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2016 (11) TMI 66 - ITAT MUMBAI

2016 (11) TMI 66 - ITAT MUMBAI - TMI - Depreciation at the rate of 60% on the courseware - Held that:- We find that the assessee is engaged in the business of imparting computer training and education on customized basis as per the requirements of the customers. The assessee developed various types of educational software/special courses keeping in view of the requirements of each institution/customer and these courses are designed and developed keeping in view of the requirements which varies f .....

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her find that the department has allowed depreciation to the assessee at the rate of 60% in the previous and succeeding years even in the assessments framed u/s 143(3) of the Act and thus, the department cannot be allowed to take different view in the different assessment years qua the same assets which are nothing but specialized software or customized training softwares which are eligible for depreciation at the rate of 60% as per the Income Tax Rules and the same was correctly depreciated at .....

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were as per terms as agreed in the memorandum of agreement and accordingly the assessee made payments through banking channels as agreed. We find merit in the submissions of the ld. AR that mere increase in expenditure was not sufficient ground for disallowance on estimation basis which is no basis in our opinion and is not justified particularly when these expenses were incurred in terms of agreement between the assessee and franchisees. The ld. CIT(A) has not given any cogent and solid reason .....

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making disallowance of ₹ 23,34,738/- in a casual manner. In view of these facts and the manner in which adhoc disallowance was made, we are inclined to set aside the order of the ld. CIT(A) and direct the AO to delete the addition. - Disallowance in respect of ESOP charges - Held that:- In the case of Biocon Ltd (2013 (8) TMI 629 - ITAT BANGALORE ), the Special Bench of the Bangalore Tribunal has held that discount on issue of shares to the employee stock option is allowable deductio .....

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llow SEBI guidelines and by following such directions the assessee has claimed ascertained amount as eligible for deduction arising on account of Employees Stock Option Plan. In the case of LEMON TREE HOTELS LTD (2015 (11) TMI 404 - DELHI HIGH COURT) upheld and fully endorsed that ESOP was an allowable expenses. In view of the facts as discussed above and the ratio laid down in the various decisions, we are of the view that the assessee has rightly written off ESOP charges and therefore, the ord .....

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travelling advances for hiring motor vehicles during the course of their employment and the expenditures incurred by them out of travelling advances. In our view, the same are not liable for deduction u/s 40(a)(ia) of the Act as it is the settled law that re-imbursement to the employees is not laible to the provisions of TDS . Accordingly, we direct AO to delete the addition. - Disallowance being the provisions for rebate - Held that:- We find that the provision of rebate which is a kind of .....

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t in the earlier and succeeding years. Accordingly, we direct AO to delete the addition. - Disallowance made u/s 14A - Held that:- The total investments made in the subsidiary companies were to the tune of ₹ 23,85,10,386/- whereas the share capital of the assessee company were ₹ 43,15,11,170/- no interest disallowance is called for as the assessee’s own fund were sufficient to cover the investment in the shares in subsidiary companies. It is also clear from the copy of audited b .....

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u/s 68 - Held that:- There some un-reconciled entries in ITNS amounting to ₹ 5,15,396/- pertaining to several parties with whom the assessee has stated not to have any business or other dealings and could not be reconciled. The AO made addition on the basis of merely ITNS information without making any other further verification of ITNS information available with the AO and therefore, the addition as made by the AO and sustained by the ld.CIT(A) was not justified when the assessee has com .....

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rred expenses on marketing/advertising and retainer-ship etc. for running and operation of business more profitably and efficiently which did not result in the creation of fixed asset or creation of any benefit of enduring nature in favour of the assessee and thus observation and findings of the AO was not correct and the ld. CIT(A) has rightly deleted the addition made by the AO after considering the submissions of the assessee and by recording the findings of facts that the expenditure incurre .....

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chisees as the assessee carried on the business of imparting education and training and rendering other services. These deposits were adjusted by the department concerned against the outstanding and pending bills of electricity and telephone, when the franchisees failed to make the payments and the same could not be recovered for the reasons stated above in large number of cases. We also find merit in the arguments of the ld.AR that the record of the assessee were destroyed in flood in 2005 and .....

