Akzo Noble Non-Stick Coatings Ltd., Ahmedabad V. The ACIT.,Circle-1, Ahmedabad

ITA 1916/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6511 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-04-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 10-06-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: RAJIB JAIN SRDR
• Assessee Lawyers: S N AGARWAL
• Keywords: Business income; Rectification of order; Bonafide belief; Corroborative evidences; Royalty expenses; Condonation of delay; Set aside
• Section: 142(1); 234B; 80IB; 10B; 154; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER AND SHRI A.N.PHAUJA, HONBLE ACCOUNTANT MEMBER ITA NO.1916/AHD/2009 ASSESSMENT YEAR:2003-04 DATE OF HEARING:4.4.11 DRAFTED:10.5.11 AKZO NOBLE NON-STICK COATINGS LTD. 16/10, DEVENDRA SOCIETAKZO NOBLE NON-STICK COATINGS LTD. 16/10, DEVENDRA SOCIETY NR. NARANPURA, AHMEDABAD PAN NO.AAACC4767F V/S. ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-1, AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI S.N.AGARWAL, AR RESPONDENT BY:- SHRI RAJIB JAIN, SR-DR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS ASSESSEES APPEAL AGAINST THE ORDER OF COM MISSIONER OF INCOME-TAX(APPEALS)-VI, AHMEDABAD IN APPEAL NO. CIT (A)-VI/ACIT, CIR.1/ 141 /07-08 FOR THE ASSESSMENT YEAR 2003-04. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IN THIS CASE FILED DELAYED APPEAL BEFORE LD. CIT(APPEALS) AND FOLLOWING APPLI CATION FOR CONDONATION OF DELAY WAS SUBMITTED BEFORE HIM:- YOUR APPELLANT PRESENTS AN APPEAL U/S.246A AGAINST THE ORDER PASSED BY THE LEARNED ASSISTANT COMMISSIONER OF INCOME-TAX , CIRCLE-1, AHMEDABAD FOR ASSESSMENT YEAR 2003-04 ON 28-02-2006 ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 2 2. THE SAID ORDER WAS SERVED ON THE APPELLANT ON 1- 04-2006 AND CONTAINED THE DISALLOWANCE (OF ROYALTY EXPENSES OF RS.50,76,207 ASSESSING THE APPELLANT AT RS.1,23,73,900/- AND RAI SING A DEMAND OF RS.25,01,745/-. ON GOING THROUGH THE ASSESSMENT ORDER, THE APPELLAN T FOUND THAT THE LEARNED ASSESSING OFFICER HAS MADE TWO APPARENT MIS TAKES WHILE FRAMING THE ASSESSMENT, VIZ. (I) HE HAS NOT GRANTED CORRESPONDING DEDUCTION U/S. 80IB ON THE INCREASED AMOUNT OF PROFITS OF THE BUSINESS AFTER M AKING DISALLOWANCE OF RS.50,76,210/-. (II) HE HAS ALSO CORRESPONDINGLY NOT GRANTED THE IN CREASED DEDUCTION U/S.80IB AFTER MAKING DISALLOWANCE AND INCREASING T HE GROSS TOTAL INCOME. 3. THE APPELLANT ON RECEIPT OF THIS ASSESSMENT ORDE R AND ON FINDING THAT THE ABOVE TWO MISTAKES HAVE CREPT IN THE COMPUTATIO N OF TOTAL INCOME (AND THEREBY THE QUANTUM OF DEMAND RAISED AGAINST T HE APPELLANT) FILED IMMEDIATELY AN APPLICATION U/S.154 OF THE ACT VIDE ITS LETTER DATED 4-04- 2006 WHICH WAS FILED WITH THE DEPARTMENT ON 5-04-20 06, A COPY OF WHICH IS ALSO ATTACHED HEREW2ITH. THE APPELLANT THE REAFTER PURSUED THE MATTER WITH THE LEARNED ASSISTANT COMMISSIONER OF I NCOME-TAX REQUESTING HIM TO RECTIFY THE ABOVE APPARENT MISTAK ES. HOWEVER, TILL THIS DATE, THE LEARNED ASSESSING OFFICER HAS NOT TAKEN U P THE SAME FOR DISPOSAL. 