2017 (9) TMI 1350 - AT - Income Tax

ITAT Emphasizes Detailed Analysis in Tax Treatment Decisions

The ITAT allowed the Revenue's appeal for statistical purposes, emphasizing the importance of a detailed analysis and comparison of facts in determining ... Addition u/s 14A - non satisfaction by AO before making addition - Held that:- The satisfaction u/s 14A before applying Rule 8D had to be recorded with reference to the books of accounts that the assessee has not made the claim correctly. We noted the Assessing Officer has not recorded any satisfaction in this manner, and a similar view has also been taken by the Panaji Bench of the Tribunal in the case of Sesa Goa Ltd. vs. JCIT (2013 (9) TMI 233 - ITAT PANAJI) following the decision of Mumbai High Court in the case of Godrej & Boyce Mfg. Co. Ltd. vs. DCIT & Another (2010 (8) TMI 77 - BOMBAY HIGH COURT) which was subsequently confirmed by Hon’ble Supreme Court, we noted that no contrary decision was brought to our notice. Therefore we confirm the order of Ld. CIT(A) deleting the said disallowance. - Decided in favour of assessee Depreciation @ 60% on UPS confirmed - See CIT vs. BSES Yamuna Powers Ltd. [2010 (8) TMI 58 - DELHI HIGH COURT ] Claim of depreciation u/s 32(1)(ii) - treating the non computation right as intangible capital assets - Held that:- After hearing the rival submissions, we do agree that each decision has to be applied on the facts and context therein. In the case of the assessee, we noted that the terms and conditions of the agreement has not been examined by A.O. to the right perspective and has not been compared with the facts and circumstances in the case of Sharp Business Systems(2012 (11) TMI 324 - DELHI HIGH COURT ). We, therefore, in the interest of justice set aside the order of Ld. CIT(A) and restore this issue to the file of the Assessing Officer with the direction that the Assessing Officer shall redecide this issue afresh after comparing the facts in the case of the assessee with the case of Delhi High Court in Sharp Business Systems (supra) in accordance with law Issues:1. Disallowance of expenditure under section 14A r.w.Rule 8D.2. Treatment of UPS as computer peripherals and depreciation allowance.3. Treatment of non-compete right as an intangible capital asset for depreciation under section 32(1)(ii).Issue 1: Disallowance under section 14A r.w.Rule 8DThe Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 3,55,234 made under section 14A r.w.Rule 8D for the Assessment Year 2009-10. The CIT(A) held that Rule 8D cannot be invoked without proper recording of reasons by the Assessing Officer. The ITAT noted that the AO did not record any satisfaction regarding the incorrectness of the claim made by the assessee. Referring to precedents, the ITAT upheld the CIT(A)'s decision to delete the disallowance.Issue 2: Treatment of UPS and DepreciationThe issue of allowing depreciation at 60% on UPS was addressed. The ITAT observed that the matter was settled by a decision of the Jurisdictional High Court, and as no contrary decision was presented, the ground was dismissed.Issue 3: Treatment of Non-compete Right as Intangible Capital AssetRegarding the claim of depreciation under section 32(1)(ii) for a non-compete right, the ITAT considered arguments from both sides. The ITAT noted a decision of the Jurisdictional High Court and a pending SLP in the Supreme Court related to a similar case. The ITAT found that the terms and conditions of the agreement had not been adequately examined by the AO. Hence, the ITAT set aside the CIT(A)'s order and directed the AO to re-decide the issue after comparing the facts with the relevant case law. The ITAT emphasized the need for a thorough examination and comparison of facts before reaching a decision.In conclusion, the ITAT allowed the Revenue's appeal for statistical purposes, emphasizing the importance of a detailed analysis and comparison of facts in determining the tax treatment of non-compete rights and other assets.