2012 (2) TMI 539 - AT - Income Tax

ITA Tribunal Upholds CIT(A) Decisions on Various Tax Issues

ACIT, (OSD) -I, Range 4, Ahmedabad Versus Mazda Ltd., Ahmedabad

The ITAT upheld the CIT(A)'s decisions to delete disallowances and additions in various issues, including liquidated damages, debit balance write-off, ... Disallowance on account of debit balance written off - Held that:- When the mater was carried before the 1st appellate authority, he has perused the details and outstanding balance and has noted that it was a business decision to write off the amount as bad debt for the year under consideration. With this brief background, we have been informed that now this issue stood settled by the Hon’ble Supreme Court in the case of TRF Ltd as reported in (2010 (2) TMI 211 - SUPREME COURT). This ground of the revenue is therefore, dismissed. Unexplained investment in stock - Held that:- When inventory of stock was taken at the close of the accounting period, the same was not recorded therein. Next, in respect of the other item of controversy, a list of all the sales involved through which the stock was dispatched to various parties along with their names, invoice number, placed on record. As per the said details, the dates of invoices were starting from 28.03.2005 to 31.03.2005 and on this basis, it is claimed that the said stock was not accounted for in the books of account. We are of the view that the reason given by the assessee for non inclusion of these two items in the books of account on account of close of accounting period was genuine as also acceptable. We, therefore, find no fallacy in the relief granted by the Ld. CIT(A). The same is hereby confirmed and this ground of the revenue is dismissed. Addition on expenditure incurred on foreign raining of the Director’s daughter as employee of the assessee company - Held that:- This issue is squarely covered by the decision of Hon’ble Karnataka High Court rendered in the case of RAS Technologies (2010 (7) TMI 670 - KARNATAKA HIGH COURT ) wherein the expenditure for foreign education of Managing Director’s son was held as business expenditure and therefore, directed to allow the same. Following this decision and the decision referred by Ld. CIT(A), we hereby confirm the relief and resultantly, this ground of the revenue is hereby dismissed. Issues Involved:1. Deletion of disallowance of Rs. 18,81,670/- on account of liquidated damages.2. Deletion of disallowance of Rs. 37,65,575/- on account of debit balance written off.3. Deletion of addition of Rs. 74,03,784/- on account of unexplained investment in stock.4. Deletion of disallowance of Rs. 18,45,993/- on account of expenditure incurred on foreign training of the Director's daughter.Detailed Analysis:Issue 1: Deletion of Disallowance of Rs. 18,81,670/- on Account of Liquidated DamagesThe assessee, involved in the manufacturing and trading of machinery parts, claimed Rs. 18,81,670/- as liquidated damages due to delayed delivery and late compliance of orders. The Assessing Officer (A.O.) disallowed this claim. However, the CIT(A) relied on previous tribunal orders in the assessee's own case for earlier assessment years, which allowed such claims. The ITAT noted that the facts and legal positions were identical to previous years and dismissed the revenue's ground, thereby upholding the deletion of the disallowance.Issue 2: Deletion of Disallowance of Rs. 37,65,575/- on Account of Debit Balance Written OffThe assessee wrote off Rs. 27,90,321/- as bad debt, providing a party-wise chart with reasons. The A.O. disallowed the claim, but the CIT(A) noted it was a business decision and allowed the write-off. The ITAT referenced the Supreme Court case of TRF Ltd (323 ITR 397) and upheld the CIT(A)'s decision, dismissing the revenue's ground.Issue 3: Deletion of Addition of Rs. 74,03,784/- on Account of Unexplained Investment in StockThe A.O. found discrepancies in the stock statement provided to the bank and the balance sheet, leading to an addition of Rs. 74,03,784/-. The assessee provided a reconciliation statement, explaining adjustments for non-moving items, excise duty, and dispatched goods not reflected in the bank statement. The CIT(A) accepted the reconciliation, noting the stock statement given to the bank was unaudited and prepared before the closing date. The ITAT found the assessee's explanations genuine and upheld the CIT(A)'s deletion of the addition, dismissing the revenue's ground.Issue 4: Deletion of Disallowance of Rs. 18,45,993/- on Account of Expenditure Incurred on Foreign Training of the Director's DaughterThe assessee claimed Rs. 18,45,993/- under 'staff training' for the Director's daughter's education in the UK. The A.O. disallowed it, considering it a personal benefit. The CIT(A) found the training relevant to the company's business and noted a service agreement requiring the daughter to serve the company post-training. The ITAT upheld the CIT(A)'s decision, referencing the Karnataka High Court's decision in RAS Technologies, which allowed similar expenses as business expenditure. The ITAT confirmed the relief and dismissed the revenue's ground.ConclusionThe ITAT dismissed the revenue's appeal on all grounds, confirming the CIT(A)'s decisions to delete the disallowances and addition. The judgment emphasized the consistency with previous tribunal decisions and relevant Supreme Court and High Court rulings.