DCIT, New Delhi V. M/s Elymer International P. Ltd., New Delhi

ITA 204/DEL/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3560 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KISHORE
• Assessee Lawyers: BP BAN SAL
• Keywords: Depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI K.G. BANSAL ITA NO. 204/DEL/2011 ASSESSMENT YEAR: 2006-07 DEPUTY CIT, VS. M/S. ELYMER INTERNATIONAL P.L TD., CIRCLE 11(1), 37 BUGLOW ROAD, KAMLA NAGAR, NEW DELHI. DELHI-1100 07. (PAN: AAACE3789P) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI B. KISHORE, SR.DR RESPONDENT BY: SHRI BP BAN SAL, CA ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORD ER OF LEARNED CIT(APPEALS) DATED 15.11.2010 PASSED FOR ASSESSMENT YEAR 2006-07. 2. THE GROUND NO. 1 IS GENERAL IN NATURE, IT DOES N OT REQUIRE ANY SPECIFIC FINDING TO BE RECORDED, HENCE IT IS REJECTED. 3. IN GROUND NO.2, REVENUE HAS PLEADED THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.2 LACS. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 16.10.2006 DECLARING TOTAL INCOME AT RS.2 ,56,32,539. ON SCRUTINY 2 OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFIC ER THAT ASSESSEE HAS DEBITED A SUM OF RS.4,25,000 UNDER THE HEAD TECHNICAL CONS ULTANCY CHARGES. HE DIRECTED THE ASSESSEE TO EXPLAIN THIS AMOUNT. IT WA S CONTENDED BY THE ASSESSEE THAT THIS AMOUNT WAS PAID TO M/S. AK SOFTW ARE HOUSE FOR USAGE OF THE SOFTWARE. ASSESSING OFFICER HAS OBSERVED THAT A SSESSEE HAD PAID THIS AMOUNT FOR SOFTWARE FROM APRIL TO NOVEMBER 2005. IN HIS UNDERSTANDING, IT IS A CAPITAL EXPENDITURE. HE ALLOWED DEPRECIATION @ 60% AND MADE AN ADDITION OF RS.2 LACS. 5. BEFORE THE LEARNED CIT(APPEALS), IT WAS CONTENDE D THAT ASSESSEE HAS NOT PURCHASED ANY SOFTWARE FROM M/S. A.K. SOFTWARE HOUSE. IT HAS PAID THE SUM OF RS.4,25,000 TOWARDS THE CHARGE FOR THE USE O F SOFTWARE OWNED BY M/S. A.K. SOFTWARE HOUSE. THE ASSESSEE POINTED OUT THAT NO ASSETS HAS CAME INTO EXISTENCE. LEARNED CIT(APPEALS) ACCEPTED THE C LAIM OF ASSESSEE AND DELETED THE DISALLOWANCE. 6. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. WE FIND THAT ASSESSING OFFIC ER HAS MISCONSTRUED THE FACTS. ASSESSEE HAS NOT ACQUIRED ANY SOFTWARE. IT H AS PAID THE CHARGES FOR USE OF THE SOFTWARE. ASSESSING OFFICER FAILED TO APPREC IATE THE FACTS IN PROPER 3 PERSPECTIVE. LEARNED CIT(APPEALS) HAS RIGHTLY DELET ED THE DISALLOWANCE. WE DO NOT SEE ANY REASON TO INTERFERE IN HIS ORDER. TH IS GROUND OF APPEAL IS REJECTED. 7. IN GROUND NO.3, THE GRIEVANCE OF THE REVENUE IS THAT LEARNED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.17,68,861 WHICH WAS ADDED BY THE ASSESSING OFFICER BY MAKING A DISALLOW ANCE OUT OF THE CLAIM MADE UNDER SEC. 80IA OF THE ACT. 8. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S MADE A CLAIM UNDER SEC. 80-IA OF THE ACT. IT HAS INCLUDED FOLLOWING IT EMS IN THE ELIGIBLE PROFIT FOR THE COMPUTATION OF DEDUCTION ADMISSIBLE UNDER S EC. 80IA OF THE ACT: 1. SALE OF SCRAP MATERIAL RS. 5,33,978 2. INTEREST ON FD AND SECURITY DEPOSIT RS.17,45,62 1 3. MISCELLANEOUS INCOME RS.12,34,883 4. FREIGHT AND INSURANCE RS. 1,80,881 RS.36,95,363 9. LEARNED CIT(APPEALS) HAS ALLOWED THE CLAIM OF AS SESSEE ON SALE OF SCRAP MATERIAL AND MISCELLANEOUS INCOME. HE HAS DIS CUSSED THE EACH ISSUE. 4 10. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. IT WAS BROUGHT TO OUR NOTICE THAT THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE ORDER OF THE ITAT PASSED IN ITA NO.1325/DEL/08 FOR ASSESSMENT YEAR 2004-05. THE LEARNED COUNSEL FO R THE ASSESSEE PLACED ON RECORD COPY OF THE ORDER. LEARNED CIT(APPEALS) HAS ALSO UPHELD THE GRANT OF DEDUCTION UNDER SEC. 80IA ON SALE OF SCRAP AND MISC ELLANEOUS INCOME AFTER PLACING HIS RELIANCE ON THE ORDER OF THE ITAT. THE ITAT IN ASSESSMENT YEAR 2004-05 HAS HELD THAT DEDUCTION UNDER SEC. 80IA IN RESPECT OF SCRAP SALES EXCLUDING THE ELEMENT OF EXCISE DUTY AND SALES TAX INCLUDED IN THE AMOUNT OF SCRAP SALES IS ALLOWABLE AS A DEDUCTION. THE ITAT H AS RECORDED THIS FINDING ON THE BASIS OF THE DECISION OF HON'BLE MADRAS HIGH COURT RENDERED IN THE CASE OF FENNER (INDIA) LTD. VS. CIT REPORTED IN 241 ITR 803. IN THIS CASE, HON'BLE HIGH COURT HAD HELD THAT THE SCRAP MATERIAL HAS A DIRECT LINK OR NEXUS WITH THE INDUSTRIAL UNDERTAKING. THEREFORE, P ROFIT FROM SALE OF SCRAP MATERIAL WAS ELIGIBLE FOR DEDUCTION UNDER SEC. 80HH OF THE ACT. THE ITAT MADE A DETAILED ANALYSIS OF THIS DECISION AND THER EAFTER ALLOWED THE DEDUCTION ON SALE OF SCRAP. HOWEVER, THE ITAT HAS O BSERVED THAT EXCISE DUTY AND SALES TAX SO COLLECTED BY THE ASSESSEE AND INCL UDED IN SCRAP SALE WILL BE EXCLUDED FROM THE ELIGIBLE PROFIT. LEARNED CIT(APPE ALS) IN THE IMPUGNED 5 ORDER HAS ALSO EXCLUDED BOTH THESE ITEMS. THE ITAT IN ASSESSMENT YEAR 2004-05 HAS ALSO ALLOWED DEDUCTION ON MISCELLANEOUS INCOME WHICH IS ON ACCOUNT OF REFUND OF SALES-TAX, CUSTOMS DUTY AND UN CLAIMED LIABILITY WRITTEN OFF. LEARNED CIT(APPEALS) FOLLOWED THE ORDER OF THE ITAT. THE ITAT DID NOT GRANT DEDUCTION ON FREIGHT, INSURANCE AND INTER EST INCOME BECAUSE THESE RECEIPTS COULD NOT BE TERMED AS DERIVED FROM THE BU SINESS OF INDUSTRIAL UNDERTAKING. LEARNED CIT(APPEALS) EXCLUDED THESE RE CEIPTS FROM GRANT OF THE DEDUCTION. WE FIND THAT THE ORDER OF THE LEARNE D CIT(APPEALS) IS IN THE LINE OF ITATS ORDER FOR ASSESSMENT YEAR 2004-05. T HERE IS NO DISPARITY ON FACTS, HENCE NO INTERFERENCE IS CALLED FOR IN THE O RDER OF THE LEARNED FIRST APPELLATE AUTHORITY 11. GROUND NO.4 IS AGAIN GENERAL IN NATURE AND DOES NOT REQUIRE ANY SPECIFIC FINDING TO BE RECORDED. IT IS REJECTED. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 08.07.201 1 SD/- SD/- ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08/07/2011 MOHAN LAL 6 COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR