2012 (12) TMI 1105 - HC - Income Tax

High Court affirms ITAT decisions on excise duty, share dilution, staff cost, interest, Section 40A(9)

The Commissioner of Income Tax-6, Mumbai Versus M/s. Glaxo India Ltd.

The High Court upheld the ITAT's decisions on various legal issues raised by the revenue, including excise duty on finished goods, capitalization of share ... - Issues involved: The judgment addresses various questions of law raised by the revenue in an appeal, including the treatment of excise duty on finished goods in closing stock, capitalization of share dilution for plant and machinery purchase, allowance of entire purchase of items like diesel, oil, and coal as expenditure, allocation of staff cost and interest, treatment of interest on DPEA liability, and applicability of Section 40A(9) of the IT Act to certain payments.Excise Duty on Finished Goods: The revenue questioned the deletion of an addition of Rs. 1,55,04,696 in respect of excise duty on finished goods in closing stock. The ITAT's decision was based on following its earlier decision in the assessee's case for a different assessment year, which had been accepted by the revenue. The High Court found no reason to take a different view and upheld the ITAT's decision.Capitalization of Share Dilution: The revenue challenged the ITAT's decision to capitalize share dilution incurred for raising capital for plant and machinery purchase and allowing depreciation on the same. The High Court noted that a similar issue raised in a previous case had been rejected by the Court, leading to the conclusion that the current appeal on this matter could not be entertained.Purchase of Diesel, Oil, and Coal: The revenue disputed the ITAT's decision to allow the entire purchase of items like diesel, oil, and coal as expenditure, even if not entirely consumed during the relevant year. The High Court observed that the ITAT had followed its decision in the assessee's case for a prior assessment year, which had been accepted. Consequently, the Court declined to entertain the revenue's challenge on this issue.Staff Cost and Interest Allocation: The revenue contested the ITAT's direction to allocate additional staff cost and interest based on earlier orders in the assessee's case, without adjusting interest income. The High Court found that the ITAT had followed its decision in the assessee's case for a different assessment year, which had been accepted. Therefore, the Court did not find grounds to entertain the revenue's objection.Interest on DPEA Liability: The revenue challenged the ITAT's decision to allow interest on DPEA liability as expenditure on a yearly basis, arguing that it was contingent in nature. The High Court noted the disputed nature of the DPEA liability before the Delhi High Court but upheld the ITAT's decision, considering the interest liability as allowable expenditure.Applicability of Section 40A(9): The revenue raised a question regarding payments made to Glaxo Sports Club and GL Education Trust, contending that they fell under Section 40A(9) of the IT Act. The High Court referenced a previous case where a similar issue was rejected, leading to the dismissal of the revenue's challenge on this matter.The High Court dismissed the appeal with no order as to costs, based on the considerations and conclusions regarding the various legal issues raised by the revenue.