High Court upholds Tribunal decisions on tax issues

Commissioner of Income-tax, Ludhiana Versus Metalman Auto (P.) Ltd.

Commissioner of Income-tax, Ludhiana Versus Metalman Auto (P.) Ltd. - [2011] 336 ITR 434 (P & H) Issues Involved:
1. Deduction under section 80-IB on labor job receipts.
2. Deduction under section 80-IB on miscellaneous income.
3. Depreciation on assets not owned by the assessee.
4. Depreciation rate on electrical installations.
5. Exemption of dividend income not claimed in the return.
6. Writing off the cost of tools and dies.
7. Treatment of designing and consultancy charges as revenue or capital expenditure.
8. Disallowance under section 14A for presumed expenditure on exempt income.

Issue-wise Detailed Analysis:

1. Deduction under section 80-IB on labor job receipts:
The Tribunal affirmed the CIT(A)'s finding that job work income was earned by the assessee through manufacturing activities for outside parties, similar to those for its own products. This income was considered derived from eligible business under section 80-IB. The Tribunal referenced the Delhi High Court's decision in Northern Aromatics Ltd. and the Madras High Court's decision in CIT v. Taj Fire Works Industries, supporting the eligibility of such income for deduction.

2. Deduction under section 80-IB on miscellaneous income:
The CIT(A) held that miscellaneous receipts, rebate, discount, and balances written off were derived from the industrial undertaking, thus qualifying for deduction under section 80-IB. The Tribunal upheld this view due to the absence of adverse material and the smallness of the dispute.

3. Depreciation on assets not owned by the assessee:
The Tribunal upheld the CIT(A)'s decision allowing depreciation on air conditioners purchased in the name of the Managing Director and his wife, as they were acquired with the assessee's funds and used for business purposes. The beneficial owner was the assessee, not the individuals.

4. Depreciation rate on electrical installations:
The Tribunal confirmed the CIT(A)'s decision to allow depreciation at 25% on electrical installations, treating them as part of plant and machinery. This was consistent with the treatment in the previous assessment year.

5. Exemption of dividend income not claimed in the return:
The Tribunal found that the CIT(A) was correct in allowing the exemption under section 10(35) despite it not being claimed in the return. The Supreme Court's decision in Goetze (India) Ltd. v. CIT did not apply to statutory exemptions. The jurisdictional High Court's decision in CIT v. Rewari Central Cooperative Bank Ltd. supported this view.

6. Writing off the cost of tools and dies:
The Tribunal upheld the CIT(A)'s decision allowing the assessee to write off 80% of the cost of tools and dies, consistent with the method followed in previous years. Tools and dies lost resale value once used, justifying the write-off.

7. Treatment of designing and consultancy charges as revenue or capital expenditure:
The Tribunal agreed with the CIT(A) that designing and consultancy charges related to tools and dies were revenue expenditures. These expenses were incurred in the course of business and did not lose their revenue character.

8. Disallowance under section 14A for presumed expenditure on exempt income:
The Tribunal upheld the CIT(A)'s decision that disallowance under section 14A was not justified without evidence of actual expenditure incurred to earn exempt income. The jurisdictional High Court's decision in Hero Cycles Ltd. supported this view, rejecting presumptive expenditure.

Conclusion:
The High Court dismissed both appeals, finding no substantial questions of law. The Tribunal's decisions were consistent with earlier judgments and the principles of consistency, affirming the CIT(A)'s findings on all issues.