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2024 (2) TMI 1192
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...., respectively. 2. Since the present cross-appeals involve common issues arising out of a similar factual matrix, therefore these cross-appeals were heard together and are being decided by way of this consolidated order. With the consent of the parties, the cross-appeal for the assessment year 2006-07 is taken up as the lead case and the decision rendered therein shall apply mutatis mutandis to the cross-appeal for the assessment year 2007-08. ITA no.1332/Mum./2013 Assessee's Appeal - A.Y. 2006-07 3. In its appeal, the assessee has raised the following grounds:- "GROUND 1: Disallowance of payments made to Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) u/s 40 A (2) (b): Rs.3,12,66,000/- 1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in following his predecessor's order for AY 2005-06 by directing the AO to allow payments made to PEL for consultancy fees and directing the basis that if comparative payments made by Appellant are more than the payments made by other group companies. No the excess should be disallowed and turnover may be adopted as the basis for determining excessiveness. ....
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....ts and circumstances of the case and in law, the CIT (A) erred in following his predecessor's order for AY 2005-06, by confirming the action of the AO of disallowing weighted deduction u/s. 35(2AB) in respect of R & D (Revenue and Capital) expenses related to Chennai-Ennore unit amounting to Rs.4,05,78,000/- as deduction claimed on the alleged ground that appellant had not provided any such formal approval in Form 3CM. 2. The Appellant prays that once approval is obtained through not in prescribed form, the Appellant is entitled to weighted deduction u/s 35(2AB) of the Act. 3. Without prejudice, the Appellant prays that the disallowance should be restricted to "weighted portion" of deduction u/s 35(2AB) to Rs.1,35,26,000/- instead of entire claim of Rs.4,05,78,000/-related to Chennai-Ennore unit. Ground V: Disallowance of excess claim of R & D Revenue Expenditure: Rs.9,63,000/- 1. On the facts and circumstances of the case and in law, the CIT (A) erred in directing the AO to look into the computation of the disallowance. 2. The Appellant prays that the computation was correctly done by the Appellant and hence the disallowanc....
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....not maintainable and directed AO to decide the case the basis facts before him in disposing the application filed u/s 154 by Appellant. 2. The Appellant prays that the AO be directed to allow deduction u/s 80G of the Act as per law. GROUND X: The Appellant craves leaves to add to, alter and/or delete the above ground of appeal." 4. The issue arising in ground no. 1, raised in assessee's appeal, pertains to the disallowance of payments made to Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) u/s 40A(2)(b) of the Act. 5. The facts of the case pertaining to this issue, as emanating from the record, are: The assessee is engaged in the manufacturing and sale of pharmaceuticals. It deals in prescription and OTC products as well as bulk drugs, chemicals, and skincare products. For the year under consideration, the assessee filed its return of income on 31/10/2006 declaring a total income of Rs. Nil. The assessee declared book profit at Rs. 154,09,13,385 under section 115 JB of the Act. The return filed by the assessee was selected for scrutiny and statutory notices under section 143(2) as well as section 142(1) of the Act were iss....
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....ket rates of payments under similar circumstances by other sister concerns. The AO, in view of the aforementioned findings, restricted the payment of Royalty to Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) from 0.5% to 0.3% of the turnover by disallowing 0.2% of the Royalty. Further, the AO disallowed 25% of the payment made towards consultancy and professional charges. Accordingly, the AO made total disallowance of Rs. 3,12,66,000 under section 40A(2)(b) of the Act in respect of payment made to Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd). 6. The learned CIT(A), vide impugned order, following the order passed by its predecessor in assessee's own case for the assessment year 2005-06, directed the AO to verify the fair market value of services rendered by the sister concern for which the payment has been made by the assessee and restrict the addition to the extent the payment is found to be excessive. Being aggrieved, both the assessee as well as the Revenue are in appeal before us on this issue. 7. We have considered the submissions of both sides and perused the material available on record. On 29/04/1995, the assess....
