ACIT, CHENNAI V. M/s. Soler Soles Private Limited, CHENNAI

ITA 1823/CHNY/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6520 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 29-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 26-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JR
• Assessee Lawyers: S SRIDHAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 1823/MDS/2010 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(3), CHENNAI. V. M/S. SOLAR SOLES PVT. LTD., 928/1,PERIYAR E VR HIGH ROAD, KILPAUK, CHENNAI-600 010. (PAN : AAICS5736Q) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI K.E.B,.RENGARAJAN JR. STANDING COUNSEL RESPONDENT BY : SHRI S. SRIDHAR O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-V, CHENNAI IN ITA NO. 348/2008-09 DATE D 06-08-2010 FOR THE ASSESSMENT YEAR 2006-07. 2. SHRI K.E.B. RENGARAJAN, JR. STANDING COUNSEL REPR ESENTED ON BEHALF OF THE REVENUE AND SHRI S. SRIDHAR, ADVOCATE REPRESENTED O N BEHALF OF THE ASSESSEE. 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS : 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND FACTS OF THE CASE. I.T.A. NO.1823/MDS/2010 2 2.1 THE LEARNED CIT(A) HAS ERRED IN DELETING THE D ISALLOWANCE OF ` 43,65,842/- MADE ON MOULDS. 2.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT M OULDS BY THEMSELVES TAKEN AS INDEPENDENT UNITS ARE CAPABLE OF BEING INSTALLED AS CAPITAL MACHINERIES. 2.3 HAVING REGARD TO THE DECISION OF THE HON'BLE H IGH COURT OF ALLAHABAD IN THE CASE OF PLASTIC PRODUCTS LTD. V. CIT (62 ITR 209) THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 3.1 THE LEARNED CIT(A) HAS ERRED IN DELETING ADDIT ION OF ` 88,698/- MADE ON ACCOUNT OF NON DEDUCTION OF TDS. 3.2 THE LEARNED CIT(A) FAILED TO APPRECIATE THAT I N VIEW OF SECTION 9(1)(VII) READ WITH SECTIONS 40(A)(I)/195 , THE ASSESSEE OUGHT TO HAVE DEDUCTED TAX AT SOURCE. 3.3 THE LEARNED CIT(A) ERRED IN HOLDING THAT NO TD S IS REQUIRED TO BE MADE IF PAYMENT IS MADE TO A FOREI GN COMPANY WITHOUT GIVING A FINDING AS TO WHETHER TH E SAID AMOUNT IS TAXABLE IN INDIA OR NOT. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF T HE LEARNED CIT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 4. IN REGARD TO GROUNDS 2.1 TO 2.3 IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE HAD IMPORTED MOULDS WHICH WERE ATTACHED TO THE MACHINERY DEPLOYED IN THE MANUFACTURING OF SHOE SOLES. IT WAS THE SUBMIS SION THAT THE ASSESSEE HAD CLAIMED THE EXPENDITURE ON THE PURCHASE OF IMPORTED MOULDS AS REVENUE I.T.A. NO.1823/MDS/2010 3 EXPENDITURE. THE ASSESSING OFFICER HAD TREATED THE SAME AS CAPITAL EXPENDITURE AND GRANTED DEPRECIATION. IT WAS THE SUBMISSION TH AT ON FIRST APPEAL THE LEARNED CIT(A) HAD HELD THAT THE EXPENDITURE ON THE PURCHAS E OF THE IMPORTED MOULDS WAS REVENUE EXPENDITURE. IT WAS THE SUBMISSION THA T THE MOULDS WERE INDEPENDENT ITEMS OF MACHINERY. IT WAS THE SUBMISS ION THAT THE PURCHASE OF THE MOULDS WERE NOT ON ACCOUNT OF REPLACEMENT OF THE DA MAGED MOULDS BUT WERE FOR THE PURPOSE OF NEW DESIGNS OF THE SOLES. IT WAS TH E SUBMISSION THAT THE EXPENDITURE ON THE PURCHASE OF THE MOULDS WERE LIAB LE TO BE HELD AS CAPITAL EXPENDITURE. 5. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT MOULDS WERE ONLY REPLACEMENT OF THE WORN OUT MOULDS USED IN THE MANUFACTURE OF THE SOLES OF SHOES WHICH WERE MANUFACTURED BY THE ASSESSEE. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD ALSO NOT INVESTIGATED INTO TH E ISSUE AND THE ORDER OF THE ASSESSING OFFICER WAS NOT A SPEAKING ORDER. IT WAS THE SUBMISSION THAT HE HAD NO OBJECTION IF THE ISSUE WAS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- ADJUDICATION. THE LEARNED DR HAD ALSO NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER CLEARLY SHOWS THAT THE ASSESSING OFFICER HAS NOT BROUGHT OUT ANY OF THE FACTS AS TO THE NATURE OF THE EXPENDITURE, WHETHER THESE WERE NEW DESIGNS, WHETHER SUCH MOULDS WERE USED EARLIER AND THE NEW MOULDS PU RCHASED WERE ONLY FOR I.T.A. NO.1823/MDS/2010 4 REPLACEMENT OF THE EARLIER MOULDS. THE NATURE OF TH E CASE HAS ALSO NOT BEEN BROUGHT OUT. A PERUSAL OF THE ORDER OF THE LEARNED CIT(A) SHOWS THAT THERE WERE 7 VARIETIES OF MOULDS WHICH WERE PURCHASED AND USED BY THE ASSESSEE FOR PRODUCTION OF THE SOLES WHICH WERE SOLD BY THE ASSE SSEE. IN THE CIRCUMSTANCES, THE ISSUE IN THIS REGARD IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE- ADJUDICATION AFTER BRINGING ALL THE FACTS RELEVANT TO THE ISSUE ON RECORD. 7. IN REGARD TO GROUNDS 3.1 TO 3.3 IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSESSEE HAD MADE TECHNICAL AND DESIGNING CHARGES T O TECHNICIANS WHO SUPERVISE THE PRODUCTION. IT WAS THE SUBMISSION THAT THE PAY MENTS WERE MADE TO FOREIGN TECHNICIANS WHO HAD COME TO THE ASSESSEES PREMISES . IT WAS THE SUBMISSION THAT TDS HAD BEEN DEDUCTED IN REGARD TO AN AMOUNT OF ` 2,50,000/-. HOWEVER, AN AMOUNT OF ` 88,698/- PAID TO THE FOREIGN COMPANY NO TDS WAS DE DUCTED. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD DISAL LOWED THE TECHNICAL AND DESIGNING CHARGES PAID TO THE EXTENT OF ` 88,698/- AS NO TDS HAD BEEN MADE ON THE SAME. IT WAS THE SUBMISSION THAT THE LEARNED C IT(A) HAD DELETED THE ADDITION HOLDING THAT THE PAYMENTS HAVING BEEN MADE TO THE F OREIGN COMPANY, TDS NEED NOT BE DEDUCTED. IT WAS THE SUBMISSION THAT AS THE PAYMENTS HAD BEEN MADE TOWARDS TECHNICAL AND DESIGNING CHARGES AND THIS WA S IN RELATION TO THE TECHNICAL WORK DONE AT THE PRODUCTION SITE OF THE ASSESSEE, T DS WAS LIABLE TO BE MADE AND THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE RE VERSED. I.T.A. NO.1823/MDS/2010 5 8. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE PAYMENT HAD BEEN MADE TO FOREIGN COMPANY AND NO TDS IS LIAB LE TO BE ,MADE. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD ALSO NOT EXAMINED THIS ISSUE IN ITS PROPER PERSPECTIVE. IT WAS FURTHER SUBMITTED THAT HE HAD NO OBJECTION IF THE ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FO R RE-ADJUDICATION. TO THIS SUBMISSION, THE LEARNED DR HAD ALSO NO OBJECTION. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER AS ALSO THE ORDER OF THE LEARNED CIT(A) SHOWS THAT THE FACTS NECESSARY FOR DECIDING THIS ISSUE ARE NOT EMANATING OUT OF THE OR DERS OF THE AUTHORITIES BELOW. IN THE CIRCUMSTANCES, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR RE-ADJUDICATION AFTER BRINGING ON RECORD THE FACTS NECESSARY FOR ADJUDICATING THE SAME. THE ASSESSING OFFICER SHALL GRANT ADEQUATE O PPORTUNITY TO THE ASSESSEE TO SUBSTANTIATE ITS CASE. IN THE CIRCUMSTANCES, THE A PPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 10. THE ORDER WAS PRONOUNCED IN THE COURT ON 30/06/ 2011. SD/- SD /- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE