2018 (1) TMI 900 - HC - Income Tax

High Court Decides Tax Issues: Leave Encashment, Depreciation, Head Office Expenses

The High Court considered various tax-related issues in the case, including leave encashment provision under Section 43B(f), treatment of debenture ... Allowance of expenditure incurred towards restructuring of debenture and claim of depreciation on 'goodwill'- revenue or capital expenditure - Held that:- This issue arising herein stands concluded in favour of the Respondent-Assessee and against the Appellant-Revenue by the decision of this Court in CIT Vs. M/s. Aditya Birla Nuvo Ltd. (2017 (3) TMI 876 - BOMBAY HIGH COURT). Head Office expenses cannot be allocated to profits derived from 100% export oriented units falling under Section 10B - Held that:- Tribunal has allowed the Respondent-Assessee's Appeal by following decision of its coordinate bench in the case of Grasim Industries [2012 (8) TMI 989 - ITAT MUMBAI]. No substantial question of law Appeal admitted on the substantial questions of law at Nos. 1 and 5. 1. Whether on the facts and circumstances of the case and in law, the Tribunal was justified in directing the Assessing Officer to allow the amount claimed by way of provision for leave encashment in view of the provisions of Section 43B(f) of the Act? 5. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in restricting the disallowance under Section 14A of the Act to ₹ 1,87,954/? Issues:1. Provision for leave encashment under Section 43B(f) of the Income Tax Act.2. Treatment of expenditure on restructuring of debenture as revenue expenditure.3. Claim of depreciation on 'goodwill'.4. Allocation of Head Office expenses to profits from 100% export-oriented units under Section 10B.5. Disallowance under Section 14A of the Act.Analysis:1. The first issue pertains to the provision for leave encashment under Section 43B(f) of the Income Tax Act. The Tribunal directed the Assessing Officer to allow the claimed amount, which was challenged in the appeal. The High Court noted the questions raised by the Revenue and agreed to consider them. The decision on this issue was pending before the Court.2. Regarding the treatment of expenditure on restructuring of debenture as revenue expenditure, the High Court referred to a previous decision in a similar case where the issue was concluded in favor of the Respondent-Assessee. Citing the precedent, the Court held that this issue did not raise any substantial question of law and thus was not entertained.3. The claim of depreciation on 'goodwill' was another issue raised in the appeal. Similar to the previous issue, the High Court found that this matter was also concluded in favor of the Respondent-Assessee based on a previous decision for the assessment year 2000-01. Consequently, the Court did not find any substantial question of law in this regard and did not entertain the issue.4. The question of allocating Head Office expenses to profits derived from 100% export-oriented units under Section 10B was also raised. The Tribunal's decision to allow this allocation was supported by a decision in another case. The Revenue accepted this decision, and no new justification was presented to warrant a different view. Therefore, the Court did not find any substantial question of law in this matter and did not entertain the issue.5. Lastly, the issue of disallowance under Section 14A of the Act was raised in the appeal. The Tribunal had restricted the disallowance to a specific amount, which was challenged. The Court admitted this issue for consideration along with other substantial questions of law mentioned in the appeal. The Respondent waived service, and the Court directed the Registry to inform the Tribunal about the order for further proceedings. The case was scheduled to be heard along with other related appeals.