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2019 (12) TMI 627 - AT - Income TaxDisallowance being commission paid to specified person / Director u/s 40A(2) - unreasonable and excessive expenditure - HELD THAT - For making disallowance u/s. 40A(2) the onus is on the Revenue to show that payments made by assessee to persons referred in clause (b) are excessive or unreasonable with regard to fair market value of the goods or services received by the assessee. In the present case the authorities below have failed to examine terms and conditions of appointment of Shri Atul Kirloskar. If the terms of appointment allow payment of such commission at the time of appointment, the commission paid to Shri Atul Kirloskar is allowable, provided the commission paid is within the limits specified under Companies Act. We are of considered view that this issue needs revisit to the file of Assessing Officer for reexamination in the light of our above observations. The ground No. 1 of the appeal is thus allowed for statistical purpose. Disallowance of Aircraft expenses - AO disallowed 1/3rd of expenditure and depreciation on the ground that the Aircraft has been used for non-business purposes - Commissioner of Income Tax (Appeals) has restricted the expenditure to 25% - HELD THAT - We observe that the issue of allowability of expenditure and depreciation on Aircraft was considered by the Tribunal in the past. The Tribunal 2017 (9) TMI 1832 - ITAT PUNE for assessment year 2004-05 has restricted the disallowance of expenditure on Aircraft to 15%. Since, the facts in assessment year under appeal and reason for disallowance is identical, respectfully following the order of Tribunal in assessee‟s own case, we deem it appropriate to modify the findings of Commissioner of Income Tax (Appeals) on this issue and restrict the disallowance to 15%. Disallowance of Expenses u/s. 14A - HELD THAT - The provisions of the Act or the Rules framed there under does not specify the manner of recording satisfaction u/s. 14A of the Act. The recording of satisfaction is subjective. The assessee has not made any suo-moto disallowance u/s. 14A for earning exempt income. After examining the assessment order we observe that the AO has recorded satisfaction before applying the provisions of Rule 8D. Hence, we do not find any merit in the contention of the assessee. Accordingly, the solitary issue raised in the appeal by the assessee is without any merit and hence, dismissed. Allowability of depreciation @ 60% on UPS and other allied items - HELD THAT - In assessment year 2009-10 the Co-ordinate Bench has upheld the findings of Commissioner of Income Tax (Appeals) in allowing depreciation @ 60% on UPS and other allied items. Commissioner of Income Tax (Appeals) in assessment year under appeal has granted relief to the assessee by following its own order in assessment year 2009-10. We find no infirmity in the findings of Commissioner of Income Tax (Appeals) on this issue. Accordingly, the same is upheld and ground No. 2 of the appeal is dismissed. Addition u/s. 14A - HELD THAT - The Hon‟ble Bombay High Court in the case of Commissioner of Income Tax Vs. Reliance Utilities and Power Ltd. 2009 (1) TMI 4 - BOMBAY HIGH COURT has held that where the assessee is having both interest bearing funds and interest free funds, it is presumed that the investment are made by utilizing interest free funds. In the light of the facts and decision of Hon ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Reliance Utilities and Power Ltd. (supra), we restore this issue back to the file of Assessing Officer for recomputation of disallowance u/s. 14A of the Act. Accordingly, ground No. 3 of the appeal by Revenue is allowed for statistical purpose. Disallowance of commission u/s. 40A(2) - HELD THAT - We find that this issue was considered by the Tribunal in appeal by Revenue in assessee‟s case in assessment year 2009-10. The commission paid to the Directors was allowed by the Tribunal. Hence, we do not find any reason to interfere with the findings of Commissioner of Income Tax (Appeals) on this issue. Accordingly, the same is upheld and ground No. 4 of the appeal is dismissed. Subsidy received by the assessee from Maharashtra Government under Package Scheme of incentive, 2001 - Revenue or capital receipt - HELD THAT - We further observe that the Co-ordinate Bench in appeal by the Revenue 2019 (7) TMI 1149 - ITAT PUNE has confirmed the findings of Commissioner of Income Tax (Appeals) in holding the sales tax benefit received by the assessee as capital receipt not liable to tax. Since, the facts in the assessment year under appeal are identical, we do not find any reason to interfere with the findings of Commissioner of Income Tax (Appeals) on this issue. Accordingly, the same is upheld and ground No. 5 of the appeal is dismissed.
Issues Involved:
1. Disallowance of Commission paid to Mr. Atul Kirloskar u/s. 40A(2) 2. Disallowance out of Aircraft Expenses 3. Disallowance of Expenses u/s. 14A 4. Addition on account of late delivery fees 5. Allowability of depreciation on UPS and allied items 6. Nature of subsidy received under Package Scheme of Incentives, 2001 7. Provision for warranty Issue-wise Detailed Analysis: 1. Disallowance of Commission paid to Mr. Atul Kirloskar u/s. 40A(2): The assessee contested the disallowance of ?1,80,00,000/- commission paid to Mr. Atul Kirloskar, arguing that it was within the limits of the Companies Act and disclosed in the annual report. The Tribunal noted that the authorities did not properly examine the terms of appointment. The issue was sent back to the Assessing Officer for re-examination, emphasizing that the onus is on the Revenue to show that the payment was excessive or unreasonable. 2. Disallowance out of Aircraft Expenses: The assessee claimed ?2,99,33,417/- as Aircraft expenses and ?1,45,55,306/- as depreciation. The Assessing Officer disallowed 1/3rd of the expenses, suspecting non-business use. The Commissioner of Income Tax (Appeals) reduced this to 25%. The Tribunal, following past decisions, restricted the disallowance to 15%, modifying the findings of the Commissioner of Income Tax (Appeals). 3. Disallowance of Expenses u/s. 14A: The assessee challenged the disallowance of ?4,36,58,306/- u/s. 14A, stating no expenses other than salary were incurred for earning dividend income. The Tribunal found that the Assessing Officer had recorded satisfaction before applying Rule 8D and dismissed the assessee's appeal. 4. Addition on account of late delivery fees: The Revenue contested the deletion of ?1,87,95,310/- as late delivery fees. The Tribunal restored this issue to the Assessing Officer, following the decision in the assessee's case for the assessment year 2009-10, to decide on similar lines. 5. Allowability of depreciation on UPS and allied items: The Revenue's appeal against allowing 60% depreciation on UPS and allied items was dismissed. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, which followed the Tribunal's earlier decision for the assessment year 2009-10. 6. Nature of subsidy received under Package Scheme of Incentives, 2001: The Revenue's appeal against treating the subsidy as a capital receipt was dismissed. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, referencing the Tribunal's earlier decision in the case of Innoventive Industries Ltd. and the assessee's own case for the assessment year 2009-10. 7. Provision for warranty: The Revenue's appeal against allowing the provision for warranty was dismissed. The Tribunal upheld the Commissioner of Income Tax (Appeals)'s decision, noting that the provision was made on a scientific basis and referencing the Supreme Court's decision in Rotork Controls India Pvt. Ltd. and the Tribunal's decision in Dana India Pvt. Ltd. Conclusion: - The assessee's appeal in ITA No. 61/PUN/2015 was partly allowed. - The assessee's appeal in ITA No. 406/PUN/2015 was dismissed. - The Revenue's appeal in ITA No. 79/PUN/2015 was partly allowed for statistical purposes. Order pronounced on Thursday, the 21st day of November, 2019.
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