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TMI Blog2020 (4) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... ion the necessity of incurring an expenditure. Thus the reasons assigned by the Assessing Officer that the transaction for purchase of trademark are not genuine cannot stand test of the law. Furthermore, it is an settled principle of law that intangible assets such as trademark, goodwill are also qualifies for depreciation at prescribed rates. We do not concur with the views of the lower authorities in disallowing the claim for depreciation on trademark. Cessation of liability u/s 41(1) - HELD THAT:- It is clear from the above that the very same AO allowed the write off of M/s.Rocky Marketing (Chennai) Pvt. Ltd., in its hands. Therefore, M/s.Rocky Marketing (Chennai) Pvt. Ltd., has waived off the liability from the assessee s hand. As per the explanation extracted, supra, the remission or cessation of any liability by a unilateral Act, is covered u/s.41(1) and hence, we do not find any reason to interfere with the order of the Ld.CIT(A). Therefore, corresponding grounds of the assessee fail. - ITA Nos.967, 968 And 969/Chny/2019 - - - Dated:- 18-2-2020 - Shri N.R.S. Ganesan, Judicial Member And Shri S. Jayaraman, Accountant Member For the Appellant : Mr. B.Ramakris ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llowed the employees contribution towards PF without appreciating the fact that the same had been remitted before the due date of filing of the return u/s.139(1). However, the Ld.CIT(A) confirmed the disallowance. In this regard, the Ld.AR submitted that this issue is covered by the order of the Hon ble Madras High Court in the case of Industrial Security Intelligence India Pvt. Ltd., in its favour in TCA No.585 586 of 2015 dated 24.07.2015. 5. We heard the rival submissions and gone through the relevant material. Following the decision of the Hon ble Jurisdictional High Court, it is held that the disallowance is not warranted. We allow the assessee s appeal on this issue. 6. The Ld.AR submitted that the AO made disallowance of depreciation on trade mark. On appeal, the Ld.CIT(A) confirmed the disallowance. In this regard, the Ld.AR submitted that this issue is covered in favour of the assessee in the assessee s own case for the AYs 2007-08 to 2009-10 in ITA Nos.673-675/Chny/2018 dated 16.05.2019. 7. We heard the rival submissions and gone through the relevant material. The relevant portion of the order relied on by the assessee is extracted as under: 6. The brief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... before ld. Commissioner of Income Tax (Appeals) contending that the very reopening the assessment is not valid in law, in as much as, reopening is based on change of opinion on the same set of facts which are in existence and also contending that Assessing Officer had no power to question the necessity to enter into transaction and also finding fault with the conclusion reached by the Assessing Officer that the transaction is malafide and transaction between assessee and M/s. Univercell Telecommunications India Pvt. Ltd is based on irrelevant material. However, ld. Commissioner of Income Tax (Appeals) dismissed the appeal both on the reopening and merits of the issue. 8. Being aggrieved, the appellant is in appeal before us in the present appeal. Ld. Authorised Representative Mr. B.Ramakrishnan, submitted that the conclusion reached by the Assessing Officer that it is an attempt by the parties to claim higher depreciation in order to evade taxes, it is based on the irrelevant material as much as appellant company had been incurring losses and M/s. Univercell Telecommunications India Pvt. Ltd is making profits. Further ld. Authorised Representative submitted that Assessing Off ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erstanding in future. Therefore, the fact that the agreement is entered on post dated stamp paper is immaterial and not germane to decide whether or not transaction is genuine. It is not the case of the Assessing Officer that substance of the transaction is something else. Therefore the reasoning of the Assessing Officer, as well as ld. Commissioner of Income Tax (Appeals) that the agreement is entered on post dated stamp paper, transaction is not genuine cannot be sustained. 12. As regards to the allegation that it is adopted to avoid evading the taxes, from the perusal of the assessment order, it is clear that even after disallowance of claim for depreciation on the trademark still the assessment resulted in losses. It is an admitted fact that payee had disclosed this income in his hands and therefore there is no motive of evasion of taxes, that can be attribute to this transactions. Finally necessity of entering into agreement, it is a settled proposition of law that it is not open to the Assessing Officer to question the necessity of incurring an expenditure and he cannot step into the shoes of the assessee as how to conduct the business of the assessee. In this conne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the deduction of an expense . The question whether an expenditure can be allowed as a deduction only if it has resulted in any income or profits came to be considered by the Supreme Court again in CIT v. Rajendra Prasad Moody [1978] 115 ITR 519 (SC), and it was observed as under (page 523): We fail to appreciate how expenditure which is otherwise a proper expenditure can cease to be such merely because there is no receipt of income. Whatever is a proper outgoing by way of expendi ture must be debited irrespective of whether there is receipt of income or not. That is the plain requirement of proper accounting and the interpretation of section 57(iii) cannot be different. The deduction of the expenditure cannot, in the circumstances, be held to be condi tional upon the making or earning of the income. It is noteworthy that the above observations were made in the context of section 57(iii) of the Act where the language is somewhat narrower than the language employed in section 37(1) of the Act. This fact is recognised in the judgment itself. The fact that the language employed in section 37(1) of the Act is broader than section 57(iii) of the Act makes the position ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as bad debt was allowed in the hands of the above company; and hence he added the said amount is a cessation of liability u/s.41(1) stating that the sum of ₹ 6,30,40,743/- unilaterally written off as bad debts by M/s.Rocky Marketing (Chennai) Pvt. Ltd. shall be deemed to be the business profits in the hands of the debtor, the assessee as per clause(a) of Sec.41(1) of the IT Act, 1961. 9. Aggrieved the assessee filed an appeal before the Ld.CIT(A). the Ld.CIT(A) held that the AO has specifically pointed out that in the assessment of the creditor viz Rocky Marketing (Chennai) Pvt Ltd which is also assessed by this same AO, who has held that the claim of the said debtor in respect of the debts due from the appellant has been written off and has allowed the same. Further, it is relevant to mention that M/s. Rocky Marketing (Chennai) Pvt Ltd has waived off the liability. Thus the AO's action in applying Sec. 41(1) is correct and is in accord with the intent and provisions of Sec. 41(1) that was introduced with a view to prevent conferment of double benefit to creditors like the appellant in the form of non-requirement of payment of liabilities and continuing to keep the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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