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of <h1>Tribunal Upholds Airline's Expense Deduction Decision, Dismisses Revenue's Appeal</h1> <h3>DCIT, Circle 2 (1), New Delhi Versus M/s. Airline Allied Services Ltd.</h3> DCIT, Circle 2 (1), New Delhi Versus M/s. Airline Allied Services Ltd. - TMI Issues involved:Appeal against deletion of addition on account of disallowance of provision for obsolescence of spares for assessment year 2006-07.Detailed Analysis:1. Background of the Case:The Deputy Commissioner of Income-tax initiated proceedings under section 147 of the Income-tax Act after audit objection regarding provision for obsolescence of spares of Rs.3,49,38,968/- escaping assessment for the assessment year 2006-07.2. Appeal Process:The assessee appealed before the Commissioner of Income-tax (Appeals) who deleted the addition. The Revenue challenged this decision before the Tribunal.3. Key Question:The main issue was whether the addition made by the AO on account of disallowance of the provision for obsolescence of spares, which was not actual expenditure during the year, was sustainable.4. Arguments Presented:The Revenue argued that the deletion of the addition was erroneous. The assessee relied on a Tribunal order in a similar case to support their position.5. Tribunal's Decision:The Tribunal noted that the provision for obsolescence of spares was not an ad hoc claim but a legitimate expense related to normal wear and tear in the aeronautic industry. The Tribunal cited the Companies Act and international accounting standards to support the assessee's claim.6. Comparison with Precedent:The Tribunal found the facts of the current case similar to a previous case involving M/s. Jet Airways (I) Ltd., where the Tribunal had ruled in favor of the assessee regarding the provision for obsolescence of spares.7. Conclusion:The Tribunal upheld the decision of the Commissioner of Income-tax (Appeals) to delete the addition of Rs.3,49,38,968/-, considering it a genuine expenditure essential for running the airline business. The appeal filed by the Revenue was dismissed due to the absence of any legal or factual flaws in the impugned order.In summary, the Tribunal's judgment favored the assessee by accepting the provision for obsolescence of spares as a legitimate expense, following established accounting standards and industry practices, ultimately dismissing the Revenue's appeal.
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