MAHINDRA & MAHINDRA LTD, MUMBAI V. DCIT CIR 2(2), MUMBAI

ITA 298/MUM/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7927 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 10-01-2011
• Assessment Year: 1992-1993
• Appeal Filed On: 12-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJIV DUTT
• Assessee Lawyers: H P MAHAJANI
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI BEFORE SHRI R.S.SYAL, AM AND SMT.ASHA VIJAYARAGHAVA N, JM ITA NO.298/MUM/2010 : ASST.YEAR 1992-1993 M/S.MAHINDRA & MAHINDRA LIMITED MAHINDRA TOWERS, GROUND FLOOR CORPORATION TAXATION, WORLI ROAD NO.13 WORLI, MUMBAI 400 018. PAN :AAACM3025E. VS. THE ADDL.COMMISSIONER OF INCOME-TAX CIRCLE 2(2) MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI H.P.MAHAJANI RESPONDENT BY : SHRI SANJIV DUTT O R D E R PER R.S.SYAL, AM : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 17.11.2009 IN RELATION TO ASSESSMENT YEAR 1992-1993 . 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINST NOT ALLOWING OF DEDUCTION U/S.37(1) IN RESPECT OF TECHNICAL FEES. BRIEFLY STA TED THE FACTS OF THE CASE ARE THAT IN THE ORIGINAL ROUND OF ASSESSMENT, THE ASSESSING OF FICER DISALLOWED TECHNICAL FEES OF RS.3,87,84,844 WHICH WAS CLAIMED BY THE ASSESSEE AS DEDUCTIBLE U/S.37(1) OF THE ACT AND ALLOWED DEDUCTION U/S.35AB AT 1/6 TH OF THE TOTAL AMOUNT. WHEN THE MATTER FINALLY WENT TO THE TRIBUNAL, THE MATTER WAS RESTO RED TO THE A.O. FOR DECIDING AFRESH IN THE LIGHT OF CERTAIN DIRECTIONS. IN THE P RESENT ROUND OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE MADE SUBMISSIONS WHICH HA VE BEEN RECORDED ON PAGE 4 OF THE ASSESSMENT ORDER IN SUPPORT OF THE DEDUCTIBI LITY OF THE ENTIRE AMOUNT. THE ASSESSING OFFICER, TAKING NOTE OF CERTAIN CLAUSES OF THE AGREEMENT WITH M/S.AVL AUSTRIA, TO WHOM THIS AMOUNT WAS PAID, CAME TO HO LD THAT DEDUCTION COULD NOT BE ITA NO.298/MUM/2010 M/S.MAHINDRA & MAHINDRA LIMITED. 2 ALLOWED U/S.37(1). HE REITERATED HIS EARLIER OPINIO N. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 3. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSING THE RELEVANT MATERIAL ON RECORD IT IS NOTICED THAT THE QUESTION WHICH FALLS FOR OUR ADJUDICATION IS WHETHER THE PAYMENT MADE TO AVL AUSTRIA AMOUNTING TO RS.3.87 CR ORES IS DEDUCTIBLE IN FULL U/S.37(1) AS REVENUE EXPENDITURE OR TO BE ALLOWED A S 1/6 TH U/S.35AB. THE HONBLE SUPREME COURT IN THE CASE OF JONAS WOODHEAD AND SONS (INDIA) LTD. VS. CIT [(1997) 224 ITR 342 (SC)] HAS LAID DOWN CERTAIN TESTS FOR DETERMINING WHETHER THE FEES FOR TECHNICAL SERVICES IS TO BE CONSIDERED AS CAPITAL OR REVENUE. SUCH TEST INCLUDES THE DETERMINATION WHETHER THE PAYMENT IS F OR NEW TECHNOLOGY OR FOR BETTERMENT OF PRODUCT; WHETHER IT IS FOR EXISTING B USINESS OR A NEW BUSINESS; WHETHER ON THE EXPIRY OF THE PERIOD OF AGREEMENT TH E ASSESSEE HAS TO RETURN THE TECHNICAL KNOW-HOW OR NOT. APART FROM THESE THREE, CERTAIN OTHER TESTS HAVE BEEN LAID DOWN AND IT HAS BEEN HELD BY THE HONBLE SUPRE ME COURT THAT THE CUMULATIVE EFFECT OF THESE FACTORS IS TO BE CONSIDERED FOR DET ERMINING WHETHER IT IS A CAPITAL OR REVENUE EXPENDITURE. THIS EXERCISE, WHICH IS ESSEN TIAL, HAS NOT BEEN CARRIED OUT EITHER BY THE AO OR THE LD. FIRST APPELLATE AUTHORI TY. AS THE INSTANT POINT IN CONTROVERSY CANNOT BE DECIDED UNLESS THE FACTS OF T HE CASE ARE TESTED ON THE TOUCHSTONE OF THE PRESCRIPTION OF THE AFORENOTED J UDGMENT OF THE HONBLE APEX COURT, IN OUR CONSIDERED OPINION, IT WOULD BE JUS T AND FAIR IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF A.O. THE JUDICIAL PRECEDENT REFERRED TO BY THE TRIBUNAL IN THE FIRST ROUND IS N OTHING BUT ALMOST THE SAME THING AS HAS BEEN HELD BY THE HONBLE SUPREME COURT IN THE A BOVE CASE. WE ORDER ACCORDINGLY AND DIRECT THE AO TO TAKE A FRESH DECIS ION IN THE LIGHT OF THE AFORENOTED JUDGEMENT OF THE HONBLE SUPREME COURT IN JONAS WOODHEAD AND SONS (INDIA) LTD. (SUPRA) AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HE ARD TO THE ASSESSEE. ITA NO.298/MUM/2010 M/S.MAHINDRA & MAHINDRA LIMITED. 3 4. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED ON THIS 25 TH DAY OF MARCH, 2011 . SD/- SD/- (ASHA VIJAYARAGHAVAN) (R.S.SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI : 25 TH MARCH, 2011. DEVDAS* COPY TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT CONCERNED 4. THE CIT(A) V, MUMBAI. 5. THE DR/ITAT, MUMBAI. 6. GUARD FILE. TRUE COPY. BY ORDER ASSISTANT REGISTRAR, ITAT, MUMBAI.