4. THE APPELLANT WAS UNDER BONAFIDE BELIEF THAT BEC AUSE THE ASSESSMENT ORDER IS CARRYING SUCH PATENT MISTAKES O F LAW AND FACTS, THE SAME WOULD BE RECTIFIED IMMEDIATELY ANDD THEREFORE, WAS OF THE BONAFIDE BELIEF THAT IT CAN FILE THE APPEAL AGAINST THE ASSESSMENT ORDER THEREAFTER. HOWEVER, SINCE THE LEARNED ACIT HAD NOT TAKEN UP AN Y PROCEEDINGS IN RESPECT OF RECTIFICATION APPLICATION U/S.154 FILED BY THE APPELLANT, THE HOPES OF THEE ASSESSEE WERE BELIED AND THE APPELLAN T NOW FILES APPEAL AGAINST THE ORIGINAL ORDER U/S.143(3) PASSED BY THE LEARNED ASSESSING ON 28.2.2006 WHICH WAS SERVED ON IT ON 1-4-2006 AFT ER5 THE DELAY OF NEARLY 130 DAYS. 5. THE APPELLANT REQUESTS YOUR HONOUR THAT LOOKING TO THE FACTS AND CIRCUMSTANCES MENTIONED ABOVE AND LOOKING TO THE BO NAFIDE BELIEF, THE APPELLANT ENTERTAINED THAT IT CAN FILE APPEAL AGAIN ST THE ORIGINAL ORDER AFTER HIS APPLICATION U/S.154 IS DISPOSED OFF, ITS REQUEST FOR CONDONATION OF DELAY IN FILING PRESENT APPEAL SHOULD BE SYMPATH ETICALLY CONSIDERED AND THIS APPEAL MAY PLEASE BE ADMITTED FOR HEARING. AND FOR THIS ACT OF KINDNESS, YOUR APPELLANT SHALL FOR EVER REMAIN, GRATEFUL TO YOUR HONOUR. ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 3 DURING THE APPELLATE PROCEEDINGS, THE ASSESSEE FURT HER MADE FOLLOWING SUBMISSIONS BEFORE LD. CIT(A) :- THE APPEAL FILED BY THE APPELLANT IS LATE BY 130 D AYS. THE APPELLANT HAS ALREADY SUBMITTED ITS APPLICATION FOR CONDONATION O F SUCH DELAY ALONG WITH APPEAL PAPER BEFORE YOUR HONOUR LAYING DOWN TH EREIN THE REASONS FOR SUCH DELAY IN FILING THE APPEAL AND REQUESTS YO UR HONOUR THAT LOOKING TO THE FACTS AND CIRCUMSTANCES NARRATED THEREIN THE DELAY IN FILING THE APPEAL, MAY PLEASE BE CONDONED AND THIS APPEAL BE A DMITTED FOR HEARING. 1.2 THE MAIN REASON FOR SUCH DELAY WAS THE PENDENCY OF THE RECTIFICATION APPLICATION FILED U/S.154 OF THE ACT BEFORE LEARNED AO WHICH WAS FILED WITHIN 5 DAYS OF SERVICE OF THE IMPUGNED ASSESSMENT ORDER BEFORE THE LEARNED A.O A COPY OF SUCH APPLICATION U /S.154 IS ATTACHED HEREWITH AT PAGE NO.1&2. ON PERUSAL OF THE SAID APPLICATION. YOUR HONOUR WOU LD FIND THAT THE MISTAKES COMMITTED BY THE LEARNED A.O ARE OBVIOUS A ND PATENT ONE IN THE SENSE THAT AFTER CONSIDERING ADDITIONS TO THE R ETURNED INCOME AND ASSESSING THEM UNDER BUSINESS INCOME, HE HAS NOT GR ANTED CORRESPONDING DEDUCTION DIN RESPECT OF SUCH ENHANCE D INCOME TO WHICH APPELLANT IS ENTITLED U/S.10-IB AS WELL AS U/S.80-I B. THE SAID MISTAKE BEING GLARING ONE, YOUR APPELLANT WAS UNDER GENUINE AND BONA FIDE BELIEF THAT THE RECTIFICATION APPLICA TION WOULD BE DISPOSED OFF FAVOURABLY IN A VERY SHORT TIME AND THAT THE AP PELLANT THEN CAN FILE THE APPEAL AGAINST SUCH MODIFIED ORDER SO AS TO RED UCE THE AREA OF DISPUTE. 1.3 UNFORTUNATELY, EVEN AFTER CONSTANT FOLLOW UP BY PERSONAL VISITS, SUCH RECTIFICATION APPLICATION REMAINED UNDISPOSED OFF. IT IS INDEED NOTEWORTHY TO MENTION THAT THOUGH THE PROVISIONS OF SECTION 15 4 EXCEPT THE LEARNED A.O TO DISPOSE OFF SUCH RECTIFICATION APPLICATION W ITHIN SIX MONTHS OF THE DATE OF FILING, SUCH APPLICATION HAS REMAINED UNDIS POSED OFF EVEN TODAY AFTER LAPSE OF ALMOST NINE MONTHS. THE APPELLANT ON CE AGAIN VIDE ITS LETTER DATED 5-9-2006, A COPY OF WHICH IS ATTACHED AT PAGE-3 OF THIS COMPILATION REMAINED LEARNED A.O ABOUT THE PENDENCY OF SUCH RECTIFICATION APPLICATION BUT TO NO AVAIL. ULTIMATELY, THEREFORE, THE APPELLANT FILED APPEAL A GAINST ASSESSMENT ORDER WHICH DUE TO ABOVE FACT WAS DELAYED BY NEARLY 130 DAYS. 2.0 LAW AND PRECEDENTS IN RELATION TO CONDONATION O F DELAY IN FILING APPEAL. ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 4 2.1 YOUR APPELLANT SUBMITS THAT SIMILAR SITUATION W AS THERE IN A RECENT CASE DECIDED BY ALLAHABAD HIGH COURT IN THE CASE OF BHARAT AUTO CENTRE VS. CIT 282 ITR 366 A COPY OF WHICH IS ATTACHED HEREWITH A T PAGES 58 TO 60. ON PERUSAL OF THE SAID DECISION YOUR HONOUR WILL FI ND THAT FACTS OF THAT CASE ARE IDENTICAL TO THE FACTS OF THE APPELLANT. I N THAT CASE ALSO THE APPELLANT HAD PREFERRED RECTIFICATION APPLICATION A ND WAS THUS PURSUING ALTERNATIVE NAMELY AND ON ACCOUNT OF NON-DECISION I N RESPECT OF SUCH APPLICATION, HIS FILING OF FINAL APPEAL GOT DELAYED . THERE ALSO THE DELAY WAS OF NEARLY 158 DAYS. BOTH THE CIT(A) AND TRIBUNA L THEREIN REFUSED TO CONDONE THE DELAY AND ULTIMATELY MATTER WENT TO ALL AHABAD HIGH COURT WHICH REVERSED THE VIEW TAKEN BY LOWER AUTHORITIES AND DIRECTED THEM TO CONDONE THE DELAY. IN THAT CASE THE COURT OBSERVED AS UNDER:- THE COMMISSIONER OF INCOME-TAX (APPEALS) AS WELL A S THE TRIBUNAL HAVE TAKEN A PEDANTIC VIEW WHILE CONSIDERI NG THE APPLICATION FOR CONDONATION OF DELAY. IT HAS BEEN C ONSISTENTLY HELD BY THE APEX COURT THAT IN THE MATTE OF CONDONATION OF DELAY, A LIBERAL AND PRAGMATIC VIEW SHOULD BE TAKEN. THE REA SONS GIVEN BY THE APPELLANT FOR THE DELAY APPEARS TO BE SUFFICIEN T CAUSE AND ACCORDINGLY, THE DELAY IS LIABLE TO BE CONDONED. HE ALSO PLACED RELIANCE ON VARIOUS CASE LAWS FOR CO NDONATION OF DELAY BEFORE LD. CIT(A). 3. LD. CIT(APPEALS) AFTER TAKING INTO CONSIDERATION THE SUBMISSION OF ASSESSEE AND THE JUDICIAL PRONOUNCEMENT ON THE ISSU E DISMISSED THE APPEAL OF ASSESSEE BY NOT CONDONING THE DELAY IN FILING OF APPEAL BY OBSERVING AS UNDER:- KEEPING IN VIEW THE AFORESAID FACTS; CIRCUMSTANCES AND VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS QUITE CLEAR THAT ACCORDING TO SECTION 249(2), APPEAL BEFORE CIT(APPEALS) SHALL BE PRESENTED WITH IN THIRTY DAYS OF THE FOLLOWING DATE: A) WHERE THE APPEAL RELATES TO ANY TAX DEDUCTED UND ER SUB-SECTION 1 OF SECTION 195, THE DATE OF PAYMENT OF THE TAX OR B) WHERE THE APPEAL RELATES TO ANY ASSESSMENT OR PE NALTY, THE DATE OF SERVICE OF THE NOTICE OF DEMAND RELATING TO THE ASS ESSMENT OR PENALTY; C) IN ANY OTHER CASE THE DATE OF INFORMATION OF THE ORDER SOUGHT TO BE APPEALED AGAINST, IS SERVED. ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 5 THE APPELLANT MUST HAVE SUFFICIENT CAUSE FOR NOT PRESENTING THE APPEAL WITHIN THAT PERIOD. WHEN THE AFORESAID IS CONSIDERED VIS--VIS THE FACT S AND CIRCUMSTANCES OF THE APPEAL UNDER CONSIDERATION, THE FACT IS ABUN DANTLY CLEAR THAT PRINCIPAL CONTENTION (I.E. MAIN GROUND OF APPEAL) I S AGAINST THE ADDITION MADE BY DISALLOWING ROYALTY EXPENSES OF RS.50,76,21 0/- AND NOT U/S.10B AND U/ 80IB, FOR WHICH THE APPELLANT HAS SU BMITTED THE RECTIFICATION APPLICATION U/S.154 OF THE I.T. ACT, 1961. THIS FACT IS CRYSTAL CLEAR FROM THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER U/S.143(3) OF THE I.T. ACT, 1961 ON 28.2.2006, WHIC H IS REPRODUCED AS UNDER:- THE RETURN OF INCOME WAS FILED ON 28.11.2003 DECLA RING TOTAL INCOME OF RS.7297690/- ALONG WITH COMPUTATION OF IN COME, PROFIT AND LOSS ACCOUNT, BALANCE SHEET, TAX AUDIT REPORT I N FORM 3CD ETC. THE RETURN WAS PROCESSED U/S.143(1) ON 18.12.2003. THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S/. 143(2) WAS ISSUED ON 13.10.2004, WHICH WAS SERVED ON THE ASSESSEE ON 30. 10.2004. THEREAFTER NOTICES U/S.143(2) AND 142(1) WERE ISSUE D ALONG WITH A DETAILED QUESTIONNAIRE ON 17.8.2005, WHICH WERE SER VED ON THE ASSESSEE ON 22.05.2005. IN RESPONSE TO NOTICES ISSU ED U/S.143(2) AND 142(1), SHIR NARELWALA, CA ATTENDED IN THE COMPANY OF SHRI H MODI FROM TIME TO TIME AND THE CASE WAS DISCUSSED WITH T HEM. 2. THE ASSESSEE CARRIES ON THE BUSINESS OF MANUFACT URING OF NON-STICK COATINGS/PAINTS. 3. DURING THE YEAR, THE ASSESSEE HAS CLAIMED ROYALT Y EXPENSES OF RS.50,76,210/- AS AGAINST RS. NIL CLAIMED IN THE IM MEDIATELY PRECEDING YEAR. THEREFORE VIDE LETTER DTD. 17.8.2005, THE ASS ESSEE WAS REQUIRED TO FURNISH SUPPORTING DETAILS AND JUSTIFY THE CLAIM. I N RESPONSE THERETO, THE ASSESSEE VIDE ITS LETTER DTD. 15.9.2005 FURNISHED T HE DETAILS. ON PERUSAL OF THE SAME IT IS SEEN THAT AS PER THE LETTER DTD. 17.5.2003 ISSUED BY THE RBI, EXCHANGE CONTROL DEPARTMENT, AHMEDABAD THE APP ROVAL TO ENTER INTO THE TECHNICAL COLLABORATION WITH FOREIGN COMPA NY WAS ACCORDED ONLY ON 17.5.2003 I.E. AFTER THE END OF THE FINANCIAL YE AR RELEVANT TO A.Y 2003-04. THEREFORE, DURING THE COURSE OF HEARING TH E ASSESSEE WAS REQUIRED TO EXPLAIN THE ALLOWABILITY OF ROYALTY PAY MENT OF RS.50,76,210/- DURING THE YEAR WITH SUPPORTING EVIDENCE. IN RESPON SE THERETO, THE ASSESSMENT VIDE LETTER DTD. 21.12.2005 CONTENDED HA T THE EFFECTIVE DATE AS PER THE AGREEMENT IS 1.4.2002 AND IS VALID FOR I NDEFINITE PERIOD UNLESS TERMINATED BY THE PARTIES. HOWEVER, THE ASSESSEE HA D NO EXPLANATION ABOUT THE ALLOWABILITY OF THE CLAIM IN VIEW OF THE APPROVAL BY THE EXCHANGE CONTROL AUTHORITIES I.E RBI FOR ENTERING I NTO THE TECHNICAL ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 6 COLLABORATION WITH THE FOREIGN COMPANY. THEREFORE, THE ROYALTY CLAIM OF RS.50,76,210/- IS DISALLOWED AND ADDED TO THE TOTAL INCOME. 4. WITH THE ABOVE REMARKS, THE TOTAL INCOME OF THE ASSESSEE IS COMPUTED AS UNDER;- TOTAL INCOME AS PER RETURN RS. 72,97,690 ADD: ADDITION/DISALLOWANCE AS DISCUSSED IN THE ORDE R 1) ROYALTY AS PER PARA 3 RS.50,76,210 RS. 50,76, 210 TOTAL INCOME RS.1,23,73,900 ASSESSED U/S.143(3) ISSUE DN & CHALLAN/RO AS THE CA SE MAY BE. GIVE CREDIT FOR PREPAID TAXES, IF ANY, AFTER VERIFICATIO N. CHARGE INTEREST U/S.234A/234B/234C/234D AS APPLICABLE. ISSUED PENAL TY NOTICE U/S.271(1) FOR CONCEALMENT/FURNISHING OF INACCURAT E PARTICULARS OF INCOME. THE APPELLANT ITSELF ADMITTED IN ITS SUBMISSION DAT ED 1.9.2008 THAT ITS PRINCIPAL CONTENTION (I.E. MAIN GROUND) IS AGAINST THE ADDITION MADE BY DISALLOWING ROYALTY EXPENSES OF RS.50,76,201/-. RES T OF THE GROUNDS (I.E. PERTAINING TO DEDUCTION U/S.10B AND U/S.80IB) ARE A LTERNATIVE CONTENTIONS. THE RELEVANT PORTION OF APPELLANTS SU BMISSIONS DATED 1.9.2008 IS REPRODUCED AS UNDER:- 1 IN CONTINUATION WITH OUR EARLIER SUBMISSION DATE D 12-12-2006, WE HAVE TO INFORM YOUR HONOUR THAT THE LEARNED ASSE SSING OFFICER HAS PASSED ON ORDER U/S.154 OF THE ACT GRANTING DED UCTION U/S.80IB TO THE APPELLANT FOR A SUM OF RS.34,88,508 /- AND ALSO U/S.10-B FOR A SUM OF RS.3,74,35,205/-. COPY OF THE SAID ORDER IS ATTACHED HEREWITH AT PAGE NOS. 1 & 2. THEREFORE, TH E LEARNED A/.O HAS IN PRINCIPLE ACCEPTED THE STAND OF THE APP ELLANT THAT DEDUCTION U/S.10-B AND U/S.80-IB ARE TO BE WORKED OUT ON THE ASSESSED INCOME. THEREFORE, THE APPELLANTS ALTERNA TIVE CONTENTION AS RAISED IN THE GROUNDS OF APPEAL AT SL . NOS. 2 & 3 ARE ALLOWED BY THE LEARNED A.O. HOWEVER, THE APPELL ANT WOULD LIKE TO ARGUE ON THE PRINCIPAL STAND THAT THE ADDITION M ADE BY DISALLOWING ROYALTY EXPENSES OF RS.50,76,210/- HAS BEEN WRONGLY MADE BY LEARNED A.O FOR THE REASONS AND FOR THE DET AILED SUBMISSIONS MADE IN OUR EARLIER SUBMISSION DATED 12 .12.2006. 2. SINCE THE ALTERNATIVE CONTENTIONS OF ALLOWING DE DUCTION U/S.10-B & US.80-IB WOULD BE DEPENDENT ON OUR PRINCIPAL STAN D MENTIONED ABOVE BEING REJECTED, WE SUBMIT TO YOUR HONOUR THAT IF WE SUCCEED ON THE PRINCIPAL CONTENTION THAT ROYALTY EX PENSES ARE NOT DISALLOWABLE, THE ALTERNATIVE CONTENTIONS AT GROUND NOS.2 & 3 BECOME INFRUCTUOUS AND MAY BE DEALT WITH ACCORDINGL Y. ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 7 3. IF ON THE OTHER HAND, OUR PRINCIPAL CONTENTION O F ROYALTY EXPENSES BEING NOT DISALLOWABLE COMES TO BE REJECTE D, THEN ALREADY IN VIEW OF THE SUBSEQUENT ORDER PASSED BY T HE LEARNED A.O U/S.154 OF THE ACT DATED 200-02-2007, THE GROUN DS AT SR. NOS. 2 & 3 WOULD ALSO BECOME INFRUCTUOUS FOR THE LI MITED PURPOSES OF PRESENT APPEAL BUT SUBJECT TO OUR RIGHT OF CHALLENGING THEM IN FURTHER PROCEEDINGS. KEEPING IN VIEW THE AFORESAID FACTS AND CIRCUMSTANC ES, IT IS ABUNDANTLY CLEAR THAT PRINCIPAL CONTENTION (I.E. THE MAIN GROU ND) IS AGAINST THE ADDITION MADE BY DISALLOWING ROYALTY EXPENSES OF RS .50,76,210/- AND NOT U/S.10B AND 80IB THEREBY, THE APPELLANT MUST HA VE FILED THE APPEAL THERE AND THEN. THE APPELLANT RELIES UPON CERTAIN CASE LAWS BUT ALL THE CASE LAWS REFERRED STRESS UPON THE SUFFICIENT CAUSE AND BO NA FIDE BELIEF BUT THE FACTS AND CIRCUMSTANCES OF THE APPEAL UNDER CONSIDE RATION CLEARLY PROVE THE FACT THAT APPLICATION FOR RECTIFICATION HAS BEE N FOUND TO BE PURELY ON MISCONCEIVED GROUNDS ON ACCOUNT OF MISTAKE OF COUNS EL. FURTHER, KEEPING IN VIEW THE AFORESAID FACTS AND CI RCUMSTANCES, THE FACT IS CRYSTAL CLEAR THAT THOUGH THE ASSESSING OFFICER HAS PASSED THE ORDER U/S.154 OF THE I.T. ACT, 1961; DULY GRANTING DEDUCT ION U/S.80IB TO THE APPELLANT FOR A SUM OF RS.34,88,508/- AND ALSO U/S. 10B OF I.T. ACT 1961 FOR A SUM OF RS.3,74,35,205/-; EVEN THEN THE APPELL ANT LIKES TO ARGUE ON THE ADDITION MADE BY DISALLOWING ROYALTY EXPENSES O F RS.50,76,210/-; DOES NOT PRESENT THE APPEAL WITHIN STIPULATED PERIO D; PRAYS FOR CONDONING THE DELAY; IRONICALLY TERMING THE SAME S UFFICIENT CAUSE, BONA FIDE MISTAKE OF THE APPELLANT AS WELL AS COUN SEL DILIGENCE, PROMPT ACTION NOT AT ALL MALA FIDE; NOT AT ALL RE SORTING TO DILATORY STRATEGY OR INACTION; IN THE NAME OF LIBERAL APPRO ACH: AND MISCARRIAGE OF JUSTICE. KEEPING IN VIEW THE AFORESAID FACTS; CIRCUMSTANCES AND VARIOUS JUDICIAL PRONOUNCEMENTS, IT IS CRYSTAL CLEAR THAT THE APPELL ANT HAS SERVICES OF CHARTERED ACCOUNTANT AND TAX CONSULTANTS OF ITS DIS POSAL. CONSEQUENTLY, IT HAS PROPER LEGAL GUIDANCE. IN THE GIVEN FACTS AND CIRCUMSTANCES, PRAYING FOR CONDONATION OF DELAY ON THE BASIS OF REASONS FURNISHED BY THE APPELLANT ARE NOT AT ALL SUFFICIEN T CAUSE FOR CONDONING THE DELAY IN QUESTION (M.S.NULON INDIA V. CIT (1996 ) 219 ITR 736 (DEL). MISTAKE MUST BE BONA FIDE AND NOT MERELY A DEVICE T O COVER THE ULTERIOR PURPOSE, NAMELY, LATCHES OF THE LITIGANT OR ATTEMPT TO SAVE LIMITATION IN A UNDERHAND WAY. THE EXPLANATION MUST