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1228/Mum/2013, I.T.A. No.1271/Mum/2014, I.T.A. No.2003/Mum/2014 - Dated:- 6-10-2016 - SHRI JOGINDER SINGH (JM), AND RAJESH KUMAR,(AM) For The Assessee : Shri S C Tiwari and Rutuja N Pawar For The Respondent : Shri A Ramchandran ORDER Per RAJESH KUMAR, Accountant Member: These are six cross-appeals filed by the respective parties. Cross-appeals for the assessment years 2007-08 and 2008-09 are directed against the order passed by the ld. CIT(A)-16, dated 16.11.2012. The cross-appeals for the asses .....

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ntion of the learned Assessing Officer that the Courseware of ₹ 5,02,29,679/- is not eligible for depreciation at the rate of 60%. 1.2 On facts and in the circumstances of the case. the learned CIT(A) erred in law and on facts in upholding the contention of the learned Assessing Officer that the Courseware is eligible for depreciation @ 15%. 1.3 On facts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the disallowance of ₹ 1,67,76,003/- .....

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the case the learned CIT(A) (A) erred in law are on facts in upholding the disallowance made by the learned Assessing Officer of ESOP charges of ₹ 11,06,563/- 4. On facts and in the circumstances of the case the learned CIT(A) on facts in upholding the disallowance by the learned Assessing Officer u/s 40(a)(ia) or the Act or hire charges to the extent or ₹ 4,46,593/-. 5. On facts and in the circumstances of the case the learned CIT(A) erred in law and on facts in upholding the disal .....

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pellant during the year and directed by the CJT(A) to learned Assessing Officer to verify and allow the claim to such extent.) 7.1. On facts and in the circumstances of the case the learned CIT (A) erred in law and on facts in upholding the contention or the learned Assessing Officer that disallowance u/s 14A of the Act could be computed by applying the provisions of rule 8D of the Income Tax Rules. 1962 for assessment year 2007-08.. 7.1.1 On facts and in the circumstances of the case the learne .....

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the case the learned err (A) erred in law and on facts in upholding the contention of the learned assessing officer that the total assets of the appellant as on 1.4.2006 were ₹ 142.10,95,818/- and not ₹ 150,19,18,020/- as claimed by the appellant and as on 31.03.2007 were of ₹ 172,33,26,035/- and not 1,76,74,75,925/- as claimed by the appellant and therefore, the average total assets were of ₹ 157,22,10,927/- and not ₹ 163,46,96,973/- as claimed by the appellant. 7 .....

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rned CIT(A) erred in law and on facts in upholding the addition by the learned Assessing Officer u/s 68 of the Act to the extent of ₹ 5,15.396/- on the basis of inadequate ITS information available with the department. 9. The order of the Commissioner (Appeals) being contrary to law, evidence and facts of the case should be set aside, amended or modified in the light of grounds deduced above. 10. Each ground of appeal hereinabove is independent and without prejudice to each other. 3. Facts .....

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ed and served upon the assessee. 4. The issue raised in ground no.1 is against the confirmation of deletion of ₹ 1,67,76,003/- by the ld.CIT(A) upholding the order of the AO that the assessee was not entitled to depreciation at the rate of 60% on the courseware of ₹ 5,02,29,679/- and actually allowing the depreciation at the rate of 15%. Thus, the disallowance has arisen because of reduction in the rate of depreciation from 60% to 15% on cost of courseware. 5. During the course of as .....

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assessee developed its own courses for e-learning and training which are developed into computer software called courseware. The ld. AR submitted that the assessee has to offer customized e-learning training as per the requirements of each individual customer and these are marketed as tailor made product customized as per the requirement of each customer . There was continuous process of enhancement, upgradation and production new courses in the form of new courseware as these are required to b .....

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%, thereby disallowing a sum of ₹ 1,67,76,003/- on account of excess depreciation . The ld. CIT(A) confirmed the action of the AO by observing and holding as under : 5.3 The Assessing Officer's order, submissions made for the appellant and material on record have been considered. As per the Act and IT. Rules computer software means any programme recorded in the specified or other information storage device. It means a computer programme, and not merely a manual or set of instructions. .....

