2022 (8) TMI 1368 - AT - Income Tax

Tribunal upholds CIT(A) decisions in favor of assessee on various disallowances by Revenue.

CIT, Circle 7 (3) (2) Versus M/s. Piramal Glass Ltd. (Earlier known as Gujarat Glass Pvt. Ltd.)

The Tribunal upheld the CIT(A)'s decisions favoring the assessee in a case involving various disallowances by the Revenue. The disallowance of ... Disallowance of depreciation claimed on Non-compete Fee - Whether it does not represent any intangible asset qualified for the depreciation as per Section 32? - HELD THAT:- Hon’ble High Court referring to then decision rendered in the case of PCIT vs. Ferromattice Milacron India (P.) Limited [2018 (10) TMI 1955 - GUJARAT HIGH COURT] decided the issue in favour of assessee. Thus, the assessee was held to be eligible for claiming depreciation u/s. 32 on Non-compete Fee, an intangible asset. We find that in the impugned order the CIT(A) has allowed depreciation on Non-competent Fee by following the order of Tribunal in assessee's own case for Assessment Year 1999-2000, A.Y.2001-02, A.Y.2006-07 and for A.Y. 2011-12 [2013 (5) TMI 302 - ITAT MUMBAI], [2016 (4) TMI 583 - ITAT MUMBAI], [2016 (10) TMI 1037 - ITAT MUMBAI], [2017 (4) TMI 862 - ITAT MUMBAI] respectively, we find no infirmity in the findings of CIT(A) on this issue. Hence, ground No.1 & 2 raised in the appeal by Revenue are dismissed. Disallowance of interest on borrowed funds u/s. 36(1)(iii) - CIT(A) has deleted the addition by following the order of Tribunal in assessee's own case - HELD THAT:- Facts in the impugned Assessment Year are identical to the facts in the aforesaid Assessment Years. Assessee further pointed that the Hon'ble Bombay High Court in [2019 (6) TMI 891 - BOMBAY HIGH COURT] has also considered the issue of disallowance of interest on borrowed funds in the appeal by the Revenue and has dismissed the question of law on this point. The Revenue has not been able to controvert the findings of the CIT(A) or has been able to demonstrate that the facts in the Assessment Year under appeal are in any manner different from the facts in the Assessment Years, wherein this issue has been decided in favour of the assessee by Co-ordinate Bench of the Tribunal. Hence, we see no reason to interfere with the findings of CIT(A) on this issue. The ground No.3 of the appeal is dismissed being devoid of any merit. Disallowance of interest on borrowed funds given to the sister concern and also disallowance of interest received from sister concern - HELD THAT:- We find that the CIT(A) has deleted the addition by following the order of Tribunal in assessee’s own case for Assessment Year 2001-02, A.Y.2005-06 to A.Y. 2009-10 and also the decision of Hon'ble Bombay High Court in [2019 (6) TMI 891 - BOMBAY HIGH COURT] No contrary material is available on record to suggest any difference in facts or legal position. We find no reason to disturb the findings of CIT(A) on this issue. Consequently, the same are upheld and grounds No.5 and 6 of the appeal are dismissed, sans-merit. Addition u/s. 41(1) of the Act in respect of sundry creditors exceeding more than three years - CIT(A) deleted the addition - HELD THAT:- As for the Assessment Year 2005-06, A.Y. 2007-08 to A.Y 2009-10 the addition u/s. 41(1) of the Act was deleted by CIT(A) in the orders for the respective Assessment Years. The Department never preferred an appeal against the orders of CIT(A) for the aforesaid Assessment Years. It clearly shows that the Revenue has accepted the findings of the First Appellate Authority. We find that the CIT(A) has deleted the addition u/s. 41(1) of the Act by following the orders of CIT(A) for the Assessment Years 2005-06, A.Y. 2007-08 to 2009-10. Facts being identical in the impugned Assessment Year we find no reason to interfere with the findings of the CIT(A) on this issue. Disallowance on deferred revenue expenditure - HELD THAT:- We find that the expenditure claimed by the assessee was on account of consultancy fees paid to ECS Ltd., AND consultancy fees paid to Accenture. The CIT(A) held that no new tangible or intangible asset has come into existence due to the aforesaid expenditure. The expenditure was incurred solely for the purpose of improvement in efficiency of various process employed by the assessee. The aforesaid findings of the CIT(A) are unrebutted. Hence, we find no reason to interfere with the same. Consequently, ground of the appeal by the Revenue is dismissed. Issues:1. Disallowance of depreciation on Non-compete Fee2. Disallowance of interest on borrowed funds3. Disallowance of interest on funds given to sister concern4. Disallowance of interest received from sister concern5. Addition made under section 41(1) of the Act6. Disallowance on deferred revenue expenditureIssue 1: Disallowance of depreciation on Non-compete FeeThe Revenue appealed against the CIT(A)'s decision to delete the disallowance of depreciation claimed on Non-compete Fee. The High Court's decision in a similar case favored the assessee, allowing depreciation on Non-compete Fee as an intangible asset under Section 32 of the Income Tax Act, 1961. The CIT(A) followed previous tribunal orders and allowed depreciation, which the Revenue challenged. The Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on grounds 1 and 2.Issue 2: Disallowance of interest on borrowed fundsThe Revenue contested the CIT(A)'s deletion of disallowance of interest on borrowed funds under section 36(1)(iii) of the Act. The CIT(A) decision was based on previous tribunal orders and High Court rulings, which the Revenue failed to refute. The Tribunal found no reason to interfere with the CIT(A)'s findings, dismissing the Revenue's appeal on ground 3.Issue 3: Disallowance of interest on funds given to sister concern and received from sister concernThe Revenue challenged the CIT(A)'s decision to delete disallowance of interest on funds given to and received from a sister concern. The Tribunal noted that the facts were similar to previous years where such disallowances were deleted. Citing commercial expediency and legal precedents, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on grounds 5 and 6.Issue 4: Addition made under section 41(1) of the ActThe Revenue appealed against the CIT(A)'s deletion of an addition under section 41(1) concerning sundry creditors exceeding three years. The Tribunal observed that the Revenue had previously accepted similar CIT(A) decisions for other years. Finding no reason to interfere, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal on ground 7.Issue 5: Disallowance on deferred revenue expenditureThe Revenue contested the CIT(A)'s deletion of disallowance on deferred revenue expenditure. The CIT(A) allowed the expenditure as revenue in nature, rejecting the Revenue's argument of enduring benefit. The Tribunal agreed with the CIT(A)'s reasoning, dismissing the Revenue's appeal on ground 8.Conclusion:The Tribunal dismissed the Revenue's appeal on all grounds, upholding the CIT(A)'s decisions in favor of the assessee. The appeal was concluded on August 5, 2022.