ITAT Annual Digest [Part 58]

Top Stories ITAT Annual Digest [Part 58] By Amal Michael – On January 14, 2024 3:02 pm – 14 mins read This yearly digest summarises all the ITAT stories published at taxscan.in in 2023 Failure to produce Confirmation Letter and Supporting Evidence of Promotion Expenses Incurred towards Medicine Agency: ITAT upholds Addition M/s. Lincoln Pharmaceuticals Ltd. vs Deputy Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 2171 The Ahmedabad Bench of Income Tax Appellate Tribunal (ITAT) has upheld the addition as the assessee had failed to produce confirmation letter and promotion expenses incurred towards the medicine agency. The two-member Bench of Annapurna Gupta, (Accountant Member) and Siddhartha Nautiyal, (Judicial Member) dismissed the appeal filed the assessee holding that the assessee in the instant facts, had not been able to produce any supporting evidence with respect to promotion expenses incurred towards “Medicine Agency, and no reply / confirmation from the aforesaid party had been received. Rate of tax applicable to Domestic Banking Companies are not Same as Foreign Banking Company: ITAT BNP PARIBAS vs Assistant Commissioner of Income tax CITATION: 2023

TAXSCAN (ITAT) 2169 The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that the rate of tax applicable to domestic banking companies is not the same as foreign banking companies. Tax levied at a higher rate in the case of a foreign company is not to be regarded as a violation of the non-discrimination clause. Referred to the Explanation in the Section 90, inserted in the IT Act with retrospective effect from 01-04- 1962 as per which the higher tax rate in case of foreign company, should not be regarded as violation of nondiscrimination clause. After considering the facts submitted by both parties, the two member bench of Padmavathy S,(Accountant Member ) and Vikas Awasthy, (Judicial Member)held that tax levied at a higher rate in the case of a foreign company is not to be regarded as a violation of the non-discrimination clause. There fore rate of tax applicable to domestic banking companies is not the same as foreign banking companies Non-Compliance behavior of assessee before Lower Authorities during Appellate Proceedings: ITAT directs to deposit cost of Rs 25,000/- In

PM relief Fund M/s Tera Naturals Resources Pvt. Ltd. vs ITO CITATION: 2023 TAXSCAN (ITAT) 2170 The Income Tax Appellate Tribunal (ITAT) Mumbai bench directed to deposit cost of Rs 25,000/- in Prime Minister Relief Fund (PMRF) due to non-compliance behavior of assessee before lower authorities during the appellate proceedings After considering the facts submitted by both parties, the two member bench of Waseem Ahmed ,(Accountant Member ) and T.R. Senthil Kumar, (Judicial Member) directed to deposit cost of Rs 25,000/- in Prime Minister Relief Fund (PMRF) due to non-compliance behavior of assessee before lower authorities during the appellate proceedings . Sanjay Deshmukh,counsel appeared for the revenue and Djaran V Gandhi appeared for assessee. Interest amount paid by Indian branch to Foreign Head Office is not taxable in India under India France DTAA: ITAT BNP PARIBAS vs Assistant Commissioner of Income tax

CITATION: 2023 TAXSCAN (ITAT) 2169 The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that the interest amount paid by the Indian Branch to Foreign Head office was not taxable in India under India France Double Taxation Avoidance Agreement (DTAA). After considering the facts submitted by both parties, the two member bench of Padmavathy S (Accountant Member) and Vikas Awasthy (Judicial Member) held that interest paid by the Indian branch/PE to the head office/GE is not taxable in India. Treatment of legal cost incurred by Hindustan Unilever in respect of merger of erstwhile Industrial Perfumes: ITAT directs Readjudication Hindustan Unilever Limited vs Addl.Commissioner of Income-tax CITATION: 2023 TAXSCAN (ITAT) 2158 The Income Tax Appellate Tribunal (ITAT) Mumbai bench directed readjudication in respect of treatment of legal cost incurred by Hindustan Unilever on merger of erstwhile Industrial Perfumes

