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TMI Blog2013 (11) TMI 111X X X X Extracts X X X X X X X X Extracts X X X X ..... by the assessee to make an investment in subsidiary company and that even if it is resulted in no income to the assessee - Following Sri Krishna Drugs Ltd. vs Department of Income tax [2013 (3) TMI 410 - ITAT HYDERABAD] – the notional interest cannot be disallowed on the reason that the assessee should have used its non interest bearing funds for the purpose of its own business purpose instead using borrowed funds for its business – Decided against Revenue. Depreciation on intangible assets u/s. 32(1)(ii) – Held that:- There is no nomenclature given in the books of account to the intangible rights acquired by the assessee is irrelevant for ascertaining the real nature of the transaction - The true nature of the assets which are acquired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 06. The Tribunal decided the issue in favour of the assessee vide its order dated 15.2.2008 by holding as follows: 4. We have considered rival submissions on either side and also perused the material available on record. Admittedly, the Group Gratuity Scheme was not recognised by the Commissioner of Income-tax. This fact is not in dispute. We have carefully gone through the provisions of sec. 36(1)(v) of the Incometax Act. Sec. 36(1)(v) reads as follows: 36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 .... (v) any sum paid by the assessee as an employer by way of contribution towards an approv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Metal Box Company of India Ltd. vs. The Workmen (1969) 73 ITR 53, held that the amount paid towards an unapproved gratuity fund can be deducted under sec. 37 of the I.T. Act, though not under sec. 36(1)(v). In view of this judgement of the jurisdictional High Court, in our opinion, even if any payment is made to an unapproved gratuity fund, it has to be allowed under sec. 37. By respectfully following the binding judgement of Andhra Pradesh High Court in the case of Warner Hindustan Ltd. (supra), we uphold the order of the CIT(A). In view of the above discussion, we dismiss the ground taken by the Revenue. 5. In view of the above decision of this Tribunal, the ground raised by the Revenue is dismissed. 6. Ground No. 3 by the Rev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n funds on which liability to pay interest is being incurred and on the other hand, certain amounts had been advanced to sister concerns or others without carrying any interest or less interest without any business purpose, the interest to that extent advance had been made without carrying any interest is to be disallowed u/s 36(1)(iii) of the Act. Such borrowings to that extent cannot possibly be held for the purpose of business but for supplementing the cash diverted without deriving any benefit out of it. In such circumstances, the assessee will not be entitled to claim deduction of interest on the borrowings to the extent those are diverted to sister concerns or other persons without interest. The establishment of nexus of funds borrowe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03 (b) Funds available for utilization after Considering the impugned investment (Rs. in lakhs) 151.21 135.66 29.27 (c) Loans from banks 109.58 84.96 (d) Investment made in fixed assets 236.38 179.74 18.94 (e) Investment made in M/s. Suvision 195.00 56.35 7. In our opinion, the assessee used its own non interest bearing funds and there is no cost to the assessee and it is a business decision taken by the assessee to make an investment in subsidiary company and that even if it is resulted in no income to the assessee, the notional interest cannot be disallowed on the reason that the assessee should have used its non interest bearing funds for the purpose of its own business purpose instead using borrowed funds f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hnical know-how of bulk drugs, value of licences, sale agreement with MNC held by the assessee and other business and commercial rights which are intangible assets like goodwill and the same is classified as goodwill in the books of account as per the provisions of section 32(1)(ii) of the Act. According to the Assessing Officer the assessee has not produced the break up details of the intangible assets and the assessee not acquired any business or commercial rights similar to that of technical knowhow, patents, trademarks, etc. and denied the depreciation on the same. We have examined the facts of the present case. In this case there is no dispute regarding acquisition of all the assets and liabilities of the Arandy Laboratories Ltd. and t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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