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2013 (3) TMI 804 - AT - Income TaxInterest on Borrowed Capital u/s 36(1)(iii) - Assessee Company is in the business of manufacturing of transformer. The AO’s objection was that the assessee had shown capital WIP, including capital advances but no interest expense had been capitalised. The assessee’s answer was that the capital advance was made from own funds and not from borrowed funds. A.O. disallowed proportionate interest u/s.36(1)(iii). - HELD THAT : - As Assessee demonstrated that there were non-interest bearing own funds and those funds were claimed to have been utilized for the purpose of capital WIP. A.O. cannot presume that the interest-bearing funds could have been used as a capital WIP. Decision in the case of - THE COMMISSIONER OF INCOME TAX VERSUS RELIANCE UTILITIES & POWER LTD. [2009 (1) TMI 4 - BOMBAY HIGH COURT], relied upon. Calculation Of Value Of Inventories Taxation u/s 145 A - A.O. that the assessee had shown an amount receivable on account of unutilized MODVAT and also a closing balance of CENVAT credit. Admittedly, those amounts were not included in the value of the closing stock. The A.O. has observed that as per the provisions of section 145A the taxes/duty/cess related to stock are required to be included in the value of the closing stock. - HELD THAT :- A.O. is directed to verify the accounting policy adopted by the assessee in respect of Modvat/Cenvat incentives and if it is according to the law, then not to disturb the method of accounting of the assessee in this regard. Decision in the cases of - ASSISTANT COMMISSIONER OF INCOME-TAX VERSUS. NARMADA CHEMATUR PETROCHEMICALS LTD. [2010 (8) TMI 263 - GUJARAT HIGH COURT] and COMMISSIONER OF INCOME-TAX VERSUS UNIQUE INDUSTRIES [2008 (5) TMI 238 - GUJARAT HIGH COURT], relied upon. Depreciation on New Commercial Vehicle under Clause VI-A of the Appendix - Assessee has claimed excess depreciation on the new commercial vehicle purchased. The AO’s objection was that those vehicles were not registered by the RTO “Commercial Vehicle”, also vehicle used by the appellant is a private vehicle not used for the purpose of hire. HELD THAT : - The vehicle purchased by the appellant fulfills all the conditions prescribed in the Income Tax Act and the related Motor Vehicle Act and falls within the definition of Commercial Vehicle. The Act has nowhere prescribed that a commercial vehicle should be a vehicle which is used for the purpose of hire . It only prescribes that the vehicle should be used for the purpose of business or profession. Depreciation on Computer Software - IT Act overwrites Accounting Standards - Assessee has claimed depreciation on computer software. The AO disallowed the depreciation holding that it was an application software and should be treated as intangible asset. Also, AS 26 specify computer software as intangible asset. HELD THAT :- The Income Tax Act does not make any difference between the system software and the application software. The schedule only provides the depreciation @ 60% on the computer software and the term ‘computer software’ has also been defined in the Appendix – I. The classification made by the Accounting Standards cannot overwrite the definition given in the Income Tax Act.
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