TaxTMI 
TaxTMI 
2025 (5) TMI 785
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....al under Section 253 of the Income-tax Act, 1961 ('Act') against the order passed by the Assessment Unit, National Faceless Assessment Centre ('AO') dated 18 June 2024 ('Final Assessment order") in pursuance of the directions issued by Dispute Resolution Panel-2 (DRP), Mumbai dated 3 May 2024 (DRP Directions") on the following grounds which are independent and without prejudice to each other. General Ground 1. On the facts and in the circumstances of the case and in law, the learned AO based on the directions of the Hon'ble DRP has erred in determining the total taxable income of the Appellant for Assessment Year ('AY") 2020-21 at Rs 332,27,26,586 instead of Rs 306,52,54,200 as returned by the Appellant for the subject AY under normal provisions of the Act. Final assessment order barred by limitation. 2. On the facts and in the circumstances of the case and in law, the final assessment order dated 18 June 2024 passed by the Assessing Officer, having been passed beyond the limitation provided in terms of section 144C read with 153 of the Act, is time-barred, bad in law, void ab initio and is liable to be quashed. Validity of final assessment ord....
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....udice to above, with respect to the depreciation amounting to Rs. 4,59,084 on intangible asset acquired from WNS UK, the learned AO has erred in law by not giving effect to the binding directions of the Hon'ble DRP and/or being contrary to the binding rulings of this Hon'ble Tribunal in the Appellant's own case; 10. On the fact and in circumstances of the case and in law, the learned AO/Hon'ble DRP has erred in disallowing deduction under Section 80G of the Act amounting to Rs 2,05,58,406 a) without appreciating the fact that the Appellant has suo moto disallowed the expenditure of Rs. 8.48,62,928 incurred on CSR activity under Section 37 of the Act. b) without appreciating the fact that the deductions claimed under Section 80G of the Act pertained to eligible payments specified under section 80G of the Act c) without appreciating the fact that there is no bar on the Appellant to claim deduction under Section 80G of the Act in respect of eligible donations made towards CSR expenditure d) without appreciating the fact that the amount grouped under CSR contributions has been paid by the Appellant on voluntary basis, and hence the same is eligible to be claim....
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....ections of the DRP, the Ld. AO passed the final assessment order under section 144C(13) of the Act. In the final assessment order, the Ld. AO made a transfer pricing adjustment under section 92CA amounting to Rs. 11,26,24,233/-. In addition, disallowances were made as follows: Disallowance under section 80G: Rs. 2,05,58,406/- Disallowance of depreciation on intangible assets: Rs. 12,42,89,747/- Being aggrieved by the final assessment order, the assessee has preferred an appeal before this Tribunal. 3. The Ld.AR argued and filed a paper book containing 392 pages which is kept on the record. The Ld.AR primarily argued the TP issue related to the jurisdiction of the Ld.AO in making addition by disobeying the direction of the DRP which contravening the provisions of section 144C(13) of the Act. In TP adjustment, the addition was made on two issues which are covered in ground nos 4 to 8. The argument is focused primarily on ground-wise which are as follows: - Ground no. 5 : Partial disallowance of depreciation 4. The assessee claimed depreciation on intangible assets like depreciation on business rights amount to Rs. 4,30,31,547/-. As per the Ld.AR, the DRP had made the directi....
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....11-12. In view of the aforesaid, the AO is directed to compute the depreciation in accordance with the relevant provision of the Act." Considering the DRP's order, the Ld.AO passed the final order with following observation which is reproduced as below:- "Thus, the Ld. DRP has directed that the disallowance is consequential to the adjustment made by the TPO in AY 2011-12. The Hon'ble ITAT has passed an order dated 19.03.2020 for AY 2011-12 and AY 2012-13 and directed to AO to delete the adjustment to the value of the contract made by the learned TPO for AY 2011-12 and also consequent depreciation adjustment made by the learned TPO for AY 2012-13. In this regard it is stated that the Department has not accepted the Hon'ble ITAT's decision and has filed further appeal to Hon'ble High Court. These appeals are pending for adjudication. Therefore, the adjustment made towards depreciation on business rights stands at Rs. 4,30,31,547/-." Ground nos. 6 to 8: Notional interest on deemed loan 5. The Ld.AR in argument stated that during A.Ys. 2016-17 and 2017-18, the assessee acquired shares of WNS Global Services UK Ltd (in short, 'WNS UK') from its Associated Enterprise....
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....8 by the order of the ITAT dated 23/07/2023 for A.Y 2017-18 and 2018-19 and order dated 09/12/2022 for A.Y 2016-17. In view of the fact that the amounts have been deleted by the Hon'ble ITAT, adjustment in the current year on account of interest becomes consequential to the adjustment made by the TPO in AY 16-17 and 17-18. In view of the aforesaid, the AO is directed to give consequential effect to the aforesaid orders of Hon'ble ITAT. The ground of objection is disposed off accordingly." 6. However, the Ld.AO had rejected the observations of the Ld. DRP on the ground that the issue is now pending before the Hon'ble jurisdictional High Court. So, the L.AO rejected the direction of the DRP and made the addition of interest on deemed loan. Ground no. 3 : Contravention of section 144C(13) 7. The Ld.AR argued that related to the two additions, viz. addition on account of business right and interest on deemed loan, the Ld.AO had not accepted the directions of the Ld.DRP, which contravened the provisions of section 144C(13) of the Act. The same issues were duly agitated before the ITAT and the ITAT has taken a view in favour of the assessee resulting in rejection of the impugn....
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....rming to the directions of ld. DRP which forms the basis of determination of total income. 15. In view of the aforesaid observations, we have no hesitation to hold that the final assessment order passed by the ld. AO, which is in appeal before us, is bad in law and accordingly the final assessment order framed is hereby quashed. In view of this decision, the other grounds raised by the assessee on merits, need not be gone into, and they are left open. 16. In the result, the appeal of the assessee is allowed." 8. We have heard the rival contention of both parties in the matter and perused the material on record. The undisputed facts on record, as brought out by the discussions above, is that the Ld. AO, as per law, was required to pass the final order of assessment dated 18/06/2024 for asst. year 2020-21 u/s 143(3) r.w.s 144C (13) r.w.s. 144B of the Act in conformity with the directions issued by the DRP u/s 144C(5) of the Act, which are binding on him as per section 144C(10) thereof and u/s 144C(13) of the Act. We find that instead of passing the final order of assessment as required by law, the Ld. AO passed the impugned final order of assessment which, as contended by the Ld. ....
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.... the issues amount to Rs. 11,26,24,233/- are quashed. Accordingly, Ground nos.4 to 8 of assessee's appeal are allowed. Ground no. 9: Depreciation on intangible assets. 9. The assessee claimed depreciation on various intangible assets comprising commercial rights, customer relationships, and non-compete fees. During the relevant assessment year, although there were no fresh transactions pertaining to these intangible assets, depreciation was claimed on the opening written down value (WDV). The assessee claimed depreciation on goodwill amounting to Rs. 8,88,46,444/- acquired from Value Edge. In accordance with Section 32(1)(ii) of the Act, depreciation on trademarks and similar intangible assets is allowable, and notably, no disallowance was made under this head in earlier assessment years 2017-18 and 2018-19. Hence, no adverse inference was drawn at that stage. The assessee claimed depreciation at the rate of 25% on the WDV, aggregating to Rs. 26,69,41,957/- for intangible assets. Out of this, depreciation of Rs. 9,96,20,663/- was allowed, while the balance amount of Rs. 16,73,21,294/- was disallowed and added back to the assessee's total income. The matter was referred to the L....
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....apital expenditure by way of 'non compete fee' in question is an 'intangible asset' and if the same is depreciable asset for the benefits u/s 32 of the Act. There is no dispute on the capital nature of the impugned 'non compete fee' in view of the reported judgment of the Supreme Court in case of Guffic Chem (P.) Ltd. v. CIT [2011] 332 ITR 602/198 Taxman 78/10 taxmann.com 105, which is adopted in the judgment in the case of Hari Shankar Bhartia v. CIT [2011] 203 Taxman 6 (Mag.)/15 taxmann.com 113 (Cal.). In any case, both the parties accepted the fact that the said fee is capital in nature. On going through the facts, arguments, submissions, documents available before us and the orders of the revenue, we find the issue is squarely covered by the decision of the Chennai Bench of the ITAT in the case of Real Image Tech (P) Ltd (supra). It is our endeavor to make this order self contained and therefore, we reproduce the relevant HELD portions of the said decision and the same read as under. Held: When a businessman pays money to another businessman for restraining the other businessman from competing with the assessee, he gets a vested right which can be enfo....
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.... period, the assessee acquires a right and it is a capital asset, which is a business or a commercial right as held by the above said decision of the Tribunal-Chennai Bench. Such rights are intangible ones, and they are covered by the provisions of clause (ii) of section 32(1) of the Act relating 'Depreciation'. The said provisions w e f 1.4.1999 read as follows. "32. (1) In respect of depreciation of- (i).... (ii) know-how, patents, copyrights, trade marks, licenses, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st April, 1998âEUR¦âEUR¦âEUR¦. 15. The said right is acquired undisputedly after the 1.4.1998 and there is no dispute on this fact. In such circumstances, without going into other aspects of the submission relating to segregating an asset from the 'block of assets' for purpose of denial of depreciation on such asset, which is of course is a settled proposition against the revenue, in our opinion, the assessee must win on this issue in view of the cited ratio in the case of Real Image Tech (P.) Ltd. (supra). Further, it is a settled is....
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....80G of the Act are as follows: - Sr. No. Particulars Amount (Rs.) Percentage of contribution eligible for deduction under section 80G of the Act Deduction amount under section 80G (Rs.) 1 PalaviI Education Trust 56,20,329 50 28,10,165 2 Pratham Info Tech Foundation 3,20,32,375 50 1,60,16,188 3 Seva Sahyog Foundation 30,31,323 50 15,15,662 4 Suprabhat Mahila Mandal 4,32,783 50 2,16,392 Total 4,11,16,810 2,05,58,407 During the assessment year under consideration, as part of its Corporate Social Responsibility (CSR) initiatives, the assessee made donations aggregating to Rs. 4,11,16,810/- to various charitable institutions. The assessee, in its return of income, disallowed the said amount under the CSR provisions. However, it simultaneously claimed a deduction of Rs. 2,05,58,407/- under Section 80G of the Act, being 50% of the total donations made. The assessee duly filed copies of donation receipts with the revenue authorities, and all payments were made through proper banking channels. Further, the tax auditor had verified the claim and reported it in the tax audit report in accordance with statutory requirements. Despite these compli....