APOLLO TYRES LIMITED vs. JOINT COMMISSIONER OF INCOME-TAX

J U D G M E N T P.R.Ramachandra Menon, J. I.T. APPEAL No.67 OF 2009: The Assessee is a Company engaged in the manufacture and sale of automobile tyres and tubes. In respect of the assessment year 1995-96, the assessment was finalised by the Assessing Officer under Section 143(3) as per Annexure A order. This was sought to be challenged by filing an appeal before the Commissioner of Income Tax (Appeals), who allowed the appeal in part, as per Annexure B order dated 27.05.1998. Both the Assessee and the Department filed appeals before the Tribunal, to the extent they were aggrieved. Both the appeals were considered together and the Tribunal, as per Annexure C common order dated 22.08.2008 finalised the matter, which is sought to be challenged by the Revenue in this appeal.

This question has already been dealt with and the position was answered against the Revenue, as per our verdict in I.T.Appeal No.973 OF 2009. The relevant portion of the said verdict is extracted below for easy reference: “The Assessing Officer found that the commission paid by the suppliers to the investment companies was not accounted in the accounts of the Assessee and hence addition was made in this regard. This was deleted by the Commissioner (Appeals) in the appeal filed by the Assessee, holding that the same is not correct or sustainable and that the said commission receipts were to be assessed at the hands of the investment companies and not at the hands of the Assessee. This was affirmed by the Tribunal in Annexure-C order, holding that the aforesaid commissions have already been substantively assessed at the hands of the investment companies. This being the position, it could not have been assessed at the hands of the Assessee under any circumstance. The said finding on fact is not assailable under any circumstance and we hold it against the Revenue.” 7. iii) Whether the deletion of the addition of Rs. 85,98,867/- representing concealment of income by selling good tyres as defective second tyres is correct? This issue was dealt with in detail and it was answered against the Revenue as per our verdict in I.T.Appeal No.973 OF 2009. The relevant portion of the said verdict is extracted below for easy reference “The Assessing Officer found that, in respect of the unit of the Assessee at Baroda, in Gujarat, the quantum under this head was only about 1% of the total production; whereas in respect of the unit at Athani in Kerala, it was nearly 2.5%. According to the Assessing Officer, the disparity was quite disproportionate and the reason might be the sale of 'good tyres' branding them as 'defective/second quality tyres'. In the said circumstance, the Assessing Officer restricted the quantum to 1%, as reckoned in respect of the Gujarat unit and made addition to the requisite extent. In the appeal filed by the Assessee, the Commissioner (Appeals) found that there cannot be any addition on the basis of surmises or conjectures and that the accounts were accepted and not rejected; adding that such reduction in the value was because of the defects with reference to the consumer complaints. The said finding was affirmed by the Tribunal. We are of the view that this is purely a 'question of fact' answered with reference to the materials on record and no interference is warranted at our hands, as no substantial question of law is involved. Question is answered against the Revenue.” 8. iv) Whether the Tribunal is right in deleting the disallowance of Rs.12 lakhs made for lack of proper vouchers? This question was also considered by us and it was answered against the Revenue, as per our verdict in I.T.Appeal No.973 OF 2009. The relevant portion of the said verdict is extracted below for easy reference Being aggrieved of the course pursued by the Commissioner (Appeals), both the Assessee and the Revenue filed appeals before the Tribunal, to the extent they were aggrieved. As per Annexure-C order under challenge, the Tribunal held that there was no valid ground to call for interference with the order passed by the Commissioner. The said 'finding on fact' is not liable to be interdicted by this Court, for want of any substantial question of law. Question stands answered against the Revenue. 9. v) Is the Tribunal right in deleting the disallowance of Rs.14,14,392/- being rent paid for a building not used for the business purpose of the Assessee? This issue has also been dealt with in detail and the position was answered against the Revenue as per our verdict in I.T.Appeal No.973 OF 2009. The relevant portion of the said verdict is extracted below for easy reference A decision was taken by the Assessing Officer in favour of the Revenue, dis-allowing the said amount holding that it was for 'non-business purpose'. However, in the appeal preferred by the Assessee, considering the facts and circumstances 50% was interdicted by the Commissioner (Appeals), restricting the dis-allowance only to an extent of the remaining 50%. This led to appeals preferred by both the Assessee and the Revenue. The Tribunal declined interference in both the appeals, holding that there was no tenable ground. In fact, it is borne out from the materials on record that the Chairman and Managing Director of the Assessee Company was also the Chairman and Managing Director of some other companies as well, who are housed in the building in question and as such, the dis-allowance/restriction to an extent of 50% came to be sustained. We do not find any reason to interdict the said finding and reasoning and no substantial question of law (but for a question of fact) is brought to our notice. It stands answered against the Revenue. 10. vi) On interpretation of S.43A, is the Tribunal right in holding that depreciation claim of Rs.1853559/- is allowable in respect of the fluctuation in the value of foreign currency without actual payment of the increased liability? This question has been answered against the Revenue, as per our verdict passed in I.T.Appeal Nos.1347 of 2009. As it stands so, it is declared

accordingly and the relevant portion of the said verdict is extracted below: “It is brought to the notice of this Court that the issue Governor India P.Ltd [312 ITR 254 (SC) and Oil and Dehradun. [322 ITR 180 (SC)]. In the light of the dictum laid down by the Apex Court, we are of the view that the challenge raised by the Revenue in I.T.Appeal No.1347 of 2009 is devoid of any merit and no substantial question of law is involved.”

The deduction is allowable to the Assessee under this provision towards export promotions and the profit, to the extent as specified, is exempted. The Assessing Officer had granted the relief and there was no grievance in this regard. But while dealing with various other issues, the matter came up for consideration before the Tribunal, who passed Annexure C order Paragraphs 23 to 23.3 are in the following terms:

“23. Ground No.7 is with regard to the claim of deduction u/s.80HHC. The Assessing Officer allowed deduction under Section 80HHC at Rs.87.02,948/- as per the Audit report filed by the Assessee. Before the first appellate authority the Assessee contended that the Assessing Officer has erred in not allowing the claim under section 80 HHC on the basis of the assessed income. The learned Commissioner of Income Tax (Appeals) allowed the claim of the Assessee by observing as under: “This issue is also covered by Ground No.(xv) of my above mentioned appellate order for the assessment year 1994-95 order dated 31.12.1997. Following the same, the appeal on this ground is allowed.” Aggrieved by the above finding of the first appellate authority, the Revenue is in appeal before the Tribunal.

this ground of appeal of the revenue.” This Court does not find any reason to interdict the order passed by the Tribunal, as no substantial question is brought to our notice. 12. viii) Is not the order of the Tribunal erroneous in allowing depreciation on the written down value worked out by Commissioner of Income Tax (Appeals) for the assessment year 1993-94? It is to be noted that, the 'written down value' may change, depending upon the foreign exchange fluctuations. The situation is resulted, as consequential to the mandate of Section 43A of the Income Tax Act. We find no ground to interfere with the findings rendered by the Tribunal on this question as well.