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2019 (4) TMI 218 - HC - Income TaxAllowability of club expenses u/s 37 - business or personal expenditure - expenses towards procuring membership in the 'club' for arranging various comforts and convenience - HELD THAT - As decided in assessee's own case 2019 (4) TMI 82 - KERALA HIGH COURT the order passed by the CIT(Appeals) in favour of the Assessee was upheld and the appeal preferred by the Revenue was dismissed in relation to the challenge against 'club expenses'. The finding arrived at by the Tribunal is well supported by reasons. The amount spent for acquiring membership in the Clubs stands on a different pedestal from the amounts incurred for availing materials supplied or service provided in the clubs. This Court finds that the said issue is to be answered in favour of the Assessee. Disallowance of commission alleging diversion of income - Sum paid by the suppliers of the Assessee to various investment companies as assessable as income of the Assessee company - HELD THAT - As decided in assessee's own case 2019 (4) TMI 79 - KERALA HIGH COURT addition deleted by the Commissioner (Appeals) in the appeal filed by the Assessee, holding that the same is not correct or sustainable and that the said commission receipts were to be assessed at the hands of the investment companies and not at the hands of the Assessee. This was affirmed by the Tribunal in Annexure-C order, holding that the aforesaid commissions have already been substantively assessed at the hands of the investment companies. This being the position, it could not have been assessed at the hands of the Assessee under any circumstance. The said finding on fact is not assailable under any circumstance and we hold it against the Revenue. Concealment of income by selling good tyres as defective second tyres - HELD THAT - As decided in assessee's own case there cannot be any addition on the basis of surmises or conjectures and that the accounts were accepted and not rejected; adding that such reduction in the value was because of the defects with reference to the consumer complaints. The said finding was affirmed by the Tribunal. We are of the view that this is purely a 'question of fact' answered with reference to the materials on record and no interference is warranted at our hands, as no substantial question of law is involved Addition for lack of proper vouchers - HELD THAT - As decided in assessee's own case as per Annexure-C order under challenge, the Tribunal held that there was no valid ground to call for interference with the order passed by the Commissioner. The said 'finding on fact' is not liable to be interdicted by this Court, for want of any substantial question of law. Question stands answered against the Revenue. Rent paid for a building not used for the business purpose - HELD THAT - As decided in assessee's own case there was no tenable ground. In fact, it is borne out from the materials on record that the Chairman and Managing Director of the Assessee Company was also the Chairman and Managing Director of some other companies as well, who are housed in the building in question and as such, the dis-allowance/restriction to an extent of 50% came to be sustained. We do not find any reason to interdict the said finding and reasoning and no substantial question of law (but for a question of fact) is brought to our notice. It stands answered against the Revenue. Depreciation on increased liability due to foreign currency fluctuation u/s 43A - HELD THAT - This question has been answered against the Revenue, as per our verdict passed in assessee's own case 2019 (4) TMI 82 - KERALA HIGH COURT by virtue of the rulings rendered in Commissioner of Income Tax,Delhi vs. Woodward Governor India P.Ltd 2009 (4) TMI 4 - SUPREME COURT and Oil and Natural Gas Corporation Ltd, Dehradun, through Managing Director vs. Commissioner of Income Tax, Dehradun. 2010 (3) TMI 81 - SUPREME COURT Deduction u/s 80HHC on the basis of finally assessed income - HELD THAT - Clause (baa) of Explanation to section 80HHC lays down that 'profits of business' means the profits of business as computed under the head Profits and gains of business or profession . Thus, where adjustments are made by the Assessing Officer to the profits of business computed by the Assessee in its return of income the assessed profit is to be considered for the purpose of computing deduction u/s.80HHC. Allowability of interest income on deposit for deduction u/s 80IA? - HELD THAT - For giving deduction under Section 80IA, the income shall be relatable to the business of the Assessee; whereas in the instant case, the disputed income is the income generated by way of interest from the amounts deposited by the Assessee elsewhere and it is having no relation to the business activity of the Assessee. This is the dictum laid down in Commissioner of Income Tax vs. Jose Thomas 2001 (11) TMI 73 - KERALA HIGH COURT . Though the said decision is with reference to the mandate for deduction under Section 80HHC, the ratio/dictum is the same.
