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2013 (7) TMI 12 - AT - Income TaxDisallowance of depreciation - as per Dept. the acquisition of client base of SKS society is neither an intangible asset nor a business or commercial right of similar nature - Held that:- It is not disputed that the assessee has acquired the entire business and commercial asset of SKS on payment of lumpsum consideration which included the cost of acquisition of the existing customer base of SKS Society. It is also a fact that, the customer base acquired by the assessee has provided an impetus to the business of the assessee as the customers acquired are with proven track record since they have already been trained, motivated, credit checked and risk filtered. They are source of assured economic benefit to the assessee and certainly are tools of the trade which facilitates the assessee to carry on the business smoothly and effectively. Therefore, by acquiring the customer base the assessee has acquired business and commercial rights of similar nature. As decided in Areva T & D India Ltd. Vs. DCIT (2012 (4) TMI 79 - DELHI HIGH COURT) while interpreting the term "business or commercial rights of similar nature" by applying the principle of ejusdem generis held that the specified intangible assets acquired under slump sale agreement were in the nature of "business or commercial rights of similar nature" specified in section 32(1)(ii) and were accordingly eligible for depreciation under that section. Thus the MOU between the assessee and SKS Society cannot be said to be purely personal & the acquisition of rights over the assets of SKS Society including the customer base is an intangible asset against the entire World, therefore, client acquisition cost paid by the assessee is towards acquiring an intangible asset and therefore eligible for depreciation u/s 32(1)(ii). In favour of assessee. Proportionate expenditure u/s 14A r.w.r. 8D disallowed - Held that:- As relying on Godrej Boyce Mfg. Co. Ltd vs. DCIT(2010 (8) TMI 77 - BOMBAY HIGH COURT) wherein held while making that determination the AO should provide a reasonable opportunity to the assessee for producing its accounts or relevant material having a bearing on the facts and the circumstances of the case. In the present case AO has not afforded adequate opportunity to the assessee and has not given any finding whether the assessee has incurred direct or indirect expenditure for earning dividend income from mutual fund. The CIT (A) has also not given any conclusive finding in this regard. Thus remit this issue to the file of the AO for reconsideration. Interest on loan to Managing Director and notional interest at the rate of 9% on account of advancing loans to employees welfare trust disallowed - Held that:- From the assessment order of the CIT (A)no clear cut finding whether the assessee has utilised borrowed funds for giving loan to the MD or employees welfare trust aroses. In case of SSPDL Ltd. Vs. DCIT [2013 (7) TMI 18 - ITAT HYDERABAD] held that unless interest payment is directly related to the diverted funds, it cannot be said that interest incurred by the assessee was for non business purpose - remit this issue to AO to decide afresh. De-recognition of interest on NPA disallowed - Held that:- As decided in Southern Technologies Ltd. Vs. JCIT (2010 (1) TMI 5 - SUPREME COURT OF INDIA) that income recognition with regard to NPAs should be as per section 45Q of the RBI Act. & CIT vs. Vasisth Chay Vyapar Ltd., and another (2010 (11) TMI 88 - Delhi High Court) that where even the principal amount itself had become doubtful of recovery it cannot be said that interest thereupon had accrued & that having regard to the provisions of section 45Q of the RBI and prudential norms issued by the RBI in exercise of its statutory powers where interest was not received on non performing asset and the possibility of recovery was almost nil it could not be treated to have been accrued in favour of the assessee direct the AO to delete the amount as it cannot be said that interest amount has accrued to the assessee.
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