Cummins Technologies India Limited (Earlier Cummins Turbo Technologies Limted), Dewas V. The CIT, Ujjain

ITA 301/IND/2013

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4885 (ITAT-INDORE)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 15-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRIDULA BAJPAI
• Assessee Lawyers: ARVIND MANTRI
• Keywords: Business expenditure; Reasonable cause; Condonation of delay; Revenue expenditure
• Section: 143(3); 37; 263

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS. 299 TO 301/IND/2013 A.YS. 2004-05 TO 2007-08 CUMMINS TECHNOLOGIES INDIA LTD (EARLIER TATA HOLSET LIMITED) INDUSTRIAL AREA NO. 2, A.B. ROAD DEWAS 455001 (M.P.) PAN AABCT 2018 B ... APPELLANT VS THE COMMISSIONER OF INCOME TAX UJJAIN ..... RESPONDENT ASSESSEE BY : SHRI ARVIND MANTRI, C.A. RESPONDENT BY : SMT. MRIDULA BAJPAI, CIT DR DATE OF HEARING : 11.11.2013 DATE OF PRONOUNCEMENT : 13.11.2013 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THE ASSESSEE IS AGGRIEVED BY THE DIFFERENT ORDERS OF THE LD. CIT, UJJAIN, OF DIFFERENT DATES PASSED U/S 263 OF THE INCOME 2 TAX ACT, 1961 FOR DIFFERENT ASSESSMENT YEARS. FIRST WE SHALL TAKE UP APPEAL IN ITA NO. 299/IND/2013 (A.Y. 2004-0 5). THE FIRST GROUND RAISED IS THAT THE LD. CIT ERRED IN CO NSIDERING THE ASSESSMENT ORDER, PASSED U/S 143(3) R.W.S. 147, FO R ALLOWING CLAIM OF EXPENDITURE INCURRED ON TOOLS AMOUNTING TO RS.19.80 LACS AND FURTHER THE ORDER U/S 263 IS BARRED BY LIM ITATION. 2. DURING HEARING THE CRUX OF ARGUMENTS ADVANCED BY SHRI ARVIND MANTRI, LD. COUNSEL FOR THE ASSESSEE IS THAT THE EXPENDITURE SO INCURRED IS OF REVENUE IN NATURE WHI CH IS AN ALLOWABLE EXPENDITURE. ON THE OTHER HAND, SMT. MRID ULA BAJPAI, LD. CIT DR DEFENDED THE CONCLUSION DRAWN IN THE IMP UGNED ORDER. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIALS AVAILABLE ON RECORD. THE FACTS IN BRI EF ARE THAT THE ASSESSEE IS A LIMITED COMPANY ENGAGED IN THE BUSINE SS OF MANUFACTURE AND SALE OF TURBO CHARGERS WHICH ARE US ED IN AUTOMOTIVE AND NON-AUTOMOTIVE APPLICATION FOR INCRE ASING THE POWER OF ENGINE AND FURTHER HELPS IN ACHIEVING THE EURO/ BHARAT NORMS ON POLLUTION. THE ORIGINAL ASSESSMENT WAS COM PLETED U/S 143(3) OF THE ACT ON 22-12-2006, ASSESSING THE TOTAL 3 INCOME AT RS22.80,47,170/- AGAINST THE INCOME OF RS.22,47,40,100/-. THE ASSESSMENT PROCEEDINGS WERE REOPENED U/S 143(3) R.W.S. 147 OF THE ACT ON 14-09- 2009 ASSESSING THE TOTAL INCOME AT RS.22,53,74,330/-. TH E LD. CIT ISSUED SHOW CAUSE NOTICE AND INVOKED THE REVISIONAL