DCIT, New Delhi V. M/s. Container Corporation of India Ltd., New Delhi

ITA 184/DEL/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7275 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-10-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 09-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: K SAMPATH ADV SH RAJ KUMAR
• Keywords: Depreciation; Difference of opinion; Change of opinion; Reassessment proceedings
• Section: 143(3); 147; 148; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER & SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 184/DEL/2013 ASSESSMENT YEAR: 2004-05 DCIT, VS. CONTAINER CORPORATION OF INDIA LTD. CIRCLE 3(1), C-3, MATHURA ROAD, NEW DELHI. OPP. APOLLO HOSPITAL, NEW DELHI. AAACC1205A (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PARWINDER KAUR , SR. DR RESPONDENT BY : SH. K. SAMPATH, ADV., SH. RAJ KUMAR, ADV. ORDER PER H.S. SIDHU, J.M. THE REVENUE HAS FILED THE PRESENT APPEAL AGAINST THE IMPUGNED ORDER DATED 17.10.2012 PASSED BY THE COMMISSIONER O F INCOME TAX (APPEALS)-VI, NEW DELHI FOR A.Y. 2004-05. 2. THE ASSESSEE IS A COMPANY FILED ITS RETURN OF IN COME ON 01/11/2004 AND THE AO COMPLETED THE SAME U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED THE ACT) ON 28/02/200 6 AT THE INCOME OF RS. 435,03,14,230/-. ON THE APPEAL FILED BY THE ASSESS EE, THE ASSESSEE GOT CERTAIN RELIEF AND APPEAL AFFECT U/S 143(3)/250/154 WAS GIVEN BY THE AO ON 09/04/2008. 3. THE ASSESSEE COMPANY IS A GOVERNMENT OF INDIA UN DERTAKING WORKING UNDER THE ADMINISTRATIVE CONTROL OF MINISTR Y OF RAILWAYS. IT IS ENGAGED IN THE BUSINESS OF HANDLING AND TRANSPORTAT ION OF CONTAINERIZED CARGO. ITS OPERATING ACTIVITIES ARE MAINLY CARRIED OUT AT ITS INLAND ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 2 CONTAINER DEPOTS (ICDS). CONTAINER FREIGHT STATION S (CFS) AND PORT SIDE CONTAINER TERMINALS (PSCTS) SPREAD ALL OVER THE COU NTRY. ITS WAGONS ARE RUNNING ON INDIAN RAILWAYS SYSTEM FOR CARRIAGE OF C ONTAINER TRAFFIC. THE APPELLANT IS ENGAGED IN DEVELOPING, OPERATING AND M AINTAINING INFRASTRUCTURE FACILITIES, INCOME FROM WHICH IS ELI GIBLE FOR DEDUCTION U/S 80IA OF THE INCOME TAX ACT. 4. SUBSEQUENTLY, THE CASE OF THE ASSESSEE COMPANY W AS REOPENED U/S 147 OF THE INCOME TAX ACT AND A NOTICE U/S 148 WAS ISSUED TO THE ASSESSEE COMPANY ON 28/03/2011. THE ASSESSING OFFI CER FINALLY COMPLETED THE REASSESSMENT U/S 143(3)/147 OF THE AC T AT TOTAL INCOME OF RS. 361,31,42,947/- VIDE ORDER DATED 20/12/2011. I N THE REASSESSMENT U/S 143(3)/147 OF THE ACT, THE AO MADE THE FOLLOWIN G ADDITIONS: A) DISALLOWANCE OF PERFORMANCE LINKED INCENTIVE (PL I) RS. 1,87,00,000 B) DISALLOWANCE OF DEPRECIATION ON PLANT & MACHINER Y ON ACCOUNT OF EXCHANGE VARIATION RS. 21,08,326/- C) DISALLOWANCE OF SOFTWARE DEVELOPMENT EXPENSES R S. 18,43,759/- 5. AGGRIEVED BY THE AFORESAID ADDITIONS THE ASSESSE E FILED AN APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO VIDE I MPUGNED ORDER DATED 17/10/2012 ALLOWED THE APPEAL FILED BY THE ASSESSEE AND QUASH THE RE- ASSESSMENT ORDER PASSED U/S 147 IN PURSUANCE TO THE NOTICE U/S 148 OF THE ACT BY HOLDING THAT NOTICE HAS BEEN ISSUED AFTE R THE EXPIRY OF FOUR YEARS FROM THE END OF RELEVANT ASSESSMENT YEARS WHI CH IS BARRED BY LIMITATION AND BEYOND THE JURISDICTION. 6. THE REVENUE FEELS AGGRIEVED AGAINST THE IMPUGNED ORDER DATED 17/10/2012 PASSED BY THE CIT(APPEALS)-VI, NEW DELHI FILED THE PRESENT APPEAL. 7. LD. DR RELIED ON THE ORDER PASSED BY THE AO U/S 143(3)/147 DATED 20/12/2011 AND THE CONTENTION RAISED BY THE REVENUE IN ITS GROUNDS OF APPEAL. ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 3 8. LD. COUNSEL FOR THE ASSESSEE CONTROVERTED THE AR GUMENT ADVANCED BY LD. DR AND RELIED UPON THE IMPUGNED ORDER PASSED BY THE LD. FIRST APPELLATE AUTHORITY. HE HAD ALSO FILED A SMALL PAP ER BOOK CONTAINING PAGE 1 TO 37 IN WHICH HE HAS ATTACHED (I) WRITTEN SUBMIS SIONS FILED BEFORE CIT(A) DATED 07.08.2012, (II) COPY OF SUBMISSION MA DE BEFORE AO U/S 132(2) REGARDING THE CLAIM OF PRODUCTIVITY LINKED I NCENTIVE (PLI) AND DEPRECIATION ON P&M, (III) COPY OF SUBMISSIONS MADE BEFORE AO DURING REASSESSMENT PROCEEDINGS U/S 147/148, (IV) COPY OF REASONS RECORDED BY DCIT FOR REOPENING THE CASE U/S 148, (V) COPY OF CB DT CIRCULAR NO. 549 DATED 31.10.1989 EXPLAINING SCOPE OF AMENDED SECTIO N 147, (VI) COPY OF CIT(A) ORDER U/S 263 FOR A.Y. 2005-06 REGARDING PRO DUCTIVITY LINKED INCENTIVE. 9. AT THE TIME OF HEARING HE HAS ALSO FILED A SYNOP SIS TO SUPPORT THE IMPUGNED ORDER AND REQUESTED THAT THE APPEAL FILED BY THE REVENUE MAY BE DISMISSED. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS PASSED BY THE REVENUE AUTHORITIES ALONG WITH THE DOCUMENTARY EVIDENCE FILED BY THE ASSESSEE AND WE ARE OF THE VIEW THAT THE AO COMPLET ED THE ASSESSMENT U/S 143(3) OF THE ACT AT AN INCOME OF RS. 435,03,14 ,230/- AND ON APPEAL FILED BY THE ASSESSEE THE LD. FIRST APPELLATE AUTHO RITY HAS ALSO GIVEN SOME RELIEF TO THE ASSESSEE AND APPEAL EFFECT U/S 143(3) /250/154 WAS ALSO GIVEN BY THE AO ON 09/04/2008. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS REOPENED U/S 147 OF THE ACT AND A NOTICE U/S 148 WA S ISSUED TO THE ASSESSEE ON 28/03/2011. THE AO FINALLY COMPLETED THE REASSESSMENT U/S 143(3)/147 OF THE ACT AT TOTAL INCOME OF RS. 36 1,31,42,947/- VIDE ORDER DATED 20/12/2011 BY MAKING THREE ADDITIONS ON ACCOU NT OF DISALLOWANCE OF PERFORMANCE LINKED INCENTIVE (PLI) AMOUNTING TO RS. 1,87,00,000/-, DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHINERY ON ACCOUNT OF ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 4 EXCHANGE VARIATION OF RS. 21,08,326/- AND DISALLOWA NCE OF SOFTWARE DEVELOPMENT EXPENSES AMOUNTING TO RS. 18,43,759/-. 