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2014 (11) TMI 217 - AT - Income TaxManagement consultancy fees disallowed – Admission of additional evidences - Held that:- Assessee has made the payment to GMM, in pursuance of management service agreement dated 24.04.2003, in terms of which the GMM would be providing services like financial, human resources, information, legal services etc. to the assessee company - The invoices have also been raised which has been placed in the paper book - the assessee has filed additional evidences in support the services rendered raised by the GMM to the assessee - These evidences go to the root of the issue, therefore, they are admitted and the matter is remitted back to the AO for examination of the evidences – Decided in favour of assessee. Loss on sale of assets disallowed – Held that:- In the statement showing computation of taxable income for AY 2003-04 filed along with return of income, the assessee had started the computation from net loss as per P&L account and thereafter has added the loss on sale of R&D assets twice - Thus the assessee has added back the loss amount at ₹ 72,60,952/-. Out of the said amount, the assessee has deducted only ₹ 36,30,476/-, which inter alia means that finally no deduction on account of loss on R&D assets have been made - the contention of the assessee appears to be prima facie correct that the assessee has not claimed any loss on sale of R&D assets in the computation of income - Hence there is no question of disallowance – the AO is directed to verify the computation of income – Decided partly in favour of assessee. Depreciation in plant and machinery – Held that:- The assessee had provided plant and machinery, equipment etc. to co-packers for the work of process/packing of flour and other food products - These plant and machineries belong to the assessee and were part of the block of assets of the assessee - Later on due to some dispute between assessee and co-packers, the business dealing was stopped and the agreement between the two parties stood terminated in the earlier year/s - the assessee had already used the asset for the purpose of its business and such asset were forming part of the block of assets - Once the plant and machinery has been used for the business purpose and is ready for use any time, then even if it has not been used for a particular period, it cannot lead to any inference that, there has been no user of plant and machinery - the assessee’s claim for depreciation on plant and machinery lying with the packers is eligible for depreciation – Decided in favour of assessee. Conversion charges disallowed – Held that:- The agreement was terminated in the month of May 2002. Before that the assessee had regular business dealing, with the said party - If the amount has been paid in pursuance of the earlier business dealing prior to the date of termination then even though payment has been made in this year, it cannot be held that same is not for the business purpose - when the payment has been made in accordance with the agreement between the parties existing earlier the same has to be allowed as business expenditure – the order of the CIT(A) is set aside - Decided in favour of assessee. Provision for leave encashment disallowed – Whether the assessee has given any actuarial valuation or not - Held that:- The assessee has provided the basis for the provision in the notes to the financial accounts in the following manner, “leave encashment benefits are provided for at 15 days salary for each employee, at current encashable basic salary” - This aspect has not been examined or verified either by the AO or by the CIT(A) – thus, the matter is to be remitted back to the AO to consider the basis for the provision made for the leave encashment as in such a situation it may not be necessary that actuarial valuation report for leave encashment has to be submitted, when the basis for leave encashment has been clearly given and there is no ambiguity about it – Decided partly in favour of assessee.
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