M/s Consolidated Energy consultants Ltd., Bhopal V. The ACIT- 1(1), Bhopal

CO 61/IND/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 9061 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 19-11-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 03-06-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: R N GUPTA
• Keywords: Competent authority; Capital expenditure

Judgement Text

1 INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NO. 191/IND/2013 A.Y. 2009-10 ACIT 1(1) BHOPAL :: APPELLANT VS CONSOLIDATED ENERGY CONSULTANTS LTD., BHOPAL PAN AABCC 6077 H :: RESPONDENT CO NO. 61/IND/2013 (ARISING OUT OF ITA NO. 191/IND/2013) A.Y. 2009-10 CONSOLIDATED ENERGY CONSULTANTS LTD., BHOPAL PAN AABCC 6077 H :: OBJECTOR VS ACIT 1(1), BHOPAL :: RESPONDENT DEPTT. BY SHRI R.A. VERMA ASSESSEE BY SHRI R.N. GUPTA DATE OF HEARING 19 . 11 .2013 DATE OF PRONOUNCEMENT 19 .1 1 .2013 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL CHAL LENGING THE IMPUGNED ORDER DATED 28.1.2013 OF THE LEARNED FIRST APPELLATE AUTHORITY WHEREAS THE ASSESSEE HAS PREFERRED CROSS OBJECTION. FIRST WE SHALL TAKE UP THE APPEAL OF THE REVENUE WHEREIN GROUNDS NO.1 & 2 PERTAIN TO NOT FOLLOWING THE PROVISIONS OF SECTIO N 250(1) AND 250(2) OF THE I.T. ACT, 1961 IN NOT PROVIDING NOTIC E TO THE ASSESSING OFFICER AND CONSEQUENT OPPORTUNITY TO HIM. 2. DURING HEARING, THE CRUX OF ARGUMENTS ADVANCED O N BEHALF OF THE REVENUE IS IDENTICAL TO THE GROUNDS RAISED AND ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER. 2.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE FROM THE ASS ESSMENT ORDER ITSELF THAT PURSUANT TO NOTICES, ISSUED TO THE ASSE SSEE, THE ASSESSEE DULY RESPONDED AND ALSO FILED WRITTEN SUBMISSIONS T O THE QUERY, RAISED DURING ASSESSMENT PROCEEDINGS ALONG WITH PRO FIT AND LOSS ACCOUNT, BALANCE SHEET, BOOKS OF ACCOUNTS, BILLS, V OUCHERS FOR 3 VERIFICATION AND THE SAME WERE TEST CHECKED. IT IS NOT THE CASE OF THE REVENUE THAT THESE DETAILS WERE NEVER PRODUCED BEFO RE THE ASSESSING OFFICER. WE FURTHER NOTE THAT THE DETAILS OF R & D EXPENSES ETC. WERE ALSO PRODUCED AS IS EVIDENT FROM THE ASSESSMENT ORDER, THEREFORE, THE CONTENTION OF THE REVENUE IS NOT SUBSTANTIATED, CONSEQUENTLY, BOTH THESE GROUNDS ARE HAVING NO MERI T, THUS, DISMISSED. 3. NOW, WE TEND TO DISPOSE OF THE APPEAL OF THE REV ENUE ON MERIT WHEREIN THE ONLY GROUND PERTAINS TO DELETING THE AD DITION OF RS.51,41,440/- MADE ON ACCOUNT OF DISALLOWANCE OF D EDUCTION CLAIMED U/S 35(1)(IV) OF THE ACT. THE CRUX OF ARGUM ENTS ON BEHALF OF THE REVENUE IS THAT NO RESEARCH IS DONE BY THE ASSE SSEE, THEREFORE, THE CLAIMED DEDUCTION WAS WRONGLY ALLOWED BY THE LD . CIT(A), THAT TOO, WITHOUT ASSIGNING ANY REASON. IT WAS SUBMITTED THAT ASSESSMENT ORDER, ON THIS ISSUE, MAY BE RESTORED. O N THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER. IT WAS ALSO POINTED OUT THAT FOR AS SESSMENT YEAR 2007-08, IDENTICALLY, THE CLAIMED DEDUCTION WAS ALL OWED TO THE ASSESSEE AND THE SAME HAS BEEN ACCEPTED BY THE DEPA RTMENT. 4 3.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. BEFORE COMING TO ANY CONCLUSION, WE ARE REPRODUCING HEREUNDER THE CONCLUSION DRAWN IN T HE IMPUGNED ORDER: 11. I HAVE CAREFULLY EXAMINED THE SUBMISSION OF THE APPELLANT THAT SIMILAR CLAIM WAS MADE DURING A.Y. 2 007-08 AT RS.9,81,137/- AND WAS ALLOWED BY THE A.O. I HAVE CAREFULLY PERUSED THE RETURN OF INCOME, ASSESSMENT ORDER AND TAX AUDIT REPORT IN FORM 3CD FOR THE A.Y. 2007- 08 AND 2009-10. I DO FIND THAT THE APPELLANT HAD MADE SIMI LAR CLAIM IN A.Y. 2007-08 AND THE ASSESSING OFFICER HAD NOT D ISALLOWED THE SAME IN THE SCRUTINY ASSESSMENT. THE ASSESSING OFFICER HAD NOT BROUGHT ON RECORD ANY CORROBORATIVE REASON TO REJECT THE CLAIM OF THE APPELLANT DURING THE YEAR UNDER CONSIDERATION. 12. I AM CONVINCED THAT THE NATURE OF THE ACTIVITY CARRIED OUT BY THE APPELLANT FALLS WITHIN THE PHRAS E SCIENTIFIC RESEARCH, PARTICULARLY FOR THE REASON THAT THE DEF INITION OF THE TERM SCIENTIFIC RESEARCH IS INCLUSIVE, AND TH AT THE SAID SCIENTIFIC RESEARCH IS IN CONNECTION WITH THE BUSIN ESS OF THE APPELLANT AND MAY FACILITATE EXPANSION OF THE BUSIN ESS OF THE APPELLANT, THEREFORE, THE APPELLANT SATISFIES ALL T HE CONDITIONS PROVIDED U/S 35 SO AS TO ENTITLE THE APPELLANT CLAI M DEDUCTION OF CAPITAL EXPENDITURE. LOOKING TO THE FA CTS AND CIRCUMSTANCES OF THE CASE AS ALSO DECISIONS CITED A BOVE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER CANNOT B E SUSTAINED. HENCE, THE DISALLOWANCE IS DELETED. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ALONG WITH THE OBSERVATIONS MADE IN THE ASSESSMENT ORDER FOR DENYI NG CLAIMED DEDUCTION AND THE CONCLUSION DRAWN IN THE IMPUGNED ORDER. EVEN THE LD. ASSESSING OFFICER IN PARA 3 HAS MENTIONED T HAT THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF ENGINEERING CONSULTAN CY IN THE FIELD OF WIND POWER GENERATION AND POWER SECTOR RELATED JOB. DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO F URNISH THE DETAILS OF R & D EXPENSES INCURRED FOR THE EARLIER SIX ASSESSMENT YEARS WHICH WERE DULY FURNISHED. THE MAJOR REASON F OR DENYING THE CLAIMED DEDUCTION BY THE ASSESSING OFFICER IS THAT THE ASSESSEE IS NOT SHARING THE RESULTS INTO PUBLIC DOMAIN THROUGH CENTRE FOR WIND ENERGY TECHNOLOGY OR ANY PUBLIC AGENCY RATHER CONSU LTANCY IS MADE TO INDIVIDUAL CUSTOMERS. THUS, THE ACTIVITY OF THE ASSESSEE IS OF COMMERCIAL NATURE AND ALLIED ACTIVITIES. WE ARE OF THE VIEW THAT IF THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF SCIE NTIFIC RESEARCH, RELATED TO THE BUSINESS OF THE ASSESSEE, IT DOES NO T MATTER THAT THE EXPENDITURE MIGHT RESULT IN SOME OTHER BENEFITS TO THE ASSESSEE OR ENURE TO THE BENEFIT OF A THIRD PARTY. IN ORDER TO GET THE BENEFIT OF DEDUCTION IN RESPECT OF CAPITAL EXPENDITURE, INCURR ED ON SCIENTIFIC RESEARCH, IT WILL SUFFICE THAT THE EXPENDITURE IS R EALLY INCURRED 6 DURING THE RELEVANT PREVIOUS YEAR. AS LONG AS THE E XPENDITURE IS OF CAPITAL NATURE AND IT IS USED FOR SCIENTIFIC RESEAR CH RELATING TO THE BUSINESS CARRIED ON BY THE ASSESSEE, SUCH DEDUCTION CANNOT BE DENIED. THE RATIO LAID DOWN IN THE DECISIONS IN CIT V. SANDOZ (INDIA) LTD. (206 ITR 385) (BOM), CIT VS. KEEN PESTICIDES ( P) LTD. (1998) 97 TAXMAN 306 (KAR), CIT VS. YAMUNA DIGITAL ELECTRONIC S (P) LTD. (1990) 103 TAXMAN 46/238 ITR 717(A.P.) SUPPORTS OUR VIEW. EXPENDITURE ON SCIENTIFIC RESEARCH IS ALLOWABLE AS A DEDUCTION U/S 35 ONLY WHEN SUCH EXPENDITURE IS LAID OUT OR EXPAND ED OR RELATED TO BUSINESS. THE TERM BUSINESS IS TO BE GIVEN A WIDE MEANING AND WITH THE RAPID ADVANCEMENT AND GROWTH IN THE FIELD OF SCIENCE AND TECHNOLOGY, EVEN CONSULTANCY SERVICES OFFERED WOULD BE COVERED UNDER THE TERM BUSINESS. THESE DAYS, PROVIDING CO NSULTANCY HAS BECOME A MAJOR SOURCE OF THE REVENUE, THEREFORE, TH E TERM BUSINESS CANNOT BE CONFINED TO ONLY SALE AND PURC HASE OF MERCHANDISE OR MANUFACTURING ACTIVITIES, THUS, SUCH EXPENDITURE ON SCIENTIFIC RESEARCH, RELATED TO ITS BUSINESS, WILL BE ALLOWABLE DEDUCTION. OUR VIEW IS FORTIFIED BY THE DECISION IN LD. CIT VS. U.P. ELECTRONICS CORPORATION LTD. (276 ITR 45) (ALL). TH E LD. ASSESSING OFFICER HAS NOT DOUBTED INCURRING OF EXPENDITURE BY THE ASSESSEE. 7 THE ASSESSEE IS A PUBLIC LIMITED COMPANY DERIVING I NCOME FROM ENGINEERING CONSULTANCY IN THE FIELD OF WIND POWER GENERATION AND RELATED JOB. THE DEFINITION OF SCIENTIFIC RESEARCH , CONTAINED IN SECTION 43(4) OF THE I.T. ACT, 1961, IS BROAD ENOUG H, WHEREIN, THE LEGISLATURE IN ITS WISDOM AS IN NO UNCERTAIN TERM S TATED THAT REFERENCES TO THE SCIENTIFIC RESEARCH RELATED TO BU SINESS, SHALL INCLUDE ANY SCIENTIFIC RESEARCH WHICH MAY LEAD TO O R FACILITATE AN EXTENSION OF THAT BUSINESS. WHEN THE TERM SCIENTIFI C RESEARCH IS USED IN RELATION TO BUSINESS, IT DOES NOT HAVE TO B E A RESEARCH ONLY IN THE FIELD OF NATURAL OR APPLIED SCIENCES. THE RE SULTS OOZING OUT OF SUCH SCIENTIFIC RESEARCH ARE USEFUL FOR PUBLIC AT L ARGE THOUGH SUCH BENEFITS ENURES TO A THIRD PARTY. IN EVERY SITUATIO N, IT CANNOT BE SAID THAT THE SCIENTIFIC RESEARCH DONE BY GOVT. AGENCIES CAN ONLY BE SAID A RESEARCH. ANY RESEARCH EVEN DONE THROUGH PRIVATE SECTOR WILL DEFINITELY BE COVERED UNDER SCIENTIFIC RESEARCH. BE FORE PROVIDING THE EXEMPTION U/S 35 OF THE ACT, THE ACTIVITY/RESEARCH ACTIVITY OF AN INDIVIDUAL ARE THOROUGHLY EXAMINED BY THE COMPETENT AUTHORITY AND THEN SUCH APPROVAL IS GRANTED. WHERE IT IS NOT ALLO WABLE, IT HAS BEEN SPECIFICALLY EXPLAINED BY ADDING PROVISOS AND EXPLA NATIONS AS IS EVIDENT FROM THE ACT ITSELF BY INSERTING SUITABLE A MENDMENTS FROM 8 TIME TO TIME. THE CENTRAL GOVT., BEFORE GRANTING AP PROVAL UNDER CLAUSE (II) OR CLAUSE (III), CALL FOR SUCH DOCUMENT S (INCLUDING AUDITED ANNUAL ACCOUNTS) OR INFORMATION, AS IT THINKS NECES SARY IN ORDER TO SATISFY ITSELF ABOUT THE GENUINENESS OF THE ACTIVIT IES AND ALSO MAKE SUCH INQUIRIES AS IT MAY DEEM NECESSARY IN THIS BEH ALF. THE ASSESSEE WAS GRANTED REGISTRATION ON FULFILMENT OF CONDITIONS AS HAS BEEN PRESCRIBED. EVEN THE LD. ASSESSING OFFICER HAS NOT DOUBTED THE FACTUM THAT ANY SCIENTIFIC RESEARCH/ACTIVITY WAS NO T DONE BY THE ASSESSEE. DURING HEARING, IT WAS ALSO POINTED OUT T HAT SINCE INCORPORATION, THE ASSESSEE IS ENGAGED IN CORE ACTI VITY OF RENDERING OF CONSULTANCY SERVICE OF TECHNO COMMERCIAL NATURE WITH COMPETENCE IN WIND ENERGY TO ITS CLIENTS AND SUCH C ONSULTANCY SERVICE INCLUDES THAT PREPARATION OF FEASIBILITY RE PORT, DETAILED PROJECT REPORT, DRAFTING OF COMMERCIAL TERMS, BID E VALUATION, ENGINEERING SUPERVISION OF CONSTRUCTION, ERECTION A ND COMMISSIONING, POST COMMISSIONING MONITORING, PERFO RMANCE IMPROVEMENT, ENERGY ESTIMATION ON THE BASIS OF DATA PROVIDED BY WEG MANUFACTURER/DEVELOPER, DESIGNING, LAY OUT AND MICRO SITTING ETC. FOR WIND POWER PROJECT, THAT TOO, FOR INVOLVIN G PRIVATE SECTORS IN WIND RESOURCES ASSESSMENT AND SUBSEQUENT TO EXAMINA TION AND 9 CERTIFICATION OF THE WIND RESOURCE STUDY BY THE CEN TRE FOR WIND ENERGY TECHNOLOGY, THE COMPETENT AUTHORITY CONSIDER S THE SAME AND IDENTIFIES THE SITE. THE ASSESSEE INCURRED EXPENDIT URE ON ACQUISITION AND INSTALLATION OF ELEVEN WIND MONITORING SYSTEM A T SEVEN LOCATIONS IN MADHYA PRADESH AND FOUR LOCATIONS IN RAJASTHAN, UNDER INTIMATION TO C-WET AND STATE NODAL AGENCIES, THUS, THE ASSESSEE COMPANY, APART FROM RENDERING TECHNICAL SERVICES TO ITS CLIENTS, DID RESEARCH IN THE FIELD OF DEVELOPMENT OF WPP AT ITS OWN AND INCURRED EXPENDITURE OF RS.51,41,440/-. THIS FACTUAL MATRIX WAS NOT CONTROVERTED BY THE REVENUE WITH THE HELP OF ANY PO SITIVE MATERIAL. SINCE THE RESEARCH DONE BY THE ASSESSEE IS USED FOR THE BENEFIT OF PUBLIC, THEREFORE, WE FIND NO INFIRMITY IN THE CONC LUSION DRAWN BY THE LD. CIT(A). WE AFFIRM THE SAME. 4. NOW, WE SHALL TAKE THE CROSS-OBJECTION NO.61/IND /2013. THE LEARNED COUNSEL FOR THE ASSESSEE BROADLY POINTED OU T THAT IT IS IN SUPPORT TO THE IMPUGNED ORDER. SINCE WE HAVE AFFIRM ED THE CONCLUSION DRAWN IN THE IMPUGNED ORDER, IT HAS REMA INED FOR ACADEMIC INTEREST ONLY, THEREFORE, DISMISSED AS INF RUCTUOUS. 10 FINALLY, THE APPEAL OF THE REVENUE AND CROSS OBJECT ION OF THE ASSESSEE ARE DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCL USION OF HEARING ON 19.11.2013. SD/- SD/- (R.C.SHARMA) (JOGINDER SINGH ) ACCOUNTANT MEMBER JUDICIAL ME MBER DATED: 19.11.2013 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, GU ARD FILE !VYAS!