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ectly providing instructions to the digital electronics or by serving as input to another piece of software. Other explanations state that Software is a generic term for organized collections of computer data and instructions, often broken into two major categories: system software that provides the basic non-task-specific functions of the computer, and application software which is used by users to accomplish specific tasks, System software is responsible for controlling, integrating, and manag .....

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king and device control software, Application software, on the other hand, is used to accomplish specific tasks other than just running the computer system. Application software may consist of a single program, such as an image viewer; a small collection of programs (often called a software package) that work closely together to accomplish a task, such as a spreadsheet or text processing system; a larger collection (often called a software suite) of related but independent programs and packages .....

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ters, packages containing a compiler, linker and other tools; and large suites (often called Integrated Development Environments) that include editors, debuggers, and other tools for multiple languages. Merely by using the term software does not imply that it would come within the ambit of the specific definition under the Act. The appellant has used the term courseware, which is basically a manual for trainers/ trainees which has been digitized and is being used for training their students/ tra .....

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t be taken to mean that these training manual consisted of computer softwares. The ld. CIT(A) held that these courseware were only readable with software. The ld. AR submitted that these courseware were developed on customized basis which were not used as standard educational tools or method for training and e-learning. Each course was designed as per the customer s requirement independently by taking into account the nature of business and its training and e-learning requirements. The ld. AR su .....

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were used for training and education by the assessee for its customers were nothing but computer softwares. These education softwares were a kind of computer software the primary purpose of which was teaching and self learning. Therefore, the ld. AR submitted that the coursewares were eligible for depreciation at the rate of 60%. The ld. AR also submitted that the depreciation has been allowed at the rate of 60% for the assessment years 2004-05 to 2013-14 which were scrutinized and assessments w .....

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sessee. 8. We have considered the rival submissions, perused the materials placed before us including the orders of authorities below. We find that the assessee is engaged in the business of imparting computer training and education on customized basis as per the requirements of the customers. The assessee developed various types of educational software/special courses keeping in view of the requirements of each institution/customer and these courses are designed and developed keeping in view of .....

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are computer softwares. We further find that the department has allowed depreciation to the assessee at the rate of 60% in the previous and succeeding years even in the assessments framed u/s 143(3) of the Act and thus, the department cannot be allowed to take different view in the different assessment years qua the same assets which are nothing but specialized software or customized training softwares which are eligible for depreciation at the rate of 60% as per the Income Tax Rules and the sa .....

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sment proceedings, the AO found that the percentage of expenses in relation to revenue is increased substantially and disproportionately from financial year 2003-04 and therefore the assessee was asked to produce vouchers etc in order to justify such steep hike in the expenses which were 55% in the financial year 2003-04 and 75% in the financial year 2006-07. The AO disallowed 10% of the expenditures claimed for the reasons that the assessee failed to produce any bills and vouchers or failed to .....

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ol project after calling remand report from the AO who admitted in the remand report dated 20.11.2011 that the disallowance was wrongly calculated by taking wrong figure of expenses. The ld. CIT(A) rejected the submissions and pleas of the assessee that these expenses were actually incurred for the business of the assessee wholly and exclusively and the books of account were audited as per the Companies Act, 1956 and also as per the Income Tax Act, 1961. 10. The ld. AR submitted before us that t .....

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ithout any reasons and justification. Finally ld AR prayed that the disallowance be deleted by setting aside the order of the ld. CIT(A) on this issue. 11. The ld. DR relied on the orders of authorities below. 12. We have carefully considered the rival submissions and perused the material placed before us including the orders of authorities below. We find that the assessee has incurred expenses on Lucknow school project which have been increased by 25% over the last three years. The reasons cite .....

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isees. The ld. CIT(A) has not given any cogent and solid reasons to support the addition made by AO. The assessee was maintaining proper bills and vouchers which were subject of various types of audit . We therefore of the view that the adhoc disallowance at the rate of 10% when the assessee is maintaining books of accounts which audited and supported with bills and vouchers and the payments were made by account payee cheques as per the agreements with franchisees can not be sustained especially .....

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ring the course of assessment proceedings, the AO found that the assessee has claimed ESOP charges to the tune of ₹ 11,06,563/- which the AO found to be of capital nature and accordingly issued show cause notice dated 14.9.2009. As per the AO, the assessee did not reply to the show cause notice and as a result of which he treated the said expenditure as capital in nature as being incurred for issue of equity shares which were issued to the eligible employees. Aggrieved by the order of the .....

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nted price as against the prevailing market price and the difference was amortised and written off on straight line basis over vesting period and included the same under the head of Salaries and Other Allowances and therefore these were actually incurred on employees and have been treated as such after following the procedure laid down by the regulator SEBI. As such these were not of capital nature and not incurred as share issue expenses. However the CIT(A) not convinced with the submissions of .....

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ingent liability which is not allowable under the Act In these circumstances and in view of the above discussion both on facts and law the assessing officer s action in not allowing deduction is confirmed. . 15. The AR vehemently submitted before us that the ESOP charges are not of capital in nature as these were neither incurred on issue of shares nor were of contingent nature as held by the ld CIT(A). The ld. AR submitted that the ESOP charges amounting to ₹ 11,06,563/- were not incurred .....

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ry and allowances as these were incentives given to the employees and accordingly treated as expenditure incurred on employees in the respective period over the vesting period and thus, these were not incurred on capital account or were not of contingent nature. The ld. AR submitted that the assessee has followed the procedure as they drawn from SEBI with regard to the employee s stock option scheme. The ld AR further submitted that the deduction of the said expenses by amortising and writing of .....

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ribunal in the case of Biocon Ltd. Vs Deputy Commissioner of Income-tax (LTU), Bangalore [2013] 25 ITR(T) 602 (Bangalore - Trib.) have set at rest all the doubts with regard to the treatment of ESOP charges. The Special Bench held that the objective of stock employees option was not to raise share capital but simply the mode of compensating the employees. The Special Bench of the Tribunal further held that issue of shares at an discounted price on a future date in view of the services satisfacto .....

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as revenue expenses. It was submitted by the ld.AR that the assessee s ESOP Scheme 2004 and it s accounting in the books of account of the assessee were made on the vesting date of exercising of option by the employees and also submitted that the amount of options which left for the want of exercise of option by the employees have been duly written back in the books of accounts of assessee as per the SEBI guidelines and offered the same for taxation. 16. The ld. DR on the other hand relied on th .....

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amortised and written off over the vesting period on straight line method. The said scheme was floated to remunerate the employees of the assessee and primary objective of the whole exercise was not to raise share capital but incentivise for consistent and strenuous effort of the employees during the vesting period. Under the said scheme, the assessee did not incur any expenses to issue shares at the discounted prices but granted only option to the employees which will be exercised at a later da .....

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s contingent in nature, whereas the arguments advanced by the ld.AR are quite convincing that the scheme was floated to reward the employees of the company and the difference between the discounted price and prevailing market price was amortised over the vesting period. The case of the assessee finds strong support from the number of the decisions referred and relied upon by the ld.AR. In the case of Biocon Ltd (supra), the Special Bench of the Bangalore Tribunal has held that discount on issue .....

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that the assessee had to follow SEBI guidelines and by following such directions the assessee has claimed ascertained amount as eligible for deduction arising on account of Employees Stock Option Plan. In the case of LEMON TREE HOTELS LTD (supra) the Hon ble Delhi High Court upheld and fully endorsed that ESOP was an allowable expenses. In view of the facts as discussed above and the ratio laid down in the various decisions, we are of the view that the assessee has rightly written off ESOP char .....

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g the order of ld. CIT(A) and AO. We find that the AO made the disallowance of entire hire charges of ₹ 36,75,372/- by referring the provisions of section 40(a)(ia) or the Act as amended with effect 1.4.2015 which was reduced by the first appellate authority to ₹ 4,46,593/- after calling the remand report dated 20.11.2011 which is reproduced by the ld.CIT(A) at page 19 of the impugned order. It was also submitted before the ld. CIT(A) that the said amount comprised of expenditures in .....