11. BEFORE THE LD. FIRST APPELLATE AUTHORITY ASSESS EE PLEADED THAT NECESSARY PRE-CONDITIONS FOR INITIATING THE RE-ASSE SSMENT PROCEEDINGS HAS NOT BEEN FULFILLED IN THE CASE OF ASSESSEE BECAUSE THE ASSESSEE DISCLOSE FULL DETAILS AND FACTS REGARDING AFORESAID CLAIMS I N COURSE OF ORIGINAL ASSESSMENT COMPLETED U/S 143(3) OF THE ACT. THE OR IGINAL ASSESSMENT WAS COMPLETED U/S 143(3) OF THE ACT AFTER EXAMINING THE RELEVANT DETAILS REGARDING AFORESAID CLAIMS. IN FACT THE AO ALSO AS KED THE APPELLANT TO FILE DOCUMENTARY EVIDENCE IN SUPPORT OF THE AFORESAID CL AIMS IN RESPONSE TO WHICH THE ASSESSEE FILED THE DETAILS AND EVIDENCES. AFTER CONSIDERING THE RELEVANT FACTS AND DETAILS AND EVIDENCES, THE AO CA ME TO THE CONCLUSION THAT THE CLAIMS WERE GENUINE AND ALLOWABLE UNDER TH E LAW. ACCORDINGLY, HE ALLOWED THE CLAIMS IN THE REGULAR ASSESSMENT COM PLETED U/S 143(3) OF THE ACT. THE ASSESSEE ALSO PLEADED THAT THE AO DID NOT HAVE ANY FRESH MATERIAL OR INFORMATION ABOUT THE SAID CLAIMS. HE HAD NO MATERIAL OR INFORMATION APART FROM CHANGE OF OPINION TO HAVE RE ASON TO BELIEVE THAT INCOME HAS ESCAPED ASSESSMENT IN THE CASE OF THE AS SESSEE. IT IS A WELL SETTLED THAT WHERE THE REASONS RECORDED BY THE AO D ISCLOSED NO MORE THAN MERE CHANGE OF OPINION, THE RE-ASSESSMENT PROC EEDINGS ARE ALLOWABLE TO BE QUASHED. EVEN UNDER THE PROVISIONS OF SECTION 147 OF THE ACT W.E.F. 01/04/1989, INITIATION OF RE-ASSESSMENT PROCEEDING ON MERE CHANGE OF OPINION IS NOT SUSTAINABLE. THE ASSESSEE ALSO CITED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. KELVINATOR INDIA LIMITED, 256 ITR 1 IN WHICH THE HONBLE HIGH COURT HAD HELD THAT SECTION 147 OF THE ACT DOES NOT POSTULATE CONFERMENT OF POW ER UPON THE AO TO INITIATE REASSESSMENT PROCEEDINGS UPON HIS MERE CHA NGE OF OPINION. THE HONBLE COURT ALSO TOOK INTO ACCOUNT CIRCULAR NO. 5 49 DATED 31/10/1989 ISSUED BY THE CBDT EXPLAINING THE SCOPE OF AMENDED SECTION 147 OF THE ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 5 I.T. ACT. TO SUPPORT THE AFORESAID CONTENTION THE LD. CIT HAS ALSO CITED THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. EICHER LTD. 294 ITR 310 & DT & TDC LTD. VS. ACIT, 324 ITR 234, REIT ERATED THE EARLIER DECISIONS AND HELD THAT REASSESSMENT BASED ON MERE CHANGE OF OPINION, WHERE MATERIAL FACTS WERE ALREADY ON RECORD, IS BAD IN LAW. AFTER THOROUGHLY GOING