Maharishi Ayurveda Products (P) Ltd., New Delhi V. ACIT, New Delhi

ITA 1369/DEL/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7454 (ITAT-DELHI)
• Duration Of Justice: 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-08-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 04-08-2010
• Assessment Year: 2001-2002
• Appeal Filed On: 29-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: H K LAL
• Assessee Lawyers: MANOJ ARORA
• Keywords: Difference of opinion; Revenue expenditure
• Section: 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL I.T.A. NO. 1369/DEL/2010 ASSESSMENT YEAR: 2001-02 MAHARISHI AYURVEDA PRODUCTS (P) LTD., VS. ASSISTANT CIT, (FORMERLY KNOWN AS MAHARISHI AYURVEDA CIRCLE 6(1), CORPORATION (P) LTD., A-14, MOHAN CO-OP NEW DELHI INDL. ESTATE, MATHURA ROAD, N.DELHI-44 (APPELLANTS) (RESPONDENT) APPELLANT BY: SHRI MANOJ ARORA, ADV. RESPONDENT BY: SHRI H.K . LAL, SR. DR ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE OR DER OF LEARNED CIT(APPEALS) DATED 18.1.2010 PASSED FOR ASSESSMENT YEAR 2001-02. THE SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN CONFIRMING THE LEVY OF PENALTY UNDER SECTION 271(1) (C) OF THE INCOME-TAX ACT, 1961. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY AT THE RELEVANT TIME WAS ENGAGED IN MANUFACTURING AND TRAD ING OF VARIOUS TYPES OF AYURVEDA AND HARBAL PREPARATION. IT HAS FILED ITS R ETURN OF INCOME ON 30 TH OCTOBER, 2001 DECLARING A LOSS OF RS.52,24,480. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC. 143(2) OF THE ACT 2 WAS ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ASSESSING OFFICER FOUND THAT THE ASSES SEE DID NOT MAKE THE PAYMENT OF EMPLOYEES AS WELL AS EMPLOYER CONTRIBUTI ON TOWARDS ESI AND PF WITHIN THE DUE DATE PROVIDED IN THOSE ACTS. HE, THE REFORE, DISALLOWED A SUM OF RS.5,30,460. THE ASSESSEE HAD CLAIMED A LOSS ON SALE OF ASSETS AMOUNTING TO RS.29,674. THIS LOSS WAS DISALLOWED TO THE ASSES SEE. THE ASSESSEE HAD CLAIMED A SUM OF RS.40,74,650 WHICH IS 10% OF THE T OTAL DEFERRED REVENUE EXPENSES SHOWN BY THE ASSESSEE IN ITS ACCOUNTS. LEA RNED ASSESSING OFFICER HAS HELD THAT THIS EXPENSE DID NOT RELATE TO THE CU RRENT YEAR HENCE NOT ALLOWABLE. 3. DISSATISFIED WITH THE DISALLOWANCE OF EXPENSES, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(APPEALS) AN D ULTIMATELY THE DISPUTE TRAVELED UP TO THE ITAT. IT APPEARS THAT THE ADDITI ON OF RS.40,74,650 OUT OF DEFERRED REVENUE EXPENDITURE, RS.4,05,822 OUT OF PE AND ESI CONTRIBUTION AND RS.29,674 ON ACCOUNT OF LOSS ON SALE OF ASSETS HAVE BEEN CONFIRMED. THE ASSESSING OFFICER FORMED AN OPINION THAT ASSESSEE H AD FURNISHED INACCURATE PARTICULARS OF THESE THREE AMOUNTS AND, THEREFORE, IT DESERVES TO BE VISITED WITH PENALTY UNDER SEC.271(1)(C) OF THE ACT. HE ISS UED A SHOW-CAUSE NOTICE TO THE ASSESSEE. 3 4. IN RESPONSE TO THE SHOW-CAUSE NOTICE, ASSESSEE M ADE A DETAILED SUBMISSIONS. HOWEVER, ASSESSING OFFICER DID NOT CON SIDER THOSE SUBMISSIONS ELABORATELY AND IMPOSED A PENALTY OF RS .17,83,763. 5. APPEAL TO THE LEARNED CIT(APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6. THE LEARNED COUNSEL FOR THE ASSESSEE WHILE IMPUG NING THE PENALTY BEFORE US HAS CONTENDED THAT IN THE QUANTUM PROCEED INGS, ASSESSING OFFICER HAS ERRED IN APPRECIATING THE TRUE NATURE OF THE DI SPUTE. THE AMOUNT OF RS.40,74,650 CLAIMED BY THE ASSESSEE AS DEFERRED RE VENUE EXPENDITURE REPRESENTS REVENUE EXPENDITURE INCURRED ON ESTABLIS HMENT, RECRUITMENT AND TRAINING, & ADVERTISEMENT AND SALES PROMOTION ETC. ACCORDING TO THE ASSESSEE, ALL THESE EXPENSES ARE OF REVENUE NATURE. THE ENTIRE AMOUNT INCURRED ON THESE ITEMS WERE NOT CLAIMED IN THE EAR LIER YEARS BECAUSE THE ASSESSEE WAS OF THE VIEW THAT THE BENEFIT OF THESE WILL ACCRUE TO IT OVER A PERIOD OF TIME. HENCE, THESE REVENUE EXPENSES IN TH E EARLIER YEARS WERE TAKEN TO THE ACCOUNT UNDER THE HEAD DEFERRED REVENUE EXP ENDITURE. A PART OF THE EXPENDITURE WAS WRITTEN OFF FROM YEAR TO YEAR. THIS ACCOUNTING POLICY IS BEING FOLLOWED BY THE ASSESSEE CONSISTENTLY OVER TH E YEARS. IT WAS FURTHER POINTED OUT THAT IN THIS YEAR ASSESSEE HAS INCURRED A SUM OF RS.3,10,57,134. 4 50% OF THIS AMOUNT I.E. RS.1,55,28,568 WAS TAKEN TO THE DEFERRED REVENUE ACCOUNT. AFTER INCLUSION OF THIS AMOUNT, THE TOTAL AMOUNT ACCUMULATED IN THE DEFERRED REVENUE ACCOUNT IS RS.4,07,46,500. 10% OF THIS AMOUNT HAS BEEN CLAIMED BY THE ASSESSEE. ASSESSING OFFICER CONSTRUE D THIS ITEMS AS IF IT WAS INCURRED IN EARLIER YEARS AND ASSESSEE IS CLAIMING IT IN THIS YEAR. HE POINTED OUT THAT EVEN IF THE LOGIC OF ASSESSING OFFICER IS ACCEPTED FOR THE SAKE OF ARGUMENT THEN ALSO THE EXPENSES CONTRIBUTED BY THE ASSESSEE TO THE DEFERRED ACCOUNT IN THIS YEAR IS RS.1,55,28,568 AND THE CLAI M OF ASSESSEE WHICH IS ONLY RS.40,74,650 WHICH IS FAR BELOW THAN THE TOTAL EXPENSES. THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDINGS MADE A ALTERNATIVE CLAIM THAT ITS ACTUAL EXPENSES INCURRED IN THIS YEAR SHOULD BE ALL OWED. BUT THIS WAS REJECTED ON THE GROUND THAT ASSESSEE HAS NOT REVISE D THE RETURN OF INCOME. THE ASSESSEE HAS DISCLOSED ALL THESE DETAILS TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THERE COULD B E NO CHARGE THAT ASSESSEE HAD FURNISHED INACCURATE PARTICULARS. ON I DENTICAL LOGIC CLAIMS WERE MADE IN THE PAST AND THOSE WERE ALLOWED BY THE ASSE SSING OFFICER. THE CONFIRMATION OF DISALLOWANCE IN THE QUANTUM PROCEED INGS WOULD NOT AUTOMATICALLY GOAD THE ASSESSING OFFICER TO IMPOSE THE PENALTY ALSO. WITH REGARD TO THE DISALLOWANCE OF PF CONTRIBUTION, LEAR NED COUNSEL FOR THE 5 ASSESSEE SUBMITTED THAT HON'BLE DELHI HIGH COURT IN A RECENT JUDGMENT RENDERED IN THE CASE OF CIT VS. P.M. ELECTRONICS RE PORTED IN 220 CTR 635 HAS HELD THAT IF EMPLOYEES AS WELL AS EMPLOYERS CON TRIBUTION TOWARDS THE PF OR ESI ACCOUNT WAS PAID BY THE ASSESSEE BEFORE THE DUE DATE OF FILING OF THE RETURN THEN NO DISALLOWANCE WOULD BE MADE. THE ASSE SSEE HAS MADE PAYMENT IN THESE ACCOUNTS BEFORE THE DUE DATE OF THE FILING OF THE RETURN, THE DETAILS ARE AVAILABLE ON PAGE 2 OF THE ASSESSMENT ORDER. AL L THESE PAYMENTS WERE MADE PRIOR TO 29.5.2001. THE RETURN WAS FILED ON 30 TH OCTOBER, 2001. IN VIEW OF THIS DECISION, THE PENALTY IS NOT IMPOSEABLE UPO N THE ASSESSEE. 7. WITH REGARD TO THE LOSS ON SALE OF ASSETS, IT WA S CONTENDED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT A LOSS OF RS. 29,674 HAD BEEN SUFFERED BY THE COMPANY ON SALE OF ASSETS. THIS LOSS HAS BEE N SHOWN IN THE P&L ACCOUNT AND THE ASSESSEE HAS NOT CONCEALED ANY PART ICULARS OF ITS INCOME. FOR BUTTRESSING HIS CONTENTIONS, LEARNED COUNSEL FOR TH E ASSESSEE RELIED UPON THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE O F CIT VS. RELIANCE PETRO PRODUCTS LTD. IN 322 ITR 158. 8. LEARNED DR ON THE OTHER HAND RELIED UPON THE ORD ER OF THE LEARNED CIT(APPEALS). HE POINTED OUT THAT IN THE ASSESSMENT ORDER, ASSESSING OFFICER HAS MADE A CATEGORICAL FINDING THAT ASSESSE E HAD MADE A CLAIM AT 6 10% OF THE OPENING BALANCE OF DEFERRED REVENUE EXPE NDITURE. IT INDICATES THAT CLOSING BALANCE IN THIS ACCOUNT WAS RS.4,07,46 ,500. ASSESSEE CLAIMED 10% OF THIS AMOUNT WHICH WOULD INDICATE THAT EXPENS E IS NOT RELATABLE TO THIS YEAR. ASSESSING OFFICER HAS NOT CONSIDERED THE ALTE RNATIVE CLAIM MADE BY THE ASSESSEE BECAUSE IT TRIED TO FILE REVISE RETURN. TH IS CLAIM WAS NOT ADMISSIBLE TO THE ASSESSEE. THUS, IT INDICATES THAT ASSESSEE H AS FURNISHED INACCURATE PARTICULARS. AS FAR AS THE OTHER TWO ADDITIONS ARE CONCERNED, HE RELIED UPON THE ORDER OF THE LEARNED CIT(APPEALS). 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORD CAREFULLY. THE CASE OF THE ASSESSEE IS THAT IT IS FOLLOWING A PARTICULARS ACCOUNTING POLICY WHERE 50% OF THE REVENUE EXPENSES INCURRED ON FOUR ACTIVITIES, NAMELY, ESTABLISHMENT, RECRUITMENT & TR AINING AND ADVERTISING AND SALES PROMOTION WHICH COPPED IN A COMMON ACCOUNT NA MED AS DEFERRED REVENUE ACCOUNT. THE TOTAL EXPENSES WERE NOT CLAIM ED IN THE YEAR OF INCURRENCE BUT ONLY 10% WAS CLAIMED EVERY YEAR. IN THIS YEAR, THE TOTAL EXPENSES INCURRED BY THE ASSESSEE UNDER THESE HEADS WERE RS.3,10,57,134. 50% OUT OF THIS APPEARS TO HAVE BEEN CLAIMED. THE 5 0% WAS TAKEN TO THE DEFERRED REVENUE ACCOUNT. IN OUR OPINION, THE ASSES SEE HAS DISCLOSED ALL NECESSARY DETAILS. IT IS THE DIFFERENCE OF OPINION BETWEEN THE ASSESSEE AS WELL 7 AS THE ASSESSING OFFICER. THIS 50% OF THE TOTAL EXP ENSES WHICH WAS TAKEN TO THE DEFERRED REVENUE ACCOUNT CAN EASILY TAKE CARE O F THE TOTAL EXPENSES I.E. RS.40,74,650 CLAIMED BY THE ASSESSEE OUT OF THE ALL EGED DEFERRED ACCOUNT. ASSESSING OFFICER DID NOT BOTHER TO EXAMINE THE CON TROVERSY WITH THIS ANGLE. THE ASSESSEE HAS DISCLOSED ALL THE DETAILS IN RESPE CT OF EXPENSES. THOSE HAVE NOT BEEN DOUBTED. THE EXPLANATION OFFERED BY THE AS SESSEE FOR EXPLAINING ITS POSITION IN THE PENALTY PROCEEDINGS IS A PLAUSIBLE ONE AND THERE IS NO LACK OF BONA FIDE. AS FAR AS THE OTHER TWO AMOUNTS ARE CONC ERNED, AFTER THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF PM ELECTRONICS (SUPRA), THE ADDITIONS IN RESPECT OF THE DISALLOWANCE OF PF AND ESI CONTRIBUTIONS COULD HAVE NOT BEEN SUSTAINABLE. THEREFORE, PENALTY AT LEAST CANNOT BE IMPOSED ON THESE AMOUNTS. AS FAR AS THE LOSS CLAIME D BY THE ASSESSEE ON SALE OF ASSETS IS CONCERNED, THE ASSESSEE HAS DISCLOSED ALL THE NECESSARY FACTS WHICH WERE NOT FOUND TO BE FALSE BY THE ASSESSING O FFICER. IN THE CASE OF RELIANCE PETRO PRODUCTS (SUPRA), HON'BLE SUPREME CO URT HAS OBSERVED THAT A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDI NG THE INCOME OF THE ASSESSEE. IN THAT CASE, THE DETAILS SUBMITTED BY TH E ASSESSEE WERE NOT FOUND TO BE ERRONEOUS, INCORRECT OR FALSE. SIMILARLY, IN THE PRESENT CASE, THE DETAILS 8 SUBMITTED BY THE ASSESSEE WERE NOT FOUND TO BE INCO RRECT OR FALSE. IN THE OPINION OF THE ASSESSING OFFICER, THE ALLEGED DEFER RED REVENUE EXPENSES WERE NOT ALLOWABLE TO THE ASSESSEE IN THE MANNER AS SESSEE HAS CLAIMED. TAKING INTO CONSIDERATION ALL THE FACTS AND CIRCUMS TANCES, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON 13.08.2010 ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13/08/2010 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR