This decision was based on the Tribunal's and the Bombay High Court's consistent rulings in the assessee's favor in previous years.

4. Addition on Account of Unutilized CENVAT Credit under Section 145A of the Income Tax Act:
The issue was restored to the AO for fresh consideration, following the Tribunal's decision in the assessee's case for the assessment year 2012-13. The AO had made an addition for unutilized CENVAT credit, which the assessee argued was reflected in the tax audit report with a net impact of nil on the Profit & Loss Account.

5. Transfer Pricing Adjustments on International Transactions:
The Tribunal partly allowed the ground concerning TP adjustments on corporate guarantee commission and interest on loans to subsidiaries. The AO was directed to compute interest on interest-free loans at LIBOR plus 200 basis points and corporate guarantee commission at 0.5%, following the Tribunal's decision in the assessee's case for the assessment year 2012-13.

6. Disallowance under Section 14A of the Income Tax Act:
The issue of disallowance under section 14A read with Rule 8D was restored to the AO to give effect to the Dispute Resolution Panel's (DRP) directions. The DRP had directed the AO to delete a part of the disallowance, which was not reflected in the final assessment order.

7. Addition of Disallowance under Section 14A for Computing Book Profit under Section 115JB of the Income Tax Act:
The issue was restored to the AO for reconsideration in line with the Special Bench decision in ACIT vs. Vireet Investments Pvt. Ltd., which held that book profit computation under section 115JB should not include disallowance under section 14A read with Rule 8D.

8. Short Grant of Tax Deducted at Source (TDS):
The issue of short grant of TDS credit was restored to the AO for verification and correction as per actual records.

9. Short Grant of Interest under Section 244A of the Income Tax Act:
This ground was dismissed as it was consequential to the other issues.

Conclusion:
The appeal was partly allowed, with several issues restored to the AO for fresh adjudication or verification, and others decided in favor of the assessee based on consistent Tribunal and High Court rulings in previous years. The order was pronounced beyond the 90-day period due to the COVID-19 lockdown, as per the Tribunal's interpretation of the applicable rules and judicial precedents.

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