TaxTMI 
TaxTMI 
2017 (3) TMI 1903
X X X X Extracts X X X X
X X X X Extracts X X X X
....39;ble CIT(A) erred in confirming the action of the A.O. in disallowing the depreciation on intangible assets amounting to Rs. 1,54,43,383. It is prayed that the A.O. may be directed to allow the claim of depreciation on intangible assets amounting to Rs. 1,54,43,383. Further, the Hon'ble CIT(A) also erred in not following the orders for A.Y. 2005-06, A.Y. 2006-07, A.Y. 2007-08 and A.Y. 2008-09 wherein the Hon'ble CIT(A) on same facts had allowed the claim of the assessee. Ground No.3 On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the A.D. in disallowing the interest claim of 9% (24% - 15%) amounting to Rs. 1,60,22,465 in respect of the fully convertible debentures issued to M/s. Cox & King India Ltd. It is prayed that the A.D. may be directed to allow the claim of interest of Rs. 1,60,22,465. Ground No. 4: On the facts and in the circumstances of the case and in law, the Hon'ble CIT(A) erred in confirming the action of the A.D. in disallowing proportionate disallowance u/s. 36(1)(iii) of the Act amounting to Rs. 93,35,011 in respect of the interest free loans adv....
X X X X Extracts X X X X
X X X X Extracts X X X X
....owed on the opening Written Down Value (WDV) accordingly. The appellant craves leave to add, alter, amend or withdraw the above mentioned Ground of appeal. Ground No.1 and Additional Ground No. 1 5. Since both these grounds of appeal are identical in nature, therefore we have decided to dispose of the same by the common order. Ld. AR appearing on behalf of the assessee submitted that the Ld. CIT(A) erred in confirming the action of the A.O. in disallowing the claim of depreciation on FSI amounting to Rs. 16,19,421 thereby restricting the claim of depreciation on FSI to 10% as against that claimed by the assessee at 25%. It was further submitted that the Ld. CIT(A) also erred in holding that only Rs. 68,16,264 being amount spent during the AY 2005-06 for acquiring rights of FSI is to be added to the block of asset. The Ld. AR also reiterated the same arguments as were raised before the Ld. CIT(A). Our attention was also drawn to the decision in assessee's own case in ITA No. 3189/Mum/2011 which is at page No. 76 to 118 of paper book filed by the assessee. The operative portion is reproduced below at para 18 of the case:- "Now, coming to the rate of depreci....
X X X X Extracts X X X X
X X X X Extracts X X X X
....as 10.4 to 10.19, I have field that depreciation cm intangible assets is to be allowed in A. Y. 2003-04 as for AY.2004-05, the appellant has claimed the depreciation on intangible assets at Rs.B,67,71,053/-on account of WDV as on 31.03.2003 (AY: and the facts are same. Hence, the depreciation on WDV is therefore the disallowance of depreciation at Rs.8,67,71,053/- . 13.2 We have considered rival contentions and perused the record. We found that the CIT(A) in its earlier order for A.Y.2003-04 has deleted the disallowance of depreciation after having the following observation :- "10.4 I have carefully considered the assessment order and the submissions made by appellant during appellate proceedings. The depreciation on intangible assets of Rs.465, 27,78, 949/- at Rs.11,50,94,737/- was claimed by the appellant in respect of the running business which. was acquired "slump sale basis" There is no dispute about the computation of depreciation at RS.11,50,94,7371-. The claim of depreciation or assessment year under consideration is the first year of such a claim. The A. O. has also accepted that intangible assets were part of slump sale. The A. O. h t however, relied mai....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and amalgamated company' in the case of amalgamating or to the 'demerged and resulting company in the case: of demerger, 'as the case may be, shall not exceed, the amount of depreciation as if the succession, amalgamation etc. had not taken place. This question was posed. to the appellant's AR. who has vide a separate note replied as under:- "Now, a question has arisen, whether in view of the 51h proviso to section 32 of the Income-tax Act, 1961 ("the Act') whether a part of the depreciation is to be apportioned and to the allowed to predecessor owner. In our considered opinion, we would like to state that the said proviso to section 32 is not applicable to the facts of the assessee case. The said provisions are applicable to the following cases only:- (1) Transfer of capital assets by a firm to a company as contemplated in section 47(xiii); (2) Transfer of capital assets by a sole proprietary concern to a company in terms of section 47(ivx); (3) Succession of business, referred to, in section 170; (4) Transfer of assets by a amalgamating company to the amalgamated company and; (5) Transfer of assets in a demerg....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... " From the above submission, it is seen that the appellant's case neither falls in the category of succession (as provided in section 47, clauses (xiii) or (xiv) or section 170), nor amalgamation or demerger. Hence, I agree that 5th proviso to section 32 of the Act would not be attracted to the case of the appellant. 10.10 Taking into consideration, the facts that the A.O. had accepted that intangible assets were acquired by way of "slump sale" and for the reasons recorded in earlier paras, I hold that the depreciation on intangible assets' at Rs.46,27,78,949/- @ 25% claimed at Rs.11,50,94, 737/- is admissible as the same were used for the purpose of appellant's business. 10. 11 This ground of appeal is therefore allowed." 13.3 We found that allocation of cost of acquisition for each block of assets in a fair and reasonable manner as permitted by law had to be accepted. Further, the CIT(A) observed that even the Assessing Officer has not denied that the hotel business could not be carried out without the sale licenses and permits. The CIT(A) further stated that 5th proviso to Section 32 of the Act would not be attracted to the case ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aid deposits on a specified due date. Hence, it requested M/s. Cox &Kings India Ltd to roll over the debentures for the periods. The roll over was agreed by M/s.Cox& Kings India Ltd with a condition for enhancing the rate of interest on the said deposits. Accordingly the appellant agreed to pay interest @ 24% on the debentures due to non availability of liquid funds with the appellant company. Thus there are twin reasons i.e. litigation in the matter as well as severe financial crunch faced by the Company. The debentures issued by the appellant to M/s. Cox & Kings India Ltd are not at all secured, for the appellant is paying interest @ 24% out of compulsion. Also, when the ARC's are charging interest @ 22% when their loans are fully secured, then the appellant is justified for paying interest on debentures @ 24% where no security is provided. It was further submitted that the AO has compared two transactions of the appellant with M/s. Cox & Kings Ltd i.e payment of interest on debentures and payment. of interest on loans. Both these transactions are independent to each other and dependent on various factors such as availability of funds, period of loan etc. It was further submi....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ovisions of section 40A(2)(b). It would be appropriate to reproduce the provisions herein below for better appreciation 56[Expenses or payments not deductible in certain circumstances. 40A. (2)(b) The persons referred to in clause (a) are the following, namely (1) where the assessee is an any relative of the assessee; individual (ii) where the assessee is a company, any director of the company, partner of the firm, or firm, association of persons or member of the association or family, or any Hindu un-divided family relative of such director, partner or member; (iii) any individual who has a substantial interest in the business or profession of the assessee, or any relative of such individual; (iv) a company, firm, association of persons or Hindu undivided family having a substantial interest in the business or profession of the assessee or any director, partner or member of such company, firm, association or family, or any relative of such director, partner or member; (v) a company, firm, association of persons or Hindu undivided family of which a director, partner or member, as the case may be, has a substantial interest in th....
X X X X Extracts X X X X
X X X X Extracts X X X X
....revenue has not brought any contrary material on record suggesting that the rate so claimed by the assessee is excessive of the fair market rate as prevalent during the year under appeal. Therefore, we hereby direct the AO to delete the disallowance of Rs. 6,92,942/- made on account of interest on fair market rate paid in excess of 18% to the persons specified under section 40A(2)(b) of the Act. 8. In the result, appeal of the assessee is allowed. After analyzing the aforementioned order as well as the order passed by the Ld. CIT(A) and paper book filed by the assessee, we found that Ld. CIT(A) has confirmed disallowance of Rs. 1,60,22,465 u/s 40A(2) of the Act made by the AO on the account that Mr. Ajay Ajit Peter Kerker, Chairman of the assessee company was the Director of M/s Cox & Kind India Ltd during the relevant period. In this regard, the Ld. CIT(A) further relied upon the comments of the Auditors in the audit report that the interest claimed by the assessee company in respect of interest paid @ 24% is prejudicial to the interest of the company. On the appreciation of the facts on record, we have noticed that the Revenue has not placed on record any material ....