Vi Micro Systems P Ltd., CHENNAI V. ACIT, CHENNAI

ITA 105/CHNY/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 2642 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2015-2016
• Appeal Filed On: 11-01-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR CIT
• Assessee Lawyers: GOPALSAMY CHOKKAPPA
• Keywords: Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI . . , . , BEFORE SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.105/CHNY/2019 /ASSESSMENT YEAR: 2015-16 M/S.VI MICROSYSTEMS P. LTD., 75, ELECTRONICS ESTATE, PERUNGUDI, CHENNAI. VS. THE ASST. COMMISSIONER- OF INCOME TAX, CORPORATE RAGE-3, CHENNAI. [PAN: AAACV 0909 J] ( # /APPELLANT) ( $%# /RESPONDENT) # & / APPELLANT BY : MR.GOPALSAMY CHOKKAPPA, CA $%# & /RESPONDENT BY : MR. R.CLEMENT RAMESH- KUMAR, ADDL.CIT & /DATE OF HEARING : 20.08.2019 & /DT. OF PRONOUNCEMENT : 26.08.2019 / O R D E R PER SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER O F THE COMMISSIONER OF INCOME TAX (APPEALS)-7, CHENNAI, IN ITA NO.60(T) /CIT(A)-7/2017-18 DATED 22.10.2018 FOR THE AY 2015-16. 2. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO IN RELATING TO THE RESEARCH & ITA NO.105/CHNY/2019 :- 2 -: DEVELOPMENT EXPENSES U/S.35(2AB) OF INCOME TAX ACT, 1961. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THE APPELLANT HUMBLY SUBMITS THAT THE LEARNED CO MMISSIONER (APPEALS) HAS FAILED TO APPRECIATE THE FACTS AND HAS MISAPPLIED THE LAW IN NOT PERMITTING THE DEDUCTION OF SCIENTIFIC RESEARCH EXPENDITURE NOT APPROVED BY DSIR. 2. THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN NOT ENTERTAINING THE ALTERNATIVE CLAIM U/S.35(1), DESPITE THE MATTER BEING COVERED BY THE H ON'BLE ITAT ORDER DATED 29/8/2017 IN THE APPELLANT'S OWN CASE FOR THE AY 2012-13 & AY 20 13-14. 3. THE LEARNED COMMISSIONER (APPEALS) HAS ERRED IN ASSUMING THAT THE ALTERNATIVE CLAIM CANNOT BE GRANTED FOR THE REASON THAT THE ASSESSING OFFICER HAD NOT PASSED ANY ORDER IN PURSUANCE OF THE ITAT ORDER, AS ON THE DATE OF HEARI NG. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING, IT IS PRAYED THAT THE DISALLOWED RESEARCH & DEVELOPMENT EXPENSES U/S.35(2AB) BE ALLOWED U/S.35(1). 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTE R, VARY AND / OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE BRIEF FACTS OF THE CASE OF THE ASSESSEE ARE TH AT THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY 2015-16 ON 29.10.20 15 ADMITTING A TOTAL LOSS OF RS.1,09,930/-. THE RETURN WAS SELECTED FOR SCRUTINY AND AFTER ISSUANCE OF NOTICE, THE ASSESSMENT CAME TO BE COMPL ETED U/S.143(3) ON 21.09.2017 AND THE FOLLOWING ADDITIONS WERE MADE: 1. DISALLOWANCE U/S.35(2AB) FOR RS.2,17,014/- 2. DISALLOWANCE U/S.40A(3) FOR RS.6,47,700/- THE ASSESSEE CLAIMED RS.49,18,507/- AS RESEARCH & DEVELOPMENT EXPENSES ELIGIBLE FOR WEIGHTED DEDUCTION U/S.35(2AB ). THE DSIR, THE PRESCRIBED AUTHORITY CERTIFIED AN EXPENDITURE OF RS .48,10,000/- ONLY. THE ASSESSEE AGREED THAT THE DIFFERENCE IS NOT ELIGIBLE FOR WEIGHTED DEDUCTION BUT CLAIMED THAT IT TO BE ALLOWED AS EXPENDITURE U/ S.35(1) OR U/S.37. THE AO DID NOT AGREE AND DISALLOWED THE SAME. ITA NO.105/CHNY/2019 :- 3 -: 4. ON BEING AGGRIEVED, THE ASSESSEE FILED AN APPEAL B EFORE THE LD.CIT(A). AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE, THE LD.CIT(A) DISMISSED THE APPEAL FILED BY THE ASSESSE E. THE LD.AR SUBMITTED THAT THE SIMILAR ISSUE HAS BEEN TAKEN UP BY THE HONBLE ITAT IN THE ASSESSEES OWN CASE FOR THE AYS 2012-13 & 2013- 14. HE FURTHER SUBMITTED THAT AFTER CONSIDERING THE ARGUMENTS OF T HE ASSESSEE, THE HONBLE ITAT REMITTED THE ISSUE BACK TO THE FILE OF THE AO TO EXAMINE THIS ISSUE AFRESH. THE ASSESSEE FURTHER SUBMITTED THAT THIS ISSUE ALSO MAY GO BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION AS DIRECTED BY THE HONBLE ITAT IN THE EARLIER YEARS. ON THE OTHER HAND, THE LD.DR SUPPORTED THE ORDERS PASSED BY THE LD.CIT(A). 5. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATERI ALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES B ELOW. 6. THERE IS NO DISPUTE THAT THE TRIBUNAL IN THE ASSES SEES OWN CASE FOR THE AYS 2012-13 & 2013-14 IN ITA NOS.1172/MDS/2017 & IN ITA NO.1173/MDS/2017 VIDE ITS ORDER DATED 29.08.2017 RE MITTED THE ISSUE BACK TO THE FILE OF THE AO, WITH THE FOLLOWING DIRE CTIONS: .WE, ACCORDINGLY, ONLY CONSIDER IT PROPER THAT THE MATTER IS RESTORED FOR ADJUDICATION ON MERITS, I.E., AS TO VALIDITY OF THE ASSESSEES C LAIM U/S. 35(1), TO 5 ITA NO.1172 & 1173/MDS/2017 (AYS 2012-13 & 2013-14 ) VI MICRO SYSTEM S PVT. LTD. V. ASST. CIT/ITO THE FILE OF THE AO, MAKING IT CLEAR THAT THE ONUS TO SU BSTANTIATE ITS CLAIM/S IS ONLY ON THE ASSESSEE. FURTHER, THE COPY OF FORM 3CL, I.E., THE FORM IN WHICH THE REPORT IS SUBMITTED BY DSIR TO THE DIRECTOR GENERAL OF INCOME TAX (EXEMPTI ONS) U/S. 35(2AB)(4) OF THE ACT (PB PGS.2-3) AS WELL AS THE AUDITED ACCOUNTS (AS AT PB P GS. 18-19/AY 2013-14), BEAR THE BREAKUP OF THE SAID EXPENDITURE. THE SAME IS CLASSI FIED UNDER THE HEADS CAPITAL EXPENDITURE AND RECURRING EXPENDITURE. THE OTHER GROUPING OF THE SAID EXPENDITURE IS THAT DEBITED TO THE PROFIT AND LOSS ACCOUNT AND THAT CAR RIED OVER IN THE BALANCE SHEET. SURELY, THESE ARE RELEVANT ASPECTS OF THE CLAIM, BOTH U/S. 35(2AB) AND U/S. 35(1), WHICH NEED TO BE EXAMINED IN THE MATTER. WE INCLUDE S. 35(2AB) AS WEL L, AS, WITHOUT DOUBT, THERE IS NO ITA NO.105/CHNY/2019 :- 4 -: QUESTION, THEREFORE, OF THE CAPITAL COST ALLOWED U/S . 35(2A) BEING CLAIMED UNDER ANY OTHER PROVISION OF THE ACT, INCLUDING U/S. 32, A CAPITAL A LLOWANCE IN RESPECT OF CAPITAL EXPENDITURE. THE AO SHALL EXAMINE THE RELEVANT ASPECTS AND DECIDE PER A SPEAKING ORDER UPON ALLOWING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. CONSIDERING THE ABOVE SAID FINDINGS, WE ARE OF THE FIRM VIEW THAT THIS ISSUE ALSO MAY GO BACK TO THE FILE OF THE AO F OR EXAMINATION AS DIRECTED BY THE TRIBUNAL IN THE EARLIER YEARS. CON SEQUENTLY, THE GROUNDS RAISED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATI STICAL PURPOSES. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 26 TH DAY OF AUGUST, 2019, IN CHENNAI. SD/- SD/- ( . ) (S. JAYARAMAN) /ACCOUNTANT MEMBER ( - . . . / ) (DUVVURU R.L. REDDY) /JUDICIAL MEMBER /CHENNAI, 1 /DATED: 26 TH AUGUST, 2019. TLN & $23 43 /COPY TO: 1. # /APPELLANT 4. 5 /CIT 2. $%# /RESPONDENT 5. 3 $ /DR 3. 5 ( ) /CIT(A) 6. /GF