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....e turnover by disallowing 0.2% of Royalty payment. We find that the coordinate bench of the Tribunal in assessee's own case in M/s Piramal Enterprises Ltd. V/s Addl.CIT, in ITA No. 5471/Mum./2017, vide order dated 30/07/2018 for the assessment year 2008-09, deleted the disallowance made under section 40A(2)(b) of the Act in respect of payment of Royalty under the aforesaid agreement, by observing as under:- "21. We have considered rival submissions and perused materials on record. On a reading of the agreement dated 29th April 1995 with PEL a copy of which is at Page-859 of the paper book, it is noticed that in addition to the reimbursement of expenses incurred by PEL on behalf of the assessee, the assessee was also required to pay to PEL royalty @ not exceeding 0.5% of his turnover of goods manufacture and traded. Thus, it is evident that the payment made of ` 822 crore to PEL constitutes both reimbursement of expenses and royalty. This fact is also clear from the working of reimbursement of expenses and royalty at Page-237 of the paper book, which indicates that an amount of ` 6.75 crore was for reimbursement of expenses and `1.47 crore towards royalty. From the assessme....
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....ssional charges is neither in any manner device to circumvent the provisions of tax laws nor is a colourable device of diverting taxable income to the sister concern. During the hearing, reliance was also placed upon CBDT Circular No. 6P dated 07/06/1968. We find that the aforesaid aspect has not been examined by the lower authorities. Therefore, we deem it appropriate to restore this issue to the file of the AO limited to examination of the aforesaid submission of the assessee. If upon examination it is found that both the companies are in the same tax bracket, then the addition on account of payment of consultancy and professional charges be deleted in the light of the aforesaid decision. 11. We further agree with the submissions of the learned Departmental Representative ("learned DR") that setting aside the matter to the file of the AO does not come within the purview of powers of the learned CIT(A) under section 251 of the Act. However, for examination of the aforesaid aspect, the issue of part disallowance of payment of consultancy and professional charges is restored to the file of the AO. With these directions, the impugned order is set aside, and ground No. 1 raised in ....
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....the total expenses taking into consideration the fact that some expenses of software will relate to day-to-day maintenance work/routine expenses. 15. We have considered the submissions of both sides and perused the material available on record. During the hearing, the learned AR reiterated the submissions made before the lower authorities and submitted that these expenses are incurred in relation to software support expenses and are in no way related to the purchase of software. It was further submitted that these expenses mainly include support and maintenance of different software like SAP, Lotus Notes at its different locations, and customisation of SAP as per the requirement of the assessee. It was also submitted that these expenses are incurred every year and are revenue in nature. The learned AR by placing reliance upon the decision of the coordinate bench in assessee's own case for the assessment year 2009-10 submitted that the expenses incurred for the purchase of software were held to be revenue expenditure. From the perusal of the order dated 07/05/2019 passed by the coordinate bench in assessee's own case for the assessment year 2009-10 in ITA No.1257/Mum/2014, we fin....
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....ads of the said expenditure along with the amount involved. The AO directed the assessee to furnish the details regarding the breakup of expenses incurred for business promotion by way of payments to doctors, chemists, distributors, dealers under the head "business promotion". In response thereto, the assessee submitted a soft copy of ledger extract as the Advertisement and Business Promotion expenses incurred at all its locations in India and transactions involved are voluminous in quantity. The AO vide order passed under section 143(3) of the Act noted that the said soft copy is only showing no. of spreadsheets all under the same caption "Advertisement and Business Promotion" and there is no separate breakup of the expenditure, as required, has been made available. Accordingly, in view of the above, the AO considered the information available in respect of the FBT proceedings for deciding on the Advertisement and Business Promotion expenses. On the basis of the aforesaid information, the AO categorise the expenditure as under:- Sl No. Particulars Amount (in Rs.) 1. Business promotion expenses 6,07,95,906 2. Key account manager expenses 3,44,75,882 3.....
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....e Act on the basis that the expenditure is in violation of the Circular issued by the MCI. Being aggrieved, the assessee is in appeal before us. 22. We have considered the submissions of both sides and perused the material available on record. In the present case, the assessee claimed a total of Rs. 49,11,53,310 on account of Advertising and Business Promotion expenses. It is evident from the record that in the absence of complete information from the assessee regarding the particulars of these expenditures, the AO proceeded to place reliance upon the information available in the FBT proceedings and restricted the disallowance to 50% of the total expenditure of Rs. 23,52,82,100, as per the aforesaid information. We find that considering the submissions of the assessee that the AO did not call for any specific details or supporting documents for expenses amounting to Rs. 23.52 crore, the learned CIT(A) sought the remand report from the AO. Vide letter dated 25/10/2012, the AO submitted its report, which is reproduced as under:- "Sub : Remand report in the case of M/s. Nicholas Piramal India Ltd- 2006-07-reg:- Ref : CIT(A)-13/Report/2011-12 dated 11-07-2011. ....
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....cts of the assessee. Finding the same to be in violation of the regulation issued by the MCI, the AO supported the conclusion of the disallowance of 50% of the aforesaid expenditure. Therefore, it is not now in dispute that the supporting evidence and documents were furnished by the assessee to substantiate its claim. There is also no dispute regarding the submission of the AO in the remand report that the expenditure was incurred for giving various gifts, travel facilities, etc. to the doctors for the promotion of assessee's products. 24. Thus, the only issue which survives for adjudication is whether the expenditure incurred by the assessee is in violation of the guidelines issued by the MCI and consequently, whether the expenditure is not allowable under section 37(1), in view of the Circular No.5 of 2012. In this regard, the learned AR submitted that the amended guidelines of the MCI were published vide notification dated 14/12/2009 and therefore are applicable only with effect from the said date. Thus, it was submitted that the said guidelines are not applicable to the year under consideration, i.e. assessment year 2006-07. 25. We find that this issue came up for conside....
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.... of Hon'ble Himachal Pradesh High Court in the case of Confederation of India Pharmaceutical Industry (SSI) Vs. CBDT reported as 353 ITR 288 (HP) upheld the findings of CIT(A) and dismissed both the appeals vide order dated 29/01/2018. The assessee carried the issue further in appeal before the Hon'ble Madras high Court in Tax Case Appeal No. 723 of 2018. The Hon'ble High Court dismissed the appeal of assessee vide judgment dated 18/03/2019. The assessee further agitated the issue before Hon'ble Supreme Court of India. The Hon'ble Apex Court affirming the decision of High Court inter alia held: - CBDT Circular 5/2012 dated 01/08/2012 is clarificatory in nature, and effective from the date of implementation of Regulation 6.8 of the 2002 Regulations, i.e. from 14/12/2009. - The Pharmaceutical companies gifting freebies to doctors etc. is clearly "prohibited by law" and not allowed to be claimed as a deduction u/s 37(1) of the Act. Thus, to sum up, view taken by the CIT(A) was approved by the Hon'ble Supreme Court of India. 9.6 Now, reverting to the facts of present case, the assessment year under appeal ....
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....en submitted to the Department of Science and Industrial Research ("DSIR") in Form No.3 CL with annexures, auditors certificate. In the absence of formal approval from the prescribed authority, the AO vide order passed under section 143(3) of the Act held that the assessee has not established its lawful entitlement to the said deduction as per section 35(2AB) of the Act. Accordingly, the AO disallowed the weighted deduction of Rs. 4,05,78,000 claimed by the assessee under section 35(2AB) of the Act. 29. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue and held that the action of the AO cannot be held as incorrect regarding the disallowance made in respect of deduction claimed under section 35(2AB) of the Act. In line with the finding of its predecessor in assessee's own case for the assessment year 2005-06, the learned CIT(A) held that the statutory Form no.3CM is a mandatory Form and the claim for deduction under the above section can only be granted if the Form is submitted before the AO. Accordingly, the action of the AO in denying the weighted deduction claimed under section 35(2AB) of the Act was upheld. The learned CIT(A) f....
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.... (not being expenditure in the nature of cost of any land or building) on in-house research and development facility as approved by the prescribed authority, then, there shall be allowed a deduction of a sum equal to one and one-half times of the expenditure so incurred." 32. The relevant rules in so far as it concerns deduction under section 35(2AB) of the Act are provided in Sub-Rule (1B), (4), and (5A) of Rule 6 of the Rules. These rules read as follows: "(1B) For the purposes of sub-section (2AB) of section 35, the prescribed authority shall be the Secretary, Department of Scientific and Industrial Research."; "(4) The application required to be furnished by a company under sub-section(2AB) of section 35 shall be in Form No.3CK."; "(5A) The prescribed authority shall, if he is satisfied that the conditions provided in this rule and in sub-section (2AB) of section 35 of the Act are fulfilled, pass an order in writing in Form No. 3CM: Provided that a reasonable opportunity of being heard shall be granted to the company before rejecting an application." 33. Therefore, from the aforesaid provisions, it is sufficiently evident that in order ....
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....red on the development of R&D facility has to be allowed for weighted deduction under section 35(2AB) of the Act. 35. We find that a similar issue was under consideration before the Hon'ble Gujarat High Court in Banco Products (India) Ltd v/s DCIT, [2018] 405 ITR 318 (Guj.). The Hon'ble High Court decided the issue in favour of taxpayer following the decision in Claris Lifesciences Ltd (supra). Further, from the perusal of all the decisions relied upon by the assessee, we find that approval in Form No. 3CM was furnished by the taxpayers. Further even in the case of DCIT v/s Meco Instruments (P) Ltd, [2010] 7 taxmann.com 24 (Mum.) we, from para-5 of the order, find that the prescribed authority, viz. Government of India, Ministry of Science and Technology, DSIR granted the approval in Form No. 3CM. However, in the present case, undisputedly the said approval by the prescribed authority in Form No.3CM is not available on the record. Therefore, we find the decisions relied upon by the assessee to be factually distinguishable. 36. We find that while deciding a similar issue in assessee's own case in Piramal Enterprises Ltd. (supra), for the assessment year 2008-09, the coordinate....
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.... assessee's own case for the assessment year 2004-05, vide order dated 20/06/2022, in ITA No. 769/Mum./2008, directed the AO to allow the depreciation at 60% and also directed the AO to consider computer and computer software as one block. Since the year under consideration is the third year of the claim of depreciation and the computation of depreciation in the current year is consequential to the preceding year, therefore we restore this issue to the file of the AO to compute the depreciation by considering the closing WDV of the preceding year as the opening WDV of the current year. Further, the AO is directed to allow depreciation on computer software at 60% in line with the directions of the coordinate bench in the preceding year. As a result, grounds No. 6 and 7 raised in assessee's appeal are allowed for statistical purposes. 41. The issue arising in ground No. 8, raised in assessee's appeal, pertains to the addition on account of increase in the value of closing stock in relation to net unutilised MODVAT credit. 42. We have considered the submissions of both sides and perused the material available on record. During the assessment proceedings, upon perusal of the Tax ....
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.... by the ld. AO by increasing the opening stock to the extent of Rs.86.56 lakhs and the net addition on account of unutilised MODVAT credit was made by the ld. AO at Rs.66,27,443/-. This action of the ld. AO was upheld by the ld. CIT(A). We find that this issue was the subject matter of adjudication by this Tribunal in assessee's own case for A.Y.2009-10 in ITA Nos.1257/Mum/2014 & 1486/Mum/2014 dated 07/05/2019 wherein it was held as under:- "Adjustment of Inventory as per Sec. 145A : Rs. 1,16,08,088 21. We shall now advert to the contention of the ld. A.R that the A.O/DRP had erred in re-computing the value of the "closing stock. at Rs. 15,982.73 lacs as against Rs. 14,834 lacs and "opening stock. at Rs. 14,367.65 lacs as against Rs. 13,335 lacs, on the ground that the assessee is following exclusive method of accounting for MODVAT with regards to its inventory. It is the claim of the ld. A.R that irrespective of whether the assessee follows Inclusive or Exclusive method of valuation of stock, the amount of unutilized MODVAT shall have no bearing on the profits of the assessee. We find that the assessee had before the lower authorities objected to the aforesaid addition as....
