2013 (1) TMI 758 - AT - Income Tax

Tribunal Upholds CIT(A) Orders, Confirms Discount Addition, Tax Treatment Clarified

The Tribunal dismissed both the assessee's and the Revenue's appeals, upholding the CIT(A)'s orders on all issues raised in the case. The addition of ... Principle of Consistency - Receipt of license fee towards canteen and staff quarters rent was chargeable under the head “Income from business' by AO in previous years. It was contended that in the present year, it should be taxed accordingly as per consistency principle - HELD THAT : - It cannot be held that if a mistake is committed by the AO in earlier years, the same should be perpetuated. Thus, this rental income is taxable under the head income from house property. Repairs and Insurance of Machinery u/s 31(i) - CIT(A) deleted the disallowance made by the AO being the expenses of reconditioning of body and engine expenses. It was contended that the decision was in favour of assessee in previous assessment years. HELD THAT : - Expenditure had been incurred to “preserve and maintain” an already existing asset, and the object of the expenditure was not to bring a new asset into existence or to obtain a new advantage. CIT (A)'s decision was upheld. Decision in the cases of COMMISSIONER OF INCOME-TAX VERSUS SARAVANA SPINNING MILLS P. LTD. [2007 (8) TMI 16 - SUPREME COURT] and COMMISSIONER OF INCOME TAX VERSUS MIHIR TEXTILES LTD. [2008 (5) TMI 282 - GUJARAT HIGH COURT], relied upon. Issues involved:1. Addition of discount receivable from IOC2. Tax treatment of license fee for canteen and staff quarters rent3. Disallowance of employee contributions and shortfall in PF account4. Disallowance of expenses for reconditioning of body and engineIssue 1: Addition of discount receivable from IOCThe assessee appealed against the confirmation of the addition of Rs. 4,39,81,000 as discount receivable from IOC, arguing that the income was accounted for in the subsequent year and should not be taxed twice. The Tribunal acknowledged the income was taxable in the present year but directed the AO to ensure no double taxation by excluding it in the subsequent year if already declared. The ground of the assessee was rejected, upholding the CIT(A)'s order.Issue 2: Tax treatment of license fee for canteen and staff quarters rentThe assessee challenged the tax treatment of license fee and rent under 'Income from House Property,' citing past assessments under 'Income from Business.' The Tribunal found the income taxable under 'Income from House Property,' dismissing the appeal. It distinguished the cited judgment, stating the income source was mainly from outsiders and not staff. Consistency with previous AO errors was not a valid argument, and the income was deemed taxable under the current head.Issue 3: Disallowance of employee contributions and shortfall in PF accountThe Revenue appealed against the deletion of disallowance of employee contributions and PF account shortfall. The Tribunal upheld the deletion citing a Supreme Court judgment and the timely deposit of amounts before the income tax return filing deadline. The ground of the Revenue was dismissed based on the CIT(A)'s findings and the Supreme Court's decision.Issue 4: Disallowance of expenses for reconditioning of body and engineThe Revenue contested the deletion of Rs. 9,73,94,965 expenses for reconditioning, claiming it was covered by a previous Tribunal decision in the assessee's favor. The Tribunal agreed with the assessee, referencing the earlier decision and finding no reason to differ in the current year. The ground of the Revenue was rejected, and the appeal was dismissed.In conclusion, both the assessee's and the Revenue's appeals were dismissed, with the Tribunal upholding the orders of the CIT(A) on all issues raised in the case.