NOT SMACK OF MA LA FIDES AND IT MUST NOT BE PUT FORTH AS PART OF A DILATORY STRATEG Y. DELAY MUST NOT BE ATTRIBUTABLE FOR WANT OF DILIGENCE OR INACTION. THE DELAY MUST NOT BE ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 8 DELIBERATE. [N. BALAKRISHNAN VS. M. KRISHNAMURTHY 1 998 (7) SUPREME COURT 123; COLLECTOR, LAND ACQUISITION V. MST. KATI JI & ORS. (1987) 62 CTR (SC) 23; 1987 913) ALR 306 (SC); BRIJINDER SING H V. KANSHI RAM AIR 1917 PC 156; SHAKUNTALA DEVI JAIN V. KUNTAL KUM ARI AIR 1969 SC 575; O.P. KATHPALIA V. LOKHMIR SINGH AIR 1984 SUPRE ME COURT 1744; STATE OF HARYAA V. CHANTDRA MANI AIR 1996 SC 1623; STATE OF MAHARASHTRA V. KAMLA MILLS LTD 91994) 94 STC 220 (S C); NEBHA & CO. V. STATE OF GUJARAT AIR 1986 SC 987; SHANKAR RAO VS . CHANDRASENKUNWAR AIR 1987 SC 1726; DY. COLLECTOR V. COMMUNIDADE OF BAMBOLIN AIR 1996 SC 148; STATE OF KERALA V. KRI SHNA KURUP MADHAVA KURUP, AIR 1971 (KERALA) 21 AND NIHALKARAN V. CWT (1989) 175 ITR 14 (MPP)] KEEPING IN VIEW THE FACTS AND CIR CUMSTANCES OF APPEAL UNDER CONSIDERATION, IT IS ABUNDANTLY CLEAR THAT APPLICATION FOR RECTIFICATION HAS BEEN FOUND TO BE PURELY ON MISCON CEIVED GROUNDS ON ACCOUNT OF MISTAKE OF COUNSEL, THEREBY, THE DELAY C ANNOT BE CONDONED. (RAJA RAMCHANDRA BHANGDE V. CIT (1984) 148 ITR 391 (MUMBAI). WITH THE RESULT, THE DELAY IN QUESTION IS NOT CONDONED. FURTHER AGGRIEVED BY THIS ORDER ASSESSEE IS NOW APP EAL BEFORE US. 4. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSES SEE REITERATED THE SAME SUBMISSION AS MADE BEFORE LD. CIT(A) WHICH HAS BEEN REPRODUCED BY US IN PARA-2 & 3 OF THIS ORDER. HE FURTHER PLACED RELIANC E ON THE RECENT DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIVIL APPEAL N O.456 OF 2010 IN THE CASE OF CIT V. PRIMA FRUIT PRODUCTS IN WHICH DELAY OF 654 DAYS OF FILING OF APPEAL WAS CONDONED BY THE HONBLE JURISDICTIONAL HIGH COURT. 5. ON THE OTHER HAND LD. SR-DR RELIED ON THE ORDER OF LD. CIT(APPEALS) . 6. AFTER HEARING BOTH THE PARTIES AND PERUSING RECO RD WE FIND THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF NON-STICK COATINGS/PAINTS. FOR THE YEAR UNDER APPEAL ASSESSEE FILED RETURN OF INCOME SHOWING INCOME OF RS.72,92,609/- CLAIMING ROYALTY E XPENSES OF RS.50,76,210/-. THIS CLAIM WAS DISALLOWED BY ASSESS ING OFFICER AND ASSESSMENT WAS COMPLETED AT THE FIGURE OF RS.1,23,7 3,210/-. AGAINST THIS ORDER AN APPLICATION FOR RECTIFICATION U/S.154 WAS FILED BY ASSESSEE BEFORE AO WHICH READS AS UNDER:- ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 9 TO THE ASST COMMISSIONER OF INCOME TAX, CIRCLE-1, AHMEDABAD SIR, SUB: APPLICATION FOR RECTIFICATION OF MISTAKE APPAR ENT ON RECORD U/S.154 OF THE INCOME TAX ACT IN CASE OF AKZO NOBEL NON-STI CK COATINGS LTD. FOR A.Y.2003-04. OUR ABOVE REFERRED CLIENT IS IN RECEIPT OF YOUR ORD ER U/S.143(3) OF THE ACT FOR A.Y. 2003-04 ALONGWITH THE INCOME TAX COMPUTATI ON FORM AND A DEMAND NOTICE FOR RS.25,01,745/-. ON PERUSAL OF THE SAID ORDER WE HAVE NOTICED CERTAI N APPARENT MISTAKES IN CALCULATION OF TAXABLE INCOME AND THE RESULTANT TAX LIABILITY, DETAILS OF WHICH ARE GIVEN HERE UNDER:- YOU HAVE DISALLOWED CLAIM OF THE ASSESSEE I.R.O. RO YALTY EXPENSE TO THE TUNE OF RS.50,76,210/- AND ADDED THE SAME TO THE TO TAL INCOME AS PER THE RETURN OF INCOME AND DETERMINED THE ASSESSED IN COME AT RS.1,23,73,900/-. IN THIS CONNECTION, WE