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2022 (7) TMI 593 - AT - Income TaxDisallowing depreciation - determination of cost of assets - parent company of the Assessee transferred its healthcare business to the Assessee, pursuant to the business transfer agreement - Transfers between Holding and Subsidiary Companies - cost to be taken as revalue amount at time of transfer or WDV - HELD THAT:- Clause (iv) and (v) of section 47 tenders certain Transfers between Holding and Subsidiary Companies as not amounting to Transfer u/s. 2(47) wherein Capital Gain is not attracted on such transactions, section 47A(1) prescribe certain conditions on which the transactions shall not be considered as Transfer and if such conditions are not complied with, Capital Gain gets levied u.s. 45. If the Assets transacted between the Holding and Subsidiary Companies fall under prescribed conditions, then the exemption granted shall stand withdrawn and the transaction shall be chargeable to Capital Gain Tax in the previous year in which the original Transfer between the group Companies took place. Further, Section 49(3) of the Act provides, where the capital gain arising from the transfer of a capital asset referred to in clause (iv) or, as the case may be, clause (v) of section 47 is deemed to be income chargeable under the head "Capital gains" by virtue of the provisions contained in section 47A, the cost of acquisition of such asset to the transferee company shall be the cost for which such asset was acquired by it. It is admitted fact that the consideration of acquisition of healthcare business was discharged by the Assessee through issue of its equity shares in favor of the MIL. The Assessee company had later allotted shares of S & G Investments and Hamlet Investments on 28.11.2003, thereby ceasing to be wholly owned subsidiary of MIL. In view of the this changed of status, by virtue of Section 47A, MIL offered the capital gains u/s. 47(iv) of the Act. Therefore, strictly speaking the provision of section 49(3) of the Act became applicable and the cost of acquisition of the Assessee was to be construed to be the cost, for which assets were acquired by Assessee. Since, it was a slump sale, the Assessee in its wisdom, was right to get the assets revalued and thereafter claim depreciation upon it. CIT(A) has corrected this error committed by the Ld. AO. At the same time the tribunal appreciates the distinction brought on record by the Ld. Sr. Counsel for the Assessee, with regard to judgment of Hon'ble Delhi High Court in Dalmia Ceramics Industries Ltd. [2004 (10) TMI 72 - DELHI HIGH COURT] - Case, on the fact of the case. Thus, the tribunal is inclined to dismiss the ground of appeal raised in the present appeals in regard to this controversy Disallowance of management consultancy fee on ad hoc basis - HELD THAT:- AO has himself allowed 50% of the expenses. To disallow 50% of total expenses on ad hoc basis mere use of discretion cannot be sustained. Assessment order does not show that any subjective analysis of the matter was done but merely relaying the special audit report, ad hoc disallowance was made. Even if special audit report referred in para 2 of the assessment order is considered same only mentioned that the services of Max India Ltd. were not related to the business of the Assessee alone but also to the subsidiary of the Assessee, Max Medical Services Ltd. (MMS). However, there is no iota of evidence on record to suggest the expenses of the Assessee relates to any extent to MMS. Thus, there is no error in the finding arrived by the Ld. CIT(A). Disallowances of preoperative expenditure - AO has disallowed deduction holding that there is no provision in the act to provide for deduction for allowing revenue expenditure for purchase pending capitalization - CIT-A deleted the addition - HELD THAT:- It can be appreciated that there is no dispute that expenditure incurred are revenue in nature. CIT(A) has rightly observed that Ld. AO has not doubted that expenditure were incurred for the healthcare business of the Assessee. Mere fact that expenditure were debited to the profit and loss account but were shown in balance sheet as preoperative expenditure pending capitalization cannot change the nature of expenses which was incurred wholly and exclusively for the expansion of the existing healthcare business, as acquired from MIL in the preceding year. Thus, the finding of the Ld. CIT(A) require no interference. Disallowance u/s. 14A read with Rule 8D - HELD THAT:- As the admitted state of affairs is that there was no exempt income during the relevant assessment years and based upon that the Ld. CIT(A) has deleted the addition. So same does not require any interference in the light of now settled proposition of law. Disallowances of professional fees etc. for obtaining loan from International Finance Corporation or Asian Development Bank - HELD THAT:- As observed that there is no dispute of the fact that the Assessee was in the course of expansion of business activity. Amount spent on appraisal of projects to check feasibility of granting loan does not bring into existence any new capital asset and thus cannot be treated as capital expenses. The Ld. CIT(A) has rightly deleted the addition made in that regard.
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