Cummins India Limited, Pune V. Deputy Commissioner of Income-tax, Circle - 1(1), Pune

ITA 160/PUN/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 5012 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 05-12-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 17-01-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T VIJAYA BHASKAR REDDY
• Assessee Lawyers: GOPAL AGARWAL
• Keywords: Depreciation; Transfer pricing; International transaction; Additional depreciation; Question of law; Initiation of penalty proceedings; Revenue expenditure; Rule 8D
• Section: 271(1)(c); 143(3); 14A; 32(1)(iia); 201; 274; 13; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, PUNE BEFORE SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, J UDICIAL MEMBER . / ITA NO . 160 /PUN/201 8 / ASSESSMENT YEAR : 20 1 3 - 14 CUMMINS INDIA LIMITED, CUMMINS INDIA OFFICE CAMPUS, TOWER A, 5 TH FLOOR, SR. NO. 21, BALEWADI, PUNE 411045 PAN : AAACC7258B ....... / APPELLANT / V/S. D EPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1 (1), PUNE / RESPONDENT ASSESSEE BY : S /S HRI KETAN VED & GOPAL AGARWAL REVENUE BY : SHRI T. VIJAYA BHASKAR REDDY / DATE OF HEARING : 2 9 - 01 - 2020 / DATE OF PRONOUNCEMENT : 19 - 02 - 20 20 / ORDER PER S.S. VISWANETHRA RAVI, JM : TH IS APPEAL BY THE ASSESSEE AGAINST THE FINAL ASSESSMENT ORDER DATED 15 - 11 - 2017 PASSED BY THE AO (DCIT, CIRCLE - 1 (1), PUNE) U/S. 143(3) R.W.S. 144C(13) OF THE ACT FOR ASSESSMENT YEAR 201 3 - 14 . 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A 51% SUBSIDIARY OF CUMMINS INC. USA. THE ASSESSEE COMPANY IS STATED TO BE LARGEST 2 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 INDEPENDENT DIESEL ENGINE DESIGNER AND MANUFACTURER ABOVE 200 HP. THE ASSESSEE COMPANY WAS SET UP IN 1962 AND IS A LEADING MANUFACTURER OF DIESEL ENGI NES WITH A RANGE FROM 65 HP TO 3500 HP AND VALUE PACKAGES SERVING THE POWER GENERATION, INDUSTRIAL AND AUTOMOTIVE MARKETS. IT ALSO CATERS TO THE GROWING MARKET FOR GAS AND DUAL FUEL ENGINES. 3. GROUND NO. 1 IS GENERAL IN NATURE, HENCE, REQUIRES NO A DJUDICATION. 4. GROUND NO. 2 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO IN REJECTING OF THE AGGREGATION OF TRANSACTIONS APPROACH ADOPTED BY THE ASSESSEE FOR BENCHMARKING ITS MANUFACTURING ACTIVITIES. 5. HEARD BOTH PARTIES AND PERUSED THE MAT ERIAL AVAILABLE ON RECORD. AS REGARDS TO THE AGGREGATION OF TRANSACTIONS , WE NOTE THAT TNMM PRE SCRIBES COMPARABILITY AND BENCHMARKING OF AN INDIVIDUAL TRANSACTION OR A GROUP OR CLASS OF TRANSACTIONS WHICH ARE SIMILAR IN ITS NATURE AND SCOPE. THE ASSESSEE H AS EMPLOYED THIS METHOD WHERE AS MANY AS 14 INTERNATIONAL TRANSACTIONS THAT ARE , EXPORT OF MANUFACTURED IC ENGINES AND COMPONENTS, IMPORT OF ENGINE PARTS AND COMPONENTS OF IC ENGINES FOR MANUFACTURING, ROYALTY PAID/PAYABLE FOR USE OF TECHNOLOGY, PAYMENT FOR MARKET SUPPORT SERVICES, PAYMENT OF WARRANTY CHARGES, PAYMENT OF DEVELOPMENT AND TESTING SERVICES, PAYMENT OF TRAINING CHARGES, PAYMENT FOR MISCELLANEOUS SERVICES, PAYMENT OF TESTING CHARGES, PAYMENT FOR CERTIFICATION SERVICES, RENDERING MISCELLANEOUS SERVICES, RENDERING OF INTERNAL AUDIT SERVICES, RENDERING OF CERTIFICATION SERVICES, PAYMENT FOR MANAGEMENT SERVICES AND RENDERING OF TESTING SERVICES HAVE BEEN GROUPED AND TAKEN BY THE ASSESSEE ARE SIMILAR IN ITS NATURE AND AGGREGATED UNDER MANUFACTURING ACTIVITY. ACCORDING TO THE TPO , EACH TRANSACTION HAS TO BE BENCHMARKED WITHOUT THE 3 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 SEGMENTATION IS AVAILABLE/POSSIBLE WITH MAJORITY OF THE COSTS DRAWN ON THE ACTUAL FIGURES FROM THE COST CENTRES. THEREBY, REJECTED AGGREGATION APPROACH ADOPTED BY THE ASSESSEE AND PROCEEDED TO DETERMINE ALP ON TRANSACTION WISE. IT WAS SUBMITTED BEFORE TH E DRP BY THE ASSESSEE THAT THIS ISSUE COVERED IN ITS FAVOUR OF ASSESSEE BY AN ORDER OF ITAT, PUNE BENCHES FOR A.YS. 2005 - 06 AND 2006 - 07 WHICH UPH ELD THE AGGREGATION APPROACH , BUT HOWEVER THE DRP TAK ING INTO CONSIDERATION , THE APPEAL IS PENDING BEFORE THE H ONBLE HIGH COURT OF BOMBAY , CONFIRMED THE VIEW OF AO/TPO IN THIS REGARD. WE FIND THAT AS RIGHTLY POINTED BY THE LD. AR THE SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL LATEST BY IN A.Y. 2011 - 12 WHEREIN THE TRIBUNAL PLACING RELIANCE IN EARLIER ORDERS PA SSED IN ASSESSEES OWN CASE UPH ELD THE AGGREGATION APPROACH ADOPTED BY THE ASSESSEE TO BENCHMARK INTERNATIONAL TRANSACTIONS IN MANUFACTURING ACTIVITY. THE RELEVANT PORTION AT PARA 15 IN CONSOLIDATED ORDER DATED 25 - 09 - 2018 IS REPRODUCED HERE - IN - BELOW : 15 . WE FIND THAT SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS AND THE TRIBUNAL IN ASSESSMENT YEAR 2009 - 10 VIDE PARAS 8 TO 10 HAS DECIDED THE SAID ISSUE IN FAVOUR OF ASSESSEE HOLDING THAT VARIOUS ACTIVITIES UNDERTAKEN BY THE ASSESSEE ARE TO BE AGGREGATED FOR DETERMINING ARM'S LENGTH PRICE OF INTERNATIONAL TRANSACTIONS. WE ARE MAKING REFERENCE TO THE FINDINGS OF TRIBUNAL IN PARAS 8 TO 10 VIDE ORDER DATED 15.05.2018. HOWEVER, THE SAME IS NOT BEING REPRODUCED FOR THE SAKE OF BRE VITY. THE GROUND OF APPEAL NO.1.2 RAISED BY THE ASSESSEE IS THUS, ALLOWED. 