DCIT(LTU), New Delhi V. M/s. Avtec Ltd., New Delhi

ITA 296/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6817 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 17-08-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 16-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K JAIN
• Assessee Lawyers: SANAT KAPOOR ADV MS ANANYA KA
• Keywords: Capital asset; Depreciation; Retrospective amendment; Revised return
• Section: 10AA

Judgement Text

1 ITA NO. 296/DEL/20 14 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI G. D. AGRAWAL, VICE PRESIDENT AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.-296/DEL/2014 (ASSESS MENT YEAR 2007-08) DCIT (LTU) NEW DELHI (APPELLANT) VS AVTEC LTD. 8 TH FLOOR, BIRLA TOWER 25, BARAKHAMBA ROAD NEW DELHI AAFCA1313C (RESPONDENT) APPELLANT BY SH. S. K. JAIN, DR RESPONDENT BY SH. SALIL KAPOOR ADV & SH. SANAT KAPOOR ADV, MS. ANANYA KAPOOR, ADV ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER DATED 6/9/2013 PASSED BY CIT(A)-V, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ADMITTING AND ALLOW ING THE ADDITIONAL GROUNDS OF APPEAL IN RESPECT OF DISALLOW ANCE OF DEDUCTION OF RS.5,75,82,474/-, U/S 10AA OF THE IT A CT, AS AGAINST CLAIM OF RS.14,83,714/- MADE BY THE ASSESSE E AND ALLOWED BY A.O. DATE OF HEARING 17.08.2016 DATE OF PRONOUNCEMENT 20 .10.2016 2 ITA NO. 296/DEL/20 14 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD.CIT(A) HAS ERRED IN ALLOWING THE CLAIM OF DEPRECIATION OF RS.8,60,411/- ON CAPITALIZATION OF LEGAL & PROFESSIONAL CHARGES. 3. THE ASSESSEE IS HAVING A MANUFACTURING UNIT AT M ADRAS SEZ IN RESPECT OF WHICH THE CLAIM OF DEDUCTION U/S 10AA OF THE INCOME TAX ACT, 1961 WAS MADE BY THE ASSESSEE. THE ORIGINAL R ETURN WAS FILED ON 29/10/2007 DECLARING INCOME OF RS.34,47,74,641/- AND THE CLAIM OF DEDUCTION U/S 10AA OF THE INCOME TAX ACT, 1961 WAS MADE AT RS.14,83,714/-. A REVISED RETURN WAS FILED ON 3 1/3/2009 AND THE CLAIM OF DEDUCTION U/S 10AA OF THE INCOME TAX A CT, 1961 WAS REVISED AT RS.5,90,65,188/-. THIS CLAIM IN THE REV ISED RETURN WAS MADE ON THE BASIS OF THE SPEECH OF HONBLE FINANCE MINISTER ON 24/2/2009 WHILE HAVING DISCUSSION ON THE BUDGET IN LOK SABHA AND REPLYING TO A QUERY. ON THE BASIS THE SPEECH AN D SINCE THE COMPANY DID NOT WANT TO LOOSE ITS CLAIM OF DEDUCTIO N U/S 10AA OF THE INCOME TAX ACT, 1961 ON ENTIRE PROFITS OF MSEZ, THE REVISED RETURN WAS FIELD ON 31/3/2009. THE CLAIM OF DEDUCT ION U/S 10AA OF THE INCOME TAX ACT, 1961 WAS ENHANCED TO RS. 5.9 0 CRORES BY WAY OF FILING OF REVISED RETURN FROM THE CLAIM OF R S.14,83,714/- OF SECTION 10AA AS CLAIMED IN THE ORIGINAL RETURN. 4. THE AMENDMENT IN SECTION WAS BROUGHT W.E.F. 1/4/ 2010 IN SECTION 10AA (7) BY FINANCE (NO.2) ACT, 2009. AS S UCH, DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE HAD E NHANCED ITS CLAIM OF DEDUCTION U/S 10AA OF THE INCOME TAX ACT, 1961 BUT SINCE THE AMENDMENT CAME W.E.F 1/4/2010 THE REVISED RETUR N AND REVISED 3 ITA NO. 296/DEL/20 14 CLAIM OF THE ASSESSEE U/S 10AA OF THE INCOME TAX A CT, 1961 WAS NOT ALLOWED BY THE A.O. BEFORE THE AMENDMENT BROUGH T IN BY THE FINANCE ACT, 2009, THE POSITION OF LAW WAS THAT THE PROFIT DERIVED BY THE UNIT FOR WHICH 10AA OF THE INCOME TAX ACT, 1961 WAS BEING CLAIMED WAS TO BE ALLOWED IN THE SAME PROPORTION TH AT THE EXPORT TURNOVER HAD TO THE TOTAL TURNOVER OF THE ASSESSEE. FOR E.G. IF THE PROFIT EARNED BY THE EXPORT OF ARTICLES OR THINGS I S RS.100, TURNOVER OF THE EXPORT UNIT IS RS.500, TOTAL TURNOVER OF THE ASSESSEE IS RS.2000, THEN THE PROFITS ELIGIBLE FOR DEDUCTION U/ S 10AA OF THE ACT IS RS.100X 500/2000=RS 25. 5. BY THE VIRTUE OF THE RETROSPECTIVE AMENDMENT, IN STEAD OF RS.2000 (TOTAL TURNOVER) BEING TAKEN FOR THE COMPUT ATION OF DEDUCTIBLE EXPORT PROFITS, RS.500 (TOTAL TURNOVER O F THE UNDERTAKING) IS TO BE TAKEN. THIS MEANS THAT THE ELIGIBLE PROFI TS FOR DEDUCTION WILL BE RS.100 AND NOT RS.25. NOW BY THE RETROSPECTIVE A MENDMENT TO SECTION 10AA (7) BY THE FINANCE ACT 2010 THE BENEFI T CONFERRED ON TO THE ASSESSEE FROM 1/4/2010 HAS BEEN MADE APPLICA BLE FROM 1/4/2006 AND SHALL APPLY TO ASSESSMENT YEAR 2007-08 ALSO. 6. THE ASSESSEE HAD MADE PAYMENT OF RS.84,38,357/- AS PROFESSIONAL AND LEGAL CHARGES IN RELATION TO TAKIN G OVER THE BUSINESS FROM HINDUSTAN MOTORS LTD INCURRED DURING ASSESSMENT YEAR 2006-07. AS THE EXPENDITURE WAS INCURRED FOR THE PURPOSE OF ACQUIRING A CAPITAL ASSET IT WAS NOT CLAIMED AS REV ENUE EXPENDITURE BY THE ASSESSEE. THE SAID PROFESSIONAL CHARGES WERE DISALLOWED BY THE ASSESSING OFFICER. 4 ITA NO. 296/DEL/20 14 7. THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). TH E CIT(A) IN ITS FINDING HELD THAT IF THERE IS A RETROSPECTIVE AMEND MENT THEN AUTHORITY WITH WHOM THE MATTER IS PENDING BECOMES L EGALLY DUTY BOUND TO FOLLOW THE AMENDMENT IN LETTER AND SPIRIT. THUS, THE CIT(A) ALLOWED THE ADDITIONAL GROUND AND DIRECTED T HE ASSESSING OFFICER TO GRANT THE RELIEF U/S 10AA OF THE ACT. 8. AS RELATES TO LEGAL AND PROFESSIONAL CHARGES, TH E CIT(A) HELD THAT INCURRING OF LEGAL AND PROFESSIONAL CHARGES BY THE ASSESSEE WERE NOT IN DISPUTE. THESE CHARGES WERE ESSENTIAL F OR EFFECTING THE TAKEOVER OF BUSINESS UNITS OF HINDUSTAN MOTORS. TH US, IT ACTUALLY FORMS THE PART OF ACTUAL COST OF THE ACQUISITION OF THE ASSESSEE. THEREFORE, CLAIM OF DEPRECIATION WAS ALLOWED BY CIT (A). 9. THE LD. DR SUBMITTED THAT THE ADDITIONAL GROUND ADMITTED BY THE CIT(A) IS NOT RIGHT AND HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. HE WAS NOT ABLE TO POINT OUT WHETHER THE RETROSPECTIVE AMENDMENT WILL NOT BE APPLICABLE IN ASSESSEES CASE . AS RELATES TO GROUND NO. 2, HE SAID THAT THE LEGAL AND PROFESSION AL CHARGES CANNOT BE CLAIMED FOR DEPRECIATION. THEREFORE, HE SUBMITTED THAT THE CIT(A) ORDER SHOULD BE SET ASIDE. 10. THE LD. AR RELIED ON THE ORDER OF THE CIT(A) AN D SUBMITTED THAT THE RETROSPECTIVE AMENDMENT IS APPLICABLE IN A SSESSEES CASE AS THE ASSESSMENT YEAR IS ON 2007-08 AND THE AMENDM ENT IS EFFECTIVE FROM 1.4.2006 WHICH CAME INTO PICTURE BY FINANCE ACT, 2010. AS RELATES TO THE SECOND GROUND, THE LD. AR R ELIED UPON THE ORDER OF THE CTIA(A) 5 ITA NO. 296/DEL/20 14 11. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH THE PARTIES, AS RELATES TO GROUND NO. 1 RETROSPECTIVE AMENDMENT IS VERY MUCH APPLICABLE TO THE ASSESSEE. BY THE RETROSPECTIVE AM ENDMENT TO SECTION 10AA (7) THROUGH THE FINANCE ACT 2010, THE BENEFIT CONFERRED ON TO THE ASSESSEE FROM 1/4/2010 HAS BEEN MADE APPLICABLE FROM 1/4/2006 AND SHALL APPLY TO ASSESSM ENT YEAR 2007-08 ALSO. AS REGARDS GROUND NO. 2, THE LD. AR R ELIED ON THE ITAT ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YE AR 2006-07 FOR DEPRECIATION CLAIM BEING ITA NO. 1606/DEL/2010 ORDE R DATED 31.05.2013. IN LIGHT OF THIS, THE PROFESSIONAL CHAR GES HAVE TO BE ALLOWED BECAUSE THE EXPENSES INCURRED BY THE ASSESS EE WAS AS PER THE AGREEMENT AND IT WAS NOT HINDUSTAN MOTORS WHICH WAS INCURRING THE EXPENSES. IT ACTUALLY FORMS THE PART OF ACTUAL COST OF THE ACQUISITION. THEREFORE, CIT(A) WAS RIGHT IN ALL OWING THE APPEAL OF THE ASSESSEE. 12. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT 20TH OF OCTOBER, 2016. SD/- SD/- (G. D. AGRAWAL) (SUCHITRA KAMBLE) VICE PRESIDENT JUDICIAL M EMBER DATED: 20/10/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 6 ITA NO. 296/DEL/20 14 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 17.08.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 18.08.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 2 0 .10.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 2 0 .10.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 7 ITA NO. 296/DEL/20 14