INDIA CAPITAL MARKETS P.LTD ( FORMELRY KNOWN AS NICHE BROKERAGE P. LTD), MUMBAI V. ADDL COT RG 4(2), MUMBAI

ITA 1191/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79008 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 06-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 21-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAVI PRAKASH
• Keywords: Depreciation; Earning of tax free income
• Section: 32; 14A

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL MUMBAI - I BENCH MUMBAI . . , / ! ! ! ! , '# '# '# '# BEFORE S/SH. H.L.KARWA,PRESIDENT & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 1191/MUM/2012, $ $ $ $ % % % % / ASSESSMENT YEAR 2008-09 M/S. INDIA CAPITAL MARKETS P. LTD. (FORMERLY KNOWN AS NICHE BROKERAGE P. LTD.), INDIA CAPITAL HOUSE, OFF DATTAPADA ROAD, DATAPADA, BORIVALI (E),MUMBAI-400066 VS. ACIT RANGE 4(2) MUMBAI-400020 PAN: AABCN0802B ( &' / APPELLANT) ( ()&' / RESPONDENT) &' * + / APPELLANT BY : SHRI HARIDAS PATHAK/BHAVIN SHAH/PRIYESH VIRA ()&' * + / RESPONDENT BY : SHRI RAVI PRAKASH $ $ $ $ * ** * ,- ,- ,- ,- / DATE OF HEARING : 08-05-2014 ./% * ,- / DATE OF PRONOUNCEMENT : 28- 05- 2014 $ $ $ $ , 1961 * ** * 254 )1( ,0, ,0, ,0, ,0, '1 '1 '1 '1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,A.M. '# '# '# '#, ,, , ! $ ! $ ! $ ! $ : CHALLENGING THE ORDER DATED 21.12.2011 OF THE CIT(A )-8,MUMBAI, ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUND NO.1 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE CIT (A) ERRED IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSE T AMOUNTING TO RS. 35,15,625/- (BEING 25% OF RS. RS 1,42,62,500/-PAID TO M/S ASHMAVIR FINANCIAL CONSULT ANTS P. LTD ON WDV BASIS). THE APPELLANT PRAYS THAT THE DEPRECIATION ON INTANGIBLE ASSET MAY KINDL Y BE ALLOWED. GROUND NO.2 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HONBLE CIT(A) ERRED IN CONFIRMING T HE DISALLOWING BLOOMBERG TERMINAL CHARGES OF RS.8,67,1 96 U/S 40(A)(IA) OF THE ACT. THE APPELLANT PRAYS TH AT THE DEDUCTION OF 8,67,196 MAY PLEASE BE ALLOWED. GROUND NO. 3 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LEARNED CIT(A) ERRED IN CONFIRMING T HE ACTION OF AO TO COMPUTE DISALLOWANCE U/S. 14A APPLY ING RULE 8D OF THE ACT. THE APPELLANT PRAYS THAT APPELLANT HAS NOT INCURRED ANY EXPENDITURE FOR EARN ING DIVIDEND INCOME AND ACCORDINGLY IT IS PRAYED TH AT NO DISALLOWANCE U/S. L4A R.W.R 8D IS CALLED FOR IN FACTS AND CIRCUMSTANCES OF THE APPELLANTS CASE. GROUND NO. 4 : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE HONBLE CIT (A) ERRED IN CONFIRMING THE DISALLOWING A SUM OF RS. 11,820 CLAIMED AS PRIOR PE RIOD EXPENDITURE. THE APPELLANT PRAYS THAT THE SAME MAY KINDLY BE ALLOWED. THE APPELLANT CRAVES TO ADD, ALTER, AMEND OR DELETE ALL OR ANY OF THE GROUNDS OF APPEAL BEFORE OR DURI NG THE COURSE OF HEARING. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF SHARE B ROKING,FILED ITS RETURN OF INCOME ON 29. 09.2008,DECLARING TOTAL INCOME OF RS.15,59,54,182/- .ASSESSING OFFICER(AO)FINALISED THE ASSESS 2 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. MENT,U/S.143(3) OF THE ACT,ON16.11.2010,DETERMINING THE TOTAL INCOME AT RS.16,18,48,380/-. 2.1. GROUND NO.1 RELATES TO THE CLAIM OF DEPREDATION ON GOODWILL PAYMENT TO M/S. ASHMAVIR FINANCIAL CONSULTANTS P.LTD.(AFCPL),OF RS. 35,15,62 5/-.DURING THE COURSE OF HEARING BEFORE US, AUTHORISED REPRESENTATIVE(AR)OF THE ASSESSEE MENTIO NED THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSE SSMENT YEARS 2006-07,2007-08 AND 2009-10. (ITA/2948&4851/MUM/2010-DATED12.12.2012,ITA/7301/MU M/2010-DTD.20.02.2013, ITA/4131/ MUM/2012-DTD.31.07.2013).WE HAVE GONE THROUGH THE O RDERS OF THE TRIBUNAL FOR THE ABOVE MENTIONED THREE AY.S.WE FIND THAT IN THE AY.2006-07 ,TRIBUNAL HAS DISCUSSED THE ISSUE IN LENGTH AND HAS DECIDED IT AS UNDER: 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE LOWER