Income Tax Appellate Tribunal - Mumbai
Asian Paints Limited,Mumbai vs Deputy Commissioner Of Income-Tax, ... on 28 April, 2026
IN THE INCOME TAX APPELLATE TRIBUNAL "A" BENCH MUMBAI
BEFORE HON'BLE JUSTICE (RETD.) C V BHADANG, PRESIDENT
AND
SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER
ITA No. 3489/MUM/2025
Assessment Year: 2021-22
Asian Paints Limited Deputy Commissioner of
Asian Paints House, Income-Tax, Circle 3(4),
6A & 6B Shanti Nagar, Mumbai
Vakola Pipeline Lane
Vs.
Santacruz (East),
Mumbai - 400055
(PAN: AAACA3622K)
(Appellant) (Respondent)
Present for:
Assessee : Shri Madhur Agrawal, Advocate
Revenue : Shri Rajesh Kumar Yadav, CIT DR
Date of Hearing : 16.03.2026
Date of Pronouncement : 28.04.2026
ORDER
PER GIRISH AGRAWAL, ACCOUNTANT MEMBER:
This appeal filed by the assessee is against the order of ld. Pr. Commissioner of Income Tax, Mumbai - 3, vide order no. ITBA/REV/F/REV5/2024-25/1074837702(1), dated 21.03.2025 passed against the assessment order by DCIT/ACIT, Circle-3(4), Mumbai, u/s. 143(3) r.w.s. 144B of the Income-tax Act, 1961 (hereinafter referred to as the "Act"), dated 29.12.2022, for Assessment Year 2021-22.
2 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22
2. Grounds taken by the assessee are reproduced as under:
"1. The Ld. PCIT ("Ld. PCIT"), erred in invoking and passing the order dated March 21, 2025 under section 263 of the Act ("impugned revision order") without appreciating that revisionary proceedings under section 263 cannot be invoked unless the conjunctive conditions, that assessment order passed is erroneous in law and prejudicial to the interests of the revenue, are satisfied. The Appellant prays that the impugned revision order dated March 21, 2025 be quashed for non-satisfaction of preconditions for invoking provisions of section 263 of the Act.
2. The Ld. PCIT, erred in revising the order and directing the Assessing officer ("Ld. AO") to make an addition of Rs.27.90 crores on account of provision for doubtful debts. The Appellant prays that the Ld. AO be directed to allow deduction of provision of doubtful debts amounting to Rs. 27.90 crores
3. The Ld. PCIT, erred in revising the order and directing the Ld. AO to make an addition of Rs.8.64 crores on account of tax on dividend received from specified foreign company u/s 115BBD of the Act without appreciating the fact that the Company has rightly claimed such amount as deduction under section 80M of the Act. The Appellant prays that the Ld. AO be directed to allow the deduction under section 80M of the Act of dividend received from specified foreign company.
4. The Ld. PCIT, erred in revising the order and directing the Ld. AO to make an addition of Rs.7.72 crores on account of festival and pooja expenses claimed under section 37(1) of the Act. The Appellant prays that the Ld. AO be directed to allow deduction under section 37(1) of the Act of festival and pooja expenses amounting to Rs. 7.72 crores.
5. The Ld. PCIT, erred in revising the order and directing the Ld. AO to make an addition of Rs.6.03 crores on account of taxes paid under protest claimed under section 43B of the Act. The Appellant prays that the Ld. AO be directed to allow a deduction under section 43B of the Act amounting to Rs. 6.03 crores.
6. The Ld. PCIT, erred in revising the order and directing to the Ld. AO make an addition of Rs.1.86 crores on account of claim of loss on account of GST credit reversal due to fire. The Appellant prays that the Ld. AO be directed to allow loss on account of GST credit reversal due to fire.
7. The Ld. PCIT, erred in revising the order and directing the Ld. AO to make an addition of Rs.0.50 crore on account of claim of exemption under section 54EC against capital gain under section 50C of the Act. The Appellant prays that the Ld. AO be directed to allow the claim of exemption under section 54EC of the Act amounting to Rs. 5 crore 3 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 2.1. There are seven grounds raised by the assessee out which ground no. 1 relates to assumption of jurisdiction by ld. PCIT for invoking revisionary proceedings u/s 263 and passing the impugned order thereon. Ground nos. 2 to 7 are in respect of direction given by the ld. PCIT to the ld. AO for making additions pursuant to the impugned revisionary order passed by him.
3. Brief facts as culled out from the records are that assessee is a leading paint manufacturing company, engaged in the business of manufacturing of paints, varnishes, enamels, other colours and home improvement products. For the year under consideration, assessee filed its return of income on 31.01.2021, reporting total income at Rs. 4189,06,81,410/- for which assessee opted taxation u/s 115BA. Ld. AO completed the original scrutiny assessment after issuing notice u/s 142(1) dated 18.10.2022, 27.10.2022 and 22.11.2022 to which assessee responded, furnishing its submissions on 25.10.2022, 04.11.2022, 05.11.2022, 25.11.2025 and 26.11.2022. Ld. AO took note of all these submissions and recorded his observations in para 5 about examination and verification conducted by him. Considering the submissions of the assessee, assessment was concluded accepting the returned income for the year.
3.1. Subsequently, ld. PCIT perused the records of the said assessment and noted that certain issues were not examined thoroughly by the ld. AO while passing the said assessment order. From the examinations of the records, ld. PCIT drew his consideration that the assessment order passed by the ld. AO is erroneous in so far as it is prejudicial to the interest of revenue on the following issues:
4 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22
i) Deduction of Provision for doubtful debts
ii) Tax on dividend received from specified foreign company under section 115BBD
iii) Deduction of festival and pooja expenses
iv) Deduction of GST paid under protest under section 43B
v) Claim of loss on account of GST credit reversal due to fire
vi) Claim of exemption under section 54EC against Capital gains under section 50 3.2. By recording the observations on each of the above stated issues, ld. PCIT issued a show cause notice dated 24.01.2025, invoking the impugned revisionary proceedings. Assessee replied to the said show cause notice exhaustively, explaining on each aspect of all the said issues, duly supported by corroborative documentary evidences.
Assessee also strongly submitted that out of the above six issues, four issues had already been considered by the ld. AO in the course of assessment proceedings. Certain detailed queries were raised and were elaborately replied with corroborative documentary evidences. These four issues were duly examined and considered by the ld. Assessing Officer which after having satisfied, were accepted without any adverse view. These four issues which were considered by the ld. AO in the course of assessment proceedings are at serial nos. (ii), (iii), (iv) and (v).
3.3. After considering the submissions made by the assessee and by referring to certain judicial precedents, ld. PCIT concluded that ld. AO has not examined the above listed six issues thoroughly while completing the assessment u/s 143(3) r.w.s. 144(B), He thus, set aside the assessment order, holding it as erroneous and prejudicial to the interest of revenue and directed the ld. AO to follow the directions given by him on each of the six issues. It is important to note at this juncture 5 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 that for each of the six issues, ld. PCIT has directed the ld. AO to make the disallowance / addition, leaving no room for exercising his role of making the assessment as against the requirement of the provisions contained in Sec. 263 since the requirement under the said section is to direct for a fresh assessment by bringing out how the assessment is erroneous in so far as it is prejudicial to the interest of revenue.
4. Certain basic facts in respect of each of the issues listed by the ld. PCIT are noted as under:
4.1. In respect of deduction of provision for doubtful debts, amounting to Rs. 27,90,49,629/-, assessee had claimed deduction u/s 36(1)(vii) by way of creating provision for doubtful debts and advances on a net basis, debiting the same to the profit and loss account and correspondingly, crediting the trade receivables, reported in the audited balance sheet. According to the assessee, the said provision for bad and doubtful debts was reduced from the debtors which were identified.
Assessee furnished party-wise details with respect to provision for bad and doubtful debts, also placed in the paper book before us. Claim of the assessee is based on the decision of Hon'ble Supreme Court in the case of Vijaya Bank vs. CIT [2010] 323 ITR 166 (SC). Assessee also made disclosure in the notes to the statement of income. Relevant part of the said note is reproduced whereby it was stated that this claim was made from A.Y. 2010-11 in view of the decision in the case of Vijaya Bank (supra). Since A.Y. 2010-11, assessee has been continuously claiming deduction in this respect:
6 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22 "Until AY 2009-10, the company was not claiming deduction in respect of provision for doubtful debts debited to the profit and loss account. Subsequent to the Hon'ble Supreme Court decision in the case of Vijaya Bank Vs CIT [(2010) 323 ITR 166 SC] the company has started claiming deduction in respect of provision for doubtful debts from AY 2010-11. This practice is consistently followed from AY 2010-11"
4.2. Assessee also submitted that this claim has been allowed by the Coordinate Bench in assessee's own case for A.Y. 2016-17 to 2018-19 in ITA nos. 2700, 2697 and 2696/Mum/2023, dated 26.07.2024.
4.3. On the second issue, assessee had received dividend of Rs. 7.81 crore from domestic companies and an amount of Rs. 8.64 crores from its subsidiary i.e. Asian Paints (Nepal) Pvt Ltd. Assessee had distributed dividend of Rs. 465.23 crores to its shareholders. According to the ld. PCIT, under section 115BBD, any dividend received by an Indian company from a specified foreign company i.e. where the Indian company holds at least 26% equity, is taxable at a concessional rate of 15%. The dividend of Rs. 8.64 crores received by the assessee from Asian Paints (Nepal) Pvt Ltd is taxable u/s 115BBD before considering any deduction as the said entity qualifies as a 'specified foreign company'.
4.4. The third issue is in respect of festival and pooja expenses of Rs. 7.72 Crores claimed by the assessee, debited in its profit and loss account. According to the ld. PCIT, only those expenditures which have been incurred wholly and exclusively for the purpose of business are to be allowed u/s 37(1). These expenses are not incurred wholly and exclusively for the purpose of business and are personal in nature and their nexus with the business expediency is not established.7 ITA No. 3489/Mum/2025
Asian Paints Limited AY 2021-22 Accordingly, these expenses should not have been allowed by the ld. AO.
4.5. Fourth issue is in respect of deduction of Goods and Services Tax (GST) under protest u/s 43B of the Act, since these were statutory payments made by the assessee and claimed the same as deductible u/s 43B while computing total income, though these were not debited to the profit and loss account. According to the ld. PCIT, deduction of GST / taxes paid under protest are in the nature of contingent liability under the provisions of Income Computation and Disclosure Standards (ICDS), specifically ICDS-X on 'Provisions, contingent liability and contingent assets'. According to him, payments made under protest cannot be allowed as a deduction until such time as the liability is confirmed. He thus, directed the ld. AO to disallow GST / taxes paid under protest, which amounts to Rs. 6,02,72,618/-
4.6. Fifth issue is in respect to claim of loss on account of GST credit reversal which occurred due to fire at Vizag Plant resulting in loss of asset. Assessee had received insurance claim against the fire loss amounting to Rs. 8.26 crores on account of loss of assets which was credited to profit and loss account and was also reduced from opening written down value of the block of assets under the Act. Assessee had claimed Rs. 8.26 crores as deductible expenditure. Also, assessee had claimed loss of Rs. 1.86 crores on account of GST which was not reimbursed by the insurance company in respect asset loss. For the loss of Rs. 1.86 crores in respect of GST, assessee submitted that it had reversed the GST credit claimed in its GST return. According to ld. PCIT, since documents submitted by the assessee could not substantiate the claim which led to an apprehension that whether right treatment was 8 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 given by assessee or not. Ld. AO was directed to disallow the amount of Rs. 1.86 crores in this regard.
4.7. The last and 6th issue is in respect of claim of exemption u/s 54EC against capital gain u/s 50C which had arisen on account of sale of flats owned by the assessee on which depreciation had been claimed, year- on-year basis. The gain on sale of flat is deemed to be short term capital gain under the provisions of Sec. 50. Assessee claimed exemption of Rs. 50 lakhs u/s 50EC against the said gain by making investments in IRFC bonds. Facts relating to making of this investment are not in dispute. According to ld. PCIT, gain on sale of flats on which depreciation has been claimed, is classified as short term capital gain u/s 50. According to him, since Sec. 50EC applies only to long term capital gain, exemption claimed by the assessee is not valid. He thus, directed the ld. AO to disallow the exemption claimed u/s 54EC of Rs. 50 lakhs.
4.8. Aggrieved by the impugned revisionary order of ld. PCIT, assessee is in appeal before the Tribunal.
5. We have heard both the parties at length and perused the material placed on record including paper book containing 368 pages and various judicial precedents relied upon. We have also given our thoughtful consideration to observations and findings arrived at by the ld. PCIT on all the six issues while passing the impugned revisionary order as well as records of assessment made by the ld. AO u/s 143(3), copies of which are placed in the paper book.
9 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22
6. In order to lay our hands on the issue before us, we delve on the provisions of section 263. From the perusal of provisions of section 263, it is apparent that there are mainly four features / stages of the power for revision to be exercised u/s 263 of the Act by the ld. PCIT -
i. The PCIT may call for and examine the records of any proceedings under the Act and for this purpose he/she need not show any reason or record any reason to believe as it is required u/s 147 or 143(2) of the Act. It is a part of his/her administrative control to call for the records and examine them.
ii. The PCIT on an analysis of both, the records and the order passed by the Assessing Officer arrives at a consideration that such an order is erroneous in so far as it is prejudicial to the interests of the Revenue. This is exercised by calling for and examining the records relating to any proceeding under this Act available at the time of examination by the PCIT. Till this stage, assistance of the assessee is not required by the PCIT.
iii. If after calling for and examining the records and the assessment order, the PCIT considers that the order of the Assessing Officer is erroneous in so far as it is prejudicial to the interest of the Revenue, he/she is bound to give an opportunity of being heard to the assessee by issuing a show cause notice pointing out the reasons for arriving at such a consideration that action u/s 263 is required on a particular issue. The PCIT has to conduct an inquiry as he may deem fit and after hearing the assessee, he/she will pass the order as deem fit.
10 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22 iv. The PCIT can annul or enhance or modify the assessment as a result of inquiry conducted and hearing the assessee by directing the Assessing Officer for a fresh assessment or to make such enquiries as he/she deems necessary.
6.1. At this stage, before considering the multi-fold contentions of the ld. Counsel for the assessee, we deem it pertinent to take note of the fundamental tests propounded in various judgments relevant for judging the action of the ld. PCIT taken u/s 263 of the Act. The co- ordinate bench of ITAT Mumbai in the case of Khatiza S. Oomerbhoy v. ITO, Mumbai reported in [2006] 101 TTJ 1095 (Mum) analysed in detail, various authoritative pronouncements including the decision of Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd. v. CIT [2000] 243 ITR 83 (SC) and has propounded the following broad principles to judge the action of CIT taken under section 263 -
(i) The CIT must record satisfaction that the order of the AO is erroneous and prejudicial to the interest of the Revenue. Both the conditions must be fulfilled.
(ii) Sec. 263 cannot be invoked to correct each and every type of mistake or error committed by the AO and it was only when an order is erroneous that the section will be attracted.
(iii) An incorrect assumption of facts or an incorrect application of law will suffice the requirement of order being erroneous.
(iv) If the order is passed without application of mind, such order will fall under the category of erroneous order.
(v) Every loss of revenue cannot be treated as prejudicial to the interests of the Revenue and if the AO has adopted one of the courses permissible under law or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order, unless the view taken by the AO is unsustainable under the law.
(vi) If while making the assessment, the AO examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and 11 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 determines the income, the CIT, while exercising his power under s 263 is not permitted to substitute his estimate of income in place of the income estimated by the AO.
(vii) The AO exercises quasi-judicial power vested in him and if he exercises such power in accordance with law and arrive at a conclusion, such conclusion cannot be termed to be erroneous simply because the CIT does not feel satisfied with the conclusion.
(viii) The CIT, before exercising his jurisdiction under section 263 must have material on record to arrive at a satisfaction.
(ix) If the AO has made enquiries during the course of assessment proceedings on the relevant issues and the assessee has given detailed explanation by a letter in writing and the AO allows the claim on being satisfied with the explanation of the assessee, the decision of the AO cannot be held to be erroneous simply because in his order, he does not make an elaborate discussion in that regard.
6.2. For this, let us also take the guidance of judicial precedence laid down by the Hon'ble Apex Court in the case of Malabar Industries Ltd. (supra) wherein their Lordships have held that twin conditions need to be satisfied before exercising revisional jurisdiction u/s 263 of the Act by the CIT. The twin conditions are that the order of the Assessing Officer must be erroneous and in so far as prejudicial to the interest of the Revenue.
6.3. In the following circumstances, the order of the AO can be held to be erroneous order, that is (i) if the Assessing Officer's order was passed on incorrect assumption of fact, or (ii) incorrect application of law, or
(iii)Assessing Officer's order is in violation of the principle of natural justice; or (iv) if the order is passed by the Assessing Officer without application of mind; (v) if the AO has not investigated the issue before him; [because AO has to discharge dual role of an investigator as well 12 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 as that of an adjudicator) then in aforesaid any of the events, the order passed by the AO can be termed as erroneous order.
6.4. Looking at the second limb as to whether the actions of the AO can be termed as prejudicial to the interest of Revenue, one has to understand what is prejudicial to the interest of the revenue. The Hon'ble Supreme Court in the case of Malabar Industries (supra) held that this phrase i.e. "prejudicial to the interest of the revenue" has to be read in conjunction with an erroneous order passed by the AO. Their Lordships held that every loss of revenue as a consequence of an order of Assessing Officer cannot be treated as prejudicial to the interest of the revenue. When the Assessing Officer adopted one of the courses permissible in law and it has resulted in loss to the revenue, or where two views are possible and the Assessing Officer has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the revenue unless the view taken by the Assessing Officer is unsustainable in law.
7. In the light of the above exposition on law enunciated in Sec. 263 and the facts relating to the six issues raised by ld. PCIT, we examined the deliberations made on the six issues for the purpose of our adjudication. We observe that assessee has furnished relevant details and explained each of the issue supported by corroborative documentary evidences and judicial precedents in the course of proceedings u/s 263 before ld. PCIT. It is well settled law for invoking the provisions of Sec. 263 that both the conditions that the order must be erroneous in so far as prejudicial to the interest of revenue needs to be satisfied. We take up each of six issues seriatim.
13 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22 i. Provisions for doubtful debts of Rs. 27,90,49,629/- (net)
(a) Admittedly it is a fact on record that assessee has started claiming deduction towards provision for doubtful debts from A.Y. 2010-11 i.e. subsequent to the decision in the case of Vijaya Bank (supra) which practice has been consistently followed by it since then. In this respect, assessee has made adequate disclosure in the note to computation of income which is already reproduced in the above paragraphs. We refer to the finding arrived at by the Hon'ble Supreme Court in the case of Vijaya Bank (supra) to consider the contention of the assessee:
"Provision for bad debts mere reduction in the Loans and Advances or Debtors on the asset side of Balance Sheet to the extent of the provision for bad debt would be sufficient to constitute a write off: The first question is no more res integra. Recently, a Division Bench of this Court in the case of Southern Technologies Limited vs. Joint Commissioner of Income Tax, had an occasion to deal with the first question and it has been answered, accordingly, in favour of the assessee and held, "one must understand 'how to write off'. If an assessee debits an amount of doubtful debt to the profit and loss account and credits the asset account like sundry debtor's account, it would constitute a write off of an actual debt. However, if an assessee debits 'provision for doubtful debt' to the profit and loss account and makes a corresponding credit to the current liabilities and provisions' on the liabilities side of the balance-sheet, then it would constitute a provision for doubtful debt. In the latter case, the assessee would not be entitled to deduction after April 1, 1989.' Further, it has been held that coming to the second question, we may reiterate that it is not in dispute that Section 36(1)(vii) of 1961 Act applies both to Banking and Non-Banking businesses. The manner in which the write off is to be carried out has been explained hereinabove."
(b) From the above, it is noted that Hon'ble Supreme Court mentions that Sec. 36(1)(vii) applied both to banking and non-banking businesses. It is pertinent to note that this issue is no longer res integra as already dealt by the Coordinate Bench in assessee's own case (supra). In this judicial pronouncement in assessee's own case, reliance was placed on the decision of Hon'ble Jurisdictional High Court of 14 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 Bombay in the case of CIT v. Tainwala Chemicals & Plastics India Ltd. [2013] 215 Taxman 153. Relevant extracts from the decision of the Coordinate Bench (supra) are as under:
"38. In ground Nos. IX & X, assessee has challenged the disallowance of provision for doubtful debts under normal computation and adjustment to book profits u/s.115JB of the Act.
39. The brief facts are that during the year consideration, the assessee had made an incremental provision for doubtful debts of Rs. 3.34 Crores. The said provision was created by debiting the profit and loss account and correspondingly credit has been reflected the under the sundry debtors account in balance sheet. These provisions for doubtful debts is made at an individual debtor level and not at consolidated level based on percentage of total value of debtors. Further, the said treatment of reduction from Sundry Debtors is an effective write off as observed by Hon'ble SC in the case of Vijaya Bank Ltd. vs. CIT (2010) 322 ITR 166 and accordingly the assessee has claimed provision for doubtful debts.
40. However, the ld. AO disallowed such provision observing that judgement of Vijaya Bank only applies to banking companies, further, also made an observation that the provision was created on an estimated basis considering the percentage of the total value of receivables and the individual debtor's account have also not been adjusted with provision amount and also that the assessee had shown its debtors in the balance sheet at full value and the provision amount was shown on the liability side of balance sheet. Further, the ld. CIT(A) upheld the disallowance made by the ld. AO by holding that it was not actual write off as irrecoverable bad debts and hence not allowable.
40.1 Ld. Counsel submitted that this issue is decided by the Tribunal in assessee's own case for A.Y.2015-16 and observed that if the assessee claims deduction of provision for doubtful debts, without any write-off of irrecoverable debt and it is contrary to section 36(1) (vii) of the Act. Further, Vijaya Bank (supra) is not applicable in the case of the Assessee, as the said decision was rendered in case of banking company. Accordingly, the provision for doubtful debts was disallowed holding that bad debts written off are allowable in the year in which it is actually written off. Thus this issue was decided against. However, Ld. Counsel for the assessee relied upon by the decision of the Hon'ble Jurisdictional High Court in the case of C1T v. Tainwala Chemicals & Plastics India Ltd. [2013] 215 Taxman 153 wherein assessee-company made provision for doubtful debt given to its group concern and had debited same to profit and loss account and correspondingly reduced assets by reducing amount of unsecured loans, doubtful debt qualified for deduction under section 36(1)(vii) following Vijaya Bank (supra). This judgment was not considered in the earlier AY 2015-16 ITAT order 15 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22
41. Further, the Hon'ble Supreme Court in Vijaya Bank (supra) itself observed at Pg. 383 and Para 8 of LPB that 'it is not in dispute that section 36(1)(vii) of the Act applies both to the Banking and Non- Banking business'. Accordingly, it appears that the Tribunal in earlier year in assessee's own case inadvertently did not consider this observation. Further, decision of Tainwala (supra) rendered by Jurisdictional High Court was not cited and therefore not considered.
42. Further, decision of Vijaya Bank (supra) is in the context of section 11 5JB qua provision for doubtful debts also followed by Karnataka High Court in CIT v. Kirloskar Systems Ltd 220 Taxman I and Hon'ble Gujarat High Court in the case of CIT v. Vodafone Essar Gujarat Ltd [2017] 397 ITR 55 for doubtful debt while computing book profit u/s.II5JB).
43. He also submitted that similar issue has arisen in the Joint venture company M/s Asian Paints PPG Pvt Ltd. The ld. CIT (A) had ruled the issue in favour of company. The department had challenged the order of the ld.CIT (A) before the Mumbai Tribunal which was dismissed by the Tribunal.
44. Ld. DR strongly relied upon the order of the ld. AO and ld. CIT(A) and also the decision of the Tribunal in assessee's own case for A.Y.2015-16.
45. We have heard both the parties and also perused the relevant finding given in the impugned orders. Assessee has made incremental provision for Rs. 3.34 Crores. The said provision was created by debiting the profit and loss account and correspondingly credit has been reflected the under the sundry debtors account in balance sheet. One very important fact is that the provision for doubtful debts is made at an individual data level and on consolidated level based on percentage of total value of debtors. Though this issue has been decided by this Tribunal in A.Y.2015-16, however, we find that Hon'ble Bombay High Court in the case of CIT vs. Tainwala Chemicals & Plastics India Ltd. (supra), following the principle laid down by the Hon'ble Supreme Court in the case of Vijaya Bank Ltd. held that where assessee company made provision for doubtful debts given to its group concern and debited the same to the profit and loss account and correspondingly reduced the assets by reducing the amount of unsecured loans, doubtful debts is qualified for deduction u/s.36(1)(vii). We find that the Tribunal had not considered the judgment of the Hon'ble Jurisdictional High Court and held that judgment of Vijaya Bank is not applicable in the case of assessee as it is applicable on the banking business. Further, we find that the Hon'ble Supreme Court in para 8 of its judgment have held that u/s.36(1)(vii) applies both for banking and non-banking business. Another important fact is that principle of Vijaya Bank in the context of u/s.115JB for the provision of doubtful debts had also been followed by the Karnataka High Court in the case of CIT vs. Kirloskar Systems Ltd(supra), the Hon'ble Gujarat High Court in the case of Vodafone Essar Gujarat Ltd. (supra) wherein the Hon'ble High Courts have allowed the provision 16 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 for doubtful debts while computing the book profit u/s.115JB. Apart from that in sister concern, this Tribunal has decided this issue in favour of the assessee.
46. The ld. AO has added provision for doubtful debts to the book profit u/s.115JB. However, under earlier provisions of u/s.115JB any amount set aside for meeting liabilities, other were to be added back. The than ascertained liabilities Department used to add back provision of doubtful debt in said category. However, the Supreme Court in CIT v. HCL Comnet Systems & Services [2008] 174 Taxman 118 decided matter in favour of Assessee. Thereafter, the Act was amended and a provision for diminution in the value of the asset was categorically inserted vide Finance Act 2009 (i.e. under clause (i) However, even after such amendment, Jurisdictional HC in 8. "Whether, on Tainwala Chemicals above observed that the facts and circumstances of the case, the Tribunal was justified in upholding the decision of the CIT (A), in deleting the addition on account of provision for doubtful debts to the book profit under Section 115JB of the Act without appreciating that the disallowance / addition on account of diminution in the value of assets is mandatory in view of Explanation (I) to Section115JB of the Act ? In so far as question (k) is concerned, the grievance of the Revenue is that for the purpose of computing profits under Section 115JB, the provision of doubtful debts has to be added. In view of our decision to question (u) above, issue of adding back the provisions for the purpose of computing book profits does not survive. This is particularly so in view of the fact that the Tribunal has recorded a finding of fact that the provision has been written off. Accordingly, we see no reason to entertain question (k)'.
47. This principle of Hon'ble Bombay High Court has been followed by the Hon'ble Karnataka High Court and Hon'ble Gujarat High Court wherein post amendment to Section 115JB also even for the book profit provision for doubtful debts has been allowed as deduction. Therefore, in view of the principles laid down by the Hon'ble Jurisdictional High Court and other High Courts as noted above, we hold that the provision for doubtful debts is deductible not only under normal provisions of law but also u/s.115JB. Accordingly, ground No. IX and X are allowed.
(c) Also, similar issue had arisen in the joint venture company, viz. Asian Paints PPG Pvt Ltd for A.Y. 2012-13, wherein matter travelled before the Tribunal in ITA no. 6548/Mum/2017, dated 22.05.2019 in the appeal filed by the Revenue which was held in favour of the assessee.17 ITA No. 3489/Mum/2025
Asian Paints Limited AY 2021-22
(d) Assessee also demonstrated by way of giving details of its claim since A.Y. 2010-11 as to how it was claimed in each year and reversal made subsequently. Assessee evidently demonstrated through these factual details that wherever there was a reversal of provision (net), it offered the same for tax in its return. In its return, if the provision for doubtful debts is disallowed, it leads to double taxation as reversal provision for doubtful debts has already been taxed in the respective year. Details so furnished are tabulated as under:
(e) The reasoning given by the ld. PCIT on this issue is that department has filed appeal before the Hon'ble High Court against the said issue. It was submitted before us that there is no stay granted by the Hon'ble High Court on the decision of the Coordinate Bench.
Respectively following, we find that this issue is squarely covered by the decision of Coordinate Bench and therefore, no adverse view is drawn against the assessee.
18 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22 ii. Tax on dividend u/s 115BBD, received from specified foreign company
(a) According to ld. PCIT, dividend of Rs. 8.64 crores received by assessee from its foreign subsidiary i.e. Asian Paints (Nepal) Pvt Ltd should have been taxed u/s 115BBD before considering any deduction. In this regard, it is important to note the provision contained in Sec. 80M inserted by the Finance Act, 2020 w.e.f. 01.04.2021 i.e. A.Y 2021- 22, whereby when a domestic company has received dividends from inter-alia, another domestic company or foreign company and has also distributed dividend to its own shareholders then, deduction under this provision is available to such a company for such previous year, to the extent of dividend distributed by it, on or before the due date.
(b) Facts in this regard are that assessee has claimed deduction of Rs. 16,45,40,818/- towards dividend received from domestic and foreign companies which includes dividend received by it from Asian Paints (Nepal) Pvt Ltd, which is less than the dividend distributed by it to its shareholders, as already noted above. It is also noted that Sec. 80M is included in Part C of the Chapter-VIA which deals with allowability of deduction from gross total income. In this regard, we refer to the decision of Hon'ble Supreme Court in the case of CIT vs. Williamson Financial Services [2007] 165 Taxman 638 (SC), wherein it is held that Chapter-VIA deductions are not deductions from a particular head of income but from gross total income.
(c) We refer to Sec. 115BBD which provides from concessional rate of tax of 15% on the dividend income received by an Indian company from a foreign company in which the said Indian company 19 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 holds 26% or more in nominal value of equity shares. The said section is reproduced for ready reference:
"115BBD (1) Where the total income of an assessee, being an Indian company, includes any Income by way of dividends declared distributed or paid by a specified foreign company, the income-tax payable shall be the aggregate of
(a) the amount of income-tax calculated on the income by way of such dividends, at the rate of fifteen per cent; and
(b) the amount of income-tax with which the assessee would have been chargeable had its total how income been reduced by the aforesaid income by way of dividends.
(2) respect of any expenditure or allowance shall be allowed to the assessee under any provision of this Act in computing its income by way of dividends referred to in sub-section (1).
(3) In this section, -
(i) "dividends" shall have the same meaning as is given to "dividend" in clause (22) of section 2 but shall not include sub-clause (e) thereof;
(ii) "specified foreign company" means a foreign company in which the Indian company holds twenty-six per cent or more in nominal value of the equity share capital of the company.
(4) The provisions of this section shall not apply to any assessment year beginning on or after the 1st day of April, 2023.]"
(d) From the reading of the above section, we note that in sub- section (1), it mentions that where the total income of the assessee "includes" another income by way of dividend from a specified foreign company. In the present case before us, total income of the assessee does not include dividend received by it from Asian Paints (Nepal) Pvt Ltd as it already got deducted u/s 80M at gross total income level. Thus, dividend received by the assessee from its foreign subsidiary does not form part of its total income. Further, we not from sub-section (2), that it does not allow deduction in respect of any expenditure or allowance 20 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 in computing in its income by way of dividend referred to in sub-section (1). Also, the non-obstante clause does not operate so as to deny deduction allowable u/s 80M which falls under Chapter-VIA whereby deductions are not deduction from particular head of income but from gross total income as held by Hon'ble Supreme Court in the case of Williamson Financial Services (supra). In the conspectus of the above stated factual matrix and the position of law, view taken by ld. PCIT does not hold its feet.
iii. Festival and Pooja expenses of Rs. 7.72 crores
(a) In this respect, claim of the assessee is that these expenses represent sweets, dry fruits etc. distributed to its business associates and employees on the occasions of festivals such as Diwali etc. which are incurred wholly and exclusively for the purpose of business allowable u/s 37(1). Assessee also submitted that the year under consideration is the year of pandemic of Covid-19. Assessee developed 'Viroprotek' range of sanitizers and disinfectants and other number of products like hand rubs, surface sanitizers etc. In order to help and support its employees and their families, assessee distributed these products to them. Assessee provided party-wise details (vendors/suppliers) of these expenses and also furnished sample copy of invoices to demonstrate their genuineness having incurred in the course of carrying of its business on the principles of commercial expediency. Reference is also made to the CBDT circular no. 17(F.No.27(2)-IT/43) dated 06.05.1983 and another circular no. 13A/20/68-IT(A-II) dated 03.10.1968, wherein it is stated that expenses incurred on the occasion of Deepawali and Mahurat are in the nature of business expenditure.
21 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22
(b) We find that all the above stated submissions were made in the course of assessment proceedings which have been duly accepted by the ld. Assessing Officer, finding them satisfactory. Ld. PCIT in this regard observed that these are personal in nature, without brining any cogent material except for making such a general and bald allegation. We certainly do not agree with the view adopted by ld. PCIT by taking into account, the factual matrix and the position of law as discussed above.
iv. GST/ other taxes paid under protest of Rs.6,02,72,618/-, claimed u/s 43B
(a) Details of amount paid under protest, totalling to Rs. 6,02,72,618/- is tabulated as under:
(b) For items at serial no. 1 and 2, they relate to disputed sales tax and excise duty liability paid under protest which has been treated as balance sheet item and not debited to the profit and loss account by the assessee. Since these falls within the provisions of Sec. 43B being statutory payments, the same have been claimed as deduction while computing the total income. According to the assessee, for similar transactions when refund is received, the same is credited to the balance sheet and offered to tax, fact of which is evident from item at serial no. 4 towards excise refund. Thus, assessee has claimed 22 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 deduction u/s 43B for statutory payments and at the same time, has offered it to tax when it received refunds. Item at serial no. 3 pertains to property maintenance charges paid under protest against land purchased from Haryana State Industrial and Infrastructure Development Corporation (HSIIDC). HSIIDC has levied maintenance charges for multiple years which was deposited by the assessee under protest. Since this fall within the ambit of property taxes, assessee claimed deduction u/s 43B towards the said payment. Assessee also reconciled the difference between Rs. 6,02,72,616/- and Rs.
5,98,67,860/- which relates to refund of Rs. 4,04,756/- as mentioned in the above table. Thus, amount of deduction claimed by the assessee as taxes paid under protest is Rs. 5,98,67,860/-.
(c) For the above, useful reference is made to the decision of Hon'ble Supreme Court in the case of CIT vs. Bharat Carbon and Ribbon Manufacturing Company Pvt Ltd [1999] 239 ITR 505 (SC) which held that statutory liability accrues on issuance of demand notice, raising of further dispute by the assessee is not relevant. In the present case before us, statutory payment made by the assessee satisfied the conditions of Sec. 43B which provides for deduction on actual payment in respect of an otherwise deductible amount. Ld. PCIT has considered these payments as contingent liability since according to him, assessee has paid these taxes under protest not allowable under ICDS. In this regard, we also make useful reference to the decision of Coordinate Bench in the case of Euro RSCG Advertising P. Ltd vs. ACIT [2012] 154 TTJ 389, wherein it was held as under:
"7. We have carefully heard the rival submissions and also gone through the findings of the CIT(A) as well as Assessing Officer. It is not disputed that the assessee has paid service tax along with interest in this year which also included the amounts pertaining to the earlier assessment years. The only issue 23 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 is whether liability can be said to have been crystallized without any formal order being passed by the service tax authorities Once the payment of service tax has been made during the year, it does not make any difference whether the same is under dispute before the service tax authorities. This issue is no more res integra as the Hon'ble Supreme Court in the case of Kedarnath Jute Mfg. Co. Ltd. v. CIT [1971] 82 ITR 363, has decided this very question in the context of provision of Section 43B of the Act. Before the Apex Court the issue related to payment of sales tax as per the demand raised by the sales tax department and the assessee had deposited the liability of sale tax under dispute. The Hon'ble Apex Court held that merely because the assessee was disputing the liability would not mean that the liability had not accrued.
8. From the plain reading of the above, it is evident that deduction claimed by the assessee in respect of any sum paid by way of tax, duty, cess, or fee, shall be allowed only in computing the income referred to in Section 28 of that previous year in which such sum is actually paid by him, irrespective of the previous year in which the liability to pay was incurred on the payment of such sum as per method of accounting regularly employed by the assessee as per section145. For the claim of deduction of the sum paid against the liability of tax, duty, cess, fee, etc., the year of payment is relevant which is to be taken into account. The year in which the assessee incurred the liability to pay such tax, duty etc., has no relevance and cannot be linked in the matter of giving benefit of deduction under Section 43B. The case laws as have been relied by the learned AR also supports this proposition of law specifically judgment of the Hon'ble Allahabad High Court in the case of C.L. Gupta & Sons (supra). Similar proposition has been held in the case Dharampal Satyapal Sons (P.) Ltd., (supra) and the Special Bench decision in the case of Glaxo Smithkline Consumer Healthcare Ltd., (supra). Following the ratio laid down in the above case laws and since no contrary decision has been cited before us, therefore, on the facts and circumstances of the case, we hold that the amount of service tax along with interest paid by the assessee is allowable in view of the provisions of Section 43B. Accordingly disallowance of amount of Rs. 81,39,000/- is deleted and ground No. 1 of assessee is allowed."
(d) Thus, in the given set of facts which were placed before the ld. AO in the course of assessment proceedings, we are in agreement with the contention of the assessee for the claim made by it u/s 43B.
24 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22 v. Loss of Rs. 1.86 crores on account of GST credit reversal due to fire
(a) This loss has arisen on account of fire at the Vizag plant of the assessee for which insurance claim was lodged. Claim towards GST component was denied by the insurance company which has been claimed as a deductible expenditure. Assessee furnished extract of Form GSTR-3B to demonstrate reversal of GST credit claimed in the GST return. It also gave details of input tax credit (ITC) reversal for integrated GST amounting to Rs. 1,75,01,625/-. Assessee also referred to provisions contained in Sec. 17(5) of the GST Act, whereby ITC is not available in respect of goods lost, stolen, destroyed, written off or disposed of by way of gift or free samples. All these details were furnished before the ld.AO in the course of the assessment proceedings and have been duly considered. Assessee claimed this as a deductible expenditure since it relates to indirect expenditure and is an allowable claim. Ld. PCIT has merely expressed his apprehension that there is no clear indication whether ITC reversal was done in full compliance with the GST laws in absence of documents. Assessee has furnished all the relevant documentary evidences and complied with the details asked for, placed on record which were before both, ld. Assessing Officer and ld. PCIT. In view of this factual position for which nothing has been brought on record to controvert the same, we find that the apprehension of ld. PCIT has no legs to stand.
vi. Deduction of Rs. 50 lacs claimed u/s 54EC in respect of capital gain arising on sale of flat on which depreciation has been claimed
(a) According to the ld. PCIT, exemption u/s 54EC applies only when long term capital gain accrued to an assessee. In the present case, 25 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 according to him, the capital gain has arisen u/s 50 whereby it is deemed to be short term capital gain and therefore, exemption claimed by the assessee is not valid. On the decision of Hon'ble Supreme Court in the case of CIT vs. Dempo Company Ltd. [2016] 242 taxman 434 (SC), ld. PCIT distinguished it by mentioning that it refers to Sec. 54EC and therefore, does not apply in the case of the assessee.
(b) In this regard, we note that Sec. 50 is for the computation of capital gains arising from the transfer of depreciable assets and is a deeming provision. It creates a fiction which ought to be confined to the computation of capital gains and cannot extend beyond that. In the case of Dempo Company Ltd., (supra), Hon'ble Supreme Court agreed with the decision of Hon'ble High Court of Bombay in the case of CIT vs. ACE Builders P. Ltd. [2006] 281 ITR 210 (Bom) , whereby it was held that Sec. 54E does not make any distinction between depreciable asset and non-depreciable asset and therefore, the exemption available u/s 54E on the capital gain arising on the depreciable asset cannot be denied by referring to the fiction created u/s 50.
(c) We note that benefit available u/s 54E is pari materia to Sec. 54EC which provides that when capital gain arising on transfer of long term capital "asset" is invested / deposited in the specified assets / bonds, it is not to be charged to tax. To establish the fact that asset disposed off by the assessee is a long term asset though falling within the computation mechanism of Sec. 50, following details were furnished as tabulated below, giving date of purchase and its period of holding:
26 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22
(d) In view of the above, the stand taken by the ld. PCIT that Sec. 54EC applies only to long term capital "gains" is misconstrued as it has reference to long term capital "asset" and not long term capital "gain".
8. In the conspectus of above factual narration on all the six issues coupled with detailed exposition on the law enunciated u/s 263, we take note of the conclusion drawn by the ld. PCIT that ld. AO has not examined the above six issues thoroughly while passing the assessment order u/s 143(3) which according to him has made it erroneous in so far as prejudicial to the interest of revenue and directed the ld. AO to disallow/add the relevant items while computing total income of the assessee.
8.1. In this regard, it is important to take note of the amendment inserted by Explanation 2 to Sec. 263 w.e.f. 01.06.2015. The Coordinate Bench of ITAT in the case of Narayan Tatu Rane vs. ITO [2016] 70 taxmann.com 227 (Mum) held that the said Explaination cannot be said to have overridden the law as interpreted by the Hon'ble Delhi High Court in the case of DG Housing Projects Ltd [2012] 343 ITR 329 (Del) according to which ld. PCIT has to conduct an enquiry and verification to establish and show that the assessment order is unsustainable in 27 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 law. Coordinate Bench held that intention of the legislature could not have been to enable the ld. PCIT to find fault with each and every assessment order, without conducting any enquiry or verification in order to establish that the assessment order is not sustainable in law, since such an interpretation will lead to unending litigation and there would not be any point of finality in the legal proceedings. The opinion of the ld. PCIT referred to in section 263 has to be understood as legal and judicious opinion and not arbitrary opinion.
8.2. From the perusal of records, we note that ld. AO elaborately dealt with four issues out of the six, raised by ld. PCIT for which ld. Assessing Officer had issued notices u/s 142(1) running into several pages, detailing the queries and mentioning specific requirements for compliance by the assessee. These notices themself demonstrates that ld. AO has gone into details of each of the issues by raising queries on multiple aspects, requiring the assessee to explain the same with corroborative evidences. All these notices are placed in the paper book and have been perused. We have also referred to the replies furnished by the assessee to these notices which are elaborate and exhaustive, coupled with relevant documentary evidences. We note that ld. AO accepted the explanations furnished by the assessee though he did not make any specific mention in the assessment order. We have already taken note on certain fundamental principles propounded in various judgments in the above paragraphs. In furtherance to the same, it is import to take not of the decision of Hon'ble Jurisdictional High Court of Bombay in the case of Aroni Commercials Ltd. vs. DCIT [2014] 44 taxmann.com 304 (Bom), wherein Hon'ble Court observed that once a query is raised during the assessment proceedings and assessee had replied, it follows that query raised was a subject of consideration of ld.
28 ITA No. 3489/Mum/2025Asian Paints Limited AY 2021-22 AO while completing the assessment. It is not necessary that an assessment order should contain reference and / or discussion to disclose its satisfaction in respect of the query raised. Relevant extract in this regard is as under:
"14...................................However, according to Mr. Chhotaray, learned Counsel for the revenue the aforesaid issue now raised has not been considered earlier as the same is not referred to in the assessment order dated 12 October 2010 passed for A.Y. 2008-09. We are of the view that once a query is raised during the assessment proceedings and the assessee has replied to it, it follows that the query raised was a subject of consideration of the Assessing Officer while completing the assessment. It is not necessary that an assessment order should contain reference and/or discussion to disclose its satisfaction in respect of the query raised. If an Assessing Officer has to record the consideration bestowed by him on all issues raised by him during the assessment proceeding even where he is satisfied then it would be impossible for the Assessing Officer to complete all the assessments which are required to be scrutinized by him under Section 143(3) of the Act. Moreover, one must not forget that the manner in which an assessment order is to be drafted is the sole domain of the Assessing Officer and it is not open to an assessee to insist that the assessment order must record all the questions raised and the satisfaction in respect thereof of the Assessing Officer. The only requirement is that the Assessing Officer ought to have considered the objection now raised in the grounds for issuing notice under Section 148 of the Act, during the original assessment proceedings......................."
8.3. Keeping the above detailed discussing both, on the facts and law, we are of the view that when ld. PCIT prima-facie conceived an opinion that is different from that of ld. Assessing Officer, the same does not give him powers to invoke revisionary proceedings u/s 263 to substitute his opinion in place of one of the plausible views arrived at by the ld. Assessing Officer, more particularly, when in the present case, it is not an expression of his opinion but a direction / mandate given to the ld. AO to make addition /disallowance which is certainly not unwarranted within the provisions of Sec. 263. Accordingly, on the issues listed above as considered by the ld. PCIT in the impugned order, no action u/s 263 is justifiable which cannot be sustained under the facts and 29 ITA No. 3489/Mum/2025 Asian Paints Limited AY 2021-22 circumstances of the present case as well as judicial precedents dealt herein above. We therefore, quash the impugned order u/s 263 and allow the grounds raised by the assessee.
9. In the result, appeal by the assessee is allowed.
Order is pronounced in the open court on 28 April, 2026 Sd/- Sd/-
(Justice (Retd.) C V Bhadang) (Girish Agrawal)
President Accountant Member
Dated: 28 April, 2026
MP, Sr.P.S.
Copy to :
1 The Appellant
2 The Respondent
3 DR, ITAT, Mumbai
4 Guard File
5 CIT
BY ORDER,
(Dy./Asstt.Registrar)
ITAT, Mumbai