Limited. After considering the facts submitted by both parties, the two member bench of Padmavathy S (Accountant Member) and Chandra Vikas Awasthy (Judicial Member) observed that expenditure as per the provisions of Section 35DD of the Income Tax Act is required to be examined by the A.O on the basis of relevant material after providing opportunity to the assessee. Speculative loss not eligible for set off against Non-Speculation Business Income: ITAT M/s Vision Millenium Exports P. Ltd. vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2175 The Mumbai bench of the Income Tax Appellate Tribunal (ITAT) held that the speculative losses are not eligible for set off against the non-speculation business income. The Two-member bench comprising of Om Prakash Kant (Accountant member) and Kavitha Rajagopal (Judicial member) held that no documentary evidence or explanation has been given by the assessee to controvert the finding of the lower authorities. Mere Wrong Claim by itself not Ipso Facto invite Penalty u/s 271(1)(c) of Income Tax Act if Bona Fides of Assessee’s Actions are

Beyond Reasonable Doubt: ITAT DCIT vs Sarva Haryana Gramin Bank CITATION:2023 TAXSCAN (ITAT) 2173 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that mere wrong claim by itself would not ipso facto invite the imposition of penalty under Section 271(1)(c) of the Income Tax Act 1961, if bona fides of assessee’s actions were beyond the reasonable doubt. The two-member Bench of Saktijit Dey, (Vice President) and Pradip Kumar Kedia, (Accountant Member) observed that the imposition of penalty had flown from the additions/disallowances as listed in the preceding paragraph. Two of such disallowances/additions stood deleted in the quantum proceedings and therefore, the very basis for imposition of penalty would not survive any more. The Bench observed that the amalgamation had taken place resulting in the stationery becoming unusable and obsolete and bona fides of the losses claimed were sufficiently proved and onus that lay upon the assessee had been primarily discharged on the parameters of penalty proceedings. Failure to Distinct between Electric Fitting Installed in Factory and Office Premises: ITAT Allows Higher Depreciation to Office Electric Fittings Super Alloy Castings P. Ltd vs

ACIT CITATION: 2023 TAXSCAN (ITAT) 2174 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has allowed higher depreciation to office electronic fittings on failure to distinguish between the electric fitting installed in factory and office premises. The two-member Bench of Saktijit Dey (Vice President) and Pradip Kumar Kedia (Accountant Member) allowed the appeal filed by the assessee aside on this issue and directing the assessing officer to reverse the disallowance holding that the Assessing Officer himself had accepted the higher claim of 15% in Assessment Year 2014-15 and palpable merit had been found in the plea of the assessee towards correctness of higher depreciation claimed on electric fittings installed at the factory premises. Increasing Value of Closing Stock of Raw Materials and Packing Materials Unutilized Balance of Modvat: ITAT directs Readjudication Hindustan Unilever Limited vs Addl.Commissioner of Income-tax CITATION: 2023 TAXSCAN (ITAT) 2158 The Income Tax Appellate Tribunal (ITAT) Mumbai bench directs readjudication related to the action of

Assessing Officer for increasing the value of closing stock of the assessee during the assessment proceedings by an amount being unutilised Modvat. After considering the facts submitted by both parties, the two member bench of Padmavathy S (Accountant Member) and Chandra Vikas Awasthy (Judicial Member) directed readjudication related to the action of Assessing Officer for increasing the value of closing stock of the assessee during the assessment proceedings by an amount being unutilised Modvat. ITAT Dismisses Appeal by Income Tax Department as NCLT Admitted Application filed by Assessee u/s 14 of IBC ACIT vs M/s Dharitrimaa Urja Pvt. Ltd CITATION: 2023 TAXSCAN (ITAT) 2178 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has dismissed the appeal filed by the Income Tax department as the National Company Law Tribunal (NCLT) had admitted the application filed by the assessee under Section 14 of the Insolvency and Bankruptcy Code

(IBC) 2016. The two-member Bench of N . K . Billaiya, (Accountant Member) and Yogesh Kumar U.S., (Judicial Member) considering the fact that the NCLT in IB-408 (ND-2022) vide order dated 09/06/2023 had declared moratorium consequently, as per Section 14 of the Insolvency and Bankruptcy Code 2016, it was order to prescribe the registration of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement decree or order in any court of law Tribunal arbitration, penal or other authorities. Deduction Allowable on Warranty expenses of motor vehicles ascertained based on actual expenses incurred on settlement of warranty schemes in earlier years: ITAT Dy. Commissioner of Income Tax vs M/s. Mahindra Two Wheelers Ltd CITATION: 2023 TAXSCAN (ITAT) 2133 The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that deduction allowable on warranty expenses of motor vehicles was ascertained based on the actual expenses incurred on settlement of warranty schemes in earlier years. The tribunal observed that provision made by the assessee was ascertained based on the actual expenses incurred on settlement of warranty schemes in earlier years and was based on the scientific exercise of making provision for warranty clauses for each and every vehicle sold on a regular basis year on year. After considering the facts submitted by both parties, the two member bench of G.S. Pannu, (President) and Sandeep Singh Karhai

(Judicial Member) upheld the deletion of disallowance made on account of provision for warranty. Therefore, the bench dismissed the appeal filed by the revenue. Determination of Income of assessee on certain Estimate not sufficient to constitute Concealed Income: ITAT deletes Penalty BhawarlalTarachandji Jain vs ITO CITATION: 2023 TAXSCAN (ITAT) 2134 The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that determination of income of assessee on certain estimate was not sufficient to constitute concealed income. Hence, the bench deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act. After considering the facts submitted by both parties, the two member bench of Amarjit Singh (Accountant Member) and Aby T Varkey (Judicial Member) held that determination of income of assessee on certain estimates was not sufficient to support the contention that the assessee had concealed his income. Therefore, the bench allowed the appeal filed by the assessee. Deeming Provision of Section 69 doesn’t apply when Assessee provides a proper Explanation regarding

Unrecorded Sale: ITAT Shri Baljinder Kumar vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2135 The Chandigarh bench of the Income Tax Appellate Tribunal (ITAT) held that the deeming provision of Section 69 of the Income Tax Act, 1961 doesn’t apply when the assessee provides a proper explanation regarding the unrecorded sale. The Two-member bench comprising of Aakash Deep Jain (Vice-President) and Vikram Singh Yadav (Accountant member) held that the name of the person, the amount receivables, date, etc has been duly recorded in the diary, thus, the statement of the assessee duly stand corroborated by the contents of the diary so found during the course of survey. Deduction u/s 80G of Income Tax Act can be claimed when Assessee satisfies all the Conditions: ITAT Optum Global Solutions (India) Private Limited CITATION: 2023 TAXSCAN (ITAT) 2137 The Hyderabad bench of the Income Ta Appellate Tribunal (ITAT) held that the deduction under Section 80G of the Income Tax Act, 1961 can be claimed when the assessee satisfies all the conditions.  The Two-member bench comprising of Rama Kanta Panda (Vice-President) and K. Narasimha Chary (Judicial member) held that the assessee satisfied the conditions of Section 80G of the Income Tax Act, the assessee is entitled to claim deduction under Section 80G of the Income Tax Act in respect of such donations which formed part of the spend towards CSR. Thus, the appeal of the assessee was allowed. Guarantee Fees paid to

Govt of Gujarat in consideration of Guarantee issued by it for Repayment of Unsecured loan is Revenue Expenditure:ITAT Gujarat State Electricity Corporation Limited CITATION: 2023 TAXSCAN (ITAT) 2138 The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench held that guarantee fees paid to the government of Gujarat in consideration of guarantee issued by it for the repayment of unsecured loan is revenue expenditure. After considering the facts submitted by both parties, the two member bench of Waseem Ahmed (Accountant Member) and T.R. Senthil Kumar (Judicial Member) held that guarantee fees paid to the government of Gujarat in consideration of guarantee issued by it for the repayment of unsecured loans are revenue expenditure. Therefore the bench dismissed the appeal filed by the revenue and partly allowed the appeal filed by the assessee. Nature and Source of Unrecorded Transactions and Nexus with Business Proved: ITAT Quashes Revision Order Shri Jasjot Singh Garcha vs The Pr. CIT CITATION: 2023 TAXSCAN (ITAT) 2140 The Chandigarh Bench of Income Tax Appellate Tribunal (ITAT) held that no reasons were recorded by the PCIT (Principal Commissioner of Income Tax) for holding assessment order by AO (Assessing Officer) to be erroneous and for application of Section 115 BBE of the Income Tax Act 1961, thus the Bench set aside revisionary order passed under Section 263 of Income Tax Act. The Two Member Bench comprising of Aakash Deep Jain, Vice President and

