THE COMMISSIONER OF INCOME TAX IV, NEW DELHI vs. IKEA TRADING I P.LTD.

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ITA - 1264 / 2009HC Delhi30 November 20091 pages
For Petitioner: SANJEEV SABHARWAL
AI SummaryDismissed

What did the High Court hold?

The High Court upheld the view taken by the ITAT. Regarding the sum of Rs. 36.27 lacs paid for demurrage, the Tribunal had held that these were fumigation expenses, incidental to business, and incurred in the normal course of business. Therefore, the Tribunal concluded that these expenses were rightly allowed by the Assessing Officer. The High Court found this view to be correct in law, supported by various judgments of the Supreme Court and High Courts. Consequently, no substantial question of law arose for consideration before the High Court.

What were the facts?

The Assessing Officer (AO) passed an assessment order. The Commissioner of Income Tax (Appeals) [CIT(A)] revised this order under Section 263 of the Income Tax Act, 1961, identifying two alleged mistakes. The first was the failure to disallow Rs. 33.66 lacs debited as 'Advance on deposits written off'. The second was the failure to disallow Rs. 36.27 lacs debited as 'Payment for demurrage'. The assessee appealed to the Income Tax Appellate Tribunal (ITAT). The ITAT upheld the CIT(A)'s view on the first point but held that the demurrage payments were business expenses and rightly allowed by the AO. The Revenue preferred an appeal to the High Court against the ITAT's order.

What were the issues?

1. Whether the ITAT erred in holding that the sum of Rs. 36.27 lacs paid for demurrage was an allowable business expenditure, despite the CIT(A)'s revision under Section 263. The Revenue argued that the CIT(A) correctly identified the demurrage payment as a disallowable expense. The assessee contended that these were fumigation expenses, incidental to business, and thus rightly allowed by the AO. The Tribunal, in its decision, found the demurrage payments to be business expenses incurred in the normal course of business. The High Court noted that the ITAT referred to various judgments of the Supreme Court and High Courts in support of its view.

Which sections of the Income-tax Act were involved?

Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF DELHI AT NEW DELHI . 30.11.2009 10# . Present: Mr. Sanjeev Sabharwal for the appellant. . . + ITA No. 1264/2009 The order of the Assessing Officer was revised by the CIT(A) in exercise of his powers under Section 263 of the Income Tax Act, 1961 whereby the Commissioner had pointed out two purported mistakes in the assessment order, namely :- (a) A sum of Rs.33.66 lacs debited as ?Advance on deposits written off? in the Profit and Loss Account had to be disallowed, which was not done. (b) Rs.36.27 lacs on account of ?Payment for demurrage ? debited in the Profit and Loss Account was also to be disallowed by the Assessing Officer. . The assessee preferred appeal against this order before the Tribunal. Insofar as the first purported mistake is concerned, the order of the CIT(A) has been upheld. However, in respect of payment of demurrage, the Tribunal has held that these were fumigation expenses and were incidental to business incurred in the normal course of business and, therefore, rightly allowed by the Assessing Officer. We find that the view taken by the ITAT is correct in law, in support whereof the Tribunal has referred to various judgments of the Supreme Court and High Courts. Therefore, no question of law arises for consideration in this appeal, which is dismissed. . . . A.K. SIKRI, J. . . . SIDDHARTH MRIDUL, J. November 30, 2009 nsk .

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