UNILIVER INDUSTRIES P. LTD, MUMBAI V. ADDL CIT RG 1(3), MUMBAI

ITA 1817/MUM/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0519 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 2 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Next Hearing Date: 23-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 06-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: POOJA SWAROOP
• Keywords: Depreciation
• Section: 14A; 32

Judgement Text

, F , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F, MUMBAI BEFORE SHRI SHAMIM YAHYA, AM & SHRI SANDEEP GOSAIN, JM ITA NO.1817/MUM/2013 : ASST.YEAR 2006-2007 M/S. UNILIVER INDUSTRIES PRIVATE LIMITED ULILEVER HOUSE, B.D.SAWANT MARG CHAKALA, ANDHERI (EAST) MUMBAI 400 099. PAN : AAACU0791P. / VS. THE ADDL .COMMISSIONER OF INCOME - TAX RANGE 1(3) MUMBAI. ( / APPELLANT) ( / RESPONDENT) /APPELLANT BY : SHRI NISHANT THAKKAR /RESPONDENT BY : MS.POOJA SWAROOP / DATE OF HEARING : 23.05.2017 / DATE OF PRONOUNCEMENT : 26.05.2017 / O R D E R PER SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST ORDER OF LEARNED CIT(A) DATED 02.12.2010 AND PERTAINS TO ASSESSMENT YEAR 2006-2007. 2. THE GROUNDS OF APPEAL READ AS UNDER:- 1. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THAT THE PAYMENTS MADE FOR COLLABORATIVE PROJECTS ARE EXPENDITURE TO ACQUIRE KNOW-HOW AND DISALLOWABLE AS CAPITAL EXPENSES. 1.1 THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT WAS ENGAGED IN THE BUSINESS OF RENDERING RESEARCH SERVICE AND THE APPELLANT HAD OUTSOURCED SOME OF THE ACTIVITIES TO VARIOUS PARTIES BASED ON AGREEMENTS WITH EACH OF THESE PARTIES IN THE NORMAL COURSE OF BUSINESS. ITA NO.1817/MUM/2013. M/S.UNILIVER INDUSTRIES PVT. LTD. 2 1.2 WITHOUT PREJUDICE TO THE ABOVE, HAVING HELD THAT ABOVE AS CAPITAL EXPENSE, THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE SAME U/S 35 (1) (IV) OF THE ACT. 1.3 HE OUGHT TO HAVE ALLOWED THE SAME U/S 35 (1) (IV) OF THE ACT. 1.4 WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED CIT(A), HAVING HELD THAT THE ABOVE EXPENSES ARE CAPITAL IN NATURE, ERRED IN NOT ALLOWING DEPRECIATION U/S 32 OF THE INCOME-TAX ACT. 1.5 WITHOUT PREJUDICE TO ABOVE, THE LEARNED CIT(A) HAVING FOLLOWED THE ORDER IN RESPECT OF AY 2002-03, FAILED TO APPRECIATE AND OUGHT TO HAVE AT LEAST ALLOWED PAYMENT TO INDIVIDUAL CONSULTANTS AS WAS ALLOWED IN THE AY 2002-03 AND AY 2004-05. 2. THE LEARNED CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS.24,47,672/- UNDER SECTION 14A OF THE INCOME-TAX ACT, 1961. 2.1 HE FAILED TO APPRECIATE THAT THE INVESTMENTS ON WHICH APPELLANT EARNED TAX-FREE DIVIDEND WERE INVESTMENTS MADE BY THE APPELLANT OUT OF ITS OWN FUNDS IN EARLIER YEARS AND NO RECURRING EXPENDITURE IS NECESSARY FOR SUCH INVESTMENT. 2.2 HE FAILED TO APPRECIATE THAT THE APPELLANT DOES NOT INCUR ANY EXPENDITURE FOR EARNING / REALIZING THE DIVIDEND. 2.3 HE FAILED TO APPRECIATE THAT THE ASSESSING OFFICER HAS NOT RECORDED ANY SATISFACTION REGARDING THE CORRECTNESS OF THE CLAIM OF THE APPELLANT AS REQUIRED UNDER THE PROVISION OF THE ACT AND THEREFORE SUCH DISALLOWANCE WAS BAD IN LAW. 2.4 HE FAILED TO APPRECIATE THAT PROVISION OF RULE 8D WERE NOTIFIED ON 24TH MARCH 2008 AND THEREFORE HAD NO APPLICATION TO THE YEAR UNDER CONSIDERATION AND THEREFORE ANY ADDITION MADE BY APPLYING RULE 8D OR AKIN METHOD IS BAD IN LAW AND OUGHT TO HAVE BEEN QUASHED. ITA NO.1817/MUM/2013. M/S.UNILIVER INDUSTRIES PVT. LTD. 3 2.5 WITHOUT PREJUDICE TO ABOVE, HE FAILED TO APPRECIATE THAT SECTION 14A(2) WAS ITSELF INSERTED BY THE FINANCE ACT 2006 W.E.F. 1.4.2007 THUS APPLICABLE ONLY FOR THE ASSESSMENT YEAR 2007-08 ONWARDS. THE APPELLANT CRAVES LEAVE TO ADD TO, ALTER OR AMEND ALL OR ANY OF THE AFORESAID GROUNDS OF APPEAL. 3. AT THE OUTSET IT IS NOTED THAT FILING OF THIS APPEAL IS DELAYED BY 708 DAYS. ASSESSEE-COMPANY IS A MULTINATIONAL COMPANY. FOR SEEKING THE CONDONATION OF DELAY, AN AFFIDAVIT HAS BEEN FILED BY SHRI LALIT ADWANI, SENIOR MANAGER, DIRECT TAXATION OF HINDUSTAN UNILEVER LIMITED. IN THE SAID AFFIDAVIT, IT HAS BEEN AVERRED THAT HINDUSTAN UNILEVER LIMITED HAS A GROUP TAX TEAM COMPRISING OF 3 QUALIFIED PERSONNEL TAKING CARE OF ENTIRE DIRECT TAX COMPLIANCE, OF WHICH HE WAS ONE. IT HAS FURTHER BEEN SUBMITTED THAT DUE TO SHEER NUMBER OF APPEALS, RECTIFICATION APPLICATION, REPLIES TO THE SHOW CAUSE NOTICES WHICH WERE TO BE FILED IN A SHORT PERIOD, HE LOST TRACK OF THE ABOVE APPEAL FOR ASSESSMENT YEAR 2006-2007 AND CARRIED THE IMPRESSION THAT THE APPEAL HAD ALREADY BEEN FILED. LATER ON, WHILE SEARCHING IN THE APPEAL FILES, HE REALIZED THAT APPEAL IN RESPECT OF ASSESSMENT YEAR 2006-2007 HAS NOT BEEN FILED. IT HAS FURTHER BEEN AVERRED THAT THIS LAPSE WAS INADVERTENT AS SIMILAR ISSUES ARE PENDING IN APPEAL FOR EARLIER YEARS. IT HAS ALSO BEEN SUBMITTED THAT NO PREJUDICE WILL BE CAUSED TO THE RESPONDENT (DEPARTMENT) IF THE APPELLANTS APPLICATION FOR CONDONATION IS ALLOWED. IN SUPPORT OF THE AFORESAID AFFIDAVIT SEEKING CONDONATION OF THE DELAY, LEARNED COUNSEL OF THE ASSESSEE HAS PLACED RELIANCE UPON FOLLOWING CASE LAWS, I.E. COLLECTOR, LAND ACQUISITION V. MST.KATIJ & ORS. [(1987) 167 ITR 471 (SC)] AND THE TRIBUNAL DECISION IN THE CASE OF BHAGYODAYA FRIENDS URBANK CO-OP. BANK LTD. V. ITA NO.1817/MUM/2013. M/S.UNILIVER INDUSTRIES PVT. LTD. 4 PRINCIPAL COMMISSIONER OF INCOME-TAX IN ITA NO.181/NAG/2016 VIDE ORDER DATED 28 TH DECEMBER, 2016. FURTHER, LEARNED COUNSEL SUBMITTED THAT THE DELAY WAS INADVERTENTLY CAUSE AND DESERVES TO BE CONDONED. HE FURTHER SUBMITTED THAT ISSUE SIMILAR TO THE ISSUES WHICH WERE BEING RAISED BEFORE THE TRIBUNAL AND THERE IS NO REASON WHY THIS APPEAL WOULD NOT HAVE BEEN FILED HENCE HE SUBMITTED THAT THE DELAY IS TO BE CONDONED. 4. PER CONTRA, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS A MULTINATIONAL COMPANY AND THE APPROACH IN SEEKING CONDONATION OF SUCH A HUGE DELAY IS VERY CASUAL. THE SAID AFFIDAVIT ADMITS THAT THE COMPANY HAS A QUALIFIED TEAM OF PROFESSIONALS TO LOOK AFTER TAX MATTERS .SHE FURTHER SUBMITTED THAT THE SAID AFFIDAVIT DOES NOT EVEN MENTION THE PERIOD OF DELAY AND THERE IS NO COGENT REASON FOR THE DELAY. SHE FURTHER SUBMITTED THAT THE DELAY IS INORDINATE AS THE DELAY IS ALMOST 2 YEARS, AND HENCE DISTINCTION HAS TO BE MADE BETWEEN A SMALL DELAY AND INORDINATE DELAY. SHE PLEADED THAT ON THE FACTS OF THIS CASE THE DELAY SHOULD NOT BE CONDONED. 5. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT THE HONBLE APEX COURT IN THE CASE OF RAM LAL VS REWA COALFIELDS AIR 1962 SC 361 HAS EXPOUNDED THAT THE CAUSE FOR DELAY IN FILING THE APPEAL WHICH BY DUE CARE AND ATTENTION WOULD HAVE BEEN AVOIDED CANNOT BE A SUFFICIENT CAUSE WITHIN THE MEANING OF THE LIMITATION PROVISION. IT IS ONLY WERE NO NEGLIGENCE, OR INACTION, FOR WANT OF BONAFIDES CAN BE IMPUTED TO THE APPELLANT, A LIBERAL CONSTRUCTION OF THE PROVISIONS HAS TO BE MADE IN ORDER TO ADVANCE SUBSTANTIAL JUSTICE. BUT, WHERE THERE IS GROSS NEGLIGENCE, INACTION FOR WANT OF BONAFIDES ON THE PART OF THE APPELLANT, THE PROVISION TO CONDONE THE ITA NO.1817/MUM/2013. M/S.UNILIVER INDUSTRIES PVT. LTD. 5 DELAY IN FILING THE APPEAL CANNOT BE SO LIBERALLY CONSTRUED PARTICULARLY IN VIEW OF THE FACT THAT PERIOD OF THE DELAY IS OF A SUBSTANTIAL PERIOD. FURTHERMORE WE NOTE THAT HONOURABLE APEX COURT IN THE CASE OF VEDABHAI BABURAO PATIL VS SHANTARAM BABURAO PATIL (2002) 253 ITR 798 HAS HELD THAT THOUGH IN EXERCISING DISCRETION, UNDER SECTION 5 OF THE LIMITATION ACT 1963 TO CONDONE THE DELAY FOR SUFFICIENT CAUSE IN NOT PREFERRING AN APPEAL OR OTHER APPLICATION WITHIN THE TIME PRESCRIBED, THE COURT SHOULD ADOPT A PRAGMATIC APPROACH. A DISTINCTION MUST BE MADE WHERE THE DELAY IS INORDINATE AND THE CASE WHERE THE DELAYS OF A FEW DAYS. WERE AS IN THE FORMER CASE THE CONSIDERATION OF PREJUDICE TO THE OTHER SIDE WILL BE A RELEVANT FACTOR AND CALLS FOR A MORE CAUTIOUS APPROACH, BUT IN THE LATTER CASE NO SUCH CONSIDERATION MAY ARISE AS SUCH CASE DESERVES A LIBERAL APPROACH. NO HARD AND FAST RULE CAN BE LAID DOWN IN THIS REGARD. THE COURT HAS TO EXERCISE ITS DISCRETION ON THE FACTS OF EACH CASE KEEPING IN MIND THAT IN CONSIDERING THE EXPRESSION SUFFICIENT CAUSE THE PRINCIPLE OF ADVANCING SUBSTANTIAL JUSTICE IS OF PRIME IMPORTANCE. 6. NOW WE EXAMINE THE PRESENT CASE. WE FIND THAT IN THIS CASE ASSESSEE HAS NOT MOVED PROPER CONDONATION APPLICATION. AN AFFIDAVIT AS REFERRED IN THE EARLIER PART OF THIS ORDER HAS BEEN FILED BY AN EMPLOYEE OF THE COMPANY. IN THE SAID EXPLANATION EVEN THE PERIOD OF DELAY HAS NOT BE MENTIONED. NO REASONABLY ACCEPTABLE EXPLANATION FOR THE DELAY HAS BEEN MENTIONED. THE ONLY REASON MENTIONED IS THAT BECAUSE OF A LOT OF WORK THE SAID EMPLOYEE FORGOT THE FILING OF APPEAL. THIS IS DESPITE THE FACT THAT THE ASSESSEE IS A MULTINATIONAL COMPANY AND IN THE SAID EXPLANATION IT HAS BEEN MENTIONED THAT IT IS SUPPORTED BY A TEAM OF PROFESSIONALS TO LOOK AFTER TAX MATTERS. IN THIS ITA NO.1817/MUM/2013. M/S.UNILIVER INDUSTRIES PVT. LTD. 6 BACKGROUND IN OUR CONSIDERED OPINION THE DELAY OF SUBSTANTIAL PERIOD OF 708 DAYS DOESN'T DESERVE TO BE CONDONED. 7. AS REGARDS THE ORDER OF APEX COURT IN THE CASE OF A MST. KATIJ (SUPRA) IS CONCERNED THERE WAS A DELAY OF ONLY FOUR DAYS IN THAT CASE AND ONLY GENERAL PRINCIPLES FOR DELAY CONSIDERATION HAS BEEN EXPOUNDED. FURTHERMORE THE TRIBUNAL DECISION CITED BY THE LEARNED COUNSEL OF THE ASSESSEE THE DELAY WAS ATTRIBUTABLE TO THE MISTAKE OF THE ASSESSEES COUNSEL AND THE DELAY WAS NOT ATTRIBUTABLE TO ANY MISTAKE ON THE PART OF THE ASSESSEE. 8. IN THE BACKGROUND OF AFORESAID DISCUSSION AND PRECEDENTS IN OUR CONSIDERED OPINION THERE IS NO JUST AND PROPER REASON TO CONDONE THE DELAY OF 708 DAYS IN THIS CASE. ACCORDINGLY THIS APPEAL IS DISMISSED BEING TIME- BARRED . 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER PRONOUNCED ON THIS 26 TH DAY OF MAY, 2017. SD/- SD/- ( SANDEEP GOSAIN ) ( SHAMIM YAHYA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 26 TH MAY, 2017. DEVDAS* / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT, MUMBAI. 4. / CIT(A), MUMBAI 5. , , / DR, ITAT, MUMBAI ITA NO.1817/MUM/2013. M/S.UNILIVER INDUSTRIES PVT. LTD. 7 / BY ORDER, //TRUE COPY// / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI 6. [ / GUARD FILE.