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Income Tax Appellate Tribunal, DELHI BENCH: ‘E’: NEW DELHI
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘E’: NEW DELHI (Through Video Conferencing) BEFORE, SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA No.4916/Del/2014 (ASSESSMENT YEAR-2010-11) ITA No.4816/Del/2016 (ASSESSMENT YEAR-2011-12)
Dy.CIT M/s Nestle India Ltd. Circle-1, (LTU), M Block, Nestle House Delhi Vs. DLF City, Phase-II, Jacaranda Marg, Gurgaon-122 002 PAN:AAACN 0757G (Appellant) (Respondent)
ITA No.4911/Del/2017 (ASSESSMENT YEAR-2012-13) ITA No.4912/Del/2017 (ASSESSMENT YEAR-2013-14)
ITA No.4913/Del/2017 (ASSESSMENT YEAR-2014-15)
Asst. CIT M/s Nestle India Ltd. Circle-1, (LTU), M Block, Nestle House New Delhi Vs. DLF City, Phase-II, Jacaranda Marg, Gurgaon-122002 PAN:AAACN 0757G (Appellant) (Respondent)
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
Cross Objection No.37/Del/ 2019 (Arising out of ITA No.4916/Del/2017) (ASSESSMENT YEAR-2010-11)
M/s Nestle India Ltd. Dy.CIT (LTU), M Block, Nestle Delhi Vs. House DLF City, Phase-II, Jacaranda Marg, Gurgaon-122002 PAN:AAACN 0757G (Cross Objector) (Respondent) ITA No.4121/Del/2017 (ASSESSMENT YEAR-2012-13) ITA No.4122/Del/2017 (ASSESSMENT YEAR-2013-14) ITA No.4123/Del/2017 (ASSESSMENT YEAR-2014-15)
ITA No.4390/Del/2016 (ASSESSMENT YEAR-2011-12)
M/s Nestle India Ltd. Dy. CIT M-Block, Nestle House Circle-1, (LTU), Vs. DLF City, Phase-II, New Delhi Jacaranda Marg, Gurgaon-122002 PAN:AAACN 0757G (Appellant) (Respondent)
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
Appellant By Sh. Ajay Vohra, Sr. Adv. Sh. Neeraj Jain, CA Sh. Karan Jain, CA Sh. Ansul Sachar, Adv. Respondent by Ms Pramita M. Biswas, CIT-DR Date of Hearing 27.07.2020 Date of Pronouncement 31.07.2020
ORDER PER BENCH: This group of ten appeals/cross objection for Assessment
Years (A.Ys) 2010-11, 2011-12, 2012-13, 2013-14 & 2014-15
involve identical issues. Accordingly, they were heard together and
are being disposed of through this common order for the sake of
convenience.
2.0 ITA No.4916/Del/2014 is Department’s appeal for Asst. Year
2010-11 and is preferred against the order of the Ld. Commissioner
of Income Tax (Appeals) {CIT (A)} dated 14.07.2014. The assessee
has filed Cross Objection bearing C.O. No.37/Del/2019 against the
Department’s Appeal. ITA No.4390/Del/2016 is the assessee’s
appeal for Asst. Year: 2011-12 which has been preferred against the
order of the Ld. CIT (A) dated 21.06.2016 whereas ITA
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
No.4816/Del/2017 is the Department’s cross appeal for the same
year. ITA No.4122/Del/2017 is assessee’s appeal for Asst. Year:
2012-13 which against the order of the Ld. CIT (A) dated
01.05.2017 whereas ITA No.4911/Del/2017 is the Department’s
Cross appeal for the same year. ITA No.4122/Del/2017 is
assessee’s appeal for Asst. Year: 2013-14 which challenges the
order of the Ld. CIT (A) dated 01.05.2017 and ITA
No.4912/Del/2017 is the Department’s Cross Appeal for Asst. Year
2013-14. ITA No. 4123/Del/2017 is assessee’s appeal for Asst.
Year: 2014-15 and challenges the findings of the Ld. CIT (A) as
contained in order dated 01.05.2017. The Department’s cross
appeal for Asst. Year: 2014-15 is captioned as ITA
No.4913/Del/2017.
2.1 The respective grounds raised by both the parties for the
captioned assessment years are as under:
2.2 ITA No.4916/Del/2014 for A.Y.2010-11 (Department’s appeal): On the facts and in the circumstances of the case and in 1. law, the Ld CIT (A) has erred in deleting the addition of Rs.73,40,98,815/- made by AO on account of disallowance of 40% of general licence fee, holding the same as not
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
incurred wholly and exclusively for the purpose of business of the assessee.