Vikram Singh Yadav, Accountant Member observed that there is no findings recorded by the PCIT as to how the deeming provisions are applicable in the instant case and the order so passed by the AO is erroneous, and it was held that merely stating that there was survey operation at the business premises of the assessee and provisions of Section 115BBE Income Tax Act are attracted, the same can be a basis for exercise of jurisdiction under section 263 of the Income Tax Act. Gain/Loss arising out of Foreign Exchange Fluctuation is Recognised as Profit or Loss Accrued During Relevant Previous Year: ITAT reinstates Income Tax Addition Deputy Director of Income Tax vs Standard Chartered Bank CITATION: 2023 TAXSCAN (ITAT) 2139 The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that the gain arising on account of revaluation of the outstanding forward contract as on the last of the previous year as per the provisions of Accounting Standard 11 would have to be recognized as profits of the relevant previous year. The Bench comprising of Prashant Maharishi, Accountant Member and Rahul Chaudhary, Judicial Member relied on the decision of Supreme Court Commissioner of Income Tax, Delhi Vs. Woodward

Governor India Pvt. Ltd. where it was held that the loss/gain arising on account of foreign exchange fluctuation is to be recognized in the Profit & Loss Account for the relevant previous year. Mere Delivery Contract provided for Delivery of Securities to the Broker is not Sufficient to Claim Loss in Stock Exchange: ITAT Allows Appeal Deputy Director of Income Tax vs Standard Chartered Bank CITATION: 2023 TAXSCAN (ITAT) 2139 The Mumbai Bench of Income Tax Appellate Tribunal (ITAT) held that mere fact that the delivery contract provides for delivery of the securities to the broker is not sufficient and does not meet the requirements of Section 15 of the Securities Contract (Regulation) Act, 1956 (SCRA). The Bench comprising of Prashant Maharishi, Accountant Member and Rahul Chaudhary, Judicial Member stated that Section 15 of SCRA deals with a contract between a member of a recognized stock exchange and a non-member. Therefore, the conclusion drawn by the CIT(A) that the provisions of Section 15 of SCRA shall not apply to transaction between the Assessee and broker is not correct. Treatment of interest income/miscellaneous receipts earned from employees of Gujarat State Electricity Corporation through advancing loan and facilities: ITAT directs Re-adjudication Gujarat State Electricity Corporation Limited vs DCIT CITATION: 2023

TAXSCAN (ITAT) 2142 The Income Tax Appellate Tribunal (ITAT) Ahmedabad bench directed re-adjudication in respect of treatment of interest income /miscellaneous receipts earned from employees of Gujarat Electricity Cor[oration through advancing loan and facilities. After considering the facts submitted by both parties, the two member bench of Waseem Ahmed (Accountant Member) and T.R. Senthil Kumar (Judicial Member) remanded the matter to the file of the CIT(A) for reconsideration. Guarantee fee paid to holding company for loan advanced by assessee company to third party is business expediency: ITAT allows deduction u/s 37 of Income Tax Act DCIT vs M/s. Rabo India Finance Ltd CITATION: 2023 TAXSCAN (ITAT) 2143 The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that guarantee fees paid to the holding company for loan advanced by assessee company to third party is business expediency. Therefore the bench allowed the deduction claimed under Section 37 of the Income Tax Act . After considering the facts submitted by both parties, the two member bench of S. Rifaur Rahman,(Accountant Member) and Rahul Chaudhary, (Judicial Member) held that guarantee fees paid to the holding company for loan advanced by assessee company to third party is business expediency thusIt should be allowable as deduction under Section 37 of the

