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2019 (12) TMI 692 - AT - Income TaxDisallowance of Aircraft Expenses - CIT(A) restricted the disallowance to 25% of the total aircraft expense and corresponding depreciation - HELD THAT - We find this issue is squarely covered by the decision of the Pune Bench of the Tribunal in assessee‟s own case 2019 (12) TMI 627 - ITAT PUNE wherein this disallowance has been restricted to 15%. Both the parties agreed that facts and circumstances for this relevant assessment year is absolutely similar to assessment year 2010-11 and therefore, maintaining principle of consistency, we follow our decision on this issue and for this year also, this disallowance on account of aircraft expenses and corresponding depreciation is restricted to 15%. The order of the Ld. CIT(Appeals) is therefore modified as indicated above. Thus, ground No.1 raised in appeal by the assessee is partly allowed. Disallowance of Expenses u/s.14A - HELD THAT - AO while providing appeal effect deleted the interest disallowance based on the fact that investments were not made from borrowed funds and sufficient interest free funds were available. CIT passed the order u/s.263 of the Act against this deletion of interest. As per the instructions in the order u/s.263, the Assessing Officer passed fresh order u/s.143(3) r.w.s.263 and recomputed the disallowance u/s.14A r.w.r.8D and restricted the disallowance to ₹ 1,95,95,619/-. Therefore, the assessee filed fresh appeal against this order and the matter is still pending before the Ld. CIT(A). In view of the present scenario, this ground raised before the Tribunal becomes infructuous. Depreciation on Printers, UPS Other allied items - HELD THAT - We observe 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. The 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 Disallowance u/s.40A(2) in respect of commission paid to Directors - 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. Addition to capital subsidy - assessee has claimed subsidy received under the aforesaid scheme as capital receipt, whereas, the Department has held the subsidy to be on revenue account - HELD THAT - The Co-ordinate Bench of Tribunal in the case of Innovative Industries Limited Vs. DCIT 2017 (4) TMI 44 - ITAT PUNE has considered the issue of subsidy received under Package Scheme of Incentive in detail. After considering catena of judgments the Tribunal held that the incentive received by the assessee under Package Scheme of Incentive, 2007 is in the form of refund of Sales Tax and is a capital receipt not liable to tax. The Commissioner of Income Tax (Appeals) has granted relief to the assessee by following the aforesaid decision of Tribunal. Disallowance of provision for warranty - HELD THAT - Commissioner of Income Tax (Appeals) granted relief to the assessee holding that the provision was created on scientific basis. Further, reliance was placed on the decision of Hon ble Supreme Court of India in the case of Rotork Contrals India Pvt. Ltd. 2009 (5) TMI 16 - SUPREME COURT and ACIT Vs. Dana India Pvt. Ltd. 2013 (10) TMI 1533 - ITAT PUNE . The findings of Commissioner of Income Tax (Appeals) was accepted by the Department and were not agitated in appeal before the Tribunal - Decided against revenue
Issues Involved:
1. Disallowance out of Aircraft Expenses 2. Disallowance of Expenses u/s. 14A 3. Depreciation on Printers, UPS & other allied items 4. Disallowance u/s. 40A(2) - Commission paid to Directors 5. Addition to Capital Subsidy 6. Disallowance of Provision for Warranty Issue-wise Detailed Analysis: 1. Disallowance out of Aircraft Expenses: The assessee incurred aircraft expenses and depreciation but failed to provide detailed records of flights and purposes of visits, leading the Assessing Officer (AO) to disallow one-third of these expenses. The CIT(A) reduced this disallowance to 25%. The Tribunal, following its previous decisions in the assessee's own case, further reduced the disallowance to 15%, maintaining consistency with past rulings. Thus, the ground was partly allowed. 2. Disallowance of Expenses u/s. 14A: The assessee challenged the disallowance of expenses under Section 14A, claiming computational errors. The CIT(A) remitted the matter back to the AO, who, upon re-evaluation, deleted the interest disallowance, concluding that investments were not made from borrowed funds. The matter was still pending before the CIT(A), rendering the ground infructuous and dismissed by the Tribunal. 3. Depreciation on Printers, UPS & other allied items: The AO disallowed higher depreciation on these items, considering them not to fall under the definition of computers. The CIT(A) reversed this decision, following earlier rulings in the assessee's favor. The Tribunal upheld this view, noting consistent decisions from previous years, and dismissed the Revenue's ground. 4. Disallowance u/s. 40A(2) - Commission paid to Directors: The AO disallowed 50% of the commission paid to Directors, deeming it unreasonably high. The CIT(A) allowed the full amount, referencing the Delhi High Court's decision in CIT Vs. Shriram Pistons & Rings Ltd., which states that remuneration approved by the Company Law Board should not be questioned unless there was no proper application of mind. The Tribunal upheld the CIT(A)'s decision, citing consistent favorable rulings in earlier years, and dismissed the Revenue's ground. 5. Addition to Capital Subsidy: The AO treated the subsidy received under the Maharashtra Government's Package Scheme of Incentive, 2001, as revenue in nature. The CIT(A) reversed this, treating it as a capital receipt, consistent with rulings from earlier years. The Tribunal upheld the CIT(A)'s decision, referencing its own earlier judgments in the assessee's favor, and dismissed the Revenue's ground. 6. Disallowance of Provision for Warranty: The AO disallowed the warranty provision, considering it excessive and not scientifically based. The CIT(A) allowed the provision, following consistent favorable rulings in earlier years. The Tribunal upheld this, referencing the Supreme Court's decision in Rotork Controls India Pvt. Ltd. and its own previous decisions, and dismissed the Revenue's ground. Conclusion: Both the appeal of the assessee and the appeal of the Revenue were partly allowed. The Tribunal's decisions were largely influenced by maintaining consistency with its own past rulings and those of higher judicial authorities.
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