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2017 (4) TMI 1633 - AT - Income TaxNature of expenses - replacement expenses on plant and machinery - AO treated these expenses as capital expenditures on the ground that these expenses brought into existence an asset or advantage of enduring nature to the assessee and these modification of expenses have resulted into quality improvement and other advantages as mentioned at page four of the assessment order - HELD THAT:- After considering the detail findings of the CIT(A ), elaborating revenue nature of expenditure on replacement of parts etc, we do not find any reason to interfere in the finding of the Commissioner of income tax appeal. Fees for use of technology - AO held that these expenditures was of capital nature as the assessee had acquired industrial information or technical assistance in the manufacturing - CIT correctly decided the appeal in favor of the assessee by stating that the said expenditure was of the Revenue nature after following the decision of his predecessor in the A.Y 2001-02 [2011 (9) TMI 1249 - ITAT AHMEDABAD]. Expenditure under the head repair and maintenance - Professional fees for renovation work,Renovation work in receiption area, Hardnest tester and SDLC Card - These expenditure are of the nature of the revenue expenditure. Because we find that hardness tester is a consumable item and it cannot be treated as revenue expenditure. Further we find that as SDLC card is often the nature of replacement of part and therefore revenue in nature. In view of the detail findings of the learned Commissioner of income tax appeal we disinclined to interfere in the order of the learned Commissioner of income tax appeal. Amount written off as bad debts - We find that the assessee has submitted party -wise details along with the list of the bad debts like, complete correspondence, proposed legal action etc., information regarding the BIF for cases, winding up proceedings regarding bad debt cases before the assessing officer. We have also observed that the learned Commissioner of income tax appeal has given complete findings. After considering the facts and legal findings provided in the order of the Commissioner of income tax appeal we do not find any reason to interfere in the decision of learned Commissioner of income tax appeal deleting addition observing that the provision of the act for disallowance of bad debt had undergone qualitative change after the amendment came into force with effect from 01-041989 it is no longer a necessary to prove that the debts had become bad. Depreciation claimed on data processing machines, had not been apportioned by the assessee between the DTA unit and EOU unit although these assets has been used by the people working in both the units - AO was not convinced with the explanation of the assessee and he had apportioned these expenses between the two units in the ratio of their turnover - CIT(A) deleted addition - HELD THAT:- We find that there is nothing on record to show that the DTA processing machines have actually been used for the EOU unit. We also find merit in the contention of the learned consul that the assessee was not required to market its product to the EOU unit as the entire production was sold to F AG Germany which was responsible for the marketing and selling of the product in foreign markets. In view of the above facts and after taking into consideration the detailed finding of the learned Commissioner of income tax appeal we do not find any reason to interfere in the finding of the learned Commissioner of income tax appeal. Nature of expenses - license fees for SAP R3 - revenue or capital expenses - HELD THAT:- We have also noticed from the finding of CIT-A that assessee has made compliance with the TDS provision and this particular payment has also been considered as revenue expenditure in the past in the case of the assessee. We find that the identical issue has been decided by the coordinate bench of the ITAT in the case of the assessee for assessment year 2001-02 in favor of the assessee at para 26 to 27 of ITAT order. After going through the complete finding of the learned Commissioner of income tax appeal we are disinclined to interfere in the decision of the learned Commissioner of income tax appeal. TP Adjustment - TPO has held that no payments for the royalty/know –how fees/ license fees was to be allowed - HELD THAT:- We find that learned Commissioner of income tax appeal has not elaborated the complete similarity of the fact of the case in the case of the assessee during the year under consideration with the facts prevailing in the case of the assessee pertaining to assessment year 2002 – 03. We considered it appropriate to set aside this issue to the file of learned Commissioner of income tax appeal to adjudicate it s a fresh after considering the particular facts prevailing during the year under consideration on this issue and any dissimilarity of facts prevailing during that assessment year 2003-03 adjudicated by his predecessor. Computation of income - deduction under section 80HHC in respect of the profit of 100%EOU included or excluded - HELD THAT:- As perused the judicial pronouncement referred by the learned DR in the case of TATA BP SOLAR INDIA limited [2010 (9) TMI 1083 - ITAT MUMBAI] as held that export turnover of the EOU which was enjoying deduction under section 10B was to be included in the total turnover but not in the computation of deduction under section 80HHC(3)(a). We also consider that the expression "such" before the expression export turnover only means that the export turnover referred to is the turnover of the goods manufactured whose profits are being computed under s. 80HHC(3)(a).Therefore, we find that while computing deduction under section 80HHC the profits of s. 10B unit will not enter the computation of total income at all. In view of above facts and legal findings, we reverse the decision of the CIT(A) and confirm the findings of the assessing officer and direct to compute the deduction u/s 80HHC accordingly as per the direction given in the judicial pronouncement of TATA BP SOLAR INDIA limited [supra] Taxability of Interest on refund - as per AO assessee had not considered this amount as part of his taxable income - HELD THAT:- We find that learned Commissioner of income tax appeal is justified in upholding the addition made by the assessing officer by observing that the interest on income tax refund received by the assessee has been held to be taxable. Repairing expenses to plant and machinery as capital expenditures on the ground that the nature of these expenditures has resulted in achieving better quality, reducing consumption, and provided benefit of enduring nature both quantitatively and qualitatively. Replacement of electric wires /cable during the renovation work - AO has rightly treated these expenditures as capital expenditures and we don't find any reason to interfere in the findings of Ld. CIT(A). Expenditure relating to professional fees for renovation work and expenditure toward renovation work in the reception area were incurred on a routine basis, therefore, we allow the appeal of the assessee by treating these expenditures of revenue in nature. Architectural fees for designing work for renovation/modernization of the office - As this issue apparent to be connected to the issue of repair/renovation to the building as mentioned by the assessee. Similarly we considered it to be most appropriate to restore this issue also to the file of the assessing officer to decide it after taking into consideration the direction in point supra. Disallowance u/s 40(a)(ia) - interest on foreign supply credit and the assessee had not made any TDS under section 195 - HELD THAT:- CIT(A) correctly applied provision of section 195 in this case for not deducting TDS on the payment made to non residents as relying on Vijay Shipbreaking Corpn [2003 (3) TMI 91 - GUJARAT HIGH COURT]
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