THROUGH THE IMPUGNED ORDER, WE ARE OF THE VIEW THAT ASSESSEE HAS FILED ITS WRITTEN SUBMISSIONS ON LEGAL ISSUE AS WELL AS ON MERIT OF THE CASE WITH THE SUPPORT OF VARIOUS DECIS IONS RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT AS WELL AS THE HO NBLE SUPREME COURT OF INDIA ALONG WITH THE RELEVANT PROVISION OF LAW. TH E LD. FIRST APPELLATE AUTHORITY HAS THOROUGHLY CONSIDERED EACH AND EVERY SUBMISSION OF THE ASSESSEE AND HAS GIVEN ITS FINDING IN PARA NO. 5 PA GE 11 TO 22. IN OUR CONSIDERED VIEW THE LD. FIRST APPELLATE AUTHORITY H AS PASSED A WELL REASONED ORDER ON THE BASIS OF VARIOUS DECISIONS ON THE ISSUES IN DISPUTE. 12. AS DISCUSSED ABOVE, IN THE REASSESSMENT ORDER P ASSED U/S 143(3)/147 OF THE ACT, THE AO MADE THE THREE ADDITI ONS NAMELY: A) DISALLOWANCE OF PERFORMANCE LINKED INCENTIVE (PL I) RS. 1,87,00,000 B) DISALLOWANCE OF DEPRECIATION ON PLANT & MACHINER Y ON ACCOUNT OF EXCHANGE VARIATION RS. 21,08,326/- C) DISALLOWANCE OF SOFTWARE DEVELOPMENT EXPENSES R S. 18,43,759/- 13. AFTER PERUSING THE REASONS RECORDED WHICH THE A SSESSEE HAS ATTACHED IN THE PAPER BOOK PAGE 26 & 27. WE ARE OF THE VIEW THAT AO VIDE HIS LETTER DATED 20/12/2005 DURING THE COURSE OF ORIGINAL ASSESSMENT PROCEEDING RAISED SPECIFIC QUERY REGARDING CHANGE I N ACCOUNTING POLICY AND THE ASSESSEE FILED ITS REPLY DATED 12/01/2006 W ITH SUPPORT OF DOCUMENTARY EVIDENCE. THE AO HAS CONSIDERED THE SA ME AND ACCEPTED THE EXPLANATION GIVEN BY THE ASSESSEE. EVEN OTHERW ISE THE CLAIM OF PLI HAS ALSO BEEN ACCEPTED BY THE CIT IN THE PROCEEDING U/S 263 FOR A.Y. 2005-06 VIDE HIS ORDER DATED 03/03/2009. KEEPING I N VIEW OF AFORESAID DISCUSSION, WE ARE OF THE VIEW THAT THE AO HAS DEAL T UPON THE ISSUE OF PERFORMANCE LINKED INCENTIVE (PLI) DURING THE COURS E OF ORIGINAL ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 6 ASSESSMENT. THE ASSESSEE COMPANY HAS DULY DISCLOSE D THE CHANGE IN ACCOUNTING POLICY REGARDING PRODUCTIVITY LINKED INC ENTIVE BEFORE THE AO AT THE TIME OF ORIGINAL ASSESSMENT. 14. SIMILARLY ON THE SECOND ISSUE REGARDING EXCHANG E VARIATION OF RS. 84,32,302/- THE DEPRECIATION CHART REDUCING THE COS T OF FIXED ASSETS WERE SUBMITTED BY THE ASSESSEE IN THE ORIGINAL ASSESSMEN T PROCEEDING AS WELL AS IN THE REASSESSMENT PROCEEDINGS. THEREFORE, THE RE IS NO OCCASION TO ADD BACK RS. 24,08,326/- AS DEPRECIATION ON ACCOUNT OF EXCHANGE VARIATION OF RS. 84,32,302/- CAPITALIZED IN THE COS T OF FIXED ASSETS THAT THE THIRD ISSUE OF DISALLOWANCES OF SOFTWARE DEVELOPMEN T EXPENSES WE HAVE SEEN THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE SPL. BENCH OF ITAT DELHI IN ITA NO. 72/DEL/2006 IN THE CASE OF M/S AMWAY INDIA ENTERPRISES VS. DCIT THAT SOFTWARE DEVE LOPMENT EXPENSES ARE REVENUE IN NATURE. THE HONBLE JURISDICTIONAL HIGH COURT VIDE ITS ORDER DATED 04/11/2011 IN THE CASE OF CIT VS. ASAHI INDIA SAFETY GLASS LTD. (ITA NO. 1110/2006 & 1111/2006) HAS ALSO HELD THAT THE S OFTWARE DEVELOPMENT EXPENSES ARE REVENUE IN NATURE. THE DETAILS OF SOF TWARE EXPENSES HAS ALREADY BEEN FURNISHED BY THE ASSESSEE DURING THE C OURSE OF ORIGINAL ASSESSMENT WHICH IS NOT DENIED BY THE REVENUE AUTHO RITY IN THEIR ORDERS. 15. WE HAVE THOROUGHLY GONE THROUGH THE IMPUGNED OR DER ON THE LEGAL ISSUE ALSO IN WHICH THE LD. FIRST APPELLATE AUTHORI TY HAS QUASHED THE REASSESSMENT ORDER WHICH HAS BEEN PASSED AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF ASSESSMENT YEARS. IT IS MATTER OF RECORD THAT THE YEAR IN QUESTION IS A.Y. 2004-05 WHICH MEANS ANY NOTICE U/S 148 ISSUED AFTER 31/03/2009 IS NOT SUSTAINABLE IN THE EYE OF LAW. I T CAN ONLY BE SUSTAINABLE IF IT PASSES THE TEST OF PROVISO, NAMELY THAT THE E SCAPEMENT OF INCOME SHOULD BE ON ACCOUNT OF FAILURE ON THE ASSESSEES P ART TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS RELEVANT TO ITS INCOME. W HEN THE AO IS ABLE TO DEMONSTRATE THAT ESCAPEMENT OF INCOME THEREIN IS OC CASIONED BY ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 7 INCOMPETENCE OR INACCURACY IN THE ASSESSEE DISCLOSU RE. LD. FIRST APPELLATE AUTHORITY HAS DISCUSSED IN DETAIL THAT IN THE IMPUGNED ORDER QUERY RAISED BY THE AO ON THE ADDITIONS IN DISPUTE HAS FULLY BEEN MET BY THE ASSESSEE WITH THE SUPPORT OF DOCUMENTARY EVIDEN CE AT THE TIME OF ORIGINAL ASSESSMENT. THEREFORE, THE REASSESSMENT O RDER IS NOT SUSTAINABLE IN THE EYE OF LAW AND THE AO ASSUMED HI S JURISDICTION U/S 147 OF THE I.T. ACT AS IT WAS A CASE OF CHANGE OF OPINI ON AND IN OUR CONSIDERED VIEW THE AO HAS NOT BROUGHT ON RECORD ANY FRESH MAT ERIAL OR INFORMATION FOR ASSUMING JURISDICTION U/S 147 OF THE ACT. WE A RE OF THE CONSIDERED VIEW THAT LD. FIRST APPELLATE AUTHORITY HAS PASSED A WELL REASONED ORDER ON MERIT AS WELL AS ON LEGAL ISSUE ON THE BASIS OF VAR IOUS DECISIONS RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT AND THE HO NBLE SUPREME COURT OF INDIA. THEREFORE, NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER. BE UPHOLD THE IMPUGNED ORDER DATED 17/10/2012 PASSE D BY THE LD. FIRST APPELLATE AUTHORITY BY DISMISSING THE APPEAL FILED BY THE REVENUE. 16. IN THE RESULT, THE REVENUES APPEAL IS DISMISSE D. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 10/10/2014 SD/- SD/- (S.V. MEHROTRA) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 10/10/2014 *KAVITA, P.S. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR ITA NO. 184/D/2013 CONTAINER CORPORATION OF INDIA LTD. 8