ACIT, New Delhi V. M/s. PepsiCo India Holdings Pvt. Ltd., Gurgaon

ITA 4102/DEL/2015

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9006 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 6 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-01-2020
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 22-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K N MEHTA
• Assessee Lawyers: SULEKHA VERMA
• Keywords: Depreciation; Business expenditure; Earning of tax free income; Valuation report; Rule 8D
• Section: 143(3); 14A; 115JB; 73; 13; 32; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F NEW DLEHI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER ITANO. 4077/DEL/2015 ASSESSMENT YEAR: 2008-09 PEPSICO INDIA HOLDINGS PVT. LTD., VS. DCIT, CIRCLE 14(1), GLOBAL BUSINESS PARK, TOWER A, NEW DELHI. 4 TH FLOOR, M.G. ROAD, GURGAON. PAN AAACP 1272G ITA NO. 4102/DEL/2015 ASSESSMENT YEAR: 2008-09 DCIT, CIRCLE 14(1), VS. PEPSICO INDIA HOLDINGS PVT . LTD., NEW DELHI. GLOBAL BUSINESS PARK, TOWER A, 4 TH FLOOR, M.G. ROAD, GURGAON. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI K.N. MEHTA, ADVOCATE RESPONDENT BY: SMT. SULEKHA VERMA, CIT/DR DATE OF HEARING: 05/12/2019 DATE OF ORDER : 14/01/2020 ORDER PER K. NARASIMHA CHARY, J.M. AGGRIEVED BY THE ORDER DATED 20/3/2015 IN APPEAL NO . 439/11-12 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A PPEALS)-7, DELHI 2 (LD. CIT(A)), FOR THE ASSESSMENT YEAR 2008-09, IN THE CASE OF M/S PEPSICO INDIA HOLDINGS (P) LTD (THE ASSESSEE), BO TH THE ASSESSEE AND REVENUE PREFERRED THESE APPEALS. SINCE THESE APPEAL S EMANATE FROM THE SAME ORDER, WE FIND IT JUST AND CONVENIENT TO DISPO SE OF BY WAY OF THIS COMMON ORDER. 2. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF SNACKS, AERATED AND NO N-AERATED BEVERAGE PRODUCTS AND EXPORT AND TRADING OF SUCH PRODUCTS. F OR THE ASSESSMENT YEAR 2008-09 IT HAD FILED ITS RETURN OF INCOME ON 3 0/9/2008 SHOWING THE TOTAL INCOME AS NIL AFTER SETTING OFF BROUGHT FORWA RD DEPRECIATION/LOSS OF RS. 1,01,40,76,789/-UNDER THE NORMAL PROVISIONS OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) AND RS. NIL UNDER SECTIO N 115 JB OF THE ACT AFTER SETTING OFF LOWER OF THE BROUGHT FORWARD DEPRECIATI ON/BUSINESS LOSS, PROFITS. ASSESSEE REVISED THE RETURN ON 1/9/2009 DE CLARING A TOTAL INCOME OF NIL AFTER SETTING OFF BROUGHT FORWARD DEPRECIATI ON/LOSS OF RS.104,75,87,646/-AND ALSO NIL UNDER SECTION 115JB OF THE ACT. ASSESSMENT WAS COMPLETE BY ORDER DATED 30/12/2011 U NDER SECTION 143(3) OF THE ACT AFTER MAKING SEVERAL ADDITIONS WH ICH INCLUDES, FOR THE PURPOSE OF THESE APPEALS, RS. 4,67,23,766/-UNDER SE CTION 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES1962 (THE RULES), DISALLOWANCE ON ACCOUNT OF PROVISION FOR LEAVE ENCA SHMENT AND PROVISION FOR GRATUITY WHILE COMPUTING THE BOOK PROFITS U/S. 115JB OF THE ACT, DISALLOWANCE ON ACCOUNT OF FURNISHING EXPENSES OF T ROPICANA BEVERAGE MERGER, DISALLOWANCE OF EXCESS DEPRECIATION ON COMP UTER PERIPHERALS, DISALLOWANCE OF DEPRECIATION ON NON-COMPETE FEES UN DER NORMAL 3 COMPUTATION AND THE DISALLOWANCE OF DEPRECIATION ON ACCOUNT OF MERGER WITH THE TROPICANA BEVERAGE COMPANY UNDER NORMAL CO MPUTATION. 