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TMI Blog2019 (6) TMI 542X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITAT MUMBAI] . Facts being identical, respectfully following the consistent view expressed by the Tribunal in the preceding assessment years, we restore the issue to the Assessing Officer for de novo adjudication. Disallowance of interest expenditure u/s 36(1)(iii) - investment of funds in sister concerns - HELD THAT:- While deciding identical issue in the latest order passed by the Tribunal in assessee s own case for the assessment year 2005 06 [ 2019 (5) TMI 411 - ITAT MUMBAI] decided the issue in favour of the assessee by holding that the investment of funds in sister concerns are for the purpose of business - we delete the disallowance made by the Assessing Officer. Disallowance of interest on account of interest free loans to the subsidiary - HELD THAT:- This is a recurring issue between the assessee and the Department from the preceding years. In the latest order passed by the Tribunal in assessee s own case for the assessment year 2006 07 [ 2016 (10) TMI 1037 - ITAT MUMBAI] Unutilized credit of Central Value Added Tax (CENVAT) u/s 145A - HELD THAT:- As decided in assessee s own case in the assessment year 2006 07 [ 2016 (10) TMI 1037 - ITAT MUMBAI] direct th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 144C(13) of the Income Tax Act, 1961 (for short the Act ) for the assessment year 2012 13, pursuant to the directions of the Dispute Resolution Panel 2 (DRP), Mumbai. 2. Grounds no.(i), (ii) and (iii), are without prejudice to each other. However, they are on the issue of deduction / depreciation claimed on non compete fee. 3. Brief facts are, the assessee company is engaged in the business of manufacturing and sale of glass containers and vials for pharma and non pharma markets. The assessee is also engaged in generation of power and investment activity. In the assessment year under dispute, the assessee had acquired Glass Division from Nicholas Piramal India Ltd. In connection with the said acquisition, assessee had paid an amount of ₹ 18 crore towards non compete fee. The assessee allocated the non compete fee to various fixed assets and claimed depreciation at the rate applicable to those assets. While framing the draft assessment order the Assessing Officer, however, disallowed assessee s claim of depreciation following his decision in earlier assessment years. Challenging the disallowance of depreciation, assessee raised objections befor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 2nd March 2016, the Tribunal though was conscious of its own contrary decision in assessment year 1999 2000, however, taking note of the decisions of Hon ble Madras High Court and Hon ble Karnataka High Court, referred to above, allowed assessee s claim of depreciation by treating the non compete fee as an intangible asset. The same view was reiterated by the Tribunal while deciding assessee s appeal for the assessment year 2006 07 in ITA no.5360/ Mum./2010, dated 16th December 2016, and in assessment year 2011 12 in ITA no.157/Mum./2011, dated 4th January 2007. Therefore, facts being identical, following the consistent view of the Tribunal in the orders referred to above, as well as the decision of different High Courts cited supra, we uphold the decision of the learned Commissioner (Appeals) on the issue. Ground is dismissed. 7. The facts being identical, respectfully following the consistent view of the Tribunal, we direct the A.O. to allow deprecation on non compete fee @ 25% by treating it as an intangible asset. 8. Thus, ground no.(i) is dismissed and ground no.(ii) is allowed. 9. In view of our decision in ground no.(ii), grou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to the Assessing Officer for fresh adjudication. In this context, we may refer to the latest order passed by the Tribunal for the assessment year 2006 07 in ITA no.8360/Mum./2010, dated 16th December 2016. Facts being identical, respectfully following the consistent view expressed by the Tribunal in the preceding assessment years, we restore the issue to the Assessing Officer for de novo adjudication in terms with the directions of the Tribunal in preceding assessment years. This ground is allowed for statistical purposes. 15. In ground no.(v), the assessee has challenged the disallowance of interest expenditure under section 36(1)(iii) of the Act. 16. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee has made investment in subsidiary companies viz. Ceylone Glass Co. Ltd., Sri Lanka, and G.G. USA Inc., USA. Further, he found that borrowed funds were utilized for making such investment. Being of the view that the investments made in the subsidiary companies is not for the purpose of assessee s business, the Assessing Officer disallowed interest expenditure of ₹ 3,98,75,785 under section 36( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... decision of the Co ordinate Bench in the preceding assessment years, we delete the disallowance made by the Assessing Officer. 