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2019 (6) TMI 31 - AT - Income TaxAllowability of expenses and depreciation of closed unit - assessee has closed operations at its manufacturing unit at Kavesar factory situated at Thane since 1.4.1999 - HELD THAT:- We have observed that this issue is a recurring issue before the tribunal in the case of the assessee. It is also observed that the tribunal in the preceding year AY 2004-05 had held that expenses incurred by the assessee ( including deprecation ) with respect to Kavesar Unit situated at Thane which was lying closed since 01.04.1999 is to be allowed as revenue expenses. The facts being identical in this year and we have no reason to take divergent view than what was taken by tribunal in preceding year AY 2004-05 and also with a view to maintain consistency. ( Ref: Hon‟ble Supreme Court decision in the case of Radhasoami Satsang v. CIT [1991 (11) TMI 2 - SUPREME COURT] ), we hold these expenses be allowable as business expenses. Thus, we hold that these expenses including depreciation with respect to Kavesar Unit located at Thane be allowed as Revenue Expenses. Disallowance of expenditure on account of purchase of application software - Revenue or capital expenditure - HELD THAT:- Respectfully following the decision of tribunal in assessee's own case for AY 2004-05 and with a view to maintain consistency, we hold that expenditure incurred by the assessee for purchase of application software to the tune of ₹ 8,65,032/- be allowed as Revenue expenses. We have while taking decision has also noted that these are not operating software but are application software. Disallowance u/s 14A - expenditure incurred in relation to earning of an exempt income - HELD THAT:- No reason to take a different view than what was taken by tribunal in assessee‟s own case for AY 2004-05 as facts are similar and also with a view to maintain consistency, we uphold disallowance of expenditure to the tune of 2% of exempt income. Disallowance on account of valuation of stock u/s 145A - differential Cenvat Credit in opening and closing stock - exclusive method of accounting OR inclusive method of accounting - HELD THAT:- The assessee is following exclusive method of accounting for valuing closing stock wherein unutilised MODVAT/Cenvat Credit is not added to the value of closing stock. We have observed that Section 145A stipulates that the duties, taxes, fees and cess (by whatever name called) paid to bring the inventory to present location is to be added to value inventory as on the date of valuation. We have observed that the Mumbai-tribunal has passed an elaborate order in the case of Sunshield Chemicals Private Ltd. v. ITO [2015 (12) TMI 767 - ITAT MUMBAI] of which one of us was part of DB pronouncing the said order, wherein tribunal held that per Section 145A it is mandatory for taxpayers to follow inclusive method. We are inclined to restore this matter back to the file of the AO for denovo determination of the issue in the light of our above discussions as well decision referred to above.The assessee will be allowed to raise its defence in denovo proceedings. The AO shall provide proper and adequate opportunity of being heard in the set aside proceedings. The grounds of appeal are allowed for statistical purposes We order accordingly. TP Adjustment - guarantee fee for counter guarantee given by assessee to its associated concern(AE) - HELD THAT:- issuance of corporate guarantee by a taxpayer in favour of its AE within meaning u/s 92A is an international transaction which is covered u/s 92B of the 1961 Act. What emerges is that providing of corporate guarantee by a taxpayer to its AE within meaning of Section 92A is an international transaction u/s 92B which need to be benchmarked using CUP method to compute ALP of the said transaction of furnishing of corporate guarantee. ALP to be computed will vary depending upon several internal as well external factors. In our considered view, end of justice will be met if the ALP be determined @ 0.5% p.a. of corporate guarantee issued by assessee in favour of Kansai Paint Company Limited, Japan. We are not inclined to accept the plea of the assessee that providing of corporate guarantee by tax-payer to its AE within meaning of Section 92A can be taken as international transaction u/s 92B only with effect from AY 2013-14 as the insertion of explanation to Section 92B By Finance Act, 2012 is w.e.f. 01.04.2002. The said explanation was declared to be clarificatory in nature.
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