3. AGGRIEVED BY SUCH ADDITIONS ASSESSEE PREFERRED A PPEAL BEFORE THE LD. CIT(A). LD. CIT(A) BY WAY OF IMPUGNED ORDER GAV E PARTIAL RELIEF TO THE ASSESSEE WHILE SUSTAINING CERTAIN ADDITIONS. HENCE, BOTH THE ASSESSEE AND THE REVENUE ARE IN THESE APPEALS BEFORE US. ITA 4077/DEL/2015 4. THOUGH THE ASSESSEE PREFERRED SEVERAL GROUNDS, A T THE TIME OF ARGUMENTS SUBMITTED THAT GROUNDS NO. 7 AND 8 ARE NO T PRESSED. GROUNDS NO. 1, 2, 4, 5 AND 6 RELATED TO THE DISALLOWANCE UN DER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES UNDER NORMAL PRO VISIONS OF THE ACT; WHEREAS GROUND NO. 3 IS THE CHALLENGE TO SUCH A DIS ALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES UNDER SECTION 115JB OF THE ACT. 5. INSOFAR AS THE ADDITION UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RULES UNDER NORMAL PROVISIONS OF THE ACT IS CONCERNED, THE SUBMISSION ON BEHALF OF THE ASSESSEE IS THAT THE AS SESSEE HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO DIVIDEND IN COME, BUT SUE MOTO THE ASSESSEE HAD DISALLOWED A SUM OF RS. 1,01,36,42 7/-UNDER RULE 8D(2)(III) OF THE RULES, WHEREAS THE LEARNED ASSESS ING OFFICER MADE AN ADDITION UNDER RULE 8D(2)(II) OF THE RULES ALSO TO THE TUNE OF RS.4,49,72,528/-AND UNDER RULE 8D(2)(III) OF THE RU LES TO THE TUNE OF RS.1,18,87,665/-WHICH CAME TO RS. 5,68,60,193/-. BY REDUCING SUCH AN AMOUNT BY THE SUE MOTO DISALLOWANCE OF THE ASSESSEE , LEARNED ASSESSING OFFICER ASSESSED THE TOTAL DISALLOWANCE TO THE TUNE OF RS. 4,67,23,766/-. IT 4 IS FURTHER SUBMITTED THAT THE LD. CIT(A) IN THE IMP UGNED ORDER DELETED THE DISALLOWANCE UNDER RULE 8D(2)(II) OF THE RULES BUT SUSTAINED THE DISALLOWANCE UNDER RULE 8D(2)(III) OF THE RULES. 6. LD. AR FURTHER SUBMITTED THAT DURING THE YEAR TH E TOTAL EXEMPT INCOME EARNED BY THE ASSESSEE WAS ONLY RS.37,13,348 /-. ACCORDING TO THE LD. AR THE DISALLOWANCE CANNOT EXCEED THE EXEMPT IN COME. FOR THIS PROPOSITION LD. AR PLACED RELIANCE ON THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF JOINT INVE STMENTS PRIVATE LIMITED VS. CIT (2015) 59 TAXMANN.COM 295 (DELHI) AND ALSO THE TRIBUNALS DECISION IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 IN ITA NO. 3461/DEL/2013 BY ORDER DATED 02/06/2016. 7. THERE IS NO DISPUTE AS TO THE QUANTUM OF THE DIV IDEND EARNED DURING THE YEAR AND IT IS RS.37,13,348/-. IN JOINT INVESTMENTS PRIVATE LIMITED (SUPRA), HONBLE JURISDICTIONAL HIGH COURT HELD THAT WHERE THE ASSESSEE DECLARED TAX-EXEMPT INCOME AND VOLUNTARILY DISALLOWED A CERTAIN EXPENDITURE UNDER SECTION 14A, IN THE ABSEN CE OF ANY REASON WHY THE ASSESSEES CLAIM FOR DISALLOWANCE UNDER SECTION 14A HAD TO BE REJECTED, LEARNED ASSESSING OFFICER WAS NOT JUSTIFI ED IN COMPUTING THE DISALLOWANCE. IT IS FURTHER HELD THAT BY NO STRETCH OF IMAGINATION CAN SECTION 14A OF THE ACT READ WITH RULE 8D OF THE RUL ES BE INTERPRETED SO AS TO MEAN THAT THE ENTIRE TAX EXEMPT INCOME IS TO BE DISALLOWED, THE WINDOW FOR DISALLOWANCE IS INDICATED IN SECTION 14A AND IS ONLY TO THE EXTENT OF DISALLOWING EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO THE TAX EXEMPT INCOME, AND THIS PROPORTION ARE POR TION OF THE TAX EXEMPT INCOME SURELY CANNOT SWALLOW THE ENTIRE AMOU NT. 5 8. FURTHER IN ASSESSEES OWN CASE, A COORDINATE BEN CH OF THIS TRIBUNAL HELD THAT THE DISALLOWANCE IN ANY CASE CANNOT EXCEE D THE EXEMPT INCOME. LD. DR DOES NOT DISPUTE THIS PROPORTION OF LAW AS L AID DOWN BY THE HONBLE HIGH COURT AND IN A NUMBER OF DECISIONS BY THE COORDINATE BENCHES OF THIS TRIBUNAL. WE, THEREFORE, WHILE RESP ECTFULLY FOLLOWING THE SAME ANSWER THE ISSUE IN FAVOUR OF THE ASSESSEE AND ALLOW GROUND NO. 1, 2 AND 4 TO 6. 9. BY WAY OF GROUND NO. 3, ASSESSEE CHALLENGED THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF T HE RULES. WHILE COMPUTING THE PROFITS UNDER SECTION 115JB OF THE AC T AND WHILE PLACING RELIANCE ON THE DECISION OF THE SPECIAL BENCH OF TH IS TRIBUNAL IN THE CASE OF ACIT VS. VIREET INVESTMENT (P) LTD REPORTED IN ( 2017) 82 TAXMANN.COM 415 (DELHI-TRIB.) (SB) IT IS SUBMITTED BY THE LD. A R THAT THE DISALLOWANCE UNDER SECTION 14A OF THE ACT READ WITH RULE 8D OF T HE RULES CANNOT BE ADDED WHILE COMPUTING PROFIT AS PER SECTION 115JB A S EXPLANATION 2TO THAT SECTION DOES NOT SPECIFICALLY MENTIONS SECTION 14A OF THE ACT, AND THEREFORE, NO DISALLOWANCE CAN BE MADE UNDER SECTIO N 14A OF THE ACT WHILE COMPUTING BOOK PROFITS UNDER MAT PROVISIONS. 10. INVIREET INVESTMENT (P) LTD (SUPRA), THE SPECIA L BENCH DEALT WITH THIS ASPECT AT LENGTH AND HELD THAT THE COMPUTATION UNDER CLAUSE (F) OF EXPLANATION 1 TO SECTION 115 JB (2) IS TO BE MADE W ITHOUT RESORTING TO THE COMPUTATION AS CONTEMPLATED UNDER SECTION 14A OF TH E ACT READ WITH RULE 8D OF THE RULES. THERE IS NO DISPUTE ON THIS P ROPOSITION. WE THEREFORE, WHILE RESPECTFULLY FOLLOWING THE SAID DE CISION ANSWER THE ISSUE IN FAVOUR OF THE ASSESSEE. 6 ITA NO. 4102 /DEL/ 2015 (REVENUES APPEAL) 11. IN REVENUES APPEAL, GROUNDS NO. 1 AND 8 ARE GE NERAL IN NATURE. GROUND NO. 2 RELATES TO THE DELETION OF THE DISALLO WANCE ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT AND PROVISION FOR GR ATUITY WHILE COMPUTING THE PROFITS UNDER SECTION 115 JB OF THE A CT. 12. IT COULD BE SEEN FROM THE ASSESSMENT ORDER THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE CREATED PROVISION FOR GRATUITY TO THE TUNE OF RS. 11,30,68,439/-AND FOR LEAVE ENCASHMENT TO THE TUNE OF RS.64,21,504/-AND SUBMITTED THAT THE PROVISION FOR GRATUITY AND LEAVE ENCASHMENT WAS CREATED SCIENTIFICALLY ON THE BASIS OF ACTUARIAL VALUATION AND WERE, THEREFORE, IN THE NATURE OF ASCERTAINED L IABILITY AND PLACED RELIANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF BHARAT EARTH MOVERS VS. CIT 245 ITR 428 (SC) AND A METAL B OX COMPANY OF INDIA LTD VS. THEIR WORKMEN (1969) 73 ITR 53 (SC). 13. LEARNED ASSESSING OFFICER HOWEVER WAS OF THE OP INION THAT THE ASSESSEE HAD EQUATED AN UNASCERTAINED LIABILITY WIT H CONTINGENT LIABILITY AND ACTUARIAL VALUATION RELIED UPON BY THE ASSESSEE TO CALCULATE THE LIABILITY ON ACCOUNT OF GRATUITY IS SUBJECT TO A NU MBER OF CONDITIONS AND IS LARGELY BASED ON ESTIMATES AND PRESUMED FIGURES, TH E BASIS OF CALCULATION MIGHT BE SCIENTIFIC BUT THIS DOES NOT MAKE IT AN AC TUAL/ASCERTAINED LIABILITY. ACCORDING TO THE LEARNED ASSESSING OFFIC ER EVEN IF AN AMOUNT IS AT ALL REQUIRED TO BE SET-ASIDE FOR MEETING LIABILI TIES IN FUTURE, THE SAME CAN BE DONE BY CREATING A RESERVE RATHER THAN CREAT ING A PROVISION WHICH IS DIRECTLY CHARGED TO THE TAXABLE PROFIT. LEARNED ASSESSING OFFICER, THEREFORE, BROUGHT THESE AMOUNTS TO TAX. 7 14. AT THE OUTSET, LD. AR SUBMITTED THAT THE ASSESS ING OFFICER HAD ACCEPTED THAT THE BASIS OF CALCULATION WAS SCIENTIF IC, BUT IT WAS STILL HELD THAT THE SAME IS NOT AN ACTUAL/ASCERTAINED LIABILIT Y. HE SUBMITTED THAT A SIMILAR ISSUE HAD ARISEN IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 IN ITA NO. 834/DEL/2010 AND 2003-04 IN ITA NO. 936 /DEL/ 2012; THAT THE MATTER WAS RESTORED BACK TO THE LEARNED AS SESSING OFFICER TO VERIFY ACTUARIAL VALUATION, AND THE LEARNED ASSESSI NG OFFICER AFTER VERIFYING THE ACTUARIAL VALUATION REPORT ALLOWED TH E CLAIM OF THE ASSESSEE. HE FURTHER SUBMITTED THAT SIMILAR WAS THE CASE IN R ESPECT OF THE ASSESSMENT YEAR 2005-06 IN ITA NO. 822/DEL/2004 WHE N THE COORDINATE BENCH OF THIS TRIBUNAL REMANDED THE ISSUE TO THE FI LE OF THE LEARNED ASSESSING OFFICER. 15. THIS FACT IS NOT CONTROVERTED. WE HAVE GONE THR OUGH THE ORDERS ARE CITED BY THE LD. AR. IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2005- 06 IN ITA NO. 822/DEL/2004 ALSO THE TRIBUNAL DEALT WITH THIS ISSUE IN THE LIGHT OF THE VIEW TAKEN FOR THE EARLIER YEARS TO RE MAND ISSUE TO THE FILE OF THE LEARNED ASSESSING OFFICER FOR VERIFICATION OF T HE ACTUARIAL VALUATION. RELEVANT OBSERVATIONS OF THE TRIBUNAL READ THUS,- WE FIND THAT IN ASSESSMENT YEAR 2000-01, THE HON'BL E TRIBUNAL VIDE ITS ORDER DATED 16.07.2009 VIDE PARA 17 HAD HELD THAT P ROVISIONS FOR LEAVE ENCASHMENT WAS ASCERTAINED LIABILITY AND, THEREFORE , IT HAD ALLOWED THE SAME FOR NOT INCLUDING THE SAME FOR CALCULATION OF BOOK PROFITS. HOWEVER IT UPHELD THE INCLUSION OF GRATUITY PROVISIONS FOR PURPOSE OF CALCULATION OF MINIMUM PROFITS. ..IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, WE FOL LOWING THE ORDER OF TRIBUNAL IN ASSESSMENT YEAR 2000-01 AND 2001-02, PA RTLY ALLOW THE APPEAL OF REVENUE BY HOLDING THAT THE PROVISIONS FO R LEAVE ENCASHMENT IS ASCERTAINED LIABILITY. AS REGARDS PROVISIONS FOR GRATUITY, THE ARGUMENT OF LD. A.R. THAT IN SUBSEQUENT YEARS LD. CIT(A) HAS ALLOWED THE RELIEF AND 8 REVENUE HAS NOT FILED APPEALS, THEREFORE, ORDER OF LD. CIT(A) SHOULD BE UPHELD, DO NOT HOLD MUCH FORCE AS WE DO NOT KNOW AS TO WHETHER THERE WERE DEFECTS IN ACTUARIAL REPORT IN THOSE YEARS OR NOT. THEREFORE, FOLLOWING ASSESSMENT YEAR 2001-02, WE REMIT BACK TH E ISSUE OF GRATUITY TO THE OFFICE OF A.O. FOR READJUDICATION WHO WILL R EADJUDICATE ON THE BASIS OF FRESH ACTUARIAL REPORT IF ANY TO BE FILED BY ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THIS IS SUE IS COVERED BY THE VIEW TAKEN BY THE TRIBUNAL IN THE EARLIER ASSESSMEN T YEARS LIKE 2002-03, 2003-04 AND 2005-06. WE, THEREFORE, WHILE RESPECTFU LLY FOLLOWING THE SAME, WHILE UPHOLDING THE FINDINGS OF THE LD. CIT(A ) IN RESPECT OF THE PROVISION FOR LEAVE ENCASHMENT, REMAND THE ISSUE RE LATING TO THE VERIFICATION OF THE ACTUARIAL VALUATION IN RESPECT OF GRATUITY, TO THE FILE OF THE LEARNED ASSESSING OFFICER. 16. GROUND 3 OF REVENUES APPEAL IS COVERED BY OUR DISCUSSION ON GROUNDS NO. 1, 2 AND 4 TO 6 OF ASSESSEES APPEAL AN D IN VIEW OF THE SAME WE DISMISS THE REVENUES GROUND. 17. GROUND NO. 4 OF REVENUES APPEAL RELATED TO THE DISALLOWANCE ON ACCOUNT OF UNFURNISHED EXPENSES OF TROPICANA BEVERA GE MANAGER. IT COULD BE SEEN FROM THE IMPUGNED ASSESSMENT ORDER TH AT DURING THE YEAR M/S TROPICANA BEVERAGES COMPANY (TBC) HAS MERGED WI TH/AMALGAMATED WITH THE ASSESSEE COMPANY W.E.F. 1/4/2007 AND WHILE FILING THE ORIGINAL RETURN OF INCOME A SUM OF RS.15,37,72,000/-WAS CLAI MED TOWARDS EXPENSES RELATING TO TBC AND ADDED BACK, WHEREAS IN THE REVISED INCOME THE SAME WAS NOT SO ADDED BACK. ASSESSING OFFICER W AS OF THE OPINION THAT SUCH AN EXPENDITURE PERTAINS TO/INCURRED FOR T HE PURPOSE OF AMALGAMATION/MERGER OF THE TWO ENTITIES, AND THEREF ORE, THE SAME HAS TO BE CAPITALISED AND ONLY 1/5 THEREOF HAS TO BE ALLOW ED AS PER THE 9 PROVISIONS OF SECTION 35DD OF THE ACT. ON THIS PREM ISE LEARNED ASSESSING OFFICER ADDED BACK THE 4/5THS OF RS.15,37,72,000/-W HICH COMES TO RS.12,30,17,600/-TO THE INCOME OF THE ASSESSEE. 18. ACCORDING TO THE ASSESSEE THESE EXPENSES RELATE D TO THE OPERATION OF M/S TROPICANA BEVERAGES COMPANY AND AFTER THE ME RGER, THE ASSESSEE CLAIMED THE SAME AS A DEDUCTION UNDER SECTION 37 OF THE ACT. ASSESSEE SUBMITS THAT THIS EXPENDITURE WAS NOT, AS HELD BY T HE LEARNED ASSESSING OFFICER, INCURRED FOR THE PURPOSE OF AMALGAMATION. THE COUNSEL ARGUED THAT PURSUANT TO THE MERGER, PROFITS MADE BY THE TR OPICANA BEVERAGES WERE INCLUDED IN THE PROFITS OF THE ASSESSEE AND TR UE DISCLOSURE THEREOF WAS MADE IN SCHEDULED 16 OF THE FINANCIALS. HE FURT HER SUBMITTED THAT THE EXPENSE DISALLOWED BY THE ASSESSING OFFICER REPRESE NT THE EXPENSE INCURRED BY THE ASSESSEE ON BEHALF OF TROPICANA BEV ERAGES AND WAS SO DISCLOSED IN THE P&L ACCOUNT, BUT THE LEARNED ASSES SING OFFICER WRONGLY CONCLUDED THAT THESE EXPENSES ARE IN THE NATURE OF AMALGAMATION EXPENSES. 19. ON THIS ASPECT, LD. CIT(A) WHILE DEALING SECTIO N 35DD OF THE ACT GAVE A FINDING THAT UNLESS AND UNTIL THE EXPENDITUR E WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF AMALGAMATION, SU CH A SECTION HAS NO APPLICATION. HE FURTHER RECORDED THAT WITHOUT GIVIN G ANY FINDING AS TO THE NATURE OF EXPENDITURE TO SAY THAT IT WAS PERTAINING TO THE AMALGAMATION/MERGER AND WAS NOT A REGULAR BUSINESS EXPENDITURE, INVOCATION OF THE PROVISIONS OF SECTION 35DD OF THE ACT IS BAD. 20. BEFORE USALSO, THE ASSESSEE ARGUED THAT THE EXP ENDITURE WAS FOR DAY-TO-DAY BUSINESS ACTIVITIES AS COULD BE SEEN FRO M THE FINANCIALS OF THE 10 ASSESSEE. OUR ATTENTION IS DRAWN TO SCHEDULE 16: NO TES TO THE ACCOUNTS AT PAGE NO. 57 OF THE PAPER BOOK WHERE IT IS STATED TH AT THE TRANSACTIONS INCLUDING INCOME AND EXPENSES FOR THE YEAR ENDED 31 ST OF MARCH 2008, WHEN THE TRANSFEROR COMPANY WAS BEING RUN AND MANAG ED IN TRUST BY THE TRANSFEREE COMPANY HAS ALSO BEEN INCORPORATED IN TH ESE ACCOUNTS. THE DETAILS OF SUCH INCOME AND EXPENDITURE ARE SHOWN. O N A PERUSAL OF THE DETAILS WE ARE OF THE CONSIDERED OPINION THAT THE S UM OF RS.12,30,17,600/-DOES NOT RELATE TO THE AMALGAMATIO N EXPENSES AND ON THE OTHER HAND THEY REPRESENT THE EXPENSES INCURRED BY THE ASSESSEE ON BEHALF OF TROPICANA BEVERAGES AND WERE DISCLOSED IN THE PROFIT AND LOSS ACCOUNT. WE, THEREFORE, DO NOT FIND ANY PERVERSITY IN THE FINDINGS OF THE LD. CIT(A) AND, ACCORDINGLY, DECLINE TO INTERFERE W ITH THE SAME ON THIS ASPECT. GROUND NO. 4 OF REVENUE IS ACCORDINGLY DISM ISSED. 21. GROUND NUMBER 5 OF REVENUES APPEAL INVOLVES TH E DISALLOWANCE OF EXCESS DEPRECIATION ON COMPUTER PERIPHERALS. DUR ING THE ASSESSMENT PROCEEDINGS LEARNED ASSESSING OFFICER NOTICED THAT A NUMBER OF ITEMS LIKE PROJECT, CABINET, BATTERY, RSA TOKEN EPBAX, AIR CON DITIONER, PHOTOCOPIER, SWITCH, UPS, STORAGE, PRINTER ETC WERE ADDED TO THE BLOCK OF ASSETS AND THE DEPRECIATION WAS CLAIMED IT 60% THOUGH THEY FOR M PART OF THEIR OFFICE EQUIPMENT/FURNITURE AND FITTINGS. LEARNED ASSESSING OFFICER THEREFORE DISALLOWED THE CLAIM OF DEPRECIATION TO THE TUNE OF RS. 42,24,297/-IN RESPECT OF SUCH ITEMS THE VALUE OF WHICH WAS 93, 87 , 327/-. 22. WHILE INVITING OUR ATTENTION TO PAGE NO. 71 OF THE PAPERBOOK, IT IS SUBMITTED BY THE LD. AR THAT THE ASSESSEE ORIGINALL Y CLAIMED THE DEPRECIATION IN RESPECT OF UPS, PRINTER, PROJECT, C ABINET AND AIR 11 CONDITIONER TO THE TUNE OF RS. 48,71,847/-BUT THE A SSESSING OFFICER CONSIDERED THE UPS, PRINTER, PROJECTOR AND THE CABI NET WORTH RS. 35,61,885/- AS OFFICE EQUIPMENT WHEREAS THE ASSESSE E SUE MOTO ADMITTED CABINET AND AIR CONDITIONER TO BE THE PART OF OFFICE EQUIPMENT AND ITS VALUE IS RS. 1,05,870/-IN RESPECT OF WHICH A DISALLOWANCE OF RS. 47,642/-ALONE COULD BE MADE. 23. ON A PERUSAL OF THE DETAILS FURNISHED AS TO THE ADDITIONS MADE IN THE BLOCK OF COMPUTERS AND COMPUTER PERIPHERALS, WE FIND THAT SUCH ADDITION WAS IN RESPECT OF UPS, PRINTER, PROJECTOR, CABINET AND AIR CONDITIONER, OUT OF WHICH THE ASSESSEE SUE MOTO ADM ITS THAT CABINET AND AIR CONDITIONER DO NOT FORM PART OF THE COMPUTER PE RIPHERALS WHEREAS OTHER ITEMS, NAMELY, UPS, PRINTER AND PROJECTOR ARE CERTAINLY COMPUTER PERIPHERALS AND ADMISSIBLE FOR 60% DEPRECIATION IN VIEW OF THE DECISIONS OF THE HONBLE APEX COURT IN THE CASE OF CIT VS. M/ S BIRLASOFT LTD IN APPEAL NO. 2645/2012 AND THE DECISION OF THE HONBLE JURIS DICTIONAL HIGH COURT IN THE CASE OF CIT VS. BSES RAJDHANI POWERS LTD (DE LHI HIGH COURT) IN ITA NO. 266/2010. 24. IN THE CIRCUMSTANCES WE UPHOLD THE CONTENTION O F THE ASSESSEE THAT UPS, PRINTER AND PROJECTOR FORM PART OF THE CO MPUTER PERIPHERALS AND DIRECT THE ASSESSING OFFICER TO RECOMPUTED THE DEPRECIATION IN RESPECT OF THESE 3 ITEMS AT 60%. GROUND NUMBER 5 IS ANSWERED ACCORDINGLY. 25 GROUND NO. 6 OF REVENUES APPEAL RELATE TO THE D ISALLOWANCE OF DEPRECIATION ON THE NONCOMPETE FEES PAID BY THE ASS ESSEE. LD. CIT(A), AS A MATTER OF FACT, OBSERVED THAT DEPRECIATION ON THE CAPITALIZED 12 NONCOMPETE FEE WAS ALLOWED IN THE EARLIER YEARS AND THEREFORE THE SAME CANNOT BE DISALLOWED IN THIS YEAR. 26. WE HAVE GONE THROUGH THE DETAILS OF THE NONCOMP ETE FEES INCORPORATED AT PAGE NO. 70 OF THE PAPER BOOK WHICH CLEARLY REVEALS THAT FOR THE EARLIER YEARS, NAMELY, 2005-06 TO 2007-08 T HE REVENUE ACCEPTED THE DEPRECIATION CLAIMED AT RS. 63,54,176/-, RS. 47 ,65,632/-, AND RS.35,74,224/-, BUT IN RESPECT OF THE ASSESSMENT YE AR 2008-09 THE DEPRECIATION ON THE CAPITALISED NONCOMPETE FEE CLAI MED THAT RS.26,80,668/-WAS DISALLOWED. REASONING GIVEN BY TH E ASSESSING OFFICER TO DISALLOW THIS CLAIM IS THAT THE ISSUE HINGES ARO UND THE INTERPRETATION OF THE PHRASE BUSINESS OR COMMERCIAL RIGHTS OF SIMILA R NATURE USED IN CLAUSE (II) OF SECTION 32, AND A CAREFUL REFERENCE TO THE LANGUAGE OF THE PROVISIONS IN SECTION 32 MAKES IT CLEAR THAT ALL TH E SPECIFIC AWARDS THAT A PRECEDING GENERAL WORDS BUSINESS OR COMMERCIAL RIG HTS OF SIMILAR NATURE ARE RELATED TO A CLASS OF RIGHTS WHICH ARE INTELLECTUAL PROPERTY RIGHTS WHEREAS THE ALLEGED PAYMENT IS FOR NONCOMPET E FEE. FURTHER, ACCORDING TO THE LEARNED ASSESSING OFFICER THE RIGH T TO NONCOMPETE ACQUIRED BY THE ASSESSEE IS ONLY A RIGHT IN PERSONA M AND THEREFORE THE ASSESSEE IS NOT ENTITLED TO CLAIM DEPRECIATION ON T HE NONCOMPETE FEE. LEARNED ASSESSING OFFICER DOES NOT REFER TO ANY CHA NGE OF CIRCUMSTANCES FROM THE EARLIER YEARS SO AS TO DEVIATE FROM THE VI EW THAT WAS TAKEN FOR EARLIER YEARS. WE THEREFORE DO NOT FIND ANYTHING IL LEGALITY OR IRREGULARITY IN THE LD. CIT(A) FOLLOWING THE VIEW TAKEN FOR THE EAR LIER YEARS UNDER IDENTICAL CIRCUMSTANCES. GROUND NO. 6 IS ACCORDINGL Y DEVOID OF MERITS AND IS DISMISSED. 13 27. GROUND NO. 7 RELATES TO THE DISALLOWANCE OF DEP RECIATION ON ACCOUNT OF MERGER WITH THE TROPICANA BEVERAGES COMP ANY UNDER NORMAL COMPUTATION. ON THIS ASPECT, LD. AR SUBMITTED BEFOR E THE LD. CIT(A) THAT THIS IS AN INADVERTENT MISTAKE CREPT INTO RECORD BE CAUSE INSTEAD OF CONSIDERING THE AMOUNT OF DEPRECIATION APPEARING IN THE REVISED TAX AUDIT REPORT LEARNED ASSESSING OFFICER RELIED ON THE ORIG INAL TAX AUDIT REPORT FOR COMPUTING THE DEPRECIATION AMOUNT UNDER THE PROVISI ONS OF THE ACT. LD. CIT(A) CONSIDERING THE REVISED TAX AUDIT REPORT, DI RECTED THE ASSESSING OFFICER TO VERIFY THE RECORD AND ALLOW DEPRECIATION AS PER THE TAX AUDIT REPORT FILED PURSUANT TO MERGER OF TROPICANA BEVERA GES COMPANY WITH THE ASSESSEE. 28. FROM THE IMPUGNED ASSESSMENT ORDER, WE FIND THA T ON NOTICING THE CHART OF DEPRECIATION AS PER INCOME TAX ACT, 1961 D ULY CERTIFIED BY THE AUDITOR WHICH SHOWS THE AMOUNT OF DEPRECIATION AT R S. 1 22, 63, 09, 689/- AS AGAINST THE AMOUNT OF DEPRECIATION OF RS. 1 22, 82, 86, 789/-DIRECTED IN THE REVISED COMPUTATION OF INCOME, LEARNED ASSESSIN G OFFICER BROUGHT THE DIFFERENCE OF DEPRECIATION TO TAX. LD. CIT(A) C ONSIDERED THE ORIGINAL TAX AUDIT REPORT AND THE REVISED TAX AUDIT REPORT A ND DIRECTED THE ASSESSING OFFICER TO VERIFY FROM THE RECORDS AND AL LOW DEPRECIATION AS PER THE TAX AUDIT REPORT THAT WAS FILED PURSUANT TO THE MERGER OF TROPICANA BEVERAGES COMPANY WITH THE ASSESSEE. WE DO NOT FIND ANY REASON FOR GRIEVANCE OF THE REVENUE ON THIS ASPECT, BECAUSE TH E LD. CIT(A) DID NOT DELETE ADDITION AND ON THE OTHER HAND SHE RECTIFIED THE APPARENT MISTAKE COMMITTED BY THE LEARNED ASSESSING OFFICER. WE THER EFORE DECLINE TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) AND D ISMISS GROUND NO. 7. 14 29. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA N O. 4077/DEL/2015 IS ALLOWED AND APPEAL OF THE REVENUE IN ITA NO. 4102/D EL/2015 IS ALLOWED IN PART FOR STATISTICAL PURPOSE. PRONOUNCED IN OPEN COURT ON 14 TH JANUARY, 2020. SD/- SD/- (G.S. PANNU) (K. NARASIMHA CHARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 14/01/2020 AKS