21. In view of our decision in ground no.(v), ground no.(vi) has become infructuous, hence, dismissed. 22. In ground no.(vii), the assessee has challenged the disallowance of interest on account of interest free loans to the subsidiary. 23. Brief facts are, in the course of assessment proceedings, the Assessing Officer noticed that the assessee had advanced interest free loans to its sister concern. Whereas, it has paid interest on borrowed funds amounting to ₹ 51 crore. From the details furnished, he found that the assessee had advanced interest free loan of ₹ 10,40,55,054, to Ceylone Glass Ltd. Whereas, it has advanced loan to another subsidiary in USA charging interest @ 11% to 13%. Thus, ultimately, the Assessing Officer concluded, since, the assessee has utilised borrowed funds for interest free advance to the subsidiary, interest expenditure to that extent should be disallowed. Accordingly, he computed interest @ 6.74% which worked out to ₹ 70,13,311. The aforesaid amount was disallowed fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, during the assessment proceedings, the Assessing Officer noticed that the assessee has not included unutilized CENVAT credit in the value of closing stock of raw material on 31st March 2012. Therefore, he called upon the assessee to explain why an amount of ₹ 5,48,13,766, should not be added to the income in terms of section 145A of the Act. Though, the assessee objected to the proposed addition, however, the Assessing Officer rejecting the objections of the assessee added the unutilized CENVAT credit amounting to ₹ 1,19,24,979 under section 145A of the Act. While deciding the objections raised by the assessee, learned DRP following its decision in the assessment year 2006 07, rejected the objections of the assessee. 30. The learned Authorised Representative submitted, while deciding identical issue in assessee s own case, the Tribunal had restored the issue to the Assessing Officer. Thus, he sought similar direction in the impugned assessment year as well. 31. The learned Departmental Representative submitted, the issue may be restored back to the Assessing Officer. 32. We have considered rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th interest on the interest free loan by applying the rate of 7.63% as per Bloomberg database resulting in an adjustment of ₹ 44,98,521. Insofar as the arm's length price of corporate guarantee commission is concerned, the Transfer Pricing Officer computed such guarantee commission at the average rate of 2.25% resulting in an addition of ₹ 5,58,15,625. 36. The assessee raised objections before learned DRP in respect of the aforesaid additions. 37. As regards adjustment of interest on interest free loan to the AE, learned DRP directed the Assessing Officer to compute the interest by applying LIBOR plus 3%. Insofar as corporate guarantee commission is concerned, learned DRP refused to interfere with the adjustment made by the Transfer Pricing Officer. 38. The learned Authorised Representative submitted, while deciding identical issue relating to adjustment made to interest on interest free loan to the AE, the Tribunal in assessment year 2011 12 has restored the issue to the Assessing Officer for benchmarking it by applying LIBOR plus basis point. He submitted, insofar as the issue relating to corporate guarantee commission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer to delete the addition. 44. The learned Authorised Representative submitted, while computing the income in the final assessment order, the Assessing Officer has not implemented the aforesaid direction of learned DRP. Therefore, he sought a direction to the Assessing Officer to implement the directions of learned DRP. 45. The learned Departmental Representative submitted, necessary directions may be issued to the Assessing Officer. 46. We have considered rival submissions and perused the material on record. It is observed, while deciding the aforesaid issue, learned DRP has specifically directed the Assessing Officer to delete the addition of ₹ 1,41,65,716. In fact, in the final assessment order, the Assessing Officer in Para 12.1, has referred to the aforesaid direction of learned DRP. As per section 144C(13) of the Act, the Assessing Officer is duty bound to implement the directions of learned DRP. In view of the aforesaid, we direct the Assessing Officer to comply with the statutory mandate by implementing the directions of learned DRP on the issue and delete the addition. 47. Ground no.(xi) is on shor ..... X X X X Extracts X X X X X X X X Extracts X X X X
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