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2020 (1) TMI 1200 - AT - Income TaxDisallowances of payments made to Piramal Corporate Services Limited (PCSL) - HELD THAT:- We find that an identical issue has been considered by the co-ordinate bench of ITAT, Mumbai in assessee's own case for AY 2008-09 [2018 (7) TMI 1887 - ITAT MUMBAI] and after considering relevant facts, including agreement between the parties dated 29/04/1995 held that the Ld. AO is under a misconception of fact has disallowed payment made to PCSL towards reimbursement of expenses, as well as payment of royalty, on the ground that PCSL has charged more to the assessee, then what is contemplated in the agreement. we direct the Ld. AO to delete additions made towards disallowances of payment made to PCSL. Disallowances of software expense - Allowable revenue expenses - HELD THAT:- In assessee's own case for AY 2009-10 [2019 (5) TMI 689 - ITAT MUMBAI] where under identical set of facts, the Tribunal by following the decision of Hon'ble Bombay High Court in the case of CIT vs Raychem RPG Ltd. [2011 (7) TMI 953 - BOMBAY HIGH COURT] held that expenditure incurred on purchase of a software and licenses are in the nature of revenue expenditure deductible u/s. 37(1) . Disallowances of deduction claimed u/s. 35(2AB) in respect of Ennore Unit, Goregaon Unit - Deduction denied on the ground that the assessee had failed to placed on record Form 3CM issued by the DSIR for approval and quantification of expenditure incurred for research and development activities - HELD THAT:- We find that for AY 2008-09 [2018 (7) TMI 1887 - ITAT MUMBAI] and 2009-10 [2019 (5) TMI 689 - ITAT MUMBAI] the issue has been restored back to the file of the Ld. AO to provide an opportunity to the assessee to furnish required approval in form 3CM from the competent authority - consistent with view taken by the co-ordinate bench for earlier years, we restored this issue to the file of the Ld. AO and direct him to follow the directions given by the Tribunal for AY 2008-09 and 209-10, while adjudicating the issue. Disallowances of claim of depreciation on additions to computer software - Assessee claimed depreciation @ 60% as applicable to computer software- HELD THAT:- While deciding identical claim made by the assessee in Assessment Year 2009-10 [2019 (5) TMI 689 - ITAT MUMBAI] as relying on M/S. SARASWAT INFOTECH LTD. [2013 (1) TMI 861 - BOMBAY HIGH COURT] has held that the computer software purchased by the assessee is eligible for depreciation at the rate of 60%. The same view was reiterated while deciding assessee’s appeal in Assessment Year 20099-10. Respectfully following the consistent view of the Tribunal in assessee’s own case, we direct the Assessing Officer to allow depreciation on addition made to computer software at the rate of 60%. This ground is allowed. Claim of the depreciation pertaining to BMIL and PHL units allowed. Adjustment of valuation of inventory as per section 145A - grossing up of tax, duty, cess, etc by revaluing the purchases and inventories by inter alia including the effect of CENVAT credit - HELD THAT:- We restored the matter to the file of the Ld. AO for re-adjudication in light of the claim of the assessee that impact of grossing up of tax would be nil to profit and loss for the year, if taxes are paid before the due date of filing the return of income. Disallowances of expenditure, in relation to exempt income u/s. 14A - HELD THAT:- Following the decisions of Hon'ble Bombay High Court, in the case of HDFC Bank Ltd. vs DCIT [2016 (3) TMI 755 - BOMBAY HIGH COURT]held that if, own funds are more than the amount of investments in shares and securities, which yield exempt income, then there could not be any disallowances towards interest expenditure. Similarly, the Tribunal further held that insofar as, disallowances of other expenditure, only those investments, which yield exempt income could be considered, while computing average value of investments - we restored the issue back to the file of the Ld. AO and direct him to follow the directions given by the Tribunal for AY 2008-09 and 2009-10, while computing disallowances of expenditure incurred in relation to exempt income u/s. 14A. Disallowances of advertisement and business promotion expenses - expenditure incurred by the assessee was for providing gifts and travel facility to the doctors - AO has disallowed a part of expenditure on the allegation that it is in violation of the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations - HELD THAT:- While deciding the issue in assessment year 2009-10 [2019 (5) TMI 689 - ITAT MUMBAI] the Tribunal has allowed assessee’s claim holding that the Indian Medical Council (Professional Conduct Etiquette and Ethics) Regulations does not apply to the assessee and further, the CBDT circular also applies prospectively. The same view was reiterated by the Tribunal while deciding the issue in assessment year 2010-11. Respectfully following the consistent view of the Tribunal in assessee’s own case as discussed above, we allow assessee’s claim by deleting the disallowance. Deduction claimed u/s. 80IC - HELD THAT:- We find that an identical issue has been considered by the co-ordinate bench of ITAT for AY 2008-09 and 2009-10, where the issue has been restored back to the file of the Ld. AO for re-adjudication. Eligibility criteria for claiming deduction u/s. 80IC - HELD THAT:- AO was erred in disallowed deduction claimed u/s. 80IC of the I.T. Act, 1961, on examination of eligibility criteria for claiming said deduction without appreciating the fact that eligibility criteria for claiming deduction needs to be examined in the year of formation of the unit. Hence, we are in agreement with the claim of the assessee that the eligibility criteria shall be examined only in the year of constitution/formation of the units as envisaged in section 80IC(4). Transfer Pricing Adjustment (TPA) on account of interest on loan - HELD THAT:- In assessee own case for AY 2008-09[2018 (7) TMI 1887 - ITAT MUMBAI] where under identical set of facts, it was held that when, loan is advanced in foreign currency, the appropriate method for bench marking rate of interest is by applying either LIBOR or EUROBOR rate and therefore, the ALP of interest chargeable to the AE cannot be determined by applying Indian PLR. TP adjustment on account of corporate guarantee commission - HELD THAT:- In assessee's own case had considered the issue for AY 2008-09 and 2009-10, where under identical set of facts, the Tribunal has directed the Ld. AO to restrict guarantee commission to 0.5% of total guarantee issued to AE's. Therefore, consistent with view taken by the co-ordinate bench, we direct the Ld. AO to restrict TP adjustment on account of guarantee commission to 0.5% of corporate guarantee issued to the AE's. Re-computation of book profit u/s. 115JB, in respect of disallowances of expenditure, in relation to exempt income u/s. 14A - HELD THAT:- ITAT Special Bench Delhi in ACIT vs. Vireet Investment P. Ltd. [2017 (6) TMI 1124 - ITAT DELHI] has held that no adjustment/disallowance can be made under section 115JB of the Act with reference to section 14A read with Rule 8D of the Rules. However, the Tribunal has directed the Assessing Officer to compute the book profit in consonance with the provisions of section 115JB of the Act read with explanation (1)(f) - we direct the Ld. AO to delete additions made towards book profit computed u/s. 115JB of the Act, in respect of disallowances made u/s. 14A Disallowances of amortization of expenses on account of trademarks u/s. 35A deleted - Considering the fact that in the preceding assessment years assessee's claim of deduction under section 35A of the Act has been allowed, applying the rule of consistency also assessee's claim of deduction in the impugned assessment year cannot be disallowed.
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