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.... which formed part of the tax audit report as "Annexure B.. 22. We have deliberated at length on the issue under consideration and find that the assessee for the purpose of its statutory accounts had followed the AS-2 on Valuation of Inventories, and the Guidance Note on Accounting Treatment of MODVAT/CENVAT issued by the ICAI. Accordingly, the assessee had followed the exclusive method for accounting purposes. However, for the purposes of income-tax it had worked out the impact of grossing up of tax, duty, cess etc. by restating the values of purchases and inventories by including inter alia the CENVAT credit. The adjustment required u/s 145A of the I.T Act was reflected in Clause 12(b) of the tax audit report of the assessee. As per Clause 12(b) the adjustment u/s 145A worked out at Nil. It is the claim of the assessee that the amount reflected in Clause 12(b) of the tax Audit report shall be treated as the adjustment required u/s 145A, and in support thereof had relied on the order of the ITAT, Mumbai in the case of Hawkins Cookers Ltd. Vs. ITO (2008) 14 DTR 206 (Mum). We have perused Clause 12(b) (Page 61 of „APB.) of the Tax Audit report of the assessee and find that it ....
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....f appeal. 46. In the aforesaid application, the assessee submitted that in relation to several grounds raised by the assessee in its appeal, it was realised that the same were dismissed by the learned CIT(A) on the basis that the same are not emanating from the assessment order. Further, pending the disposal of assessee's rectification application under section 154 of the Act, the learned CIT(A) has also directed the assessee to take up these issues before the AO in rectification proceedings. It was submitted that ground no. 9 which pertains to the denial of deduction under section 80G of the Act is one such issue. Accordingly, the assessee seeks admission of the aforesaid additional ground of appeal. Since the basic facts for deciding this issue are available on record, the prayer of the assessee vide aforesaid application is accepted. 47. The brief facts of the case pertaining to this issue are that the assessee made payments amounting to Rs. 88,45,947 to various parties as donations. Accordingly, it made a claim of deduction of Rs. 44,22,974 (i.e. 50%) under section 80G of the Act. However, the AO while passing the assessment order did not grant the deduction as claimed by....
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....he file of the AO as the setting aside of the issues to the file of the AO does not came within the powers of CIT(A). iii. The Learned CIF(A) has erred on the facts and in Law in directing the AO to calculate the excessive payments (out of the royalty and consultancy and professional charges paid) on the basis of turnover without looking into the reasonableness of the payments. iv. The Learned CIT(A) has erred on the facts and in Law in directing the Assessing Officer that the depreciation not claimed by M/s. Bochirnger Mannhein India Ltd and M/s. Piramal Holdings Ltd, should not be considered for the purpose of working out the written downvalue, to allow the depreciation thereof. v. The Learned CIT(A) has erred on the facts and in Law in deleting the disallowance made by the 40 in respect of deduction of Rs. 24285714/- claimed u/s. 35A in respect of the acquisition of the trade mark by M/s. Sarabhai Piramal Pharmaceuticals Ltd. (since merged with the assessee company)". vi) The Learned CIT(A) has erred on the facts and in Law in deciding that the deduction u/s. 80HHC for the purpose of section 115JB is to be worked out on the basis of adjusted book profit following the decision of....
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....15/01/2020, for the assessment year 2010-11 decided the issue in favour of the assessee by following the earlier decision of the Tribunal in assessee's own case for the assessment year 2009-10. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:- "19. We have head both the parties, perused the material available on record and gone through orders of the authorities below. We find that this issue was subject matter of deliberations by the co-ordinate bench of ITAT, Mumbai 'J' bench in assessee's own case for AY 2009-10, where under identical set of facts, the Tribunal allowed claim of depreciation. The relevant findings of the Tribunal are as under:- 18. Insofar the disallowance of the claim of depreciation pertaining to BMIL is concerned, we find that the same being a recurring issue is covered by the order of the Tribunal in the assesses own case for A.Y. 2008-09 in favour of the assessee. We find that the Tribunal while disposing off the appeal of the assessee for A.Y. 2008-09, had observed that it was an admitted fact that BMIL before its merger had not claimed depreciation on the assets in the A.Y. 1995....
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....e DRP, though PHL had not claimed depreciation on its assets, however, the A.O while framing the assessment in its hands for A.Y 1996-97 had allowed the same. Apart there from, the assessee had during the year relevant to A.Y 1999-2000 sold its two divisions viz. (i). Glass Division (GGL); and (ii). Bulk Drug Division (BDD) on a slump sale basis. As such, the assessee company in A.Y 1999-2000 while computing the deprecation had dropped the WDV of the aforesaid two undertakings from the respective block of assets" on the date of such slump sale. As observed hereinabove, the A.O declined to accept the claim of the assessee that it was a "slump sale" transaction and considered the same as an itemised sale of assets. On the basis of his aforesaid observations, the A.O worked out the WDV of the block of assets" by taking the values of the assets as were recorded in the books of accounts of the purchasing company, as the sale value, and reduced the same from the different block of assets". In the backdrop of his aforesaid reworking of the WDV the A.O scaled down the assesses claim of depreciation in respect of assets of PHL. 20. On a perusal of the records, we find that it is th....
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.... fact that the issue is a recurring dispute and the Revenue is before the Hon'ble High Court on the question of allowability, followed the approach adopted in the assessment year 2005-06 and disallowed the claim of the assessee. The learned CIT(A), vide impugned order, allowed the ground raised by the assessee on this issue following the order passed by the coordinate bench of the Tribunal in assessee's own case for the assessment year 2005-06. Being aggrieved, the Revenue is in appeal before us. 58. We have considered the submissions of both sides and perused the material available on record. We find that the coordinate bench of the Tribunal in assessee's own case, for the assessment year 2010-11, vide order dated 15/01/2020 (cited supra) decided this issue in favour of the assessee following the earlier decisions of the coordinate bench. The relevant findings of the coordinate bench, in the aforesaid decision, are reproduced as under:- "49. We have heard both the parties and perused the material available on record. We find that an identical issue had been considered by the co-ordinate bench of ITAT, in assessee own case for AY 2008-09 and 2009-10 and after considerin....
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....ction u/s 35A on the trade marks, then the deduction of the entire expenditure of Rs. 34 crore in terms of the observations of the tribunal had to be allowed in one go u/s 37 of the I-T Act, which would thus put it in a much more disadvantageous position, had thus for the said reason not pressed its appeal before the High Court on the issue of allowability of claim of deduction u/s 35A of the I.T Act. In the backdrop of the aforesaid facts, the Tribunal while disposing off the appeal of the assessee for the preceding year ie A.Y 2008-09 observed that as the claim of the assessee for deduction u/s 35A was allowed in the preceding years, thus applying the rule of consistency allowed the same during the year before them. We have given a thoughtful consideration and are of the considered view that as the assesses claim of deduction u/s 35A had consistently been allowed by the Tribunal in the preceding years, therefore, respectfully following the view taken by the Tribunal while disposing off the appeal of the assessee for A.Y 2008-09, the disallowance made by the A.O/DRP u/s 35A of Rs. 2,42,85,714/- during the year under consideration viz. A.Y 2009-10 is vacated. The Ground of appeal N....
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....'s order for AY 2005-06 by directing the AO to allow payments made to PEL for consultancy fees and corporate service charges on the basis that if comparative payments made by Appellant are more than the payments made by other group companies, the excess should be disallowed and turnover may be adopted as the basis for determining excessiveness. 2. The CIT(A) further erred in holding that AO had invoked section 40A(2)(b) indirectly by taking into account agreement clauses and holding that excessive payment has been made, ignoring the fact that AO had specifically not invoked section 40A(2)(b) of the Act. 3. The Appellant prays that entire payment made to Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) be allowed as deductible expenses u/s 37(1) of the Act. Ground II: Disallowance of Software expenses amounting to: Rs.50,55,271/- 1. On the facts and in the circumstances of the case and in law, the CIT (A) erred in following his predecessor's order for AY 2005-06, by upholding the action of the AO of disallowing software expenses amounting to Rs.50,55,271/- on the alleged ground that the said expenditure g....
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....duced. GROUND VI: Depreciation on Goods Capitalized in Assessment Year: 2002-03/- 1. On the facts and circumstances of the case and in law, the CIT(A) erred in stating that the issue relates to AY 2002-03 and not for the assessment year under appeal i.e. AY 2007-08. 2. The Appellant prays that the aforesaid claim was allowed by the AO in AY 2006-07 on filing of rectification by the Appellant u/s. 154 of the Act and hence should be allowed. GROUND VII: Depreciation on Items Capitalized in Assessment Year: 2005-06/- 1. On the facts and circumstances of the case and in law, the CIT(A) erred in stating that the issue relates to AY 2005-06 and not for the assessment year under appeal i.e. AY 2007-08. 2. The Appellant prays that the aforesaid claim was allowed by the AO in AY 2006-07 on filing of rectification by the Appellant u/s. 154 of the Act and hence should be allowed. GROUND VIII: Depreciation on Technical Knowhow Capitalized in Assessment Year: 2003-04/- 1. On the facts and circumstances of the case and in law, the CIT(A) erred in stating that the issue relates to AY 2003-04 and not....
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..... Accordingly, the assessee was asked to justify the nature of payments made as well as the quantum and also specify how these payments were wholly and exclusively for the purpose of business. In response thereto, the assessee submitted a copy of the agreement dated 29/04/1995 entered with Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd). The assessee also furnished debit notes raised by Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) and the breakup of the expenditure actually incurred and apportionment amongst the group companies. The AO vide order dated 18/12/2000 passed under section 143(3) of the Act, after considering the submissions of the assessee, observed that against an actual expenditure incurred of Rs. 830 lakh by Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) towards common services to various group companies, it charged Rs. 1348 lakh for services rendered. The AO further held that since the actual expenditure incurred is only Rs. 830 lakh, therefore apportionment between the group members is to be restricted to Rs. 830 lakh out of which the share of the assessee will be in the same ratio....
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....ubmissions of the learned DR that setting aside the matter to the file of the AO does not come within the purview of powers of the learned CIT(A) under section 251 of the Act. Since the addition made by the AO is based on the implementation of the terms of the agreement, we will analyse the issue from that perspective. 69. As per clause 5 of the aforesaid agreement dated 29/04/1995, the assessee agreed to pay, as a consideration, a Royalty at the rate of not exceeding 0.5% of the turnover of goods manufactured and traded by it. Further, the assessee agreed to contribute an appropriate proportion of the expenses incurred by Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) in fulfilling its obligations under this agreement. 70. As noted above, the coordinate bench of the Tribunal in assessee's own case for the assessment year 2008-09, vide order dated 30/07/2018 (cited supra) found the payment of Royalty by the assessee to be in compliance of the terms of the aforesaid agreement and accordingly deleted the same. Further, in the year under consideration, we find that the assessee paid Royalty @0.05% of the turnover which is even less than the rate of 0.....
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....med by the Appellant (i.e. 915 net of service tax) comprises of the service charges apportioned amounting to Rs.789 lakhs and the amount of royalty which amounts to Rs. 126 lakhs." 72. It is evident from the record that the learned CIT(A), without examining the submissions of the assessee, merely upheld the findings of the AO regarding the part disallowance of the payment made by the assessee. Thus, in the present case, the calculation of apportionment of expenses by Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) is only in dispute. As per the AO, Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd) has been paid more than the actual expenses incurred by it which is to be apportioned as per clause 5(b) of the agreement. While it is the plea of the assessee that the consideration paid by the assessee is as per the agreement and the assessee has only paid its share of allocated expenses. Since the calculation of actual expenses incurred, which is to be apportioned, needs to be reconciled with the payment made by the assessee, we deem it appropriate to restore the issue of allowance of corporate service charges to the file of the AO....
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....regaon Unit. In the year under consideration also it is an admitted fact that for both the aforesaid units the assessee has not received approval under Form No.3CM from DSIR and its application is pending before the DSIR despite various reminder letters. Since a similar issue has already been decided in assessee's appeal for the assessment year 2006-07, therefore our findings/conclusions rendered therein shall apply mutatis mutandis. Accordingly, we deem it appropriate to restore this issue to the file of the AO to provide an opportunity to the assessee to furnish the approval of the prescribed authority in the prescribed manner for claiming deduction under section 35(2AB) of the Act. With the above directions, ground no. 3 raised in assessee's appeal is allowed for statistical purposes. 76. Grounds no. 4 raised in assessee's appeal pertain to the disallowance of depreciation on computer software. Since a similar issue has already been decided in assessee's appeal for the assessment year 2006-07, therefore our findings/conclusions rendered therein shall apply mutatis mutandis. Accordingly, the AO is directed to allow depreciation on computer software at 60% in line with the dire....
