Facts of the Case

The appeal was filed by the Revenue challenging the order of the Income Tax Appellate Tribunal (ITAT) dated 31.07.2020 concerning Assessment Year 2011–12.

The Assessing Officer (AO) had made multiple additions and disallowances, including:

  • Disallowance of license fee amounting to ₹90.77 crores
  • Disallowance under Section 14A read with Rule 8D
  • Restriction of depreciation from 60% to 15%
  • Disallowance of depreciation on energy-saving and pollution control devices

The ITAT deleted or reduced these additions, which led to the present appeal before the High Court.

 Issues Involved

  1. Whether deletion of disallowance of license fee by ITAT was justified.
  2. Whether reduction of disallowance under Section 14A read with Rule 8D was correct.
  3. Whether higher depreciation @60% was allowable instead of 15%.
  4. Whether depreciation on energy-saving and pollution control devices was rightly allowed.

 Petitioner’s Arguments (Revenue)

  • The ITAT erred in deleting substantial additions made by the AO.
  • Disallowance of license fee was wrongly removed.
  • Reduction of disallowance under Section 14A was not in line with Rule 8D and CBDT Circular No. 5/2014.
  • Higher depreciation @60% was incorrectly allowed ignoring functional test principles.
  • Depreciation was wrongly allowed on assets not put to use.

 Respondent’s Arguments (Assessee – Nestle India Ltd)

  • The issues raised were already covered by earlier judgments of the High Court.
  • ITAT correctly applied settled legal principles.
  • No new substantial question of law arose for consideration.
  • The AO’s disallowances were unsustainable in law and on facts.

 Court’s Findings / Order

  • The Court held that Issue (i) regarding license fee was already covered by earlier decision dated 11.05.2011 (ITA 662/2005).
  • Issues (ii) and (iv) were covered by judgment dated 17.05.2023 in ITA 281/2023, where it was held that no substantial question of law arose.
  • Issue (iii) relating to higher depreciation was also covered in ITA 303/2023, where the Revenue’s appeal had already been dismissed.

 Important Clarification

  • When issues are already settled by precedent, the High Court will not entertain appeals raising identical questions.
  • Section 14A disallowance and depreciation matters must align with judicial precedents rather than mere AO interpretation.
  • Repetitive litigation on settled issues does not constitute a “substantial question of law.”

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS04072023ITA3012023_142805.pdf

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