2018 (4) TMI 1822 - AT - Income Tax

ITAT Rules in Favor of Assessee: Sales Tax Subsidy Non-Revenue, Allows Feasibility & Travel Expenses, Dismisses Dept Appeals.

DCIT, Central Circle 3, New Delhi Versus Minda Industries Ltd.

The ITAT ruled in favor of the assessee, allowing all four appeals concerning assessment years 2009-10 to 2012-13. The ITAT upheld the treatment of sales ... Assessment u/s 153A - Treatment to sales tax subsidy - revenue or capital receipt - HELD THAT:- issue of sales tax subsidy is covered in favour of the assessee by order of ITAT in assessee’s own favour in earlier assessment years 2007 – 08 and 2008 – 09 [2016 (4) TMI 1320 - ITAT DELHI]. This issue also came up in assessment year 2009 – 10 and the same was decided in favour of the assessee - Also this addition has been made without there being any incriminating material found in respect of this addition during the course of search conducted on the premises of the assessee. Respectfully following the earlier orders of the Tribunal in the assessee’s own case as aforementioned we allow these grounds raised by the assessee. Disallowance of professional charges paid for feasibility study - Tribunal had noted that no new asset had come into existence nor any benefit of enduring nature had resulted for the assessee company and, therefore, the expenditure incurred on feasibility study was to be allowed as revenue expenditure. As nothing new has been brought on record by the Department subsequent to the earlier order of the ITAT and nothing new or incriminating was found during the course of search, we hold that the expenditure incurred on feasibility study is to be allowed as revenue expenditure and accordingly we allow the grounds raised by the assessee in this regard. Disallowance u/s 14A - Admittedly, the assessee had not earned any dividend income during the year under consideration and, therefore, no disallowance under section 14A could be made. It is seen that with respect to this disallowance also nothing incriminating was found during the course of search and, therefore, in absence of any evidence to the contrary being demonstrated by the Department, since the assessee has not earned any dividend income during the year under consideration, we find no reason to interfere with the findings of CIT (Appeals) in this regard and we deem it fit dismiss the grounds raised by the Department. Ad hoc disallowance to the extent of 5% of the total foreign travelling expenses - as per AO disallowance should be restored to 10% of the total expenditure on foreign travelling - HELD THAT:- As no incriminating material has been brought on record in respect of this item of expenditure and this issue has already been settled in favour of the assessee by earlier orders of the ITAT [2016 (4) TMI 1320 - ITAT DELHI]. Consistent with the view taken in earlier orders of the ITAT, the ground raised by the assessee is allowed Addition for scrap sales - addition for the first time in the order passed under section 153A - HELD THAT:- It is settled law that there is no scope for extrapolation in assessment framed under section 153A of the Act and the additions can be made only with reference to incriminating material found during the course of search. This view supported by another judgment in the case of Principal CIT versus Smt. Anita Rani[2017 (3) TMI 389 - DELHI HIGH COURT] - in view of the finding of fact by the Ld. CIT (Appeals) that incriminating material found in respect of the scrap sales amounted to ₹ 20,73,211/- - Decided against revenue. Issues Involved:- Appeals against separate orders dated 24.04.2015 of the Ld. CIT (Appeals)-25, New Delhi for assessment years 2009-10 to 2012-13.- Treatment of sales tax subsidy as revenue receipt.- Disallowance of payment for feasibility study.- Deletion of disallowance under section 14A of the Income Tax Act.- Confirmation of ad hoc disallowance on foreign traveling expenses.- Deletion of addition related to scrap sales.Analysis:Assessment Year 2009-10:- Sales Tax Subsidy: The ITAT decided in favor of the assessee, citing earlier orders in the assessee's favor for assessment years 2007-08 and 2008-09. No incriminating material was found during the search, leading to allowing the grounds raised by the assessee.- Feasibility Study Disallowance: The ITAT noted that no new fact or incriminating material was unearthed during the search, and as the issue was previously settled in favor of the assessee, the expenditure on feasibility study was allowed as revenue expenditure.Department's Appeal - Disallowance under Section 14A:- The ITAT upheld the deletion of disallowance under section 14A as the assessee had not earned any dividend income during the year, and no incriminating material was found during the search.Assessment Year 2010-11:- Ad Hoc Disallowance on Foreign Traveling Expenses: The ITAT allowed the ground raised by the assessee, as no incriminating material was found, and the issue had been settled in favor of the assessee in previous assessment years.- Addition related to Scrap Sales: The ITAT dismissed the Department's appeal, as the addition was made on conjectures and surmises without any incriminating evidence found during the search.Assessment Years 2011-12 and 2012-13:- The issue of ad hoc disallowance on foreign traveling expenses was settled in favor of the assessee by earlier ITAT orders, leading to the allowance of the appeals for both years.Final Result:- All four appeals of the assessee were allowed, while both appeals of the Department were dismissed, with the orders pronounced on 27th April 2018.