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2023 (7) TMI 1150 - AT - Income TaxDeduction on account of non-compete fee amortized in the computation of income - Assessee explained that the payment of non-compete fees has been done to the shareholders/contractors of the bottling companies to facilitate the conduct of the assessee s business more efficiently and more profitably leaving the fees untouched - HELD THAT - As in assessee s appeal for A.Y 2008 09 2023 (6) TMI 393 - ITAT DELHI has considered a similar disallowance we find that this is a recurring dispute between the parties from assessment years 1999-2000 onwards and has been consistently decided against the assessee even by the Tribunal.- Decided against assessee. Reversal of provision towards bad debts - assessee explained that as per the accounting policy and receivables past due for more than 90 days needs to be provided and this amount is offered for tax while computing tax-free income after making provisions for doubtful receivable - HELD THAT - We have carefully perused the orders of the authorities below. Provision was created in the earlier year and it was written back in that year is not in dispute. CIT(A) has admitted that the issue in hand is a case of reversal of provision of which income has already been offered in the earlier year. Therefore we fail to understand why the addition has been sustained by the ld. CIT(A). In A.Ys 2008 09 and 2009 10 2023 (6) TMI 393 - ITAT DELHI also similar issue arose but no disallowance was made in this regard as the ld. CIT(A) has deleted the disallowance and no appeal has been filed by the revenue against the decision of the ld. CIT(A).No merit in the addition. We therefore direct the Assessing Officer to delete the disallowance - This ground is allowed. Disallowance of traffic challans - HELD THAT - We find force in the contention of assessee. Similar disallowance was considered by this Tribunal in A.Y 2008 09 as held payment of compounding fee for violation of provision under the Motor Vehicles Act 1988 and Rules thereunder has held that such expenditure is allowable as business expenditure under section 37(1) - Decided in favour of assessee. Addition on account of deposits from customers - assessee is accepting deposit from customers like distributers/retailers etc as a security deposit - CIT(A) accepted that section 41(1) of the Act does not apply but applied provisions of section 41(2) and 43(6) - HELD THAT - Facts on record show that the assessee has not claimed any trading liability. Containers and bottles are shown under the head Current Assets and deposits are shown as Liabilities . There is no evidence brought on record to show that liability has ceased to exist. In our considered view the cessation of liability can only occur either by operation of law or debtors unequivocally declaring his intention to not honour his liability when payment is demanded by the creditor. As considering from all possible angles neither provisions of section 41(1) of the Act apply Assessing Officer fails nor provisions of section 41(2) and 43(6) of the Act CITA fails . This ground by the assessee is allowed and similar grievance in revenue s appeal is dismissed. Delayed payment to PF/ESI - HELD THAT -This quarrel is now settled by the decision of Checkmate Services 2022 (10) TMI 617 - SUPREME COURT . Addition on account of inventory loss and leakages - CIT(A) was convinced that the inventory loss is actually write off and not based on estimation and deleted the addition - HELD THAT - The undisputed fact is that since the assessee is engaged in the business of manufacturing and distribution of non-alcoholic beverages which are perishable in nature these beverages are supplied in glass and plastic bottles which are susceptible to breakage. Such breakage and expiry of the products leads to inventory losses in the year under consideration. Write off of inventory is based on actual loss and not on estimation. Therefore CIT(A) was correct in allowing the same as business expenditure. Such action of the ld. CIT(A) cannot be faulted with. This ground is dismissed. Addition on account of repair and maintenance - steep increase of 53% in these expenses from immediate previous year whereas the turnover of the assessee company has increased by 35% only - HELD THAT - It is not acceptable the comparison of the increase in sales with increase in repairs and maintenance expenses etc. - difference of 18% between 53% and 38% has no logic without pointing out any error or defect in the books of account which are audited and no adverse inference has been pointed out by the auditors. Decided against revenue.
Issues Involved:
1. Disallowance of non-compete fees. 2. Addition on account of reversal of provision towards bad and doubtful debt. 3. Disallowance of traffic challans. 4. Addition on account of deposits from customers. 5. Deletion of addition on account of delayed payment to PF/ESI. 6. Deletion of addition on account of inventory loss and leakages. 7. Deletion of addition on account of repair and maintenance. Summary: 1. Disallowance of Non-Compete Fees: The assessee challenged the disallowance of Rs. 2,02,71,336/- as non-compete fees. The Tribunal noted that this issue had been consistently decided against the assessee in previous years, following the decision of the Tribunal in the assessee's appeal for A.Y 2008-09. The Tribunal upheld the decision of the lower authorities, dismissing the ground. 2. Addition on Account of Reversal of Provision Towards Bad and Doubtful Debt: The assessee contested the addition of Rs. 8,34,21,291/- made by the Assessing Officer. The Tribunal found that the provision was created in the earlier year and written back in the same year, which was admitted by the CIT(A). Since the income was already offered in the earlier year, the Tribunal directed the Assessing Officer to delete the disallowance, allowing the ground. 3. Disallowance of Traffic Challans: The Tribunal addressed the disallowance of Rs. 2,18,81,852/- for traffic challans. Referring to a similar case in A.Y 2008-09, the Tribunal found that such payments were allowable as business expenditure under section 37(1) of the Act. The Tribunal directed the Assessing Officer to delete the disallowance, allowing the ground. 4. Addition on Account of Deposits from Customers: The assessee and the revenue both appealed against the CIT(A)'s decision on deposits from customers amounting to Rs. 1,58,09,01,589/-. The Tribunal found that neither section 41(1) nor section 41(2) and 43(6) of the Act applied to the facts of the case. The Tribunal allowed the assessee's ground and dismissed the revenue's appeal on this issue. 5. Deletion of Addition on Account of Delayed Payment to PF/ESI: The revenue's appeal contested the deletion of Rs. 2,48,279/- for delayed payment to PF/ESI. The Tribunal followed the Supreme Court's decision in Checkmate Services Pvt Ltd and reversed the CIT(A)'s findings, allowing the ground in favor of the revenue. 6. Deletion of Addition on Account of Inventory Loss and Leakages: The revenue appealed against the deletion of Rs. 9,29,17,122/- for inventory loss and leakages. The Tribunal found that the write-off was based on actual loss and not estimation, supporting the CIT(A)'s decision to allow it as business expenditure. The Tribunal dismissed the revenue's ground. 7. Deletion of Addition on Account of Repair and Maintenance: The revenue's appeal also challenged the deletion of Rs. 7,81,31,170/- for repair and maintenance. The Tribunal found no logic in comparing the increase in sales with the increase in repair and maintenance expenses without pointing out any error in the audited books of account. The Tribunal upheld the CIT(A)'s decision, dismissing the ground. Conclusion: The appeal of the assessee in ITA No. 5671/DEL/2018 and the appeal of the Revenue in ITA No. 5810/DEL/2018 were both partly allowed. The order was pronounced in the open court on 18.07.2023.
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