TMI Blog2019 (8) TMI 1053X X X X Extracts X X X X X X X X Extracts X X X X ..... Allianz General Insurance Company Ltd. [2019 (8) TMI 370 - ITAT PUNE] , a copy of which has been placed on record by the ld. AR. No contrary precedent has been brought to our notice by the ld. DR. Following the precedent, we allow this additional ground of appeal Depreciation on the amount of capital expenditure incurred by the assessee on certain premises - HELD THAT:- For the A.Y. 2004-05 in which the Tribunal noticed that the assessee purchased a property during the year and carried out suitable repairs/renovation to make it fit for use. The decision of the ld. CIT(A) capitalizing 40% of the expenditure as against 80% done by the AO, was approved by the Tribunal. Once a particular amount has been held to be capital expenditure on a building purchased by the assessee, the same has to be subjected to depreciation. As the Tribunal has approved the capitalizing of certain amount to Building account, we, therefore, direct the AO to allow depreciation on such amount as per law. Sales to Associated Enterprises (AEs) - HELD THAT:- Assessment year 2005-06 and demonstrated that the subject matter and facts for both these assessment years are similar. It is seen that sales t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is allowed for statistical purposes. Expenditure on premises-Treated as Capital - HELD THAT:- We uphold the capitalization of expenses in relation to the premises @40% in this year also. It is directed that the assessee be allowed depreciation on such capitalized amount. Thus, this ground of appeal of the assessee is partly allowed. Ad-hoc disallowance of miscellaneous expenses @ 10% - HELD THAT:- Assessing Officer to the amount disallowable out of miscellaneous expenses in accordance with the directions given in the immediately two preceding years on this score.That for this year also, the impugned order is set aside and the matter is remitted back to the file of Assessing Officer with similar directions and the Assessing Officer shall decide the issue accordingly after providing reasonable opportunity of hearing to the assessee. As the AO has himself disallowed 10% of the remaining expenses, we direct that the disallowance for this year should be restricted to 10% instead of 15%. The Assessing Officer is also directed to verify the gifts. Thus, this ground of appeal is allowed for statistical purposes. Payment of VRS expenditure is allowable or not for deduction u/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order only. There is no notice of demand u/s.156 of the Act send with the draft assessment order. Therefore, there is no violation of Section 144C of the Act. 6. We have perused the case records and heard the rival contentions. We find that in the present case, the draft assessment order is accompanied by the notice u/s.274 r.w.s.271(1)(c) of the Act. However, there is no notice of demand u/s.156 of the Act sent to the assessee along with draft assessment order. In the aforesaid case laws relied upon by the assessee, the assessment was completed u/s.143(3) r.w.s.144C(3) of the Act. In this case it is not so. Firstly, assessment order in the present case was passed u/s.143(3) r.w.s. 144C of the Act. Secondly, in the case referred by the assessee, demand notice was sent along with penalty notice. But in the instant case, there is no such demand notice that is being sent and therefore, the character of the assessment order is that of the draft assessment order. Therefore, there is no violation of Section 144C of the Act. We, therefore, uphold the validity of assessment order passed u/s. 143(3) r.w.s.144C of the Act. Thus, additional ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . CIT(A) capitalizing 40% of the expenditure as against 80% done by the AO, was approved by the Tribunal. Once a particular amount has been held to be capital expenditure on a building purchased by the assessee, the same has to be subjected to depreciation. As the Tribunal has approved the capitalizing of certain amount to Building account, we, therefore, direct the AO to allow depreciation on such amount as per law. That on the similar facts and circumstances, for this year also and maintaining the rule of consistency, we allow the additional ground No.3 raised in appeal by the assessee. Adjudication of grounds in the appeal memo Now we would proceed to adjudicate the grounds raised by the assessee in the appeal memo. 11. The first ground is with regard to the sales to Associated Enterprises (AEs) . 12. It was contended by the Ld. AR of the assessee that during the year total sales to AEs was at ₹ 61.38 Crores, out of which ₹ 54.10 Crores is not disputed. It is ₹ 7.28 Crores which is the disputed amount. The Ld. AR invited our attention to the TPO‟s order at Page 15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ct that the payment of Royalty to the AEs was as per RBI norms, we are satisfied that the view taken by the ld. CIT(A) is unassailable. This ground, therefore, fails. Respectfully following our findings in the preceding assessment year i.e. assessment year 2005-06, we allow this ground of appeal of the assessee. 15. Next ground is with regard to the international transaction of receipt of indenting commission . 16. The Tribunal in its order for assessment year 2005-06 in assessee‟s own case (supra.) on the issue as per detailed reasoning contained therein had upheld the order of the Ld. CIT(A) where ALP of commission income at ₹ 13.79 Crore as against the transacted value of commission income at ₹ 13.38 Crore was found within +/- 5% range, therefore, not calling for any transfer pricing addition. This ground of appeal of the Revenue was therefore not allowed. However, in the present facts and circumstances, we have analyzed that no such calculation has been taken into account by the Sub-ordinate Authorities in any of their respective orders either by the Assessing Officer/TPO or DRP. Hence, in the present facts ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ures in that case was held to be revenue in nature. Similar position the assessee had witnessed for assessment year 2001-02 wherein the Ld. CIT(Appeals) himself has given relief to the assessee. But in the relevant assessment given, the specialized software used by the assessee, the degree of endurability of these software are to be ascertained. If they are of such expenditure that they can be used directly for manufacturing and production and for longer degree of endurability then there cannot be any iota of doubt that they are capital in nature. However, if the degree of endurability is small then following the decision of the Hon ble Bombay High Court (supra.) this expenditure should be treated as revenue expenditure and hence, allowable. In view of the matter, we set aside the order of the Ld. CIT(Appeals) on this issue and restore it to the file of Assessing Officer for detailed verification as herein above mentioned after complying with the principles of natural justice. Thus, ground No.2 raised in appeal by the assessee is allowed for statistical purposes. 19.1 The Ld. AR of the assessee however contended that they hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Tribunal‟s order. It was observed by the Tribunal that after allowing full deduction towards software expenses and fees for handling share record and making full disallowance for warranty expenses, Gifts and Donations, the Tribunal restricted the addition to 15% of the balance expenses. The Tribunal further held following the same view, the impugned order on this issue was set aside and the matter was remitted to the file of Assessing Officer to the amount disallowable out of miscellaneous expenses in accordance with the directions given in the immediately two preceding years on this score. That for this year also, the impugned order is set aside and the matter is remitted back to the file of Assessing Officer with similar directions and the Assessing Officer shall decide the issue accordingly after providing reasonable opportunity of hearing to the assessee. As the AO has himself disallowed 10% of the remaining expenses, we direct that the disallowance for this year should be restricted to 10% instead of 15%. The Assessing Officer is also directed to verify the gifts. Thus, this ground of appeal is allowed for statistical purposes. 25. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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