2020 (8) TMI 148 - AT - Income Tax

Tribunal Upheld Assessee's Favorable Decisions, Dismissed Department Appeals

Dy. CIT Circle-1, (LTU), Delhi Versus M/s Nestle India Ltd. And (Vice-Versa), Dy. CIT Circle-1, (LTU), Delhi, Asst. CIT Circle-1, (LTU), New Delhi Versus M/s Nestle India Ltd.

Dy. CIT Circle-1, (LTU), Delhi Versus M/s Nestle India Ltd. And (Vice-Versa), Dy. CIT Circle-1, (LTU), Delhi, Asst. CIT Circle-1, (LTU), New Delhi Versus ... 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.