9911796707
TMI Blog2024 (6) TMI 1446X X X X Extracts X X X X X X X X Extracts X X X X ..... overed by the earlier orders of Tribunal in assessee's own case. The copies of the same have been placed on record. The Ld. CIT-DR also advanced arguments. 1.3 Having heard rival submissions and upon due consideration of relevant material on record including the orders of Tribunal in earlier years, our adjudication would be as under. ITA No.7/Chny/2018 for AY 2010-11: 2. First, we take up assessee's appeal ITA No.7/Chny/2018 for AY 2010-11 which arises out of the combined order of learned Commissioner of Income Tax (Appeals)-17, Chennai dated 27.10.2017 in the matter of an assessment framed by AO u/s 143(3) r.w.s.147/28.03.2016. 2.1 The following grounds of appeal have been made by the Assessee : Ground No.1 - is general in nature. Ground No. 2& 3 - the assessee is aggrieved by treating the software development expenses as capital expenditure and allowing depreciation @ 60%, against claim of revenue expenditure. 3. The assessee being a resident corporate assessee is stated to be engaged as non-banking finance company as well as engaged in the business of hire purchasing and leasing. The assessee filed return of income for AY 2010-11 and 2011-12 and declared the income and o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (i) Recovery of bad debt written off in the books of amalgamating companies (ii) Depreciation on UPS (iii)Disallowance u/s. 14A r.w.r. 8D of the Act (iv) Interest Income or ESM/IRR method (v) Inclusion of notional income related to NPA as income (vi) expenditure on presentation to employee and customers (vii) Adhoc disallowance of expenditure on Pooja @office premises and branch opening. Particulars AY 2011-12 Income declared in Return of Income filed Rs. 362.62 Cr. Scrutiny Assessement - CASS Yes Order U/s.143(3) 27/03/2014 Income Assessed to Tax Rs. 424.54 Cr. Ld. CIT(A) Order 26.10.2017 Order U/s.143(3) r.w.s 147 09/12/2016 Income Assessed to Tax Rs. 492.29 Cr. Ld. CIT (A) Order 27.10.2017 7. Recovery of Bad-Debt written off in the books of amalgamating Companies: 7.1 The assessee, in its computation of income, reduced taxable income by Rs. 599.49 Lacsbeing amount recovered out of bad-debts written-off in the books of amalgamating companies on the ground that it was exempt / non-taxable. It transpired that the assessee recovered this sum out of bad-debts which were written-off in the books of amalgamating companies. The same was claimed on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irmed first appellate order which allowed depreciation of 60%. Considering the same, this issue is decided in assessee's favour for in other three A.Ys. i.e. 2015-16, 2016-17 & 2017-18 also. 9. Disallowance u/s.14A r.w. Rule 8D: 9.1 The assessee earned dividend income of Rs. 58.52 Crores and also earned Profit on Sale of Shares of Rs. 2.18 Crores, totaling to Rs. 60.71 crores and same was claimed as exempt U/s.10 of the Act. However, the assessee did not offer any disallowance u/s 14A. Considering the fact that the assessee had made substantial investment of Rs. 945.99 Crores during the year which were shown as 'current investments, the AO proceeded to make disallowance u/s 14A r.w.r. 8D. It was also observed by the AO that the assessee was actively involved in purchase and sale of investments / mutual funds. The disallowance would be attracted even if the assessee did not earn any exempt income from a particular investment. The CBDT, vide Circular No. 5/2014 dated 11.02.2014, has clarified this position of law. 9.2 Finally, applying Rule 8D, the AO computed aggregate disallowance of Rs. 222.23Lacs which was interest disallowance u/r 8D(2)(ii) and indirect expense disallowance ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ght to tax in the earlier years and would not constitute income of the current year. 10.3 We find that this issue is covered by the latest order of Tribunal in ITA Nos.10 to 12/2018 dated 17.05.2024 for the A.Y. 2012-13 to 2014-15. The bench, in paras 5.3 and 5.4, considered the decision of Hon'ble High Court of Madras in assessee's own case. The Hon'ble Court had directed Ld. AO to tax the interest income on EMI method or ESM method which was consistently being followed by the assessee and allow consequential relief in accordance with law. Considering the same, similar directions were issued by Tribunal. 10.4 Since facts are pari-materia the same in this year, the Assessing Officer and the Ld.CIT(A) have already affirmed the income offered to tax to the tune of Rs. 510.90 lacs is in consistency with the method of income followed in hire purchase finance charges as correct. In our considered view, the claim of the assessee for a reduction from total income of Rs. 510.90 lacs which was brought to tax in the earlier years is not acceptable and therefore the ground of the assessee is dismissed. 11.Inclusion of Notional Income related to NPA as income for the A Y 2011-12: 11.1 The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f only 50% by the Ld. CIT(A) without any basis. The ld. AR also relied on the decision of Hon'ble High Court of P&H in the case of Atlas cycle Industries Ltd Vs.CIT[1982] 134 ITR 458, wherein the Hon'blecourt held that "periodic grants to management of temple constructed for employees are allowable as business expenditure" and prayed for allowing the pooja expenses claimed as business expenditure. 12.3 The assessee company has developed a custom carrying out pooja on regular basis & on the occasions of special festivals apart from conducting pooja at the time of branch opening ceremonies. Such expenditure are rightly claimed as business expenditure as these expenses are made in the interest and welfare of the Assessee and its employees. 12.4 On perusal of facts and circumstances of the case and considering the huge turnover,Profits declared, customer base and employees of the assessee company, the amount of expenditure spent forpooja expenses as a commercial expediency to the business and claiming such expenditure is reasonable. The amount spent towards Pooja expenses is a miniscule compare to the turnover and profits of the assessee. Considering the decision of the high court of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same as business expenditure cannot be termed as personal in nature and hence appeal of the assessee is allowed by dismissing the decision of disallowing the same by the lower authorities. Hence, the assessee succeeds in this ground and allowed. 