Interpreting Depreciation Rules & Disallowance of Expenditure under Income Tax Act

The Pr. Commissioner of Income Tax-10 Versus Huntsman International (India) Pvt. Ltd.

The Pr. Commissioner of Income Tax-10 Versus Huntsman International (India) Pvt. Ltd. - TMI Issues involved:
1. Eligibility of depreciation for distribution network, material supply contract, and brand use under Section 32(1)(ii) of the Income Tax Act.
2. Disallowance under Section 14A of the Income Tax Act for expenditure incurred by the assessee for earning exempt income.

Analysis:
1. The first issue pertains to the eligibility of depreciation for certain assets under Section 32(1)(ii) of the Income Tax Act. The Tribunal had allowed depreciation for the distribution network, material supply contract, and brand use, which was challenged by the appellant. The main contention was that the Tribunal failed to provide reasons for considering these assets eligible for depreciation under the clause 'any other business or commercial rights of a similar nature' and did not explain the application of the doctrine of 'ejusdem generis.' The High Court admitted the appeal for consideration based on this question of law.

2. Moving on to the second issue, it revolves around the disallowance made by the Assessing Officer under Section 14A of the Income Tax Act regarding the expenditure incurred by the assessee for earning exempt income. The Tribunal, in the impugned judgment, held that since the assessee had not earned any exempt income during the relevant year, no disallowance under Section 14A could be made. This decision was based on the precedent set by the Delhi High Court in the case of CIT Vs. Holcim India (Pvt.) Ltd. The High Court, in a previous judgment, had also followed the same principle, emphasizing that if there is no tax-free income earned by the assessee, the corresponding expenditure incurred cannot be considered for disallowance under Section 14A. The Court dismissed the appeal, stating that no substantial question of law arose in this context.

In conclusion, the High Court addressed the issues surrounding the eligibility of depreciation for specific assets and the disallowance under Section 14A of the Income Tax Act. The judgment provided detailed analysis and referenced relevant legal precedents to support the decisions made in each issue.