6. WE FIND THE ISSUE RAISED IN GROUND NO. 2 IS SIMILAR TO ISSUE RAISED IN A.Y. 2011 - 12 BASING ON SAME IDENTICAL FACTS AND NO CONTRARY ORDER PLACED ON RECORD AGAINST ORDER OF ITAT, THUS, IN VIEW OF THE SAME, GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED. 7 . GROUND NOS. 3.1 AND 3.2 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/TPO IN COMPARING SEGMENTAL PROFITABILITY OF THE ASSESSEE BETWEEN EXPORT OF AES SEGMENT AND DOMESTIC SALES SEGMENT IGNORING 4 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 PRODUCT DIFFERENCE, DIFFERENCES IN MARKETS AS WELL AS D IFFERENCE IN THE FUNCTIONS, ASSETS AND RISKS. 8. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE WHEREIN THE TRIBUNAL HELD THAT TNMM IS TO BE APPLIED AND THE MARGINS OF ASSESSEE ARE TO BE COMPARED WITH AVERAGE MARGINS OF EXTERNAL COMPARABLE COMPANIES. FOR READY REFERENCE THE RELEVANT PORTION AT PARA 10 IS REPRODUCED HERE - IN - BELOW : 16. THE NEXT ISSUE RAISED VIDE GROUNDS OF APPEAL NO.2.1, 3.1 AND 3.2 IS AGAINST MOST APPROPRIATE METHOD TO BE APPLIED AND WHETHER INTERNAL COMPARABILITY WAS TO BE MADE I.E. PROFITABILITY OF EXPORT TO ASSOCIATED ENTERPRISES WAS TO BE COMPARED WITH DOMESTIC SALES MADE BY THE ASSESSEE. THE SAID ISSUE HAS BEEN ADJUDICAT ED BY THE TRIBUNAL IN EARLIER YEARS AND IT HAS BEEN HELD THAT TNMM METHOD HAS TO BE APPLIED AND THE MARGINS OF ASSESSEE ARE TO BE COMPARED WITH AVERAGE MARGINS OF EXTERNAL COMPARABLE COMPANIES. THE RELEVANT FINDINGS OF TRIBUNAL VIDE ORDER DATED 15.05.2018 ARE IN PARAS 11 AND 12 AND FOLLOWING THE SAME PARITY OF REASONING, WE ALLOW THE ISSUE IN FAVOUR OF ASSESSEE. HOWEVER, THE ISSUE RAISED VIDE GROUNDS OF APPEAL NO.3.3 TO 3.5 ON WITHOUT PREJUDICE BASIS, IN VIEW OF OUR ALLOWING THE ISSUE IN FAVOUR OF ASSESSEE, WOULD BECOME ACADEMIC IN NATURE AND THE SAME ARE THUS, DISMISSED. 9. IN VIEW OF THE ORDER OF ITAT IN ASSESSEES OWN CASE ABOVE, GROUND NOS. 3.1 AND 3.2 RAISED BY THE ASSESSEE ARE ALLOWED AND GROUND NO. 3.3 BECOMES ACADEMIC. 10. IN RESPECT OF GROUND NO. 4.1, WE FIND THAT, IN VIEW OF OUR DECISION IN GROUND NOS. 3.1 AND 3.2, THE GROUND NO. 4.1 RAISED BY THE ASSESSEE BECOME ACADEMIC, REQUIRING NO ADJUDICATION. 11. GROUND NO. 5.1 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/TPO IN EXCLUDING EXP ORT INCENTIVE WHILE COMPUTING THE OPERATING MARGIN OF THE ASSESSEE IN EXPORT TO AES SEGMENT. 12. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL IN ASSESSEES OWN CASE FOR 5 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 A.Y. 2011 - 12 WHE REIN IT HAS BEEN HELD THAT EXPORT INCENTIVE IS TO BE INCLUDED AS PART OF OPERATING INCOME WHILE DETERMINING OPERATING MARGIN OF ASSESSEE. THE RELEVANT PORTION OF PARA 21 IS REPRODUCED HERE - IN - BELOW : 21. WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. WELSPUN ZUCCHI TEXTILES LTD. (SUPRA) AND IT HAS BEEN LAID DOWN THAT DEPB BENEFIT ARISING TO THE ASSESSEE THEREIN WAS OPERATING REVENUE INCLUDABLE IN ARRIVING AT OPERATING PROFIT. THE SAID PROPOSITION OF JURISDICTIONAL HIGH COURT HAS BEEN APPLIED BY THE PUNE BENCH OF TRIBUNAL IN CARRARO INDIA PVT. LTD. VS. ACIT (SUPRA) AND IT HAS BEEN HELD THAT EXPORT INCENTIVES AND SCRAP SALES ARE TO BE INCLUDED AS OPERATING INCOME. ACCORDINGLY, WE HOLD THAT EXPORT INCENTIVES ARE TO BE CONSIDERED AS OPERATING INCOME OF ASSESSEE, WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS OF ASSESSEE. THE GROUND OF APPEAL NO.4.1 RAISED BY ASSESSEE IS THUS, ALLOWED. 13. IN VIEW OF THE ABOVE, WE HOLD THAT EXPORT INCENTIVES ARE TO BE CONSIDERED AS OPERATING INCOME OF ASSESSEE, WHILE BENCHMARKING INTERNATIONAL TRANSACTIONS OF ASSESSEE , GROUND NO. 5.1 RAISED BY THE ASSESSEE IS ALLOWED. 14. GROUND NO. 6.1 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/TPO IN CONSIDERING PLI AS OPERATING PROFIT TO TOTAL COST AS AGAINST OPERATING PROFIT TO SALES , WITHOUT PROVING COGENT REASONS. 15. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE IDENTICAL ISSUE HAD COME UP BEFORE THIS TRIBUNAL FOR A.Y. 2011 - 12 WHEREIN THE CO - ORDINATE BENCH CONSIDERING THE EARLIER ORDERS OF TRIBUNAL IN ASSESSEES OWN CASE HELD THE PLI OF NET PROFIT TO SALES IS TO BE ACCEPTED. THE RELEVANT PORTION OF PARA 23 IS REPRODUCED HERE - IN - BELOW : 23. WE FIND THAT THIS ISSUE ALSO STANDS COVERED IN FAVOUR OF ASSESSEE BY THE ORDERS OF TRIBUNAL IN ASSESSEES OWN CASE IN EARLIER YEARS AND THE RELEVANT FINDINGS ARE IN PARAS 13 AND 14 OF THE ORDER DATED 15.05.2018, WHICH ARE BEING REFERRED TO BUT NOT BEING REPRODUCED FOR THE SAKE OF BREVITY. HENCE, THE GROUND OF APPEAL NO.5.1 RAISED BY ASSESSEE IS ALLOWED. 1 6 . IN VIEW OF THE ABOVE, WE DIRECT THE AO TO FOLLOW THE DIRECTION OF ITAT IN A.Y. 2011 - 12 IN ASSESSEES OWN CASE IN DECIDING THE ISSUE RAISED IN GROUND NO. 6.1 , THUS, GROUND NO. 6.1 RAISED BY TH E ASSESSEE IS ALLOWED. 6 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 1 7 . GROUND NO. 7.1 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/TPO IN NOT GRANTING THE BENEFIT OF 3 PERCENT AS PER PROVISO TO SECTION 92C(2) OF THE ACT. 1 8 . HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECO RD. SIMILAR ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL IN A.Y. 2011 - 12 IN ASSESSEES OWN CASE WHEREIN THE TRIBUNAL ACCEPTED THE CONTENTION OF ASSESSEE IN GRANTING BENEFIT OF VA RIATION NOT EXCEEDING THE TOLERANCE MARGIN. THE RELEVANT PORTION OF PARA 24 IS RE PRODUCED HERE - IN - BELOW : 24. THE NEXT ISSUE VIDE GROUND OF APPEAL NO.6.1 IS AGAINST THE BENEFIT OF VARIATION / REDUCTION OF 5% FROM THE ARITHMETIC MEAN. THE SAID ISSUE HAS ALSO BEEN DECIDED BY THE TRIBUNAL IN ASSESSMENT YEARS 2007 - 08, 2008 - 09 AND 2009 - 10. ACCORDINGLY, WE HOLD THAT THE BENEFIT OF RANGE OF +/ - 5% IS AVAILABLE IF THE VARIATION DOES NOT EXCEED THE SAID TOLERANCE MARGIN. THE GROUND OF APPEAL NO.6.1 IS THUS, ALLOWED. 19 . IN VIEW OF THE ABOVE, WE DIRECT THE AO/TPO TO GIVE BENEFIT OF RANGE OF 5% IF THE VARIATION DOES NOT EXCEED THE SAID TOLERANCE MARGIN, THUS, GROUND NO. 7.1 RAISED BY THE ASSESSEE IS ALLOWED. 2 0 . GROUND NOS. 8.1 TO 8.4 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/TPO IN RESPECT OF ADDITION ON ACCOUNT OF MANAGEMEN T FEE. 2 1 . HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR SUBMITTED THAT THE ADVANCE PRICING AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE CENTRAL BOARD OF DIRECT TAXES (CBDT) IN A.Y. 2014 - 15. HE SUBMITS THAT IT SUPP LIES GUIDELINES TO THE PREVIOUS YEAR. I.E. A.Y. 2013 - 13 AND PRAYED TO REMAND THE MATTER TO THE FILE OF AO/TPO TO EXAMINE THE SAME ON THE ISSUE OF APPLICABILITY OF ADVANCE PRICING AGREEMENT INVOLVING THE MANAGEMENT SERVICE FEE. THE LD. AR ALSO PLACED ON RE CORD OF ORDER OF THIS TRIBUNAL IN THE CASE OF M/S. HONEWELL AUTOMATION INDIA LIMITED VS. ACIT IN ITA NO. 359/PUN/2013 FOR A.Y. 2008 - 09, DATED 7 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 02 - 11 - 2018 , WHEREIN , ON PERUSAL OF THE SAME , WE NOTE THAT A.Y. IN THAT APPEAL WAS 2008 - 09 AND ADVANCE PRICING AGRE EMENT WAS ENTERED ON 30 - 03 - 2017 , CONSIDERING THE SAME , THE TRIBUNAL DIRECTED THE AO TO EXAMINE THE FACTS CLOSELY AND CONCLUDE THE ISSUE OF APPLICABILITY OF ADVANCE PRICING AGREEMENT TO THE YEAR UNDER CONSIDERATION IN PRINCIPLE. FOR READY REFERENCE THE RE LEVANT PORTION IS REPRODUCED HERE - IN - BELOW : 4. REGARDING THE TP ISSUES, I.E. GROUND NOS. 14 TO 17, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUES RAISED IN THESE GROUNDS ARE IDENTICAL BOTH ON FACTS AND ON LAW TO THAT OF THE ISSUES SETTLED VIDE TH E ADVANCED PRICING AGREEMENTS (APA) MADE U/S.92CC OF THE I.T. ACT, 1961. BRINGING OUR ATTENTION TO THE ADVANCED PRICING AGREEMENT, LD. COUNSEL SUBMITTED THAT IT WAS AGREED UPON BETWEEN THE ASSESSEE AND THE CBDT VIDE AGREEMENT DATED 30 - 03 - 2017 ON THE AP OF THE INTRA - GROUP MANAGERIAL & ADMINISTRATIVE SERVICES AND THE SAME IS RELEVANT FOR THE A.YRS. 2015 - 16 TO 2019 - 20. 5. REFERRING TO THE ISSUES IN THE PRESENT ASSESSMENT YEAR UNDER CONSIDERATION, I.E. A.Y. 2008 - 09, LD. COUNSEL FAIRLY SUBMITTED THAT THIS YEAR IS NOT ACTUALLY COVERED BY THE SAID AGREEMENT. HOWEVER, HE BROUGHT OUR ATTENTION TO VARIOUS DECISIONS AS WELL AS T HE FACTS RELEVANT TO THE YEAR UNDER CONSIDERATION AND SUBMITTED THAT THE ISSUE STANDS COVERED BY THE SAID ADVANCED PRICING AGREEMENT FOR THIS YEAR ALSO. IN THIS REGARD, HE FILED THE FOLLOWING WRITTEN SUBMISSIONS : ON MARCH 2017, THE APPELLANT HAS ENTERE D INTO A UNILATERAL APA WITH CBDT FOR THE TRANSACTION OF AVAILING OF CENTRALIZED MANAGEMENT, ADMINISTRATIVE AND OTHER SERVICES FROM HONEYWELL INTERNATIONAL INC., USA (H11) (TRANSACTION I). THE AGREEMENT IS VALID FROM A.Y. 2011 - 12 TO A.Y. 2014 - 15 (ROLLBACK PERIOD) AND AY.2015 - 16 TO 2019 - 20 (APA PERIOD). THOUGH, A.Y. 2008 - 09 IS NOT COVERED UNDER THE APA, THE APPELLANT WISHES TO SUBMIT THAT THE FACTS OF THE SAID TRANSACTION ARE SIMILAR TO THE FACTS AS COVERED IN THE APA YEAR. UNDER THE APA, TRANSACTIONAL NET MARGIN METHOD (TNMM) WAS SELECTED THE MOST APPROPRIATE METHOD AND THE AE; I.E. H11 AS TESTED PARTY. 5.1 FURTHER, BRINGING OUR ATTENTION TO THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF ABICOR BINZEL P RODUCTION (INDIA) PVT. LTD. VS. DY.CIT IN ITA NOS.2253 TO 2255/PUN/2014 AND ITA NO.139/PUN/2014, LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THIS CASE THE APA IS FOUND APPLICABLE TO THE EARLIER ASSESSMENT YEARS IN THOSE CASES, AS THE CASE MAY BE, WHEN T HE FACTS OF THE A.Y. 2008 - 09 ARE SIMILAR TO THAT OF THE ASSESSMENT YEAR COVERED IN THE APA. FOR THE SAKE OF CONVENIENCE, THE SAME ARE EXTRACTED HERE AS UNDER : 1. IN THE CASE OF ABICOR BINZEL PRODUCTION (INDIA) PVT. LTD. VS. DY.CIT (ITA NOS. 2253 TO 2255 /PUN/2014 IN THE LIGHT OF FACT THAT ASSESSEE HAS ENTERED INTO APA, THE COORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSMENT YEAR 2009 - 10 HAS DIRECTED ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF APA AS NATURE OF TRA NSACTIONS ARE SIMILAR. .. IF THEY ARE OF SIMILAR NATURE, THE SAME CAN BE DECIDED AFRESH IN LINE WITH THE TERMS AND CONDITIONS OF APA. THE APPEALS OF THE ASSESSEE ARE THUS, ALLOWED FOR STATISTICAL PURPOSE WITH AFORESAID DIRECTIONS. 2. IN THE CASE OF AB ICOR BINZEL PRODUCTION (INDIA) PVT. LTD. VS. DY.CIT (ITA NO.139/PN/2014) 8 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 THE ASSESSEE HAS MADE A REQUEST SINCE IT HAD ENTERED INTO ADVANCE PRICING AGREEMENT (APA) WITH CBDT COVERING NINE YEARS FROM AY 2010 - 11 TO AY 2013 - 14 UNDER ROLLBACK PROVISIONS AND FROM AY 2014 - 15 TO 2018 - 19 BEING THE BALANCE APA PERIOD, SIMILAR PROPOSITION SHOULD BE APPLIED TO THE YEAR UNDER CONSIDERATION ALSO AS THE INTERNATIONAL TRANSACTIONS ENTERED INTO BY THE ASSESSEE WITH ITS AES IN THE INSTANT ASSESSMENT YEAR ARE IDENTICAL TO THE INTERNATIONAL TRANSACTIONS WHICH WERE PART OF THE APA PROCEEDINGS. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE THUS, ALLOWED. 3. IN THE CASE OF RANBAXY LABORATORIES LTD. VS. ACIT (ITA NO.196/DEL/2013) IT IS CLEAR THAT IF THE INTERNATIONAL T RANSACTIONS ARE SAME IN THE YEAR OF APA AND THE YEAR FOR WHICH ROLLBACK IS APPLIED, ROLL BACK IS ALLOWED TO THE ASSESSEE ON CERTAIN NORMAL CONDITION OF FILING RETURN OF INCOME, REPORT OF ACCOUNTANT AND A REQUEST IN SPECIFIED FORMAT. OFFCOURSE, IT HAS ALSO NORMAL REVENUE SAFEGUARDING EXCLUSION CLAUSES OF INCOME GOING BELOW THE RETURNED INCOME AND WHERE ITAT HAS PASSED AN ORDER ON THE SUBJECT. THEREFORE EVEN THE RULES PROVIDE THAT IF THE INTERNATIONAL TRANSACTIONS ARE SAME IN THE YEAR OF APA AND IN THE PAST Y EAR THAN BOTH THE PARTIES, ASSESSEE AND CBDT MAY AGREE FOR APPLYING THE AGREEMENTS CONTAINED IN APA AGREED. NEEDLESS TO SAY THAT LD.TPO/AO SHALL GIVE DUE WEIGHTAGE TO THE ADVANCE PRICING AGREEMENT SIGNED BY THE ASSESSEE WITH CBDT ON OTHER ISSUES ALSO (OTHER THAN THE ISSUE OF SELECTION OF TESTED PARTY) FOR DETERMINATION OF ALP AND IN CASE OF ANY DIVERGENT VIEW, THE ASSESSEE SHALL BE GRANTED AN ADEQUATE OPPORTUNITY TO SUBSTANTIATE ANY CLAIM/ARGUMENTS ON THE MANNER OF DETERMINATION OF ALP. 4. IN THE CASE OF RBS INDIA DEVELOPMENT CENTRE PVT. LTD. VS. ACIT (ITA NO.5538/DEL/2010), THE TPO DID NOT TAKE INTO CONSIDERATION OTHER INCOME WHICH WAS IN THE NATURE OF OPERATING INCOME. THE AR PLACED THE APA BEFORE THE HONBLE BENCH AND POINTED OUT THAT THE OTHER INCOME WAS PART OF OPERATING INCOME AS PER THE TERMS OF THE AGREEMENT. THE ISSUE WAS RESTORED BACK TO THE FILE OF THE LD. AO/TPO FOR VERIFICATION OF THE ASSESSEES CLAIM. 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE MATTER SHOULD B E REMANDED TO THE FILE OF AO/TPO, AS THE CASE MAY BE, FOR THE PURPOSE OF COMPARING THE FACTS OF THE CASE AND THE RELEVANT TERMS OF AGREEMENT BETWEEN THE CBDT AND THE ASSESSEE. AO IS DIRECTED TO EXAMINE THE FACTS CLOSELY AND CONCLUDE THE ASSESSEE ON THE ISS UE OF APPLICABILITY OF APA TO THE ASSESSEES CASE FOR THE YEAR UNDER CONSIDERATION IN PRINCIPLE. AO IS ALSO DIRECTED TO CONSIDER THE ABOVE CITED DECISIONS OF PUNE BENCH OF THE TRIBUNAL AS WELL AS DELHI BENCH OF THE TRIBUNAL FOR THE LEGAL PROPOSITION OF DEC IDING THE ISSUE IN THE LIGHT OF APAS. ACCORDINGLY, THE GROUNDS NOS. 14 TO 17 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 2 2 . IN VIEW OF THE ABOVE, THE ISSUE RAISED IN GROUND NOS. 8.1 TO 8.4 WE DEEM IT PROPER TO REMAND THE ISSUE TO THE FILE OF AO/TPO TO CONSIDER THE ISSUE AFRESH IN TERMS OF ADVANCE PRICING AGREEMENT. GROUND NOS. 8.1 TO 8.4 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 2 3 . GROUND NOS. 9.1 TO 9.5 RAISED BY THE ASSESSEE QUESTIONING THE ACTION OF AO /TPO ON DISALLOWANCE OF EXPENSES U/S. 14A OF THE ACT. 9 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 2 4 . HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUE HAD COME UP BEFORE THIS TRIBUNAL FOR A.Y. 2012 - 13 WHEREIN THE TRIBUNAL PLACED RELIANCE IN THE ORDER OF A.Y. 2010 - 11 ALONG WITH THE DETAILS PLACED THEREIN IN PAGE 385 OF THE PAPER BOOK HELD THE SAME REASONS SHALL APPLY TO THE YEAR UNDER CONSIDERATION THEREIN. THE RELEVANT PORTION OF PARAS 4 TO 7 ARE REPRODUCED HERE - IN - BELOW : 4. GROUND NO.6 PERTAINS TO THE DISALLOWANC E OF EXPENSES U/S.14A OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT ). 5. THE ASSESSING OFFICER DEALT WITH THIS ISSUE AT PAGE - 5 IN PARA 5 ONWARDS IN HIS ORDER AND HAS GIVEN FINDINGS AT PARA 5.4.1 ONWARDS AS PER THE DETAILED REASONS AS APPEARING IN THE ORDER OF THE ASSESSING OFFICER WHICH IS ON RECORD, THE ASSESSING OFFICER MADE DISALLOWANCE UNDER RULE 8D @0.5% OF AVERAGE VALUE OF INVESTMENTS AS PER THE PROVISIONS OF RULE 8D(2)(III) WHICH WORKS OUT TO RS.84,79,657/ - AS PER ANNEXURE - 1. TH E ASSESSEE HAS ALREADY DISALLOWED RS.33,52,000/ - AND THEREFORE, THE ASSESSING OFFICER DISALLOWED REMAINING AMOUNT OF RS.51,27,657/ - U/S.14A OF THE ACT AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE ( RS.33,52,000/ - + RS.51,27,657/ - ) = RS.84,79,657/ - . 6. AT THE TIME OF HEARING, THE LD. AR OF THE ASSESSEE INVITED OUR ATTENTION TO THE DECISION OF THE PUNE BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE IN ITA NO.556/PUN/2015 & ITA NO.574/PUN/2015 FOR THE ASSESSMENT YEAR 2010 - 11 AND ITA NO.834/PUN/2016 & ITA NO.821/PUN/2016 FOR THE ASSESSMENT YEAR 2011 - 12 DECIDED ON 25.09.2018 WHEREIN AT PARA 44 OF THE SAID ORDER, THE TRIBUNAL HAS GIVEN ITS FINDINGS ON THE ISSUE OF DISALLOWANCE OF EXPENSES U/S.14A OF THE ACT WHICH IS AS FOLLOWS: 44. THE ISSUE RAISED IN GROU NDS OF APPEAL NO.8.1 AND 8.2 IS AGAINST DISALLOWANCE OF EXPENSES UNDER SECTION 14A OF THE ACT. THE ASSESSEE IN ASSESSMENT YEAR 2010 - 11 HAS RAISED SIMILAR ISSUE VIDE GROUND OF APPEAL NO.7.1. THE LEARNED AUTHORIZED REPREHENSIVE FOR THE ASSESSEE POINTED OUT T HAT DETAILS ARE PLACED AT PAGE 385 OF PAPER BOOK AND DISALLOWANCE IN THE YEAR WOULD WORK OUT TO RS.49,16,894/ - . APPLYING THE SAME AS IN GROUND OF APPEAL NO.7.1 IN ASSESSMENT YEAR 2010 - 11, WE DISALLOW RS.49,16,894/ - UNDER SECTION 14A OF THE ACT. 7. WE HAVE PERUSED THE CASE RECORDS AND GIVEN CONSIDERABLE THOUGHT TO THE JUDICIAL PRONOUNCEMENT PLACED BEFORE US. WE FIND THAT WHILE ADJUDICATING THIS ISSUE, THE TRIBUNAL HAS PLACED RELIANCE ON THE DECISION IN ASSESSEE S OWN CASES IN ITA NO.2417/PUN/2012 FOR TH E ASSESSMENT YEAR 2008 - 09 & IN ITA NO.309/PUN/2014 FOR THE ASSESSMENT YEAR 2009 - 10. THE SAME PARITY OF REASONING TO BE APPLIED AND WE REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE THE ISSUE IN LINES OF THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2011 - 12. THUS, GROUND NO.6 RAISED IN APPEAL BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 2 5 . IN VIEW OF THE ABOVE, WE REMAND THE ISSUE RAISED IN GROUND NOS. 9.1 TO 9.5 TO THE FILE OF AO/TPO TO DECIDE T HIS ISSUE IN TERMS OF FINDING OF THIS TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2012 - 13. ACCORDINGLY, GROUND NOS. 9.1 TO 9.5 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. 10 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 2 6 . GROUND NOS. 10.1 TO 10.4 RAISED BY THE ASSESSEE CHALLENGING THE A CTION OF AO/TPO IN DISALLOWANCE OF DEDUCTION U/S. 35(2AB) OF THE ACT. 27. THE FACTS RELATING TO THE ISSUE ON HAND IS THAT THE ASSESSEE HAS CLAIMED WEIGHTED DEDUCTION OF RS.94.14 CRORES U/S. 35(2AB) OF THE ACT IN RESPECT OF ITS IN - HOUSE R & D FACILITY AS APPROVED BY THE DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RESEARCH (DSIR). THE AO ASKED THE ASSESSEE TO FILE THE DETAILS OF EXPENDITURE INCURRED AND THE APPROVAL GIVEN BY THE DSIR. ON PERUSAL OF THE SUBMISSIONS THE AO OBSERVED THAT THE DSIR HA S NOT APPROVED EXPENDITURE OF RS.12.87 CRORES OUT OF THE TOTAL EXPENDITURE OF RS.47.07 CRORES. THE ASSESSEE WAS ASKED TO EXPLAIN WHY PROPORTIONATE DEDUCTION U/S. 35(2AB) OF THE ACT SHOULD NOT BE DISALLOWED TO THE EXTENT OF THE AMOUNT DISALLOWED BY THE DSI R. THE ASSESSEE CONTENDED BEFORE THE AO THAT THE DSIR HAS APPARENTLY MADE SOME MISTAKE IN APPROVING THE EXPENDITURE AS ABOVE SINCE THEY HAVE NOT FURNISHED THE REASONS FOR SUCH REJECTION AND REQUESTED TO FURNISH THE DETAILS OF SUCH REJECTION AND ALSO TO FU RNISH THE REASONS FOR DOING SO. HOWEVER THEY HAVE REFUSED TO PROVIDE THE DETAILS OF SUCH REJECTION TO OUR COMPANY STATING THAT THEY ARE NOT PERMITTED TO SHARE SUCH DETAILS WITH THE COMPANIES. IT IS SUBMITTED THAT IT IS AGAINST THE PRINCIPLES OF NATURAL JU STICE TO DENY THE ASSESSEE THE DETAILS OF EXPENSES BEING DISALLOWED IN ITS CASE AND TO DENY AN OPPORTUNITY TO THE ASSESSEE TO JUSTIFY SUCH EXPENDITURE. IN THESE CIRCUMSTANCES, THE ASSESSEE CANNOT APPROACH THE DSIR SINCE THE DSIR DOES NOT PROVIDE THE DETAIL S OF EXPENSES NOT CONSIDERED ELIGIBLE OR PERTAINING TO R & D. FURTHER SUCH DETAILS OF EXPENSES REJECTED ARC ALSO NOT MADE AVAILABLE BY THE ASSESSING OFFICER. WE NOTE THAT THE ASSESSEE SUBMITTED THAT IF AO DECIDES TO DISALLOW THE ABOVE WEIGHTED DEDUCTION R ELYING ON THE APPROVAL BY DSIR, MADE A REQUEST TO ALLOW THE BASIC EXPENDITURE AS REVENUE EXPENDITURE NOTING THAT 11 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 SUCH EXPENDITURE IS ON REVENUE ACCOUNT AND INCURRED FOR BUSINESS PURPOSES. THE APPROVAL OF DSIR IS RELATED TO WEIGHTED DEDUCTION U/S. 35(2AB) AND NON - GRANTING OF THE APPROVAL BY DSIR TO THE ABOVE EXPENSES OF RS.1287.33 LACS WOULD ONLY MEAN THAT EXPENSES TO THE EXTENT OF RS.1287.33 LACS INCURRED BY OUR COMPANY MAY NOT BE ELIGIBLE FOR WEIGHTED PORTION OF (I.E. ADDITIONAL) DEDUCTION OVER AND ABOVE THE AMOUNT INCURRED. THE CONTENTION OF THE ASSESSEE WAS CONSIDERED BY THE ASSESSING OFFICER AND HE WAS OF THE OPINION THAT THE DSIR GUIDELINES PROVIDE FOR SUBMISSION OF AUDITOR CERTIFICATE EVERY YEAR. THE DSIR SCRUTINIZES THE CLAIMS OF THE ASSESSEE AND EITHER ACCEPTS THE SAME IN FULL OR PARTIALLY. IN THE PRESENT CASE, THE DSIR HAS ACCEPTED THE CLAIM OF THE ASSESSEE COMPANY EXCEPT FOR RS.12.87 CRORES. DSIR, BEING THE APPROPRIATE AUTHORITY FOR THE PURPOSES OF SECTION 35(2AB) AS WELL AS SECTION 35(3) OF THE INCOME TAX ACT, 1961, IS AUTHORIZED TO ACCEPT OR REJECT THE CLAIMS OF THE ASSESSES. THE HYDERABAD BENCH OF THE HON'BLE ITAT IN THE CASE OF M/S. ELECTRONICS CORPORATION OF INDIA LTD. HAS CATEGORICALLY HELD THAT IS NOT FOR EITHER THE ASSESSING AUTHORITY OR THE APPELLATE AUTHORITY TO DECIDE ON THE EXPENDITURE WHICH WILL BE ENTITLED TO WEIGHTED DEDUCTION U/S. 35(2AB). IN FACT, U/S. 35(2AB) (3) IF ANY QUESTION ARISES U/S. 35 AS TO WHETHER AND IF SO, WHAT EXTENT ANY ACTIVITIES CONSTITUTES OR CONSTITUTED OR ANY A SSET WAS USED FOR SCIENTIFIC RESEARCH, THE MATTER SHOULD BE REFERRED TO THE APPROPRIATE AUTHORITY WHOSE DECISION WILL BE FINAL. IN THIS CASE THE APPROPRIATE AUTHORITY IS THE DSIR. THE DSIR HAS CERTIFIED THE QUANTUM OF ELIGIBLE R & D EXPENDITURE FOR THE PUR POSES OF WEIGHTED DEDUCTION U/S. 35 (2 AB), THE FIGURE CANNOT BE TAMPERED WITH BY ITAT. EVEN IF THE ASSESSEE IS RIGHT IN THAT, THERE IS A MISTAKE IN THE CERTIFICATE ISSUED BY THE DSIR, WHICH WE DON'T KNOW, THE SAME CAN ONLY BE RECTIFIED BY DSIR AND NOT THE I TAT IN APPELLATE PROCEEDINGS. WE NOTE THAT THE DETAILS OF ELECTRICITY EXPENSE AND LEGAL AND 12 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 PROFESSIONAL FEES RELATED TO R & D UNIT WAS CALLED FOR. IN RESPONSE, THE SAME WAS SUBMITTED BY THE ASSESSEE . PERUSAL OF DETAILS, THE AO OBSERVED THAT ELECTRICITY BI LLS AND LEGAL FEES DOES NOT SPECIFY THAT IT WAS INCURRED FOR R & D UNIT ONLY AND IT CANNOT BE HELD THAT THIS EXPENDITURE WAS SOLELY INCURRED FOR R & D UNIT ONLY. 28. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. SIMILAR ISSUE HAS BEEN DECIDED BY THIS TRIBUNAL IN A.Y. 2012 - 13 IN ASSESSEES OWN CASE. THE RELEVANT PORTION OF PARA 12 IS REPRODUCED HERE - IN - BELOW : 12. BOTH THE PARTIES HEREIN AGREED, THE FACTS AND CIRCUMSTANCES IN THIS YEAR ARE ABSOLUTELY SAME AS THAT FOR ASSESSMENT YEAR 20 11 - 12. THEREFORE, MAINTAINING THE PARITY OF REASONING SINCE RELIEF GRANTED TO THE ASSESSEE BY THE TRIBUNAL FOR ASSESSMENT YEAR 2011 - 12, FOLLOWING THE SAME, WE ALLOW THIS GROUND OF APPEAL OF THE ASSESSEE. THUS, GROUND NO.7 RAISED IN APPEAL BY THE ASSESSEE I S ALLOWED. 2 9 . WE FIND THE FACTS RELATING TO ISSUE ON HAND IS IDENTICAL TO ISSUE RAISED IN A.Y. 2012 - 13 AND THERE IS NO DISPUTE IN THIS REGARD. THE SAME ISSUE CAME UP BEFORE THE ITAT FOR A.Y. 2009 - 10 AND DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. AG AIN ITAT FOR A.Y. 2011 - 12 PLACED RELIANCE ON THE ORDER OF A.Y. 2009 - 10 AND HELD IN FAVOUR OF ASSESSEE WHICH IS AT PAGE 140 OF THE PAPER BOOK AT PARAS 33 AND 34. THUS, I N VIEW OF THE SAME, GROUND NOS. 10.1 TO 10.4 RAISED BY THE ASSESSEE ARE ALLOWED. 30. GROUND NOS. 11.1 TO 11.4 RAISED BY THE ASSESSEE CHALLENGING THE ACTION OF AO/TPO FOR DISALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION IN SUBSEQUENT YEAR. 31. THE BRIEF FACTS RELATING TO THE ISSUE ON HAND IS THAT DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, THE AO FOUND THE CLAIM OF ASSESSEE SEEKING ADDITIONAL DEPRECIATION ON OLD PLANT AND MACHINERY. ACCORDING TO HIM, THE 13 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 SAID PLANT AND MACHINERY WAS ADDED IN THE PREVIOUS YEAR AND REQUESTED THE ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF ADDITIONAL DEPRE CIATION ON PLANT AND MACHINERY WHICH WAS ADDED IN PREVIOUS YEAR IS ELIGIBLE FOR CLAIMING DEPRECIATION IN SUBSEQUENT YEAR. THE ASSESSEE REPLIED THAT THE ADDITIONAL DEPRECIATION FOR THE YEAR UNDER CONSIDERATION CLAIMED INCLUDES ADDITIONAL DEPRECIATION OF RS .2,55,68,424/ - BEING 10% OF VALUE OF ADDITIONS OF RS.25,56,84,241/ - WHICH WERE ADDED AFTER 04 - 10 - 2011. FURTHER, IT WAS CONTENDED THAT THE PROVISIONS U/S. 32 OF THE ACT ALLOWS DEPRECIATION ON FIXED ASSETS ACQUIRED DURING THE RELEVANT PREVIOUS YEAR AS WELL AS IN EARLIER YEARS. FURTHER, IT WAS STATED IN CASE OF ANY NEW MACHINERY OR PLANT WHICH HAS BEEN ACQUIRED AND INSTALLED AFTER 31 - 03 - 2005 FURTHER EQUAL TO 20% OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II) OF SECTION 32 OF THE ACT AND SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CLAIM ADDITIONAL DEPRECIATION. THE AO CONSIDERING THE AMENDMENT OF SECTION 32 THROUGH FINANCE BILL 2015 HELD NO BALANCE ADDITIONAL DEPRECIATION IN SUBSEQUENT YEAR IS ALLOWABLE AND DENIED THE ADDITIONAL DEPRECIATION OF RS.2,55,68,424/ - , AGAINST WHICH THE ASSESSEE IS BEFORE US. 32. HEARD BOTH PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE IDENTICAL ISSUE HAD COME UP BEFORE THIS TRIBUNAL FOR A.Y. 2012 - 13. THE RELEVANT PORTION OF PARA 15 IS REPRODUCED HERE - IN - BELOW : 15. THE LD. AR OF THE ASSESSEE INVITED OUR ATTENTION TO THE DECISION OF THE HON BLE BOMBAY HIGH COURT IN THE CASE OF THE PR. COMMISSIONER OF INCOME TAX - 14 VS. M/S. GODREJ INDUSTRIES LTD., INCOME TAX APPEAL NO.511 OF 2016 FOR ASSESSMENT YEAR 2007 - 08 WHEREIN THE QUESTION BEFORE THE HON BLE HIGH COURT WAS AS FOLLOWS: WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE TRIBUNAL IS RIGHT IN LAW IN HOLDING THAT THE ASSESSEE IS ENTITLED TO 50% OF THE ADD ITIONAL DEPRECIATION UNDER SECTION 32(1)(IIA) OF THE IT ACT, 1961? THE HON BLE BOMBAY HIGH COURT ON THIS ISSUE HAS HELD AND OBSERVED AS FOLLOWS: 5. HAVING HEARD COUNSEL FOR THE REVENUE AND FOR THE ASSESSEE, WE NOTICE THAT THE ASSESSEE'S CLAIM OF ADDI TIONAL DEPRECIATION ARISES OUT OF CLAUSE (IIA) OF SUB - SECTION 1 OF SECTION 32 OF THE ACT. CLAUSE (II) OF SUB - SECTION 1 OF 14 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 SECTION 32 OF THE ACT RECOGNIZES THE DEPRECIATION ON BLOCK OF ASSETS. CLAUSE (IIA) GRANTS ADDITIONAL DEPRECIATION IN CASE OF ACQUISIT ION AND INSTALLATION OF NEW MACHINERY OR PLANT BY AN ASSESSEE AFTER 31ST MARCH, 2005, THE ASSESSEE BEING ENGAGED IN BUSINESS OF MANUFACTURE OR PRODUCTION OF AN ARTICLE OR THING. 6. WE MAY ALSO NOTICE THAT THE SECOND PROVISO TO CLAUSE (II) OF SECTION 1 OF SUB - SECTION 32 OF THE ACT, WOULD RESTRICT ASSESSEE'S CLAIM OF DEPRECIATION TO 50% IN CASE, THE ASSETS ARE ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND PUT TO USE FOR THE PURPOSES OF BUSINESS OR PROFESSION FOR A PERIOD LESS THAN 180 DAYS IN THE SAI D PREVIOUS YEAR. 7. IN THE CONTEXT OF SUCH STATUTORY PROVISIONS, THE REVENUE HAS RAISED THE QUESTION - WHETHER WHEN 50% OF THE ADDITIONAL DEPRECIATION IS CLAIMED BY THE ASSESSEE IN A PARTICULAR ASSESSMENT YEAR, SINCE THE ACQUISITION AND PUTTING IN TO USE OF THE ASSETS IN THE PREVIOUS YEAR WAS FOR LESS THAN 180 DAYS, THE ASSESSEE CAN CLAIM THE REMAINING DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEAR. SUCH A QUESTION CAME UP FOR CONSIDERATION BEFORE THE DIVISION BENCH OF KARNATAKA HIGH COURT IN COMMISSIONER OF INCOME TAX AND ANOTHER V/S. RITTAL INDIA PVT. LTD., REPORTED IN 380 ITR 423. THE COURT, AFTER REFERRING TO THE STATUTORY PROVISIONS, HELD AND OBSERVED IN PARA 8 AS UNDER: 8: - THE AFORESAID TWO CONDITIONS, I.E., THE UNDERTAKING ACQUIRING NEW PLANT AND MACHINERY SHOULD BE A NEW INDUSTRIAL UNDERTAKING, OR THAT IT SHOULD BE CLAIMED IN ONE YEAR, HAVE BEEN DONE AWAY BY SUBSTITUTING CLAUSE (IIA) WITH EFFECT FROM APRIL 1, 2006. THE GRANT OF ADDITIONAL DEPRECIATION, UNDER THE AFORESAID PROVISION, IS FOR THE BEN EFIT OF THE ASSESSEE AND WITH THE PURPOSE OF ENCOURAGING INDUSTRIALIZATION, BY EITHER SETTING UP A NEW INDUSTRIAL UNIT OR BY EXPANDING THE EXISTING UNIT BY PURCHASE OF NEW PLANT AND MACHINERY, AND PUTTING IT TO USE FOR THE PURPOSES OF BUSINESS. THE PROVISO TO CLAUSE (II) OF THE SAID SECTION MAKES IT CLEAR THAT ONLY 50 PER CENT OF THE 20 PER CENT WOULD BE ALLOWABLE, IF THE NEW PLANT AND MACHINERY SO ACQUIRED IS OUT TO USE FOR LESS THAN 180 DAYS IN A FINANCIAL YEAR. HOWEVER, IT NOWHERE RESTRICTS THAT THE BALA NCE 10 PER CENT WOULD NOT BE ALLOWED TO BE CLAIMED BY THE ASSESSEE IN THE NEXT ASSESSMENT YEAR. THE LANGUAGE USED IN CLAUSE (IIA) OF THE SAID SECTION CLEARLY PROVIDES THAT 'A FURTHER SUM EQUAL TO 20 PER CENT OF THE ACTUAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (II)'. THE WORD 'SHALL' USED IN THE SAID CLAUSE IS VERY SIGNIFICANT. THE BENEFIT WHICH IS TO BE GRANTED IS 20 PER CENT ADDITIONAL DEPRECIATION. BY VIRTUE OF THE PROVISO REFERRED TO ABOVE, ONLY 10 PER CENT CAN BE C LAIMED IN ONE YEAR, IF PLANT AND MACHINERY IS PUT TO USE FOR LESS THAN 180 DAYS IN THE SAID FINANCIAL YEAR. THIS WOULD NECESSARILY MEAN THAT THE BALANCE 1 0 PER CENT ADDITIONAL DEDUCTION CAN BE AVAILED OF IN THE SUBSEQUENT ASSESSMENT YEAR, OTHERWISE THE VE RY PURPOSE OF INSERTION OF CLAUSE (IIA) WOULD BE DEFEATED BECAUSE IT PROVIDES FOR 20 PER CENT DEDUCTION WHICH SHALL BE ALLOWED. IT HAS BEEN CONSISTENTLY HELD BY THIS COURT, AS WELL AS THE APEX COURT, THAT THE BENEFICIAL LEGISLATION, AS IN THE PRESENT CASE, SHOULD BE GIVEN LIBERAL INTERPRETATION SO AS TO BENEFIT THE ASSESSEE. IN THIS CASE, THE INTENTION OF THE LEGISLATION IS ABSOLUTELY CLEAR, THAT THE ASSESSEE SHALL BE ALLOWED CERTAIN ADDITIONAL BENEFIT, WHICH WAS RESTRICTED BY THE PROVISO TO ONLY HALF OF THE SAME BEING GRANTED IN ONE ASSESSMENT YEAR, IF CERTAIN CONDITION WAS NOT FULFILLED. BUT, THAT, IN OUR CONSIDERED VIEW, WOULD NOT RESTRAIN THE ASSESSEE FROM CLAIMING THE BALANCE OF THE BENEFIT IN THE SUBSEQUENT ASSESSMENT YEAR. THE TRIBUNAL, IN OUR VI EW, HAS RIGHTLY HELD, THAT ADDITIONAL DEPRECIATION ALLOWED UNDER SECTION 32(1)(IIA) OF THE ACT IS A ONE - TIME BENEFIT TO ENCOURAGE INDUSTRIALIZATION, AND THE PROVISIONS RELATED TO IT HAVE TO BE CONSTRUED REASONABLY, LIBERALLY AND PURPOSIVELY, TO MAKE THE P ROVISION MEANINGFUL WHILE GRANTING THE ADDITIONAL ALLOWANCE. WE ARE IN FULL AGREEMENT WITH SUCH OBSERVATIONS MADE BY THE TRIBUNAL. 15 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 IN VIEW OF THE AFORESAID, WE DO NOT FIND THAT ANY INTERFERENCE IS CALLED FOR WITH THE ORDER OF THE TRIBUNAL, OR THAT ANY QU ESTION OF LAW ARISES IN THIS APPEAL FOR DETERMINATION BY THIS COURT.' AFTER THE SAID JUDGMENT OF THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD.,(SUPRA), LEGISLATION HAS ALSO AMENDED THE STATUTORY PROVISIONS BY ADDING THE THIRD PROVISO TO CLAUSE (II) OF SUB - SECTION 1 OF SECTION 32 OF THE ACT, WHICH READS AS UNDER: - PROVIDED ALSO THAT WHERE AN ASSET REFERRED TO IN CLAUSE (IIA) OR THE FIRST PROVISO TO CLAUSE (IIA), AS THE CASE MAY BE, IS ACQUIRED BY THE ASSESSEE DURING THE PREVIOUS YEAR AND IS PUT TO USE FOR THE PURPOSES OF BUSINESS FOR A PERIOD OF LESS THAN ONE HUNDRED AND EIGHTY DAYS IN THAT PREVIOUS YEAR, AND THE DEDUCTION UNDER THIS SUB - SECTION IN RESPECT OF SUCH ASSET IS RESTRICTED TO FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESC RIBED FOR AN ASSET UNDER CLAUSE (IIA) FOR THAT PREVIOUS YEAR, THEN, THE DEDUCTION FOR THE BALANCE FIFTY PER CENT OF THE AMOUNT CALCULATED AT THE PERCENTAGE PRESCRIBED FOR SUCH ASSET UNDER CLAUSE (IIA) SHALL BE ALLOWED UNDER THIS SUB - SECTION IN THE IMMEDIAT ELY SUCCEEDING PREVIOUS YEAR IN RESPECT OF SUCH ASSET. 8. THE THIRD PROVISO, THUS, NOW RECOGNIZES THE RIGHT OF AN ASSESSEE TO CLAIM THE REMAINING 50% DEPRECIATION IN SUBSEQUENT YEAR IN A CASE WHERE MACHINERY AND PLANT BEING ACQUIRED AND PUT TO USE FOR L ESS THAN 180 DAYS IN THE PREVIOUS YEAR, THE DEPRECIATION WAS RESTRICTED TO 50%. SUCH A SITUATION AS IN THE PRESENT CASE, WAS CONSIDERED BY THE DIVISION BENCH OF THE MADRAS HIGH COURT IN COMMISSIONER OF INCOME TAX V/S. SHRI T. P. TEXTILES PVT. LTD., 394 ITR 483, THE COURT REFERRED TO THE JUDGMENT OF THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT. LTD., (SUPRA) AS WELL AS THE ADDITION OF THIRD PROVISO TO CLAUSE (II) OF SUB - SECTION 1 OF SECTION 32 OF THE ACT AND OBSERVED AS UNDER: - '10.1: - THE PLAIN LANGUAGE O F SECTION 32(1)(IIA) READ ALONG WITH RELEVANT PROVISO WOULD HAVE US COME TO THE CONCLUSION THAT, THERE IS NO LIMITATION IN THE ASSESSEE CLAIMING THE BALANCE 10 PER CENT OF ADDITIONAL DEPRECIATION IN THE SUCCEEDING ASSESSMENT YEAR. 10.2: - AS A MATTER OF F ACT, WITH EFFECT FROM APRIL 2016 THE AMBIGUITY, IF ANY, IN THIS REGARD IN THE MIND OF THE ASSESSING OFFICER STANDS REMOVED BY VIRTUE OF THE LEGISLATURE INCORPORATING IN THE STATUTE THE NECESSARY CLARIFICATORY AMENDMENT. 