M/s Porritts & Spencer (Asia) Ltd., Faridabad V. ACIT, Faridabad

ITA 1697/DEL/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81597 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 07-08-2014
• Assessment Year: 1993-1994
• Appeal Filed On: 07-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SANTOSH K AGGARWAL
• Assessee Lawyers: MANOJ KUMAR CHOPRA
• Keywords: Depreciation; Rectification of order; Question of law; Assessment record; Revenue expenditure; Capital expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH F, NEW DELHI BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER & SHRI J.S. REDDY, ACCOUNTANT MEMBER ITA NO. 1697/DEL/2011 ASSESSMENT YEAR: 1993-94 PORRITTS & SPENCER (ASIA) LTD., VS. ACIT, (NOW KNOWN AS M/S VOITH PAPER FABRICS INDIA LTD.) CIRCLE-II, PLOT NO. 113-114, SECTOR-24, CGO COMPLEX, N.H.I V, FARIDABAD. FARIDABAD. AABCP0441Q (APPELLANT) (RESPONDENT) & ITA NO. 2090/DEL/2012 ASSESSMENT YEAR: 1993-94 ACIT, VS. PORRITTS & SPENCER LTD. CIRCLE-II, CGO COMPLEX, N.H. IV, PLOT NO. 113-11 4, FARIDABAD. SECTOR-24, FARIDABAD. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANOJ KUMAR CHOPRA, SR. DR RESPONDENT BY : SH. SANTOSH K. AGGARWAL, ADV. ORDER PER DIVA SINGH, J.M. THESE APPEALS HAVE BEEN FILED BY THE ASSESSEE AND T HE REVENUE PERTAINING TO 1993-94 ASSESSMENT YEAR ARE BEING DEC IDED BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE ASSESSEE HA S FILED ITS APPEAL AGAINST THE ORDER DATED 12/01/2011 OF CIT(A)-FARIDABAD ON V ARIOUS GROUNDS. HOWEVER, AT THE TIME OF HEARING THE ARGUMENTS WERE CONFINED TO GROUND NO. 2 WHICH READS AS UNDER: - 2. WHETHER, IN THE FACTS AND CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN NOT FOLLOWING THE DECISION OF THE HONBLE TRIBUNAL ITA NOS. 1697/DEL/2011 & 2090/D/2012 2 PASSED IN APPELLANTS OWN APPEAL FOR THE A.Y. 1994- 95 ITA NO. 1232/DEL/2006; ON 20.02.2009. 2. THE REVENUE IN ITS APPEAL AGAINST THE ORDER OF T HE CIT(A)-FARIDABAD DATED 16/02/2012 PASSED ON THE RECTIFICATION PETITI ON FILED BY THE ASSESSEE U/S 154 OF THE INCOME TAX ACT, 1961 CONTENDS THAT T HE CIT(A) HAS REVIEWED ITS ORDER. THE RECORD SHOWS THAT THE ASSESSEE IN H IS PETITION FILED U/S 154 OF THE ACT PLEADED THAT WHILE DECIDING THE APPEAL THE ISSUE PERTAINING TO ASSESSEES CLAIM OF DEDUCTION ON ACCOUNT OF SCIENTI FIC RESEARCH & DEVELOPMENT ADDRESSED VIDE GROUND NO. 2 BEFORE THE CIT(A) AS PER ORIGINAL GROUNDS THEREAFTER SUBSTITUTED BY THE REVISED GROUN D NO. 3(III) BEFORE THE CIT(A) REMAINED UN-ADJUDICATED BY MISTAKE AS SUCH T HE SAME MAY BE DECIDED. 