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2020 (9) TMI 1165 - AT - Income TaxDepreciation in respect of assets taken over on amalgamation - HELD THAT:- As decided in own case no infirmity in the order of the CIT(A) who had directed the A.O to allow depreciation on the assets taken over on amalgamation. Disallowance of expenditure on closure of Thane Factory as business expenditure - HELD THAT:- As decided in own case relying on M/S. NICHOLAS PIRAMAL (INDIA) LTD. [2016 (5) TMI 723 - BOMBAY HIGH COURT] after deliberating on the assessee’s claim of expenses pertaining to closure of its “Thane Unit”, had observed, that the business of manufacturing of drugs at different units constituted single business and closing down of one unit and shifting its activity to other units was an expenditure that was incurred by the assessee for purposes of its business. As the facts leading to the disallowance of “Thane factory” expenses by the A.O during the year under consideration remains the same as were involved in the aforesaid preceding years, therefore, respectfully following the view taken by the Hon’ble High Court we uphold the order of the CIT(A) in context of the said issue during the year under consideration. Accordingly, finding no infirmity in the order of the CIT(A) who had directed the A.O to delete the aforesaid disallowance. Depreciation on purchase of software application - CIT(A) erred in directing the AO to grant depreciation @ 60% as against 25% granted by the AO - HELD THAT:- As decided in own case expenditure incurred by the assessee on purchase of software application and payment made for acquiring license to use those applications was to be allowed as a revenue expenditure. In the backdrop of the aforesaid settled position of law, we are of the considered view that as the aforesaid software purchased by the assessee did not form part of its profit making apparatus and only facilitated carrying its business more efficiently, therefore, the same was rightly claimed by it as a revenue expenditure. We thus in terms of our aforesaid observations direct the A.O to allow the software expenses. Disallowance being professional fees paid to M/s. Brown & Wood - HELD THAT:- We notice that assessee has incurred consultancy charges to list the ‘ADR’ in ‘NYSE’ and later dropped this project. The AO treated the expenditure as capital and disallowed the same and simultaneously, invoked provision of section 40(a)(i) and 195 of the Act. We notice that in the similar situation, the Hon’ble Bombay High Court in the case of Nimbus Communications Ltd.[2011 (12) TMI 696 - BOMBAY HIGH COURT] has treated the capital expenditure of share issue expenses, which ultimately aborted public issue. The expenditure does not have enduring benefit to the assessee and allowed these expenses as revenue expenditure by relying on CIT vrs. Essar Oil Ltd. case [2008 (10) TMI 649 - BOMBAY HIGH COURT] since the issue before is similar. Therefore, the ground raised by revenue is accordingly dismissed. Invoking provision of section 40(a)(i), we are in agreement with the submission of the Ld. AR that these services were rendered outside India and none of the income earned by M/s Brown & Wood is taxable in India and there is no obligation on the assessee to deduct tax. Payment in foreign exchange for professional services rendered - Whether the payment is towards royalty covered u/s.40(a)(i) of the Act and relied upon the order of AO - HELD THAT:- As decided in M/S. NGC NETWORKS (INDIA) PVT. LTD. [2018 (5) TMI 1148 - BOMBAY HIGH COURT] under Section 40(a)(i) of the Act, under which the expenditure has been disallowed by the Revenue, meaning of royalty as defined therein, is that as provided in Explanation 2 to Section 9(1)(vi) of the Act and not Explanation 6 to Section 9(1)(vi) of the Act. Thus, the disallowance of expenditure under Section 40(a)(i) of the Act can only be if the payment is 'Royalty' in terms of Explanation 2 to Section 9 (1)(vi) of the Act. Undisputedly, the payment made for channel placement as a fee, is not royalty in terms of Explanation 2 to Section 9(1)(vi) of the Act. Therefore, no disallowance of expenditure under Section 40(a) (vi) of the Act, can be made in the present facts. Amount transferred to Debenture Redemption Reserve - assessee made the reserve after determining the net profit as per the company's Act - Whether there is no provision in Sec. 115J to reduce such amount from the net profit - HELD THAT:- As decided in own case [2012 (8) TMI 696 - ITAT MUMBAI] As rightly held by the CIT(A) the amount in question cannot be said to be a reserve but was only a provision. The liability for which such provision was made was an ascertained or known liability and, therefore, amount was to be reduced from the profit as per P&L a/c prepared in accordance with provisions of Companies Act, 1956 to arrive at the book profits under s. 1I5JA of the Act.
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