2020 (8) TMI 148 - AT - Income Tax

Tribunal Upheld Assessee's Favorable Decisions, Dismissed Department Appeals

The Tribunal upheld the CIT (A)'s decisions in favor of the assessee, resulting in the dismissal of the Department's appeals. The disallowance of the ... Disallowance of 40% of general licence fee - addition as same as not incurred wholly and exclusively for the purpose of business of the assessee - HELD THAT:- This issue is squarely covered in favour of the assessee by the orders of the Hon’ble High Court and the Tribunal in assessee’s own case in earlier Asst. Years. We also note that this issue was also decided in favour of the assessee by dismissing the Department’s ground in immediately preceding Asst. Year: 2009-10 [2020 (7) TMI 567 - ITAT DELHI] by a Co-ordinate Bench of this Tribunal - we uphold the findings of the Ld. CIT (A) on the issue and dismiss the ground raised by the Department vis a vis license fee in all the years under consideration. Rate of depreciation to be allowed on UPS - assessee has claimed deprecation @ 60% in all the years under appeal whereas the AO has restricted the same to 15% - CIT (A) deleted the disallowance - HELD THAT:- We note that this issue is squarely covered in favour of the assessee by numerous orders of the Tribunal as well as of the Hon’ble Delhi High Court. Even in Asst. Year 2009-10 [2020 (7) TMI 567 - ITAT DELHI] the Tribunal, in assessee’s own case has decided the issue in favour of assessee by upholding the order of the Ld. CIT (A) on the issue. Now even the depreciation schedule provides depreciation on UPS @ 60%. Thus, the controversy is now settled by the amendment in the depreciation schedule itself. Accordingly, in Asst. Year 2010-11 we dismiss the ground raised by the Department and in Asst. Year: 2011-12 we allow the ground raised by the assessee with respect to depreciation on UPS and direct that the assessee should be given benefit of depreciation on UPS @ 60%. Disallowance u/s 14A - non recording of satisfaction - Suo moto disallowance - Department’s challenge to a part deletion of the disallowance by the Ld. First Appellate Authority by holding that no disallowance could have been made in respect of interest expenses as the assessee had accumulated surplus - HELD THAT:- We find that this issue stands covered in favour of the assessee by the order of the Tribunal in Asst. Year: 2009-10 [2020 (7) TMI 567 - ITAT DELHI] We also note that although the Ld. CIT-DR has submitted that the issue of recording the satisfaction has to be examined every year and that there is no res-judicata in Income Tax proceedings, all the same, a perusal of the Asst. orders for the years under appeal shows that the Assessing Officer has made identical observations in all the years under appeal and in all the years the factum of recording of satisfaction is completely absent. Suo moto disallowances were not commented upon by the Assessing Officer but were completely disregarded and no satisfaction for not accepting the suo moto disallowances was recorded by the AO.AR has also submitted that the disallowances may be restricted to the suo moto disallowance offered by the assessee company. Therefore, we sustain the disallowance u/s 14A, as offered by the assessee company accordingly. Depreciation on pollution control equipment and energy saving devices - AO denied depreciation on the ground that the assessee could not establish that the pollution control equipment and energy saving devices were put to use by the assessee - HELD THAT:- We note that this issue is also covered in favour of the assessee by the order of the Co-ordinate Bench of the ITAT in assessee’s own case for Asst. Year 2009-10 [2020 (7) TMI 567 - ITAT DELHI] wherein the Tribunal has upheld the findings of the Ld. CIT (A) in deleting the said depreciation disallowance made by the Assessing Officer. we dismiss the ground raised by the Department on the issue of disallowance of depreciation on pollution control equipment and energy saving devices in all the five years under appeal. Revenue appeal dismissed. Issues Involved:1. Disallowance of general license fee.2. Disallowance under Section 14A of the Income-tax Act, 1961.3. Depreciation on UPS.4. Depreciation on pollution control equipment and energy-saving devices.Detailed Analysis:1. Disallowance of General License Fee:The Assessing Officer (AO) disallowed 40% of the general license fee paid by the assessee to Societe Des Produits Nestle SA, alleging it to be excessive and not incurred wholly and exclusively for the business. The Commissioner of Income Tax (Appeals) [CIT (A)] deleted this disallowance, relying on previous orders of the Tribunal and the Delhi High Court in the assessee's own case. The Tribunal upheld the CIT (A)’s decision, noting that this issue had been consistently decided in favor of the assessee in prior years, including the immediately preceding assessment year 2009-10.2. Disallowance under Section 14A of the Income-tax Act, 1961:The AO made disallowances under Section 14A read with Rule 8D, which were partially deleted by the CIT (A). The Tribunal observed that the AO had not recorded the necessary satisfaction for disregarding the assessee's suo moto disallowances, which is a requirement as per the Delhi High Court's ruling in Maxopp Investment Ltd. The Tribunal restricted the disallowance to the amounts offered by the assessee suo moto for each assessment year, dismissing the Department's appeals on this issue.3. Depreciation on UPS:The AO restricted depreciation on UPS to 15%, treating it as part of plant and machinery. The CIT (A) allowed the assessee’s claim of 60% depreciation in some years but upheld the AO’s decision in others. The Tribunal noted that the issue was settled in favor of the assessee by the Delhi High Court in CIT vs. BSES Rajdhani Power Limited, which held that UPS is an integral part of computers and eligible for 60% depreciation. The Tribunal directed that depreciation on UPS should be allowed at 60% for all the years under appeal.4. Depreciation on Pollution Control Equipment and Energy-saving Devices:The AO disallowed depreciation on these assets, arguing that the assessee did not establish their usage. The CIT (A) deleted these disallowances. The Tribunal, referring to its decision in the assessee's case for the assessment year 2009-10, upheld the CIT (A)’s findings. The Tribunal emphasized that the AO's objections were baseless and negated by certificates from Chartered Engineers confirming the assets' installation and usage.Conclusion:The Tribunal's order resulted in the following:- Disallowance of General License Fee: The Department's appeals were dismissed, and the CIT (A)’s deletion of the disallowance was upheld.- Disallowance under Section 14A: The disallowance was restricted to the amounts offered by the assessee suo moto, and the Department's appeals were dismissed.- Depreciation on UPS: The Tribunal directed that depreciation be allowed at 60% for UPS, dismissing the Department's appeals and allowing the assessee's appeals where applicable.- Depreciation on Pollution Control Equipment and Energy-saving Devices: The Tribunal upheld the CIT (A)’s deletion of the disallowance, dismissing the Department's appeals.In summary, the Tribunal's order resulted in partial relief for the assessee and dismissal of all the Department's appeals.