2022 (4) TMI 1571 - AT - Income Tax

Disallowing services charges payments - CIT(A) restricted addition to the extent of 30% - assessee seeks to delete the entire service charges disallowance whereas the Revenue's endeavour is to restore the assessment findings rejecting this entire claim - HELD THAT - We find no merit in the Revenue's instant argument as it is clear from a perusal of the assessment findings that the assessing authority had itself admitted the relevant factual position herein to be similar as in AY 1999-2000 2022 (4) TMI 1073 - ITAT PUNE wherein the taxpayer has already succeeded. We therefore adopt judicial consistency to accept assessee's impugned service charge claim in entirety and allow its corresponding ground. Disallowing travelling expenditure - HELD THAT - We make it clear first of all that the CIT(A) himself held in his detailed discussion that the assessee had been including these travelling charges as part and parcel of service charges only till AY 1999-2000 which have been separately accounted in the impugned assessment year onwards. We reiterate that the assessee's service agreement issues have already been decided against the department all along as well in the preceding paragraphs. That being the case, we find no substance in the Revenue's vehement arguments supporting the impugned disallowance in principle since the very claim stands accepted all along in principle. Quantification of the impugned travelling expenses disallowance - Although the assessee had to indeed perform its reimbursement obligation regarding travelling expenditure to payee group, we hardly see any reason for the latter entity's employees right to claim the same regarding their family members as well. This is coupled with the fact that there is no complete reconciliation between the corresponding travelling expenses vis- -vis the assessee's business requirement involving the group company employees' travel to sufficiently discharge its onus of having incurring this expenditure wholly and exclusively for the purpose of the business. Faced with this situation, we find that a lump sum travel expenditure disallowance of 10% on estimation basis would be just and proper. Ordered accordingly. The assessee succeeds in the remaining 90% travelling expenditure component. Necessary computation shall follow as per law. Depreciation disallowance on coolers - not only the learned lower authorities had accepted the assessee's identical depreciation claim pertaining to cooler provides to the bottlers/vendors by allowing the same in preceding years throughout but also the learned counsel sought to invite our attention that the accepted written down value thereon as on 01.04.1999 held as eligible for depreciation. And that the dispute therein is only for the coolers which have been added in the asset schedule of the relevant previous year. We thus observe that there is hardly any justification on the part of the learned lower authorities to adopt a different approach in the impugned assessment year's depreciation claim only for the newly added coolers installed at bottlers/vendors premises. Decided in favour of assessee.

Summary

Issues Involved:
1. Disallowance of service charges.
2. Disallowance of traveling expenditure.
3. Disallowance of depreciation claims on coolers.

Issue-wise Detailed Analysis:

1. Disallowance of Service Charges:
The primary issue in these appeals is the disallowance of service charges. The assessee, M/s. Coca Cola India Pvt. Ltd., claimed substantial service charges which were partly disallowed by the Assessing Officer (AO) and the Commissioner of Income Tax (Appeals) [CIT(A)]. The Tribunal noted that similar disallowances had been made in earlier assessment years but were decided in favor of the assessee by the Tribunal. The Tribunal reiterated that the service charges paid by the assessee to CCI Inc. for services rendered to bottlers were deductible under section 37(1) of the Act. The Tribunal followed the principle of judicial consistency and deleted the entire disallowance of service charges for the relevant assessment years, thereby allowing the assessee's appeals on this issue and dismissing the Revenue's cross appeals.

2. Disallowance of Traveling Expenditure:
The second issue pertains to the disallowance of traveling expenditure. The AO disallowed traveling expenses reimbursed to CCI Inc. employees, arguing that these were not incurred wholly and exclusively for the assessee's business. The CIT(A) upheld the disallowance, stating there was no contractual obligation justifying the reimbursement. The Tribunal, however, found that the assessee had been including these traveling charges as part of service charges in earlier years, which had been accepted. The Tribunal allowed 90% of the traveling expenses, disallowing only 10% on an estimation basis due to lack of complete reconciliation between the expenses and the business requirement. Thus, the assessee's appeals were partly allowed on this issue.

3. Disallowance of Depreciation Claims on Coolers:
The third issue involves the disallowance of depreciation on coolers. The AO disallowed the depreciation claim on coolers provided to bottlers/vendors, stating that these were not used for the assessee's business. The CIT(A) upheld this disallowance. The Tribunal, however, noted that similar depreciation claims had been allowed in earlier years. The Tribunal observed that there was no justification for adopting a different approach for the current assessment year. Therefore, the Tribunal deleted the disallowance of depreciation on coolers and allowed the assessee's appeals on this issue.

Conclusion:
The Tribunal allowed the assessee's appeals partly for all the assessment years involved, specifically allowing the service charges in full, traveling expenses to the extent of 90%, and depreciation on coolers in full. The Revenue's cross appeals were dismissed. The Tribunal emphasized judicial consistency and the principle of allowing legitimate business expenses under section 37(1) of the Act. The order was pronounced in the open court on 29th April 2022.