10.3: - . . .. 11: - WE MAY ONLY INDICATE THAT DURING THE COURSE OF THE ARGUMENTS OUR ATTENTION WAS DRAWN TO THE 'MEMORANDUM EXPLAINING THE PROVISIONS IN FINANCE BILL 2015' WHEREBY THE AFOREMENTIONED AMENDMENT WAS BROUGHT ABOUT. 11.1: - THE RELEVANT PART OF THE MEMORANDUM IS E XTRACTED HEREAFTER: - 'TO REMOVE THE DISCRIMINATION IN THE MATTER OF ALLOWING ADDITIONAL DEPRECIATION ON PLANT OR MACHINERY USED FOR LESS THAN 180 DAYS AND USED FOR 180 DAYS OR MORE IT IS PROPOSED TO PROVIDE THAT THE BALANCE 50 PER CENT OF THE ADDITIONAL DEPRECIATION ON NEW PLA NT OR MACHINERY ACQUIRED AND USED FOR LESS THAN 180 DAYS WHICH HAS NOT BEEN ALLOWED IN THE YEAR OF ACQUISITION AND INSTALLATION OF SUCH PLANT OR MACHINERY SHALL BE ALLOWED IN THE IMMEDIATELY SUCCEEDING PREVIOUS YEAR. THIS AMENDMENT WILL TAKE EFFECT FROM 1S T APRIL 2016 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2016 - 17 AND SUBSEQUENT ASSESSMENT YEARS.' 11.2: - A PERUSAL OF THE EXTRACT OF THE MEMORANDUM RELIED UPON WOULD SHOW THAT THE LEGISLATURE RECOGNIZED THE FACT THAT THE MANNER IN WHIC H THE REVENUE CHOSE TO INTERPRET THE PROVISION AS IT STOOD PRIOR TO ITS AMENDMENT WOULD LEAD TO DISCRIMINATION IN RESPECT OF PLANT AND 16 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 MACHINERY WHICH WAS USED FOR LESS THAN 180 DAYS AS AGAINST THAT WHICH WAS USED FOR 180 DAYS OR MORE. 11.3: - IN OUR OPIN ION, AS INDICATED ABOVE, THE AMENDMENT IS CLARIFICATORY IN NATURE AND NOT PROSPECTIVE, AS IS SOUGHT TO BE CONTENDED BY THE REVENUE. THE MEMORANDUM CANNOT BE READ IN THE MANNER, IN WHICH, THE REVENUE HAS SOUGHT TO READ IT, WHICH IS, THAT THE AMENDMENT BROUG HT IN WOULD APPLY ONLY PROSPECTIVELY. 11.4: - WE ARE, CLEARLY, OF THE VIEW THAT THE MEMORANDUM, WHICH IS SOUGHT TO BE RELIED UPON BY THE REVENUE, ONLY CLARIFIES AS TO HOW THE UNAMENDED PROVISION HAD TO BE READ ALL ALONG. 11.5: - IN ANY EVENT, IN SO FAR A S THE COURT IS CONCERNED, IT HAS TO GO BY THE PLAIN LANGUAGE OF THE UNAMENDED PROVISION, AND THEN, COME TO A CONCLUSION IN THE MATTER. AS ALLUDED TO ABOVE, OUR VIEW, IS THAT, UPON A PLAIN READING OF THE UNAMENDED PROVISION, IT COULD NOT BE SAID THAT THE AS SESSEE COULD NOT CLAIM BALANCE DEPRECIATION IN THE ASSESSMENT YEAR, WHICH FOLLOWS THE ASSESSMENT YEAR, IN WHICH, THE MACHINERY HAD BEEN BOUGHT AND USED, ALBEIT, FOR LESS THAN 180 DAYS. 9. IT COULD BE THUS, TO SEEN THAT THE KARNATAKA HIGH COURT IN RITTAL INDIA PVT., LTD., (SUPRA) EVEN WITHOUT THE AID OF THE STATUTORY AMENDMENT HELD THAT REMAINING 50% UNCLAIMED DEPRECIATION WOULD BE AVAILABLE TO THE ASSESSEE IN THE SUCCEEDING ASSESSMENT YEAR. NOW THE LEGISLATION HAS AMENDED THE PROVISION BY ADDING A PROVIS O WHICH, SPECIFICALLY RECOGNIZES THE SAID RIGHT. THE MADRAS HIGH COURT IN SHRI T.P.TEXTILES PVT. LTD.,(SUPRA) RULED THAT SUCH PROVISO BEING CLARIFICATORY IN NATURE, WOULD APPLY TO PENDING CASES, COVERING PAST PERIOD ALSO. 10. WE HAVE NO REASON TO TAKE VI EW DIFFERENT FROM TWO HIGH COURTS, EXAMINING THE SITUATION AT CONSIDERABLE LENGTH. IN THE RESULT, NO QUESTION OF LAW ARISES. IN THIS JUDGMENT OF THE HON BLE BOMBAY HIGH COURT, THERE IS REFERENCE MADE TO THE DECISION OF THE HON BLE KARNATAKA HIGH COURT I N THE CASE OF COMMISSIONER OF INCOME TAX AND ANOTHER VS. RITTAL INDIA PVT. LTD., 380 ITR 423 AND THE DECISION OF THE HON BLE MADRAS HIGH COURT IN THE CASE OF IN THE CASE OF COMMISSIONER OF INCOME TAX VS. SHRI T.P. TEXTILES PVT. LTD., 394 ITR 483 AND IN BOT H THESE CASES, IT HAS BEEN UNANIMOUSLY OBSERVED AND HELD THAT THE ASSESSEE CAN CLAIM BALANCE DEPRECIATION IN THE SUBSEQUENT ASSESSMENT YEAR. THE HON BLE BOMBAY HIGH COURT WAS OF THE OPINION THAT THERE EMERGES NO REASON TO TAKE A DIFFERENT VIEW FROM THAT TA KEN BY THE AFORESAID TWO HIGH COURTS, EXAMINING THE SITUATION AT CONSIDERABLE LENGTH. THEREFORE, APPEAL OF THE REVENUE WAS DISMISSED BY THE HON BLE JURISDICTIONAL HIGH COURT. RESPECTFULLY, FOLLOWING THE BINDING JUDGMENT OF THE HON BLE JURISDICTIONAL HIGH COURT, WE ALLOW GROUND NO.8 RAISED BY THE ASSESSEE. 33. THUS, I N VIEW OF THE ABOVE, GROUND NOS. 11.1 TO 11.4 RAISED BY THE ASSESSEE ARE ALLOWED. 34. IN GROUND NO. 12.1 THE ASSESSEE HAS ASSAILED INITIATION OF PENALTY PROCEEDINGS U/S. 274 R.W.S. 271(1)(C) OF THE ACT, IT WAS AGREED BY THE LD. AR THAT IT IS THE GROUND RAISED BY THE ASSESSEE IS PRE - MATURE AT THIS STAGE. HENCE, REQUIRES NO ADJUDICATION, THE SAME IS DISMISSED. 17 ITA NO. 160/PUN/2018, A.Y. 2013 - 14 35. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH FEBRUARY, 2020 . SD/ - SD/ - (ANIL CHATURVEDI) (S.S. VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBE R / PUNE; / DATED : 19 TH FEBRUARY, 20 20 RK / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT. 2. / THE RESPONDENT. 3. THE DISPUTE RESOLUTION PANEL - 3 , MUMBAI 4. THE PR. COMMISSIONER OF INCOME TAX - 1, PUNE 5. , , , / DR, ITAT, C BENCH, PUNE. 6. / GUARD FILE. // // TRU E COPY // / BY ORDER, / PRIVATE SECRETARY, , / ITAT, PUNE