DEPUTY COMMISSIONER OF INCOME TAX, DELHI V. SHRIRAM PISTONS AND RINGS LTD, DELHI

ITA 4150/DEL/2024

AI Insights

The case involves appeals by the Revenue against the decisions of the CIT(A) for the assessment years 2015-16 and 2020-21, where the CIT(A) had allowed the appeals of Shriram Pistons and Rings Ltd., the respondent. The main issues in dispute were the classification of expenditures on dies for new model development and productivity maintenance as capital or revenue expenditures. The Tribunal noted that similar issues had been previously decided in favor of the assessee in earlier years, and the CIT(A) had relied on these precedents. The Tribunal found no reason to deviate from the established judicial consistency and upheld the CIT(A)'s decisions.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 41775 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-02-2025
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2020-2021
• Other Referred Cases: Excel Industries Ltd. 358 ITR 295 (SC)
• Laws Referred To: CBDT Circular No.09/2024
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAHIL KUMAR BANSAL
• Assessee Lawyers: R.K. KAPOOR; SHRUTI
• Keywords: Revenue expenditure; Depreciation; Rule of consistency; Tax effect; Capital expenditure

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH “G”, NEW DELHI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER, AND SHRI ANUBHAV SHARMA, JUDICIAL MEMBER ITA NOS. 4123 & 4150/Del/2024 A.YRS. : 2015-16 & 2020-21 DCIT, ROOM NO. 225E, C.R. BUILDING, 2ND FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI-2 VS. SHRIRAM PISTONS AND RINGS LTD., HIMALAYA HOUSE 23, KG MARG, 3RD FLOOR, NEW DELHI – 1 (PAN: AAACS0229G) (APPELLANT) (RESPONDENT) Appellant by : Shri Sahil Kumar Bansal, Sr. D.R. Respondent by : Shri R.K. Kapoor, CA & Ms. Shruti Gupta,CA Date of hearing : 28.01.2025 Date of pronouncement : 12.02.2025 ORDER PER SHAMIM YAHYA, AM : The Revenue has filed these Appeals against the separate Orders of the Ld. CIT(A)/NFAC, Delhi relating to assessment years 2015-16 & 2020-21. 2. The grounds raised in ITA No. 4123/Del/2024 (AY 2015-16) read as under: 1. Whether in facts and circumstances of the case Ld. CIT(A) was right in allowing appeal of the assessee. 2. Whether in facts and circumstances of the case Ld. CIT(A) has erred in deleting the addition in this respect of Rs. 2 1,58,16,785/- being expenditure on account of dies for new model development. 3. Whether in facts and circumstances of the case Ld. CIT(A) has erred in deleting the addition in this respect of Rs. 13,92,819/- being expenditure on account of Productivity Maintenance. 3. At the outset, Ld. Counsel for the assessee submitted that tax effect involved in this appeal is Rs. 58,06,504/-, which is below the prescribed limit of Rs. 60 lacs, as stipulated in CBDT Circular No.09/2024 dated 17.09.2024 in filing the appeal before the Tribunal. Ld. DR has no objection to this proposition. 4. Keeping in view of the aforesaid factual matrix, we deem it fit and proper to dismiss the appeal of the Revenue in the light of the aforesaid Circular No.09/2024 of the CBDT dated 17.09.2024, as not maintainable. Resultantly, the ITA No. 4123/Del/2024 (AY 2015-16) filed by the Revenue is dismissed. 5. The grounds raised in ITA No. 4150/Del/2024 (AY 2020-21) read as under:- 1. Whether in facts and circumstances of the case Ld. CIT(A) was right in allowing appeal of the assessee. 2. Whether in facts and circumstances of the case Ld. CIT(A) has erred in deleting the addition in this respect of Rs. 12606417 being expenditure on account of dies for new model development. 3 3. Whether in facts and circumstances of the case Ld. CIT(A) has erred in deleting the addition in this respect of Rs. 12070731/- being expenditure on account of Productivity Maintenance. 6. At the outset, Ld. Counsel for the assessee submitted that the issues in dispute are identical to additions made in earlier years, which have been deleted by the ITAT, and thus Ld. CIT(A) has deleted the additions in dispute in the year under consideration relying upon the decision of the ITAT in earlier years. Ld. DR also could not controvert this statement of the Ld. Counsel for the assessee. Further, Ld. Counsel for the assessee has summarized his submissions as under:- “This is a Departmental Appeal in which two grounds of appeal are raised. One is regarding the expenditure incurred on Dies and Moulds for developing new model of the item which is manufactured by the assessee. The AO has treated the expenditure on the dies and moulds as capital expenditure and has allowed the depreciation on the same by treating the same as plant and machinery. The second ground is the expenditure incurred by the assessee on productivity maintenance audit. At the outset, it submitted that both these grounds are identical which have been raised by the department from time to time and year after year and are fully covered in favour of the assessee by the earlier orders of ITAT in assessee’s own case.” 7. We have heard both the parties and perused the records. The findings of the Ld. CIT(A) on both the issues are reproduced as under:- 4 “6. Decision After perusal of assessment order, facts on record and submissions of the appellant, grounds of appeal in this case are decided as hereunder. 6.1 Ground no. 1 & 2: The ground no. 1 of appeal and the sub-grounds therein pertain to the claim that the AO erred in disallowing the expenses of Rs. 1,39,28,067/- by treating the same as capital expenditure and in making net addition of Rs. 1,26,06,417/- (after allowing depreciation) on account of expenses incurred on dies for new model development. Ground no. 2 of appeal & the sub-grounds therein pertain to the claim that the AO erred in disallowing the expenses of Rs. 1,20,70,721/- by treating the same as capital expenditure on account of expenses incurred on maintenance (TPM) & ISO-9001 expenses. 6.1.1 The written submission filed by the appellant during these appeal proceedings are summarized as under:- (i) Similar additions had been made year after year in the last many years and the appellant has been getting relief from the appellate authorities i.e. CIT(A) which relief has been confirmed by the Hon’ble ITAT. The issue pertaining to capitalization of expenditure on dies and moulds used in R & D Centre has travelled up to Hon’ble Delhi High Court as well and the Hon’ble Delhi High Court has upheld that the dies and moulds for manufacturing new model used in R & D are not capital in nature. Similarly, against the capitalization of expenses on total productivity maintenance and ISO 9001, the issue is now settled in favour of the appellant by the decisions of CIT(A) as well as Hon’ble ITAT. (ii) The appellant also filed copy of decisions of Hon’ble ITAT in its own case in AY 2011-12 (ITA No. 4278/Del/2015 dated 12/02/2019) & AY 2014-15 (ITA No. 7249/Del/2017 dated 16/07/2021), decided in its favour & further relied upon decision of Hon’ble Supreme Court, regarding the rule of consistency, in Excel Industries Ltd. 358ITR 295 (SC). 6.1.2 As has been discussed in earlier paras of this order, the reason for AO making disallowances and additions in this year on the two issues, taken up by the appellant in ground no. 1 & 2 of appeal, was same as reasoning of AOs in AY 2009- 10 to 2014-15. It is noted from the details filed by the appellant that the impugned issues have been decided in its favour holding the expenses as revenue expenditure allowable to the appellant in following decisions of Hon’ble ITAT: Sl No. Case No. Dated AY Remarks 1 ITA 7249/DEL/2017 16/07/2021 2014-15 Issues decided on merits in favour of 5 appellant. 2 ITA 905/Del/2018 05/08/2021 2013-14 Department’s appeal dismissed due to low tax effect. 3 ITA 5386/Del/2015 27/11/2018 2012-13 Department’s appeal dismissed to low tax effect. 4 ITA 4278/Del/2015 12/02/2019 2011-12 Issues decided on merits in favour of appellant. 5 ITA 3897/del/2014 05/05/2017 2010-11 Issues decided on merits in favour of the appellant. 6 ITA 5438/Del/2012 31.10.2013 2009-10 Issues decided on merits in favour of appellant. The relevant portion of latest order on merits, of Hon'ble ITAT in ITA No. 7249/Del/2017, dated 16/07/2021 for AY 2014-15, is reproduced hereunder: “We have heard rival submission of the parties on the issue in dispute and perused the relevant material on record. The finding of the Ld. CIT(A) on the issue in dispute are reproduced as under:- “7. I have considered the facts of the case, basis of disallowances made by the AO and findings of Hon’ble ITAT vide their order dated 05.05.2017 in the case of appellant on identical facts for AY 2010-11. Hon’ble ITAT, after discussing the issue and relying on the decision of jurisdiction