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f the paper book. The ld. AR also submitted that these expenses were incurred by employees out of their tour advances while they were on tour. Looking into the facts and circumstances of the case, we find that the assessee had incurred these expenses through employees out of their travelling advances for hiring motor vehicles during the course of their employment and the expenditures incurred by them out of travelling advances. In our view, the same are not liable for deduction u/s 40(a)(ia) of .....

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related accessories in the government and government aided schools in the National Capital region of Delhi. The assessee raised the bills to the Directorate of Education and Directorate of Education withheld certain payments on the ground of delayed installation of infrastructure, non performance of infrastructure and faculty absenteeism etc. The assessee reduced the amount billed and raised to Delhi Government by way of a provisions of rebate to the extent the amount withheld for deficiency in .....

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at the said withholding of the amount were still not received in the subsequent years and there were no dispute pending for recovery against the customer qua the said amount. The ld. CIT(A) held that the amount written off by the assessee as a provision of rebate but it was claimed as bad debt. The ld. CIT(A) further noted that under the provisions of section 36(1)(vii) of the Act the deduction for debts written off can be allowed only where the said amount have been claimed as income by the ass .....

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ted by the Directorate of Education of Delhi Government. The ld.AR submitted that in the mercantile system of accounting there is no accrual of income if the billed amount was not accepted by the customers. The ld. Counsel in defence of his argument relied upon the decision in the case of : a) CIT Vs. Bharat Petroleum Corporation Ltd. (1993) 202 ITR 492 (Cal) b) CIT V/s Kerala State Drugs and Pharmaceutical Lts 192 ITR 1 (Ker); c) CIT V/s Sikaria Sons and co. 216 ITR 440(Gau); Indian Overseas Ba .....

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were made in earlier years qua the amount billed but not acknowledged by the Directorate of Education Delhi. The provisions for rebate of ₹ 3,00,00,000/- for the assessment year 2006-07 and ₹ 10,80,00,000/- for the AY 2010-11 were allowed by the revenue in the assessment proceedings completed u/s 143(3) of the Act. Finally the ld. AR prayed that since the assessee has already credited the billed amount in its books of accounts and treated as income after raising bills on the Directo .....

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to set off the profit which was of contingent in nature and did not satisfy the conditions laid down u/s 36(1)(vii) of the Act and prayed for upholding the appellate order of ld.CIT(A). 24. Considering the facts of the case that the Directorate of Education, Government of Delhi to whom the assessee rendered services of computer education , training and installation of infrastructure for imparting training denied the part payment of the billed amount for rendering the deficient services to custo .....

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ew Delhi Government in the books of assessee. In our view provisions of rebate was rightly claimed by the assessee upon the same being denied by the person from whom it was receivable and also satisfies the conditions as laid down in section 36(1)(vii) of the Act particularly when the similar deductions were allowed by the department in the earlier and succeeding years. We also find that the assessee s case find strong support from the decisions cited above in which it has been held that merely .....

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ax v. Kerala State Drugs & Pharmaceuticals Ltd (supra), it was held that mere entries made in the accounts did not represent any income accrued or received by the assessee. That excess amount credited in the books of the assessee was not assessable as its income. It was also held that the amount of supplementary bill disputed by the buyer which was ultimately set aside by the Hon ble High Court several years back and later cannot be charged to tax in the year of raising of the such supplemen .....

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e that the assessee has provided an amount of ₹ 40,71,369/- as provision for leave encashment. The AO during the course of assessment proceedings issued show cause notice to the assessee to explain as to why the provisions should not be disallowed. In reply to the show cause notice, the assessee submitted that the said provisions were made on the basis of actuarial report which was liability of the assessee and was accordingly provided. However, the AO not finding the reply convincing reje .....

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observing that the said judgment covers the case of the assessee; that the amount provided by the assessee in respect of future liability would be allowable subject to the fulfillment of certain conditions which the assessee has not satisfied and therefore the provisions were sustained to the extent of Rs. ₹ 19,00,418/-. 27. We have carefully considered the rival submissions and perused the material placed before. We find that in the case of Exide Industries Ltd the Hon ble Supreme Court h .....