On the facts and circumstance of the case and in law, 2. the Ld CIT (A) has erred in reducing the disallowance made u/s 14A from Rs.16,95,310/- to Rs.2,43,995/- thereby granting relief to the extent of Rs.14,51,315/-.
On the facts and circumstance of the case and in law, 3. the Ld. CIT (A) has erred in deleting the addition of Rs.2,80,321/- made by AO by restricting the depreciation on UPS @15% as against assessee’s claim @60%.
On the facts and circumstances of the case and in law, 4. the Ld.CIT(A) has erred in deleting the addition of Rs.17,27,059/- made by AO by denying the claim of depreciation in respect of energy saving and pollution control equipment on the ground that it was not put to use.
The appellant craves leave to, add to, alter, amend or 5. vary from the above grounds of appeal at or before the time of hearing.”
2.3 ITA No.4816/Del/2016 for A.Y.2011-12 (Department’s appeal):
On the facts and in the circumstances of the case and 1. in law, the Ld CIT (A) has erred in deleting the addition of Rs.90,77,99,068/- made by AO on account of disallowance of 40% of general licence fee, holding the same as not incurred wholly and exclusively for the purpose of business of the assessee.
On the facts and circumstance of the case and in law, 2. the Ld CIT (A) has erred in reducing the disallowance made
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
u/s 14A from Rs.18,33,783/- to Rs.17,58,758/- thereby granting relief to the extent of Rs.75,025/-.
On the facts and circumstance of the case and in law, 3. the Ld. CIT (A) has erred in deleting the addition of Rs.50,82,770/- made by AO denying the claim of depreciation in respect of pollution control equipment as there was no evidence submitted to indicate that they were pollution control equipments.
The appellant craves leave to, add to, alter, amend or 4. vary from the above grounds of appeal at or before the time of hearing.”
2.4 ITA No.4911/Del/2017 for A.Y.2012-13 (Department’s appeal):
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of Rs.1,06,54,85,768/- made by the AO on account of disallowance of 40% of general license fee, holding that the same as not incurred wholly and exclusively for the purpose of business of the assessee.
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in reducing the disallowance made u/s 14A from Rs.31,21,639/- to 30,72,696/- thereby granting relief to the extent of Rs.48,943/-
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.2,59,26,734/- made by AO denying the claim of depreciating in respect or pollution control equipment as there was no evidence submitted to indicate that they were pollution control equipments.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
The appellant craves leave to, add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 2.5 ITA No.4912/Del/2017 for A.Y.2013-14 (Department’s appeal):
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of Rs.1,17,83,98,395/- made by the AO on account of disallowance of 40% of general license fee, holding that the same as not incurred wholly and exclusively for the purpose of business of the assessee.
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in reducing the disallowance made u/s 14A from Rs.32,42,193/- to 31,20,127/- thereby granting relief to the extent of Rs.1,11,033/-
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.4,50,01,287/- made by AO denying the claim of depreciating in respect or pollution control equipment as there was no evidence submitted to indicate that they were pollution control equipments.
The appellant craves leave to, add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
2.6 ITA No.4913/Del/2017 for A.Y.2014-15 (Department’s appeal):
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting addition of Rs.1,25,91,03,440/- made by the AO on account of disallowance of 40% of general license fee, holding that the same as not incurred wholly and exclusively for the purpose of business of the assessee.
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in reducing the disallowance made u/s 14A from Rs.21,18,404/- to 20,30,404/- thereby granting relief to the extent of Rs.88,002/-
On the facts and in the circumstances of the case and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.41,66,502/- made by AO denying the claim of depreciating in respect or pollution control equipment as there was no evidence submitted to indicate that they were pollution control equipments.
The appellant craves leave to, add to, alter, amend or vary from the above grounds of appeal at or before the time of hearing. 2.7 Cross Objection No.37/Del/2019 for Asst. Year: 2010-11 filed by the assessee: a. That the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred on facts and in law in upholding the action of the Assessing Officer [‘AO’] in confirming the disallowance of Rs.14,51,315/- under section 14A of the Income-tax Act,
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
1961 [‘the Act’] read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 [‘the Rules’]. b. That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. c. That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act was recorded by the AO. d. The respondent craves leave to add, amend, alter or vary from the above grounds at or before the time of hearing. 2.8 ITA No.4121/Del/2017 for A.Y.2012-13 (Assessee’s appeal):
That the Commissioner of Income Tax (Appeals) 1. [‘CIT(A)’] erred on facts and in law in upholding the action of the assessing officer [‘AO’] in disallowing expenditure of Rs.30,72,696 under section 14A of the Income-tax Act, 1961 [‘the Act’] read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 [‘the Rules’]. 1.1 That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. 1.2 That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law was recorded by the AO before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
1.3 That without prejudice, the CIT (A) erred on facts and in law in not appreciating that disallowance, if any, under section 14A of the Act, had to be restricted to Rs.9,64,928/- as per computation provided by the appellant.
