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2019 (8) TMI 1053 - AT - Income TaxViolation of Section 144C - validity of the order passed u/s.143(3) r.w.s. 144C stating that the Assessing Officer had passed draft assessment order without following the mandate as laid down u/s.144C - HELD THAT:- Firstly, assessment order in the present case was passed u/s.143(3) r.w.s. 144C of the Act. There is no such demand notice that is being sent and therefore, the character of the assessment order is that of the draft assessment order. Therefore, there is no violation of Section 144C. We, therefore, uphold the validity of assessment order passed u/s. 143(3) r.w.s.144C of the Act. Thus, additional ground No.1 is dismissed. Non- disallowance of Educational Cess - HELD THAT:- It is seen that relying on Circular F. No. 91/58/66-ITJ(19) dt. 18th May, 1967, the Hon’ble Rajasthan High Court in Chambal Fertilisers and Chemicals Ltd. [2018 (10) TMI 589 - RAJASTHAN HIGH COURT] has held that Education cess is not disallowable u/s 40(a)(ii) of the Act. The said judgment has also been followed by the Pune bench of the Tribunal in DCIT vs. Bajaj Allianz General Insurance Company Ltd. [2019 (8) TMI 370 - ITAT PUNE], a copy of which has been placed on record by the ld. AR. No contrary precedent has been brought to our notice by the ld. DR. Following the precedent, we allow this additional ground of appeal Depreciation on the amount of capital expenditure incurred by the assessee on certain premises - HELD THAT:- For the A.Y. 2004-05 in which the Tribunal noticed that the assessee purchased a property during the year and carried out suitable repairs/renovation to make it fit for use. The decision of the ld. CIT(A) capitalizing 40% of the expenditure as against 80% done by the AO, was approved by the Tribunal. Once a particular amount has been held to be capital expenditure on a building purchased by the assessee, the same has to be subjected to depreciation. As the Tribunal has approved the capitalizing of certain amount to Building account, we, therefore, direct the AO to allow depreciation on such amount as per law. Sales to Associated Enterprises (AEs) - HELD THAT:- Assessment year 2005-06 and demonstrated that the subject matter and facts for both these assessment years are similar. It is seen that sales to AEs is always more. At Page 661 onwards Volume-I of the Paper book, the entire details of sales have been placed before us. AR further contended that for assessment year 2005-06, the Tribunal in assessee‟s own case (supra.) in detailed has determined this issue restoring the matter to the file of the AO/TPO for deciding it afresh giving certain directions.That on similarity of facts and circumstances, first ground is remitted back to the file of Assessing Officer/TPO with similar directions as referred hereinabove. Thus, first ground of appeal by the assessee is allowed for statistical purposes Royalty payment made by the assessee to its AEs - HELD THAT:- As in assessment year 2005-06 in assessee‟s own case 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 of payment of royalty came up for consideration before the Tribunal in assessee’s own case for the earlier assessment years in which deletion of transfer pricing addition on payment of royalty by the ld. first appellate authority has been upheld. Considering the entire conspectus of the case, including the fact that the payment of Royalty to the AEs was as per RBI norms, we are satisfied that the view taken by the ld. CIT(A) is unassailable International transaction of receipt of indenting commission - HELD THAT:- In the present facts and circumstances, we have analyzed that no such calculation has been taken into account by the Sub-ordinate Authorities in any of their respective orders either by the Assessing Officer/TPO or DRP. Hence, in the present facts and circumstances, this issue is remitted back to the file of Assessing Officer/TPO for fresh adjudication and the assessee is directed to submit calculation before the Assessing Officer on the issue and thereafter, the Assessing Officer shall adjudicate the same after considering our decision as rendered in assessee‟s own case for assessment year 2005-06(supra.). Needless to say, AO/TPO shall grant reasonable opportunity of hearing to the assessee in accordance with law. Thus, this ground of appeal is allowed for statistical purposes. Expenditure on premises-Treated as Capital - HELD THAT:- We uphold the capitalization of expenses in relation to the premises @40% in this year also. It is directed that the assessee be allowed depreciation on such capitalized amount. Thus, this ground of appeal of the assessee is partly allowed. Ad-hoc disallowance of miscellaneous expenses @ 10% - HELD THAT:- Assessing Officer to the amount disallowable out of miscellaneous expenses in accordance with the directions given in the immediately two preceding years on this score.That for this year also, the impugned order is set aside and the matter is remitted back to the file of Assessing Officer with similar directions and the Assessing Officer shall decide the issue accordingly after providing reasonable opportunity of hearing to the assessee. As the AO has himself disallowed 10% of the remaining expenses, we direct that the disallowance for this year should be restricted to 10% instead of 15%. The Assessing Officer is also directed to verify the gifts. Thus, this ground of appeal is allowed for statistical purposes. Payment of VRS expenditure is allowable or not for deduction u/s.35DDA - HELD THAT:- In assessee’s own case for earlier years as well. The Tribunal has held the assessee to be entitled to deduction u/s.35DDA on the basis of incurring of liability. A further direction has been given to ensure that the assessee does not get deduction on actual payment basis. The impugned order is set aside to this extent and the matter is remitted to the AO for allowing deduction only towards incurring of liability, i.e. on accrual of liability towards VRS u/s.35DDA and that no amount should be allowed as deduction on payment basis.
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