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2016 (1) TMI 784 - PUNJAB AND HARYANA HIGH COURT

2016 (1) TMI 784 - PUNJAB AND HARYANA HIGH COURT - [2016] 388 ITR 74 - Expenses for setting off new business and fee paid - ITAT treated as as revenue in nature - Held that:- The expenditure in dispute incurred by the assessee as revenue in nature and allowable as deduction because the assessee has incurred the aforesaid expenses on different businesses owned by the assessee including health care business which constituted one business only. As regards the payment made to McKinsey & Company the .....

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. The CIT(A) had held that in so far as genuineness of this payment is concerned, there was no controversy that it was actually paid to Mckinsey & Co. After appreciating the material, it was further recorded that this expenditure was revenue in nature. - Decided against revenue - Depreciation worked out with reference to the written down value computed as a result of order passed under Section 250(6) of the Act for the assessment year 1998-99 - Held that:- Since the order of CIT(A) in the ca .....

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the asset of the assessee for the assessment year 1999-2000 - Decided against revenue - ITA No. 426 of 2010 (O&M) - Dated:- 8-9-2015 - MR. AJAY KUMAR MITTAL AND MR. RAMENDRA JAIN., JJ. For The Appellant : Mr. Vivek Sethi, Advocate For The Respondent : Mr. Ajay Vohra, Senior Advocate with Mr. Gaurav Jain, Advocate and Mr. Vishal Gupta, Advocate AJAY KUMAR MITTAL, J. 1. This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short the Act ) against the order da .....

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ances of the case the ITAT was right in law in directing that depreciation should be worked out with reference to the WDV computed as a result of order passed u/s 250(6) of the I.T. Act for the A.Y. 1998-99? 2. A few facts necessary for disposal of the present appeal as mentioned therein are that the assessee filed its return of income on 14.12.1999 for the assessment year 1999-2000 declaring the income at ₹ 9,08,42,893/- under Section 115J of the Act. The said return was processed under S .....

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#8377; 3,09,25,659/- on account of excess depreciation allowance. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals), Ludhiana [hereinafter referred to as the CIT(A) ]. The CIT(A), Ludhiana vide order dated 16.8.2002 (Annexure A-2) allowed the appeal and deleted the additions made by the Assessing Officer. Being dissatisfied, the revenue filed the appeal before the Tribunal, who vide order dated 1.1.2010 (Annexure A-3) dismissed the said appeal. Hence .....

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th reference to the written down value computed as a result of order passed under Section 250(6) of the Act for the assessment year 1998-99? 5. Examining issue (i) above, it would be advantageous to notice the legal position first. The Apex Court in CIT v. Prithvi Insurance Co. Limited (1967) 63 ITR 632, considering whether the business of life insurance and the business of general insurance could be regarded as same business, had observed as under:- A fairly adequate test for determining whethe .....

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in Prithvi Insurance Co. Limited's case (supra) was reiterated by the Supreme Court in Produce Exchange Corporation Limited v. CIT (1970) 77 ITR 739 by holding that while determining two or more lines of businesses of the assessee to be same business or different businesses , regard has to be made to that there is common management of the main business and other lines of businesses, unity of trading organization, common employees, common administration, a common fund and a common place of bu .....

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. The relevant observations read thus:- I have considered the rival submissions in the matter. On merits, I find that the appellant has been able to ordain well that the various businesses carried on by it (including Healthcare) do constitute the same business of the appellant. I accordingly hold that the various businesses carried on by the appellant including Healthcare business, constitute one business only, and not separate businesses. 8. The Tribunal on appeal had affirmed the said findings .....

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8,483/- was revenue or capital in nature. In order to effectively resolve the said controversy, it would be essential to have the bifurcation of ₹ 6,70,78,483/- which is as under:- Salaries and Wages 52,60,075.00 Rent 1,21,182.00 Travelling and Conveyance 65,18,063.02 Communication 9,81,000.00 Business Promotion 9,68,569.11 Legal & Professional (including fee paid to Mckinsey & Co.) 5,15,24,383.00 Advertisement 60,602.00 Miscellaneous/other expenses 16,44,609.39 6,70,78,483/- 10. T .....

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re and was not admissible as revenue expenditure. The CIT(A) had held that in so far as genuineness of this payment is concerned, there was no controversy that it was actually paid to Mckinsey & Co. After appreciating the material, it was further recorded that this expenditure was revenue in nature. The Tribunal had affirmed the said findings with the following observations:- 12. Keeping in view the aforesaid discussion by the learned first appellate authority in the impugned order, we are o .....

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llate authority has rightly held that the observations of the A.O. that agreement had been entered by the MTVL with McKinsey & Company and not the assessee was incorrect as MTVL is a subsidiary company and was not carrying on any business activities. The bill was raised by McKinsey & Co. in the name of the assessee. The payment was made by the assessee only. After going through the aforesaid judgment cited by the learned counsel for the assessee as well as the learned CIT(A), we are of t .....

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ied upon by the learned counsel for the revenue in Commissioner of Income Tax v. OCL India Limited, ITA No. 1037 of 2009, decided on 29.11.2010 by the Delhi High Court, Commissioner of Income Tax v. Flour and Food Ltd. ((1988) 170 ITR 469 (MP), The Commissioner of Income Tax v. Zenith Steel Pipes and Industries Ltd. (2009) 315 ITR 95 (Bom) and Larsen & Toubro Ltd. v. Commissioner of Income Tax ITR No. 67 of 1989 decided on 15.6.2012 also by the Bombay High Court may be examined. Suffice it t .....

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ment year 1999-2000 where the allowability of the expenditure is not in dispute but the issue is whether it has to be allowed in one year as revenue expenditure or by spreading over by way of depreciation or amortisation over the years after capitalising it. At present, the number of years that have gone by from the initial year has been more than about fifteen years. Learned counsel for the revenue has not been able to demonstrate that there had been any change in the rate of taxation during th .....

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