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TMI Blog2014 (7) TMI 497X X X X Extracts X X X X X X X X Extracts X X X X ..... A.Y. 2005-06 as provided under the Act. (ii) Ld. CIT(A) erred by not confirming the original assessment order by which deduction U/s. 80HHC was granted for Rs. 8,52,921/- for the A.Y.2001-02, however confirmed the order of Assessing Officer passed U/s. 143(3) of the Act subsequently wherein deduction U/s. 80HHC was withdrawn based on the amended section of 80HHC(3) of the Act by virtue of the deduction being withdrawn with retrospective effect for the turnover exceeding Rs. 10 crores. (iii) Ld. CIT(A) erred by confirming the order of Ld. Assessing Officer for disallowing the claim of deduction U/s. 37 of the Act for the payment made towards non-compete fee to M/s.Easwarn & Sons Engg. Ltd., from whom the assessee had acquired technical knowhow for switchgear division for A.Y 2005-06. 2.2. Revenue's Appeal for Assessment year 2001-02 (i) Ld. CIT(A) erred by directing the Ld. Assessing Officer to follow the judgment of the jurisdictional High Court in the case of Velayudhaswamy Spinning Mills Pvt. Ltd. Vs. ACIT in 231 CTR 368 since the same has not reached finality as the SLP filed by the Revenue is pending before the Hon'ble Apex Court. 3. The assessee is a limited company, eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted. Without prejudice to the stand of the Department that the assessee's initial assessment year is A.Y. 1995-96uder the Law as applicable for that year, even if the assessee is said to have made an option from A.Y.2000-01 in terms of Sec.80-IA(2) as applicable from A.Y. 2000-01, the initial assessment year as stated in sub section (5) cannot be the same as the year of first claim referred to sub section(2). The initial assessment year as applicable under the pre A.Y. 2000-01 section 80-IA is applicable to the assessee. It cannot be changed with the amendment effected to subsection 80IA. 8.6. Based on the above discussion, the following facts emerge: * The assessee's initial assessment year is A.Y 1995-96 under the law as applicable for that year. * The option of choosing the initial assessment year from A.Y 1996-97 was available only to an enterprise operating, maintaining an infrastructure facility and the assessee's case does not fall within the definition of infrastructure facility. * There is nothing on record that the assessee had consciously chosen its initial assessment year. The records show that the assessee has been claiming and being allowed loss and depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ls available on record made available before us. On perusing the provisions of the Act, we find that the Act stood as follows prior to 01.04.2002 as follows:- Sec.80-IA '(1) Where the gross total income of an assessee includes any profits and gains derived from any business of an industrial undertaking or an enterprise referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction from such profits and gains of an amount equal to hundred per cent of profits and gains derived from such business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, twenty-five per cent of the profits and gains for further five assessment years: (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rom the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park [ or develops [***] a special economic zone referred to in clause (iii) of subsection( 4) ] or generate power or commences transmission or distribution of power [or undertakes substantial renovation and modernization of the existing transmissions or distribution lines. ------------------------------------------------------------------------------------------------------ ------------------------------------------------------------------------------------------------------------ (4) This section applies to - (i) --------- (ii) ------------ (iii) ----------------- (iv) An [undertaking] which,- (a) Is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, [2006] Thus, from the amended provisions of section 80-IA (4), it is clear that the deduction U/s. 80-IA (1) & (2) would be applicable for an undertaking if it begins to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Payment made towards non-compete fee U/s. 37 of the Act. During the course of assessment proceedings, it was noticed by the Ld. Assessing Officer that the assessee had claimed deduction of Rs. 1 crore towards payment of non-compete fees. The Ld. Assessing Officer disallowed the claim of the assessee by observing as under:- "By payment of non-compete fee, the assessee has derived an enduring benefit in its Switchgear division. It is well settled law that wherever the benefit of any expenditure laid down is spread over a number of years and any asset of enduring benefit comes into existence by virtue of such expenditure, then they have to be classified as capital expenditure. Hence, the payment of non-compete fee claimed as revenue expenditure by the assessee, is rejected and the same is treated as capital in nature. The non-compete fee is neither classified under 'intangible asset' nor under 'tangible asset' in the depreciation table of the Income Tax Act / Rules and hence no depreciation is also allowed. Reliance is also placed on the decision of the Hon'ble High Court of Madras in the case of Tamilnadu Dairy Development Corporation Ltd. Vs Ld. CIT - 239 ITR 142 wherein it w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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