2024 (3) TMI 1330 - HC - Income Tax

Disallowance of expenses written off - debts written off is only allowable if the assessee offers the same as income in previous years, which the assessee failed to prove - ITAT deleted addition - HELD THAT - The issue is squarely covered by the decision of the Apex Court in TRF Limited 2010 (2) TMI 211 - SUPREME COURT and also Oman International Bank 2009 (2) TMI 54 - BOMBAY HIGH COURT - there can be no substantial question of law on this issue. We have considered the same and also Mr. Suresh Kumar agrees. Additional grounds raised - expenses on windmill be allowed as Revenue expenditure - ITAT had restored the issue back to the Assessing Officer ( AO ) for fresh consideration and AR/Assessee states, the AO, while giving effect to the order of the ITAT has allowed depreciation on windmills and, therefore, this will be a non-issue. Thus assessee agreed. Allowability of entertainment expenditure food subsidy coupons disallowed u/s 37(2), expenses related payments to schools disallowad u's 40A(9) and advertisement expenditure (deferred revenue) as revenue expenditure - HELD THAT - Tribunal had relied on assessee s own case for AY 1996-97 and Revenue had not challenged the decision of the ITAT. Mr. Srihari submitted, relying on the decision of Commissioner of Income Tax v. Excel Industries Ltd. Anr 2013 (10) TMI 324 - SUPREME COURT that if question of law has not been raised or if the finding of the ITAT has been accepted by Revenue for a previous year, in the subsequent year, it cannot be raised. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop or the issue and it ought let the matter rest rather than spend the taxpayers money in pursuing litigation for the sake of it. Thus we dismiss the appeal with no order as to costs.

Summary

Issues:
1. Disallowance of expenses written off
2. Write off of investment on windmills
3. Disallowance of deduction claimed on debenture redemption
4. Entertainment expenditure 'food subsidy coupons'
5. Expense related payments to schools
6. Advertisement expenditure (deferred revenue)

Issue 1 - Disallowance of expenses written off:
The Revenue appealed under Section 260A of the Income Tax Act, challenging the ITAT's order on the deletion of expenses written off. The Tribunal relied on the assessee's case for AY 1996-97 and the TRF Limited case, ruling in favor of the assessee. The Respondent argued that the issue was settled by the TRF Limited case and a previous decision of the Bombay High Court. The Court agreed, and the appeal was dismissed.

Issue 2 - Write off of investment on windmills:
The ITAT had sent back the issue of windmill expenses claimed as revenue expenditure to the AO for reconsideration. The Respondent confirmed that the AO had allowed depreciation on windmills, making this issue irrelevant. Both parties agreed, and the Court dismissed this issue.

Issue 3 - Disallowance of deduction claimed on debenture redemption:
The Tribunal directed the CIT(A) to admit an additional ground and decide on the debenture redemption issue. The Respondent informed that the matter was pending before the CIT(A). The Court directed the CIT(A) to resolve the issue within three months for immediate closure due to the prolonged duration of the case.

Issue 4 - Entertainment expenditure 'food subsidy coupons':
The ITAT allowed entertainment expenditure on 'food subsidy coupons,' which the Revenue contested as not covered under section 37(2) of the Income Tax Act. The Court did not find substantial merit in this argument and dismissed the appeal.

Issue 5 - Expense related payments to schools:
The ITAT allowed expense related payments to schools, challenged by the Revenue under section 40A(9) of the Income Tax Act. The Court did not find the challenge substantial and dismissed the appeal.

Issue 6 - Advertisement expenditure (deferred revenue):
The ITAT allowed advertisement expenditure as revenue expenditure, which the Revenue disputed due to differing entries in accounts. The Court referred to the principle of not reopening settled issues unless there is a material change justifying it. As the Revenue had accepted previous decisions in favor of the assessee, the Court dismissed the appeal on this issue.

In conclusion, the High Court of Bombay dismissed the Revenue's appeal under Section 260A of the Income Tax Act, addressing various issues related to expenses written off, windmill investments, debenture redemption, entertainment expenditure, school payments, and advertisement expenditure. The Court upheld the ITAT's decisions based on legal precedents and settled principles, resulting in the dismissal of the appeal with no costs.