TaxTMI 
TaxTMI 
2019 (2) TMI 37
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....s. 71 ,02,401 under Section 14A of the Income-tax Act, 1961 ('the Act') read with Rule 8D of the Income-Tax Rules, 1962 ('the Rules'). 1.2 On the facts and circumstances of the case, the learned CIT(A) erred in confirming the mechanical application of Rule 8D of the Rules without recording satisfaction against the claim of the Appellant. 1.3 The Appellant prays that additional disallowance of Rs. 71,02,401 under Section 14A of the Act be deleted. Ground 2 - Depreciation at 10% on temporary shed as against 100% claim of depreciation is unwarranted 2.1 On the facts and circumstances of the case, the learned CIT(A) erred in confirming the restriction of depreciation at 10% on the temporary shed as against 100% depreciation claimed by the Appellant. 2.2 The Appellant prays that depreciation be allowed at 100% on temporary shed as against 10% under the Act. Ground 3 - Depreciation at 10% on electrical fitting as against 15% claim of depreciation is unwarranted 3.1 On the facts and circumstances of the case, the CIT(A) erred in reclassifying electrical fitting under the block of Furniture and fittings, thereby resulting in rest....
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....s. Ld. Assessing Officer put the assessee on notice why disallowance could not be made under Section 14A r.w.r.8D. 6. Assessee replied that it had an approved investment policy for minimizing risk and investments were made based on the guidelines received from its investment advisors. As per the assessee , apart from signing of the forms, management did not spend any significant time for managing the investment portfolio. Assessee also pointed out that it had made suo-motu disallowances u/s.14A of the Act for meeting the expenditure of two staff who were engaged in the investment transactions. 7. However, ld. Assessing Officer was not impressed by the above reply. According to him, assessee did not maintain any separate account for the expenditure relating to the investments giving rise to exempt income. As per the ld. Assessing Officer, assessee also did not give details of the ratio applied for computing the suo-motu disallowances made by it. In other words, as per ld. Assessing Officer, assessee had not given any basis how it arrived at the suo-motu disallowance for the respective years. As per the ld. Assessing Officer, investments whether it yielded exempt income or not,....
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....ents made by the assessee while averaging it for applying 0.5% thereon. Argument of the assessee before us is that investments in mutual funds and subsidiaries which did not earn any exempt income had to be excluded. We are afraid we cannot accept this line of argument, since this issue is no more res-integra. Hon'ble Apex Court in the case of Maxopp Investment Ltd (supra) after considering various judgments of the various High Courts on this issue had held as under at paras 31 to 41 of its judgment. ''31. We have given our thoughtful consideration to the argument of counsel for the parties on both sides, in the light of various judgments which have been cited before us, some of which have already been taken note of above. 32. In the first instance, it needs to be recognised that as per section 14A(1) of the Act, deduction of that expenditure is not to be allowed which has been incurred by the assessee "in relation to income which does not form part of the total income under this Act". Axiomatically, it is that expenditure alone which has been incurred in relation to the income which is includible in total income that has to be disallowed. If an expenditu....
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....bjective behind section 14A of the Act in mind, the said provision has to be interpreted, particularly, the words "in relation to the income" that does not form part of total income. Considered in this hue, the principle of apportionment of expenses comes into play as that is the principle which is engrained in section 14A of the Act. This is so held in Walfort Share and Stock Brokers P. Ltd., relevant passage whereof is already reproduced above, for the sake of continuity of discussion, we would like to quote the following few lines therefrom* : "The next phrase is, 'in relation to income which does not form part of total income under the Act'. It means that if an income does not form part of total income, then the related expenditure is outside the ambit of the applicability of section 14A . . . The theory of apportionment of expenditure between taxable and non- taxable has, in principle, been now widened under section 14A." 35. The Delhi High Court, therefore, correctly observed that prior to introduction of section 14A of the Act, the law was that when an assessee had a composite and indivisible business which had elements of both taxable and ....
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.... gains of business and profession". The Board, going by the decision of this court in Nawanshahar case, clarified that it has to be treated as income falling under the head "Profits and gains of business and profession". The Board also went to the extent of saying that this would not be limited only to co-operative societies/banks claiming deduction under section 80P(2)(a)(i) of the Act but would also be applicable to all banks/commercial banks, to which Banking Regulation Act, 1949 applies. 38. From this, the Punjab and Haryana High Court pointed out that this circular carves out a distinction between "stock-in-trade" and "investment" and provides that if the motive behind purchase and sale of shares is to earn profit, then the same would be treated as trading profit and if the object is to derive income by way of dividend then the profit would be said to have accrued from investment. To this extent, the High Court may be correct. At the same time, we do not agree with the test of dominant intention applied by the Punjab and Haryana High Court, which we have already discarded. In that event, the question is as to on what basis those cases are to be decided where ....
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....assessee, though the assessee has to ultimately trade those shares by selling them to earn profits. The situation here is, therefore, different from the case like Maxopp Investment Ltd. where the assessee would continue to hold those shares as it wants to retain control over the investee-company. In that case, whenever dividend is declared by the investee-company that would necessarily be earned by the assessee and the assessee alone. Therefore, even at the time of investing into those shares, the assessee knows that it may generate dividend income as well and as and when such dividend income is generated that would be earned by the assessee. In contrast, where the shares are held as stock-in-trade, this may not be necessarily a situation. The main purpose is to liquidate those shares whenever the share price goes up in order to earn profits. In the result, the appeals filed by the Revenue challenging the judgment of the Punjab and Haryana High Court in State Bank of Patiala also fail, though law in this respect has been clarified hereinabove. 41. Having regard to the language of section 14A(2) of the Act, read with rule 8D of the Rules, we also make it clear that before a....
