2014 (1) TMI 650

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....ccount of reimbursement of warranty claims.    2. The ld.CIT(A) has failed to appreciate that the expense has been incurred by the appellant for the purpose of the business and is allowable expense under the provisions of the Income Tax Act, 1961." 3. At the time of hearing before us, it was stated by the learned counsel that as per business transfer agreement dated 19.02.2005 between Hindustan Motors Ltd. (in short 'HML') and the assessee company, the assessee company reimbursed the warranty claim to HML amounting to Rs. 75,33,736/-. That there was a provision for warranty claim amounting to Rs. 65,37,508/-. Accordingly, the balance amount of Rs. 9,96,228/- was claimed as a revenue expenditure. It is stated by the learned couns....

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....reimbursed to HML. Therefore, so far as customers are concerned, they were already satisfied. He, therefore, submitted that even on the ground of commercial expediency, the claim of the assessee cannot be allowed. 5. We have considered the arguments of both the sides and perused the material placed before us. The learned counsel for the assessee had made the claim on two alternate grounds - (i) that the liability has arisen as per business purchase agreement because the assessee has taken over all assets and liabilities including the warranty; and (ii) business expediency, i.e., if warranties of the customers are not fulfilled, then the goodwill of the assessee and, as a consequence, future business would be badly affected. After consideri....

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....IT(A) has, in view of the facts & circumstances of the case, grossly erred in law and on facts, in disallowing the claim of depreciation of Rs.8,83,995/- on capitalization of professional charges of Rs.84,38,347/-." 8. Ground Nos.4, 5, 6 & 7 are only arguments in support of ground No.3. 9. At the time of hearing before us, it was stated by the learned counsel that during the accounting year relevant to the assessment year under consideration, the assessee had incurred an expenditure of Rs. 84,38,347/- on account of professional charges which were pertaining to transfer of business from HML to the assessee company. That the above professional charges were capitalized and allocated to the value of various assets purchased by the assessee as....

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.... the allowability of depreciation on professional charges. Therefore, the assessee's claim would require verification at the end of the Assessing Officer. 12. In the rejoinder, it is stated by the learned counsel that the assessee has capitalized and allocated professional charges to the various assets purchased by the assessee. The assessee has claimed depreciation on those assets year after year in accordance with law. That in AY 2008-09, 2009-10 & 2010-11 also, the depreciation claimed by the assessee on those assets included the value of professional charges allocated to the respective assets. In the assessment order, the Assessing Officer had discussed only those items on which some disallowance was made. Since no disallowance was mad....