PROCEEDINGS U/S 263 OF THE ACT ON THE PLEA THAT THE ASSESSMENT ORDER PASSED U/S 143(3) R.W.S. 147 OF THE ACT IS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE, THEREFORE, THE TOOL DEVELOPMENT EXPENSES AMOUNTING TO RS.19.80 LACS, D EBITED UNDER PROFIT AND LOSS ACCOUNT, NEEDS ENQUIRY AND IN VESTIGATION WHICH WAS NOT DONE BY THE ASSESSING OFFICER. THE AS SESSEE FELT AGGRIEVED AND IS IN APPEAL BEFORE THIS TRIBUNAL. 3.1 WE HAVE PERUSED THE ASSESSMENT ORDER AND FOUND OUT THAT NO ATTEMPT HAS BEEN MADE BY THE LD. ASSESSING OFFICER TO MAKE A REQUIRED DISCUSSION ON THE CLAIM OF SUCH EXP ENSES. THEREFORE, THE LD. CIT RIGHTLY INVOKED THE PROVISIO N OF SECTION 263 OF THE ACT. THEREFORE, TO THIS EXTENT, HIS REVI SIONAL JURISDICTION IS JUSTIFIED. HOWEVER, WE DEAL WITH TH E ISSUE ON MERIT AS NO USEFUL PURPOSE WILL BE SERVED IN REMANDING TH E MATTER BACK TO THE FILE OF THE ASSESSING OFFICER AND TO PU T THE 4 MACHINERY AGAIN ON LEGS MORE SPECIFICALLY WHEN THE ISSUE CAN BE PUT TO REST THAT TOO IN THE LIGHT OF THE OBSERVA TION MADE BY THE LD. CIT HIMSELF. IN PARA 5 OF THE IMPUGNED ORDE R, THE LD. CIT HAS OBSERVED AS UNDER:- FROM THE SAID REPLY, IT IS THUS EVIDENT THAT THE ASSESSEE HAS MADE OUT A CASE FOR THE ALLOWANCE OF THE SAID CLAIM THAT THESE TOOLS WERE USED FOR THE BUSINESS AND HENCE WERE ALLOWABLE U/S 37. THERE IS NO DISPUTE AT PRESENT ON THE ISSUE AS TO WHETHER SAID EXPENDITURE WAS RELATED TO THE BUSINESS OF THE ASSESSEE OR NOT . IT IS HOWEVER, TO BE SEEN THAT EVEN THOUGH THE SAID EXPENDITURE WAS FOR THE PURPOSES OF BUSINESS WHETHER THE SAME WAS ALLOWABLE AS A REVENUE EXPENDITURE. BEFORE THE LD. CIT, THE ASSESSEE FURNISHED THE COPY OF ACCOUNT OF TOOL EXPENSES, CONTAINING BILLS AND VOUCHERS FOR PURCHASE OF TOOLS / DEVELOPMENT EXPENSES BY CLAIMING THAT THE S AME ARE GENUINE BUSINESS EXPENSES WHICH ARE ALLOWABLE U/S 3 7 OF THE ACT. WE FIND THAT THE EXPENSES IN QUESTION WERE INC URRED BY THE ASSESSEE FOR BETTER CONDUCT AND IMPROVEMENT OF THE EXISTING MANUFACTURING ACTIVITY FOR PERFECT DESIGNING WITH R ESPECT TO EXECUTION OF THE MANUFACTURING ACTIVITY, THUS SUCH EXPENSES ARE OF REVENUE IN NATURE. THE RATIO LAID DOWN IN CI T VS PRAGA 5 TOOLS LTD, 157 ITR 282 (A.P.) SUPPORTS OUR VIEW TH AT THE TOOL EXPENSES WERE INCURRED FOR BUSINESS EXIGENCIES WHIC H CAN BE SAID INSEPARABLE PARTS FOR THE SMOOTH FUNCTIONING O F THE MACHINERY. THEREFORE, IT IS AN ADMISSIBLE REVENUE E XPENDITURE. THE TOOLS ARE VERY MUCH NECESSARY IN MANUFACTURING ACTIVITY AND SMOOTH FUNCTIONING OF THE ASSET/ MACHINERY FOR