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....xpenditure under the head "Business Promotion Expenses" in the return of income. 2. The Appellant prays that the AO be directed to allow depreciation @25% amounting to Rs. 61,174/- for the year under consideration, on the opening WDV of the aforesaid goods capitalized. 3. Alternatively, the Appellant prays that the AO be issued necessary directions to dispose off the application u/s 154 in a time bound manner. ADDITIONAL GROUND NO. III: DEPRECIATION AMOUNTING TO RS. 1,24,510/- ON ITEMS CAPITALIZED IN AY 2005-06: 1. On the facts and circumstances of the case and in law, the ld. AO erred in not calculating depreciation on items capitalized in AY 2005-06 amounting to Rs. 8,85,400/- for purchase of software, which were originally claimed as a revenue expenditure under the head "Legal and Professional Fees" in the return of income. 2. The Appellant prays that the AO be directed to allow depreciation @25% amounting to Rs. 1,24,510/- for the year under consideration, on the opening WDV of aforesaid items capitalized. 3. Alternatively, the Appellant prays that the AO be issued necessary directions to dispose off the application u/s 154 ....
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....25% on the same. In further appeal, the learned CIT(A) upheld the said disallowance and no further appeal was preferred by the assessee against the aforesaid addition. Accordingly, in the year under consideration, the assessee made a claim for allowance of depreciation @25% on the goods capitalised in the assessment year 2002-03. However, the AO did not render any finding on the aforesaid claim of the assessee. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue on the basis that the same does not emanate from any action of the AO as taken in the assessment order for the assessment year 2007-08. The assessee submitted that similar ground has been allowed in its favour in the assessment year 2006-07 vide rectification order dated 09/02/2009. However, in the year under consideration, its rectification application filed under section 154 of the Act is still pending disposal before the AO. 84. We have considered the submissions of both sides and perused the material available on record. Since the rectification application filed by the assessee is already pending consideration before the AO, we direct the AO to consider the plea of the a....
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....esent appeal is dismissed as infructuous. 88. The issue arising in additional ground no.4 pertains to depreciation on technical know-how capitalised in the assessment year 2003-04. 89. The brief facts of the case pertaining to this issue are that in the assessment year 2003-04, the assessee paid an amount of Rs. 7,61,00,000 to Danisco USA Inc. for settlement of the dispute. However, in the assessment year 2003-04, the AO disallowed the amount on the basis that the said payment being capital in nature. In further appeal, the learned CIT(A) upheld the said disallowance and directed the AO to allow depreciation on the same in accordance with the provisions of the Act. The assessee did not press this ground in its appeal before the Tribunal. Accordingly, in the year under consideration, the assessee made a claim for allowance of depreciation @25% on the amount capitalised in the assessment year 2003-04. However, the AO did not render any finding on the aforesaid claim of the assessee. The learned CIT(A), vide impugned order, dismissed the ground raised by the assessee on this issue on the basis that the same does not emanate from any action of the AO as taken in the assessment or....
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....ion thereon. V. The Learned CIT(A) has erred on the facts and in Law in deleting the disallowance made by the AO in respect of deduction of Rs. 24285714/- claimed u/s. 35A in respect of the acquisition of the trade mark by M/s. Sarubhai Piramal Pharmaceuticals Ltd. (since merged with the assessee company). vi. The Learned CIT(A) has erred on facts and in law in holding that the disallowance made under section 14A is not covered for computing of Book Profit under section 115JB of the Income tax Act, relying on the decision of Delhi Tribunal in Quippo Telecom Infrastructure Lid Vs. ACIT (ITA 4931/D/2010), without appreciating the fact that the said disallowance is covered in clause (f) of explanation Lin section 115JB." 93. In view of our findings rendered in respect of ground no.1 raised in assessee's appeal, pertaining to the disallowance of payments made to Piramal Corporate Services Ltd (formerly known as Piramal Enterprises Ltd), grounds no. (i), (ii), and (iii) raised in Revenue's appeal are partly allowed for statistical purposes. 94. The issue arising in ground no. (iv), raised in Revenue's appeal, pertains to the allowance of depreciation in respect o....