AUTHORITIES. WE HAVE ALSO GONE THROUGH THE COPY OF THE DEED OF ASSI GNMENT OF BUSINESS, SALE OF GOODWILL AND MASTER SERVICES AGREEMENT. BY VIRTUE OF CLAUSE (1) OF THE SAID DEED, IT IS PROVIDED AS UNDER (1) ASSIGNMENT AND CONSIDERATION: (A)THAT IN CONSIDERATION OF THE SUM OF RS.2,50,00,0 00/-(RS. TWO CRORE AND FIFTY LACS ONLY) PAID BY THE ASSIGNEE TO THE ASSIGNOR-1 ON THE EXECUTION OF THESE PRESENTS, RECEIPT WHEREOF THE ASSIGNOR-1 DO HEREBY ADMIT, THE ASSIGNOR-1 AS BENEF ICIAL OWNER, IRREVOCABLY ASSIGNS, CONVEYS, SELLS, GRANTS AND TRANSFERS ONTO THE ASSIGNEE WITHO UT LIMITATION AND IN PERPETUAL, ALL THE SAID RETAIL CLIENTELE OF THE ASSIGNOR-1 IN STOCK BROKING BUSINESS INCLUDING THE EXISTING BUSINESS ASSOCIATES (A LIST OF RETAIL CLIENTELE/BUSINESS ASS OCIATES IS ENCLOSED AS ANNEXURE-A), TOGETHER WITH THE GOODWILL ATTACHED THERETO WITH ALL THE RIG HTS AND BENEFITS BELONGING THERETO TO HOLD THE SAME AND ALL THE SAID RETAIL CLIENTELE HEREBY ASSIG NED ON TO THE ASSIGNEE ABSOLUTELY; AS ON 1 ST SEPTEMBER, 2005. (B)THE ASSIGNOR-1 HEREBY COVENANTS WITH THE ASSIGNE E THAT HE HAS FULL RIGHT AND ABSOLUTE AUTHORITY TO ASSIGN THE SAID RETAIL CLIENTELE TOGET HER WITH THE GOODWILL ATTACHED THERETO AND .THAT HE HAS NOT ASSIGNED OR AGREED TO ASSIGN THE SAME IN FAVOUR OF ANY OTHER PERSON OR CREATED ANY ENCUMBRANCES THEREON AND THAT THE ASSIGNEE WILL BE ENTITLED TO USE THE SAID RETAIL CLIENTELE TOGETHER WITH THE GOODWILL ATTACHED THERETO OF THE ASSIGNOR-1 WITHOUT ANY OBJECTION AND OR INTERRUPTION BY THE ASSIGNOR-1 OR ANY PERSON CLAIMI NG UNDER HIM INCLUDING THAT OF THE ASSIGNOR-2 AND THAT THE ASSIGNORS WILL AT THE REQUEST AND COST S OF THE ASSIGNEE AT ANY TIME EXECUTE ANY DOCUMENT AS MAY BE REQUIRED FOR BETTER AND MORE PER FECTLY ASSURING THE SAID ASSIGNMENT OF CLIENTELE AND THE GOODWILL ATTACHED THERETO UNTO TH E ASSIGNEE. 12.IT IS NOT IN DISPUTE THAT BY VIRTUE OF THIS AGRE EMENT, M/S.AFC HAS TRANSFERRED ITS ENTIRE RETAIL CLIENTELE TO THE ASSESSEE FOR A CONSIDERATION OF RS .2.50 CRORES. THE ONLY ISSUE TO BE DECIDED IS, WHETHER THIS CONSTITUTES OR CREATES AN INTANGIBLE A SSET ELIGIBLE FOR DEPRECIATION UNDER SECTION 32 (1) (II) OF THE ACT? LET US FIRST SEE THE PROVISIONS OF SECTION 32 (1) ( II) OF THE ACT. 32. DEPRECIATION.-- 1) IN RESPECT OF DEPRECIATION OF- (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE BEING TANGIBLE ASSETS; (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADEMARKS, LIC ENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BE ING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1 ST DAY OF APRIL, 1998, OWNED, WHOLLY OR PARTLY, BY TH E ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION THE FOLLOWIN G DEDUCTIONS SHALL BE ALLOWED-- (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTAGE ON THE ACTUA L COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED. III) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCE NTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED.. 13.A PERUSAL OF THE ABOVE PROVISION SUGGESTS THAT C ERTAIN INTANGIBLE ASSETS ON WHICH DEPRECIATION COULD BE CLAIMED ARE- KNOW HOW, PATENTS, COPY RIGHT S, TRADE MARKS, LICENSES, FRANCHISE OR ANY OTHER BUSINESS OR COMMERCE RIGHTS OF SIMILAR NATURE . THIS EXPRESSION ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE BY ITSELF WOUL D MEAN TO INCLUDE ALL KINDS OF COMMERCIAL RIGHTS. THE LANGUAGE IN SECTION 32 (1) (II) CLEARLY INVITES THE APPLICATION OF THE RULE OF EJUSDEM 3 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. GENERIS WHICH MEANS THAT WORDS OF A GENERAL NATURE FOLLOWING SPECIFIC AND PARTICULAR WORDS SHOULD BE CONSTITUTE AS LIMITED TO THINGS WHICH ARE OF SAME NATURE AS THOSE SPECIFIED. THE SPECIFIC WORDS IN SECTION 32 OF THE ACT REVEAL THE SIMILARIT Y IN THE SENSE THAT ALL THE INTANGIBLE ASSETS SPECIFIED ARE TOOLS OF THE TRADE WHICH FACILITATES THE ASSESSEE TO CARRY ON THE BUSINESS. THEREFORE, THE EXPRESSION , ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE WOULD INCLUDE SUCH RIGHTS WHICH CAN BE USED AS A TOOL TO CARRY ON THE BUSINESS. THIS VIEW FINDS SUPPORT FROM THE DECISION OF THE TRIBUNAL IN THE CASE OF SKYLINE CAT ERERS P LTD V/S ITO 306 ITR ~AT1 369 MUMBAI. 14.IN THE LIGHT OF THESE OBSERVATIONS, IT CANNOT BE DENIED THAT BY GETTING A RIGHT OVER 3709 CLIENTS OF M/S. AFC, SUCH RIGHT IS USED AS A TOOL TO CARRY ON THE BUSINESS BY THE ASSESSEE. MERELY BECAUSE THE ASSESSEE SHOWED THE PAYMENT TO BE ON ACCOUNT OF GOODWILL IN THE BOOKS OF ACCOUNT, NO ADVERSE INFERENCE COULD BE DRAWN AGAINST THE ASSESS EE. 15.EVEN ASSUMING THAT THE PAYMENT HAS BEEN MADE FOR THE PURCHASE OF GOODWILL OF M/S. AFC IT HAS TO BE ACCEPTED THAT IN THIS LINE OF BUSINESS TH E GOODWILL OF THE BROKER IS PARAMOUNT. BECAUSE OF CERTAIN STRAY INCIDENCES WHICH HAVE TAKEN PLACE IN THE STOCK MARKET WHICH HAVE SHAKEN THE CONFIDENCE OF THE PUBLIC AT LARGE IN THE PAST, THE INVESTORS ALWAYS DEPEND UPON THE GOODWILL OF THE BROKER BECAUSE NO INVESTOR WOULD LIKE TO BURN H IS FINGERS BY THE UNSCRUPULOUS ACTIVITIES UNDERTAKEN BY CERTAIN FRAUDULENT BROKER. M/S. AFC H AD A STRONG CLIENTELE BASE OF 3709 PERSONS WHICH ITSELF SHOW THAT M/S. AFC WAS HOLDING A STRON G REPUTE IN THE EYES OF ITS CLIENTS. UNDOUBTEDLY, BY PURCHASE OF RIGHTS TO DO THE BUSINE SS WITH THESE 3709 CLIENTS THE ASSESSEE HAS ACTUALLY PURCHASED THE GOODWILL OF M/S. AFC. 16 LORD MACNAGHTEN MARK IN IRC VS. MULLER & CO. MAR GARINE LTD. [1901) AC 217 HL REMARKED THAT ALTHOUGH GOODWILL WAS EASY TO DESCRIB E IT WAS DIFFICULT TO DEFINE. IN A PROGRESSING BUSINESS GOODWILL TENDS TO SHOW PROGRESSIVE INCREAS E AND IN A FAILING BUSINESS IT MAY BEGIN TO WANE. ITS VALUE MAY FLUCTUATE FROM ONE MOMENT TO AN OTHER DEPENDING ON CHANGES IN THE REPUTATION OF THE BUSINESS. IT IS EFFECTED BY EVERY THING RELATING TO THE BUSINESS, THE PERSONALITY AND BUSINESS RECTITUDE OF THE OWNERS, THE NATURE AN D CHARACTER OF THE BUSINESS, ITS NAME AND REPUTATION, ITS LOCATION, ITS IMPACT ON THE CONTEMP ORARY MARKET, THE PREVAILING SOCIO ECONOMIC ECOLOGY, OR INTRODUCTION TO OLD CUSTOMERS AND AGREE D ABSENCE OF COMPETITION. 17.COMMERCIAL RIGHTS GAIN SIGNIFICANCE IN THE COMME RCIAL WORLD AS THEY REPRESENT A PARTICULAR BENEFIT OR ADVANTAGE OR REPUTATION BUILT OVER A CER TAIN SPAN OF TIME AND THE CUSTOMER ASSOCIATE WITH SUCH ASSETS. 18.IT WOULD NOT BE OUT OF PLACE TO HIGHLIGHT THE VI EWS EXPRESSED BY THE HONBLE HIGH COURT OF DELHI IN THE CASE OF AREVA T & D INDIA LTD. VS. DCI T (2012) 345 ITR 421. IN THE PRESENT CASE, APPLYING THE PRINCIPLE OF EJU SDEM GENERIS, WHICH PROVIDES THAT WHERE THERE ARE GENERAL WORDS FOLLOWING PARTICULAR AND SPECIFIC WORDS, THE MEANING OF THE LATTER WORDS SHALL BE CONFINED TO THINGS OF THE SAME KIND, AS SPECIFIE D FOR INTERPRETING THE EXPRESSION BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE SPECIFIED IN S ECTION 32(1)(II) OF THE ACT. IT IS SEEN THAT SUCH RIGHTS NEED NOT ANSWER THE DESCRIPTION OF KNOW-HOW , PATENTS, TRADE MARKS, LICENCES OR FRANCHISES BUT MUST BE OF SIMILAR NATURE AS THE SP ECIFIED ASSETS. ON A PERUSAL OF THE MEANING OF THE CATEGORIES OF SPECIFIC INTANGIBLE ASSETS REFERR ED TO IN SECTION 32(L)(II) OF THE ACT PRECEDING THE TERM BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATU RE, IT IS SEEN THAT THE AFORESAID INTANGIBLE ASSETS ARE NOT OF THE SAME KIND AND ARE CLEARLY DIS TINCT FROM ONE ANOTHER. THE FACT THAT AFTER THE SPECIFIED INTANGIBLE ASSETS THE WORDS BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE HAVE BEEN ADDITIONALLY USED, CLEARLY DEMONSTRATES THAT T HE LEGISLATURE DID NOT INTEND TO PROVIDE FOR DEPRECIATION ONLY IN RESPECT OF SPECIFIED INTANGIBL E ASSETS BUT ALSO TO OTHER CATEGORIES OF INTANGIBLE ASSETS, WHICH WERE NEITHER FEASIBLE NOR POSSIBLE TO EXHAUSTIVELY ENUMERATE. IN THE CIRCUMSTANCES, THE NATURE OF