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2013 (12) TMI 139 - ITAT MUMBAIExpenses debited to the Profit & Loss account – Capital or revenue – Held that:- Following assessee’s own case for A.Y. 2006-07 and 2007-08 - These expenditures are capital in nature and forms part of cost of investment. The expenditure relating to professional fees paid - These expenditures were on account of research and development activities which falls within the ambit of section 35D - This issue has not been examined by the Assessing Officer from this angle –This particular issue was restored for fresh adjudication. Development expenditure - Construction equipment - Capital or revenue in nature – Held that:- Following assessee’s own case for assessment years 2006-07 and 2007-08 - Such kind of technical consultancy is in the nature of capital only as the assessee had acquired the technical knowhow, which has an enduring benefit – Decided against assessee. Disallowance under section 14A – Held that:- No borrowed funds have been utilized for the purpose of investment as the assessee has sufficient profit and interest free funds for making investment - The disallowance of interest component has to be removed – The issue was restored for fresh adjudication. Club membership fees – Held that:- Following Full Bench decision of P&H High Court decision in Groz Beckert Asia Ltd. [2013 (2) TMI 375 - PUNJAB & HARYANA HIGH COURT] - The nature of the expenditure incurred by the assessee cannot be said to be a capital expenditure - The corporate membership was obtained for running the business with a view to produce profit - Such membership does not bring into existence an asset or an advantage for the enduring benefit of the business - It is an expenditure incurred for the period of membership and is not long lasting. By subscribing to the membership of a club, no capital asset is created or comes into existence - The issue was restored. Transfer pricing adjustment - Guarantee fee and notional interest – Held that:- Following many cases of the co-ordinate bench of the Tribunal where guarantee fee commission between 0.20% to 0.5% have been upheld – In assessee’s own case for earlier years - 3% has been upheld - The same rate should be applied in this year also as a matter of consistency without there being any change in the facts and the circumstances. Capital loss on sale of R&D assets – Held that:- Following assessee's own case for assessment years 2006-07 and 2007-08 - The assessee had been allowed 100% depreciation on the asset used for R&D purpose in the first year itself and if indexation for claiming capital loss is also allowed it will amount to double benefit - Section 35 is part of Chapter-IV dealing with computation of business income and section 43 is part of the same heading - The provisions of capital gain cannot be imported to allow the assessee one more deduction – Decided against assessee. Disallowance under section 40a(ia) – Year end provisions – Held that:- Following assessee's own case for the assessment years 2006-07 and 2007-08 - The provisions of TDS are not applicable in the year and provisions, as the TDS have been deducted by the assessee, when the bills have been booked – As per amendment brought by the Finance Act, 2005 in section 40(a)(ia) with retrospective effect from 1st April 2005 in the first proviso – Decided in favour of assessee. Scientific research expenditure - weighted deduction under section 35(2AB) – Held that:- Following assessee’s own case for earlier years - Once the R&D facilities are approved in Form 3CL and DSIR has not rejected the application submitted by the assessee, then it can be presumed that the application has been accepted - The failure on the part of the DSIR to inform the I.T. authorities in time cannot be the reason for denying weighted deduction to the assessee – Decided in favour of assessee. Incentive and service coupon – Disallownace u/s 40(a)(ia) – Held that:- Following assessee's own case for the assessment year 2007-08 - TDS is not required to be deducted as the provisions of section 194H is not applicable as the sale was made on principal-to-principal basis - Regarding service coupon - The matter has been set aside to the file of the Assessing Officer - Partly allowed for statistical purposes. Depreciation on intangible asset – Held that:- Following assessee’s own case for assessment year 2007-08 - The existence of an agreement to acquire technology is not sufficient to claim depreciation. There has to be some active or passive use of technology knowhow during the year - Decided against assessee. Reversal of provisions for medical benefits – Reversal of FCCB premium - Held that:- The amount which has been disallowed in the assessment year 2007-08 then in the assessment year 2008-09, deduction has to be allowed on the amount reversed in this year as it will lead to double taxation, one in the assessment year 2007-08 and the other in the assessment year 2008-09 – Decided in favour of assessee. Octroi incentive - Revenue receipt or not – Held that:- The assessee has received octroi incentive as per the "package scheme of incentive" declared by the Government of Maharashtra - Following the principle laid down by Hon'ble Supreme Court in Ponni Sugar and Chemicals Ltd. - The purpose test for which subsidy is given has to be applied for deciding the issue - If the object of the subsidy is to enable the assessee to set up a new unit or to expand the existing unit then the receipt of the subsidy is on capital account and if the subsidy claimed is to enable the assessee to run the business more profitably then the receipt is on the revenue account - This fundamental principle has not been examined either by the Assessing Officer or by the Tribunal - The matter should be restored back to the file of the Assessing Officer to consider the scheme and the objects for which such incentive was given and to decide the issue in view of the principle laid down. Sale proceeds of R&D assets - Held that:- Following Pruthvi Brokers & Shareholders Pvt. Ltd. [2012 (7) TMI 158 - BOMBAY HIGH COURT] - Appellate authorities can accept the new claims that were not made before the AO - An assessee is entitled to raise not merely additional legal submissions before the appellate authorities, but is also entitled to raise additional claims before them. The appellate authorities have the discretion whether or not to permit such additional claims to be raised - They have the jurisdiction to entertain the new claim. That they may choose not to exercise their jurisdiction in a given case is another matter - The claim of the assessee is allowed subject to verification of the evidence filed by the assessee before the Assessing Officer - Decided in favour of assessee. Sub-letting of the property – Held that:- The income from letting out the property to Ridge Business Centre has been assessed as business income in earlier years - When the income which has been derived from stock-in-trade and has been accepted as business income, then the computation has to be made under section 28 and not under section 23 - The assessee has duly shown the income received / accrued from Ridge Business Centre as business income, then any further rent realized by Ridge Business Centre form the third party cannot be said to have been earned / received or accrued to the assessee company - No further income can be attributed to the as business income and not from the income from house property – Decided in favour of assessee. Deduction under section 80IC – Held that:- Following assessee’s own case for earlier years - The Assessing Officer was directed by the Tribunal to quantify the loss for the year under consideration and give clear cut findings as to whether the unit at Haridwar was set up in January 2006 or not - Partly allowed for statistical purposes.
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