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2015 (4) TMI 49 - AT - Income TaxDisallowance of interest expenditure on account of notional interest cost made by the AO - CIT(A) deleted disallowance - Held that:- Advances were made by the assessee during the regular course of business. And the advances were in the nature of credit facilities and the impugned advances were in the nature of the business advances and were not bearing any interest. The AO had disallowed the interest on notional basis only. We find that ld. CIT(A) has rightly held that since these advances were not bearing any interest, the disallowance of interest made by the AO on notional basis is not in accordance to law. Since the assessee had interest free funds of ₹ 47.50 crores in excess of the business advances, hence, in view of the Hon’ble Apex Court decision in the case of SA Builders (2006 (12) TMI 76 - SUPREME COURT OF INDIA) wherein it was held that where an advance is made for business purpose and commercial expediency no disallowance on account of interest can be made, therefore, Ld. CIT(A) has rightly deleted the addition on this account. - Decided in favour of assessee. Disallowance of technical advisory fees - Held that:- IT(A) has rightly observed that the onus is on the assessee to substantiate on the basis of evidences regarding business expenditure which has been claimed u/s 37(1). This onus has not been discharged by the assessee. We note that ld CIT(A) has rightly held that in the absence of any evidences on record regarding the nature of services provided for which the above expenditure has been incurred, the disallowance made by the AO is as per law, hence, the ld CIT(A) has rightly dismissed this ground of appeal. In view of the above we are of the view that no interference is called for in the impugned order passed by the ld CIT(A), hence we uphold the same by rejecting this ground of appeal as raised by the assessee in respect of “Technical Advisory Fees” which amounts to ₹ 7 crores and we confirm disallowance of ₹ 7 crores because assessee failed to substantiate its claim. Depreciation - Whether CIT(A) has failed to allow depreciation thereon being expenditure [technical advisory fees] of capital nature eligible for depreciation u/s. 32(1) ? - Held that:- The assessee vide the agreement dated 15.02.2001 read in conjunction with agreement dated 04.01.2001 has acquired the know-how to manufacture “No Mercury Added R-20 Batteries” and for manufacture of technical documentation, drawing, design etc for “D Paper” and “AA Meta”, which are intangible asset qualifying for depreciation u/s 32(1)(ii) of the Act. As we had noted before the consideration for M/s SISL as per the agreement dated 04.01.2001, is in force from 01.01.2001 up to 31.12.2001, which need to be read in conjunction with agreement dated 15.12.2001, so the agreement is in force from 01.01.2001 to 31.12.2001. And the total consideration for the year is ₹ 8.77 crores. So we can allow one-fourth (1/4th) of the said consideration as capital expenditure for which depreciation can be allowed. It amount to ₹ 2.19 crores for which the AO is directed to allow depreciation in accordance to law for the relevant assessment year, which needless to say the rest of the amount i.e. ₹ 6.58 crores will become the W.D.V for the subsequent Assessment Year. - Decided partly in favour of assessee. Disallowing excise duty payment which was deductible u/s. 43B - Held that:- The liability of ₹ 70 lacs on account of excise duty was not of the assessee. Keeping in view of the said agreement, ld. CIT(A) has rightly held that he concurred with the view of the AO that since the liability did not belong to the assessee, hence, the claim of deduction u/s. 43B of ₹ 70 lacs was not allowed, which does not call any interference on our part, hence, we uphold the order of the Ld. CIT(A) on this issue. However, we find force in the contention of the ld AR that the said levy of ₹ 70 lakhs additional Excise Duty was challenged and the same have been refunded back to M/s Rialto which in turn has refunded it to the assessee in subsequent Assessment Year, in that case that amount shall not taxed which will amount to double taxation in the hands of the assessee - Decided against assessee. Disallowance of inventory written off - CIT(A) has deleted the addition - Held that:- CIT(A) in the instant case also found that the assessee had filed the complete details of the inventory which have been written off, as well as evidences in the form of persons before whom the said items were disposed off. Therefore, Ld. CIT(A) has rightly held that as the facts being similar, he has no reason to differ with the findings of the Ld. CIT(A)-XII, New Delhi on the identical and similar issue involved in A. Y 2004-05. Hence, following the earlier precedent, the Ld. CIT(A)-XV, New Delhi has rightly deleted the addition of 2,07,89,275/- and decided the issue in favour of the assessee.
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