Hindustan Coca Cola Beverages Pvt. Ltd. Vs ACIT (ITAT Delhi)
ITAT Delhi held that payment of compounding fee for violation of provision under the Motor Vehicles Act, 1988 and Rules are allowable as business expenditure under section 37(1) of the Income Tax Act.
Facts- The assessee in its appeal has challenged disallowance on account of non-compete fees; reversal of provisions towards bad and doubtful debts; amount paid for traffic, challans and deposit from customers.
Conclusion- Held that non compete fee was capital expenditure, resulting in benefit of enduring nature, and therefore, not an allowable as revenue deduction.
We have carefully perused the orders of the authorities below. Provision was created in the earlier year and it was written back in that year is not in dispute. The ld. CIT(A) has admitted that the issue in hand is a case of reversal of provision of which income has already been offered in the earlier year. Therefore, we fail to understand why the addition has been sustained by the ld. CIT(A).
The Coordinate Bench while dealing with identical issue of payment of compounding fee for violation of provision under the Motor Vehicles Act, 1988 and Rules thereunder has held that such expenditure is allowable as business expenditure under section 37(1) of the Act. Thus, following the decision of the Coordinate Bench, we delete the disallowance.
Held that section 41(2) of the Act was inserted W.E.F 1.04.1998 to provide for a levy of balancing charge in respect of certain depreciable assets, namely, building, machinery, plant or furniture which is owned by the assessee in respect of which depreciation is claimed u/s 32(1)(i) of the Act, that is, assets of an undertaking engaged in generation or generation and distribution of power which was, or has been used for the purpose of business. It is clear that section 41(2) of the Act applies only if the assets are owned by the power generating undertaking and since the assessee is not a power generating company.
FULL TEXT OF THE ORDER OF ITAT DELHI
The above cross appeals by the assessee and Revenue are preferred against the order of the ld. CIT(A) – 42, New Delhi dated 29.06.2018 pertaining to Assessment Year 2010-11. Both the appeals were heard together and are disposed of by this common order for the sake of convenience and brevity.
2. The assessee, in its appeal, has challenged the disallowance on account of:
