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2013 (3) TMI 410 - ITAT HYDERABADUnrecognized Gratuity Fund - Deduction Under Sec. 36(1)(v) or Section 37 of the Income-tax Act - Provision created towards excise duty payable on closing stock of finished goods - contingent liability - Disallowance of proportionate interest on the investments made and loans advanced to its subsidiary - Depreciation on the goodwill - Held that :- Regarding Unrecognized Gratuity Fund 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 business or profession - In our opinion, even if any payment is made to an unapproved gratuity fund, it has to be allowed under sec. 37. Regarding addition of excise duty payable tothe closing stock - held that:- Following the judgement in ACIT vs. D & H Secheron Electrodes (P) Ltd (2007 (11) TMI 546 - MADHYA PRADESH HIGH COURT ) wherein the issue was decided in favour of the assessee. It was held that the Excise Duty payable should not be added to the closing stock. Accordingly, this ground of the Revenue is dismissed. Interest on amount advanced to subsidiary company - held that:- In our opinion, the assessee used its own non interest bearing funds and there is no cost to the assessee and it is a business decision taken by the assessee to make an investment in subsidiary company and that even if it is resulted in no income to the assessee, the notional interest cannot be disallowed on the reason that the assessee should have used its non interest bearing funds for the purpose of its own business purpose instead using borrowed funds for its business. Regarding Depreciation on goodwill - held that:- The true nature of the assets which are acquired by the assessee is business and commercial rights which is nothing but goodwill on which the assessee is entitled for depreciation u/s. 32(1)(ii) of the Act. There is no dispute in this case regarding the payment of Rs. 14,55,21,444 and the total value of the tangible assets is lesser than Rs. 5,57,38,146 and this is nothing but intangible assets in the form of technical knowhow, copy right, trademark, licences, franchisees and the claim of depreciation on these items is admissible and it fits within the description of section 32(1)(ii) of the Act. Our view is supported by the various judgements relied on by the assessee's counsel. Accordingly this ground of the Revenue is dismissed. - Decided against the assessee.
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