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2014 (5) TMI 926 - AT - Income TaxClaim of deduction u/s 35D of the Act Acquisition of manufacturing facility - Disallowance of deduction u/s 37(1) of the Act Legal and professional fees incurred Held that:- The revenue authorities are themselves not sure, as to how the expenditure has to be treated thus, the most reasonable adjudication would be to set aside the findings of the CIT(A) on this issue and restore the issue to the AO with a direction to examine the nature of expense and come to one definite finding, i.e. whether the assessee was correct to invoke section 35D, or the AO was correct to treat it as revenue and in that case, the factum of TAS would be looked into, or the expense is a capital expenditure and if so, depreciation as per law has to be allowed Decided in favour of Assessee. Disallowance on incidental expenses Acquisition of assets capitalized - Excess claim of depreciation Held that:- The acquisition of the machinery from Bilag is not disputed - the machinery is a capital asset and whatever expense is incurred on such outlay, it shall bear the character of capital and added to the cost - Relying upon Ciba Of India Limited Versus Commissioner Of Income-Tax [1993 (1) TMI 35 - BOMBAY High Court] the amount would form part of the cost of the assessment for the purpose of depreciation thus, the additional depreciation, claimed by the assessee on Bilag machinery is to be allowed thus, the order of the CIT(A) is set aside and the AO is directed to allow the depreciation on the machinery that had been acquired from Bilag, and also include incidental expenses incurred on acquisition of assets - This would also include legal and professional expenses as incidental expenses Decided in favour of Assessee. Disallowance of professional fee reimbursed - Services provided by E&Y TDS not deducted - Held that:- The expense is allowable, but the allowability of the expense is dependent on the deduction of TAS or exemption therefrom, is the onus, on the assessee to prove the correct reliance of legal provisions - there are invoices raised by the audit professionals and there upon, requests to the parent company, to make the payment to E&Y and BMR Associates - there is no evidence or agreement has been shown has to make the payment initially and also that there is any correspondence between the assessee and its parent for such an arrangement - The documents are essential to come to viable conclusion - the order of the CIT(A) be set aside and the AO is directed to take definite view Decided in favour of Assessee. Depreciation on goodwill and non-compete fee Held that:- Following Commissioner of Income Tax, Kolkata Versus Smifs Securities Ltd. [2012 (8) TMI 713 - SUPREME COURT] - intangibles like goodwill are eligible for depreciation - non compete fee is in the nature of the payment and is now covered u/s 28(va) of the Act, it would be revenue in nature the AO is directed to allow the depreciation on goodwill as per law and consider the payment of non-compete fee, in terms of section 28(va) Decided in favour of Assessee.
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