INCREASING THE OUTPUT. THE MANUFACTURING PROCESS OF TURBO CHA RGES, THE RAW MATERIAL UNDERGOES VARIOUS CHANGES FOR WHICH TH E MACHINES REGULARLY REQUIRES ADDITIONAL TOOLS FOR PE RFORMING THE MANUFACTURING ACTIVITY AND THUS, WITHOUT DAY TODAY EXPENDITURE ON SUCH TOOLS, THE END-PRODUCT MAY NOT BE POSSIBLE. IT IS CLEARLY A REVENUE EXPENDITURE. THEREFORE, THIS GROUND OF TH E ASSESSEE IS DISPOSED OFF IN TERMS INDICATED HEREINABOVE. 4. NOW WE SHALL TAKE UP APPEAL IN ITA NO.300/IND/20 13. THE LD. CIT DR OUT RIGHTLY POINTED OUT THAT THIS AP PEAL IS BARRED BY 341 DAYS. THE LD. COUNSEL FOR THE ASSESSEE INVIT ED OUR ATTENTION TO THE APPLICATION FILED FOR CONDONATION OF DELAY AND READOVER THE CONTENTS CONTAINED THEREIN. IT WAS POI NTED OUT THAT THE ORDER U/S 263 WAS RECEIVED ON 09-04-2012 AND TH E ASSESSEE ASKED THE COUNSEL TO FILE APPEAL BEFORE TH E TRIBUNAL 6 WITHIN THE STIPULATED TIME. AS PER THE ASSESSEE, TH E APPEAL WAS PREPARED WITHIN TIME AND THE PAPERS WERE HANDED OVE R TO THE STAFF MEMBERS FOR FILING THE SAME. IT WAS PRESUMED BY THE COUNSEL THAT APPEAL HAS BEEN FILED. LATER ON, THE COUNSEL FORGOT TO FILE THE APPEAL. THE LD. CIT DR STRONGLY OPPOSED THE ASSERTION MADE BY THE LD. COUNSEL FOR THE ASSESSEE BY SUBMITTING THAT SUCH A CONCOCTED STORY CANNOT BE AC CEPTED AND THE ASSESSEE IS EXPECTED TO EXPLAIN THE DELAY OF EA CH DAY IN FILING THE APPEAL BEFORE THIS TRIBUNAL. THE LD. COU NSEL INVITED OUR ATTENTION TO VARIOUS DECISIONS WHICH HAS BEEN NARRA TED IN THE APPLICATION. 4.1 WE HAVE CONSIDERED THE ASSERTIONS MADE BY THE LD. RESPECTIVE COUNSEL, PERUSED THE MATERIALS AVAILABLE ON RECORD ALONGWITH THE DECISIONS CITED. BROADLY, WE ARE OF T HE VIEW THAT SUBSTANTIAL CAUSE OF JUSTICE SHOULD NOT BE HINDERED BY TECHNICALITIES. AT THE SAME TIME, THE PROVISION IN LIMITATION ACT AND FACTUAL MATRIX CANNOT BE IGNORED. IT IS NOT A C ASE OF SMALL DELAY RATHER THE FACTS NARRATED BEFORE US ARE CLEAR LY INDICATING THAT IT IS A CONCOCTED STORY. IT IS VERY STRANGE TH AT THE PAPERS WERE HANDED OVER TO THE COUNSEL WITHIN TIME AND MER ELY IT WAS 7 PRESUMED THAT APPEAL HAS BEEN FILED. THE PAPERS WER E RECEIVED ON 09-04-2012 WHEREAS MR. RAKESH BAGHELA L EFT HIS JOB AT THE END OF MARCH, 2013. THEREFORE, NOBODY WI LL BELIEVE THAT DURING THIS PERIOD SUCH PAPERS REMAINED UNNOTI CED. THERE IS A NO REASONABLE CAUSE FOR THIS DELAY. EVEN ON AS KING BY THE BENCH REGARDING THE DELAY, NO SATISFACTORY REPLY WA S OFFERED BY THE ASSESSEE. THEREFORE, WE FIND NO JUSTIFICATION T O ALLOW THE APPLICATION OF THE ASSESSEE