Issues Involved:
1. Deductibility of club expenses as business expenses. 2. Assessability of commission paid by suppliers as income of the Assessee. 3. Deletion of addition representing concealment of income by selling good tyres as defective second tyres. 4. Deletion of disallowance for lack of proper vouchers. 5. Deletion of disallowance of rent paid for a building not used for business purposes. 6. Allowability of depreciation claim on foreign currency fluctuation without actual payment. 7. Deduction under Section 80HHC based on finally assessed income. 8. Allowability of depreciation on the written down value. 9. Deduction under Section 80IA for interest on deposits. Detailed Analysis: 1. Deductibility of Club Expenses: The court examined whether the club expense of ?23,14,415/- met by the Assessee is deductible as business expenses or should be treated as personal expenditure. The court noted that this expense was for procuring membership for the Assessee in a club and did not include expenses towards facilities availed or items consumed in the club. The court referenced a previous verdict in I.T.Appeal Nos. 1347 of 2009, where it was held that such expenses are deductible as business expenses. The court upheld this view, declaring the issue in favor of the Assessee. 2. Assessability of Commission Paid by Suppliers: The court addressed whether the sum of ?2,63,38,783/- paid as commission by the suppliers to various investment companies should be assessed as income of the Assessee. The court referenced its previous decision in I.T.Appeal No. 973 of 2009, where it was determined that the commission receipts were to be assessed at the hands of the investment companies, not the Assessee. The court upheld this finding, ruling against the Revenue. 3. Deletion of Addition for Concealment of Income: The court considered whether the deletion of the addition of ?85,98,867/- representing concealment of income by selling good tyres as defective second tyres was correct. The court referenced its decision in I.T.Appeal No. 973 of 2009, where it was found that the addition was based on surmises and conjectures without rejecting the accounts. The court ruled this as a question of fact and upheld the deletion, ruling against the Revenue. 4. Deletion of Disallowance for Lack of Proper Vouchers: The court examined whether the Tribunal was right in deleting the disallowance of ?12 lakhs made for lack of proper vouchers. The court referenced its decision in I.T.Appeal No. 973 of 2009, where it was held that there was no valid ground for interference with the Commissioner’s order. The court upheld this finding, ruling against the Revenue. 5. Deletion of Disallowance of Rent: The court addressed whether the Tribunal was right in deleting the disallowance of ?14,14,392/- being rent paid for a building not used for the business purpose of the Assessee. The court referenced its decision in I.T.Appeal No. 973 of 2009, where it was found that the disallowance was justified only to the extent of 50% due to the shared use of the building. The court upheld this finding, ruling against the Revenue. 6. Allowability of Depreciation Claim: The court examined whether the Tribunal was right in holding that the depreciation claim of ?18,53,559/- is allowable in respect of the fluctuation in the value of foreign currency without actual payment of the increased liability. The court referenced its decision in I.T.Appeal Nos. 1347 of 2009, where it was held that such claims are allowable based on Supreme Court rulings. The court upheld this finding, ruling against the Revenue. 7. Deduction under Section 80HHC: The court addressed whether the Tribunal was right in upholding the order of the CIT(A) allowing deduction under Section 80HHC on the basis of finally assessed income. The court referenced the Tribunal’s findings that the assessed profit should be considered for computing the deduction. The court upheld this finding, ruling against the Revenue. 8. Allowability of Depreciation on Written Down Value: The court examined whether the Tribunal’s order allowing depreciation on the written down value worked out by the Commissioner of Income Tax (Appeals) for the assessment year 1993-94 was erroneous. The court noted that the written down value may change due to foreign exchange fluctuations as per Section 43A of the Income Tax Act. The court upheld the Tribunal’s findings, ruling against the Revenue. 9. Deduction under Section 80IA for Interest on Deposits: The court considered whether the interest earned by the Assessee from money put in deposit could be considered for computing deduction under Section 80IA of the Act. The court found that the interest income was not related to the business activity of the Assessee and referenced the decision in Commissioner of Income Tax vs. Jose Thomas. The court upheld the Tribunal’s findings, ruling against the Assessee. Conclusion: The court found no substantial question of law raised by the Revenue to warrant interference with the Tribunal’s verdict. Both I.T.Appeal No. 67 of 2009 and I.T.Appeal No. 86 of 2009 were dismissed.
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