2018 (8) TMI 1058 - AT - Income Tax

Addition on account of duty credit scrips received but not utilized - Held that - assessee had not undertaken any import of goods during years under consideration which is an admitted position. In our considered view, income does not accrue until imports are made and raw materials are consumed by assessee. - CIT(A) has rightly deleted the additions - it is observed that assessee had not undertaken any import of goods during years under consideration which is an admitted position. In our considered view, income does not accrue until imports are made and raw materials are consumed by assessee. - Decided against the revenue. Disallowance u/s 14A - suo moto disallowance made by assessee - disallowance regarding exempt income - exclusion of the investments made by tenets group concerns/subsidiary companies which were made to acquire controlling interest or to serve the business interest of assessee. - Held that - We are therefore inclined to consider the plea of assessee by setting aside the issue back to Ld.AO for re-computation of disallowance under section 14A having regards to the decision of Hon ble Supreme Court in the case of Maxxop investments Ltd vs CIT 2018 (3) TMI 805 - SUPREME COURT OF INDIA

Summary

Issues:
1. Revenue's appeal against the deletion of addition on duty credit scrips.
2. Revenue's appeal on depreciation rate of computer peripherals.
3. Assessee's Cross Objection on disallowance under section 14A.

Issue 1: Revenue's appeal against the deletion of addition on duty credit scrips:
The Revenue contended that the CIT (Appeals) erred in deleting the addition of a specific amount made on account of duty credit scrips received but not utilized. The Revenue argued that such scrips, providing free foreign exchange to the assessee, are taxable under section 28 of the Income Tax Act. However, the Tribunal dismissed the Revenue's appeal, citing a lack of material contrary to the findings of the CIT (Appeals) and referencing a Supreme Court decision. The Tribunal upheld the deletion of the addition based on the absence of imports and consumption of raw materials by the assessee during the relevant years.

Issue 2: Revenue's appeal on depreciation rate of computer peripherals:
The Revenue raised an issue regarding the depreciation rate of computer peripherals at 60%. Both parties acknowledged that this issue was covered by a Delhi High Court decision, which allowed depreciation at a higher rate for computer peripherals integral to the computer system. Consequently, the Tribunal dismissed the Revenue's appeal, following the precedent set by the High Court decision.

Issue 3: Assessee's Cross Objection on disallowance under section 14A:
The Assessee filed a Cross Objection regarding the disallowance made under section 14A of the Income Tax Act. The Assessee argued that the disallowance should be deleted as substantial investments were made in group concerns or subsidiary companies for business interests. The Tribunal considered the Assessee's arguments, noting that the disallowance should not exceed the exempt income earned. Referring to relevant case law, the Tribunal allowed the Assessee's Cross Objection, directing the Assessing Officer to recompute the disallowance under section 14A, limiting it to the amount of exempt income earned by the Assessee during the relevant year.

In conclusion, the Tribunal dismissed the Revenue's appeal on both issues while allowing the Assessee's Cross Objection on the disallowance under section 14A for statistical purposes. The Tribunal provided detailed reasoning for each issue, referencing legal precedents and relevant provisions of the Income Tax Act to support its decisions.