HAVE TO SU BMIT THAT SINCE THE ASSESSEE IS ENTITLED TO DEDUCTION U/S.10B AS WELL A S U/S.80-1B OF THE ACT, THE ASSESSED TOTAL INCOME SHOULD BE CALCULATED AS UNDER IN THE SAID ORDER: TOTAL BUSINESS INCOME BEFORE ALLOWANCE 4,39,87,35 5 OF DEDUCTION U/S.10B (AS PER THE RETURN FILED) ADD: ROYALTY EXP. DISALLOWED AS PER YOUR ORDER 50,76,210 4,90,63,565 LESS: INCOME EXEMPT U/S.10B 3,74,35,205 (33562087/43987355*49063565) __________ GROSS TOTAL INCOME 1,16,28,360 LESS: DEDUCTION U/S.80IB 34,88,508 (30% OF GROSS TOTAL INCOME) __________ NET TAXABLE INCOME 81,39,852 SAY RS. 81,39,850 HENCE, THE CORRECT FIGURE OF ASSESSED INCOME IN THE ORDER SHOULD BE RS.81,39,850/- AS AGAINST RS.1,23,73,900/-. THE RES ULTANT TAX WORKING IS ALSO ERRONEOUS AND NEEDS RECTIFICATION. CALCULATION OF INTEREST U/S 234B ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 10 & C NEEDS RECTIFICATION AND ALSO THE AMOUNT OF TAX CREDIT ALLOWED IN THE COMPUTATION SHEET IS WRONG. THIS BEING A MISTAKE APPARENT ON RECORD, WE REQUEST YOU TO RECTIFY THE SAME BY PASSING AN ORDER U/S.154 OF THE INCOME TAX ACT AND OBLIGE. IN CASE YOU REQUIRE FURTHER CLARIFICATION IN THE MA TTER, PLEASE LET US KNOW. FOR YOUR REFERENCE, WE ENCLOSE HEREWITH A COPY OF A SSESSMENT ORDER U/S.143(3) TAX CALCULATION SHEET AND THE DEMAND NOT ICE FOR YOUR PERUSAL. PLEASE DO THE NEEDFUL IN THE MATTER. THANKING YOU, YOURS FAITHFULLY, FOR SHAH NARIELWALA & CO. CHARTERED ACCOUNTANTS SD/- PARTNER ENCL.: AS ABOVE. IT IS CLEAR FROM THE ABOVE THAT DISALLOWANCE OF ROY ALTY EXPENSE OF RS.50,76,210/- WAS NOT THE ISSUE IN THE RECTIFICATI ON APPLICATION. THE ASSESSEES CONTENTION WAS THAT SINCE ASSESSEE IS EN TITLED TO DEDUCTION U/S 80- IB AND SECTION 10B THE TOTAL TAX LIABILITY OF THE A SSESSEE MAY BE RE-CALCULATED AS PER HIS APPLICATION FOR RECTIFICATION. 7. WE FURTHER FIND THAT BEFORE LD. CIT(APPEALS) FOL LOWING GROUNDS OF APPEAL WERE TAKEN WHEN APPEAL WAS FILED LATE BY 130 DAYS: (1) THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN DISALLOWING ROYALTY EXPENSES OF RS.50,76,210/- ON T HE GROUND THAT THE APPROVAL BY THE EXCHANGE CONTROL AUTHORITIES I.E RB I FOR ENTERING INTO THE TECHNICAL COLLABORATION WITH THE FOREIGN COMPAN Y WAS RECEIVED SUBSEQUENT TO THE YEAR END. YOUR APPELLANT SUBMITS THAT SINCE THE EXPENSE WAS INCURRED PURSUANT TO THE AGREEMENT WITH THE FOREIGN PARTIES WHEREIN THE EFFECTIVE DATE OF AGREEMENT WAS 1-04-2002, THE EXPENSES ARE ACCRUED DURING THE YEAR UNDER CONSIDER ATION AND IT IS LIABLE TO BE ALLOWED FROM THE COMPUTATION OF PROFIT S OF THE BUSINESS. IT IS SUBMITTED THAT IT BE SO HELD NOW. (2) WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED ASS ESSING OFFICER FURTHER ERRED IN LAW AND ON FACTS IN NOT GRANTING DEDUCTION U/S.10B ON THE ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 11 INCREASED INCOME PURSUANT TO THE ABOVE DISALLOWANCE OF RS.50,76,210/- IN RESPECT OF PAYMENT OF ROYALTY. IT IS SUBMITTED T HAT DEDUCTION/EXEMPTION U/S.10B IS TO BE ALLOWED ON THE BASIS OF PROFITS OF THE BUSINESS AS COMPUTED UNDER THE HEAD, BUSINESS INCOME AND HENCE, CORRESPONDING DEDUCTION U/S.10B ALSO SHOULD HAVE BEEN GRANTED TO THE APPELLANT; YOUR APPELLANT SUBMITS THAT IT BE SO HELD NOW. (3) WITHOUT PREJUDICE TO GROUND NOS. 1 & 2, THE LEA RNED ASSESSING OFFICER ALSO ERRED IN LAW AND ON FACTS IN NOT GRANT ING