3. BOTH THE PARTIES QUA THEIR RESPECTIVE APPEALS HA VE BEEN HEARD AND AS FAR AS THE NON-ADJUDICATION OF THE SPECIFIC GROUND BEFORE THE CIT(A) IS CONCERNED. THIS FACT IS NOT DISPUTED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CONSIDER ED THE MATERIAL AVAILABLE ON RECORD INCLUDING INFORMATION OBTAINED UNDER THE RTI BY THE ASSESSEE WHICH HAS BEEN CONSIDERED BY THE CIT(A) AN D THE ORDER DATED 20/02/2009 OF THE TRIBUNAL IN ASSESSEES OWN CASE O N SIMILAR FACTS AND CIRCUMSTANCES ON WHICH RELIANCE HAS BEEN PLACED BY THE LD. AR. 5. THE SPECIFIC ARGUMENT OF THE LD. SR. DR WAS THAT HE RELIES ON THE ASSESSMENT ORDER AS ON GOING THROUGH THE MATERIAL A VAILABLE ON RECORD THE ITA NOS. 1697/DEL/2011 & 2090/D/2012 3 FINDING RECORDED IN THE ORDER DATED 16/02/2012 OF C IT(A)-FARIDABAD WHICH IS SUPPORTED BY THE RELEVANT DOCUMENTS IN THE PAPER BO OK HE COULD NOT REFER TO ANY FACT OR POSITION IN LAW IN ORDER TO CANVAS A CO NTRARY VIEW. 6. THE RELEVANT FACTS OF THE CASE ARE THAT THE ASSE SSEE WHO DECLARED AN INCOME OF RS. 4,59,13,380/- CLAIMED AS A DEDUCTION EXPENDITURE OF RS. 47,85,600/- ON SCIENTIFIC RESEARCH RELATED TO HIS B USINESS. THE SAID EXPENDITURE CONSISTED OF REVENUE EXPENDITURE OF RS. 20,30,199/- AND CAPITAL EXPENDITURE OF RS. 27,55,401/-. IN SUPPORT OF THE SAID CLAIM RELIANCE WAS PLACED UPON THE PROVISIONS OF SECTION 35 OF THE ACT AND THE RENEWAL OF RECOGNITION TO IN HOUSE RESEARCH AND DEVELOPMENT UN IT OF THE ASSESSEE AT FARIDABAD, HARYANA AFTER 31/03/1994 GRANTED BY THE GOVERNMENT OF INDIA, MINISTRY OF SCIENCE & TECHNOLOGY, DEPART OF SCIENTI FIC & INDUSTRIAL RESEARCH, NEW DELHI. WHEREAS THE AO ALLOWED REVENUE EXPENDIT URE, CAPITAL EXPENDITURE WAS NOT ALLOWED BY HIM. THE SAID ACTIO N WAS CHALLENGED IN APPEAL BEFORE THE CIT(A) WHO HOWEVER FAILED TO ADJU DICATE UPON THE ISSUE RESULTING IN THE APPEAL FILED BY THE ASSESSEE. THE ASSESSEE ALSO MOVED A RECTIFICATION U/S 154 BEFORE THE CIT(A) WHICH WAS A LLOWED. RESULTING IN THE APPEAL OF THE REVENUE IT IS SEEN THAT THE CIT(A) IN HIS IMPUGNED ORDER U/S 154 DECIDED THE ISSUE IN THE FOLLOWING MANNER: 3. I HAVE CONSIDERED THE SUBMISSIONS FILED BY THE LD.COUNSEL FOR THE APPELLANT. IN THE APPELLATE ORDER DATED 12.01.2011 , THE ISSUE REGARDING ALLOWABILITY OF DEDUCTION U/S 35 FOR EXPENDITURE ON SCIENTIFIC RESEARCH WAS DECIDED IN PARA 6.1 OF THE ORDER. THE DECISION WAS BASED ON THE REMAND REPORT OF THE AO DATED 11.08.2006, IN PARA (II) OF WHICH, THE AO SUBMITTED ITA NOS. 1697/DEL/2011 & 2090/D/2012 4 THAT, AS DIRECTED BY THE LD. CIT(A) BY HIS ORDER IN APPE AL NO. 147/96-97 DATED 12.12.1999, A REFERENCE HAS BEEN MADE ON 11.0 8.2006 TO THE PRESCRIBED AUTHORITY FOR THEIR DECISION IN THE MATT ER . THIS WAS THE SOLE REASONS DISTINGUISHING THE FACTS OF APPELLANTS CAS E FOR AY 2003-04 FROM AY 2004-05 WHEREIN THE HONBLE ITAT HAD ALLOWED THE CL AIM OF DEDUCTION FOR EXPENDITURE ON SCIENTIFIC RESEARCH WHEN NO REFERENC E WAS MADE BY THE AO. IN VIEW OF THE CONTENTIONS RAISED BY THE APPELLANT IN RECTIFICATION APPLICATION, THE CASE RECORDS WERE REQUISITIONED VIDE LETTER DATED 0 9.12.2011 AND EXAMINED ON BEING SUBMITTED BY THE AO ON 16.12.2011. SINCE, NO REFERENCE WAS FOUND TO HAVE BEEN MADE, THE AO, VIDE LETTER DATED 21.12.201 1, WAS DIRECTED TO CLARIFY THE POSITION AS UNDER: 2. THE ASSESSMENT RECORDS (IN 4 VOLUMES) OF ABOVE NAMED ASSESSEE HAVE BEEN RECEIVED THROUGH YOUR LETTER DATED 14.12.2011. ON EXAMINATION OF CASE RECORDS, IT IS REVEALED THAT THE COPY OF REFER ENCE DATED 11.08.2006 MADE TO PRESCRIBED AUTHORITY IN CONNECTION WITH CLA IM OF EXPENDITURE ON SCIENTIFIC RESEARCH AND DEVELOPMENT HAS NOT BEEN FO UND TO BE ON RECORDS. IN MY APPELLATE ORDER DATED 12.01.2011 IN APPEAL NO . 195/2002-03 (74/2010-11), THE GROUND NO. 2 OF APPEAL HAS BEEN D ECIDED VIDE PARA 6.1 OF THE APPELLATE ORDER REJECTING THE GROUND OF APPE AL AFTER CONSIDERING THE REMAND REPORT DATED 11.08.2006 U/S 35D OF THE ACT. IN ASSESSMENT YEAR 1994-95, HONBLE ITAT ALLOWED RELIEF ONLY ON THE GR OUND THAT WHEN THE AO CHOOSES NOT TO REFER THE MATTER TO THE PRESCRIBE D AUTHORITY, THE DELETION MADE BY LD.CIT(A) WAS RIGHT. THE APPELLANT HAS FIL ED AN APPLICATION U/S 154 AGAINST THE APPELLATE ORDER DATED 12.01.2011, W HICH IS PENDING ADJUDICATION. YOU ARE DIRECTED TO CLARIFY ONLY TWO POINTS: (I) WHETHER A REFERENCE AS STATED IN REMAND REPORT DATE D 11.08.2006 HAS BEEN MADE; (II) IF SO, A COPY THEREOF. THE REPORT IN THE MATTER MAY BE SUBMITTED TO THIS O FFICE ON OR BEFORE 10.01.2012 POSITIVELY. THE CASE RECORDS ARE RETURN ED HEREWITH IN 4 VOLUMES. 3.1 THE AO, VIDE LETTER F.NO. ACIT/C-II/FBD/2011-1 2/6190 DATED 30.01.2012 HAS SUBMITTED AS UNDER: IN THIS CONNECTION, IT IS SUBMITTED THAT ON REQUES T OF THE ASSESSEE ALL POSSIBLE EFFORTS WERE MADE BY THIS OFFICE TO LOCATE THE SAID RELEVANT RECORD/LETTER BUT UNFORTUNATELY THE SAID PARTICULAR RECORD HAS NOT BEEN LOCATED TILL DATE THOUGH ASSESSMENT RECORDS FOR THE AO 1993-94 IN FOUR VOLUMES IS AVAILABLE, WHICH WAS ALSO SUBMITTED TO Y OUR GOODSELF VIDE LETTER DATED 14.12.2011. 3.2 THE APPELLANT HAS ALSO SOUGHT INFORMATION UNDE R RIGHT TO INFORMATION ACT AND A COPY OF INFORMATION SUBMITTED BY THE AO I S FILED ON RECORD. ON ITA NOS. 1697/DEL/2011 & 2090/D/2012 5 EXAMINATION OF CASE RECORDS, THE REPORT OF THE AO A ND THE INFORMATION PROVIDED UNDER THE RTI ACT, IT IS ABUNDANTLY CLEAR THAT THE AO HAS NOT REFERRED THE MATTER U/S 35(3) TO THE PRESCRIBED AUT HORITY. IF THAT BEING SO, THE FACTS OF THE CASE REMAIN IDENTICAL TO THAT OF A .Y. 1994-95 WHEREIN THE HONBLE ITAT HAS DECIDED THIS ISSUE IN FAVOUR OF TH E ASSESSEE. THEREFORE, IN ABSENCE OF ANY REFERENCE TO THE PRESCRIBED AUTHORIT Y FOR AY 2003-04 AND IN VIEW OF THE ORDER OF HONBLE ITAT IN THE APPELLANT S OWN CASE FOR AY 1994- 95, THE DECISION IN PARA 6.1 OF THE ORDER DATED 12. 01.2011 TAKEN AGAINST THE ASSESSEE WAS OPPOSED TO THE DECISION OF HONBLE ITA T IN THE IDENTICAL FACTS AND CIRCUMSTANCES AND CONSTITUTES A MISTAKE APPAREN T FROM RECORDS. CONSEQUENTLY, THE AO IS DIRECTED TO ALLOW DEDUCTION OF RS. 27,55,408/- U/S 35 OF THE ACT ON ACCOUNT OF EXPENDITURE ON SCIENTIF IC RESEARCH. IT MAY BE REITERATED THAT IN THE ASSESSMENT ORDER, THE AO HAS HELD PART OF THE EXPENDITURE ON SCIENTIFIC RESEARCH AS CAPITAL IN NA TURE BUT DID NOT ALLOW ANY DEPRECIATION. THE DEPRECIATION ON SUCH CAPITAL EXP ENDITURE WAS ALLOWED VIDE ORDER U/S 154 DATED 14.06.1996 AND SUBSEQUENTL Y MODIFIED VIDE ORDER U/S 154 DATED 19.07.1996. CONSEQUENT TO THE DECISI ON ALLOWING DEDUCTION FOR EXPENDITURE ON SCIENTIFIC RESEARCH, THE AO IS DIREC TED TO WITHDRAW THE DEPRECIATION GRANTED IN THE YEAR UNDER APPEAL AS WE LL AS IN SUBSEQUENT YEARS AS PER THE PROVISIONS OF LAW. 7. IT IS SEEN THAT NOT ONLY THE VIEW TAKEN IS IN FU LL ACCORD WITH THE VIEW OF THE ITAT IN ASSESSEES OWN CASE, SIMILAR ISSUE CAME UP FOR CONSIDERATION BEFORE THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. FCS INTERNATIONAL MARKETING PVT. LIMITED, 283 ITR PAGE 32 (P&H), WHEREIN THEIR LORDSHIPS CAME TO THE FOLLOWING CONCLUSION: 6. WE ARE UNABLE TO AGREE WITH LD. COUNSEL. IT I S MANIFESTLY CLEAR FROM THE IMPUGNED ORDER THAT THE TRIBUNALS CONCLUSION THAT THE ASSESSING OFFICER WAS DUTY BOUND TO REFER THE MATTER TO THE SPECIFIED AUTHORITY FOR ITS OPINION, NOT ONLY BECAUSE OF A SPECIFIC DIRECTION TO THAT EF FECT BY THE TRIBUNAL IN ITS EARLIER ORDER BUT ALSO ON ACCOUNT OF THE PROVISIONS OF SUB-SECTION (3) OF SECTION 35 OF THE ACT. IT PROVIDES THAT IF ANY QUE STION ARISES UNDER THIS SECTION AS TO WHETHER, AND IF SO, TO WHAT EXTENT, A NY ACTIVITY CONSTITUTED, OR ANY ASSET WAS BEING USED FOR SCIENTIFIC RESEARCH, T HE BOARD SHALL REFER THE QUESTION TO THE PRESCRIBED AUTHORITY, WHOSE DECISIO N