The appellant craves leave to add, alter, amend or vary the above grounds of appeal at or before the time of hearing.
2.9 ITA No.4122/Del/2017 for A.Y.2013-14 (Assessee’s appeal):
That the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred on facts and in law in upholding the action of the assessing officer [‘AO’] in disallowing expenditure of Rs.32,31,160/- under section 14A of the Income-tax Act, 1961 [‘the Act’] read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 [‘the Rules’]. 1.1 That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. 1.2 That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law was recorded by the AO before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act. That without prejudice, the CIT (A) erred on facts and 1.3 in law in not appreciating that disallowance, if any, under section 14A of the Act, had to be restricted to Rs.20,13,989/- as per computation provided by the appellant.
The appellant craves leave to add, alter, amend or vary the above grounds of appeal at or before the time of hearing.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
2.10 ITA No.4123/Del/2017 for A.Y.2014-15 (Assessee’s appeal):
That the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred on facts and in law in upholding the action of the assessing officer [‘AO’] in disallowing expenditure of Rs.20,30,402/- under section 14A of the Income-tax Act, 1961 [‘the Act’] read with Rule 8D(2)(iii) of the Income-tax Rules, 1962 [‘the Rules’]. 1.1 That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. 1.2 That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law was recorded by the AO before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act. That without prejudice, the CIT (A) erred on facts and 1.3 in law in not appreciating that disallowance, if any, under section 14A of the Act, had to be restricted to Rs.17,02,026/- as per computation provided by the appellant.
The appellant craves leave to add, alter, amend or vary the above grounds of appeal at or before the time of hearing.
2.11 ITA No.4390/Del/2016 for A.Y.2011-12 (Assessee’s appeal) :
That the Commissioner of Income Tax (Appeals) [‘CIT(A)’] erred on facts and in law in upholding the action of the assessing officer [‘AO’] in disallowing expenditure of
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
Rs.17,58,758/- under section 14A of the Income-tax Act, 1961 [‘the Act’] read with Rule 8D (2)(iii) of the Income-tax Rules, 1962 [‘the Rules’]. 1.1 That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that no expenditure was actually incurred in earning the exempt dividend income. 1.2 That the CIT (A) erred on facts and in law in not appreciating that no satisfaction as required by law was recorded by the AO before resorting to Rule 8D of the Rules for purposes of making disallowance under section 14A of the Act. That without prejudice, the CIT (A) erred on facts and 1.3 in law in not appreciating that disallowance, if any, under section 14A of the Act, had to be restricted to Rs.10,02,954/- as per computation provided by the appellant.
That the CIT (A) erred on facts and in law in upholding the action of the AO in allowing depreciation on UPS @ 15% instead of 60% as claimed by the appellant, holding that UPS is neither a computer nor a computer accessory.
2.1. That the CIT (A) erred on facts and in law in confirming the aforesaid disallowance without appreciating that the UPS were used by the appellant along with computer systems at different locations.
The appellant craves leave to add, alter, amend or vary the above grounds of appeal at or before the time of hearing.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
2.12 Thus, it is seen that the assessee is challenging
disallowance u/s 14A of the Income Tax Act, 1961 (hereinafter
called ‘the Act) read with Rule-8D of the Income Tax Rules, 1962
(‘the Rules’) in all the assessment years under consideration. The
Department also has challenged the part - relief allowed by the Ld.
CIT (A) with respect to disallowance under Rule-14A made by the
Assessing Officer. Apart from this, the assessee is also challenging
the action of the Ld. CIT (A) in upholding the action of the AO in not
allowing depreciation on UPS @ 60% in AY 2011-12 whereas the
Department is in appeal in AY 2010-11 on the same issue
challenging the action of the Ld. CIT (A) in directing that
depreciation on UPS be allowed @ 60%. Apart from this, the
Department is challenging the relief granted by the Ld. CIT (A) with
respect to disallowance of license fee and depreciation on pollution
control equipment/ energy saving devices in all the years under
appeal.
