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2017 (4) TMI 920 - GUJARAT HIGH COURT

2017 (4) TMI 920 - GUJARAT HIGH COURT - TMI - Disallowance of claim of depreciation on non compete fees - Held that:- Considering the fact that the similar claim on non compete fees was allowed in the earlier years and same has been accepted by the Revenue in essence of any change in facts, the assessee is rightly held to be entitled to the depreciation on non compete fees. In the recent decision in the case of Commissioner of Income Tax, Delhi IV vs. M/s. Dalamia Promoters & Devels (P) Ltd [201 .....

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- Held that:- As found that the assessee has followed due procedure, maintained the list of packaging material contains clear description of the goods that were considered to be not usable and also the list for damaged stock clearly show the material, quantity and description of the various items which were lying at different godowns across the country which were considered to be damaged and accordingly the statement for provision for damage was prepared and on that basis the goods have actually .....

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ravelled abroad, duration of visit, countries visit, nature and amount of expenses and purpose of travel. The learned CIT(A) also observed that even otherwise considering annual turnover of more than ₹ 195 crores, the foreign travel expenditure of ₹ 3,20,467/only was required to be allowed, more particularly, when the same was duly supported by documentary evidence. The aforesaid has been confirmed by the learned Tribunal. Considering the facts and circumstances of the case, we are o .....

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the assessee and no asset has been created but it is a tool for facilitating the business of the assessee and therefore, held expenditure of website to be of revenue nature. - Decided in favour of assessee - Trade mark expenses, also and following decision of the Hon'ble Supreme Court in the case of Finlay Mills Ltd (1951 (10) TMI 1 - SUPREME Court) the learned CIT(A) held that the trade mark expenses is of revenue in nature as the same does not created any assets or it does not result into .....

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ased for sales promotion - Held that:- Considering the fact that merely because the logo of the company was added on the gift article which was to permit its business, it cannot be said that the purchase of goods article was a work contract for which TDS was required to be deducted. Logo was required only for the purpose of identification of the company. Therefore, the same is rightly held to be allowable as business expenditure. We are in complete agreement with the view taken by the learned CI .....

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proposed questions of law. "A. Whether the Tribunal erred in law and on facts in deleting the disallowance of claim of depreciation on non compete fees to the extent of ₹ 1,40,625/? B. Whether the Tribunal erred in law and on facts in deleting the disallowance of claim of depreciation of reduction of ₹ 5,18,761/from stock of packing material and ₹ 27,17,342/from stock of finished goods ? C. Whether the Tribunal erred in law and on facts in deleting the disallowance of clai .....

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and trading in low calorie and Cosmeceuticals products filed return of income for AY 200910 declaring total income at ₹ 38,53,16,250/. The case was selected for scrutiny. The assessee claimed the depreciation on noncompete fees; reduction of ₹ 5,18,761/from stock of packing material and ₹ 27,17,342/from stock of finished goods. The assessee also claimed the deduction towards foreign travel expenses. The assessee also claimed the deduction towards expenses related to web design .....

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f claim of reduction of ₹ 5,18,761/from stock of Packing material and ₹ 27,17,342/from stock of finished goods. That the AO also made disallowance of ₹ 3,20,467/claimed in respect of foreign travel expenses. The AO also disallowed ₹ 53,25,263/recording web design charges, trade mark expenses and survey expenses claimed by the assessee. The AO also disallowed the expenditure of ₹ 36,60,981/under Section 40(a) (ia)of the Act incurred by the assessee company on account .....

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k of Packing material and ₹ 27,17,342/from stock of finished goods ; deleted disallowance of claim of foreign travel expenses of ₹ 3,20,467/; deleted the disallowance of ₹ 53,25,263/recording web design charges, trade mark expenses and survey expenses claimed by the assessee and also deleted the disallowance of ₹ 36,60,981/under Section 40(a)(ia)of the Act. Consequently, learned CIT(A) allowed the said appeal preferred by the assessee. 2.3. Feeling aggrieved and dissatisf .....

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ete fees which was capitalized as an intangible asset. The assessee claimed the depreciation of intangible asset in the nature of trade marks, technical know how and noncompete fees. The AO disallowed the depreciation on non compete fees by holding that payment towards noncompete fees were not in the nature of intangible assets eligible for depreciation provided under Section 32 of the Act and therefore, made disallowance of ₹ 1,40,625/. The aforesaid came to be deleted by the learned CIT( .....

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me non compete fees without there being any change in the facts, no disallowance of depreciation can be made in the year under consideration. The same has been confirmed by the learned Tribunal. Under the circumstances and considering the fact that the similar claim on non compete fees was allowed in the earlier years and same has been accepted by the Revenue in essence of any change in facts, the assessee is rightly held to be entitled to the depreciation on non compete fees. In the recent deci .....

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e fees to the extent of ₹ 1,40,625/, a similar depreciation was allowed in the earlier assessment year and therefore, being no change in facts in the year under consideration. 5.0. Now, so far as proposed question No.B is concerned, it relates to disallowance of claim of reduction ₹ 5,18,761/from stock of packing material and ₹ 27,17,342/from stock of finished goods. The AO disallowed the said claim due to failure on the part of the assessee to produce requisite evidence in res .....

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n produced. The report of the technical / audit committee who had verified such stock has not been submitted. The A. O. has further held that the reduction of ₹ 27,17,242/was the provision of damage reduced from the stock of finished goods and it was not an actual write off. The appellant has submitted that the amount of ₹ 5,18,761/was reduced due to shortage found at the time of physical verification, discontinuation of product, nonmoving materials and there were the name of earlier .....

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no .requirement of any technical or audit committee before the write off. Regarding the write off of ₹ 27,17,242/, the appellant has given a complete list of the items which were made for write off and it was mentioned that the list was for the provision of damaged goods and on that basis, the write off has actually been made and the goods have been reduced from the overall stock statement. The appellant has, therefore submitted that even if it was mentioned as provision, the stock was act .....

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rious items which were lying at different godowns across the country which were considered to be damaged and accordingly the statement for provision for damage was prepared and on that basis the goods have actually been reduced from the closing stock of finished goods. The appellant has followed due procedure and the auditors must have verified the various lists before finalizing the accounts. There is no requirement of any special report for considering the reduction in stock and the procedure .....

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on of the goods that were considered to be not usable and also the list for damaged stock clearly show the material, quantity and description of the various items which were lying at different godowns across the country which were considered to be damaged and accordingly the statement for provision for damage was prepared and on that basis the goods have actually been reduced from the closing stock of finished goods, it cannot be said that the learned CIT(A) as well as learned Tribunal has commi .....

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ot furnish the details to substantiate the nature of expenses incurred whether they were for personal or business purpose. However, the learned CIT(A) deleted the said disallowance by observing that the assessee has submitted the complete details of employees who have travelled abroad, duration of visit, countries visit, nature and amount of expenses and purpose of travel. The learned CIT(A) also observed that even otherwise considering annual turnover of more than ₹ 195 crores, the foreig .....

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l. 7.0. Now, so far as proposed question No. D is concerned, the same relates to the disallowance of ₹ 53,25,263/regarding web designing charges, trade mark expenses and survey expenses claimed by the assessee. The AO disallowed the said expenditure by treating the same as capital expenditure. On an appeal, learned CIT(A) relying upon the decision of the Delhi High Court in the case of CIT vs. Indian Visit Com Pvt Ltd (176 Taxman 164) held that in case of expenditure on website, there is n .....

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o any advantage of enduring nature.. 7.2. So far as survey expenses is concerned, the learned CIT(A) also observed and held that expenditure incurred on survey number treated as revenue in nature as the survey expenses has been incurred to improve the efficiency of the business by finding out customers preference for sugar substitute, market research for butter margarine evaluation of cosmetic product, software support and maintenance etc. The learned CIT(A) also observed that looking to the nat .....

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aid expenses were made by the assessee and that by the aforesaid expenses no new asset has been acquired and / or there is no change in the fixed asset of the assessee, we are of the opinion that no error has been committed by the learned Tribunal and / or learned CIT(A) treating the aforesaid expenses as revenue in nature. We confirm the finding recorded by the learned CIT(A) as also learned Tribunal treating the aforesaid expenses as revenue in nature. 8.0. Now, so far as proposed question no. .....

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d therefore, the provision of Section 194 C are not applicable. The relevant observations of the learned CIT(A) in para 8.3 are as under: I have carefully perused the assessment order and the submissions given by the appellant. The A. O. has treated the expenditure on certain items of sales promotion expenses amounting to ₹ 36,60,981/as liable for deduction of TDS u/s. 194C of the Act holding it as work contract. The appellant has submitted that it was not a work contract. These expenses w .....

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