Tagros Chemicals India Ltd, Chennai V. ACIT, Corporate Circle 3(1), Chennai

CO 53/CHNY/2018

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3839 (ITAT-CHENNAI)
• Duration Of Justice: 10 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 28-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS VIJAYA PRABHA
• Assessee Lawyers: G BASKAR
• Keywords: Depreciation; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH: CHENNAI , , % BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.15/CHNY/2018 /ASSESSMENT YEAR: 2012-13 THE ASST. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-3(1), NEW BLOCK, 4 TH FLOOR, 121, M.G.ROAD, NUNGAMBAKKAM, CHENNAI-600 034. VS. M/S.TAGROS CHEMICALS- INDIA LTD., NO.72, JHAVER PLAZA, IV FLOOR, RAJA ANNAMALAI BUILDING, MARSHALLS ROAD, EGMORE, CHENNAI-600 008. [PAN: AAACT 2952 K] ( ' /APPELLANT) ( ()' /RESPONDENT) CROSS OBJECTION NO.53/CHNY/2018 (IN ITA NO.15/CHNY/2018) /ASSESSMENT YEAR: 2012-13 M/S.TAGROS CHEMICALS- INDIA LTD., NO.72, JHAVER PLAZA, IV FLOOR, RAJA ANNAMALAI BUILDING, MARSHALLS ROAD, EGMORE, CHENNAI-600 008. [PAN: AAACT 2952 K] VS. THE ASST. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-3(1), NEW BLOCK, 4 TH FLOOR, 121, M.G.ROAD, NUNGAMBAKKAM, CHENNAI-600 034. ( ' /APPELLANT) ( ()' /RESPONDENT) DEPARTMENT BY : MRS.VIJAYAPRABHA, JCIT ASSESSEE BY : MR.G.BASKAR, ADV. + /DATE OF HEARING : 07.06.2018 + / DATE OF PRONOUNCEMENT : 07.06.2018 ITA NO.15/CHNY/2018 & CO NO.53/CHNY/2018 :- 2 -: / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-11, CHENNAI, IN ITA NO.41/CIT (A)-11/2015-16 DATED 25.09.2017 FOR THE AY 2012-13. 2. M/S.TAGROS CHEMICALS INDIA LTD., THE ASSESSEE, I S ENGAGED IN THE BUSINESS OF MANUFACTURING PESTICIDES AND CHEMICALS. WHILE MAKING THE ASSESSMENT FOR THE AY 2012-13, THE AO, INTER ALIA, NOTICED THAT THE ASSESSEE CLAIMED DEPRECIATION OF RS.1,69,98,522/- AGAINST TH E EXPENDITURE INCURRED FOR REGISTRATION OF PRODUCTS IN FOREIGN COUNTRIES OF RS .7,89,84,947/-. HE REQUIRED THE ASSESSEE TO PROVIDE THE DETAILS TOWARDS WHICH T HE ASSESSEE SUBMITTED THAT THE AMOUNT CLAIMED AS DEDUCTION BEING 25% OF DEPREC IATION ON THE EXPENDITURE INCURRED OF RS.7,89,84,947/-, IS TOWARD S REGISTRATION WITH VARIOUS AUTHORITIES IN FOREIGN COUNTRIES TO ENABLE ITS PROD UCTS TO BE EXPORTED AND DEALT IN SUCH COUNTRIES, BY TREATING THE REGISTRATION AS INTANGIBLE ASSET. THE AO FOUND THAT ANY PAYMENT MADE OUTSIDE INDIA ATTRACTS PROVISIONS OF CHAPTER- XVII-B AND FAILURE TO COMPLY WITH SUCH PROVISION WO ULD ATTRACT THE DISALLOWANCE OF SUCH DEDUCTION. ACCORDINGLY, THE AO DISALLOWED THE DEPRECIATION CLAIMED AT RS.1,69,98,522/- U/S.40(A)(I) R.W.S.195. AGGRIEVED , THE ASSESSEE FILED APPEAL BEFORE THE LD.CIT(A). THE LD.CIT(A) FOLLOWING THE DECISION OF THE HONBLE ITAT CHENNAI BENCH, IN THE ASSESSEES OWN CASE FOR THE AY 2010-11, IN ITA ITA NO.15/CHNY/2018 & CO NO.53/CHNY/2018 :- 3 -: NO.528/MDS/2016 DATED 06.02.2017, ALLOWED THE APPEA L. AGGRIEVED, THE REVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUND S: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO L AW AND FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED CIT(A) ERRED IN DELETING THE DISALL OWANCE OF DEPRECIATION OF RS.L,69,98,522/- CLAIMED ON EXPENDITURE INCURRED FOR OBTAINING THE R EGISTRATION OF ITS PRODUCTS IN EUROPEAN COUNTRIES WHICH INCLUDES REGISTRATION EXPENSES/VALI DATION, ANALYSIS, EFFICACY TRIALS, ETC HOLDING THE SAME AS INTANGIBLE ASSET AS PER SECTI ON 32(1)(II) OF THE INCOME TAX ACT, 1961. 2.2 THE LEARNED CIT(A) OUGHT TO HAVE SEEN THAT THE REGISTRATION OF THE PRODUCT OF THE ASSESSEE IN FOREIGN COUNTRIES IS AN APPRECIABLE ASSET AND HE NCE ONLY CREATION OF AN ASSET FOR WHICH NO DEPRECIATION CAN BE ALLOWED. 2.3 THE LEARNED CIT(A) FAILED TO SEE THAT THE RELIE D ON DECISION OF THE HONBLE APEX COURT IN THE CASE OF TECHO SHARES AND STOCKS LIMITED IS ONLY RELATING TO BSE MEMBERSHIP CARD AND HONBLE COURT ITSELF HAS OBSERVED THAT IT SHOULD NO T BE UNDERSTOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A LICENSE OR A FRANCHISE IN TERMS OF SECTION 32(1)(II) OF THE IT ACT, 1961. 2.4 IT IS HUMBLY SUBMITTED THAT THE DECISION OF THE HONBLE TRIBUNAL IN THE ASSESSEE OWN CASE FOR AY 2010-11 HAS NOT BEEN ACCEPTED BY THE DEPARTM ENT AND APPEAL FILED U/S.260A IS PENDING. HENCE, TO KEEP THE ISSUE ALIVE, FURTHER AP PEAL IS SUGGESTED FOR THIS YEAR ALSO. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE A ND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE ASSESSEE FILED A CROSS-OBJECTION SUPPORTING THE ORDER OF THE LD.CIT(A). THE LD.DR PRESENTED THE CASE ON THE LIN ES OF THE GROUNDS OF APPEAL, SUPRA. THE LD.AR INVITED OUR ATTENTION TO THE HONBLE JURISDICTIONAL HIGH COURT DECISION IN ITS CASE VIZ., CIT V. M/S.TA GROS CHEMICALS (INDIA) LTD., IN TCA NO.555 OF 2017 DATED 28.11.2017, PLEADED THA T THE ISSUE MAY BE DECIDED ACCORDINGLY. 4. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. THIS ISSUE IS COVERED IN ITEM (III) OF THE QUESTIO N OF LAW RAISED BEFORE THE HONBLE HIGH COURT, THE RELEVANT PORTION IS EXTRACT ED AS UNDER: (III)WHETHER THE TRIBUNAL WAS RIGHT IN HOLDING THAT THE REGISTRATION FEES AND OTHER RELATED PAYMENTS CONSTITUTE INTANGIBLE ASSETS AND ELIGIBLE FOR DEPRECIATION WITHIN THE MEANING OF BUSINESS OR COMMERCIAL RIGHTS U/S 32(1)(II) IN VIEW OF THE FACT THAT REGISTRATION OF PESTICIDES ITA NO.15/CHNY/2018 & CO NO.53/CHNY/2018 :- 4 -: IN A PARTICULAR COUNTRY CANNOT BE TERMED AS ANY INT ANGIBLE ASSET LISTED IN SECTION 32(1)(II) OF THE INCOME TAX ACT, 1961 ? THE RELEVANT PORTION OF THE JUDGMENT IS EXTRACTED AS UNDER: 7.WITH REGARD TO THE SECOND ISSUE, WHEREIN THE ASSE SSEE CLAIMED THAT THE PAYMENT OF REGISTRATION FEE TO BE EQUITABLE TO AN INTANGIBLE A SSET, WE FIND THAT THE FINDING OF THE TRIBUNAL IS NOT SUPPORTED BY REASONS, ESPECIALLY ON THE FACTUAL ASPECT AS TO WHAT IS THE EFFECT OF PAYMENT OF THE REGISTRATION FEE FOR ACQUIRING SUCH A LICENC E. THAT APART, THE ASSESSEE'S ALTERNATE CLAIM THAT IT SHOULD BE TREATED AS A REVENUE EXPENDITURE HAS ALSO BEEN NEGATIVED BY THE ASSESSING OFFICER. WE FIND THAT THE ASSESSING OFFICER, IN PAR AGRAPH 4.2 OF THE ASSESSMENT ORDER, HAS NOT GIVEN INDEPENDENT REASON AS TO WHY THE ALTERNATE SU BMISSION OF THE ASSESSEE IS NOT ACCEPTED. THEREFORE, WE FIND THAT THE FINDING OF THE TRIBUNAL IN PARAGRAPH 13 ON THE SECOND ISSUE, IN OUR CONSIDERED OPINION, HAS BEEN RENDERED WITHOUT GOING INTO THE COMMERCIAL ASPECT OF THE EFFECT OF THE REGISTRATION FEE PAID BY THE ASSESSEE, WHICH , EVEN ACCORDING TO THE ASSESSING OFFICER, IS A HUGE EXPENSE. THEREFORE, WE FEEL THAT THE SECOND ISSUE ALSO SHOULD BE REMANDED TO THE ASSESSING OFFICER FOR FRESH CONSIDERATION GIVING LI BERTY TO THE ASSESSEE TO RAISE ALL ISSUES INCLUDING THE ALTERNATE PLEA THAT IT SHOULD BE TREA TED AS A REVENUE EXPENDITURE. 5. FROM THE ABOVE, IT IS CLEAR THAT THE HONBLE JUR ISDICTIONAL HIGH COURT HAS REMITTED THE ABOVE MATTER BACK TO THE AO FOR A FRES H CONSIDERATION, GIVING LIBERTY TO THE ASSESSEE TO RAISE ALL ISSUES INCLUDI NG THE ALTERNATE PLEA THAT IT SHOULD BE TREATED AS A REVENUE EXPENDITURE AND DECI DE THE MATTER. IN THE FACTS AND CIRCUMSTANCES, WE DEEM IT FIT TO REMIT TH IS ISSUE BACK TO THE AO FOR A FRESH CONSIDERATION IN ACCORDANCE WITH THE DECISION OF THE HONBLE HIGH COURT, SUPRA. 6. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I N ITA NO.15/CHNY/2018 IS TREATED AS PARTLY ALLOWED AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IN CO NO.53/CHNY/2018 IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 07, 201 8, IN CHENNAI. SD/- SD/- ( ) (GEORGE MATHAN) /JUDICIAL MEMBER ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER ITA NO.15/CHNY/2018 & CO NO.53/CHNY/2018 :- 5 -: /CHENNAI, 0 /DATED: JUNE 07, 2018. TLN + (12 32 /COPY TO: 1. ' /APPELLANT 4. 4 /CIT 2. ()' /RESPONDENT 5. 2 ( /DR 3. 4 ( )/CIT(A) 6. /GF