2022 (2) TMI 1309 - HC - Income Tax

Disallowance u/s 14A r.w.r. 8D - disallowance of foreign travel expenses claim for additional depreciation and commission to foreign and Indian agents - HELD THAT - With regard to the commission paid to four entities abroad the discussion on the said issue - After noting the details of the overseas commission paid to four parties the tribunal has referred to the documents and certificates in the form of paper book and came to the conclusion that the documents conclusively proved that the commission agent has rendered services to the assessee outside India. Commission paid to the other agents abroad were considered and after taking note of the facts the tribunal was satisfied that the commissioner was right in granting relief to the assessee. With regard to the commission paid to the Indian agents for export sales - After noting the facts the tribunal held that the commission is not paid to any related party of the assessee. We find that no substantial question of law arises for consideration on the three issues. Restriction of disallowance u/s 14A the tribunal has discussed the said issue and after noting the facts directed the assessing officer to disallow only a sum u/s 14A on the ground that the disallowance under the said provision cannot exceed the exempt income.

Summary

Issues:
1. Disallowance of foreign trade expenses
2. Deletion of disallowances on additional depreciation
3. Disallowance under Section 14A of the Income Tax Act
4. Deletion of addition on account of commission to foreign and Indian agents

Analysis:

Issue 1: Disallowance of foreign trade expenses
The appeal was against the Tribunal's order on disallowance of Rs. 42,65,989 on foreign trade expenses. The Tribunal affirmed the CIT(A)'s decision to delete the addition. The Tribunal conducted a detailed factual analysis, considering documents and details noted by the CIT(A), and granted relief based on the evidence provided. The Court found no substantial question of law on this issue.

Issue 2: Deletion of disallowances on additional depreciation
The Tribunal also deleted disallowances of Rs. 12,45,778 on additional depreciation. The Court noted that the Tribunal upheld the CIT(A)'s decision without citing cogent reasons. However, the Court found that the department had relied on the assessing officer's findings, and no substantial question of law arose.

Issue 3: Disallowance under Section 14A of the Income Tax Act
The Tribunal restricted the disallowance under Section 14A of the Act to Rs. 1,486, emphasizing that the disallowance cannot exceed the exempt income. The Court agreed with the Tribunal's approach and found no error, concluding that no substantial question of law arose on this issue.

Issue 4: Deletion of addition on account of commission to foreign and Indian agents
Regarding the addition of Rs. 3,73,78,133 on commission to foreign and Indian agents, the Tribunal examined the issue in detail. The Tribunal reviewed documents and certificates provided as evidence of services rendered, both abroad and in India. After thorough consideration, the Tribunal concluded that the commission payments were justified. The Court concurred with the Tribunal's findings and dismissed the appeal, stating that no question of law, let alone a substantial one, was present for consideration.

In conclusion, the Court upheld the Tribunal's decision, dismissing the revenue's appeal and closing the connected application.