3.0 The brief facts of the case are that the assessee company
is manufacturer of wide range of food items covering beverages,
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
baby food powders, chocolates and confectionery, culinary
products, etc.
3.1 The returns of income for the various years under
consideration, the additions/disallowances made by the Assesing
Officer (AO) and the income assessed as per the assessment orders
are as under: (i) Assessment Year: 2010-11 (a) Returned income - Rs.7,79,66,41,380/- (b) Disallowance of license fee - Rs.73,40,98,815/- (c) Disallowance u/s 14A - Rs.16,95,310/- (d) Disallowance of depreciation - Rs.20,28,005/- (e) Total additions - Rs.73,78,22,130/- (f) Assessed income - Rs.8,53,44,63,510/-
(ii) Assessment Year: 2011-12 (a) Returned income - Rs.10,10,12,81,200/- (b) Disallowance of license fee - Rs.90,77,99,068/- (c) Disallowance u/s 14A - Rs.18,33,783/- (d) Disallowance of depreciation - Rs.52,55,604/- (e) Total additions - Rs.91,48,88,455/- (f) Assessed income - Rs.11,01,61,69,655/-
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
(iii) Assessment Year: 2012-13 (a) Returned income - Rs.12,53,68,36,330/- (b) Disallowance of license fee - Rs.1,06,54,85,768/- (c) Disallowance u/s 14A - Rs.31,21,639/- (d) Disallowance of depreciation - Rs.2,59,26,734/- (e) Total additions - Rs.1,09,45,34,141/- (f) Assessed income - Rs.13,63,13,70,471/-
(iv) Assessment Year:2013-14 (a) Returned income - Rs.12,40,55,72,280/- (b) Disallowance of license fee - Rs.1,17,83,98,395/- (c) Disallowance u/s 14A - Rs.33,42,193/- (d) Disallowance of depreciation - Rs.4,50,01,287/- (e) Total disallowance - Rs.1,22,67,41,872/- (f) Assessed income - Rs.13,63,23,14,155/-
(v) Assessment Year: 2014-15 (a) Returned income - Rs.15,43,73,93,380/- (b) Disallowance of license fee - Rs.1,25,91,03,440/- (c) Disallowance u/s 14A - Rs.21,18,404/- (d) Disallowance of depreciation - Rs.41,66,502/- (e) Total disallowance - Rs.1,26,53,88,346/- (f) Assessed income - Rs.16,70,27,81,726/-
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
3.2 In all the captioned years, the assessee had approached
the Ld. First Appellate Authority against the
additions/disallowances made in the assessment order as stated in
the previous paragraphs.
3.3 With respect to the disallowance of license fee, the Ld.
CIT (A) has deleted the addition made by the Assessing Officer in all
the years under appeal. The Assessing Officer had made a
disallowance of 40% on ad hoc basis of the royalty paid by the
assessee to Societe Des Produits Nestle SA for the use know-how
and provision of technical assistance alleging to same to be
excessive and unreasonable and not having been incurred for the
purpose of the business of the assessee. The Ld. CIT (A) has deleted
the addition by relying on the orders of the Tribunal and the
Hon’ble Delhi High Court in assessee’s own case in earlier Asst.
Years. The Department is in appeal against this deletion of
disallowance by the Ld. CIT (A) in all the years before us.
3.4 The second issue under challenge by the Department in
Asst. Years 2010-11, 2011-12, 2012-13 2013-14 & 2014-15 is
action of the Ld. CIT (A) in deleting the addition with respect to
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
depreciation in respect of energy saving and pollution control
equipment which had been disallowed by the AO on the ground that
the equipment and the devices had not been put to use.
3.5 The third controversy in this bunch of appeals is whether
depreciation on UPS is to be allowed @ 60% or 15%. The AO has
taken a view that UPS is a part of plant and machinery and is,
therefore, eligible to depreciation only @ 15% whereas it has been
the contention and claim of the assessee that UPS, being an integral
part of the computer, is eligible to depreciation @ 60%. In AY 10-11,
the Ld. CIT (A) allowed the claim of the assessee and the
Department is in appeal before us whereas in Asst. Year: 2011-12,
the Ld. CIT (A) upheld the action of the Assessing Officer in
restricting the depreciation on UPS to 15% and the assessee in
appeal against the said finding of the Ld. CIT (A).