BUSINESS OR COMMERCIA L RIGHTS CANNOT BE RESTRICTED TO ONLY THE AFORESAID SIX CATEGORIES OF ASSETS, VIZ., KNOW-HOW, PATENTS, TRADEMARKS, COPYRIGHTS, LICENCES OR FRANCHISES. THE NATURE OF BUSINESS OR COMMERCIAL R IGHTS CAN BE OF THE SAME GENUS IN WHICH ALL THE AFORESAID SIX ASSETS FALL. ALL THE ABOVE FALL I N THE GENUS OF INTANGIBLE ASSETS THAT FORM PART OF THE TOOL OF TRADE OF AN ASSESSEE FACILITATING SMOOT H CARRYING ON OF THE BUSINESS. IN THE CIRCUMSTANCES, IT IS OBSERVED THAT IN THE CASE OF T HE ASSESSEE, INTANGIBLE ASSETS, VIZ., BUSINESS CLAIMS ; BUSINESS INFORMATION ; BUSINESS RECORDS ; CONTRACTS ; EMPLOYEES ; AND KNOW-HOW, ARE ALL ASSETS, WHICH ARE INVALUABLE AND RESULT IN CARRYING ON THE TRANSMISSION AND DISTRIBUTION BUSINESS 4 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. BY THE ASSESSEE, WHICH WAS HITHERTO BEING CARRIED O UT BY THE. TRANSFEROR, WITHOUT ANY INTERRUPTION. THE AFORESAID INTANGIBLE ASSETS ARE, THEREFORE, COMPARABLE TO A LICENCE TO CARRY OUT THE EXISTING TRANSMISSION AND DISTRIBUTION BUSINESS OF THE TRANSFEROR. IN THE ABSENCE OF THE AFORESAID INTANGIBLE ASSETS, THE ASSESSEE WOULD HAV E HAD TO COMMENCE BUSINESS FROM SCRATCH AND GO THROUGH THE GESTATION PERIOD WHEREAS BY ACQUIRIN G THE AFORESAID BUSINESS RIGHTS ALONG WITH THE TANGIBLE ASSETS, THE ASSESSEE GOT AN UP AND RUN NING BUSINESS. THIS VIEW IS FORTIFIED BY THE RATIO OF THE DECISION OF THE SUPREME COURT IN TECHN O SHARES AND STOCKS LTD. 120101 327 ITR 323 [SC) WHEREIN IT WAS HELD THAT INTANGIBLE ASSETS OWN ED BY THE ASSESSEE AND USED FOR THE BUSINESS PURPOSE WHICH ENABLES THE ASSESSEE TO ACCESS THE MA RKET AND HAS AN ECONOMIC AND MONEY VALUE IS A LICENCE OR AKIN TO A LICENCE WHICH IS ONE OF THE ITEMS FALLING IN SECTION 32(1)(II) OF THE ACT. IN VIEW OF THE ABOVE DISCUSSION, WE ARE OF THE VIEW THAT THE SPECIFIED INTANGIBLE ASSETS ACQUIRED UNDER SLUMP SALE AGREEMENT WERE IN THE NATURE OF B USINESS OR COMMERCE RIGHTS OF SIMILAR NATURE SPECIFIED IN SECTION 32(1)(II) OF THE ACT A ND WERE ACCORDINGLY ELIGIBLE FOR DEPRECIATION UNDER THAT SECTION. 19.THE I.T.A.T. MUMBAI G BENCH IN THE CASE OF DCI T VS. WEIZMAN FOREX LTD. IN ITA. NO. 3571 / MUM/ 2011 OBSERVED THAT THE DEFINITION OF THE ASSET WHICH IS A SUBJECT MATTER OF THE TRANSFER CONSISTS OF ALL CONTRACT, LICENSES, FRANCH AISE, DISTRIBUTION NET WORK, CUSTOMER LISTS, MARKETING STRATEGIES AND SOFTWARE AND WHEN THE INTA NGIBLE ASSET BEING COMMERCIAL BUSINESS RIGHTS DIMINISHED IN VALUE OR PHYSICAL WEAR AND TEA R IS NOT AN ESSENTIAL CONDITION FOR ADMISSIBILITY FOR DEPRECIATION, IF THE ASSET IS USE D AS A BUSINESS TOOL FOR EARNING INCOME. 20.IN THE LIGHT OF THE ABOVE DISCUSSION, IT IS NOT IN DOUBT OR DISPUTE THAT PURCHASE OF THE CLIENTELE BUSINESS BY THE ASSESSEE FROM M/S. AFC IS A RIGHT W HICH CAN BE USED AS A TOOL TO CARRY ON THE BUSINESS. IT CAN ALSO BE SEEN FROM THE ANGLE OF PUR CHASE OF ENTIRE MARKETING NET WORK BY THE ASSESSEE FROM M/S.AFC EVEN IF CONSIDERED FROM THIS ANGLE THE ASSESSEE IS ELIGIBLE FOR DEPRECI - ATION AS HELD BY THE TRIBUNAL. IN ITA.NO.181/MUM/ 2 008 IN THE CASE OF M/S. JYOTI INDIA METAL INDUSTRIES PVT. LTD. VS. ACIT. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. SMIFS SECURITIES LTD. (2012) 24 TAXMANN.COM 222 HAS HELD THAT GOODWI LL IS AN ASSET ELIGIBLE FOR DEPRECIATION. 21.IN OUR CONSIDERATE VIEW, AFTER CONSIDERING THE E NTIRE GAMUT OF FACTS OF INSTANT CASE, WE HAVE NO HESITATION TO HOLD THAT THE ASSESSEE IS ENTITLED FO R DEPRECIATION ON PAYMENT OF RS.2.50 CRORES @ 25% WHICH COMES TO RS.62,50,000/- AS CLAIMED BY THE ASSESSEE. THE ASSESSING OFFICER IS ACCORDINGLY DIRECTED TO ALLOW THE DEPRECIATION. GRO UND NO.1 IS ACCORDINGLY ALLOWED. RESPECTFULLY FOLLOWING THE DECISIONS OF THE CO-ORDI NATE BENCH,ON THE SIMILAR ISSUE,PASSED IN ASSESSEES OWN CASE IN THE YEARS MENTIONED ABOVE,WE DIRECT THE AO TO ALLOW THE CLAIM MADE BY IT FOR DEPRECIATION ON INTANGIBLE ASSET.GROUND NO.1 ,IS ACCORDINGLY ALLOWED. 3. NEXT GROUND DEALS WITH DISALLOWANCE OF BLOOMBERG T ERMINAL CHARGES,OF RS.8,67,196/-,U/S.40 (A)(IA) OF THE ACT.DURING THE ASSESSMENT PROCEEDING S,THE AO NOTICED THAT THE ASSESSEE HAD MADE PAYMENT TO BLOOMBERG DATA SERVICES(BDS).HE WAS OF T HE OPINION THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX ON THESE PAYMENTS.AS THE ASSESSEE HAD FAILED TO DED UCT TAX, THE AO INVOKED THE PROVISIONS OF SECTION 40A(IA) AND DISALLOWED THE EN TIRE PAYMENT OF RS.8.67 LAKHS. 3.1. AGAINST THE ORDER OF THE AO ASSESSEE PREFERRED AN A PPEAL BEFORE THE FIRST APPEAL AUTHORITY (FAA).BEFORE HIM,THE ASSESSEE EXPLAINED THAT THE PA YMENT WAS MADE FOR TERMINAL CHARGES FOR ON LINE INFORMATION AND DATA BASE ACCESS AND RETRIEVAL SERVICES AND THEREFORE,NO TDS WAS REQUIRED TO BE DEDUCTED AS THE PAYMENT WAS FOR A SUBSCRIPTIO N OF FINANCIAL E-MAGAZINE AND THEREFORE, THE AO ERRED IN INVOKING THE PROVISIONS OF SECTION 40A( IA).FAA,AFTER CONSIDERING THE FACTS,HELD THAT BLOOMBERG TERMINAL CHARGES WERE IN NATURE OF TRANSA CTION CHARGES,THAT PAYMENT WAS MADE TO BDS.RELYING UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT DELIVERED IN THE CASE OF 5 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. KOTAK SECURITIES LTD.(ITA.3111OF 2009)HE HELD THAT PAYMENT MADE TO BDS CONSTITUTED FEE FOR TECHNICAL SERVICES COVERED BY THE PROVISIONS OF SEC TION 194-J OF THE ACT,THAT THE ASSESSEE WAS LIABLE TO DEDUCT TAX AT SOURCE.FAA CONFIRMED THE DI SALLOWANCE MADE BY THE AO. 3.2. BEFORE US,AR STATED THAT IDENTICAL ISSUE WAS DECIDE D IN FAVOUR OF THE ASSESSEE BY THE ORDERS OF THE TRIBUNAL DELIVERED FOR THE AY.S.2006-07 AND 2007-08.DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO.WE FIND THAT IN THE A Y.2008-09 FAA HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THE DEPARTMENT HAD CHALL ENGED HIS ORDERS BEFORE THE TRIBUNAL.WHILE DECIDING THE APPEAL,FILED BY THE AO,FOR THE AY. 200 7-08,(SUPRA)TRIBUNAL HAS HELD AS UNDER: BEFORE US,THE LEARNED D.R. COULD NOT BRING ANY DIS TINGUISHING FACTS WHICH CAN SUGGEST THAT THE PAYMENT WAS LIABLE FOR TDS. IN THAT VIEW OF THE MAT TER AND CONSIDERING THE FACT THAT THE PAYMENT IS NOTHING BUT A SUBSCRIPTION FOR E-MAGAZINE/JOURNA L WE DO NOT FIND ANY INFIRMITY IN THE FINDING OF THE CIT(A) AND WE CONFIRMED THE SAME. GROUND NO.1 I S ACCORDINGLY DISMISSED. RESPECTFULLY,FOLLOWING THE ORDER OF THE TRIBUNAL FO R THE EARLIER YEAR,WE DECIDE GROUND NO.2 IN FAVOUR OF THE ASSESSEE,AS THE PAYMENT IS NOTHING MO RE THAN A SUBSCRIPTION FOR E-MAGAZINE/ JOURNAL. 4. NEXT GROUND OF APPEAL PERTAINS TO DISALLOWANCE MADE U/S.14A OF THE ACT R.W.RULE 8D OF THE INCOME TAX RULES,1962(RULES).DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE HAD EARNED EXEMPT INCOME OF RS.10.56 LAKHS,BEING DI VIDEND INCOME.HE DETERMINED THE AMOUNT OF EXPENDITURE AT RS.14.99 LAKHS(RS.12.03LAKHS UNDE R RULE 8D(II) AND RS.2.96 LAKHS UNDER RULE 8D(III),)AS PER THE PROVISIONS OF RULE 8 D OF THE R ULES AND DISALLOWED THE SAME. 4.1. AGGRIVED BY THE ORDER OF THE AO,THE ASSESSEE FILED AN APPEAL BEFORE THE FAA. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND THE ASSESSMENT ORDER HE HELD THAT THE ASSESSEE HAD NOT KEPT SEPARATE ACCOUNTS OF EXPENSES INCURRED FOR EARNING EXEMPT INCOME,THAT IT HAD NOT MAINTAINED RECORDS ON ACCOUNT OF EXPENDITURE HAVING BEEN INCURRED FOR EARNING DIVIDEND INCOME,THAT AO CANNOT BE FASTENED WITH ANY BURDEN T O DISCOVER SUCH EXPENDITURE OF ESTABLISH NEXUS OF SUCH EXPENDITURE WITH EXEMPT INCOME,THAT IN ABSENCE OF RELEVANT DETAILS OF SUCH EXPEN -DITURE THE PROVISIONS OF RULE (8D)WERE APPLICABLE, THAT SUB-SECTION 2 OF SECTION 14A WAS APPLIC - ABLE FROM 01.04.2007, THAT SAID SECTION REQUIRED TH E AO TO DETERMINE THE DISALLOWANCE TO BE MADE IN ACCORDANCE WITH SUCH METHOD AS HAD BEEN PRE SCRIBED,THAT MERELY FROM BALANCE OF OWN FUNDS IN THE BALANCE