2015 (11) TMI 639 - AT - Income Tax

Disallowance of deduction u/s 80 JJAA - CIT(A) allowed the claim - Held that - In assessee s own case for the A.Y. 2008-09 the Tribunal had upheld the observations of the Ld.CIT(A) that as per provisions of S.80 JJAA(1) of the Act the benefit is to be allowed for three years starting from the P.Y. in which the employment was provided, and as such the benefit will be available for the succeeding two years also. The Tribunal also considered the Proviso to S.80 JJAA of the Act and held that the same is applicable to the first year only and as per said Proviso in the case of existing undertaking the additional wages shall be nil if the increase in the number of work men during the year is less than 10% of the work men employed in such undertaking on the last date of the preceding year. In view of above legal proposition when we analyse the facts and circumstances of the A.Y. 2009-10 we clearly observe that as per provisions of S.80 JJAA of the Act the deduction is available for three consecutive years in respect of the additional employment created by the assessee company during the first year itself i.e. A.Y. 2007-08 and, therefore, the fact that the assessee has employed 1022 new work men during the A.Y. 2009-10 is irrelevant for adjudication of the claim of deduction in respect of employment created by the assessee during the A.Y. 2007-08. Under the above noted facts and circumstances and respectfully following the propositions laid down by the Tribunal in the order for A.Y. 2008-09 in the assessee s own case we are unable to see any incorrectness or any other valid reason to interfere with the order of the First Appellate Authority and thus we hold that the impugned addition made by the A.O. was misconceived and not sustainable on the facts and in law and the same was rightly directed to be deleted by the Ld.CIT(A). - Decided against revenue. Addition on account of sales returns - CIT(A) deleted the addition - Held that - We are in agreement with the conclusion of the Ld.CIT(A) that there was a difference between the disallowance of expenditure and the accrual of income and as per prudent concept of accountancy the income cannot be charged until and unless it is realised or accrued to the assessee. On this issue the AO tried to charge alleged excessive sales returns to tax by taking 4.5% average sales returns which is not a correct approach. The amount of sales return is an expenditure accrued to the assessee when sold newspapers returned by the vendors on account of unsold stock and the same is deducted from the amount of sales raised against the respective vendors. The revenue authorities can not ignore this fact that the amount of sales return shown by the assessee is varying from place to place and in the maximum cases the percentage of sales return is less than 4.5% which is as low as 2.08% in Agra, 2.32% in Punchkula. In this situation disallowance on the basis of average 4.5% sales returns cannot be held to be unsustainable. In this situation we are in agreement with the conclusion of the Ld.CIT(A) that the assessee has duly accounted sales returns on the basis of evidence produced and brought on record, therefore, disallowance made by the A.O. cannot be held as sustainable and in accordance with law and the Ld.CIT(A) rightly followed the proposition laid down by the ITAT Agra Bench in assessee s own case for the A.Y. 2003-04. Accordingly we incline to hold that the AO made disallowance and addition without any basis and by ignoring the relevant facts and explanation of the assessee and the sale was rightly held as unsustainable by the Ld.CIT(A) and the First Appellate Authority had rightly directed the AO to delete the same. - Decided against revenue.

Summary

Issues Involved:
1. Deduction under Section 80JJAA of the Income Tax Act.
2. Addition on account of sales returns.

Detailed Analysis:

Issue 1: Deduction under Section 80JJAA of the Income Tax Act

The Revenue challenged the allowance of a deduction under Section 80JJAA amounting to Rs. 1,10,28,251/- by the Ld.CIT(A). The A.O. had disallowed this deduction on the grounds that the assessee had employed 1022 new regular workers during the current financial year but had only taken a deduction for 288 regular workers employed in earlier years. The A.O. argued that the assessee had stopped claiming the deduction for newly employed workers in subsequent years, thus the claim was rightly disallowed.

The Tribunal noted that a similar issue was previously decided in favor of the assessee in ITA no.1808/Del/12 for A.Y. 2008-09. The Tribunal had upheld that the deduction under Section 80JJAA is available for three consecutive years starting from the year in which the employment was provided, and no new employment creation is required each year for claiming the deduction. The Tribunal found that the conditions stipulated under Section 80JJAA were duly met by the assessee, and the deduction was correctly allowed by the Ld.CIT(A).

Issue 2: Addition on account of sales returns

The Revenue also contested the deletion of an addition of Rs. 1,34,10,746/- on account of sales returns. The A.O. had estimated an average sales return of 4.5% and added the excess sales returns to the returned income of the assessee. The Ld.CIT(A) deleted this addition, following the Tribunal's orders for earlier assessment years where similar additions were deleted.

The Tribunal reviewed the facts and noted that the sales return percentages varied by location due to local conditions and competition. The Tribunal emphasized that the sales returns were not an expenditure but a matter of income accrual. The assessee had provided detailed records and evidence of unsold newspapers returned by agents, which were accepted by the A.O. in other branches with higher sales return percentages. The Tribunal found that the A.O. had no basis for adopting a 4.5% average sales return and that the addition was not sustainable. The Ld.CIT(A) rightly deleted the addition by following the Tribunal's previous decisions.

Conclusion:

The Tribunal dismissed the Revenue's appeal and upheld the Ld.CIT(A)'s order allowing the deduction under Section 80JJAA and deleting the addition on account of sales returns. The Tribunal found no merit in the Revenue's grounds and confirmed that the assessee had met all the conditions for the claimed deductions and sales returns.