2016 (5) TMI 1386 - AT - Income Tax

Tribunal rulings on tax deductions: depreciation, school expenses upheld; community expenses dismissed; sales tax claim remanded.

DCIT, CC-34, Mumbai Versus Prism Cement Ltd. And Vice Versa

The Tribunal allowed the assessee's claim under Section 35E, depreciation on a badminton court, reimbursement of school expenses, and upheld the allowance ... Disallowance of claim u/s 35E - Held that:- We find that the issue for Assessment year 2000-01 and 2002-03, the Tribunal has dismissed the appeal of the Revenue, therefore, in view of the decision from Hon’ble jurisdictional High Court in CIT vs Paul Brothers [1992 (10) TMI 5 - BOMBAY High Court] and Western Outdoor Interactive Pvt. Ltd. (2012 (8) TMI 709 - BOMBAY HIGH COURT), we allow this ground of the assessee as in the absence of any contrary facts. The Department is not expected to a different view. Depreciation in respect of badminton court allowed. Reimbursement of school expenses allowed. Sales tax and VAT subsidy received by the assessee - Held that:- This ground was taken as additional ground. Since, this ground was not raised before the Revenue authorities, therefore, in all fairness, this ground is sent to the file of the Assessing Officer to examine the claim of the assessee and decide in accordance with law. The assessee be given opportunity of being heard. Allowance of depreciation for earlier years, when such depreciation was not actually allowed in those years - Held that:- We note that the assessee did not claim depreciation while computing business profit for Assessment year 2000-01 and 2001-02, which position had become final as the ld. Assessing Officer did not allow depreciation in those years. However, the Explanation-5 to section 32 of the Act was inserted by the Finance Act w.e.f. 01/04/2002 (i.e. from Assessment year 2002-03) from which year the assessee had started claiming depreciation. Considering the totality of facts, we are in agreement with the finding of the Ld. Commissioner of Income Tax (Appeal) that it is not open for the Assessing Officer to assume the allowance of depreciation for earlier years, when such depreciation was not actually allowed in those years, because, the situation could have been different, if he would have reopened the assessment of those earlier years. Without amending the assessments of those years, the assumed written down value could not be considered to work out the depreciation of the current year - Decided against revenue Exchange rate fluctuation loss - Held that:- We affirm the stand of the Ld. Commissioner of Income Tax (Appeal) by holding that the loss arising on account of foreign exchange fluctuation rate in respect of loans on revenue account is allowable u/s 37(1) of the Act. Claim for depreciation on UPS at the rate of 15% as against 60% - Held that:- The assessee the depreciation on UPS at the rate of 60% in place of 15% restricted by the Revenue. See Macawber Engineering System (I) P. Ltd. Versus Assistant Commissioner of Income-tax [2013 (11) TMI 131 - ITAT MUMBAI ] Disallowance u/s 14A read with Rule 8D - assessee received dividend income - Held that:- Commissioner of Income Tax (Appeal) sent back the matter to the file of the Ld. Assessing Officer to make a reasonable disallowance by following the decision from Hon’ble jurisdictional High Court in Godrej & Boyce Mfg. Ltd.[ (2010 (8) TMI 77 - BOMBAY HIGH COURT)]. We find no infirmity in the direction of the Ld. Commissioner of Income Tax (Appeal) and the same is affirmed. Issues Involved:1. Disallowance of claim under Section 35E.2. Disallowance of depreciation on badminton court.3. Disallowance of reimbursement of school expenses.4. Disallowance of community expenses.5. Claim regarding sales tax and VAT subsidy.6. Assumption of allowance of depreciation for earlier years.7. Exchange rate fluctuation loss.8. Disallowance under Section 14A read with Rule 8D.Issue-wise Detailed Analysis:1. Disallowance of Claim under Section 35E:The assessee's claim under Section 35E amounting to Rs. 3,44,00,000/- was disallowed. The assessee argued that the claim was accepted in the assessment year 2000-01 and should be allowed in subsequent years as well. The Tribunal referenced CIT vs Paul Brothers and Western Outdoor Interactive Pvt. Ltd., which held that if a claim is allowed in the first year, it should not be denied in later years unless there are changes in facts. The Tribunal found no change in facts and allowed the assessee's claim.2. Disallowance of Depreciation on Badminton Court:The assessee's claim for depreciation on a badminton court amounting to Rs. 1535/- was disallowed. The Tribunal noted that similar claims were allowed in previous years (Assessment years 2000-01, 2003-04, and 2004-05) and directed the Assessing Officer to follow the same order, thus allowing the claim.3. Disallowance of Reimbursement of School Expenses:The assessee's claim for reimbursement of school expenses amounting to Rs. 20,95,807/- was disallowed. The Tribunal referenced previous decisions in favor of the assessee for similar claims in earlier years (Assessment years 2000-01, 2003-04, and 2004-05) and allowed the claim.4. Disallowance of Community Expenses:The assessee did not press the ground for disallowance of community expenses amounting to Rs. 1,53,815/- due to the smallness of the amount. Therefore, this ground was dismissed as not pressed.5. Claim Regarding Sales Tax and VAT Subsidy:The assessee's claim regarding sales tax and VAT subsidy was raised as an additional ground. Since this ground was not raised before the Revenue authorities, the Tribunal remanded the issue back to the Assessing Officer for examination and decision in accordance with the law, ensuring the assessee is given an opportunity to be heard.6. Assumption of Allowance of Depreciation for Earlier Years:The Revenue's appeal contested the assumption of depreciation allowance for earlier years when it was not actually allowed. The Tribunal noted that the assessee did not claim depreciation in the assessment years 2000-01 and 2001-02, and the position had become final. The Tribunal upheld the decision that it is not open for the Assessing Officer to assume the allowance of depreciation for earlier years without reopening those assessments.7. Exchange Rate Fluctuation Loss:The Revenue's appeal contested the allowance of exchange rate fluctuation loss. The Tribunal referenced the decision in CIT vs Woodword Governor India Pvt. Ltd. and upheld the allowance of the exchange rate fluctuation loss as a revenue expenditure, affirming that the loss arising on account of foreign exchange fluctuation rate in respect of loans on revenue account is allowable under Section 37(1).8. Disallowance under Section 14A read with Rule 8D:The Revenue's appeal contested the disallowance under Section 14A read with Rule 8D. The Tribunal noted that the Assessing Officer made a disallowance of Rs. 71,87,621/- by applying Rule 8D, while the assessee received dividend income of Rs. 47,23,466/-. The Tribunal upheld the direction of the Commissioner of Income Tax (Appeal) to make a reasonable disallowance following the decision in Godrej & Boyce Mfg. Ltd., which held that Rule 8D applies prospectively from the assessment year 2008-09.Conclusion:The appeals were disposed of with the Tribunal allowing some grounds in favor of the assessee based on precedents and remanding certain issues back to the Assessing Officer for further examination. The Tribunal's decisions were aligned with previous rulings and legal principles, ensuring consistency and fairness in the application of tax laws.