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2025 (1) TMI 1471 - AT - Income TaxDisallowance u/s 14A r/w Section 8D - HELD THAT - As the appellant company had not earned any exempt income from the investment and the investment did not fall under the category of exempt income in the year under consideration. Hon ble High Court had rendered decision in the appellant s own case for the A.Y. 2012-13 2021 (12) TMI 441 - ITAT DELHI Therefore deletion on account of disallowance deserves to be upheld. Addition on account of Rental Income - CIT(A) by referring the details of Rental income observed that appellant had submitted details of documents before the AO for verification - CIT(A) directed the learned AO to consider the submissions made by the appellant/assessee and give relief subject to verification of evidence. In the given facts the order of learned CIT(A) deserves approval. Disallowance of Misc. Foreign Expenses - Genunity of expenses not doubted and expenses being incurred wholly and exclusively for purposes of business are not disputed by the revenue. So assessee deserves relief. Disallowance of Advertisement and sales promotion exp on being 1% of total expenditure on the head - The books of accounts were not rejected. In the case of assessee s own case learned CIT(A) for A.Ys. 2011-12 2012-13 had decided the issue in favour of the assessee. So the contention of learned AO was not justifiable and the reasons of treating 1% of total expenditure as bogus or unexplained was unwarranted. Disallowance of 50% of software expenses - Since learned AO had not given any specific reason and exact amount of the expenditure to treat such expenditure as capital in nature. Relying on judgments of learned CIT(A) and ITAT in appellant s own case the view taken by learned CIT(A) is meritorious. Disallowance of expenses of Consumption debtors - CIT(A) appreciated party wise details of consumption debtors showing that the discount was very much ascertained. The consumption debtors were filed before the learned AO during the course of assessment proceedings. ITAT has also allowed this claim of the A.Ys. 2011-12 2012-13 2013-14 2014-15 and the Hon ble High Court of Delhi 2022 (8) TMI 361 - DELHI HIGH COURT also allowed the case in favour of the assessee. The learned CIT(A) rightly relying on the judgments deleted additions Disallowance u/s 43B of the Act towards claim of Leave Encashment - As per ratio of judgment in the case of Exide Industries Ltd. 2007 (6) TMI 175 - CALCUTTA HIGH COURT the directions for verification of the claim of assessee are deserves to be upheld. Revenue appeal dismissed.
ISSUES PRESENTED and CONSIDERED
The Tribunal considered several issues related to the disallowances and additions made by the Assessing Officer (AO) against the assessee's income for the Assessment Years (AY) 2016-17 and 2017-18. The core legal questions included:
ISSUE-WISE DETAILED ANALYSIS Disallowance under Section 14A of the Act The Tribunal examined the legal framework under Section 14A, which pertains to the disallowance of expenditure incurred in relation to income not includible in total income. The Tribunal noted that the assessee did not earn any exempt income from the investments during the relevant assessment year. This was supported by a precedent in the assessee's own case for AY 2012-13, where a similar disallowance was deleted. The Tribunal upheld the CIT(A)'s decision to delete the disallowance of Rs. 1,43,73,610/-. Rental Income Addition The Tribunal considered the CIT(A)'s direction to the AO to verify the rental income claim of Rs. 10,43,144/-. The CIT(A) had observed that the assessee provided necessary documentation for verification. The Tribunal found this directive appropriate, supporting the CIT(A)'s approach to ensure accurate verification before making any additions. Disallowance of Miscellaneous Foreign Expenses The Tribunal reviewed the disallowance of Rs. 1,19,33,625/- related to foreign currency expenses. The CIT(A) noted that the expenses were audited and there was no dispute regarding their genuineness or business purpose. The Tribunal agreed with the CIT(A) that the AO's rejection of the claim lacked justification, leading to the deletion of this disallowance. Disallowance of Advertisement and Sales Promotion Expenses The Tribunal analyzed the disallowance of Rs. 1,06,42,710/-, which was 1% of the total expenditure in this category. The CIT(A) observed that there were no discrepancies in the books of accounts, which were not rejected. Given that similar disallowances were overturned in previous years, the Tribunal found the AO's rationale for the disallowance unjustified and upheld the CIT(A)'s decision to delete it. Disallowance of Expenses of Consumption Debtors The Tribunal considered the disallowance of Rs. 82,33,577/- related to consumption debtors. The CIT(A) had relied on detailed submissions and past favorable judgments for the assessee. The Tribunal found that the CIT(A) rightly deleted the disallowance, as the issue had been consistently decided in favor of the assessee in previous years. Verification of Leave Encashment Claim The Tribunal examined the CIT(A)'s directive to verify the leave encashment claim of Rs. 77,71,211/-. Citing the precedent set in Exide Industries Ltd. vs. Union of India, the Tribunal found the directive for verification appropriate and upheld the CIT(A)'s order. Disallowance of Software Expenses The Tribunal reviewed the disallowance of 50% of software expenses amounting to Rs. 16,84,803/-. The CIT(A) noted the absence of specific reasons from the AO for treating these as capital expenses. Given the favorable judgments in the assessee's past cases, the Tribunal upheld the CIT(A)'s decision to delete the disallowance. SIGNIFICANT HOLDINGS The Tribunal's judgment established several core principles:
In conclusion, the Tribunal dismissed the appeals filed by the department for both AY 2016-17 and 2017-18, upholding the CIT(A)'s decisions and providing relief to the assessee on all contested issues.
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