SAINT GOBAIN INDIA PRIVATE LIMITED, CHENNAI V. DCIT, CC - 6 (1), CHENNAI

ITA 2489/CHNY/2019

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9693 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 27-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Depreciation; Principle of natural justice; Additional evidence; Non-deduction of tax; Revenue expenditure; Set aside

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B B ENCH, CHENNAI , . , % BEFORE SHRI MAHAVIR SINGH, VICE-PRESIDENT AND SHRI G.MANJUNATHA, ACCOUNTANT MEMBER ./ I.T.A.NO.2489/CHNY/2019 ( / ASSESSMENT YEAR: 2012-13) M/S. SAINT GOBAIN INDIA PVT.LTD. SIGAPI ACHI BUILDING, 7 TH FLOOR, 18/3, RUKMINI LAKSHMIPATHY ROAD, EGMORE, CHENNAI-600 008. VS THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE-6(1), CHENNAI. PAN:AABCS4338M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. R.VIJAYARAGHAVAN, ADVOCATE /RESPONDENT BY : MR. SURESH PERIASAMY, JCIT /DATE OF HEARING : 28.12.2020 /DATE OF PRONOUNCEMENT : 28.12.2020 / O R D E R PER G.MANJUNATHA, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER OF THE LEARNED CIT(A)-9, CHENNAI DATED 25.06. 2019 AND PERTAIN TO ASSESSMENT YEAR 2012-13. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX ( APPEALS) CIT(A) IS CONTRARY TO LAW, FACTS AND CIRCUMSTANCES OF THE CASE AND AGAINST THE PRINCIPLES OF NATURAL JUSTICE. 2. FEE AND SERVICE CHARGES PAID TO SAINT GOBAIN PLA CO SAS 2.1 THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.3,15,73,894 (RS.2,40,57,443 PLUS RS.75,16,451) T OWARDS FEE AND SERVICE CHARGES PAID TO SAINT-GOBAIN PLACO SAS (SG PLACO) WITHOUT APPRECIATING THAT IT IS A REVENUE EXPENDITU RE INCURRED FOR 2 ITA NO.2489/CHNY/2019 THE PURPOSE OF BUSINESS AND ALLOWABLE UNDER SECTION 37(I) OF THE ACT. 2.2 THE CIT(A) ERRED IN RELYING ON THE ORDER OF THE CIT(A) FOR AY 2008-09 TO DECIDE ON THE ISSUES IN APPEAL WITHOUT A PPRECIATING THAT THE INCOME TAX APPELLATE TRIBUNAL VIDE ORDER D ATED 9 DECEMBER 2015 IN ITA NO.99O/MUM/2013 HAS SET ASIDE THE ALLEGED ORDER FOR FRESH CONSIDERATION. 2.3 THE CIT(A) ERRED IN UPHOLDING THE ADHOC DISALLO WANCE OF RS.75,16,451 BEING OF 20 PERCENT OF FEE AND SERVICE CHARGES MADE BY THE ASSESSING OFFICER AS NON-BUSINESS EXPEN DITURE. 2.4 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE E XPENDITURE WAS INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINES S AND ADHOC DISALLOWANCE IS NOT PERMISSIBLE UNDER THE PROVISION S OF THE ACT. 2.5 THE CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO IN TREATING THE BALANCE 80% OF FEE AND SERVICES CHARGES AS ENDU RING IN NATURE AND DISALLOWING AN AMOUNT OF RS.2,40,57,443. 2.6 THE CIT(A) FAILED TO APPRECIATE THAT THE ACT DO ES NOT RECOGNISE THE CONCEPT OF DEFERRED REVENUE EXPENDITURE AND AMO RTISATION IS ALLOWED ONLY FOR CERTAIN EXPENSES SPECIFIED UNDER SECTION 35D 35DD AND 35DDA OF THE ACT. 2.7 THE CIT(A) FAILED TO APPRECIATE THAT THE FEE AN D SERVICE CHARGES DOES NOT FALL WITHIN THE PURVIEW OF THE EXP ENDITURE SPECIFIED UNDER SECTION 35D OF THE ACT AND CANNOT B E DEFERRED TO FUTURE YEARS. 2.8 THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE S UPREME COURT IN THE CASE OF TAPARIA TOOLS LIMITED 260 ITR 102 HE LD THAT REVENUE EXPENDITURE INCURRED IN PARTICULAR YEAR HAS TO BE ALLOWED IN THAT YEAR AND DEPARTMENT CANNOT DENY THE SAME. 2.9 THE CIT(A) ERRED IN STATING THAT THE APPELLANT HAS CLAIMED DEDUCTION UNDER SECTION 35D OF RS.80,43,477 WITHOUT APPRECIATING THAT IT IS THE DEDUCTION ALLOWED BY THE AO CONSEQUE NT TO THE DISALLOWANCES MADE IN THE EARLIER YEARS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS CONSTRUCTION 3 ITA NO.2489/CHNY/2019 PRODUCTS LIKE GYPSUM PLASTERBOARDS, CEILING TILES, JOINTING AND FINISHING PRODUCTS FILED ITS RETURN OF INCOME FO R THE ASSESSMENT YEAR 2012-13 ON 30.11.2012 DECLARING NIL TAXABLE IN COME AFTER SETTING OFF BROUGHT FORWARD UNABSORBED DEPRECIATIO N UNDER THE NORMAL PROVISIONS OF THE ACT. THE ASSESSEE HAS COMP UTED BOOK PROFIT UNDER SECTION115JB OF THE ACT AT ` 24,97,22,737/-. THE CASE WAS TAKEN UP FOR SCRUTINY AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS CLAIMED FEES AND SERVICE CHARGES PAID TO SAINT GO BAINMATERIAUX DE CONSTRUCTION (SGMDC) AND SAINT GOBAINPLACO SAS, FRANCE (SG PLACO) AND EXPENDITURE INCURRED UNDER THE HEAD FEES AND SERVICE CHARGES IS IN THE NATURE OF DEFERRED REVE NUE EXPENDITURE AND ACCORDINGLY, FOLLOWING ORDER FOR ASSESSMENT YEA R 2008-09 DISALLOWED A SUM OF ` 3,15,73,894/- U/S.40A(IA) OF THE ACT FOR FAILURE TO DEDUCT TAX AT SOURCE U/S.195 OF THE ACT. 4. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY, BUT COULD NOT SUCCEED. THE LEA RNED CIT(A) FOR THE DETAILED REASONS RECORDED IN HIS APPELLATE ORD ER DATED 25.06.2019 HAS DISMISSED THE APPEAL FILED BY ASSESS EE BY FOLLOWING 4 ITA NO.2489/CHNY/2019 HIS PREDECESSOR CIT(A)S ORDER FOR ASSESSMENT YEAR 2008-09, WHERE ADDITIONS MADE BY THE ASSESSING OFFICER TOWARDS 20 % OF AD-HOC DISALLOWANCE OF FEES AND SERVICE CHARGES AND REMA INING 80% OF AMORTISATION OF DEFERRED REVENUE EXPENDITURE HAS BE EN UPHELD. BEING AGGRIEVED BY THE LEARNED CIT(A)S ORDER, ASSE SSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR FOR THE ASSESSE, AT THE TIME OF HEARING, SUBMITTED THAT APPEAL FILED BY ASSESSEE NEEDS TO GO BACK TO THE FILE OF THE LEARNED CIT(A) TO DECIDE THE ISSUE AFRESH I N ACCORDANCE WITH OUTCOME OF APPEAL FILED BY THE ASSESSEE FOR ASSESS MENT YEAR 2008- 09 PENDING BEFORE LEARNED CIT(A), BECAUSE ISSUE I N QUESTION FOR THE IMPUGNED ASSESSMENT YEAR IS RELATING TO DISALL OWANCE MADE BY ASSESSING OFFICER TOWARDS FEES AND SERVICE CHARGES PAID TO SAINT GOBAINMATERIAUX DE CONSTRUCTION (SGMDC)AND SAINT G OBAINPLACO SAS, FRANCE (SG PLACO) FOR THE ASSESSMENT YEAR 20 08-09 AND FINDINGS RECORDED FOR ASSESSMENT YEAR 2008-09 WOUL D HAVE BEARING ON THE PRESENT APPEAL. 6. THE LEARNED DR, ON THE OTHER HAND, FAIRLY ACCEPT ED THAT ISSUE INVOLVED IN THE PRESENT APPEAL IS LINKED TO DISALL OWANCES MADE BY 5 ITA NO.2489/CHNY/2019 ASSESSING OFFICER FOR ASSESSMENT YEAR 2008-09 AND T HE TRIBUNAL HAS SET ASIDE APPEAL FILED BY ASSESSEE FOR ASSESSM ENT YEAR 2008- 09 TO THE FILE OF THE LEARNED CIT(A) TO DECIDE ISS UE IN ACCORDANCE WITH LAW, AFTER CONSIDERING ADDITIONAL EVIDENCES F ILED BY THE ASSESSEE. THEREFORE , THIS APPEAL ALSO NEEDS TO BE SET ASIDE TO FILE OF LEARNED CIT(A) TO DECIDE IN ACCORDANCE WITH FIN DINGS OR OUTCOME OF THE APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09. 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH ORDERS OF THE AUTHORIT IES BELOW . THE DISPUTE IN PRESENT APPEAL PERTAINS TO SERVICE CHARG ES AND FEES PAID TO RELATED CONCERNS OF ASSESSEE I.E. SAINT GOBAINM ATERIAUX DE CONSTRUCTION (SGMDC) AND SAINT GOBAINPLACO SAS , FRANCE (SG PLACO) THE ASSESSING OFFICER HAS DISALLOWED FEES AND SERVICE CHARGES PAID TO ABOVE TWO PARTIES FOR THE ASSESS MENT YEAR 2008- 09 ON AD-HOC BASIS AND HAS ALSO APPLIED PROVISION S OF SECTION 35D OF THE INCOME TAX ACT, 1961, AND AMORTIZED REMAININ G EXPENDITURE OVER A PERIOD OF FIVE YEARS . THE APPEAL FILED BY T HE ASSESSEE FOR THE ASSESSMENT YEAR 2008-09 HAS BEEN SET ASIDE BY THE TRIBUNAL TO THE FILE OF LEARNED CIT(A) AND DIRECTED THE CIT(A) TO DECIDE ISSUE AFTER 6 ITA NO.2489/CHNY/2019 CONSIDERING ADDITIONAL EVIDENCES FILED BY THE ASSE SSEE. THE ASSESSEE CLAIMS BEFORE US THAT ISSUE IN PRESENT AP PEAL IS LINKED TO DISALLOWANCE MADE BY ASSESSING OFFICER TOWARDS FEES AND SERVICE CHARGES PAID TO ABOVE TWO CONCERNS FOR THE ASSESSM ENT YEAR 2008- 09 AND FINDING OR OUTCOME OF THE APPEAL FOR ASS ESSMENT YEAR 2008-09 WOULD HAVE BEARING ON THE PRESENT APPEAL. THEREFORE, CONSIDERING THE FACTS AND CIRCUMSTANCES OF THIS C ASE AND CONSISTENT WITH THE VIEW TAKEN BY THE CO-ORDINATE B ENCH FOR ASSESSMENT YEAR 2008-09 IN ITA NO.990/MUM/2013, WE SET ASIDE THE APPEAL TO THE FILE OF LEARNED CIT(A) AND DIREC T HIM TO RECONSIDER THE ISSUE IN ACCORDANCE WITH LAW, AFTER CONSIDERIN G OUTCOME OF APPEAL FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2 008-09. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DECEMBER, 2020 SD/- SD/- ( ) ( . ) (MAHAVIR SINGH) (G. MANJUNATHA ) / VICE-PRESIDENT $ / ACCOUNTANT MEMBER & /CHENNAI, ' /DATED 28 TH DECEMBER, 2020 DS )* +* /COPY TO: 1. APPELLANT 2. RESPONDENT 3. , () /CIT(A) 4. , /CIT 5. * 1 /DR 6. /GF .