SHALL BE FINAL. THE AO WAS DUTY BOUND TO STRICTLY COMPLY WITH THE STATUTOR Y PROVISIONS AS ALSO THE DIRECTION BY THE TRIBUNAL. ADMITTEDLY, NO SUCH REFERENCE WAS MADE BY THE AO AND, THEREFORE, THERE WAS NO OCCASION FOR THE BO ARD ALSO TO REFER THE SAME TO THE PRESCRIBED AUTHORITY. IN VIEW OF THE S AID FACTUAL SCENARIO, NO ITA NOS. 1697/DEL/2011 & 2090/D/2012 6 FAULT CAN BE FOUND WITH THE IMPUGNED ORDER. AN ASS ESSEE IS NOT EXPECTED TO UNDERGO THE PROCESS OF AN ENDLESS LITIGATION ON ACCOUNT OF INACTION ON THE PART OF THE AO. IN OUR OPINION, NO QUESTION OF LAW, MUCH LESS A SUBSTANTIAL QUESTION OF LAW, ARISES FROM THE IMPUGN ED ORDER . (EMPHASIS PROVIDED BY THE BENCH) 7.1 IN THE AFOREMENTIONED PECULIAR FACTS AND CIRCU MSTANCES, WE ARE OF THE VIEW THAT IN THE ABSENCE OF ANY SPECIFIC ARGUMENT A SSAILING THE FACTS OR POSITION OF LAW WE FIND NO GOOD REASON TO COME TO A CONTRARY FINDING. ON A CONSIDERATION OF THE PECULIAR FACTS AND CIRCUMSTANC ES OF THE CASE WE HOLD THAT RECTIFICATION ORDER IN THE FACTS AS THEY STAND DOES NOT AMOUNT TO A REVIEW AS ADMITTEDLY THE GROUND WAS NOT DECIDED BY THE CIT (A) BY MISTAKE WHILE PASSING THE ORDER DATED 12.1.2011. WE HAVE TAKEN O URSELVES THROUGH THE ORDER OF THE TRIBUNAL FOLLOWED BY THE CIT(A), WHERE IN THE EXPENDITURE HAS BEEN DENIED FOR NO FAULT TO THE ASSESSEE AND MERELY BECAUSE THE AO CHOOSES NOT TO REFER THE MATTER TO THE PRESCRIBED A UTHORITY DOES NOT WARRANT ANY INTERFERENCE. WE FIND THAT THE INCURRING OF EX PENDITURE HAS NOT BEEN DOUBTED. RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL THE DEPARTMENTAL APPEAL IS DISMISSED. SINCE THE RELIEF GRANTED BY T HE CIT(A) HAS BEEN CONFIRMED BY US ON THE REASONING THAT NON-ADJUDICAT ION OF THE SPECIFIC GROUND IN APPEAL BY THE CIT(A) IN HIS ORDER DATED 1 2.01.2011 WHICH NECESSITATED THE FILING OF RECTIFICATION PETITION U /S 154 CANNOT BE SAID TO AN ACT OF REVIEWING THE ORDER AS ADMITTEDLY IN THE ORDER D ATED 12.1.2011 MISTAKE RECTIFIABLE U/S 154 HAD OCCURRED WHICH WAS CORRECTE D IN THE ORDER DATED ITA NOS. 1697/DEL/2011 & 2090/D/2012 7 16.2.2012. THUS, SINCE THE ORDER DATED 16.2.2012 H AS BEEN CONFIRMED THE ASSESSEES APPEAL BECOMES INFRUCTUOUS. 8. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS D ISMISSED AND THE ASSESSEES APPEAL BECOMES INFRUCTUOUS. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 29 TH AUGUST 2014. SD/- SD/- (J.S. REDDY) (DIVA SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 29/08/2014 *KAVITA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR ITA NOS. 1697/DEL/2011 & 2090/D/2012 8