Facts of the Case

The present appeal pertains to Assessment Year 2010–11, wherein the Revenue challenged the order of the Income Tax Appellate Tribunal (ITAT) dated 31.07.2020. The dispute primarily revolved around multiple additions and disallowances made by the Assessing Officer (AO), including disallowance of license fee, disallowance under Section 14A read with Rule 8D, and issues relating to depreciation on certain assets.

The ITAT had granted relief to the assessee, Nestlé India Ltd., by deleting or reducing various additions. Aggrieved by the same, the Revenue preferred an appeal before the Delhi High Court raising several substantial questions of law.

 Issues Involved

  1. Whether the ITAT was correct in deleting the addition made on account of disallowance of license fees.
  2. Whether reduction of disallowance under Section 14A read with Rule 8D was justified.
  3. Whether allowing higher depreciation @60% instead of 15% was legally valid.
  4. Whether deletion of disallowance of depreciation on energy-saving and pollution control devices not put to use was correct.

 Petitioner’s Arguments (Revenue)

  • The ITAT erred in deleting substantial additions made by the AO without properly appreciating the facts and applicable legal provisions.
  • The disallowance of license fees was justified and should not have been deleted.
  • The reduction in disallowance under Section 14A was contrary to Rule 8D and CBDT Circular No. 5/2014.
  • Higher depreciation allowed by the ITAT was incorrect, particularly in light of judicial precedents such as Dinamalar vs ITO.
  • Depreciation should not be allowed on assets that were not put to use during the relevant assessment year.

 Respondent’s Arguments (Assessee – Nestlé India Ltd.)

  • The issues raised by the Revenue were already covered by earlier judgments of the Delhi High Court in the assessee’s own case and other binding precedents.
  • The ITAT had correctly appreciated the facts and applied settled legal principles.
  • No substantial question of law arose from the Tribunal’s findings as they were purely factual and consistent with existing jurisprudence.

 Court’s Findings / Order

The Delhi High Court dismissed the appeal filed by the Revenue and held as follows:

  • The issue relating to disallowance of license fees was already covered by an earlier decision of the Court, wherein the Revenue’s appeal had been dismissed.
  • Issues concerning Section 14A disallowance and depreciation on certain assets were also covered by a recent judgment of the Court, holding that no substantial question of law arose.
  • The issue regarding higher depreciation had already been decided in a connected appeal (ITA 303/2023) in favour of the assessee.

Accordingly, the Court concluded that no substantial question of law arose for consideration, and the appeal was dismissed.

 Important Clarification

  • The High Court emphasized that when issues are already settled by earlier judgments, re-agitating them does not give rise to a substantial question of law.
  • The ruling reinforces the principle that appeals under Section 260A of the Income Tax Act are maintainable only when substantial questions of law arise.
  • Findings of fact by the ITAT, when consistent with precedent, are generally not interfered with.

 Sections Involved

  • Section 14A of the Income Tax Act, 1961
  • Rule 8D of the Income Tax Rules, 1962
  • Section 32 (Depreciation)
  • Section 260A (Appeal to High Court)

Link to download the order - https://delhihighcourt.nic.in/app/showFileJudgment/RAS04072023ITA3002023_142716.pdf

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