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2014 (1) TMI 975 - AT - Income TaxPayment made under Voluntary Retirement Scheme - Revenue or capital expenditure - Held that:- Before introction of section 35DDA - The assessee can claim the expenditure incurred on account payment made for the VRS which are in the nature of business expenditure and are deductible u/s.37 - Following G.E.Medical Systems India (P) Ltd [2012 (10) TMI 53 - ITAT, Bangalore] - The Tribunal has allowed the claim of the assessee that the impugned expenditure is for the purpose of the business and deductible u/s.37 of the Act - Decided in favour of assessee. Non-compete fees paid - Held that:- The supply agreement has nothing to do with the competition fees agreement as the same has been paid on account of Agrimore not engaging in the production of these four items for seven years and fifteen years - Following CIT vs. Coal Shipment Pvt. Ltd [1971 (10) TMI 6 - SUPREME Court] - Payment made to ward of competition in the business of arrival would constitute capital expenditure of the object of making that payment is to derive an advantage by eliminating the competition over some length of time - The same result would not follow if there is no uncertainty of the duration of the advantage and the same can be put on an end any time - Although an enduring benefit need not be everlasting character it should not be so transitory and ephemeral that it can be terminated at any time at the volition of any of the parties - In the assessee's case, the three products of the company has advantage for seven years and the 4th product has advantage for fourteen years. The agreement has been entered in order to have the advantage of enduring nature as the life of these products itself in the competition age would be over before the period of seven years and fourteen years is over - Ld. CIT(A) was justified in upholding that this payment is required to be considered as capital in nature - Decided against assessee. Bad debts - Held that:- Following TRF Limited Vs. CIT [2010 (2) TMI 211 - SUPREME COURT] - After 01.04.1989, it is not necessary for the assessee to establish that the debt, in fact, has become irrecoverable - If the bad debt has been written off as irrecoverable in the accounts of the assessee it is enough for claiming deduction u/s.36(1)(vii) - It becomes manifest that the deduction on account bad debt is to be allowed in the year in which the amount is written off in its books of account provided the conditions of section 36(2) are fulfilled - There is no requirement to distinctly prove that the debt has, in fact, become irrecoverable as a pre-requisite condition for allowing of deduction – Decided in favour of assessee. Value of closing stock - Held that:- Following assessee's own case for the Assessment Years 1994-95 - Post manufacturing expenses are not required to be included in the valuation of the closing stock - Decided against revenue.
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