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2021 (3) TMI 1 - AT - Income TaxClaim of education cess - Whether liability for education cess on income tax paid for the year ought to be allowed as tax deductable expenses while computing the taxable income.” - HELD THAT:- 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]. No contrary precedent has been brought to our notice by the ld.DR. Following the precedent, we allow this additional ground of appeal. - Also see SESA GOA LIMITED, VERSUS THE JOINT COMMISSIONER OF INCOME-TAX, RANGE 1, PANAJI GOA. [2020 (3) TMI 347 - BOMBAY HIGH COURT] - Decided in favour of assessee. Depreciation on the expenditure of premises - revenue or capital expenditure - HELD THAT:- As decided in own case [2019 (8) TMI 448 - ITAT PUNE] 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. Disallowance of depreciation on the expenditure of software - HELD THAT:- Once such software development have been treated as capital expenditure, then it is but natural that depreciation on the same will have to be allowed in the succeeding years as well, including the year under consideration. However, it is relevant to keep in mind that the assessments of the assessee for the assessment years 2008-09 and 2009-10 have been quashed by the Tribunal on a legal issue. Thus while granting consequential depreciation on the software development cost for the year under consideration, the AO should keep in mind to compute the opening w.d.v. by reducing not only the depreciation granted by him for the A.Y. 2007-08 but also deemed depreciation at the rate of 60% for the next two years, whose assessments have been quashed. Only the remaining amount will constitute opening w.d.v. of the software development cost on this score. Accordingly, additional ground No.3 is allowed to this extent. TP Adjustment - benchmarking export of finished goods to associated enterprises - TPO accepted that TNMM is the most appropriate method for sales - HELD THAT:- Sales to its AE and non-AEs which were effected, they belongs to different geographical location, different quantities lifted and customization of products. Such differences have significant bearing on the price charged by the assessee. No adjustment has been allowed by the TPO on account of such differences. In the same manner, the ld. DR also could point out any mechanism for giving adjustment on account of such material differences. In such circumstances, the price charged from AEs and non-AEs cannot be compared under the CUP method. The Hon’ble jurisdictional High Court in Pr. CIT Vs. Amphenol interconnect India Pvt. Ltd.. [2018 (3) TMI 536 - BOMBAY HIGH COURT] has held that the CUP method is not appropriate method in case of geographical difference, volume difference, timing difference, risk difference and functional difference. There are significant differences in the sales made by the assessee to its AEs and non-AEs, the effect of which has neither been given by the TPO nor it has been shown that how it can be given, we hold that the action of the authorities below in applying the CUP as the most appropriate method cannot be sustained. Following the view taken by the Tribunal in the earlier year in assessee’s own case [2019 (8) TMI 1053 - ITAT PUNE] we set aside the impugned order and remit the matter back to the file of the AO/TPO with similar directions. Disallowance u/s.14A r.w.r. 8D - HELD THAT:- Assessee , has own fund exceeding investment made and the borrowings and therefore, based on the decision of the Hon’ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. [2009 (1) TMI 4 - BOMBAY HIGH COURT] and HDFC Bank [2014 (8) TMI 119 - BOMBAY HIGH COURT] there should not be any disallowance of interest expenses u/s.14A. Therefore, out of the total disallowance made by the Assessing Officer u/s.14A r.w.r.8D, the disallowance in respect of interest expenditure is, therefore, deleted. Disallowance under rule 8D @ 0.5% of the average investment yielding exempt income towards administrative expenses as relying on own case [2019 (7) TMI 949 - ITAT PUNE] we direct the Assessing Officer to sustain ½% of the disallowance on administrative expenses attributable to exempt income.
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