High Court in appellant’s own case, decided both the issue as under:- I \"8.1 On perusing the above finding of the Ld. C.IT(A), with regard to ground no.l relating to deletion of disallowance of Rs. 80,34,087/- is concerned, we find that the assessee has incurred expenditure of Rs. 1,20,49,317/- on account of dies for new model development. However, the AO treated this expenditure as capital expenditure in nature and therefore, just allowed depreciation on the amount and disallowed the remaining amount of Rs. 80,34,087/-. We further note that in the assessment order, the AO has not given any reasoning for treating such expenditure as capital in nature and just mentioned that following earlier assessment orders, maintaining the consistency and to keep the issue alive he is treating the expenditure as capital in nature. On the other hand, the assessee has argued that this issue of expenditure on dies and models has already been decided in assessee's favour by the Jurisdictional Delhi High Court in ITA No.167/2008 for A.Y. 1998-99 and in ITA No.480/2003 in AY 2000-01 in assessee's own case. We further find that IT AT, Delhi Bench in ITA No.5438/Del/2012 for AY 2009-10 in assessee's own case has again followed the decision of Hon'ble High Court and allowed the expenditure as revenue expenditure. Therefore, the issue is squarely covered by the decisions of IT AT as well as Hon'ble Jurisdictional High Court in the assessee's own case in earlier assessment years, the AO's action in treating the 6 expenditure on dies and models as capital in nature was not justified. Hence, the Ld. CIT(A) has rightly deleted the disallowance of Rs.80,34,087/- made by the AO, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 1 raised by the Revenue in its Appeal. 8.2 With regard to ground no.2 relating to deletion of disallowance of Rs. 12,16,796/- is concerned, we find that the AO has not given any basis for making such disallowance and just repeated the same logic that in preceding years such disallowance was made by the AO and therefore, following the principle of consistency and just to keep the issue alive, he made the disallowance. In the appellate proceedings, the assessee has produced the decision of ITAT, Delhi, in ITA No. 5438/Del/2012 in assessee's own case, wherein the issue has already been decided in favour of the assessee. Since the issue is squarely covered by the decision of higher judicial authority, the AO's action in disallowing the expenditure under the heads \"TPM and 'ISO-9001', total amounting to Rs. 12,16,796/- was not justified. Hence, the Ld. CIT(A) has rightly deleted the disallowance of Rs. 12,16,796/- made by the AO, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 2 raised by the Revenue in its Appeal.\" 7.1 Since the Hon'ble ITAT has already taken a view on both the issues as intended by appellant in both the grounds, respectfully following the same, I also delete the additions made by AO on account of capital expenditure on dies for new model development amounting to Rs. 3,10,82,299/- and under 4.1 We find that Learned CIT(A) has followed decision of the ITAT in earlier years and, therefore, we do not find any error in the order of the learned CIT(A) on the issue-in-dispute raised before us. Accordingly, all the grounds of the appeal of the Revenue are dismissed.” Respectfully following the aforementioned decisions of Hon’ble ITAT, Delhi, the disallowances and consequent additions (of Rs. 1,26,06,417/- & Rs. 1,20,70,731/-), made on the impugned issues in the impugned assessment order are hereby deleted. Ground no. 1 & 2 of appeal are allowed.” 8. We find that Ld. CIT(A) has followed the decision of the ITAT of earlier years in assessee’s own case, therefore, we do not find any error in the order of the Ld. CIT(A) on the issues in dispute raised before us. It is not the case of change of facts and circumstances of the case. Hence, we uphold the action of the Ld. CIT(A) and accordingly, the grounds raised by the Revenue are dismissed. Resultantly, the appeal for AY 2020-21 stand dismissed. 7 9. In the result, both the appeals filed by the Revenue stand dismissed. Order pronounced on 12.02.2025. Sd/- (ANUBHAV SHARMA) Sd/- (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER SRBHATNAGAR Copy forwarded to:- 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT Assistant Registrar "