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2016 (4) TMI 1343 - AT - Income TaxAddition on account of compensation received on account of termination of trade mark 'ENO and Fruit Salt' - assessment as capital receipt - Held that:- In the instant case, the agreement with U.K. Company to manufacture 'ENO' in India formed the very foundation of the business of the assessee of producing and marketing ENO. The contract with U.K. Company vested valuable trade mark rights in the assessee's company, which formed the very basis of business of manufacturing and marketing 'ENO'; and is of the nature of capital asset. The decision of the Hon'ble Supreme Court in the case of Kettlewell Bullen and Co. Ltd. v CIT [1964 (5) TMI 4 - SUPREME COURT] is squarely applicable to the facts of the present case. Therefore, we hold that the compensation of ₹ 4.5 crores received by the assessee company for termination of the agreement for use of trademark of 'ENO' and 'Fruit Salt', with U.K. Company is a capital receipt not liable to tax. In this case the right to produce, market and sell the products under each trade mark/brand name licence given by U.K. Company to the assessee constituted a separate source of income and the compensation received on termination of the licence agreement in respect of even one of the said trade marks constituted a capital receipt not liable to tax in the hands of the assessee. In our opinion, CIT(A) has correctly decided the issue in favour of the assessee after analyzing and considering the facts of the case and also the settled legal position. Therefore, we do not see any valid ground in interfering with the findings of the CIT(A) on this issue. Accordingly, we uphold the order of CIT(A) and dismiss ground No. 1 of the appeal. Recompute the deduction u/s. 80HHC after excluding Excise Duty, Octroi and Sales-tax etc from the total turnover - Held that:- We observe that the issue is squarely covered in favour of the assessee and against the Revenue by the decision of the Hon'ble Supreme Court in the case of CIT v Laxmi Machine Works [2007 (4) TMI 202 - SUPREME COURT]. We do not find any infirmity in the findings of the CIT(A) on this issue. Accordingly, we uphold the order of CIT(A) on this issue and reject ground No. 2 of the appeal. 100% depreciation on Effluent Treatment Plant - Held that:- the subsequent reply submitted by M/s. Envirad Project (P) Limited to the Assessing officer clarified that the plant had been put in the operation and started functioning w.e.f. 15.3.1997 and as per the arrangement, final payment was to be made after all modifications/completion of all obligation of order and full satisfaction of the assessee. It is true that some of the bills were made subsequent to the financial year under consideration but that cannot be a ground for rejecting the claim of the assessee. Thus, considering the entire facts and circumstances of the present case, we are of the opinion that the CIT(A) has passed a well reasoned order after appreciating the facts of the case and also the relevant documentary evidence submitted by the assessee, therefore, we do not see any valid ground in interfering with the findings of the CIT(A) on this issue. Claim of deduction u/s. 80-I - the claim was disallowed on the ground that all the machines were installed in the existing factory premises and according to the Assessing Officer the same could be treated as routine replacements with better capacity - Held that:- Similar claim had been disallowed u/s. 80-I in-assessment year 1979-80 and when the matter came up before the Tribunal, deduction under section 80-J was held to be permissible to the assessee. The matter again traveled upto the Tribunal in assessment years 1989-90 and in 1991-92 to 1995-96 and the issue was decided in favour of the assessee. Since the basis for the disallowance are same as in earlier years, we respectfully following the orders of the Tribunal in assessee's own case for assessment years 1991-92-to 1995-96 (supra) dismiss this ground of appeal raised by the Revenue. Addition by excluding the Excise Duty in the valuation of closing stock - Held that:- Since the assessment years involved before us are prior to 1.4.99 and section 145A not being applicable, we do not find any infirmity in the order of the CIT(A) in directing to exclude the excise duty component from the valuation of closing stock We, therefore, find no justification to interfere with the order of the CIT(A). The grounds of appeals raised by the revenue in the respective assessment years are accordingly dismissed. Value the closing stock on the direct cost method as adopted by the assessee subject to inclusion of certain expenses - Held that:- Tribunal in assessee's own case for the assessment year 82-83 (supra), uphold the order of the CIT(A) in regard to valuation of closing stock and dismiss the above common grounds of appeals raised by the assessee as well the revenue. Addition on account of MODVAT element not reflected in the value of closing stock - Held that:- Assessing officer had included the modvat credit in the valuation of closing stock. The CIT(A) has recorded a finding of fact that the assessee had decided the purchases not of modvat credit and accordingly has not included the modvat credit in the valuation of closing stock and has accordingly deleted the addition for the respective assessment year. The parties before us agreed that the issue is covered in favour of the assessee by the decision of the Hon'ble Supreme Court in the case of Indo Nippon [2003 (1) TMI 8 - SUPREME COURT]. Respectfully following the said decision of the Hon'ble Supreme Court in the case of Indo Nippon, this common ground raised by the Revenue in respective assessment years is hereby dismissed. Expenditure on account of rent paid for guest house - allowable busniss expenditure - Held that:- Hon'ble Supreme Court in the case of Britannia Industries Ltd. V CIT and Another [2005 (10) TMI 30 - SUPREME COURT], wherein held that the intention of the Legislature was to exclude from deduction the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purpose of a guest house of the nature indicated in sub-section (4) of section 37 - if the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodation used for the purpose of the business or profession, then the Legislature would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in section 37(5) and the provisions of sections 31 and 32 would have been sufficient for that purpose. Interest charges u/s. 234B - Held that:- Present case are squarely covered by the decision of BHAGAT CONSTRUCTION CO. PVT. LTD., M/S. M.R.G. PLASTIC TECHNOLOGIES AND OTHERS [2015 (8) TMI 621 - SUPREME COURT] in as much as it is undisputed that Form I.T.N.S. 150 contained a calculation of interest payable on the tax assessed. This being the case, it is clear that as per the said judgment, the Form must be treated as part of the assessment order in the wider sense in which the expression has to be understood in the context of Section 143, which is referred in Explanation 1 to Section 234B. - Decided against assessee
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