2019 (12) TMI 1108 - AT - Income Tax

Disallowance of discount given to dealers - HELD THAT - As decided in own case 2017 (12) TMI 1395 - ITAT PUNE the assessee as businessman had taken business decision to make a policy for the distribution of its goods and to pay discount to different dealers in this regard. Such business decision cannot be negated by the Assessing Officer on the surmise that as per the Assessing Officer the discount paid by the assessee was higher. The assessee is best judge of its business arrangement and in the absence of any evidence found that the expenditure has not been incurred merely on the ground that the rate of discount paid is higher the expenditure cannot be disallowed in the hands of assessee. We find support from the ratio laid down by the Hon ble Supreme Court in CIT Vs. Walchand Co. Pvt. Ltd. 1967 (3) TMI 2 - SUPREME COURT . Accordingly we find no merit in the order of Assessing Officer in this regard. Disallowance of late delivery charges - HELD THAT - As in assessee s own case for A.Ys. 2010-11 and 2011-12 we find no error in the order of CIT(A) in holding that the late delivery charges paid by the assessee were in the nature of expenditure carried out during the course of carrying on the business. The said late delivery charges were levied by the OEM customers who were given specific orders to the assessee for delivery within time frame but because of the delay in the project clause for L.D. charges was applied and the amount was recovered from the assessee. In the totality of the above said facts and circumstances we are of the view that the said expenditure is duly allowable in the hands of assessee. Accordingly we hold so Disallowance of depreciation on windmill at 80% as it was commissioned on 09.08.2007 - AO noticed that high rate of depreciation was also claimed on civil work and installation of electrical lines - HELD THAT - As decided in own case apellant was entitled to higher depreciation on the electrical line for transmission of the power generated. The Assessing Officer is directed to call for the breakup of each of these items of expenditure and allow accelerated depreciation on the items mentioned

Summary

Issues Involved:
1. Disallowance of discount given to dealers.
2. Disallowance of late delivery charges.
3. Disallowance of depreciation on civil work and electrical installation.

Issue-wise Detailed Analysis:

1. Disallowance of Discount Given to Dealers:
The first ground concerns the disallowance of discount given to dealers. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee claimed ?2,01,41,391/- as discount expenses. The AO found inconsistencies in the discount rates and suspected inflated expenditure. Consequently, the AO disallowed the discount claim, adding it to the income. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed this decision, referencing previous favorable decisions for the assessee for A.Ys. 2010-11 and 2011-12. The CIT(A) noted that the assessee had a distribution policy in place and that the business decision to offer discounts was justified and consistent with industry practices. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's disallowance was based on mere surmises and lacked substantial evidence. The Tribunal noted that the assessee's discount policy was a legitimate business decision and dismissed the Revenue's appeal on this ground.

2. Disallowance of Late Delivery Charges:
The second ground involves the disallowance of late delivery charges amounting to ?3,02,411/-. The AO disallowed this claim, arguing it was not eligible for deduction under section 37(1) of the Income Tax Act. The CIT(A) disagreed, referencing similar cases from A.Ys. 2010-11 and 2011-12, where such charges were deemed allowable business expenditures. The Tribunal supported the CIT(A)'s view, stating that late delivery charges were a legitimate business expense incurred during the ordinary course of business. The Tribunal found no distinguishing features in the current year's facts compared to previous years and dismissed the Revenue's appeal on this ground.

3. Disallowance of Depreciation on Civil Work and Electrical Installation:
The third ground pertains to the disallowance of depreciation on civil work and electrical installations. The AO observed that the assessee claimed higher depreciation rates on these items, which the AO deemed unjustifiable. The CIT(A) partially overturned this decision, referencing previous rulings that allowed higher depreciation rates for items integral to windmill operations. The CIT(A) directed the AO to allow higher depreciation on specific components like reinforced cement foundations and electrical installations essential for power transmission. The Tribunal upheld the CIT(A)'s decision, noting consistency with prior rulings and finding no reason to interfere. The Tribunal dismissed the Revenue's appeal on this ground as well.

Conclusion:
In conclusion, the Tribunal dismissed the Revenue's appeal on all grounds, affirming the CIT(A)'s decisions to allow the discount given to dealers, late delivery charges, and higher depreciation rates on specific windmill-related expenditures. The Tribunal found the CIT(A)'s rulings consistent with prior decisions and supported by substantial evidence, thereby rejecting the AO's disallowances.