Income Tax Act. Receipts that constitute business receipts cannot be held as unaccounted money of the assessee: ITAT directs re-computation Smt.Saraniyaa Karthick vs ITO CITATION: 2023 TAXSCAN (ITAT) 2144 The Chennai bench of the Income Tax Appellate Tribunal (ITAT) held that receipts constitute business receipts and nothing else and therefore, the same could not be held to be unaccounted money of the assessee. The two member bench consisting of V. Durga Rao (Judicial member) and Manoj Kumar Aggarwal (Accountant member) held that In most cases, the clients opted for travelling at later dates. Thus, such receipts constitute business receipts and nothing else and therefore, the same could not be held to be unaccounted money of the assessee. Under such circumstances, making full addition thereof could not be held to be justified. Incurring expenditure for the purpose of expansion of business is allowable u/s 271(C) of Income

Tax Act: ITAT Tourism Finance Corporation of India Ltd vs Addl. CIT CITATION: 2023 TAXSCAN (ITAT) 2145 The Delhi bench of the Income Tax Appellate Tribunal (ITAT) held that NBFC being financial company tried to enter in to banking business and for this purpose the assessee incurred expenditure on preparation of a report on transformation of company from financial institution to banking company, which was not beyond the scope of working. The two bench member consisting of Pradip Kumar Kedia (Accountant member) and Chandra Mohan Garg (Judicial member) held that the assessee had incurred expenditure for the purpose of expansion of its business from financial activities to banking activities and thus the same was for the purpose of business of assessee and thus allowable. ITAT sets aside revision order in the absence of finding error in the order of AO in allowing assessee’s claim earned from sale of land as being in the nature of capital gains u/s 54EC Shri Laxmanbhai Balchanddas Patel vs Pr. Commissioner of Income-tax CITATION: 2023 TAXSCAN (ITAT) 2146 The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) held that there is no basis with the PCIT to hold that the facts relating to the

transaction in sale of land were indicative of the same being in the nature of adventure in the nature of trade. The two member bench consisting of Madhumita Roy (Judicial member) and Annapurna Gupta (Accountant member) held that, in the absence of any finding of error in the order of the Assessing Officer allowing the assessee’s claim of gains earned from sale of land as being in the nature of capital gains, the order passed by the PCIT under Section 263 of the Income Tax Act is liable to be set aside. No Penalty u/s 271(1)(c) Income Tax Act shall levied if Bonafide Assessee revised and added Interest Income: ITAT Pramila Tarneja vs The DCIT Circle CITATION: 2023 TAXSCAN (ITAT) 2147 The Income Tax Appellate Tribunal (ITAT) Delhi bench held that the penalty under Section 271(1)(c) of the Income Tax Act should not be levied if the assessee bonafide revised and added the interest income. After considering the facts submitted by both parties, the two member bench of Pradip Kumar Kedia (Accountant Member) and Chandra Mohan Garg (Judicial Member) directed AO to deleted the penalty imposed under Section 271(1)(c) of the Income Tax Act and held that the interest income declared in revised return does not amount to concealment of income. Therefore the bench allowed the appeal filed by the assessee. Transfer Pricing Adjustment shall not be made on

account of Intra-Group Services available from AE for Manufacturing & Trading Services, if proven with Documentary Evidences: ITAT Lord India Private Limited vs Assistant Commissioner of Income Tax CITATION: 2023 TAXSCAN (ITAT) 2148 The Income Tax Appellate Tribunal (ITAT) Mumbai bench held that transfer pricing adjustment should not be made on account of Intra -Group Services available from Associate Enterprise (AE) for manufacturing and trading services, if the assessee proved the same with documentary evidence. After considering the facts submitted by both parties, the two member bench of Amarjit Singh (Accountant Member) and Amit Shukla (Judicial Member) observed that the assessee has properly demonstrated objective analysis of each of the Intragroup services rendered with document evidence. Hence, transfer pricing adjustment should not be made on account of Intra-Group Services available from Associate Enterprises(AE) for manufacturing and trading service , if the assessee proves the same with documentary evidence. Disallowance of Interest on Delayed TDS Deposit and Service Tax without Bifurcation: ITAT directs Re-Adjudication Apeejay Pvt. Ltd. vs D.C.I.T CITATION: 2023

