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TMI Blog2012 (11) TMI 1327X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs. 1,22,023 Amount debited to P L A/c Rs. 5,79,238 3. It was explained before the AO during the assessment proceedings that the assessee had taken Group Gratuity Life Insurance Scheme in 1982 and the said amount represented premium paid towards the same during the year. In line with the earlier years, the AO concluded that the assessee had not taken any approval from the prescribed authority i.e. Commissioner of Income-tax/Chief Commissioner of Income-tax as required u/s 36(1)(v) of the IT Act. He, therefore, felt that the said provision could not be allowed as the same was not towards any approved gratuity fund. He further felt that the same could not be allowable u/s 37 also, as there being a specific provision in respect of the said deduction, the general provision of section 37 could not be invoked. Accordingly, the AO disallowed the claim of deduction of the assessee. 4. Aggrieved, the assessee carried the matter in appeal before us. 5. Before the CIT(A), the AR of the assessee submitted that this ground was allowed by the CIT(A) for the AY 2008-09 vide order dt. 29/07/2011. He further submitted that the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal 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 Income- tax 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 approved gratuity f und created by him for the exclusive benefit of his employees under an irrevocable trust. We have also carefully gone through the provisions of sec. 37 of the Income-tax Act. Sec. 37 provides for deduction of expenditure not being in the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenditure of the assessee, but laid out and expended wholly and exclusively for the purposes of the busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of depreciation so claimed, the assessee submitted that during the AY 2006-07, M/s Arandi Laboratories Ltd. had amalgamated with the assessee company, vide order No. CP No. 84 of 2005 dated 31st March, 2006 of AP High Court. It was explained that the assessee had purchased 3,13,119 shares of M/s Arandi Laboratories directly from the share holders @ Rs. 464.74 per share, for a total cost of Rs. 14,55,21,444/- and after acquisition of the said shares, however, they opined that an amalgamation would result in better and efficient utilization of resources. Therefore, the scheme of amalgamation was framed. It was further explained that after approval of such amalgamation by the Hon ble High Court, the investment of Rs. 14,55,21,444/- in the shares of M/s Arandi Laboratories has been considered by the assessee in its books of account by appropriating the value to the respective heads of assets/liabilities. The assessee contended that in case of amalgamation, as per accounting standard of the ICAI, in preparing Transferee Company s financial statements, the assets and liabilities of the transferor company should be incorporated at their existing carrying amounts, or alternatively, the co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position whereby similar claim was accepted in the past. The CIT(A) therefore following the said decisions held that the claim of the assessee regarding depreciation on intangible assets is to be allowed. 15. Aggrieved, the revenue is in appeal before us. 16. We have heard the arguments of both the parties and perused the record. We find that the issue is squarely covered by the decision of the coordinate bench of ITAT, Hyderabad in assessee s own case for AY 2008-09 in ITA No. 1698/Hyd/2011 vide order dated 25/01/2012, wherein the coordinate bench held as under: Ground No. 4 raised by the Revenue is as follows: The learned CIT(A) erred in allowing depreciation on intangible assets. 10. With reference to the above ground, the learned DR relied on the order of the Tribunal in the case of R.G. Keswani vs. ACIT (120 TTJ 1081)(Mum) and requested the Bench to refer the case to Special Bench. However, in view of the order of the Tribunal in assessee's own case cited supra, we are inclined to decide the issue in favour of the assessee rather than referring the same to Special Bench. Further, we feel it appropriate to mention herein that the order of the co-ordinate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is background there is no justification to uphold the stand of the IT authorities to deny the claim of the assessee for deduction under s. 80IB in relation to the profits and gains. - Saurashtra Cement Chemical I ndustries Ltd. vs. CIT (1979) 11 CTR (Guj) 139; (1980) 123 ITR 669 (Guj) and CIT vs. Paul Brothers (1995) 216 ITR 548 (Bom) relied on. 11. In view of the above decision of the Tribunal, this ground of the Revenue is dismissed. 17. Since the issue under consideration is identical to that of the case decided by the coordinate bench in assessee s own case for AY 2008-09, respectfully following the same, we uphold the order of the CIT(A) in allowing the depreciation claim of Rs. 58,78,633/- on intangible assets and dismiss the ground of appeal of the assessee. 