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2016 (3) TMI 962 - ITAT MUMBAI

2016 (3) TMI 962 - ITAT MUMBAI - TMI - Disallowance of depreciation on customer rights - Held that:- Respectfully following the order of Tribunal in assessee’s own case, we direct the AO to allow assessee’s claim of depreciation on customers’ rights as once it is seen that the expenditure has been incurred for acquiring the business, we cannot hold that acquisition of customer rights are bogus. We, therefore, hold that the expenditure as such was genuine.Once the expense has been accepted by us .....

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an the interest expenditure and since the interest income is positive no interest disallowance can be made.- Decided in favour of assesse

Disallowance of claim of bad debts - Held that:- The issue is covered in favour of assessee vide order of the Tribunal in assessee’s own case for A.Y.2007-08 upholding the action of CIT(A) for deleting disallowance of bad debts. Also see CIT Vs. Shreyas S. Morakhia [2012 (3) TMI 103 - BOMBAY HIGH COURT ].- Decided in favour of assesse

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avour of assessee

Disallowance of mark to market loss - Held that:- CIT(A) has deleted disallowance by relying on the order of special bench of the Tribunal in the case of CIT Vs. Bank of Baharain [2010 (8) TMI 578 - ITAT, MUMBAI ]. The issue is covered in favour of the assessee vide decision of the Hon’ble Supreme Court in the case of CIT Vs. Woodward Governor [2009 (4) TMI 4 - SUPREME COURT] - Decided in favour of assessee

Disallowance on depreciation on goodwill - Held t .....

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2013, ITA No.4577/Mum/2012, ITA No.7463/Mum/2011 & ITA No.5788/Mum/2013 - Dated:- 19-2-2016 - SHRI R.C.SHARMA, AM AND SHRI RAM LAL NEGI, JM For The Assessee : Shri Vijay Mehta For The Revenue : Chandra Vijay ORDER PER R.C.SHARMA (A.M): These are the cross appeals filed by the assessee and revenue against the order of CIT(A)-Mumbai, for the assessment years 2008-09 to 2010-11. 2. Common grounds have been taken in all the years under consideration, therefore, all the appeals were heard together an .....

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f bad debts, depreciation on VSAT, Vanda loss, mark to market loss, depreciation on goodwill. Against the above order of CIT(A), both assessee and revenue are in appeals before us. 4. The first common ground in the assessment years 2009-2010 & 2010-2011, pertains to disallowance of depreciation on customer rights. From the record we found that in the assessment year 2009-2010, the assessee acquired customer rights aggregating to ₹ 6,83,52,328/- from three concerns in course of business .....

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erting to ground no. 4, the fact that the assessee acquired customers rights when it acquired the business, the assessee claimed the expenditure to be capital in nature and claimed depreciation. The revenue authorities denied the claim of depreciation holding the transaction of acquiring customers rights to be sham. 27. Before us, the AR placed reliance on the decision of i) Hidelberg Cement India Ltd. vs Addl. CIT -31 DTR 582(Mum) - In this case non-compete fees was paid for a period of 1 year .....

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s (P) Ltd. (supra), it has been held, A perusal of the provision of section 32(1)(ii) suggests that certain intangible assets on which depreciation could be claimed are: know-how, patents, copyrights, trademarks, licenses, franchise or any other business or commercial rights of similar nature. This expression 'any other business or commercial rights of similar nature' by itself would mean to include all kinds of commercial rights. The language in section 32(1)(ii) clearly invites the app .....

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rights which can be used as a tool to carry on the business. [Para 13] It cannot be denied that by getting a right over 3709 clients of company AFC , such right is used as a tool to carry on the business by the assessee. Merely because the assessee showed the payment to be on account of goodwill in the books of account, no adverse inference could he drawn against it. [Para 14] Goodwill in stock market Even assuming that the payment has been made for the purchase of goodwill of company 'AFC .....

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lf show that AFC was holding a strong repute in the eyes of its clients. Undoubtedly by purchase of rights to do the business with these 3709 clients the assessee has actually purchased the goodwill of AFC [Para 15] Commercial rights gain significance in the commercial world as they represent a particular benefit or advantage or reputation built over a certain span of time and the customer associate with such assets. [Pam 17] It is not in doubt or dispute that purchase of the clientele business .....

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he assessee had not given classification on the expenditure. 30. We have heard the arguments and have perused the orders & the case laws cited before us. The fact that the assessee acquired business of Peninsula is not disputed, therefore, the expenditure of acquisitions of customers rights also have to be treated as genuine. The bald assertions of the revenue authorities cannot substantiate the disallowance. 31. Once it is seen that the expenditure has been incurred for acquiring the busine .....

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onsideration are same, respectfully following the order of Tribunal in assessee s own case, we direct the AO to allow assessee s claim of depreciation on customers rights. 5. The next grievance of assessee pertains to disallowance u/s.14A. The assessee has received exempt income. In the computation assessee has suo motu disallowed ₹ 9,82,352/- u/s.14A. The AO calculated disallowance under Rule 8D which comprises of interest and other expenses. By the impugned order the CIT(A) directed the .....

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estment in shares was suo motu offered for disallowance. So far as disallowance of interest is concerned, we found that interest income earned by the assessee was more than the interest expenditure and since the interest income is positive no interest disallowance can be made. For this purpose reliance can be placed on the decision in the case of Trade Apartments, ITA No.1277/Kol/2011, order dated 30-3-2012 and Morgan Stanley India Securities, ITA No.5072/Mum/2005, dated 13-4-2011. Respectfully .....

