TMI Blog2013 (11) TMI 186X X X X Extracts X X X X X X X X Extracts X X X X ..... ription of "knowhow, patents, trademarks, licenses or franchises" but must be of similar nature as the specified assets – Decided in faovur of Assessee. Provision for Liquidated Damages - Expenses Towards Information Technology & Marketing Support Activities - Disallowance of the share of common expenses – Held that:- Held that:- Disallowance of warranty provision, the reasoning adopted by the Assessing Officer as well as CIT(A) was that the assessee had only followed approximation method instead of taking into consideration the liquidated damages as claimed by the concerned parties – in the absence of any record maintained on the claim raised by the assessee, the CIT(A) had rightly held that the liability in question was an unascertained one and not allowable - Consequently, qua this ground of the assessee, we confirm the findings of the CIT(A). The CIT(A)’s order that on the one hand he was directing the Assessing Officer to verify and allow the expenditure and on the other hand, he had disallowed the entire expenditure claimed by the assessee unmindful of the fact that the Assessing Officer himself had accepted the same - the findings of the CIT(A) in this regard were mutu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Areva T D Systems India Ltd merged with Areva T D India Limited, had filed its return of income on 27.11.2006 disclosing loss of Rs.97,06,238/-. On 31.03.2008, it revised its return . This time, loss amount declared was Rs.1,05,41,362/-. Per assessee, the revision of return was attributed to merger of the earlier company with the present assessee with effect from 01.01.2006 as approved by the Hon ble Delhi High Court vide order dated 14.08.2007. The financial year in question was also restricted to April, 2005 to December, 2005. On 31.03.2008, assessee s return was processed under section 143(1) of the Act . 4. In scrutiny proceedings, the Assessing Officer noticed that the assessee had raised a claim of depreciation of Rs.3,11,01,728/- @ 25% on goodwill . Per assessee, the said payment had been made as excess of net value of the seller entity and accounted it as goodwill . In the assessment order dated 31.12.2008, the Assessing Officer declined the same on the basis of the assessment order pertaining to the preceding assessment year 2005-06, wherein, it was held that the goodwill in question was not included in the list of assets subject matter of the agreement. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r nature" have been additionally used, clearly demonstrates that the Legislature did not intend to provide for depreciation only in respect of specified intangible assets but also to other categories of intangible assets, which were neither feasible nor possible to exhaustively enumerate. In the circumstances, the nature of "business or commercial rights" cannot be restricted to only the aforesaid six categories of assets, viz., knowhow, patents, trademarks, copyrights, licenses or franchises. The nature of "business or commercial rights" can be of the same genus in which all the aforesaid six assets fall. All the above fall in the genus of intangible assets that form part of the tool of trade of an assessee facilitating smooth carrying on of the business. In the circumstances, it is observed that in case of the assessee, intangible assets, viz., business claims; business information; business records; contracts; employees; and knowhow, are all assets, which are invaluable and result in carrying on the transmission and distribution business by the assessee, which was hitherto being carried out by the transferor, without any interruption. The aforesaid intangible assets are, therefo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng the share of expenses pooled and shared by all AREVA units towards Information technology Marketing support activities. 4. The learned officer has erred in writing unrelated facts while disallowing the share of common expenses. He has not been consistent in his decision on this matter, as he has been allowing this expense in the earlier years. 5. The appellant craves leave to add, withdraw, amend or forego any or all of the above grounds of appeal during the appellate proceedings. 9. Common facts apropos are that the assessee; formerly known as Areva T D Instrument Transformers India Private Limited is now known as Areva T D India Limited, because of a merger approved by the Hon ble Delhi High Court vide order dated 14.08.2007 with effect from 01.01.2006. It had filed its return of income on 27.11.2006 declaring income of Rs.5,73,39,048/- followed by a revised return dated 31.03.2008 owing to the above merger. This time, the income declared was Rs 52,46,325/-. The same was processed under section 143(1) of the Act . 10. As it is revealed from the assessment order, in scrutiny proceedings, the Assessing Officer noticed that an amount of Rs.19,38,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the apex court in the above cited case of M/s Rotorks Controls India (P)Ltd. 5.14 The assessee's AR also claimed the provision for liquidated damages in the similar manner as provision for warranty on the ground that liquidated damages are calculated scientifically on the above basis. As per the contractual terms, if the execution of an order gets delayed, the customer is entitled to claim liquidated damages. Based on delays occurring in each delivery under the contract, the amount of LD is worked in line with what has been agreed in the contract. Though, the AR claims this provision to be allowed in line with provision for warranty, I am not in agreement with her because the two provisions are on different footings. The assessee can claim actual amount of expenditure incurred in meeting the extra expenses on liquidated damages like execution of contracts getting delayed due to transport problem and any other manner interlinked with other companies in the execution of the project. Therefore, provision for liquidated damages is treated as unascertained liability which is not to be allowed under normal provision u/s 37(1) of the I.T. Act. However, the AO, is directed to allow t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es. In appeal, the CIT(A) also holds that only liquidated damages and actual expenses incurred by the assessee are allowable. On a query being put up in the course of hearing, the AR informs that there is no record maintained by the assessee relating to the purchasers who have raised their respective claims in furtherance to the warranty provision in question. This leaves us with an inference that the assessee is not following any scientific computation method in order to support the claim of warranty provision. Accordingly, we hold that in the absence of any record maintained on the claim raised by the assessee, the CIT(A) has rightly held that the liability in question is an unascertained one and not allowable. Consequently, qua this ground of the assessee, we confirm the findings of the CIT(A). 15. So far as the next plea of the assessee regarding ISSCO and country network expenditure is concerned, we notice from the CIT(A) s order that on the one hand he is directing the Assessing Officer to verify and allow the expenditure and on the other hand, he had disallowed the entire expenditure of Rs.75,34,297/- claimed by the assessee unmindful of the fact that the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X
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