2019 (8) TMI 1347 - HC - Income Tax

Nature of expenses - expenses on consumption and replacement of stores and spares - revenue or capital expenditure - disallowance u/s. 40(a)(ia) in respect of commission payment to dealers - HELD THAT - questions Nos.1 and 3 as proposed by the Revenue are concerned, the same are no longer res integra in view of the decision of this Court in the case of Principal Commissioner of Income Tax vs. M/s. Gujarat Narmada Valley Fertilizer and Chemicals Ltd. 2019 (4) TMI 1723 - GUJARAT HIGH COURT Disallowance u/s 37(1) in respect of expenses being contribution / donation to educational institutions, trust, local bodies - HELD THAT - This issue is also no longer res integra in view of the decision of this Court in the case of the Principal Commissioner of Income Tax vs. M/s. Gujarat Narmada Valley Fertilizer and Chemicals Ltd. 2019 (8) TMI 1288 - GUJARAT HIGH COURT

Summary

Issues:
1. Interpretation of substantial questions of law regarding the treatment of expenses on consumption and replacement of stores and spares, contribution/donation to educational institutions, trust, and local bodies, and commission payment to dealers.
2. Application of previous court decisions to determine the resolution of the proposed questions of law.
3. Dismissal of the Tax Appeal based on the non-debatable nature of the proposed questions.

Analysis:

1. The first substantial question of law raised by the Revenue pertains to the treatment of expenses on consumption and replacement of stores and spares as revenue expenditure instead of capital expenditure. The court refers to a previous decision in the case of Principal Commissioner of Income Tax vs. M/s. Gujarat Narmada Valley Fertilizer and Chemicals Ltd., where a similar issue was addressed. The court finds that the matter is no longer res integra, indicating that the issue has already been conclusively settled by the previous judgment.

2. The second issue raised by the Revenue concerns the deletion of disallowance under section 37(1) of the Act in relation to expenses for contribution or donation to educational institutions, trust, and local bodies. The court again cites a previous decision in the case of Principal Commissioner of Income Tax vs. M/s. Gujarat Narmada Valley Fertilizer and Chemicals Ltd., highlighting that this issue is also no longer res integra. The court's reliance on past judgments indicates a consistent legal interpretation on this matter.

3. The final substantial question of law involves the deletion of disallowance under section 40(a)(ia) regarding commission payment to dealers. The court notes that the nature of services rendered by the dealers to the assessee company was considered in the Assessing Officer's decision to make the disallowance. However, the court dismisses the Tax Appeal as none of the proposed questions are debatable, emphasizing the finality and clarity provided by previous court decisions. The dismissal is based on the established legal principles and precedents, indicating a consistent application of the law in similar cases.

In conclusion, the judgment addresses the interpretation of substantial questions of law related to various expenses and disallowances under the Income Tax Act, relying on previous court decisions to resolve the issues definitively. The dismissal of the Tax Appeal underscores the importance of legal precedent and the non-debatable nature of the proposed questions based on established legal principles.