ASSISTANT COMMISSIONER INCOME TAX-VAPI vs. M/S MITSU LIMITED

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TAXAP/350/2020HC GujaratGJHC24051276202005 January 2021Author: HONOURABLE MR. JUSTICE J.B.PARDIWALA,HONOURABLE MR. JUSTICE ILESH J. VORA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the appeal filed by the revenue. Regarding question 1, the Court took notice that this very issue concerning non-compete fees for the same assessee had been decided in favour of the assessee by this Court in Tax Appeal No. 800 of 2013, vide judgment and order dated 04.07.2016. Therefore, the Court held that the ITAT was justified in its finding on this issue. For questions 2 and 3, involving smaller amounts of Rs. 45,215 and Rs. 54,316 respectively, the Court implicitly upheld the ITAT's decision by dismissing the appeal, as the primary issue concerning non-compete fees had already been decided against the revenue. The operative direction was the dismissal of the appeal.

What were the facts?

This Tax Appeal was filed by the revenue (Assistant Commissioner Income Tax-Vapi) against an order of the Income Tax Appellate Tribunal (ITAT), Ahmedabad, dated 04.05.2020, for Assessment Year 2002-2003. The appeal challenges the ITAT's decision regarding the taxability of non-compete fees, the deletion of disallowance for sales promotion expenses, and the eligibility of miscellaneous income for deduction under Section 80HHC. The amounts in dispute for the latter two issues were Rs. 45,215 and Rs. 54,316, respectively. The revenue noted that the issue concerning non-compete fees had been previously decided by this Court in favour of the assessee in a prior appeal (Tax Appeal No. 800 of 2013) concerning the same assessee.

What were the issues?

The Tribunal was asked to decide three substantial questions of law: 1. Whether the receipt of Rs. 14,55,41,760 in the form of non-compete fees is capital in nature and not chargeable to tax, as held by the ITAT. 2. Whether the ITAT was justified in deleting the disallowance of Rs. 45,215 on account of sales promotion expenses, which was made by the Assessing Officer (AO) on an estimated basis without justification, despite the assessee not submitting details to substantiate the claim. 3. Whether the ITAT was justified in holding that miscellaneous income of Rs. 54,316 is eligible for deduction under Section 80HHC, even though the assessee company could not justify that it was derived from export. Contentions: Assessee: The judgment does not record specific contentions for the assessee on these issues, other than implicitly supporting the ITAT's order. Revenue: The revenue argued that the ITAT erred in its findings on all three questions, particularly concerning the capital nature of non-compete fees, the deletion of disallowance for sales promotion expenses without justification, and the eligibility of miscellaneous income for Section 80HHC deduction.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80HHC

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/350/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO.  350 of 2020 ========================================================= = ASSISTANT COMMISSIONER INCOME TAX­VAPI  Versus M/S MITSU LIMITED  ========================================================== Appearance: MRS KALPANAK RAVAL(1046) for the Appellant(s) No. 1 DARSHAN R PATEL(8486) for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE ILESH J. VORA   Date : 05/01/2021

ORAL ORDER (PER : HONOURABLE MR. JUSTICE J.B.PARDIWALA)

1.

This   Tax   Appeal   under   Section   260   A   of   the Income Tax Act, 1961 (for short “the Act, 1961”) is   at   the   instance   of   the   revenue   and   is directed against the order passed by the Income Tax   Appellate   Tribunal,   Ahmedabad,   dated 04.05.2020 in ITA No.1671/AHD/2006 for the A.Y. 2002­2003. 2. We   have  heard  Mrs.   Kalpana   Raval,   the  learned Senior   Standing   Counsel   appearing   for   the revenue and Mr. R.K.Patel, the learned counsel appearing for the respondent – assessee.

3.

The   revenue   has   proposed   the   following   three substantial   questions   of   law   for   the consideration of this Court :

“1. Whether   on   the   facts   of   the   case,   the Hon'ble ITAT was justified in law in hodling C/TAXAP/350/2020 ORDER that receipt of Rs.14,55,41,760/­ in the form of non­compete fees are capital in nature and not chargeable to tax ?

2.

Whether on the facts of the case and in law,   the   Hon'ble   ITAT   was   justified   in deleting   the   disallowance   of   Rs.45,215/­   on account   of   sales   promotion   expenses   done   by the   AO   on   estimates   basis   without   any justification   even   though   no   details   were submitted   before   the   AO   to   substantiate   the claim put by the assessee ?

3.

Whether   on   the   facts   of   the   case,   the Hon'ble ITAT was justified in law in holding that the miscelleneous income of Rs.54,316/­ is   eligible   for   deduction   u/s.   80   HHC   even though the assessee company could not justify that   the   same   was   derived   from   export   and

hence   cannot   be   held   eligible   for   deduction u/s. 80 HHC ?

4.

We take notice of the fact that with respect to the   questions   Nos.2   and   3   respectively,   the amount   involved  is   Rs.45,215/­   and   Rs.54,316/­ respectively.   So   far   as   the   question   No.1   is concerned,   the  same   has  also   been   answered   by this   Court   while   disposing   of   the   Tax   Appeal No.800   of   2013   with   respect   to   very   same assessee   vide   judgment   and   order   dated 04.07.2016. We take notice of the fact that in Tax   Appeal   No.800   of   2013,   the   very   same question   with   respect   to   upholding   to   the addition   of   a   particular   amount   towards   non­ compete   fees   was   raised.   The   questions   as C/TAXAP/350/2020 ORDER proposed   by   the   revenue   in   the   said   appeal ultimately came to be answered in favour of the assessee. The very same question of law has been raised in the present case with respect to the very same assessee.

5.

In the result, this appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (ILESH J. VORA,J) SUCHIT

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