2020 (2) TMI 1235 - HC - Income Tax

Court upholds CIT (A) and Tribunal decisions, dismissing Revenue's appeal. Section 35D additions deleted.

The Principal Commissioner of Income Tax, Gandhinagar Versus Gujarat Power Corporation Ltd.

The High Court upheld the decisions of the CIT (A) and the Tribunal, dismissing the Revenue's appeal. The additions under Section 35D of the Income Tax ... Claim of deduction u/s 35D - amortization of certain preliminary expenses - HELD THAT:- CIT (A) as well as the Tribunal both relied upon the fact that once the Assessing Officer has allowed the claim under Section 35D of the Act in the first year of allowance, it could not have been cured and therefore, in view of the doctrine of consistency, the claim made by the assessee is required to be allowed for the year under consideration. Tribunal therefore followed the decision taken by in assessee’s own case [2013 (9) TMI 363 - ITAT AHMEDABAD] and dismissed the appeal of the Revenue. In view of the aforesaid facts and more particularly, as the Tribunal has not given any independent finding for the year under appeal and followed its earlier decision in assessee’s own case which has attained finality, the appeal requires to be dismissed only on that ground. Disallowance of payment of rent and taxes - non commencement of business - HELD THAT:- CIT(A) as well as the Tribunal have arrived at concurrent finding of the fact that the payment of rent and taxes, paid by the assessee, is not capital expenses but is only revenue expenses paid out to fulfill the statutory requirement for the purpose of continuing the ownership of the land. - Revenue appeal dismissed. Issues Involved:1. Addition of claim under Section 35D of the Income Tax Act.2. Addition of Rent, Rates, and Taxes.3. Deduction for principal part of rent received without a corresponding claim.Issue 1: Addition of claim under Section 35D of the Income Tax Act:The Revenue appealed against the deletion of an addition of Rs. 25,16,488 made by the CIT (A) for a claim under Section 35D of the Act. The Tribunal held that the assessee was not entitled to the deduction under Section 35D, emphasizing that the expenses were not incurred in connection with setting up or extending an industrial undertaking. However, the CIT (A) and the Tribunal relied on the doctrine of consistency, stating that once the claim was allowed by the Assessing Officer in the first year, it had to be allowed in subsequent years. The Tribunal followed its decision in the assessee's previous case, which had attained finality, leading to the dismissal of the Revenue's appeal.Issue 2: Addition of Rent, Rates, and Taxes:The second issue revolved around the addition of Rs. 2,72,81,590 for rent, rates, and taxes paid by the assessee for lands where activities had not commenced. The CIT (A) held that these expenses were revenue in nature as they did not create new fixed assets or bring enduring advantages. The Tribunal concurred, noting that the expenses were routine and did not provide any enduring benefit, thus upholding the CIT (A)'s decision. It was concluded that the expenses were revenue in nature and not capital, leading to the dismissal of the Revenue's appeal.Issue 3: Deduction for principal part of rent received without a corresponding claim:Regarding the deduction for the principal part of rent received without a corresponding claim, the Court declined to answer as this issue did not arise from the Tribunal's order. Therefore, no substantial question of law was deemed to have arisen from the impugned order. The appeal was dismissed accordingly.In summary, the High Court upheld the decisions of the CIT (A) and the Tribunal regarding the deletion of additions under Section 35D and for rent, rates, and taxes, emphasizing the revenue nature of the expenses. The appeal was dismissed, and the issue concerning the deduction for the principal part of rent received was not addressed as it did not arise from the Tribunal's order.