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urther ruled by the Co-ordinate Bench that it would be open to the department to recover the outstanding demands in case the appeal of the department is allowed by the Apex Court. The operative part of the decision is reproduced below : 9. In view of the observations of the Hon ble Supreme Court, in our view, it will be proper to dispose of this appeal in the light of the order of the Hon ble Supreme Court dated 08.05.2009 passed in the case of CIT vs. Exide Industries Ltd. (supra). We therefore .....

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il Appeal of the Department in the case of Exide Industries Ltd. (supra) is allowed by the Hon ble Supreme Court. Subject to our above observations, the matter is restored to the file of the AO to be adjudicated afresh as per the decision of the Hon ble Supreme Court in the case of Exide Industries Ltd. (supra) We find that the facts of the case before us is identical as decided by the coordinate bench in the decisions(supra) and therefore by following the decision of the bench respectfully , we .....

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7; 2,67,21,188/- from M/s Bejing Aptech Jade Bird Information Technology Co. Ltd. The AO also observed that the assessee made investments of ₹ 23,85,10,346/- in the subsidiary companies in India and these subsidiary companies did not declare dividend during the year. According to the AO the investments made by the assessee in the subsidiary companies in India were with the motive to earn dividend income which would be exempt from tax as and when declared by the subsidiary companies. Accord .....

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the AO computed the disallowance at ₹ 1,56,27,270/- by applying the ratio laid down on the decision of Special Bench of the Delhi Tribunal on account of interest paid. 30. During the course of appellate proceedings, the ld. CIT(A) directed the AO to recalculate the disallowance by excluding the investment made in the foreign companies on the ground that the dividend received from the investment with foreign companies is not exempt from the tax and is taxable. During the year dividend rece .....

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ion of Cheminvest Ltd (supra). 31. We have carefully considered the rival submissions and perused the material on the issue. It was argued by the ld.AR that the disallowance made u/s 14A r.w.r.8D was made primarily by relying on the decision of the decision of the Special Bench of the Tribunal Delhi in the case of Cheminvest Ltd V/s ITO (2009) 121 ITD 318 (Delhi) (SB) which is no longer applicable as the same was reversed by the Hon ble Delhi High Court as reported in (2015) 378 ITR 0033 (Del) w .....

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31.3.2007 and thus submitted that no interest disallowance is called for as the assessee s own fund were sufficient to cover the investment in the shares in subsidiary companies by strongly relying on the decision in the case of Hon ble Bombay High Court in the case of SBI DHFL Ltd reported in 376 ITR 296 (Bom) and in the case of CIT V/s HDFC Bank Ltd reported in 383 ITR 529 (Bom). Considering the facts of the case and in the light of the various decisions cited above, we find that the assessee .....

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ot be applied as has been held in the case of Commissioner of Income-tax v.Oriental Structural Engineers (P.) Ltd. 2013] 32. taxmann.com 210 (Delhi), Garware Wall Ropes Ltd Vs. Addl. CIT (2014)(65 SOT 86)(Mum). and in the case of M/s JM Financial Limited V/s Addl CIT(ITA No.4521/M/2012. We, therefore, following the ratio laid down in the above decisions, delete the disallowance made u/s 14A by setting aside the order of ld.CIT(A) and directing the AO accordingly. 33. Ground no.8 is in respect of .....

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n whether the same was offered for taxation or not. Accordingly the AO added to the total income of the assessee an amount of ₹ 1,73,41,224/- u/s 68 of the Act by holding that the same as unexplained cash receipts in the hands of the assessee. 35. Before the ld. CIT(A), the ld.AR submitted that the assessee has filed necessary details and reconciled statement as per ITS information and filed vide letter dated 28.12.2009 which is placed at pages 195/296 of Vol 1 of the assessee s paper book .....

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ly the ld. CIT(A) held that the ground raised by the assessee was rendered infructuous in view of the rectification application and order thereon by the AO however the ld.CIT(A) sustained the disallowance to the extent of ₹ 5,15,396. 36. We have considered the rival submissions on the issue. It was vehemently argued before us by the ld.AR that some items of ITNS aggregating amount ₹ 5,15,396/- could not be reconciled in absence of information. The ld. Counsel drew our attention to th .....

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essee on the basis of mere ITNS information without making any inquiries from those parties when the assessee has disowned transactions. The ld.AR prayed that the addition was required to be deleted as there is no proper enquiry or verification on the part of the AO and addition was made just by rejecting an ITNS information. 37. The ld. DR relied on the orders of authorities below. 38. It is clear from the above that there are some un-reconciled entries in ITNS amounting to ₹ 5,15,396/- p .....

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S are filed by the third parties and the AO could have enquired from those parties whose information was available, however the AO simply proceeded to add the unaccounted amount without doing any inquiry. Accordingly, we direct the AO to delete the addition. I.T.A. No.1227/Mum/2013 (BY Revenue) 39. Grounds of appeal taken by the revenues are as under : 1. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in not upholding the AO's view that the brand bui .....

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tances of the case and in law, the Ld. CIT(A) erred in holding brand building expenditure as revenue in nature, without considering the fact that admittedly, the assessee had incurred the said expenditure for the creation of a brand, which is a capital asset of enduring nature and intended to be used for revenue generation over several years/beyond the relevant assessment year." 40. The sole issue raised in the grounds of appeal is against the deletion of addition by the ld.CIT(A) to the tu .....

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penses should not be treated as capital expense and ultimately disallowed the same and added the same to the total income of the assessee. 42. The assessee filed reply vide letter dated 6.11.2009 submitting therein that these expenses were in the form of retainer-ship fees, marketing expenses, art work charges for CD s designs for leaflets, brochures, colour prints, campaign illustrations etc. Thus, these were incurred in the normal course of business as routine expenses. It was submitted before .....

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erved that these expenses were incurred for building a brand name/image of the assessee from which the assessee got enduring benefit over the period of time. However, the AO allowed depreciation at the rate of 25% thereby making an addition of ₹ 76,21,871/-. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld.CIT(A) 43. Before the ld. CIT(A), the assessee submitted that these expenses is debited under the head Brand building expenses were in the nature of marke .....

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to do business more effectively and profitably while creating no fixed benefit of permanent nature. In defence of argument, the ld.AR relied on number of decisions including the decision of the Hon ble Apex Court in the case of Empire Jute Co. Ltd. reported in 124 ITR (SC). 44. The ld.CIT(A) after considering the submissions of the assessee and the case law deleted the addition by observing and holding as under : 3.3 The Assessing Officer's order, submissions made for the appellant and mate .....

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ion made by the Assessing Officer is deleted. Accordingly the Assessing Officer when giving appeal effect will also make suitable adjustment to the depreciation granted on the premises of taking the expenditure to be capital expenditure. 45. We have considered the rival submissions on the issue. We find that the assessee has incurred expenses on marketing/advertising and retainer-ship etc. for running and operation of business more profitably and efficiently which did not result in the creation .....

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and does not require any interference from our part and accordingly we uphold the same on this issue by dismissing the appeal of revenue. I.T.A. No.723/Mum/2013 (by assessee) Grounds of appeal taken by the assessee are reproduced below : 1 The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of ESOP expenses of ₹ 3,64,49,900/- 2. The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowa .....

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4,94,048/- (correct amount ₹ 4,94,098/) 4. The l.d CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of ₹ 1,04,08,418/-. 5. Each ground of appeal hereinabove is independent and without prejudice to each other ; 6. The CIT(A) order being contrary to law, evidence and facts of the case should be set aside amended or modified in the light of the ground deduced above 46. Grounds of appeal raised by the assessee in this appeal bearing Gro .....

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observed that the assessee has written off some securities given for electricity/telephone connections aggregating to ₹ 1,04,08,418/-. The assessee had written off the said advances as they were not recoverable and were adjusted against the company expenses against the outstanding bills of electricity and telephone. The AO came to the conclusion that these advances written off were not admissible expenses u/s 37 of the Act thereby rejecting the contentions of the assessee by holding that .....

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ent or adjusted against the dues. Ultimately, the AO disallowed the whole some ₹ 1,04,08,418/- and added the same to the total income of the assessee. 49. Before the ld. CIT(A) the assessee submitted that the advances give to electricity department and telephone department were not recoverable. When the assessee was not able to get refund of deposits as the franchises operating form the (rented) premises had committed default in the payment of bills and violated the conditions for allotmen .....