AS NO PLAUSIBLE REASON/ EXPLANATION WAS PUT FORTH BY THE ASSESSEE FOR CONDONING THE DEL AY. THUS THE APPLICATION OF THE ASSESSEE IS DISMISSED, RESUL TING INTO DISMISSAL OF APPEAL OF THE ASSESSEE AS NOT ADMITTE D. 5. NOW WE SHALL TAKE UP THE APPEAL IN ITA NO. 301/I ND/2013 (A.Y. 2007-08) WHEREIN THE ONLY GROUND RAISED PERTA INS TO ALLOWING CLAIM OF WARRANTY EXPENSES OF RS.34,71,507 /-. THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT FOR ASSESSM ENT YEAR 2005-06 WARRANTY CLAIM OF RS.12.00 LACS , FOR ASSES SMENT YEAR 2006-07 RS.16.20 LACS, FOR ASSESSMENT YEAR 2007-08 RS.30,65,282/-,FOR ASSESSMENT YEAR 2008-09 RS.4,52, 493/- AND FOR ASSESSMENT YEAR 2009-10 SUCH CLAIM OF RS.61,100 /- WAS ALLOWED BY THE DEPARTMENT THAT TOO WHILE FRAMING TH E 8 ASSESSMENT U/S 143(3) OF THE ACT. THEREFORE, IT WAS CONTENDED THAT NO U TURN IS PERMITTED FOR THE IMPUGNED AS SESSMENT YEAR. THE LD. CIT DR CONTENDED THAT EACH YEAR IS AN INDEPENDENT. THEREFORE, THE LD. CIT WAS JUSTIFIED. 5.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. THE ASSESSEE FIL ED THE COPY OF THE ASSESSMENT ORDERS DATED 23-10-2008 (A.Y. 200 5-06), DATED 11-11-2009 (A.Y.2006-07), DATED 24-11-2010 (A .Y. 2007-08), DATED 22-12-2006 (A.Y. 2004-05), FRAMED U /S 143(3) OF THE ACT. IN THE PROFIT AND LOSS ACCOUNT, THE CLA IMED WARRANTY EXPENSES HAVE BEEN ALLOWED BY THE DEPARTMENT ITSELF MEANING THEREBY IN EARLIER AND SUBSEQUENT ASSESSMENT YEARS SUCH CLAIM OF THE ASSESSEE HAS BEEN DULY CONSIDERED AND ALLOWED BY THE DEPARTMENT. THE ASSESSEE COMPANY ACCRUED WAR RANTY COST UPON DOMESTIC SALES. ADMITTEDLY, THE RULE OF C ONSISTENCY HAS TO BE FOLLOWED BUT AT THE SAME TIME, THE ASSESS ING OFFICER IS EXPECTED TO EXAMINE THE NATURE AND EXTENT OF SUCH W ARRANTY MORE SPECIFICALLY WHEN THE PRODUCT WARRANTY COST IS BASED UPON ESTIMATE OF THE ASSESSEE AS HAS BEEN MENTIONED IN N OTE NO. 19 (SCHEDULE 14). WE ARE AWARE THAT THE WARRANTY EX PENSES 9 ARE ALLOWABLE BUT ITS EXTENT, NATURE AND NECESSITY WITH RESPECT TO SALE NEEDS EXAMINATION BY THE ASSESSING OFFICER. THEREFORE, ON THIS ISSUE, IN PRINCIPLE, WE AFFIRM THE STAND OF THE LD. CIT FOR INVOKING REVISIONAL JURISDICTION. HOWEVER, THE ASSE SSING OFFICER IS DIRECTED TO EXAMINE THE CLAIM OF THE ASSESSEE IN TERMS INDICTED HEREINABOVE. THE ASSESSEE BE GIVEN DUE OPP ORTUNITY OF BEING HEARD. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 13 TH NOV. 2013. SD/- SD/- (R.C. SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED - 13TH NOV. 2013 COPY TO APPELLANT/RESPONDENT/CIT/CIT(A)/DR RNM/-