3.6 Disallowance u/s 14A of the Act read with Rule-8D is
subject to challenge by both the parties during the years under
appeal. The details of dividend earned by the assessee, suo moto
disallowance offered by the assessee company, disallowance made
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
u/s 14A by the Assessing Officer, disallowance deleted by Ld. CIT
(A) and disallowance sustained by the Ld. CIT (A) are depicted in the
following chart:
ASST. DIVIDEND DISALLOWANCE DISALLOWANCE Disallowance of 14A Disallowance of 14A under Rule 8D(2) (iii), YEARS INCOME (in Rs.) OFFERED BY THE UNDER 14A MADE BY under Rule 8D(2)(iii), sustained by CIT(A) [B] COMPANY, ON SUO THE ASSESSING deleted by CIT(A) [A] (in Rs.) MOTO BASIS (in Rs.) OFFICER [A+B] (in Rs.) 2010-11 3,27,60,532 16,95,310 2,43,995 14,51,315 11,52,656 2011-12 5,15,55,446 18,33,783 75,025 17,58,785 10,02,954 2012-13 7,97,78,187 9,64,928 31,21,639 48,943 30,72,696 2013-14 9,29,02,863 33,42,193 1,11,033 32,31,160 20,13,989 2014-15 12,02,94,974 21,18,404 20,30,402 17,02,026 88,002
3.6.1 The basic contention of the assessee against the
disallowance u/s 14A as sustained by the Ld. CIT (A) is that since
the assessee had made a suo moto disallowance under the
provisions of section 14A, the Assessing Officer could not have
made a disallowance in excess of the said suo moto disallowance
without recording a satisfaction as to how the assessee’s suo moto
disallowance was defective. It is also the assessee’s plea that the
Assessing Officer could not have made the disallowance in absence
of him having established any nexus between the amount of
expenditure and the exempt income earned by the assessee.
3.6.2 On the other hand, the Department is challenging
the action of the Ld. CIT (A) in deleting the disallowance made in
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
terms of Rule-8D (2)(ii) on the ground that since the asseesee had
surplus funds available with it, it could not be inferred that the
assessee had utilized borrowed funds for the purposes of making
investment and, therefore, no disallowance could be made for the
interest expenditure.
4.0 At the outset, it has been submitted by the Ld. AR that
all the issues before us i.e. both in the assessee’s appeals/ Cross
Objection and the Department’s appeals were squarely covered in
favour of the assessee by the order of the Tribunal in the
immediately preceding assessment year i.e. Asst. Year: 2009-10 in
assessee’s own case vide order dated 22.07.2020 in ITA
No.1954/Del/2014 being the assessee’s appeal and in ITA
2020/Del/2014 being the Department’s appeal. The Ld. AR has
argued that on identical facts, the Tribunal has held all the issues
in favour of the assessee and, therefore, detailed arguments were
not required on any of the issues in this bunch of appeals. The Ld.
AR drew the Benches attention to the relevant paragraphs of the
said order of the Tribunal and submitted that the findings recorded
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
by the Tribunal in the immediately preceding Asst. Year: 2009-10
kindly be followed in these five years under appeal also.
5.0 Per contra, the Ld. CIT-DR fairly accepted that by and
large all the issues in this bunch of appeals stood covered in favour
of the assessee by the order of the Tribunal as aforesaid. The Ld.
CIT-DR, however submitted that so far as the finding of the
Tribunal with respect to non recording of satisfaction by the
Assessing Officer prior to making the disallowance u/s 14A of the
Act was concerned, each Asst. Year would have to be examined
separately as there is no res-judicata in Income Tax proceedings.
The Ld. CIT-DR also fairly accepted that depreciation on UPS was
allowable @ 60% even as per the amended rates provided in the
depreciation schedule.
6.0 We have gone through the records and have also perused the
orders of the lower authorities and have also perused the order of
the ITAT in assessee’s own case for Asst. Year: 2009-10. So far as
the issue of disallowance u/s 14A read with Rule-8D is concerned,
which is also related to the Department’s challenge to a part
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
deletion of the disallowance by the Ld. First Appellate Authority by
holding that no disallowance could have been made in respect of
interest expenses as the assessee had accumulated surplus, we find
that this issue stands covered in favour of the assesee by the order
of the Tribunal in Asst. Year: 2009-10. The relevant observations of
the Tribunal are contained in paragraphs 7.1, 7.1.1. The same are
being reproduced herein under for a ready reference:
“7.1 As far as the assessee’s appeal is concerned, ground Nos.1, 1.1, 1.2, 1.3 are related to ground No.2 of the Department’s appeal wherein the issue under dispute pertains to disallowance u/s 14A of the Act. The Assessing Officer had made a disallowance of Rs. 39,25,411/- u/s 14A of the Act r.w.Rule-8D of the Rules, 1962 and the Ld. CIT (A) restricted the disallowance to Rs.32,93,106/- by holding that no disallowance could have been made under the provisions of Rule 8D(2) (ii) in respect of interest expenses as the assessee company had accumulated surplus amounting to Rs.302 Crores and general reserve of 276 Crores. The Ld. CIT (A) also observed that the opening balance of investments was Rs.85.67 Crores, and, thus, investments subjected to Rule-8D were not brought forward from earlier years. It was also observed by the Ld. CIT (A) that the Assessing Officer could not demonstrate that loans
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
were borrowed for making investments in dividend yielding assets only. We find no reason to interfere with this factual finding of the Ld. CIT (A).
