2016 (7) TMI 918 - HC - Income Tax

Addition on account of VRS payment - ITAT confirming the order of the CIT(A) in deleting the addition - Held that - It is not in dispute that the law applicable to the assessee is as at 1st April, 2000. The revenue sought to rely upon Section 35DDA which was introduced with effect from 1st April, 2001. Therefore, the contention of the revenue failed both before the CIT(A) and before the learned Tribunal. The circular referred to in the question does not help the revenue either. Mrs. Gutgutia has not relied upon that circular. In that view of the matter, the question no.1 is answered in the affirmative in favour of assessee Addition of sundry expenses - Held that - When the disallowance was made purely on the basis of conjecture there was no alternative to the CIT(A) or to the learned Tribunal but to delete the disallowance. - Decided in favour of assessee

Issues:
1. Challenge to judgment and order of Income Tax Appellate Tribunal for assessment year 2000-01.
2. Deletion of addition on VRS payment.
3. Disallowance of sundry expenses.
4. Exclusion of certain payments from foreign airlines and diplomats.
5. Restoration of matter back to assessing officer for further enquiry on aircraft maintenance expenses.

Analysis:

1. The main issue in this case was the challenge to the judgment and order passed by the Income Tax Appellate Tribunal for the assessment year 2000-01. The questions of law were formulated, including the justification for confirming the order of the CIT(A) in deleting certain additions and disallowances made by the assessing officer.

2. Regarding the deletion of addition on account of VRS payment, the revenue contended that the expenditure was in the nature of capital expenditure and should not have been deleted. However, the Court noted that the law applicable to the assessee was as of 1st April, 2000, and the revenue's reliance on Section 35DDA introduced in 2001 was not valid. The circular mentioned did not support the revenue's case, leading to the affirmation of the deletion of the addition.

3. The issue of disallowance of sundry expenses amounting to ?2 crores was also raised. The assessing officer had made the addition based on estimation without providing any concrete basis for the estimate. The CIT(A) and the Tribunal both found the disallowance to be based on conjecture and surmises, leading to its deletion. The Court upheld this decision, stating that when an addition is made purely on conjecture, it must be deleted.

4. The matter of excluding certain payments from foreign airlines and diplomats was also raised. The Tribunal had restored the issue back to the assessing officer for further enquiry. The Court found no reason to interfere with this decision, stating that the Tribunal was entitled to view that further enquiry on facts was required. Therefore, the matter was left for the assessing officer to decide in accordance with the law.

5. Lastly, the restoration of the matter back to the assessing officer for further enquiry on aircraft maintenance expenses was also addressed. The Court found no interference necessary in this matter as well, affirming the Tribunal's decision to require a further enquiry on the facts. The appeal was dismissed, and the parties were directed to bear their own costs.

In conclusion, the judgment addressed various issues related to additions, disallowances, and further enquiries, ultimately upholding the decisions made by the CIT(A) and the Tribunal in deleting certain additions and disallowances while allowing further enquiry on specific matters.

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