TAXSCAN (ITAT) 2150 The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) has directed re-adjudication as the disallowance of interest on delayed Tax Deducted at Source (TDS) deposit and service tax was without bifurcation The two-member Bench of Manish Borad, (Accountant Member) Sonjoy Sarma, (Judicial Member) observed that the tribunal while considering the appeal had already deleted the addition made under Section 2(22)(e) of the Income Tax Act and also deleted the disallowance made under Section 14A read with Rule 8D of Income Tax Rules, for Assessment Year 2017-18. Delayed remittance of employees’ contribution due to mis-utilization of funds: ITAT upholds disallowance Krystal Integrated Services Pvt Ltd Krystal House vs DCIT CITATION: 2023 TAXSCAN (ITAT) 2154 The Income Tax Appellate Tribunal (ITAT) Mumbai bench upheld the disallowance made by the lower authority towards the delayed remittance of employees contribution by reason of mis-utilization of funds. After considering the facts submitted by both parties, the two member bench of Padmavathy S (Accountant Member) and Vikas Awasthy (Judicial Member) held that assessee is not entitled for claim of deduction qua the amount deposited towards employees contribution on account of provident fund / ESI after due date prescribed under the respective Act. Penalty u/s 271B not Leviable when Audit Completed within Reasonable Time of Appointment of Auditors by Regulatory Authority: ITAT Directs Re- Adjudication M/s.Gramin Sewa Sahakari Samiti Maryadit vs The Income Tax Officer CITATION: 2023 TAXSCAN (ITAT) 2149 The Raipur Bench of Income tax Appellate Tribunal (ITAT) has directed re-adjudication as penalty under Section 271B of the Income Tax Act,1961 would not be leviable when audit has been completed within a reasonable time by the appointment of auditors by the regulatory

authority. The two-member Bench of Ravish Sood, (Judicial Member) and Arun Khodpia, (Accountant Member) observed that there was nothing on the part of assessee which made assessee responsible for the delay. The appeal filed by the assessee was partly allowed restoring the issue to the files of AO to verify the documents and accordingly, in terms of our aforesaid observations herein either enforce or vacate the penalty imposed under Section 271B of the Income Tax Act in the present case. Addition cannot be Deleted merely for Mentioning Section 68 Instead of Section 69 of Income Tax Act when Cash Deposit of Rs. 49,000/- Found Each Time in Bank Account: ITAT Smt. Gloria Eugenia Rynjah Banerji vs ITO CITATION: 2023 TAXSCAN (ITAT) 2130 The Delhi Bench of Income Tax Appellate Tribunal (ITAT) has held that the addition could not be deleted merely for mentioning Section 68 instead of Section 69 of the Income Tax Act , 1961 when the cash deposit of Rs.49,000/-had been found each time in the bank account of assessee. The two-member Bench of N. K. Billaiya, (Accountant Member) and Yogesh Kumar Us, (Judicial Member) dismissed the appeal filed by the assessee holding that “The logic behind deposit of cash of Rs. 49,000/- each time in the bank account was also not justified. To sum up, the factual matrix is not commensurate with human probability. On such unbelievable facts the additions cannot be deleted merely on technical ground that the AO mentioned section 68 instead of section 69 of the Act.” Income Tax Deduction U/S80P cannot be denied on ground of Delay in Submitting Audit Report by Govt Auditor: ITAT Uttam Dairy Staff Co- operative Credit & Supply Society Limited vs AO CITATION: 2023 TAXSCAN (ITAT) 2151 The Ahmedabad bench of

the Income Tax Appellate Tribunal (ITAT) he that CIT(A) was unjustified in denying right to claim deduction under Section 80P of the Income Tax Act on grounds of Government auditor failing to give audit report on time. The single member bench consisting of Suchritra Kamble held that the Assessing Officer as well as the CIT(A) was not right in disallowing the claim of deduction under Section 80P of the Income Tax Act to the assessee only on the ground of delay in filing the return. Thus the appeal was allowed.

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