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2019 (8) TMI 369 - AT - Income TaxDisallowance u/s 35DD - fees for increase in authorized share capital - amalgamation proceedings conceived - HELD THAT:- This ground is covered by the decision of Co-ordinate Bench of the Tribunal, Pune in assessee‟s own case in [2019 (7) TMI 949 - ITAT PUNE] and [2019 (7) TMI 1082 - ITAT PUNE] Assessing Officer and the CIT(Appeals) has not denied the facts that there were amalgamation proceedings with respect to the assessee, however they have not brought out any reasons, specially in the order of the Ld. CIT(Appeals) that when entire expenses are in connection with amalgamation proceedings and the Revenue Authorities have allowed stamp duty expenses as deduction u/s.35DD of the Act then what is the reason for not allowing the expenses incurred regarding fees for increase in authorized share capital which is also part of the same amalgamation proceedings. We are also inclined to agree with the submission of the Ld. AR after perusing facts of the case in the decision of the Hon’ble Delhi High Court (supra.) that it relates to fees for registration of company and essentially dealing with provision of section 35D(2)(c)(iii) of the Act. There is substantial difference between registration of a company and action taken for increase in authorized share capital. In the case of the assessee because of amalgamation proceedings, there was need to increase in authorized share capital and therefore, such expenses cannot be segregated from the main amalgamation proceedings and therefore, these expenses are part of amalgamation expenses. Additions deleted - Decided in favour of assessee. Nature of expenses - software development expenses - revenue or capital expenditure - HELD THAT:- One of the parties could submit through evidence regarding endurability of these software, whether it is in the category of general purpose of software or specialized software which can be utilized directly for manufacturing or production. Therefore, this issue needs detailed verification. Hon‟ble Bombay High Court in the case of CIT Vs. Geoffrey Manners & Co. Ltd. 2014 (6) TMI 958 - BOMBAY HIGH COURT] wherein the decision of the Tribunal has been upheld by observing that in the changing trend development of technology for research is essential and there is small degree of endurability attached to it. Thus, the expenditures in that case was held to be revenue in nature. Similar position the assessee had witnessed for assessment year 2001-02 wherein the Ld. CIT(Appeals) himself has given relief to the assessee. But in the relevant assessment given, the specialized software used by the assessee, the degree of endurability of these software are to be ascertained. If they are of such expenditure that they can be used directly for manufacturing and production and for longer degree of endurability then there cannot be any iota of doubt that they are capital in nature. However, if the degree of endurability is small then following the decision of the Hon‟ble Bombay High Court (supra.) this expenditure should be treated as revenue expenditure and hence, allowable. In view of the matter, we set aside the order of the Ld. CIT(Appeals) on this issue and restore it to the file of Assessing Officer for detailed verification - Decided in favour of assessee for statistical purposes. Expenditure on premises - nature of expenditure - HELD THAT:- Assessee company during the year had purchased a second hand bungalow for MD. Thereafter, all these repairs works had taken place. The case laws relied on the by the Ld. AR are on the facts and situation that renovation/repairs were taken place where already the property was in use. But in this case during the year property was purchased and suitable repairs/renovation were made and then it was put to use. So substantially facts are different as compared to the case of the assessee. AO had directed 80% to be capitalized which was reduced to 40% by the Ld. CIT(Appeals) considering that some of the repairs were in nature of current repair. We find this reasoning to be judicious so as that it had maintained the principles of equality with regard to the parties herein in the given facts and circumstances. We do not find any infirmity with the findings of the Ld. CIT(Appeals) which is thereby upheld. Thus, ground No.3 raised in appeal by the assessee is dismissed. Deduction towards provision for warranty - HELD THAT:- From the material on record, it can only be gathered that the assessee credited a sum of ₹ 77,53,766/- to provision account. It is not clearly emanating as to whether ₹ 77,53,766/- was, in fact, offered for taxation in this assessment year. If the assessee really offered the amount of ₹ 77,53,766/- for taxation, then the view taken by the Ld. CIT(Appeals) in deleting the addition has to be upheld. On the other hand, if it is found that the amount of ₹ 77,53,766/- was credited to Provision for warranty account, but was not offered for taxation, in that case, provision will have to be restricted @ 0.40% of total sales, which is ₹ 1.17 crore as against the claim of deduction for provision at ₹ 1,76,75,590/-. Excess amount of provision in that case will have to be disallowed. We therefore, set aside the impugned order on this score and remit the matter to the file of Assessing Officer for deciding the issue afresh in accordance with the above directions. Needless to say, the assessee will be allowed a reasonable opportunity of hearing. Thus, ground No.6 raised in appeal by the Revenue is allowed for statistical purposes. Disallowance of miscellaneous expenses - CIT-A restricted this disallowance to 20% - HELD THAT:- As seen that a sum of ₹ 41,33,283/- has been included under this head, which is on account of Software development account. We have separately dealt with this issue and allowed the assessee‟s claim for statistical purposes. This amount is, therefore, directed to be excluded from the total of Miscellaneous expenses. A sum of ₹ 25,83,042/- included under this head is on account of actual expenditure on warranty repairs during that period. Similar issue has been decided by the Tribunal in the immediately preceding year against the assessee. We, therefore, direct to disallow the amount of ₹ 25,83,042/-. In the preceding year, we have also disallowed expenditure incurred by the assessee on Gifts and Donations, in entirety. The Assessing Officer is directed to verify the details of such Miscellaneous expenses and disallow the amount relating to Gifts and Donation, if included, under this head. For the preceding year, we have allowed full deduction towards fees for share handling. The Assessing Officer is directed to allow deduction for the full amount towards fees for share handling, after excluding it from this head, if already included. In so far as the remaining amount is concerned, following the view taken in the preceding year, we direct the Assessing Officer to restrict the disallowance to 15% of such remaining expenses. Computation of deduction u/s.80HHC - confirmation of inclusion of commission income - confirmation of exclusion of 90% of Service charges and Miscellaneous income from profits of business for deduction u/s.80HHC - HELD THAT:- similar issue came up for consideration before the Tribunal in assessee’s own case for the immediately preceding assessment year. Following the view taken by the Tribunal in assessee’s own case for still another year, the matter has been remitted to the AO for a fresh decision. Both the sides are in agreement that the facts and circumstances of the extant ground are similar to those for the A.Y. 2002-03 [2019 (7) TMI 949 - ITAT PUNE] . Following the view taken for the immediately preceding assessment year, we set aside the impugned order and remit the matter to the file of AO for deciding this issue in conformity with the directions given by the Tribunal in its earlier orders TP adjustment on account of royalty payment made to AE - HELD THAT:- As decided in own case [2019 (7) TMI 1082 - ITAT PUNE] and [2019 (7) TMI 949 - ITAT PUNE] TPO is required to determine the ALP of an international transaction under one of the methods mandated under rule 10B of the Income-tax Rules, 1962. Nothing of the sort has been done in the instant case. The TPO got influenced with extraneous reasons, which have no bearing on the determination of the ALP of an international transaction. It is further observed that similar issue came up for consideration before the Tribunal in assessee’s own case for the immediately preceding assessment year. The transfer pricing addition made in similar circumstances has been deleted. Relevant discussion has been made on page 39 onwards of the order. Considering the entire conspectus of the case, including the fact that the payment of Royalty to AEs was as per RBI norms, we are satisfied that the view taken by the ld. CIT(A) is unassailable. This ground, therefore, fails
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