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the appeal on this ground by observing and holding as under : 7.3. The assessment order, submissions made for the appellant and materials on record have been considered. The benefit of the provision of section 36(1)(vii) deduction for debts written off can be allowed only where the said amounts have been claimed as income by an assessee. In the present case in appeal the deposits made are not shown to have been included as income of the assessee in earlier year/so For section 36(1)(vii) to be a .....

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on despite there being no specific provision for the same. If there is a direct and proximate nexus between the business operation and the loss or its is incidental to, then the loss is deductible. The parameters for claim of business loss and the bad debts are different. In order to claim business loss, the appellant has to produce sufficient evidences as to how and under what circumstances, it has incurred such losses. However, the appellant has, neither in the present appeal proceedings nor b .....

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t India in number of towns and cities wherever these deposits were made by SSI Limited which the assessee had taken over. It was also submitted that the assessee s business mostly consisted on carrying out business activity all over India for which the assessee has entered into the large number of franchisee agreement. These advances were given by franchisee on behalf of the assessee for obtaining electricity and telephone connections. Out of these, in good number of cases, the franchisee could .....

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t was also argued by the ld.AR that the assessee s record were damaged and destroyed due to unprecedented flood in Mumbai in 2005 and were also received due amount of compensation from ICICI Lombard against the insurance policy taken by the assessee which were furnished before the authorities below and also forming part of this record at pages at 235 to 272 of the paper book. Due to all these reasons the ld. AR submitted that it became impossible to seek refund from the department like electrici .....

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ven by the assessee for getting telephone and electric connections and could not be written off as business loss as those were not covered u/s 41 of the Act and therefore rightly disallowed by the AO and upheld by the ld. CIT(A) and requested for upholding the orders of the authorities below. 52. From the above facts, it is clear that the company has paid various advances for obtaining telephone and electric connections in the business premises in its franchisees as the assessee carried on the b .....

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damage and destructions of record of the assessee. In our opinion, the said writing off advances given in the ordinary course of business which has direct nexus of the operation of business of the assessee and the amount of advances were written off out of business exigency and is therefore business loss. Accordingly, we set aside the order of the ld.CIT(A) and direct the AO to delete the disallowance. ITA No.1228/Mum/2013 (by the revenue) 53. The revenue has taken the following grounds of appe .....

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expenditure has not been incurred for the purpose of the business of the year under consideration only." 3. "On the facts and in the circumstances of the case and in law, the Ld. CIT(A)erred in holding brand building expenditure as revenue in nature, without considering the fact that admittedly, the assessee had incurred the said expenditure for the creation of a brand, which is a capital asset of enduring nature and intended to be used for revenue generation over several years/beyond .....

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m/2013. Therefore out decisions in ITA No.946/Mum/2013 would mutatis mutandis apply to these grounds as well. Accordingly these grounds are dismissed. I.T.A. No.1271/Mum/2014(by the assessee) 55. Grounds of appeal taken by the assessee read as under : 1. The Learned CIT(A) erred in law and on facts and in the circumstances of the case in confirming the disallowance of ESOP expenses of ₹ 1,49,21,324/-. 2. The Learned CIT(A) erred in law and on facts and in the circumstances of the case in c .....

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for computing disallowance under section 14A of the Act erred- (a) in placing reliance on the decision of ITAT Ahmadabad in Advance Finstock Pvt Ltd and not following the decision of the co-ordinate Mumbai Bench in the case of Morgan Stanley Securities P. Ltd. which is binding on her and; (b) In not following the decision of the jurisdictional Bombay High Court in the case of Godrej & Boyce wherein at para 24 it was held "that the basic principle of taxation is to tax net income. This p .....

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eals) being contrary to law, evidence and facts of the case should be set aside, amended or modified. 5. Each ground of appeal hereinabove is independent and without prejudice to each other. 6. The appellant craves leave to reserve to itself the right to add, to alter or amend annul any of the grounds of appeal at or before the time of hearing and to produce such further evidences, documents and papers as may be necessary. 56. The issue raised in grounds of appeal bearing Ground No.1,2 and 3 hav .....

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