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2021 (10) TMI 505 - AT - Income TaxDepreciation on the basis of computation made by the assessee - itemized sale of assets or slump sale - HELD THAT:- We find that both the parties before us fairly agreed that this issue is already covered in favour of the assessee by the order of this Tribunal in [2019 (5) TMI 689 - ITAT MUMBAI] as is discernible from the order of the DRP, the issue as to whether the sale of the aforesaid two divisions was to be construed as itemized sale of assets or slump sale is pending before the ITAT in the preceding years of the assessee. Accordingly, the DRP had directed the A.O to allow depreciation to the assessee on the basis of the outcome of the main appeal regarding slump sale vs. itemized sale. In the backdrop of the aforesaid fact situation, now when the matter as to whether the sale of the aforesaid two divisions by the assessee is to be treated as an itemized sale or a slump sale is pending in the case of the assessee for the preceding years, therefore, we find no infirmity in the order of the DRP who had rightly directed the A.O to allow depreciation to the assessee on the basis of the outcome of the main appeal - Decided against revenue. MAT computation - Computation of deduction u/s.80HHC of the Act for the purpose of calculating book profits u/s.115JB - HELD THAT:- We find that this issue is no longer res integra in view of the decision Bhari Information Technology Systems (P) Ltd. [2011 (10) TMI 19 - SUPREME COURT] wherein the decision of the Syncom Formulations India Pvt. Ltd. [2007 (3) TMI 288 - ITAT BOMBAY-H] had been duly approved by the Hon’ble Apex Court. Though this decision was rendered by the Hon’ble Apex Court in the context of claiming deduction u/s.80HHE of the Act vis-à-vis computation of book profits u/s.115JA of the Act, the same analogy would apply to the issue in dispute before us. We find that the Hon’ble Apex Court had held that deduction u/s.80HHE had to be worked out on the basis of adjusted book profit u/s.115JA of the Act and not on the basis of profits computed under regular provisions of law applicable to computation of profits and gains of business. Respectfully following the same, we do not find any infirmity in the order passed by the ld. CIT(A). Accordingly, the ground No.1(b) raised by the Revenue is dismissed. Deduction for provision of bad and doubtful debts while computing book profits u/s.115JB - HELD THAT:- Section 115JB of the Act is a self-contained code by itself starting with a non-obstante clause. The Hon’ble Supreme Court in the case of Apollo Tyres [2002 (5) TMI 5 - SUPREME COURT] had already held that the book profits reported by the assessee which has been approved by their shareholders in the Annual General Body meeting could not be tinkered with by the ld. AO other than those additions or deductions specified in Explanation-1 to Section 115JB (2) of the Act. Clause (i) of Explanation to Section 115JB(2) of the Act specifically mandates that provision for diminution in value of any asset should be added back while computing book profits u/s.115JB of the Act. It is not in dispute that the provision for doubtful debts in the instant case does represent provision made for diminution in value of asset. There is absolutely no quarrel that the case does not fall under Clause “C” of Explanation 1 to Section 115JB(2) of the Act. We hold that the issue in dispute falls in Clause (i) of Explanation 1 to Section 115JB(2) of the Act. We are not inclined to make this provision redundant or otiose - we hold that provision for bad and doubtful debts is required to be added back while computing book profits u/s.115JB Set off of Losses of amalgamating company in the hands of the assessee company - Slump sale - whether the assessee had complied with the provisions of Section 72A of the Act r.w.rule 9C of the Rules which alone would enable it to get the benefit of set off of accumulated losses of amalgamating company in addition to the scheme of merger approved by the Hon’ble Bombay High Court? - HELD THAT:- The income tax dispute cannot be determined based on newspaper reports. But in the instant case, the facts stated in the newspaper reports stood subsequently ratified by the actual events that had taken place post merger. We are completely in agreement with the argument advanced by the ld. AR that since assessee was not in control of the operations of GBDFC prior to the merger including the sale of ibuprofen undertaking on 01/11/2002 by way of slump sale, the assessee cannot be held responsible for the same. The act of GBDFC prior to merger, to sell any of its undertaking to its sister concern Alpex for a paltry consideration is of absolutely no relevance to the assessee company herein. In view of the aforesaid observations, we hold that the ld. CIT(A) had rightly directed the ld. AO to allow set off of losses of amalgamating company in the hands of the assessee. Accordingly, ground No. 1(d) raised by the revenue is dismissed. Allowability of capital loss on sale of shares - AO has alleged that the assessee has not furnished any tenable reason for the loss that it has incurred by selling off its share holding - HELD THAT:- Revenue did not point out any facts which would evidence that the transaction was not genuine. In such a case where the genuineness is not disputed with any evidence, it is not open to discard the documents and/or transaction on the basis of some supposed object/intent. In the present facts the Revenue accepts the documents but only substitutes the consideration. Therefore, the issue is whether such substitution of full consideration received by fair market value of the asset is