2019 (12) TMI 1108 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions on dealer discounts, late charges, and depreciation rates

The Dy. Commissioner of Income Tax, Circle – 5, Pune. Versus Rathi Transpower Pvt. Ltd.

The Dy. Commissioner of Income Tax, Circle – 5, Pune. Versus Rathi Transpower Pvt. Ltd. - TMI Issues Involved:1. Disallowance of discount given to dealers.2. Disallowance of late delivery charges.3. Disallowance of depreciation on civil work and electrical installation.Issue-wise Detailed Analysis:1. Disallowance of Discount Given to Dealers:The first ground concerns the disallowance of discount given to dealers. During the assessment proceedings, the Assessing Officer (AO) noticed that the assessee claimed Rs. 2,01,41,391/- as discount expenses. The AO found inconsistencies in the discount rates and suspected inflated expenditure. Consequently, the AO disallowed the discount claim, adding it to the income. The Commissioner of Income Tax (Appeals) [CIT(A)] reversed this decision, referencing previous favorable decisions for the assessee for A.Ys. 2010-11 and 2011-12. The CIT(A) noted that the assessee had a distribution policy in place and that the business decision to offer discounts was justified and consistent with industry practices. The Tribunal upheld the CIT(A)'s decision, emphasizing that the AO's disallowance was based on mere surmises and lacked substantial evidence. The Tribunal noted that the assessee's discount policy was a legitimate business decision and dismissed the Revenue's appeal on this ground.2. Disallowance of Late Delivery Charges:The second ground involves the disallowance of late delivery charges amounting to Rs. 3,02,411/-. The AO disallowed this claim, arguing it was not eligible for deduction under section 37(1) of the Income Tax Act. The CIT(A) disagreed, referencing similar cases from A.Ys. 2010-11 and 2011-12, where such charges were deemed allowable business expenditures. The Tribunal supported the CIT(A)'s view, stating that late delivery charges were a legitimate business expense incurred during the ordinary course of business. The Tribunal found no distinguishing features in the current year's facts compared to previous years and dismissed the Revenue's appeal on this ground.3. Disallowance of Depreciation on Civil Work and Electrical Installation:The third ground pertains to the disallowance of depreciation on civil work and electrical installations. The AO observed that the assessee claimed higher depreciation rates on these items, which the AO deemed unjustifiable. The CIT(A) partially overturned this decision, referencing previous rulings that allowed higher depreciation rates for items integral to windmill operations. The CIT(A) directed the AO to allow higher depreciation on specific components like reinforced cement foundations and electrical installations essential for power transmission. The Tribunal upheld the CIT(A)'s decision, noting consistency with prior rulings and finding no reason to interfere. The Tribunal dismissed the Revenue's appeal on this ground as well.Conclusion:In conclusion, the Tribunal dismissed the Revenue's appeal on all grounds, affirming the CIT(A)'s decisions to allow the discount given to dealers, late delivery charges, and higher depreciation rates on specific windmill-related expenditures. The Tribunal found the CIT(A)'s rulings consistent with prior decisions and supported by substantial evidence, thereby rejecting the AO's disallowances.