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2016 (10) TMI 1037 - AT - Income TaxClaim of depreciation on non-compete fee - Held that:- Considering the fact that there are decisions of non-jurisdictional High Courts in favour and against the assessee, we are of the view that following the settled principle of law, the decision favourable to the assessee has to be followed. It is further pertinent to mention here that decisions of the Hon'ble Madras and Karnataka High Courts were not before the Tribunal when the order for A.Y 1999-2000 was passed. Therefore, considering the fact that the subsequent order of Tribunal in assessee‟s own case for A.Y 2001-02 has followed the orders of two different High Courts, i.e., Hon'ble Madras and Karnataka High Courts, and also decision of the Mumbai Bench in the case of Shreya Lifescience Pvt. Ltd., we are inclined to follow the decision of Tribunal in assessee‟s own case for A.Y 2001-02 and allow assessee‟s claim of depreciation on non-compete fee. Adoption of actual cost for computing the depreciation - Held that:- While the assessee has claimed depreciation on the value recorded in its books of account, the Assessing Officer has computed depreciation on the WDV as recorded in the books of the seller-company. In A.Y 1999-2000, while considering an identical nature of dispute arising out of claim of depreciation, the Tribunal had remitted the matter back to the file of CIT(A). In assessee‟s own case for A.Y 2001-02 also, the issue was remitted back to the Assessing Officer for deciding afresh. Consistent with the view taken by the Tribunal for A.Ys 1999-2000 and 2001-02, we restore the matter back to the file of Assessing Officer for deciding afresh keeping in view the directions of Tribunal in the preceding assessment years referred to above. Investment in shares in subsidiary companies not for the business purpose hence not allowable under section 36(1)(iii) - Held that:- A chart has been furnished before us indicating the income earned from the aforesaid transactions with the subsidiary which far outweigh the interest cost on the investments made in shares of the subsidiary. Further, assessee's contention that it has sufficient interest free funds available to make the investment has not been controverted by the Assessing Officer. Moreover, it is observed in assessment year 2001–02, the Tribunal while dealing with identical interest disallowance on account of investment made with the very same subsidiary, in the order referred to above has deleted the disallowance on the reasoning that investment in the subsidiary was out of commercial expediency. As the Assessing Officer has not examined the issue in proper perspective and has made the disallowance simply relying upon the disallowance made by him in assessment year 2005–06, we are of the view that such disallowance cannot be sustained. Accordingly, we delete the addition made by the Assessing Officer. In view of our aforesaid decision, the issue raised by the assessee in additional ground has become infructuous, hence, need not be adjudicated. Disallowance of interest at estimated cost of borrowing on amounts advanced to sister concern and directors - Held that:- We have noted, while considering similar issue of disallowance of interest on the amount given to sister concern and directors, the Tribunal, in assessee‟s own case for assessment year 2001–02 deleted the disallowance having found that such advances were made for commercial expediency. It is also worth mentioning the contention of the assessee that in respect of Piramal Glass, U.K., the Transfer Pricing Officer has already made disallowance while determining the arm's length price prima–facie appears to be correct. In view of the aforesaid, we delete the disallowance Addition u/s 41 - Held that:- In the course of hearing, the learned Authorised Representative has also furnished a chart before us of the sundry creditors existing for more than three years indicating that in one case, the outstanding amount was paid back to the sundry creditor and in rest of the cases, the amount was written back and offered to tax in different financial years. In view of the aforesaid, we direct the Assessing Officer to verify the aforesaid claim of the assessee and if it is found that the assessee has paid the amount to the creditor or it has written back and offered to tax the amount outstanding in subsequent assessment years no addition under section 41(1) can be made. This ground is allowed for statistical purposes. Addition for claim for write–off of non–moving and obsolete finished goods - Held that:- DRP has directed the Assessing Officer to examine the issue of double disallowance, in our view, the Assessing Officer has not considered the same by applying his mind to the fact and material on record. It appears from the computation of income, the Assessing Officer has again made addition of ₹ 1.76 crore and ₹ 71,25,000. Further, the Assessing Officer has not properly implemented the direction of the DRP that in case the inventory has irrevocably written–off in the books only amount which could be brought to tax is the amount received from sale of such inventory. Since the Assessing Officer has not properly examined the issue in strict compliance to the directions of the DRP, we are inclined to restore the issue to the file of the Assessing Officer for adjudication afresh after due opportunity of being heard to the assessee. Including CENVAT credit to the opening and closing stock - Held that:- On a reading of section 145A of the Act, it is to be noted that as per the said provision, while valuing the opening stock and closing stock further adjustment has to be made to include amount of any tax, duty, cess or fee actually paid / incurred by the assessee to bring the goods to the place of its location and condition as on the date of valuation. It is further relevant to observe, the Hon'ble Delhi High Court in CIT v/s Mahavir Aluminium Ltd.[2007 (11) TMI 41 - HIGH COURT OF DELHI ], interpreting the provisions of section 145A has observed that adjustment of closing stock by including tax, cess, or fee cannot be made without making corresponding adjustment to the opening stock. This view has been reiterated in a number of decisions of the Tribunal which the learned Authorised Representative relied upon. We, therefore, direct the Assessing Officer to value the closing stock strictly in terms of section 145A, keeping in view the principle laid down in judicial precedents referred to above and only after providing due opportunity of being heard to the assessee Disallowance of bad debt written–off in the books - Held that:- As fairly submitted by the learned Authorised Representative, assessee's claim of deduction of an amount of ₹ 62,09,372, has been allowed by the first appellate authority while deciding assessee‟s appeal in assessment year 2005–06. That being the case, as the assessee has received the amount of bad debt in the impugned assessment year, it has to be assessed as income in the impugned assessment year. Accordingly, we dismiss assessee's ground Disallowance of deduction under section 80HHHC while computing book profit under section 115JB - Held that:- As could be seen, the assessee claimed deduction under section 80HHC while computing book profit under section 115JB taking shelter under clause (iv) of Explantion–1 to section 115JB. As fairly submitted by the learned Authorised Representative, clause (iv) of Explanation–1 to section 115JB, has been omitted with retrospective effect from 1st April 2005. That being the case, assessee‟s claim cannot be allowed. Computing margin under TNMM - as per assessee Assessing Officer / Transfer Pricing Officer should have applied it to A.E. sales only that too in respect of sales to GG USA Inc. - Held that:- We find merit in the aforesaid submissions of the assessee. The purpose of introducing transfer pricing provisions is to ascertain whether international transactions between two related parties are at arm‟s length. Therefore, non–A.E. transactions cannot be taken into account for computing the margin under TNMM. Accordingly, we direct the Assessing Officer / Transfer Pricing Officer to compute margin on the basis of sales made to GG USA Inc. only. Ground allowed for statistical purposes. Addition made on account of interest on interest free loan to Piramal Glass, U.K. and compensation for providing corporate guarantee to Gujarat Glass International - Held that:- On a perusal of the observations of the DRP, in respect of ground no.17, we find that DRP has not adjudicated on the issue of charging of interest on interest free loan to Piramal Glass, U.K. and compensation for providing corporate guarantee to Gujarat Glass International Inc., USA. We have also found that the assessee had filed an application under section 154 before the DRP which is still pending. In view of the aforesaid fact, we restore the issue back to the file of the DRP for adjudication after providing due opportunity of being heard to the assessee
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