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2011 (7) TMI 530 - AT - Income TaxJurisdiction power u/s 263 by CIT(A) - assessee has borrowed funds from McDowell Alcobev Pvt. Ltd. on which interest was paid in the earlier years - as per CIT AO has not ascertained the effective date from which the interest was not charged and whether the interest charged in the accounts for the earlier years had also been written off- Held that:- The assessee had appended a note to the accounts on this issue stating therein that in view of the weakened financial conditions and the impending merger of the company with its holding company, McDowell Alcobev Private Ltd., the Board of Directors of the company requested the holding company not to charge interest on monies borrowed from them. Thus when the assessee has not charged interest to Profit & Loss Account, there is no question of creeping any error in the assessment order in question - Hence, this issue cannot be treated as a ground leading to revision of the assessment order as there is neither any error nor any relatable loss to the Revenue. Amalgamation of the assessee-company with its holding company - Held that:- Pursuant to the approval by the Board of Directors at its meeting held on 28-1-2004, and approval by the Board of Directors of McDowell Alcobev Private Ltd. (Formerly McDowell Alcobev Limited) at its meeting held on 27th January, 2004, the Company has filed a petition in the Hon'ble High Court of judicature at Chennai for merger of the Company, with the holding company McDowell Alcobev Private Ltd. with effect from 1st July, 2002 which is pending admission by the court. Consequently, no effect of the merger/operations has been given in preparing the accounts of the company. Thus keeping in view the explanation of the assessee, incorporated hereinabove, which could not be found to be false either by the AO or CIT, the reasoning given by the CIT in his revisional order cannot satisfy the test laid down under section 263. Depreciation on Trade marks and Licences - Held that:- When the Assessing Officer has not allowed the claim of depreciation on intangible assets, there cannot be any prejudice caused to the interests of the Revenue. No prejudice could be shown by the Revenue in this regard during the hearing - Hence, there is no question of any further verification on this issue. Service charges paid to United Breweries Ltd and Inertia Industries Ltd. - Held that:- Verification of a transaction with the group company is at arm's length and is not a statutory requirement under section 40A(2) - It was argued that as per the provisions of section 40A(2) what is required of the Assessing Officer is to form an opinion that an expenditure is not excessive or unreasonable - The discretion to decide this issue is vested with the Assessing Officer and he has exercised the same in favour of the assessee - Thus, it cannot be said that an error has crept into the assessment order causing prejudice to the Revenue. In favour of assessee.
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