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2014 (6) TMI 214 - AT - Income TaxClaim of depreciation u/s 32(1)(ii) of the Act – Requisition of participating interest in oil blocks - Held that:- As decided in assessee’s own case in the earlier assessment year, it has been held that:- The commercial rights of exploration of mineral oils, as acquired by the assessee falls under the expression of any other business or commercial rights of the nature similar to one of the category i.e. licenses as stipulated in Section 32(1)(ii) - The commercial rights of exploration and licenses acquired by the assessee being in the nature of intangible assets are eligible for the claim of depreciation at the rate prescribed u/s 32(1)(ii) of the Act - It also cannot be said that the right so acquired was not an asset - If it is an asset being the right then it is obvious that same is commercial right, therefore in the nature of asset in the form of license - This right had been granted to the assessee by way of license and the assessee became owner of such right i.e. license to have an access and to carry on of business of exploration and development of mineral oil - such an asset fall within the category of asset falling u/s 32(1)(ii) of the Act - the assessee had acquired business and commercial right and license by making payment of Rs.1559.10 crores, which is in the nature of intangible assets entitled to claim of depreciation u/s 32(1)(ii) of the IT Act – as the expenditure is treated as capital in nature the same is eligible for claim of depreciation at the rates prescribed for the assets falling u/s 32(1)(ii) of the Act – Decided against Revenue. Allowability of expenses - Evaluating existing business opportunities relating to products pending for final evaluation – Held that:- Following CIT Vs. Essar Oil Ltd. [2008 (10) TMI 387 - Bombay High Court] - If the assessee is not successful in obtaining bid, such expenditure is allowable as revenue expenditure - As the assessee was continuously in the business of exploration and production of oil, the expenditure so incurred was in the normal course of its business, such expenditure being revenue in nature incurred for the purpose of existing exploration and production business was required to be allowed u/s 37(1) of the IT Act – thus, the order of the FAA is upheld – Decided against Revenue. Claim for allowance of risk insurance premium – Held that:- As decided in assessee’s own case for the earlier assessment years, it cannot be denied that investment in the Sudan and expenditure incurred to take the insurance cover is a business decision - the expenditure needs to be allowed u/s 37(1) of the Act for the reason that the same is incurred in order to safeguard its business interest as it is the real beneficiary of insurance as well as investment made in the subsidiary – the expenditure also falls within the meaning "for the purpose of business" as the appellant has earned substantial dividend from the above investment which has been offered to tax in India and therefore such expense has a direct link with the investment and also in protecting the legitimate business interest of the appellant – Relying upon S.A. Builder Ltd VS CIT [2006 (12) TMI 82 - SUPREME COURT] – there was no infirmity in these findings of the FAA - The policy itself has been take at the specific directions given by the Govt. of India – Decided against Revenue. Taxability of amount received in advance – Quantity of gas sold – Held that:- As decided in assessee’s own case for the earlier assessment years, under the mercantile system of accounting, a transaction of sale or purchase is complete only on the passing of title/risk attached to such sale or purchase from one party to another - the transaction of sale of gas was not complete in the current year as the title/risk of the gas did not pass from the appellant to the buyer in the absence of delivery - there could not be any reason for treating the advance received as a part of sale for the year - the title and risk in the gas sold passes from the seller to the buyer only when the gas sold is delivered by the seller to the buyer and not earlier – the amount received by the appellant is in the nature of advance received for sale of gas, and to the extent that the sale of gas has not taken place during the year under consideration the amount of advance cannot be treated as sale and added to the income of the appellant for the current year – Revenue could not controvert the factual findings of the FAA – Decided against Revenue. Allowability of depreciation on UPS @ 60% - Held that:- Following CIT vs. Oriental Ceramics and Industries Ltd. [2011 (1) TMI 26 - DELHI HIGH COURT] - once the amount has gone out of the coffers of the assessee, the assessee would be entitled to capitalize the same - The assessee has spent the expenditure on the glow sign boards with an object to facilitate the business operation and not with an object to acquire asset of enduring nature - the expenditure was of revenue nature and the Tribunal has rightly treated the same as of revenue nature - depreciation @ 60% on UPS shall be allowed – Decided against Revenue.
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