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2024 (2) TMI 540 - AT - Income TaxDisallowance being expenses related to Trial Sales - assessee failed to furnish all bills/vouchers pertaining to above expenditure before the AO - CIT(A) deleted the addition - HELD THAT - The grievance of the Revenue is not based on any solid foundation. Is this not a fact that in the immediately preceding assessment year 2010-11 similar claim has been accepted vide order of assessment u/s 143(3) of the Act? Without bringing on record anything new and adverse to take a different view in the subsequent year is against the Rule of consistency. CIT(A) has found that invoices amounting to Rs. 1.72 crores were produced before the Ld. AO during the assessment proceedings. That too has been ignored and no credit even therefor has been allowed by the Ld. AO. Books of account have been maintained which are duly audited. It is also not a case of rejection of books of account. There is nothing on record to show that the claim of the assessee is not legally bonafide as alleged by the Ld. AO. The impugned disallowance is not justified at all. CIT(A) has deleted the disallowance after having allowed opportunity to the Ld. AO. We decline to interfere and reject this ground. Disallowance u/s 43B - deduction claimed was on account of leave encashment and furnished list of employees to whom leave encashment was paid during the year - CIT(A) deleted addition - grievance of the Revenue that the Ld. CIT(A) did not appreciate that payments pertained to earlier years and the assessee did not establish that these payments were disallowed in earlier assessment years - HELD THAT - AO referred to the Departmental records of earlier years, the facts could have easily been verified. This was not done. Before the Ld. CIT(A) details have been furnished. Nothing averse has been pointed out. The finding of the Ld. CIT(A) is in consonance with the decision of the Hon ble Supreme Court in UOI vs. Exide Industries Ltd. 2020 (4) TMI 792 - SUPREME COURT as observed that with the application of clause (f) of section 43B, the eligibility for deduction arises in the previous year in which the payment is actually made and not that in which provision was made in that regard, irrespective of the system of accounting followed by the assessee. We, therefore, reject this ground being devoid of any merit. Disallowance u/s 14A - expenses in respect of exempt income disallowed - CIT(A) held that section 14A will not apply if no exempt income is received or receivable during the relevant previous year - HELD THAT - CIT(A) has recorded finding of fact that the assessee has not claimed any exempt income and therefore impugned disallowance is not called for. Agreeing with the finding of the Ld. CIT(A), this ground is also dismissed. Nature of expenses - advertisement expenses - CIT(A) deleted the disallowance concluding that none of the payments would provide any long term benefit to the appellant, therefore, the expenditure cannot be held to be of capital in nature. - HELD THAT - The grievance of the Revenue is baseless. We do not find any reason to deviate from the above findings of the Ld. CIT(A) in the absence of any adverse material brought on record by the Revenue. This ground is also rejected. Disallowance of depreciation - CIT(A) held the assessee has not provided the evidence of installation and put to use of the Plant and Machinery either at the assessment or appellate proceeding stage and confirmed the impugned disallowance - before the Ld. CIT(A) the assessee had asserted that the record shows that assets have been installed by the assessee and therefore there is no reason to draw adverse inference as to their usage for the purposes of business - HELD THAT - We do not find any adverse comment on the above contentions raised by the assessee before the Ld. CIT(A). Before us the Revenue has not brought any material to show that the law laid down in decisions Refrigeration and Allied Industries Ltd 2000 (8) TMI 37 - DELHI HIGH COURT and Capital Bus Services 1980 (2) TMI 69 - DELHI HIGH COURT is inapplicable to the facts of the assessee s case which unequivocally assert that assets were put to use and tax audit report vouches for it.
Issues Involved:
1. Disallowance of expenses related to trial sales. 2. Disallowance under section 43B. 3. Disallowance under section 14A. 4. Disallowance of advertisement expenses. 5. Disallowance of depreciation. Summary of Judgment: Issue 1: Disallowance of expenses related to trial sales The Ld. AO disallowed Rs. 2,90,04,000/- for lack of documentary evidence, despite the assessee providing detailed justifications and partial invoices. The Ld. CIT(A) found the disallowance unjustified as similar claims were accepted in the previous year, and the expenses were duly recorded and audited. The Tribunal upheld the Ld. CIT(A)'s decision, emphasizing consistency and the absence of any adverse findings on the assessee's claim. Issue 2: Disallowance under section 43B The Ld. AO disallowed Rs. 5,56,022/- for lack of supporting evidence. The Ld. CIT(A) deleted the disallowance, noting adequate disclosure in the tax audit report and compliance with section 43B. The Tribunal agreed, highlighting that the Ld. AO should have verified departmental records and that the Ld. CIT(A)'s findings aligned with the Supreme Court's decision in UOI vs. Exide Industries Ltd. Issue 3: Disallowance under section 14A The Ld. AO disallowed Rs. 58,84,990/- under section 14A r.w. Rule 8D, despite the assessee claiming no exempt income. The Ld. CIT(A) deleted the disallowance, citing Delhi High Court judgments that section 14A does not apply if no exempt income is received or receivable. The Tribunal upheld this decision, dismissing the Revenue's reliance on CBDT Circular No. 5/2014 and other judgments. Issue 4: Disallowance of advertisement expenses The Ld. AO disallowed Rs. 53,01,600/- considering it capital expenditure providing enduring benefit. The Ld. CIT(A) deleted the disallowance, finding the expenses recurring and not providing long-term benefits. The Tribunal found no reason to deviate from the Ld. CIT(A)'s findings, rejecting the Revenue's grievance. Issue 5: Disallowance of depreciation The Ld. CIT(A) upheld the disallowance of Rs. 55,21,000/- for lack of evidence of installation and use of Plant and Machinery. The assessee contended that the tax audit report confirmed the installation and use. The Tribunal found no adverse comments on the assessee's contentions and allowed the Cross Objection, deciding in favor of the assessee. Conclusion: The appeal of the Revenue is dismissed, and the Cross Objection of the assessee is allowed.
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