permissible. As held by the Tribunal at the relevant time there was no power vested in the authorities under the Act to substitute a full value of consideration received for sale of shares by fair market value in respect of stocks and shares. The power to substitute full consideration with fair market value in respect of shares came into the statute only on introduction of Section 50D with effect from 1st April, 2013. Moreover, such a power under Section 50D of the Act is only to be exercised if the Assessing Officer comes to a finding that the consideration received is not ascertainable or cannot be determined - we do not find any infirmity in the action of the ld. CIT(A) allowing capital loss on sale of shares of Reckitt Piramal Pvt. Ltd., and Charak Piramal Pvt. Ltd. Allowability of bad debts as deduction - HELD THAT:- As it is no longer necessary for the appellant to establish that the debt which is written off has become bad during the year. The A.O. is therefore directed to allow bad debts. Addition in respect of unutilized MODVAT credit u/s.145A - HELD THAT:- As relying on own case [2019 (5) TMI 689 - ITAT MUMBAI] we restore this issue to the file of the ld. AO to decide the same in the light of directions issued by this Tribunal for A.Y.2009-10. Accordingly, the ground No. I raised by the assessee is allowed for statistical purposes. Disallowance of interest expenditure paid to various banks u/s.36(1)(iii) - payment was made for the loan which was utilized for acquiring the capital asset and an amount expended in the sum of ₹ 9.47 Crores which was upheld by the ld. CIT(A) by placing reliance on the order passed by his predecessor in assessee”s own case for A.Y.2002-03 - HELD THAT:- We find that the appeal preferred to this Tribunal in assessee”s own case for A.Y.2002-03 had been adjudicated already by this Tribunal in [2020 (4) TMI 812 - ITAT MUMBAI] to hold that the payment of prepayment charges also partakes the character of interest . We find that there cannot be any iota of doubt that the entire transaction of acquisition of business assets by the assessee has been done on the grounds of commercial expediency and hence the entire interest payment and prepayment charges would be squarely allowable as deduction u/s 36(1)(iii) of the Act itself. Accordingly, the Ground raised by the assessee is allowed. Granting deduction only in respect of 1/5th of the expenditure in respect of payment made to M/s. Accenture by applying the provisions of section 35DD of the Act as against the claim of deduction of the whole expenditure u/s.37(1) by assessee - HELD THAT:- We find that the very same issue was the subject matter of adjudication by this Tribunal in assessee”s own case for A.Y.2002-03 wherein it was held that assessee would be eligible for deduction u/s.37(1) - We hold that the provisions of Section 35DD of the Act as alleged by the ld. CIT(A) cannot be made applicable in the instant case as admittedly the same only refers to expenses incurred pursuant to amalgamation. Hence, we direct the ld. AO to grant deduction of the said expenditure u/s.37(1) of the Act. Computation of deduction u/s.80HHC - AO show-caused the assessee with regard to claim of deduction u/s.80HHC of the Act to explain as to why the profits of the business should not be recomputed in view of Explanation (baa) of Section 80HHC(4) - HELD THAT:- While computing the 90% of interest together with rent, miscellaneous income, service charges, commission etc., for the purpose of reducing the same from profits from business eligible for deduction u/s.80HHC of the Act in order to arrive at the adjusted profits of the business, whether the gross interest income or net interest income is to be considered. We find that this issue is no longer res integra in view of the decision of ACG Associated Capsules (P) Ltd., [2012 (2) TMI 101 - SUPREME COURT] wherein it was held that net interest is to be considered. We find that the Hon’ble Apex Court in para 10 of its order had held that 90% of net amount of receipt of nature of interest, rent, commission etc. which is actually included in the profits of the assessee is to be deducted from the profits of the assessee for determining “profits of the business” of the assessee under Explanation (baa) of Section 80HHC. Correct head of income - Treatment of rental income from let out portion of Rhone Poulenc House (RPIL) as “income from other sources” instead of “income from house property” - HELD THAT:- We find that the ownership of the RPIL House vests with the assessee for four years and hence, assessee continued to be the owner of the part premises of RPIL House and hence, the rental income thereon should be assessed only under the head “income from house property” and assessee would be entitled for statutory deduction @30% u/s.24(a) of the Act for the same. Enhancing the income of the assessee by disallowing the loss on redemption of shares by treating it as not a legitimate commercial transaction - AO accepted the claim of long term capital loss in the order passed by him u/s.143(3) - HELD THAT:- We hold that the ld. CIT(A) grossly erred in making enhancement of income by disallowing the claim of long term capital loss on redemption of preference shares. Levy of penalty u/s 271(1)(c) of the Act in respect of professional fees to Accenture - HELD THAT:- We find that we have already held that the professional fees paid to Accenture would be allowable as deduction u/s.37(1) of the Act. Since in the quantum appeal, it has already been held to be revenue expenditure, the levy of penalty would have no legs to stand. Accordingly, the grounds raised by the assessee are allowed.
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