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2013 (11) TMI 1269 - AT - Income TaxUtilization of Interest on Borrowed Funds – Whether the CIT (A) had erred to allow interest paid on borrowed funds ignoring the fact that the borrowed funds were utilized for advancing to group companies or in advancing interest free loans to them – Following C.I.T. vs. Bharti Televenture Ltd. [2011 (1) TMI 326 - DELHI HIGH COURT] - There was no specific instance noted by the Assessing Officer in respect of any direct nexus between the borrowed fund and the advances made to the subsidiaries - The Assessing Officer had made general observations without going into the depth of the matter and without pointing out any specific instance where an interest bearing borrowing was advanced to the subsidiaries or establishing that the borrowings made by the appellant were not for business purposes - the assessee was found to be having an adequate non-interest bearing fund by way of Share Capital and Reserves - Even otherwise, the advances were found to be made to the subsidiaries for business considerations which is nothing but the commercial expediency of assessee - the factual position reflected from the record of the assessee, the onus laid on it stood discharged – Decided against Revenue. License Fee - Amortization u/s 35ABB – Applicability of Section 37 - Whether the CIT (A) has erred in directing to allow license fee paid to Department of Telecommunication - Held that:- Following ASSISTANT COMMISSIONER OF INCOME-TAX Versus BHARTI CELLULAR LTD. [2006 (4) TMI 50 - ITAT, KOLKATA] - Annual license fee calculated on the basis of annual revenue of the assessee company was of revenue expenditure and have to be allowed u/s. 37 and not u/s. 35ABB – thus Assessing Officer was directed to treat the licence fee as revenue expenditure covered u/s. 37 of the I.T. Act. Rate of Depreciation - Higher rate of depreciation on computers, printers and scanners - Whether the CIT (A) has erred by allowing the depreciation @ 60% on computer peripherals though the I.T. Rules allows 60% depreciation only on computer and computer software – Held that:- Following C.I.T. vs. BSES Rajdhani Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT] - Computer accessories and peripherals such as, printers, scanners and server etc. form an integral part of the computer system - the computer accessories and peripherals cannot be used without the computer - they are the part of the computer system, they are entitled to depreciation at the higher rate of 60% - Assessing Officer was directed to allow the depreciation @ 60% on computer peripherals. Disallowance of Block Profit u/s 115JB - Whether the CIT (A) has erred in directing to delete addition from block profit ignoring the fact that the Explanation to section 115JB (2)(b) of the Act clearly states that if any reserve by whatever name called are debited to the P&L account, The book profit has to be increased by that amount – Held that:- The losses acquired under the scheme of amalgamation and difference in consideration and value of net assets acquired under the scheme of amalgamation was a valid charge made to profit and loss account, as per the general accepted accounting policy and accounting standard - Commissioner of Income Tax (A) has allowed this loss claimed in the profit and loss account for the purposes of computing the book profits u/s. 115JB – Following Apollo Tyres Ltd. vs. C.I.T. [2002 (5) TMI 5 - SUPREME Court ]. The statutory auditors of the company have confirmed in their auditor’s report that the profit and loss account has been drawn up in accordance with Accounting Standards and Companies Act, 1956 – Explanation to section 115JB (2) does not provide any such adjustment to compute the book profit from the profit and loss account drawn as per Schedule VI of the Companies Act, 1956 - Any such adjustments which are not explicitly provided under the said Expln. 2 are not tenable – Decided against Revenue.
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