TaxTMI 
TaxTMI 
2013 (3) TMI 410
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....f the Income-tax Act. Sec. 36(1)(v) reads as follows: "36. (1) The deductions provided for in the following clauses shall be allowed in respect of the matters dealt with therein, in computing the income referred to in section 28 - .... (v) any sum paid by the assessee as an employer by way of contribution towards an approved gratuity fund created by him for the exclusive benefit of his employees under an irrevocable trust." We have also carefully gone through the provisions of sec. 37 of the Income-tax Act. Sec. 37 provides for deduction of expenditure not being in the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenditure of the assessee, but laid out and expended wholly and exclusively for the purposes of the business or profession, while computing income chargeable to tax. The main contention of the Revenue is that under sec. 36(1)(v), the payment made by the assessee as employer could be allowed only in respect of approved gratuity fund. Since the Group Gratuity Scheme is not approved by the CIT, according to the Revenue, it cannot be allowed. However, the contention of the assessee is that in view of the judgement o....
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....at there was disallowance of interest at Rs. 46,17,110 towards amount advanced to sister concern. It was observed by the Assessing Officer that the assessee made investment of Rs. 4,29,49,868 in its subsidiary company M/s. Ensolvia Infotech Ltd., in the following manner: Share capital Rs. 2,51,35,000 Unsecured loans Rs. 1,78,14,868 Total Rs. 4,29,49,868 The assessee offered neither dividend income on the investment or any interest income on the loans advances. As the assessee incurred interest expenditure at Rs. 1,53,66,025 on borrowed funds and in turn the assessee made interest free advances to the sister concern, the Assessing Officer disallowed the proportionate interest at 10.7% per annum on the investment which works out at Rs. 46,17,110. The CIT(A) deleted the same on the reason that the assessee advanced fund to the sister concern from out of its own resources and as such the hypothesis of the Assessing Officer that such loans were out of interest bearing fund is not correct. The investment made in the assessment year under consideration is only a carried forward investment. As such, the CIT(A) deleted the addition by following the order of the Tribunal in assessee's....
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....ised by the assessee, the same were used for business purpose. If in the process of examination of genuineness of such deduction, it transpires that the assessee advanced certain funds to its sister concern at no interest, there would be a very heavy onus on the assessee to be discharged before the assessing officer to effect that in spite of heavy interest payable on fresh borrowings and pending loans on which the assessee incurring interest liability, still there is a justification to advance loans to sister concerns for non business purpose and accordingly, such interest payment cannot be allowed as a deduction. However, in the present case, as seen from financial statement of assessee's, there is availability of own fund and reserve and surplus in the impugned assessment years. These funds are more than sufficient to make investment in the subsidiary company. This can be seen from the following table: (a) Financial year 2000-01 2001-02 2002-03 (b) Funds available for utilization after Considering the impugned investment (Rs. in lakhs) 151.21 135.66 29.27 (c) Loans from banks 109.58 84.96 (d) Investment made in fixed assets 236.38 179.74 18.94 (e) Investment made in 195.00 56.....
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....ore than the net worth of the amalgamated company and there is no evidence of purchase of intangible assets in terms of 5th proviso and Explanation 3 to section 32(1)(ii) of the Act and the assessee has not acquired any intangible assets to grant depreciation. Accordingly he denied the depreciation. On appeal, the CIT(A) allowed the claim of the assessee. Against this the revenue is in appeal before us. 13. The learned AR relied on the following decisions: i) Hindustan Coca Cola Beverages (P) Ltd. vs. DCIT, 132 TTJ 602 (ITAT Delhi 'C' Bench) ii) Kotak Forex Brokerage Ltd. vs. ACIT, 131 TTJ 404 (Mum.) iii) Skyline Caterers (P) Ltd. vs. ITO, 118 TTJ 344 (Mum.) iv) B. Raveendran Pillai vs. CIT, 332 ITR 531 (Ker.) v) CIT vs. Hindustan Coca Cola Beverages (P) Ltd. , 331 ITR 192 (Del). 14. The learned counsel for the assessee also relied on the decision of this Tribunal in the case of AP Paper Mills Ltd. vs. ACIT, I.T.A. No. 218/Hyd/06 for A.Y. 2002-03 wherein the Tribunal vide its order dated 4.11.2009 held as follows: "15. In the present case, consequent upon amalgamation of CPL with APPM, the market share of assessee company has increased substantially, as submitted by the assess....
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....en filed or brown field venture. 15.3 From the above advantages accrued by the assessee is nothing but various intangible assets and business advantages, this is nothing but intangible asset as enumerated in s. 32 of the IT Act as per this definition, it includes know-how, patents, copyrights, trademarks, licenses, franchises, etc., any other business or commercial rights of similar nature. Therefore, all the rights are similar to the rights mentioned in section 32 of the IT Act is acquired by the assessee in this case. Thus goodwill is a business or commercial rights of similar nature and the assessee is benefitted by amalgamation by acquiring that commercial value being intangible assets which the assessee has paid on amalgamation i.e., excess consideration over the above the excess of assets over liabilities is a goodwill which is an asset entitled for depreciation u/s. 32 of IT Act. As such, Assessing Officer is justified in granting the depreciation on goodwill while completing the assessment u/s. 143(3) of the IT Act and CIT is not justified in invoking the provisions of s. 263 on this issue. Further, the provision of s. 263 could be invoked by the CIT if the circumstances s....