2017 (3) TMI 1679 - HC - Income Tax

Claim of commission and brokerage u/s 37 - Held that - The contentions which are raised by the department is required to be considered and the same has been considered at length. The basic contention is that the Tribunal while discussing the matter has observed that in the previous year the department itself has accepted it and was not challenged. Apart from that, the commission which has been paid was paid by account payee and the same was verified. The commission which has been paid from accounts was also verified by the department. In that view of the matter, we are of the opinion that books of account are not rejected and the same is accepted. Thus the view taken by the Tribunal is just and proper and the first issue is required to be answered in favour of the assesseee and against the department. Sales tax incentive as a capital receipt - constructive payment for the purpose of section 43B - Held that - For Section 43B of the Act, in our opinion, in view of para 9 of the judgment of Delhi High Court in Commissioner of Income Tax Vs. Ram Pistons & Rings Ltd. (2008 (5) TMI 631 - DELHI HIGH COURT), the view taken by the Tribunal is just and proper and this issue is also required to be answered in favour of the assessee and against the department. Section 80JJAA claim permanency is not there and increase is there. The Tribunal while considering the same has taken into consideration the provisions of that Section and rightly granted the benefit in favour of the assessee. Therefore that issue is also required to be answered in favour of the assessee and against the department. Regarding Section 43B of the Act, establishment and research is always for the purpose of benefit of the business. In that view of the matter, the said issue is also required to be answered in favour of the assessee and against the department.

Issues Involved:
1. Allowance of commission and brokerage under Section 37.
2. Allowance of depreciation and additional depreciation under Section 32.
3. Treatment of sales tax incentive as a capital receipt.
4. Claim under Section 80JJAA without being mentioned in the return.

Detailed Analysis:

1. Allowance of Commission and Brokerage under Section 37:
The department contended that the commission and brokerage claims were unjustified as there was no proper material on record, particularly when purchasers stated no agents were involved. The Tribunal, however, found that the commission agents rendered services, evidenced by agreements and payments through cheques. The Tribunal's decision was based on substantial documentary evidence, identifying and verifying the agents, and confirming the services rendered. The Tribunal also noted that similar payments were made in previous years without material changes in facts. The High Court upheld the Tribunal's view, stating that the books of account were not rejected and the commission paid was verified, thus answering the issue in favor of the assessee.

2. Allowance of Depreciation and Additional Depreciation under Section 32:
The department argued that the pick and place machine was not solely used for in-house research and development but also for business purposes, thus questioning the allowance of depreciation. The Tribunal's decision to allow the claim was based on the understanding that the machine's use for business purposes did not negate its eligibility for depreciation. The High Court agreed with the Tribunal, emphasizing that the establishment and research activities benefit the business, thus answering this issue in favor of the assessee.

3. Treatment of Sales Tax Incentive as a Capital Receipt:
The department argued that the sales tax incentive should be treated as a constructive payment under Section 43B. The Tribunal, relying on the Gujarat High Court's decision in Commissioner of Income Tax-III Vs. Nirma Ltd., held that the incentive was meant to attract capital investment and was thus a capital receipt. The High Court upheld this view, noting that the incentives were aimed at ensuring the development of backward areas and generating employment, thus answering the issue in favor of the assessee.

4. Claim under Section 80JJAA:
The department contended that the claim under Section 80JJAA was unjustified as it was not mentioned in the return and the employment expenses were not permanent. The Tribunal granted the benefit, considering the provisions of the section and the permanency of the employment increase. The High Court upheld the Tribunal's decision, noting that the increase in employment was permanent and the provisions were rightly applied, thus answering this issue in favor of the assessee.

Conclusion:
The High Court dismissed all appeals except D.B. Income Tax Appeal No. 238/2016, which was not admitted. Each issue was thoroughly considered and decided in favor of the assessee, affirming the Tribunal's decisions and rejecting the department's contentions.

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