2021 (9) TMI 763 - AT - Income Tax

Tribunal rules in favor of assessee on deductions, expenses, and capital expenditure issues

M/s Hughes Communications India Ltd Versus The D.C.I.T Circle 12 (1) New Delhi And The I.T.O Circle 12 (1) New Delhi Versus M/s Hughes Communications India Ltd

M/s Hughes Communications India Ltd Versus The D.C.I.T Circle 12 (1) New Delhi And The I.T.O Circle 12 (1) New Delhi Versus M/s Hughes Communications ... Issues:1. Disallowance of deduction under section 80-IA of the Income-tax Act, 1961 for Assessment Years 2008-09 and 2009-10.2. Disallowance of deduction based on the allocation of expenses and other income.3. Disallowance of a portion of the licence fee as capital expenditure.Analysis:1. The appeals involved a common issue regarding the disallowance of deduction under section 80-IA of the Income-tax Act for the Assessment Years 2008-09 and 2009-10. The Assessing Officer disallowed a portion of the deduction claimed by the assessee, citing reasons such as the lack of separate books of accounts for eligible and non-eligible units and incorrect allocation of expenses. The Tribunal considered the arguments presented by both parties and analyzed the allocation of expenses and income to determine the eligibility of the deduction claimed.2. The Tribunal observed that the assessee maintained an ERP-based accounting system with separate codes for each head of expenditure, which was deemed acceptable for claiming deductions under the Act. The Tribunal referred to previous cases where similar accounting systems were upheld for claiming deductions under different sections of the Act. The Tribunal also noted that the expenses were allocated based on actual scientific principles and certified by a Chartered Accountant, indicating a valid basis for the allocation.3. Regarding the allocation of other income and the consistency of claims, the Tribunal emphasized that the claim for deduction had been accepted in the initial Assessment Year of 2007-08. The Tribunal held that unless the claim was disturbed in the initial year, it could not be challenged in subsequent years. Additionally, the Tribunal highlighted that the Assessing Officer had allowed the deduction in later Assessment Years, invoking the Rule of Consistency to support the assessee's claim.4. Another issue in the appeals concerned the disallowance of a portion of the licence fee as capital expenditure. The Assessing Officer initially disallowed a significant amount of the fee as capital expenditure, but upon directions from the appellate authority and in compliance with a decision of the Hon'ble Delhi High Court, the Assessing Officer later deleted the addition. The Tribunal, considering the settlement of the issue, dismissed the Revenue's appeals related to this matter.5. In conclusion, the Tribunal partly allowed the assessee's appeals and dismissed the Revenue's appeals, based on the analysis of the disallowance of deductions under section 80-IA, allocation of expenses, and treatment of the licence fee as capital expenditure. The Tribunal's decision was pronounced on 14.09.2021 in the presence of both parties' representatives.