13.5 This issue arises in assessee's appeals for AYs 2015-16, 2016-17, 2017-18 and 2018-19 also. Facts remaining the same, the assessee's ground for all these years stands allowed. Revenue's Appeal ITA NO.26 to 28/2018 for AYs 2010-11& 2011-12 14. The issues that fall for our consideration are - (i) Rate of Depreciation on commercial Vehicles @50% (ii) loss on sale of repossessed assets (iii) Depreciation on software development (iv) Depreciation on computer software (v) Disallowance of bad Debts (vi) Non-Compete fees as revenue expenditure (vii) Business origination cost These are adjudicated as under: 15. Rate of Depreciation on Commercial vehicles 15.1 The assessee claimed higher depreciation of 50% on leased vehicles. The Ld. AO rejected the claim on the ground that the assessee was involved in the business of finance and leasing and the accelerated depreciation was not available to them. The accelerated depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I hold that the Assessing Officer erred in disallowing the depreciation claimed by the appellant. The Assessing Officer is directed to allow depreciation at the higher rate of 50% for the new motor vehicles acquired between 1.1.2009 and 30.09.2009 and used for the purposes of their business. The appellant succeeds in this ground. 15.3 We are of the considered view that the Ld. CIT(A) has clinched the issue in correct perspective after appreciating the statutory provisions. The adjudication of Ld. CIT(A), therefore, do not require any interference on our part. The grounds raised by the revenue stand dismissed. 15.4 This issue arises in AY 2011-12 also which stand disposed-off on similar lines. In the result, revenue's appeal on this groundfor both the years stand dismissed. 16. Loss on sale of repossessed assets allowed as expenditure : 16.1 The Assessing officer observes that out of the total amount of Rs. 1367.68 Lakhs and Rs. 902.10 Lakhs claimed as loss on sale of repossessed assets for the A Ys.2010-11 and 2011-12 respectively, an amount of rupees 156.36 and 158.02 was only added back Hindi computation of income statements, therefore, the balance amount of 1211.32 and 744 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case, we are inclined to uphold the decision of the ld.CIT(A) of deleting the disallowance of expenditure by the AO, and direct the AO to verify the correctness of the claim of 'loss on sale of repossessed assets' and allow the expenditure in accordance with law. Therefore, this ground of the revenue is dismissed. 16.8 This issue arises in AY 2011-12 also which stand disposed-off on similar lines. In the result, revenue's appeal on this ground for both the years stand dismissed. 17. Depreciation on Software Development : 17.1 We find that an identical issue has been considered by us in appellant's own case for assessment year 2010-11 in ITA No. 7/Chny/2018. The facts are identical for the year under consideration. The reasons given by us in preceding paragraph no. 4 to 4.4, shall mutatis mutandis apply to this appeal, as well. Therefore, for similar reasons, we dismiss the ground raised by the revenue for assessment year 2010-11. 18. Depreciation on Computer Software : 18.1 The assessee has claimed depreciation of Rs. 48,48,510/- @60% on computer software purchased of Rs. 96,04,553/- as an expenditure. The AO, restricted the depreciation to 25% and thereby made a disallow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has disallowed the expenditure u/s. 37 of the Act, treating the same as capital expenditure. 20.2 The impugned action of the AO has been deleted by the Ld.CIT(A) by following the decision of Hon'ble Supreme Court in the Guffic cum P ltd Vs.CIT - 332 ITR 602 (SC) and also the Hon'ble High Court of Madras in the case of Carborandum Universal Ltd Vs. CIT 26 Taxmann.Com 268 (Mad), wherein it is ruled that expenditure incurred towards payment of non-compete fee was allowable as a deduction u/s. 37(1) of the Act. 20.3 We heard the rival contentions and considering the facts and circumstances of the case and orders of the authorities below. We note that the assessee has paid an amount of Rs. 60 lakhs as noncompete fee Inland Carriers (Bombay), to take over the business of logistics. The ld.CIT(A) has considered the decision of the Hon'ble Supreme Court in the case of Guffic cum P ltd Vs.CIT (Supra), wherein the lordship has declared as under: "The position, in law, is clear and well-settled There is a dichotomy between the receipt of compensation by an assessee for the loss of agency and receipt of compensation attributable to the negative/restrictive covenant. The compensation receiv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents after deducting at source in accordance with the provisions of the Act also shows that the said expenditure is in the nature of revenue and hence, the company followed the policy of charging off entire business origination cost to P&L account in the year in which it was incurred. The ld.CIT(A) also observed that the AO in the assessment made for the AY 2007-08 u/s. 143(3) r.w.s. 147 of the Act, no disallowance was made and deleted the disallowance of business origination cost made by the AO of Rs. 30.39 crores. 21.3 We find that this issue has been dealt with by tribunal in ITA No.74 to 78/2015 dated 09.03.2022 for the A.Ys.2006-07 to 2010- 11. The bench vide paras 6.2 & 6.3 of the order, chose to follow the decision of Hon'ble Apex court in Taparia Tools Pvt. Ltd. Vs. JCIT (372 ITR 605) where in it was held that normally revenue expenditure incurred in a particular year has to be allowed in that year and if the assessee claims the full expenditure, department could not deny the same. Finally the claim was allowed.Therefore, this issue is covered in Assessee's favour. We direct the AO to allow the claim. This ground stand allowed. Conclusion 22. The assessee's appeals, for ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