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....tructures which are built in open space are susceptible to very fast corrosion. Especially so, in a sea side area like Chennai. We cannot say that such structure is having an enduring nature. We are of the opinion that assessee was eligible to claim 100% depreciation on such structures. We set aside the orders of the lower authorities and allow the claim of the assessee for 100% depreciation on such temporary sheds built by using steel pipes and iron meshes. Ground No.2 of the assessee for all the years stands allowed. 15. Alluding to the third common ground which is on restriction of depreciation claimed on electrical fittings, ld. Counsel for the assessee submitted that the electrical fittings were eligible for 15% depreciation, whereas lower authorities had given the rates available for buildings. As per the ld. Authorised Representative such electrical fittings were to be considered as part of plant and machinery and was eligible for 15% depreciation. 16. Per contra, ld. Departmental Representative strongly supported the orders of the lower authorities. 17. We have considered the rival contentions and perused the orders of the authorities below. It is not disputed t....
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....we find from the above description is that all these were nothing but items in the nature software or software applications. Entry No.5 coming in III of Part A in New Appendix I clearly says that computer included computer software. Note 7 of the Appendix, defines computer software as any computer programme recorded in any information storage device. We are therefore of the opinion that assessee was eligible to claim depreciation at the rate of 60% on the above items. Orders of the lower authorities on this issue are set aside and the claim is allowed. Ground No.4 of the assessee stands allowed. 21. This leaves us with one another ground which is appear in the appeal of the assessee for the assessment year 2014-15. This ground is reproduced hereunder:- ''Ground 5 - Disallowance of payment of non-compete fees of Rs, 12,35,58,502 is unwarranted. 5.1 On the facts and circumstances of the case, the CIT(A) erred in confirming disallowance of Rs. 12,35,58,502 towards non-compete fees claimed by the Appellant as revenue expenditure. 5.2 On the facts and circumstances of the case, the CIT(A) erred in confirming the rejection of the Appellant's alternative ....
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....s profit earning capacity. According to him, it was purely a revenue expenditure. In any case as per ld. Authorised Representative, if it was considered to have been incurred in a capital field, then it resulted in an intangible asset eligible for depreciation u/s.32 of the Act. Reliance were placed on the following judgments:- (i) CIT vs. Coal Shipments (P) Ltd (1971) 82 ITR 902 (SC) (ii) Empire Jute Co. Ltd vs. CIT, (1980) 3 Taxman 69 (SC) (iii) Carborandum Universal Ltd vs. JCIT(2012) 26 Taxmann.com 268 (Madras HC) (iv) CIT vs. (Late) GD Naidu and others (1986) 24 Taxmann 255 268 (Madras HC) (v) Asianet Communications Ltd vs. CIT(2018 ) 96 26 Taxmann.com 399 (Madras HC) (vi) Hatsun Agro Products Ltd. vs. JCIT (2018) 99 26 Taxmann.com 220 (Madras HC) (vii) Hidelberg Cement India Ltd vs. ACIT( 2015) 55 26 Taxmann.com 336 (Mumbai ITAT) 24. Per contra, ld. Departmental Representative submitted that even though the tenure of the agreement was only for eighteen months, it had a linkering effect. According to him, non compete agreement placed at paper book pages 273 to 285, clearly indicated that Shri. V. Shankar coul....
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.... 2.2 During the Restricted period, the founder shall not, directly or indirectly, 2.2.1 for himself or on behalf of or in conjunction with any other Person; 2.2.2 cause his Affiliates; or 2.2.3 assist any Person to; call upon any Retained Employees or any individual who is, at the time the individual is called upon, an employee of the Company, (a) for the purpose or with the intent of soliciting such employee away from, or out of the employment of the Company, or employ or offer employment to any individual who was an employee of the Company during the period of 12 (twelve) months prior thereto or is employed by the Company; or (b) with a view to use the specific knowledge or skills of such person for the benefit of any Person carrying on Company's Activities; or Cc) to terminate or breach a contractual or any other relationship with the Company' Nothing in this Clause 2.2 shall apply to an individual who has ceased to be employed by the Company for a period of at least 12 (twelve) months prior thereto or an individual who has applied for employment with the founder or his affiliates or with any Person who is being assisted by the Fo....
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....kar and restricting himself from indulging in any competition with the business of the assessee or from weaning way the employees. Hon'be Jurisdictional High Court in the case of M/s.Asianet Communications Ltd vs. CIT [T.C (Appeal) No.174 of 2005 dated 26.06.2018] with regard to non compete compensation, had held as under at paras 46 to 49 of its judgment. 46.The governance for non-compete is traceable to Section 27 of the Indian Contract Act, 1872 which reads as below "27. Agreements in restraint of trade, void.- Every agreement, - by which anyone is restrained from exercising a lawful profession, trade or business or any kind, is to that extent void. Exception 1. -Saving of agreement not to carry on business of which goodwill is sold - One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business. Any contractual term that imposes ....