2019 (4) TMI 295 - HC - Income Tax

Disallowance u/s 14A - ITAT replacing the words such expenditure by such investment in relation to the disallowance - HELD THAT - The change was brought about on appreciation of the facts and it was accordingly recorded that the mistake pointed out by the assessee was correct, in turn leading to the correction as aforesaid. This is purely a question of fact and does not involve any question of law, much less any substantial question of law . Since no other question/ground is raised, we are of the view that there is no substantial question of law as envisaged under Section 260A of the I.T. Act to call for interference of this Court.

Summary

Issues:
1. Challenge to assessment order under Section 143(3) of the Income Tax Act for the assessment year 1997-98.
2. Appeal before the Commissioner of Income Tax (Appeals) and subsequent order by the Income Tax Appellate Tribunal.
3. Questions of law suggested by the Revenue regarding club expenses, depreciation, and disallowance under Section 14A of the Income Tax Act.

Issue 1: Challenge to Assessment Order
The respondent, engaged in the business of automotive tires, filed a return for the assessment year 1997-98, which was assessed under Section 143(3) of the Income Tax Act by the assessing officer in 2000. The assessee appealed before the Commissioner of Income Tax (Appeals) in 2003, followed by the Income Tax Appellate Tribunal's order in 2009. The Tribunal later considered a miscellaneous petition leading to further reliefs for the assessee, prompting the Revenue to appeal to the High Court.

Issue 2: Appeal and Questions of Law
The Revenue raised substantial questions of law related to club expenses, depreciation on equipment due to foreign exchange fluctuations, and disallowance under Section 14A of the Income Tax Act. The High Court addressed these questions, including whether club expenses were personal expenditure, the applicability of Section 43A on depreciation, and the ITAT's substitution of "such expenditure" with "such investment" under Section 14A.

Analysis:
1. The High Court dismissed the Revenue's appeal regarding club expenses, citing previous judgments in favor of the assessee for other assessment years, thus ruling against the Revenue's contentions.
2. Regarding depreciation on equipment due to foreign exchange fluctuations, the High Court upheld the Tribunal's decision, referring to previous judgments dismissing similar appeals by the Revenue and concluding that Section 43A applied in the case.
3. The High Court addressed the ITAT's substitution of words under Section 14A, emphasizing that it was a factual correction based on the appreciation of facts, not involving any substantial question of law. As no other grounds were raised, the appeal was dismissed for lack of substantial legal issues.

In conclusion, the High Court's judgment upheld the decisions of the lower authorities, dismissing the Revenue's appeal due to the absence of substantial legal questions warranting interference under the Income Tax Act.