7.1.1 However, it has further been brought to our notice that in the alternate, the assessee had submitted a computation before the Assessing Officer wherein it was submitted that the disallowance, if any, could not exceed Rs.8,34,934/- being the costs of treasury operations. However, it is seen that neither the Assessing Officer nor the Ld. CIT (A) has commented on this computation of the assessee. Thus, apparently, the satisfaction, as contemplated and laid down by the Hon’ble Delhi High Court in the case of Maxopp Investment Ltd. (supra) to be recorded by the Assessing Officer is completely absent and, therefore, in absence of the required satisfaction, such disallowance could not have been made. However, since, the Ld. AR has argued that the disallowance may be restricted to Rs.8,34,934/-, we, accordingly, restrict the disallowance to Rs.8,34,934/- and direct the AO to delete the remaining disallowance. Thus, ground No.1 of the assessee’s appeal stands partly allowed.”
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
6.0.1 We also note that although the Ld. CIT-DR has
submitted that the issue of recording the satisfaction has to be
examined every year and that there is no res-judicata in Income Tax
proceedings, all the same, a perusal of the Asst. orders for the years
under appeal shows that the Assessing Officer has made identical
observations in all the years under appeal and in all the years the
factum of recording of satisfaction is completely absent. We also
note that the assessee had made suo moto disallowances in the
years under appeal as under:
2010-11 Rs.11,52,656/- 2011-12 Rs.10,02,954/- 2012-13 Rs.9,64,928/- 2013-14 Rs.20,13,989/- 2014-15 Rs.17,02,026/-
6.0.2 The above suo moto disallowances were not
commented upon by the Assessing Officer but were completely
disregarded and no satisfaction for not accepting the suo moto
disallowances was recorded by the AO. The Ld. AR has also
submitted that the disallowances may be restricted to the suo moto
disallowance offered by the assessee company. Therefore, we
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
sustain the disallowance u/s 14A, as offered by the assessee
company for the various years under appeal as under:
2010-11 Rs.11,52,656/- 2011-12 Rs.10,02,954/- 2012-13 Rs.9,64,928/- 2013-14 Rs.20,13,989/- 2014-15 Rs.17,02,026/- 6.0.3 Accordingly, the ground raised by the assessee
stands partly allowed and grounds raised by the Department are
dismissed with respect to disallowance u/s 14A in all the five years
under consideration.
6.1 The next issue under challenge by the Department
is the action of the Ld. CIT (A) in deleting the ad hoc disallowance @
40 % of the license fee paid by the assessee company to M/s Societe
Des Produtis Nestle, SA Switzerland. The Assessing Officer made
the following disallowance in respect of the license fee for the
different years under consideration:
Asst. Years. License Fee 2010-11 Rs.73,40,98,815/- 2011-12 Rs.90,77,99,068/- 2012-13 Rs.1,06,54,85,768/- 2013-14 Rs.1,17,83,98,395/- 2014-15 Rs.1,25,91,03,440/-
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
6.2 The Ld. CIT (A), however, deleted the disallowance by
relying on various orders of the Hon’ble High Court and the
Tribunal in assessee’s own case. It is seen that this issue is
squarely covered in favour of the assessee by the orders of the
Hon’ble High Court and the Tribunal in assessee’s own case in
earlier Asst. Years. We also note that this issue was also decided in
favour of the assessee by dismissing the Department’s ground in
immediately preceding Asst. Year: 2009-10 by a Co-ordinate Bench
of this Tribunal. The relevant observations of the ITAT in this regard
are contained in paragraphs 7.4, 7.4.1 & 7.4.2 of the said order and
the same are reproduced here in under for a ready reference:
“7.4 Coming to the remaining issues in the Department’s appeal, Ground No.1 challenges the action of the Ld. CIT (A) in deleting the addition of Rs.61,01,74,000/- made on account of license fee. It is seen that the Assessing Officer, following the order of his predecessor for the immediately preceding assessment year 2008-09, disallowed on ad hoc basis 40% of the general license fee paid by the assessee to M/s Societe des Produtis Nestle, S.A. Switzerland for use for know-how and technical assistance, alleging that the same was excessive and not reasonable and had not been incurred for the
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
purposes of business of the assessee. The Ld. CIT (A) on appeal, relying on the various orders of the Hon’ble High Court and the Tribunal in assessee’s own case deleted the disallowance. 7.4.1 It is seen that this issue is covered in favour of the assessee by the following orders of the Hon’ble High Court and the Tribunal rendered in assessee’s case in the earlier Assessment Years as under:
Assessment Authority Appeal No. Date of order Years Passing Order 1997-98 ITAT ITA NO.4545/Del/2000 10.01.2005 1998-99 ITAT ITA NO.2239/Del/2002 10.01.2005 1999-00 ITAT ITA NO.2755/Del/2003 30.04.2007 2000-01 ITAT ITA NO.2714/Del/2004 15.06.2007 2001-02 ITAT ITA NO.1979/Del/2006 27.03.2009 2002-03 ITAT ITA NO.1980/Del/2006 27.03.2009 2003-04 ITAT ITA NO.1612/Del/2007 24.07.2009 2004-05 ITAT ITA NO.3096/Del/2007 24.07.2009 2005-06 ITAT ITA NO.319/Del/2010 22.03.2010 2006-07 ITAT ITA NO.4477/Del/2010 18.11.2011 2007-08 ITAT ITA NO.4669/Del/2012 03.01.2014 2008-09 ITAT ITA NO.4670/Del/2012 03.01.2014 1997-98 to Delhi High ITA No.662/2005, 11.05.2011 2000-01 and Court ITA No.1202/2005, 2005-06 ITA No.96/2008, ITA No.294/2008, ITA No.288/2011, 2006-07 Delhi High ITA No.644/2012 21.11.2012 Court 2007-08 Delhi High ITA No.502/2014 10.09.2014 Court 2008-09 Delhi High ITA No.532/2014 10.09.2014 Court
7.4.2 The Ld. CIT-DR also could not controvert this fact. Therefore, in view of the binding judicial precedents in asssessee’s own case as enumerated above, we find no reason to interfere with the findings of the Ld. CIT (A) on the issue.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
Accordingly, Ground No.1, of the Department’s appeal stands dismissed.”
6.2.1 Accordingly, in view of the above binding judicial
precedents in asseessee’s own case and on identical facts, we
uphold the findings of the Ld. CIT (A) on the issue and dismiss the
ground raised by the Department vis a vis license fee in all the
years under consideration.
6.3 The next issue before us is the rate of depreciation to
be allowed on UPS. The assessee has claimed deprecation @ 60% in
all the years under appeal whereas the AO has restricted the same
to 15% in AY 2010-11 and 2011-12. In Asst. Years: 2010-11, the
Ld. CIT (A) deleted the disallowance but in Asst. Year 2011-12 the
Ld. CIT (A) has upheld the disallowance. We note that this issue is
squarely covered in favour of the assessee by numerous orders of
the Tribunal as well as of the Hon’ble Delhi High Court. Even in
Asst. Year: 2009-10, the Tribunal, in assessee’s own case has
decided the issue in favour of assessee by upholding the order of
the Ld. CIT (A) on the issue. The relevant observations of the
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
Tribunal are contained in paragraph 7.5 of the said order which are
as under:
“7.5 Ground No.3 of the Department’s appeal challenges the action of the Ld. CIT (A) in deleting the disallowance of Rs.1,39,152/- made by the Assessing Officer by restricting the claim of depreciation in respect of UPS from 60% to 15%. The Ld. CIT-DR as fairly accepted that this issue is covered in favour of the assessee by the judgment of the Hon’ble Delhi High Court in the case of CIT vs. BSES Rajdhani Power Limited in ITA No.1266/2010 vide order dated 31.08.2010 and CIT vs. BSES Yamuna Power Ltd. vide order dated 31.08.2010. It is seen that the Hon’ble Delhi High Court has held that UPS is to be considered as an integral part of the computers and depreciation is to be allowed @ 60%. Accordingly, in view of the settled legal position, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue also and dismiss ground No.3 of the Department’s appeal.” 6.3.1 We also note that now even the depreciation
schedule provides depreciation on UPS @ 60%. Thus, the
controversy is now settled by the amendment in the depreciation
schedule itself. Accordingly, in Asst. Year 2010-11 we dismiss the
ground raised by the Department and in Asst. Year: 2011-12 we
allow the ground raised by the assesee with respect to depreciation
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
on UPS and direct that the assessee should be given benefit of
depreciation on UPS @ 60%.
6.4 The only issue now remaining in the bunch of appeals
is depreciation on pollution control equipment and energy saving
devices. The Assessing Officer has denied depreciation on pollution
control equipment and energy saving devices on the ground that the
assessee could not establish that the pollution control equipment
and energy saving devices were put to use by the assessee. The
following disallowances were made by the Assessing Officer in
respect of depreciation on such equipment and devices in the years
under appeal as under:
Asst. Years. Disallowance of Disallowance of license fee depreciation on pollution control equipment (in Rs.) 2010-11 73,40,98,815 17,27,059 2011-12 90,77,99,068 17,27,059 2012-13 1,06,54,85,768 2,59,26,734 2013-14 1,17,83,98,395 4,50,01,287 2014-15 1,25,91,03,440 41,66,502
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
6.4.1 However, the Ld. CIT (A) has deleted these
disallowances in all the years under consideration before us. We
note that this issue is also covered in favour of the assessee by the
order of the Co-ordinate Bench of the ITAT in assessee’s own case
for Asst. Year: 2009-10 wherein the Tribunal has upheld the
findings of the Ld. CIT (A) in deleting the said depreciation
disallowance made by the Assessing Officer. The relevant findings of
the Tribunal are contained in paragraph 7.6 of the order of the ITAT
and the same is being reproduced herein under for a ready
reference:
“7.6 Ground No.4 of the Department’s appeal challenges the action of the Ld. CIT (A) in deleting the disallowance of Rs. 33,90,330/- made by the Assessing Officer by denying the claim of the depreciation in respect of energy saving and pollution control equipment on the ground that it was not put to use. It is seen that the Assessing Officer disallowed the claim of depreciation by alleging that the assessee has only established the factum of purchase of assets and not the condition of assests being put to use. The Assessing Officer further observed that comparative results were not submitted to establish that assets were energy saving and pollution control equipment. It is also seen that no adverse observation had been made by the Assessing Officer with respect to the purchase and installation of such assets. In addition to this, the assessee had also submitted
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
certificates from Chartered Engineers to the effect that the assets purchased fall within the category of Air Pollution Control Equipment, Water Control Equipment, Energy Saving Devices and Renewable Energy Devices. These certificates submitted by the assessee have been taken note of by the Assessing Officer but have not been commented upon. It is not in dispute that the assets fall within the description of the assets referred to in the Income Tax Rules which contains the deprecation schedule. The only objection of the Assessing Officer seems to be that the assets had not been put to use and that the assessee could not furnish comparative results. However, provisions of Sec.32 of the Act do not mandate such requirement. To assume that having purchased and installed the energy saving devices and pollution control equipment but not putting the same to use is, thus, just a baseless surmise and conjecture which stands negated by the certificates from the Chartered Engineers. Therefore, it is our considered opinion that the Ld. CIT (A) was absolutely correct in holding that having installed the devices, the assessee had extensively put the assets to use for the purposes of business and that under the law, the assessee was not required to monitor the outcome of use of such items in its business. The Hon’ble Delhi High Court in the case of CIT vs. Insilco Ltd. reported in 2009 ITOL 115-HC-DEL had held that it would be more appropriate to understand the expression ‘use’ as comprehending cases where the machinery is kept ready by the owner for its use in its business. Therefore, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue also and we dismiss ground No.4 of the Department’s appeal.
ITA No.4916/Del/2014 & Ors DCIT (LTU) vs. Nestle India Ltd. Gurgaon
6.4.2 Therefore, in view of the findings of the Co-ordinate
Bench in assessee’s own case for Asst. Year: 2009-10 as aforesaid,
we dismiss the ground raised by the Department on the issue of
disallowance of depreciation on pollution control equipment and
energy saving devices in all the five years under appeal.
7.0 In the final result, the four appeals of the assessee and
the Cross Objection of the assessee stands partly allowed and all
the five appeals of the Department stand dismissed.
Order pronounced on 31/07/2020.
Sd/- Sd/- (R.K.PANDA) (SUDHANSHU SRIVASTAVA) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31/07/2020 PK/Ps Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI