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2018 (5) TMI 952
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....disallowance under section 14A. 2. In the facts and circumstances of case and in law, the learned CIT(A) erred in directing the AO to allow depreciation on non-compete fees as intangible assets u/s 32(1)(ii) of the !T Act. 3. In the facts and circumstances of case and in law, the learned CIT(A) erred in directing the AO to allow depreciation on non-compete fees admitting the additional ground/additional evidence without affording an opportunity of being heard to the AO. 4. Any other ground that may be urged at the time of hearing." 3. On perusal of record, we find that there was a delay of 32 days in filing the CO before us. To this effect, the assessee filed an affidavit wherein it was affirmed that due to change in management at the relevant point of time, the delay of 32 days were occurred, hence, the delay has occurred due to unavoidable circumstances and there was no intention to default. As the assessee was prevented by reasonable cause in not filing the CO within the stipulated time, we condone the delay and admitted the CO for adjudication. 4. As regards ground No. 2 pertaining to disallowance u/s 14A, during the year under consideration, th....
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....f Madhucon Infra Ltd. (ITA No. 410/Hyd/2015, order dated 20/05/2016 - where both the Members are signatories), the coordinate bench has held as under: "10. Considered the submissions of both the parties and perused the material facts on record as well as the orders of revenue authorities. We have also gone through the cases cited by the ld. AR. In the case of M/s Alliance Infrastructure Projects Pvt. Ltd., (supra), the coordinate bench of ITAT Bangalore has held as under: "14. Therefore, unless and until, there is receipt of exempted income for the concerned assessment years, we are of the view, Section 14A of the Act cannot be invoked. In this appeal, the revenue has not dispelled the contention of the assessee before AO that it was not in receipt of any exempt income. Learned CIT(A), has misconstrued the decision of Delhi Bench of this Tribunal in the case of M/s Technopak Advisors (P) Ltd., as that of the Hon' Delhi High Court, without recognizing that after the said decision, there has been a catena of judgments from various High Courts, going in favour of the assessee. Hence according to us, the Assessing Officer has erred in invoking Section 14A of the A....
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....ven to sister concerns, without interest. It was held that deduction for interest was permissible when loan was taken for business purpose and not for diverting the same to sister concern without having nexus with the business. The observations made therein have to be read in that context. In the present case, admittedly the assessee did not make any claim for exemption. In such a situation section 14A could have no application." 7.4 In the case under consideration, we find that the investments were made purely on account of commercial necessity and as no exempt income was earned from the investment so made, the provisions of Section 14A will not be applicable in the case of assessee. Therefore, following the said decisions of the coordinate bench as section 14A cannot be invoked without any exempt income, accordingly, we dismiss the grounds raised by the revenue and allow the grounds raised by the assessee in C.O. 8. As regards ground Nos. 2 & 3 pertaining to non-compete fee, brief facts relating to these grounds are, during the AY assessee has not claimed non-compete fee paid in the return of income. However, it has treated the same as advance payment and kept it as balance....
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....a Rao and Smt. Jayasree @ Rs. 1 crore each in AY 2008-09. It was further submitted that as per the agreement dated 22/07/2007, assessee has to pay non-compete fee of Rs. 4 crores to the erstwhile promoters as per the schedule Rs. 1 crore each in AY 2008-09 and Rs. 1 crore each in AY 2009-10. It was submitted that this expenditure is wholly and exclusively for the purpose of business and, therefore allowable u/s 28 read with section 37 of the Act. It was also brought to the knowledge of CIT(A) that AO has rejected the claim of this payment of Rs. 4 crores as expenditure in AY 2009-10 on the ground that non-compete fee agreement would benefit to subsidiary company and not assessee company. 9.1 It was further submitted that assessee as a holding company made payment for business purpose and whether is the purpose of holding or subsidiary company would not be relevant as held in the case of SA Builders Vs. CIT, 288 ITR 1 and further relied on other case law. It was also subumitted that in support of filing of additional grounds, which arise directly out of the facts and evidence on record does not require any investigation into the facts and therefore qualify for adjudication. 9.....
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....n for allowing expenditure is the expenditure made is for commercial expediency or not. It does not matter whether it is holding company or its subsidiary. I, therefore, hold that the payment of non-compete fee is made for commercial expediency in this case and is eligible to claim as deduction. The appellant has claimed non-compete fee as deduction as revenue expenditure or alternatively claimed depreciation in his written submissions. But, it cannot be revenue expenditure as claimed by the appellant. The expenditure incurred for the acquisition of Non-compete Right is not revenue expenditure since the same has been incurred for the acquisition of a capital asset. It is pertinent to point out in this regard that the appellant has acquired the Right of no competition in printing business. It has resulted in the acquisition of an unrivaled and no competed business domain / territory for the appellant for a specific period. The acquisition of such a business domain / territory with no competition has brought advantages in the capital field. The transaction resulting in the acquisition of the Right to do printing business without any competition is final and irreversible. This Right h....
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....ra of cases, the courts have held that CIT(A) and ITAT have power to allow deduction for expenditure to assessee to which it was otherwise entitled even though no claim was made in the return of income. The assessee is entitled to a particular claim, which it missed in the return of income, may claim during appellate proceedings. However, the assessee should ensure that all necessary evidences are submitted during appellate proceedings and available on record. The case to refer in particular is CIT vs. Pruthvi Brokers & Shareholders P. Ltd., 349 ITR 336 (Bom.). In the case under consideration, the assessee has submitted all relevant information on record relevant to claim the non-compete payment and it is not in dispute. The only issue is, it is not claimed in the return of income. Since, CIT(A) has power to allow the claim as per the above decisions of higher courts, it is within the powers of CIT(A) to allow the claim of the assessee. Therefore, ground raised by the department is dismissed. C.O. No. 13/Hyd/2016 by assessee 13. The assessee has filed the following cross objections in its C.O: "1. The Learned CIT(A) failed to note that the entire income was deductibl....
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....n U/s.194H was not applicable and therefore ought to have deleted the above amount. 3. The learned C1T(A) erred in confirming the payment of Rs. 10 lakhs to P.Rama Raju u/s 40a(ia) of I.T. Act, 1961 thereby failing to note that the disallowance was unwarranted as it was a payment made for business promotion and hence ought to have allowed the sum of Rs. 10lakhs. 4. Any other ground that may arise at the time of hearing." 17. Ground No. 1 is similar to the ground raised in AY 2008-09 (supra), therefore, following the conclusions drawn therein, we allow the ground raised by the assessee. (Refer Para No. 12). 18. As regards ground Nos. 2 & 3 regarding payment of commission to Shri P. Ramaraju without deducting TDS, it is observed that the assessee has shown Rs. 10,00,000/- as special discount in case of Shri P. Ramaraju. The assessee had appointed consignment agent for developing market outside AP. Shri P. Ramaraju was instrumental in developing good market in Karnataka and the amount paid to him relating to market development was debited as special discount to profit and loss a/c. The AO held that the expenditure incurred is genuine, the deduction was not allo....