TaxTMI 
TaxTMI 
2025 (6) TMI 1144
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.... CIT/BLR-1/123/u/s263/2012-13 of the Commissioner of Income Tax, Bengaluru-1 passed under Section 263 of the Income Tax Act, 1961 ('IT Act' in short) vide order dated 17.03.2014 for the AY: 2008-09. 3. The facts to be noted for the purpose of this order are, the appellant is a Private Limited Company incorporated on 08.10.1998, which is engaged in the business of manufacturing through contract manufacturers and distributing the Advanced Weight Management, Inner and Outer Nutritional Products and trading of Cosmetic Products, which it operates through direct selling net work. The appellant, for the AY: 2008-09, filed its return of income on 13.09.2008 declaring a total loss of Rs. 3,03,76,816/-. The said return was subsequently revised and the appellant filed a revised return on 31.03.2010 declaring a total loss of Rs.3,67,17,524/-. According to the appellant, during the impugned Assessment Year it carried-out the following Leasehold Improvements at its leasehold office premises at Bengaluru, Kolkata, Mumbai and Guwahati. Particulars Location Total Interior and other related works Bangalore 1,50,68,567 Herbalife Logo & Letters Re-fabrication on Wall surface ....
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....ot carry-out rectification under Section-154 of the IT Act. The Respondent No. 1 thereafter initiated revisionary proceedings under Section 263 of the IT Act by issuing a show-cause notice dated 26.02.2014. The Respondent No. 1 was of the opinion that the appellant's claim for 100% depreciation of Leasehold Improvements being allowed by the Assessing Officer, was erroneous and prejudicial to the interest of the Revenue as in his opinion, the appellant was entitled to depreciation thereon at 10% as per the Rules. The appellant filed its reply to the show-cause notice and objected to the proposal made by the Respondent No. 1 and claimed that the Assessing Officer had examined the issue and applied his mind to allow the claim of the appellant of depreciation @100% on leasehold improvements. 5. The Respondent No. 1 passed a revisionary order dated 17.03.2014 under Section 263 of the IT Act and held that the order of assessment for the subject AY-2008-09 was erroneous and prejudicial to the interest of the Revenue. The Respondent No. 1 therefore, directed the Assessing Officer to re-do the assessment afresh and in case the depreciation of Leasehold Improvements was to be restricted, ....
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....nal in ICICI Venture Funds Management Co. Ltd. Vs. CIT (ITA No.66/Bang/2010), wherein it has been held that merely because there has been no elaborate discussion on the issue by the Assessing Officer, that cannot by itself lead to conclusion that, there is no application of mind by the Assessing Officer concerned. He placed reliance on the decision of the Bengaluru Bench of the Tribunal in IBM India Private Limited (ITA No. 598/Bang/2011) in this regard. 10. It was also his submission that the Tribunal erred in disregarding the favourable order of the Commissioner of Income Tax (Appeals)-12, Bengaluru, in the appellant's own case for the AY:2002-03 on the matter pertaining to Leasehold Improvements. That apart, it was his submission that the Tribunal erred in upholding the revision proceedings initiated by the Respondent No. 1 under Section 263 of the IT Act on the basis of an objection raised by the Audit Department and without application of mind by the Respondent No. 1 himself. He contested the revisional proceedings by stating that the same were without appreciating that, the order of the Assessing Officer was neither erroneous nor prejudicial to the interest of the Revenue.....
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....ssee would justify the order of the CIT (Appeals) and the Tribunal. According to him, perusal of both the order of assessment and the submissions put-forth by the assessee, vide letter dated 15.07.2011 in the course of assessment proceedings, on the basis of the details/documents called for by the Assessing Officer would go to show that, neither the details were called for by the Assessing Officer in respect to the issue of the assessee's claim for 100% depreciation nor there was even a whisper of this issue in the order of assessment for the AY:2008-09 dated 29.10.2012. In other words, it is his submission that in the order dated 29.10.2012, various other issues were considered, such as capitalization of 25% of royalty paid to Herbalife International Inc., Transfer Pricing Adjustment of ALP, Doubtful Debts Written Off, Administrative Fees. According to him, no enquiry in the matter of Assessee's claim for 100% depreciation on leasehold improvements was conducted by the Assessing Officer is established by the admission of the AR of the Assessee before the learned CIT on 13.12.2014 in the course of revisionary proceedings. 14. According to Mr. Raviraj, it was held that, no enquir....
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....n the matter pertaining to leasehold improvements and as such, there was no reason for not to allow the depreciation @100%. 17. We are not in agreement with the submissions made by Mr. Pardiwala. This we say so in view of the appellant's own case through its authorized representative, which has been noted by the CIT (Appeals), wherein the CIT (Appeals) has in unequivocal terms stated that, wherein the authorized representative of the assessee in the course of reviosional proceedings before the CIT (Appeals), vide order sheet dated 13.03.1994 admitted that, no enquiry was conducted by the Assessing Officer in the Assessment Proceedings in respect of the issue of depreciation on leasehold improvements. In fact, such a submission was not controverted by the Appellant-Assessee before the Tribunal also. So, the issue is, when the issue of depreciation at 100% was a non-issue before the Assessing Officer, which means, the Assessing Officer has not examined nor applied his mind in respect of the available rate of depreciation on leasehold improvements and granting the same in terms of the order of assessment for AY:2008-09 dated 29.10.2012 is erroneous prejudicial to the interest of th....
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....d separately." xxx xxx xxx xxx 20. Similarly, even we highlight the findings in the order of the Tribunal from Paragraph 6.1 onwards, which reads as under:- xxx xxx xxx xxx "6.1. We have heard the rival contentions, perused and carefully considered the material on record; including the judicial pronouncements cited. The CIT, Bangalore-I, on an examination of the order of assessment passed under Section 143(3) r.w.s. 144C of the Act dt.29.12.2012 and records of assessment, was of the view that the Assessing Officer, while passing the order of assessment, neither made any enquiry nor applied his mind while allowing the assessee's claim for 100% depreciation on leasehold improvements thereby resulting in the order passed being erroneous and prejudicial to the interests of Revenue. Further, we also observe that the statement of the Id. CIT, that the AR of the assessee in the course of revisionary proceedings before him vide order sheet noting on 13.3.2014 admitted that no enquiry was conducted by the Assessing Officer in assessment proceedings in respect of the issue of depreciation on leasehold improvements, has not been controverted before us. 6.2....
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....in the Employee Stock Option (ESOP) scheme of the Herbalife Group and has offered ESOP to its employees. As per the arrangement of the company with its parent company, the compensation expense relatable to the stock compensation grants had to be reimbursed by the company to its parent company on exercise of such options by the employees. The company during the relevant year has recorded an compensation expense of Rs.1,29,540 on account of exercise of ESOPs by the employee. The said amount has been cross charged by the parent company to the company. We are in the process of collating the balance information / details sought by your goodself and would submit the same in the next hearing. We request your goodself to grant us two weeks time to furnish the same. Should your goodself require any further information/documents, we shall be glad to provide the same upon hearing from you. Yours faithfully, For Herbalife International India Private Limited. Sd/- Authrised Signatory Enclosure: As above." 6.3 A perusal of the assessee's letter dt.15.7.2011 to the Assessing Officer (supra) establishes that the assessee filed reply / details in respect o....