SHEET, IT COULD NOT BE SAID TH AT NO BORROWED FUND HAD EVER BEEN UTILIZED FOR THE PURPOSE OF MAKING INVESTMENT OR UNDERTAKING TRA NSACTIONS WHICH HAVE YIELDED DIVIDEND INCOME WHICH HAD BEEN CLAIMED AS EXEMPT,THAT THE AS SESSEE HAD FAILED TO PRODUCE ANY CASH FLOW STATEMENT OR ANY OTHER MATERIAL WHICH COULD ESTABLI SH THAT BORROWED FUND HAD NOT BEEN UTILISED FOR EARNING OF EXEMPT INCOME IN AS MUCH AS NO SUCH FUND HAD BEEN UTILISED FOR MAKING INVEST - MENT FROM WHICH DIVIDEND HAD BEEN RECEIVED,THAT MER ELY,ON THE BASIS OF BALANCE OF OWN FUND AND BORROWED FUND AS ON THE DATE OF THE BALANCE SHE ET,IT COULD NOT BE PRESUMED THAT BORROWED FUND HAD NOT BEEN UTILISED FOR EARNING OF EXEMPT IN COME. 4.2. BEFORE US,AR STATED THAT SIMILAR ISSUE WAS PARTLY A LLOWED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL DELIVERED FOR THE AY.2009-10. HE REFERRED TO THE BALANCE-SHEET OF THE ASSESSEE FOR THE YEAR UNDER APPEAL AND ARGUED THAT IT HAD SUFFICIENT OWN FUNDS TO MAKE INVEST - MENTS,THAT PRINCIPLE LAID DOWN BY THE DECISION OF R ELIANCE UTILITY AND POWER LTD.(313ITR340) WERE APPLICABLE IN THE MATTER UNDER CONSIDERATION.D R SUPPORTED THE ORDERS OF THE AO AND FAA. 6 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. 4.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT TRIBUNAL HAS RESTORED BACK THE MATTER OF 14A DISALL OWANCE TO THE FILE OF THE AO FOR FRESH CONSIDERATION,WHEREAS IN THE YEAR 2009-10 ISSUE WAS PARTLY ALLOWED IN FAVOUR OF THE ASSESSEE.IN THE CASE BEFORE US,UNDISPUTED FACTS ARE THAT THE AS SESSEE HAD NOT MAINTAINED SEPARATE ACCOUNTS FOR EXEMPT AND TAXABLE INVESTMENTS,THAT COMMONS FUNDS W ERE USED FOR MAKING INVESTMENTS,THAT IT HAD EARNED EXEMPT INCOME AND THE PROVISIONS OF SECT ION 14A AND RULE 8D WERE APPLICABLE IN THE YEAR.IT IS TRUE THAT FROM THE BALANCE SHEET IT TRAN SPIRES THAT IT HAD SUFFICIENT OWN FUND FOR MAKING INVESTMENT.BUT,IT WAS POSITION AS ON 31 ST MARCH OF THE YEAR UNDER APPEAL AND THE INVESTMENTS WERE NOT MADE ON THAT DAY.WHETHER OR NOT TAX FREE F UNDS WERE AVAILABLE ON THE DATE OF MAKING INVESTMENT CAN BE PROVED BY THE CASH FLOW STATEMENT .IT IS NOT KNOWN THAT WHETHER THE ASSESSEE HAD SUPPLIED THE CASH FLOW STATEMENT BEFORE THE AO/ FAA.THEIR ORDERS ARE SILENT ABOUT IT.IT IS ALSO FOUND THAT THE AO HAD MADE DISALLOWANCE UNDER RULE 8D(2)(III) AND IN THE ORDER FOR 2009-10 THERE IS NO DISCUSSION ABOUT IT. WE HAVE PERUSED THE JUDGMENT OF RELIANCE UTILITY AN D POWER LTD.(SUPRA).IN THAT MATTER A FINDING OF FACT WAS GIVEN BY THE TRIBUNAL THAT ASSESSEE HAD INTEREST FREE FUNDS AND THEREFORE HONBLE COURT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESS EE.IN THE CASE UNDER APPEAL THERE IS NO SUCH FINDING OF FACT.SECONDLY,AS STATED EARLIER FOR DECI DING THE ALLOWABILITY OF SUCH CLAIM ,STUDY OF CASH FLOW STATEMENT IS NECESSARY.THEREFORE, IN OUR OPINION,IN THE INTEREST OF JUSTICE,MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR FRESH AD JUDICATION AFTER AFFORDING A REASONABLE OPPORTU -NITY OF HEARING TO THE ASSESSEE.GROUND NO.3 IS ALL OWED,IN PART,IN FAVOUR OF THE ASSESSEE. 5. LAST GROUND OF APPEAL DEALS WITH PRIOR PERIOD EXPEN SES OF RS.11,820/-.DURING THE ASSESSMENT PROCEEDINGS AO FOUND THAT THE ASSESSEE WAS FOLLOWIN G MERCANTILE SYSTEM OF ACCOUNTING,THAT EXPENSES RELATING TO INTERNET BILL OF HATHWAY CABLE FOR PRIOR PERIOD WERE DEBITED TO ITS P & L ACCOUNT.HE HELD THAT AS PER THE MERCANTILE SYSTEM O F ACCOUNTING ONLY THOSE EXPENDITURE THAT HAD CRYSTALLIZED DURING A PARTICULAR YEAR WERE ALLOWABL E,THAT EXPENDITURE INCURRED BY THE ASSESSEE WAS NOT FOR THE YEAR UNDER APPEAL NOR WAS IT CRYSTA LLIZED DURING THE YEAR.FINALLY,HE MADE AN ADDITION OF RS.11,820/- TO THE TOTAL INCOME OF THE ASSESSEE.IN THE APPELLATE PROCEEDINGS,THE ASSESSEE CONTENDED THAT BILL WAS RECEIVED DURING TH E YEAR UNDER CONSIDERATION,THAT WAS THE REASON FOR BOOKING THE EXPENDITURE IN THE YEAR UNDER APPEA L.FAA HELD THAT THE ASSESSEE WAS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING,THAT EXPENSES W ERE TO BE BOOKED IN THE YEAR OF PROCUREMENT OF SERVICES OR GOODS.HE UPHELD THE ORDER OF THE AO. 5.1. BEFORE US,IT WAS ARGUED THAT BILL FOR INTERNET SERV ICE WAS RECEIVED AFTER THE END OF THE LAST FY., THAT INCURRING OF EXPENDITURE WAS NOT DOUBTED BY THE AO OR THE FAA,THAT EXPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE.AR RELIED UPON THE JUDGMENT OF MAHANAGAR GAS LIMITED(42TAXMANN.40)DELIVERED BY THE HONBLE BOMBAY HIGH COURT.DR SUPPORTED THE ORDER OF THE FAA. 5.2. WE HAVE HEARD THE RIVAL SUBMISSIONS.WE FIND THAT AO OR THE FAA HAVE NOT RAISED ANY QUESTION ABOUT INCURRING OF EXPENDITURE.THERE ONLY OBJECTION IS THAT THE ASSESSEE WAS FOLLOWING A PARTICULAR SYSTEM OF ACCOUNTING AND IT SHOULD NOT H AVE BOOKED THE EXPENDITURE OF EARLIER YEAR WHILE PREPARING THE ACCOUNTS FOR THE CURRENT YEAR.T HERE IS NO DOUBT THAT AN ASSESSEES,FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING SHOULD TAKE CAR E OF ALL EXPENSES OF THAT PARTICULAR AY.,WHILE PREPARING THE BOOKS OF ACCOUNTS OF THE RELEVANT PER IOD. 7 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. BUT,THERE ARE CERTAIN CIRCUMSTANCES WHERE THE LIABI LITIES/EXPENSES CRYSTALISE AFTER THE 31 ST MARCH OF THAT PARTICULAR YEAR.PRIOR PERIOD EXPENSES ARE N OT A NEW PHENOMENON IN THE FIELD OF ACCOUNTING OR TAXATION LAWS. COURTS ARE OF THE VIEW THAT IF THE EXPENDITURE INCURRED IN PARTICULAR YEAR ARE CRYSTALLISED IN A SUBSEQUENT YEAR BECAUSE OF CERTAIN REASONS, SAME CANNOT BE DISALLOWED ONLY ON THE GROUND THAT ASSESSEE IS FOLLOWING MERCA NTILE SYSTEM OF ACCOUNTING. IF ASSESSEE IS FOLLOWING A PARTICULAR SYSTEM OF ACCOUNTING AND IT IS NOT DISTORTING INCOME, TREATMENT OF PRIOR PERIOD EXPENSES LOSES ITS IMPORTANCE.THE ALLOWABILI TY OF SUCH EXPENDITURE IN A PARTICULAR YEAR HAS TO BE DECIDED IN PRAGMATIC MANNER. IN THE CASE OF KHAITAN CHEMICALS AND FERTILIZERS LT D.(307ITR150)HONBLE DELHI HIGH COURT HAS DEALT THE ISSUE OF PRIOR PERIOD EXPENSES AS UNDER: ACCOUNTING STANDARDS ARE RECOMMENDED BY THE INSTIT UTE OF CHARTERED ACCOUNTANTS OF INDIA. ACCOUNTING STANDARD (AS-5) STIPULATES THAT PRIOR PE RIOD ITEMS ARE INCOME OR EXPENSES WHICH ARISE IN THE CURRENT PERIOD AS A RESULT OF ERRORS OR OMISSIONS IN THE PREPARATION OF THE FINANCIAL STATEMENTS OF ONE OR MORE PRIOR PERIODS.THEREFORE, THE INCOME OR EXPENSES RELATABLE TO PRIOR PERIOD ITEMS ARE THOSE WHICH ARISE IN THE CURRENT P ERIOD, I.E., THE PERIOD RELEVANT FOR THE PURPOSES OF COMPUTING THE NET PROFIT OR LOSS. PRIOR PERIOD I TEMS ARE TO BE INCLUDED IN THE DETERMINATION OF NET PROFIT OR LOSS. IF A PRIOR PERIOD ITEM IS AN EX PENSE, IT WOULD GO TOWARDS REDUCING THE NET PROFIT OR INCREASING THE LOSS, AS THE CASE MAY BE. ON THE OTHER HAND, IF THE PRIOR PERIOD ITEM IS AN INCOME, IT WOULD GO TOWARDS INCREASING THE NET PROF IT OR REDUCING THE LOSS, AS THE CASE MAY BE. THE SAME IS THE POSITION WITH EXTRAORDINARY ITEMS W HICH MAY BE INCOME OR EXPENSES. PRIOR PERIOD ITEMS AND EXTRAORDINARY ITEMS FORM PART OF T HE NET PROFIT OR LOSS. PARAGRAPH 7 OF AS-5 STIPULATES THAT THE NET PROFIT OR LOSS, INTER ALIA, COMPRISES EXTRAORDINARY ITEMS AND SHOULD BE DISCLOSED ON THE FACE OF THE STATEMENT OF PROFIT AN D LOSS. PARAGRAPH 15 OF AS-5 STIPULATES THAT THE NATURE AND AMOUNT OF PRIOR PERIOD ITEMS SHOULD BE S EPARATELY DISCLOSED IN THE STATEMENT OF PROFIT AND LOSS IN A MANNER THAT THEIR IMPACT ON THE CURR ENT PROFIT OR LOSS CAN BE PERCEIVED. TWO APPROACHES HAVE BEEN INDICATED IN PARAGRAPH 19 OF T HE SAID ACCOUNTING STANDARD (AS-5). THE NORMAL APPROACH IS TO INCLUDE THE PRIOR PERIOD ITEM S IN THE DETERMINATION OF NET PROFIT OR LOSS FOR THE CURRENT PERIOD. THE ALTERNATIVE APPROACH IS TO SHOW SUCH ITEMS IN THE STATEMENT OF PROFIT AND LOSS AFTER DETERMINATION OF THE CURRENT NET PROFIT OR LOSS. THE OBJECT IS TO INDICATE THE EFFECT OF SUCH ITEMS ON THE CURRENT PROFIT OR LOSS. SIMILARLY,IN THE CASE OF SAURASHTRA CEMENT & CHEMIC AL INDUSTRIES LTD.,THE HONBLE GUJARAT HIGH COURT ALSO DISCUSSED THE ISSUE OF PRIOR PERIOD EXPE NSES AT LENGTH AND HAS HELD AS UNDER: MERELY BECAUSE AN EXPENSE RELATES TO A TRANSACTION OF AN EARLIER YEAR IT DOES NOT BECOME A LIABILITY PAYABLE IN THE EARLIER YEAR UNLESS IT CAN BE SAID THAT THE LIABILITY WAS DETERMINED AND CRYSTALLIZED IN THE YEAR IN QUESTION ON THE BASIS O F MAINTAINING ACCOUNTS ON THE MERCANTILE BASIS. IN EACH CASE WHERE THE ACCOUNTS ARE MAINTAINED ON T HE MERCANTILE BASIS IT HAS TO BE FOUND IN RESPECT OF ANY CLAIM, WHETHER SUCH LIABILITY WAS CR YSTALLIZED AND QUANTIFIED DURING THE PREVIOUS YEAR SO AS TO BE REQUIRED TO BE ADJUSTED IN THE BOO KS OF ACCOUNT OF THAT PREVIOUS YEAR. IF ANY LIABILITY, THOUGH RELATING TO THE EARLIER YEAR, DEP ENDS UPON MAKING A DEMAND AND ITS ACCEPTANCE BY THE ASSESSEE AND SUCH LIABILITY HAS BEEN ACTUALL Y CLAIMED AND PAID IN THE LATER PREVIOUS YEARS IT CANNOT BE DISALLOWED AS DEDUCTION MERELY ON THE BAS IS OF THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS AND THAT IT RELATED TO A TRANSACTI ON OF THE PREVIOUS YEAR. THE TRUE PROFITS AND GAIN OF A PREVIOUS YEAR ARE REQUIRED TO BE COMPUTED FOR THE PURPOSE OF DETERMINING TAX LIABILITY. THE BASIS OF TAXING INCOME IS ACCRUAL OF INCOME AS WELL AS ACTUAL RECEIPT. IF FOR WANT OF NECESSARY MATERIAL CRYSTALLIZING THE EXPENDITURE IS NOT IN EX ISTENCE IN RESPECT OF WHICH SUCH INCOME OR EXPENSES RELATE, THE MERCANTILE SYSTEM DOES NOT CAL L FOR ADJUSTMENT IN THE BOOKS OF ACCOUNT ON ESTIMATE BASIS. IT IS ACTUALLY KNOWN INCOME OR EXP ENSES, THE RIGHT TO RECEIVE OR THE LIABILITY TO PAY WHICH HAS COME TO BE CRYASTALLIZED, WHICH IS TO BE TAKEN INTO ACCOUNT UNDER THE MERCANTILE SYSTEM OF MAINTAINING BOOKS OF ACCOUNT. AN ESTIMATED INCO ME OR LIABILITY, WHICH IS YET TO BE CRYSTALLIZED, CAN ONLY BE ADJUSTED AS A CONTINGENCY ITEM BUT NOT AS AN ACCRUED INCOME OR LIABILITY OF THAT YEAR. TO ILLUSTRATE, WE FIND FROM THE DETAILS OF THE EXPE NSES THAT CERTAIN EXPENSES RELATED TO THE FEES PAID 8 ITA NO. 1191/MUM/2012 M/S. INDIA CAPITAL MARKETS P. LTD. TO THE EXPERTS, OUT OF POCKET EXPENSES INCURRED BY THE CONSULTATION FIRM AND DISCHARGE OF LIABILITY ON ACCOUNT OF DEMURRAGE CLAIMED BY THE PORT AUTHORI TIES. SUCH ITEMS WITHOUT INVESTIGATION INTO THE FACTS ABOUT THE CRYSTALLIZATION OF SUCH DUES CA NNOT BE DISALLOWED MERELY ON THE GROUND THAT THEY RELATE TO TRANSACTIONS PERTAINING TO AN EARLIE R ACCOUNTING YEAR. FROM THE ABOVE,IT IS CLEAR THAT PRIOR PERIOD EXPENS ES CAN BE ALLOWED IF BILLS ARE RECEIVED IN SUBSEQUENT YEAR.AS-5 STIPULATES THAT SUCH EXPEND ITURE SHOULD BE GIVEN A PARTICULAR TREATMENT IN THE ACCOUNTS.IN THE AUDIT REPORT,FACT OF PRIOR PERIOD EXPENSES WAS MENTIONED AS REQUIRED BY THE AS-5.THEREFORE,CONSIDERING THE F ACTS AND CIRCUMSTANCES OF THE CASE,WE ARE OF THE OPINION THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR THE EARLIER YEAR IS AN ALLOWABLE EXPENDITURE FOR THE CURRENT YEAR.FOLLOWIN G THE ABOVE MENTIONED JUDGMENTS OF THE HONBLE HIGH COURTS AND REVERSING THE ORDER OF THE FAA,WE DECIDE GROUND NO.4 IN FAVOUR OF THE ASSESSEE. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 3,4 $5, 6 '7 * 0 1,4 #8, * , 9: . ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH MAY,2014. '1 * ./% ; <'$ 28 , 2014 / * 0 = SD/- SD/- ( . . / H.L.KARWA ) ( ! / RAJENDRA ) / PRESIDENT '# '# '# '# /ACCOUNTANT MEMBER / MUMBAI, <'$ /DATE: 28 . 05.2014 SK '1 '1 '1 '1 * ** * (,? (,? (,? (,? @?%, @?%, @?%, @?%, / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / &' 2. RESPONDENT / ()&' 3. THE CONCERNED CIT (A) / A B , 4. THE CONCERNED CIT / A B 5. DR I BENCH, ITAT, MUMBAI / ?C0 (,$ , . . . 6. GUARD FILE/ 0 3 )?, )?, )?, )?, (, (,(, (, //TRUE COPY// '1$ / BY ORDER, D / 9 DY./ASST. REGISTRAR , /ITAT, MUMBAI