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of <h1>High Court affirms Tribunal decisions on tax issues: depreciation, stock value, expenses. Revenue appeal dismissed.</h1> <h3>PR. COMMISSIONER OF INCOME TAX-4, AHMEDABAD Versus ZYDUS WELLNESS LIMITED</h3> PR. COMMISSIONER OF INCOME TAX-4, AHMEDABAD Versus ZYDUS WELLNESS LIMITED - TMI Issues Involved:1. Depreciation on non-compete fees.2. Reduction of stock value for packing material and finished goods.3. Foreign travel expenses.4. Web design charges, trademark expenses, and survey expenses.5. Disallowance under Section 40(a)(ia) of the Income Tax Act for gift articles.Issue-wise Detailed Analysis:1. Depreciation on Non-Compete Fees:The Tribunal addressed whether the non-compete fees, capitalized as an intangible asset, were eligible for depreciation under Section 32 of the Income Tax Act. The Assessing Officer (AO) disallowed the depreciation on the grounds that non-compete fees did not qualify as an intangible asset. However, the CIT(A) allowed the depreciation, referencing decisions from the Chennai and Pune Benches and noting that similar claims had been accepted in previous assessment years. The Tribunal upheld this view, emphasizing the principle of consistency as endorsed by the Supreme Court in Commissioner of Income Tax, Delhi IV vs. M/s. Dalamia Promoters & Devels (P) Ltd.2. Reduction of Stock Value for Packing Material and Finished Goods:The AO disallowed reductions in stock value due to insufficient evidence. The CIT(A) overturned this, noting that the reductions were supported by detailed lists and proper procedures followed by the assessee, including physical verification and documentation of non-usable and damaged goods. The Tribunal confirmed this decision, agreeing that the assessee had provided adequate evidence and followed due procedure.3. Foreign Travel Expenses:The AO disallowed foreign travel expenses due to a lack of substantiating details. The CIT(A) reversed this decision, noting that the assessee provided comprehensive details of the travel, including employee names, travel duration, destinations, and purposes. The Tribunal upheld this, considering the expenses reasonable given the assessee's substantial turnover.4. Web Design Charges, Trademark Expenses, and Survey Expenses:The AO treated these expenses as capital expenditures. The CIT(A), referencing the Delhi High Court decision in CIT vs. Indian Visit Com Pvt Ltd, held that web design expenses were revenue in nature as they facilitated business without creating a new asset. Trademark expenses were also deemed revenue, following the Supreme Court's decision in Finlay Mills Ltd, as they did not create an enduring advantage. Survey expenses were considered necessary for business efficiency and customer preference analysis. The Tribunal upheld the CIT(A)'s view, confirming these expenses as revenue in nature.5. Disallowance under Section 40(a)(ia) for Gift Articles:The AO disallowed expenses for gift articles due to non-deduction of TDS under Section 194C, treating them as work contracts. The CIT(A) disagreed, stating that the expenses were for promotional articles with the company logo, which did not constitute a work contract. The Tribunal supported this, noting that adding a logo for business promotion did not require TDS deduction, and thus, the expenses were allowable.Conclusion:The High Court dismissed the Revenue's appeal, affirming the Tribunal's decisions on all issues, thereby upholding the CIT(A)'s allowances of the disputed claims.
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