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made by the assessee u/s.14A of the Act was incorrect. It was also brought to our notice that in the case of sister concern of the assessee similar working was accepted by the AO for A.Y.2009-10 to 2011-12. It was submitted by ld. AR that for A.Y,2008-09, in the case of sister concern of the assessee, the AO had calculated disallowance u/s.14A of the Act in accordance with Rule 8D which was challenged before the Tribunal. The Tribunal accepted the contention of assessee and sent the matter back .....

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n the interest of justice, with regard to disallowance of other expenses, matter is restored to the file of AO for deciding afresh in terms of direction given by the Tribunal in the above case. We direct accordingly. 7. In the assessment year 2009-2010, the revenue is aggrieved for disallowance of claim of bad debts. From the record we found that the assessee claimed bad debts of ₹ 3,02,30,904/- which is also written off to P/L account. The brokerage earned in respect of the said parties i .....

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has been upheld by the Hon ble Bombay High Court in the case of CIT Vs. Shreyas S. Morakhia, 342 ITR 285. Respectfully following the judicial pronouncements in assessee s own case, we uphold the action of CIT(A) for deleting disallowance of bad debts. 8. With regard to deleting disallowance of depreciation on VSAT, we found that the assessee company had claimed depreciation of ₹ 1,04,41,922/- on VSAT(Very Small Aperture Terminal) @ 60% of WDV considering the same as part computer. By follo .....

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Y.2006-07 being ITA No.6371/Mum/2008; and iv) A.Y.2007-08 being ITA No.168/Mum/2011. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal, as stated above, we confirm the action of CIT(A) for deleting the disallowance of depreciation on VSAT. 9. The revenue is also aggrieved for deleting disallowance of Vanda loss. The assessee incurred net loss on account of Vanda transactions of ₹ 82,68,912/-. The assessee claimed t .....

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ed in favour of the assessee vide order of the Tribunal in the following cases :- i) Parkar Securities Ltd., 102 TTJ 235 (Ahd); and ii) Rajvi Securities (P) Ltd., 50 SOT 592. As the facts and circumstances during the year under consideration are same, respectfully following the order of the Tribunal, we confirm the order of CIT(A) for deleting disallowance on Vanda loss. 10. The revenue is also aggrieved by the order of CIT(A) in deleting disallowance of mark to market loss. 10.1 We found that t .....

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do not find any error on the part of CIT(A) in deleting the disallowance made on mark to market loss. 11. With regard to disallowance on depreciation on goodwill, we found that the consideration paid for business acquisition was fixed towards customers rights, fixed assets, goodwill & non-compete fees. It is submitted that depreciation was claimed in respect of fixed assets and customer rights, however, inadvertently, no depreciation was claimed on goodwill in the return and before the AO. .....

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urities (supra), we do not find any infirmity in the order of CIT(A) for deleting disallowance of depreciation on goodwill. Assessment Year 2010-2011 : 12. The grounds taken by the assessee with regard to disallowance of depreciation on customers rights, disallowance u/s.14A are same. Following the reasoning given hereinabove, we direct the AO to delete the disallowance of depreciation on customers rights and disallowance on interest u/s.14A. The disallowance of other expenses is directed to be .....

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. Assessment Year 2008-09 : 14. In this year, the assessee is aggrieved for disallowance on foreign exchange loss. The issue is covered in favour of the assessee vide order of the Tribunal in assessee s own case for the assessment year 2007-08, ITA No.168/Mum/2011, dated 21-1-2015. As the facts and circumstance during the year under consideration are same, we direct the AO to delete the disallowance on foreign exchange loss. 15. Next grievance pertains to disallowance u/s.14A. As the reasoning f .....

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ment year 2009-2010. 17. The issue with regard to indexed cost of stock exchange card is covered in favour of the assessee vide order of the Tribunal in case of M/s Parag Parikh Financial Advisory Services Ltd., ITA No.3118/Mum/2012, dated 29-1-2014. 17.1 We have considered rival contentions and found that in case of M/s Parag Parikh Financial Advisory Services Ltd. (supra), the Tribunal held as under :- 8. We have heard the ld. representatives of both the parties and also have gone through the .....

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a unit of the Unit Trust of India established under the Unit Trust of India Act, 1963 (52 of 1963) or a unit of a Mutual Fund specified under clause (23D) of section 10] [or a zero coupon bond], the provisions of this clause shall have effect as if for the words "thirty-six months", the words "twelve months" had been substituted.] [Explanation 1].-(i) In determining the period for which any capital asset is held by the assessee- (ha) in the case of a capital asset, being equ .....

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rmining the period for which any capital asset is held by the assessee the provisions of section 42A will be applicable and after determining the period of holding of an asset as per the explanation 1 to section 42A, if the asset is found to be held by an assessee for not more than 36 months immediately preceding the date of its transfer, the same will fall in the definition of short term capital asset and if the period is more than 36 months then the asset will fall in the definition of long te .....

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BSE card and not from the date of conversion of BSE card into equity shares. As per the section 55(2)(ab) of the Act, the cost of acquisition in relation to equity shares allotted to a shareholder under a scheme of demutualisation or corporatisation shall be the cost of acquisition of his original membership of the exchange. For the sake of convenience section 55 (2) (ab) is reproduced as under: 55.(2). [For the purposes of sections 48 and 49, "cost of acquisition,- [(ab) in relation to a c .....

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