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2014 (1) TMI 588 - AT - Income TaxComputation of deduction u/s 80HHC of the Act – Reduction of 90% of miscellaneous income – Income treated as non-operational business income - Held that :- miscellaneous income consist mainly of scrap sales, sales tax refund and discount - Nowhere it is mentioned that exchange gain is also included - Be that as it may, if there is any exchange gain involved the assessee is entitled for deduction under section 80HHC - the Assessing Officer was directed not to reduce 90% of Miscellaneous income from the eligible business profits for the purpose of computation of deduction u/s 80HHC - Decided against Revenue. Allowability of Expenses – Bad debts u/s 36(i)(vii) r.w. 36(2) of the Act OR business loss u/s 37(1) of the Act – Held that:- The assessee has not written off the amount as bad debt but has claimed loss on assignment due to transfer of the debtors by a deed of assignment - for claiming the bad debt as allowable under the provisions of the Income Tax Act the same must be written off in conformity with the provisions of the Income Tax Ac - By transferring the debt to Mahindra & Mahindra Ltd., the assessee has lost the ownership over the debts - the assessee has made the provisions of section 41(4) redundant - the assessee has not shown any income on account of recovery of part of such debt since the assessee has assigned the debts to Mahindra & Mahindra. It is not the business of the assessee to assign debts - the assessee, i.e. the assignor has undertaken to collect the debts on behalf of the assignee and has remitted the same periodically - The submission of the assessee that M/s. Mahindra & Mahindra Ltd. has paid tax on the debts so recovered and therefore taxing the same in the hands of the assessee amount to double taxation is without any merit – Thus, the contention of the assessee that amount of Rs.1,34,99,999/- should be allowed either as a bad debt or a business loss cannot be accepted - the assessee has adopted a colourable device to compensate Mahindra & Mahindra for the surrender of their 51% shareholding and therefore this is a capital expenditure – Decided against Assessee. Nature of Expenses – Capital OR Revenue expenditure – Expenses paid for use of trade name – Expenses treated as payment made for purchase of goodwill – Depreciation not allowed on these expenditure – Held that:- There is no dispute to the fact that the assessee has incurred expenditure of Rs.75 lakhs being one time licence fee paid to the owner for granting to the user, the licence to continue to use the trade mark as per the name licence agreement dated 18-07-2002 - the assessee treated the same as Revenue expenditure in the books - Assessee contended that the entire amount should be allowed as Revenue expenditure – the decision given in CIT Vs. SMIFS Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] followed - goodwill under Explanation 3(b) of section 31(2) of the Act is eligible for depreciation - Thus, the order of the CIT(A) set aside and the matter remitted back to the AO to allow depreciation on the goodwill – Decided in favour of Assessee. Disallowance of Prepaid charges – Charges paid in respect of debentures issued – Held that:- Decision of the SC in CIT Vs. Ashok Leyland Ltd. [1972 (10) TMI 1 - SUPREME Court] followed - The amount incurred by the assessee being prepayment charges paid in respect of debentures issued are expenses incurred for the purpose of business and the same is an allowable expenditure – Decided in favour of Assessee.
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