DEDUCTION U/S.80IB ON THE INCREASED AMOUNT OF GROSS TOTAL INCOME AFTER MAKING IS OF ROYALTY EXPENSES OF RS.50,76,210/-. YOUR APPELLANT SUBMITS THAT IT BE SO HELD NOW AND THE INCREASED DEDUCTION AS IS ELIGI BLE U/S.80-IB BE GRANTED TO THE APPELLANT. (4) THE LEARNED ASSESSING OFFICER ERRED IN LAW AND ON FACTS IN CHARGING INTEREST U/S/.234B FOR RS.6,14,360/- AND U/S.234D F OR RS.21,879/-. IT IS SUBMITTED THAT IN THE FACTS AND CIRCUMSTANCES OF TH E CASE, SUCH INTEREST IS NOT CHARGEABLE. THE APPELLANT DENIES ITS LIABILI TY TO BE ASSESSED TO SUCH INTEREST AS THE DISALLOWANCE MADE BY THE LEARN ED ASSESSING OFFICER COULD NOT HAVE BEEN ANTICIPATED. IT IS SUBM ITTED THAT IT BE SO HELD NOW AND THE INTEREST CHARGED AS MENTIONED ABOVE BE DELETED. IT IS CLEAR FROM THE ABOVE THAT MAIN ISSUE BEFORE L D. CIT(APPEALS) WAS THE DISALLOWANCE OF ROYALTY EXPENSES OF RS.50,76,210/- AND THE DEDUCTION U/S.80- IB AND SECTION 10B WERE ONLY ALTERNATIVE GROUNDS. I N VIEW OF THIS, IT CANNOT BE SAID THAT DELAY IN FILING THE APPEAL WAS DUE TO NON -DISPOSAL OF RECTIFICATION APPLICATION OF THE ASSESSEE BY THE ASSESSING OFFICE R AND THEREFORE LD. CIT(A) HAS RIGHTLY NOT CONDONED THE DELAY IN FILING OF APP EAL BEFORE HIM. DUE TO THIS FACTUAL POSITION THE CASE LAWS RELIED BY THE ASSESS EE ARE ALSO OF NO HELP TO HIM. IN THE CASE OF PRIMA FRUIT PRODUCTS (SUPRA) THE TRIBUNAL DECIDED THE APPEAL IN QUESTION WITH REGARD TO DISALLOWANCE OF D EDUCTION U/S.80-IB OF THE INCOME-TAX ACT, 1961. THE ASSESSEE WAS GRANTED RELI EF FOR A SUM OF RS.92,85,082/-, THE ISSUE IN RESPECT OF RS.14,57,90 6/- WAS SET ASIDE AND ADDITION OF RS.1,21,152/- WAS CONFIRMED. AGAINST TH IS ORDER, REVENUE FILED MISCELLANEOUS APPLICATION (MA FOR SHORT) BEFORE TRI BUNAL PRAYING THAT MATTER MAY BE RE-ADJUDICATED AS SEVERAL DOCUMENTS OF THE R EVENUE HAVE NOT BEEN CONSIDERED BY TRIBUNAL. THIS MA WAS DISMISSED BY TH E TRIBUNAL. THEREAFTER THE REVENUE WENT IN APPEAL BEFORE HONBLE JURISDICT IONAL HIGH COURT WHICH ITA NO.1916/AHD/2009 A.Y. 2003-04 AKZO NOBLE NON-STICK COATINGS LTD. V. ACIT CIR-1, A BD PAGE 12 WAS LATE BY 654 DAYS BY THEN. THE CONDONATION OF DE LAY WAS PRAYED ON THE GROUND THAT REVENUE WAS UNDER BONA FIDE BELIEF THAT MA FILED BEFORE THE TRIBUNAL MAY BE ALLOWED AND TILL THEN NO APPEAL WAS PRESENTED BEFORE THE HONBLE HIGH COURT. THIS EXPLANATION OF THE REVENUE WAS ACCEPTED BY HONBLE HIGH COURT AND DELAY IN FILING OF APPEAL WA S CONDONED. SINCE THE ISSUE BEFORE THE HONBLE HIGH COURT AND BEFORE THE TRIBUNAL IN MA WAS SAME THE DELAY WAS CONDONED BY THE HONBLE HIGH COURT. B UT IN THE INSTANT CASE, AS WE HAVE ALREADY POINTED OUT THE ISSUE BEFORE LD. CI T(APPEALS) AND ISSUE IN THE RECTIFICATION APPLICATION BEFORE THE A.O. HAVIN G NOT BEEN SAME, THE RATIO AS LAID DOWN BY THE HONBLE HIGH COURT IN THE CASE OF PRIMA FRUIT PRODUCTS (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE CASE. IN VIEW OF THE ABOVE AND ALSO IN VIEW OF VARIOUS CASE LAWS RELIED BY LD. CIT(APPE ALS) WE FIND NO NEED TO INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. 8. IN THE RESULT, ASSESSEES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 27/05/2011 SD/- SD/- (A.N.PHAUJA) (D.K. TYAGI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 27/05/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-VI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD