2010 (6) TMI 876 - AT - Income Tax

Tribunal Decision: Expenses, Deductions, Exclusions under Income Tax Act

The Dy. CIT, Circle-3 (3), Mumbai Versus M/s. Wartsila India Ltd., Mumbai

The Tribunal dismissed the Revenue's challenges on various grounds related to expenses, deductions, and exclusions under the Income Tax Act. It upheld the ... - Issues involved: The judgment involves the following issues: 1. Allowance of payments to clubs, 2. Allowance of bad debts and liquidated damages, 3. Exclusion of hire charges u/s 80HHC, and 4. Exclusion of discount receipt, balances, and provisions written back u/s 80HHC.Allowance of payments to clubs: The Revenue challenged the allowance of payments to clubs amounting to Rs. 82,035, contending that such expenses did not promote the assessee's business. The Tribunal cited a precedent where membership fees to a club were considered an allowable expenditure for better contacts and publicity. Relying on this, the Tribunal dismissed the Revenue's ground.Allowance of bad debts and liquidated damages: The Revenue disputed the allowance of Rs. 4,64,18,200 on account of bad debts and liquidated damages, arguing that the assessee failed to provide evidence of actual write-off in the books of account. The assessee invoked an amendment to Sec. 36(1)(vii) stating that only the write-off was required, not proof of irrecoverability. The CIT(A) accepted the submission, noting that similar claims were allowed in previous years. The Tribunal upheld the CIT(A)'s decision, citing a Supreme Court ruling that post-1989, only write-off is necessary, not proof of irrecoverability.Exclusion of hire charges u/s 80HHC: The Revenue raised a ground regarding the exclusion of 90% of net hire charges while calculating deduction u/s 80HHC. The Tribunal found this ground irrelevant for the year and dismissed it as infructuous.Exclusion of discount receipt, balances, and provisions written back u/s 80HHC: Regarding the exclusion of these items while computing deduction u/s 80HHC, the CIT(A) directed the AO not to exclude balances written back, considering them as revenue expenses. The Tribunal upheld this decision. For discount receipt and provisions written back, the Tribunal remitted the issues to the AO for further adjudication based on earlier decisions.In conclusion, the Tribunal allowed the appeal filed by the Revenue for statistical purposes, addressing various grounds related to expenses, deductions, and exclusions under the Income Tax Act.