18. In the result, appeal of the revenue is dismissed. ITA NO. 843/HYD/2012 APPEAL BY THE ASSESSEE 19. The substantive ground raised by the assessee in this appeal is as follows: The learned CIT(A) erred in confirming the action of the AO in disallowing the loan amount written off of Rs. 2,27,52,698/- debited to Profit loss account. The learned CIT(A) ought to have considered the fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore the AO. It was added that in the AY 2010-11, Rs. 2,70,000/- was recovered and offered for assessment. He argued that the amount was advanced in the process of the assessee s business activity from out of its own funds and the AO failed to see that the assessee was in the process of diversification of its business activities. Contending that the decisions cited by the AO are have no application, the AR of the assessee relied on the decision of the Hon ble Mumbai ITAT in the case of Tainwala Chemicals and Plastics India Ltd. Vs. ACIT, 59 DTR 354 holding that the activity of making deposit from out of surplus funds in the inter corporate deposits is to be considered as business activity and if such debt is written off, the same is allowable as deduction. 24. After considering the submissions of the assessee, the CIT(A) after approving the findings of the AO and case laws relied upon by him including the case of VST Industries Ltd. Vs. ACIT in ITA No. 691/hyd/2005, dt 23/07/2010 and rejecting the case relied upon by the assessee in the case of Tainwala Chemicals and Plastics India Ltd Vs. ACIT (supra), held that there was no regular deployment of surplus funds in ICDs or loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting, even if interest is chargeable it would not make any difference in accounting. 28. We have heard the arguments of both the parties, perused the record and gone through the orders of the authorities below. We find that this issue is squarely covered by the decision of the coordinate bench of Hyderabad ITAT in the case of VST Industries Ltd. Vs. ACIT in ITA No. 691/Hyd/2005, dt 23/0-7/2010, wherein the coordinate bench held as under: 11. We have heard both the parties and perused the material on record. To claim debt as bad debt and as a deduction, the debt should be in respect of business, which is carried on by the assessee in the relevant assessment year, should have been taken into account in computing the income of the assessee for the accounting year or should represent money lent in ordinary course of its business of banking or money lending. The amount should be written off as irrecoverable in the accounts of the assessee for that accounting year in which the claim for deduction is made for the first time. The assessee can claim debt as bad debt, in respect of debt which would have come into the balance sheet as a trading debt. The debt means something more than a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ay the same, that itself cannot be the reason of debt as bad debt. In order that a loss might be deductible it must be a loss in the business of the assessee and not a payment relating to the business of somebody else which under the provisions of the Act was deemed to be and became the liability of the assesee. Losses allowable if it sprang directly and was incidental to business of the assessee, loss which assessee had incurred was not in its own business and it cannot be deducted in respect of the business of the assessee from its profits. The amount incurred by the assessee which is not in the ordinary course of business cannot be allowed as a deduction. Further, a debt can be incident to business only if it arises out of transaction, which was necessary in furtherance of the business and was within the range of business activity of assessee. Everything associated or connected with the business cannot be said incidental thereto. Not merely should there be a close proximity to the business, as such, but it should also be an integral ad essential part of the carrying on the business of the assessee. We should see whether the transaction is necessary part of the normal course of b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g activity of the assessee. The advance in the field of investment made for the purpose of securing source of income and not for the purpose of earning income is not entitled for any deduction. In other words, the source of income is not synonymous to the income. In order to entitle deduction it should have been incurred in the course of carrying on the business and it should be in the nature of revenue loss. In the present case, debt claimed as bad debt is not a trading debt emerged from the trading activity of the assessee. The debt arises out of investment activities of the assessee and that is in the capital field, not on account of revenue, cannot be allowed as a bad debt. Reliance also placed on the judgement of Supreme Court in the case of Aluminium Company Ltd. Vs. CIT (1971) (79 ITR 514) (SC), CIT Vs. Abdullabhai Abdulkadar (1961) (41 ITR 545 ) (SC). In view of these judgements of the Supreme Court, we have not considered the various judgements cited by the assessee's counsel. 12. Regarding write off of the secondment charges and other expenses, this amount is advanced to the subsidiary company for making expenses like salary and secondment charges, expenses incurre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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