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2021 (11) TMI 1094 - AT - Income TaxDisallowance u/s.14A r.w.r. 8D - Necessity of recording satisfaction - HELD THAT - Since the facts and circumstances on this issue for the year under consideration are similar to those of earlier years 2019 (12) TMI 627 - ITAT PUNE , respectfully following the precedent and specifically noting that the AO did record satisfaction in the assessment order, as further elaborated by the ld. CIT(A) in the impugned order, we hold that due satisfaction was recorded. Insofar as the calculation of disallowance at 0.5% under Rule 8D(2)(iii) is concerned, it is seen that the assessee itself computed such amount during the course of assessment proceedings and placed the same before the AO. To sum up, the ground raised by the assessee is dismissed. Nature of receipt - capital or revenue receipt - taxability of receipt by the assessee under Package Scheme of Incentives (PSI) 2001 as revenue receipt chargeable to tax - HELD THAT - The Hon ble Bombay High court in Pr. CIT Vs. M/s. Welspun Steel Ltd. 2019 (3) TMI 397 - BOMBAY HIGH COURT has taken similar view in deciding question no. (b) raised before it and held that the Tribunal was justified in holding that subsidy cannot be considered as a payment directly or indirectly to meet any portion of the actual cost. The assessee in that case also got subsidy for industrial development. Similar view has also been taken in M/s. Alkoplus Producers Pvt. Ltd. and Another 2019 (4) TMI 558 - ITAT PUNE - It is overt that subsidy, in the prevailing circumstances, does not qualify for reduction from the cost of assets in pursuance of Explanation 10 to section 43(1) of the Act. We, therefore, overturn the alternative view also as canvassed in the impugned order on this score. This ground is allowed. Allowability of Aircraft expenses - CIT(A) upheld the disallowance at 25% of the gross amount of expenses - HELD THAT - While sustaining the disallowance, the ld. CIT(A) took gross figures of aircraft expenses. The assessee has placed on record a calculation showing that out of total expenses of Rs.560.06 lakh the assessee recovered a sum of Rs.344.80 lakh from outside parties etc., leading the net amount of expenses at Rs.215.26 lakh. The disallowance is, therefore, directed to be restricted to 15% of the net expenses after verification of the calculation shown by the assessee - Decided partly in favour of assessee. Disallowance of Provision made for warranty - CIT(A) allowed part relief by restricting the disallowance - HELD THAT - similar issue arose for consideration before the Tribunal in the earlier years. A copy of the Tribunal order for the assessment year 2011-12 2019 (12) TMI 627 - ITAT PUNE has been placed on record, which shows that the assessee s claim has been accepted in entirety for the amount of provision created by it. Respectfully following the precedent, we allow the assessee s ground and dismiss that of the Revenue. Disallowance of weighted deduction claimed u/s.35(2AB) - assessee claimed the weighted deduction - Department of Scientific and Industrial Research (DSIR), New Delhi approving authority, reduced the amount of eligible deduction - HELD THAT - Amount of weighted deduction should be allowed in entirety irrespective of the fact that it was not approved by the DSIR, subject to verification of the claim by the AO in terms of the afore referred judgment of SUN PHARMACEUTICAL INDUSTRIES LTD. 2017 (8) TMI 933 - GUJARAT HIGH COURT . Depreciation at 60% on Printers, UPS and other allied items - HELD THAT - It is seen that similar issue came up for consideration before the Tribunal for the assessment year 2011-12 2019 (12) TMI 627 - ITAT PUNE . Relevant discussion has been made at page 54 of the paper book in which the opinion of the ld. CIT(A), in increasing the rate of depreciation, has been upheld. Respectfully following the same, we dismiss this ground. Addition u/s.40A(2) on account of commission paid to Directors - AO treated the payment to Directors as excessive to this extent as per the mandate of section 40A(2), which was deleted in the first appeal - HELD THAT - As seen that similar issue came up for consideration before the Tribunal in the assessee s own case for the assessment year 2011-12. Respectfully following the precedent, we uphold the impugned order on this score.
Issues:
1. Disallowance under section 14A of the Income-tax Act, 1961 2. Taxability of subsidy received under Package Scheme of Incentives (PSI) 2001 3. Disallowance of Aircraft expenses 4. Provision made for warranty 5. Disallowance of weighted deduction claimed under section 35(2AB) 6. Depreciation rate on Printers, UPS, and allied items 7. Addition under section 40A(2) on commission paid to Directors Issue 1: Disallowance under section 14A of the Income-tax Act, 1961: The AO disallowed Rs.2,14,30,844 under section 14A due to exempt income earned from investments. The CIT(A) upheld the disallowance. The Tribunal found that the AO recorded proper satisfaction before applying Rule 8D. The Tribunal also noted that the assessee had computed the disallowance amount themselves. Since similar disallowances were made in previous years and proper satisfaction was recorded, the Tribunal dismissed the assessee's appeal. Issue 2: Taxability of subsidy received under Package Scheme of Incentives (PSI) 2001: The AO treated the subsidy received as revenue income, contrary to the assessee's claim of it being a capital receipt. The CIT(A) upheld the AO's decision, deviating from earlier years' decisions. The Tribunal disagreed with the CIT(A) and held that the subsidy should be treated as a capital receipt. The Tribunal also discussed the application of Explanation 10 to section 43(1) and overturned the alternative view taken by the CIT(A). Issue 3: Disallowance of Aircraft expenses: The AO disallowed 25% of Aircraft expenses, which the CIT(A) reduced to 15%. The Tribunal upheld the CIT(A)'s decision based on precedents from earlier years. The disallowance was directed to be calculated on the net expenses after considering recoveries made by the assessee. The Tribunal dismissed the Revenue's appeal and partly allowed the assessee's appeal. Issue 4: Provision made for warranty: The AO disallowed the provision made for warranty, which the CIT(A) partially allowed. The Tribunal, following precedent, allowed the assessee's ground and dismissed the Revenue's appeal based on previous decisions. Issue 5: Disallowance of weighted deduction claimed under section 35(2AB): The AO disallowed an excess amount claimed as weighted deduction under section 35(2AB). The Tribunal, considering earlier decisions, held that the weighted deduction should be allowed entirely, subject to verification by the AO as per the judgment of the Gujarat High Court. Issue 6: Depreciation rate on Printers, UPS, and allied items: The AO allowed depreciation at 15% instead of the assessee's claim of 60%. The CIT(A) restored the assessee's claim, and the Tribunal upheld this decision based on previous rulings. Issue 7: Addition under section 40A(2) on commission paid to Directors: The AO disallowed a portion of commission paid to Directors under section 40A(2), which was deleted in the first appeal. The Tribunal, following precedent, upheld the deletion of the addition. In conclusion, the Tribunal partly allowed the assessee's appeal and dismissed the Revenue's appeal, addressing various issues related to disallowances, taxability of subsidies, expenses, provisions, deductions, depreciation rates, and additions under different sections of the Income-tax Act, 1961. The Tribunal's decisions were based on proper satisfaction recorded by the AO, consistency with previous rulings, and legal interpretations of relevant provisions.
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