M/s. Technico Agri Sciences Ltd., Chandigarh V. ACIT, New Delhi

ITA 3113/DEL/2013

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 1636 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 6 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 18-07-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 17-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ROHIT JAIN SHRI DIPESH JAIN
• Keywords: Capital asset; Depreciation; Additional evidence; Assessment record; Revenue expenditure; Capital expenditure; Set aside
• Section: 143(3); 37(1)

Judgement Text

ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 5847/DEL/2010 ASSESSMENT YEAR: 2001-02 ITA NO. 3111/DEL/2013 ASSESSMENT YEAR: 2003-04 ITA NO. 3112/DEL/2013 ASSESSMENT YEAR: 2004-05 ITA NO. 3113/DEL/2013 ASSESSMENT YEAR: 2005-06 ITA NO. 3114/DEL/2013 ASSESSMENT YEAR: 2006-07 TECHNICO AGRI SCIENCES LTD., VS ACIT, (FORMERLY KNOWN AS CHAMBAL AGRITECH LTD.), CIRCLE 3(1), SCO-835, 1SRT & 2 ND FLOOR, NEW DELHI. NAC MANIMAJRA, CHANDIGARH-160101 (PAN: AAACC9811G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT JAIN, ADVOCATE SHRI DIPESH JAIN, CA RESPONDENT BY : SHRI PRADEEP SINGH GAUTAM, SR. DR DATE OF HEARING: 21.08.2018 DATE OF PRONOUNCEMENT : 19.11.18 ORDER PER BENCH: ALL THE FIVE APPEALS HAVE BEEN PREFERRED BY THE ASS ESSEE. ITA 5847/DEL/2010 IS THE ASSESSEES APPEAL FOR ASSESSME NT YEAR ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 2 2001-02 AND IS PREFERRED AGAINST THE ORDER DATED 4. 11.2010 WHICH HAS BEEN PASSED BY THE LD. CIT (A)-IV, NEW DE LHI. ITA NO. 3111/DEL/2013 IS THE ASSESSEES APPEAL FOR ASSESSME NT YEAR 2003-04 AND IS PREFERRED AGAINST THE ORDER DATED 28 .2.2013 PASSED BY THE LD. CIT (A)-IV, NEW DELHI. ITA NO. 31 12/DEL/2013 IS THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2004-0 5 AND IS PREFERRED AGAINST THE ORDER DATED 28.02.2013 WHICH HAS BEEN PASSED BY THE LD. CIT (A)-IV, NEW DELHI. ITA NO. 31 13/DEL/2013 IS THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-0 6 AND IS PREFERRED AGAINST THE ORDER DATED 28.02.2013 WHICH HAS BEEN PASSED BY THE LD. CIT (A)-IV, NEW DELHI. ITA NO. 31 14/DEL/2013 IS THE ASSESSEES APPEAL FOR ASSESSMENT YEAR 2005-0 6 AND IS PREFERRED AGAINST THE ORDER DATED 28.02.2013 WHICH HAS BEEN PASSED BY THE LD. CIT (A)-IV, NEW DELHI. 1.1 ALL THE FIVE APPEALS WERE HEARD TOGETHER AND F OR THE SAKE OF CONVENIENCE, THEY ARE BEING DISPOSED OF THR OUGH THIS CONSOLIDATED ORDER. 2.0 BRIEF FACTS OF THE CASE FOR ASSESSMENT YEAR 20 01-02 IN ITA NO. 5847/DEL/2010 ARE THAT THE ASSESSEE COMPANY WAS SET UP IN MARCH 1999 AS A JOINT VENTURE OF M/S CHAMBAL FERTILIZERS LTD. AND TECHNICO PTY. LTD. TO PRODUCE TISSUE CULTU RE BASED HIGH ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 3 YIELDING SEED POTATOES. THE ASSESSEES BUSINESS CO MMENCED ON 14.09.2000, I.E. DURING THE ASSESSMENT YEAR 2001-02 . OUT OF THE TOTAL NET PRE-OPERATIVE/PRE-COMMENCEMENT EXPENDITUR E OF RS.8,97,91,659/-, THE ASSESSEE HAD CAPITALIZED AN A MOUNT OF RS. 2,88,77,659/- ALLOCATED TO THE FIXED ASSETS VIZ. BU ILDING AND PLANT AND MACHINERY. THE AMOUNT OF FIXED ASSETS ON WHICH DEPRECIATION WAS CLAIMED WAS RS. 2,57,95,922/- AND DEPRECIATION OF RS. 50,81,747/- WAS CLAIMED. THE ORIGINAL ASSESSMENT ORDER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT') WAS COMPLETE D ON 27.02.2004 WHEREIN THE ASSESSING OFFICER DID NOT ALLOW THE ASS ESSEES CLAIM OF DEPRECIATION OF RS. 50,81,747/- ALLEGING THAT THE P REOPERATIVE EXPENSES OF RS. 2,57,95,922/- WERE NOT LINKED TO BU SINESS ASSETS AND, THEREFORE, COULD NOT BE CAPITALIZED. THE ASSE SSEE APPROACHED THE LD. CIT (A) AND THE LD. CIT (A) DIRE CTED THE ASSESSING OFFICER TO IDENTIFY AND CAPITALIZE THE EX PENSES WHICH RELATED TO THE PERIOD AFTER THE SETUP OF BUSINESS B UT BEFORE THE COMMENCEMENT OF OPERATIONS TO THE COST OF FIXED ASS ETS AND ALLOW DEPRECIATION THEREON. AGGRIEVED WITH THE DIRECTION S OF THE LD. CIT (A), THE ASSESSEE APPROACHED THE ITAT AND THE ITAT IN ITA NO.1305/DEL/2007, VIDE ORDER DATED 23.11.2008, SET ASIDE THE ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 4 ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A D IRECTION TO CAPITALIZE ALL THE EXPENSES WHICH WERE HAVING NEXUS WITH THE FIXED ASSETS AND ALLOW CONSEQUENTIAL DEPRECIATION THEREON . FURTHER, THE ASSESSING OFFICER HAD ALSO NOT ALLOWED CAPITALI ZATION OF ANOTHER AMOUNT OF RS. 30,81,737/- FORMING PART OF T HE PREOPERATIVE EXPENSES AND WHICH WAS UPHELD BY THE L D. CIT(A) WAS ALSO DIRECTED BY THE ITAT TO BE CAPITALIZED. 2.1 DURING THE COURSE OF SET ASIDE PROCEEDINGS BEF ORE THE ASSESSING OFFICER, THE ASSESSING OFFICER REQUIRED T HE ASSESSEE TO FURNISH DETAILS OF ALL THE EXPENSES WHICH WERE CAPI TALIZED ALONG WITH RELEVANT BILLS AND VOUCHERS AND TO PROVE NEXUS OF THE EXPENSES WITH THE FIXED ASSETS. HOWEVER, IN THE SE COND ROUND ALSO BEFORE THE ASSESSING OFFICER, THE ASSESSING OF FICER VIDE ASSESSMENT ORDER DATED 20.11.2009, DISALLOWED THE C LAIM OF DEPRECIATION ON PREOPERATIVE EXPENSES CAPITALIZED T O FIXED ASSETS ALLEGING THAT NO DOCUMENTARY EVIDENCES/BILLS AND VO UCHERS WERE SUBMITTED BY THE ASSESSEE. THE ASSESSEE AGAIN APPR OACHED THE LD. CIT (A) AND SUBMITTED THAT ALL THE DETAILS REQU IRED BY THE ASSESSING OFFICER WERE DULY FURNISHED BEFORE THE AS SESSING OFFICER AND WERE ALSO EXAMINED BY THE ASSESSING OFFICER. H OWEVER, THE LD. CIT (A) UPHELD THE DISALLOWANCE ON DEPRECIATION ON ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 5 PREOPERATIVE EXPENSES CAPITALIZED TO FIXED ASSETS O N THE GROUND THAT THE DETAILS FILED BY THE ASSESSEE WERE NOT BAC KED BY PROPER BILLS AND VOUCHERS. 2.2 NOW, THE ASSESSEE HAS APPROACHED THE ITAT CHALLENGING THE ORDER OF THE LD. CIT (A) AND HAS RA ISED THE FOLLOWING GROUNDS OF APPEAL IN ITA NO. 5847/DEL/201 0:- 1. THAT THE IMPUGNED ORDER PASSED BY THE LEARNED CIT (A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED CIT (A) ERRED IN SUSTAINING T HE ADHOC DEPRECIATION DISALLOWANCE OF RS. 50,81,747/- ON THE TOTAL PRE-OPERATIVE EXPENDITURE OF RS. 2 , 57 , 95 , 922/ - (INCURRED BY THE APPELLANT COMPANY BEFORE 14 SEPTEMBER 2000 I .E. THE DATE OF COMMENCEMENT OF COMMERCIAL PRODUCTION) ALLOCATED TO FIXED ASSETS. 3. THAT THE LEARNED CIT (A) ALSO FAILED TO APPRECIA TE THAT COMPLETE DETAILS AS ASKED WERE PROVIDED TO THE LEAR NED AO. THAT A SPECIFIC OFFER TO SUBMIT ALL DOCUMENTS A GAIN WAS ALSO MADE BEFORE THE LEARNED CIT (A) BY THE ASSESSEE, WHICH WAS IGNORED. 4. THAT THE LEARNED CIT (A) FAILED TO APPRECIATE TH AT THE DETAILS OF LEGITIMATE EXPENDITURE OF RS. 2 , 57 , 95 , 922/- INCURRED TO SET UP THE PROJECT, HAS DIRECT NEXUS WI TH THE PURCHASE AND INSTALLATION OF PLANT AND MACHINERY AN D CONSTRUCTION OF BUILDING. 5. THAT THE LEARNED CIT (A) ALSO ERRED IN FAILING TO NOTICE THAT THE LEARNED AO COMPLETELY DISREGARDED THE INSTRUCTI ONS/ ORDER OF HONBLE ITAT VIDE ITS ORDER DATED 21.11.20 08, ADVISING THE LEARNED AO TO CAPITALIZE THOSE EXPENSE S WHICH HAS DIRECT NEXUS WITH THE FIXED ASSETS. 6. THAT THE SAID ACTION OF THE LEARNED CIT (A) WAS ARBITRARY, CONJECTURAL AND AGAINST LAW AND FACTS OF THE CASE. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 6 3.0 THE FACTS FOR ASSESSMENT YEAR 2003-04 IN ITA N O. 3111/DEL/2013 ARE THAT DURING THE FY 1999-2000, THE ASSESSEE HAD ENTERED INTO A LICENSE AGREEMENT DATED 19.07.19 99 WITH M/S TECHNICO PTY. LTD. TO CARRY OUT LICENSED OPERATIONS WITH THE USE OF LATTERS TECHNOLOGY REQUIREMENT FOR MANUFACTURE/DIS TRIBUTION OF MINIATURE POTATO SEEDS. A SERVICE AGREEMENT DATED 19.07.1999 WAS ALSO ENTERED INTO WITH M/S TECHNICO FOR ASSISTA NCE IN THE MANAGEMENT AND PRODUCTION OF THE MINIATURE SEEDS. DURING ASSESSMENT YEAR 2003-04, THE ASSESSEE HAD PAID LICE NCE FEE OF RS. 6,09,14,000/- IN TERMS OF THE LICENSE AGREEMENT AND A FURTHER AMOUNT OF RS. 1,18,77,353/- AS TECHNOLOGY ENHANCEME NT FEE IN TERMS OF THE LICENCE AGREEMENT. APART FROM THIS, T HE ASSESSEE ALSO PAID AN AMOUNT OF RS. 47,86,525/- TOWARDS AGRONOMY MANAGEMENT FEE IN TERMS OF THE SERVICE AGREEMENT AN D A FURTHER SUM OF RS. 17,62,065/- AS PRODUCTION FACILITY MANAG EMENT FEE AGAIN IN TERMS OF THE SERVICE AGREEMENT. THE ASSES SING OFFICER, VIDE ASSESSMENT ORDER DATED 28.02.2006, HELD THAT T HESE EXPENSES/FEES RESULTED IN AN ENDURING BENEFIT TO TH E ASSESSEE AND TREATED THE SAME AS DEFERRED REVENUE EXPENDITURE AS AGAINST THE ASSESSEE CLAIMING THE SAME AS REVENUE EXPENDITURE. THE ASSESSING OFFICER HELD THAT THIS EXPENDITURE WAS TO BE ALLOWED ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 7 OVER A PERIOD OF FIVE YEARS AND ACCORDINGLY ALLOWED ONLY 1/5 TH OF THE EXPENDITURE AS DEDUCTIBLE IN ASSESSMENT YEAR 20 03-04. APART FROM THIS, THE ASSESSEE HAD CLAIMED AMORTIZATION OF LOOSE TOOLS AMOUNTING TO RS. 55,036/- AS BEING ALLOWABLE OVER A PERIOD OF THREE YEARS. THE ASSESSING OFFICER, HOWEVER, HELD THE SAME TO BE CAPITAL IN NATURE AND ALLOWED DEPRECIATION THEREON @25%. APART FROM THIS, THE ASSESSING OFFICER ALSO MADE A DISALL OWANCE OF RS. 34,78,817/- ON ACCOUNT OF ALLEGED EXCESS DEPRECIATI ON CLAIMED BY THE ASSESSEE WITH RESPECT TO THE PREOPERATIVE EXPEN DITURE WHICH HAD BEEN CAPITALIZED BY THE ASSESSEE IN ASSESSMENT YEAR 2001-02 BUT WAS NOT ALLOWED BY THE AO. THIS ACTION OF THE ASSESSING OFFICER WAS AFFIRMED BY THE LD. CIT (A). 3.1 NOW, THE ASSESSEE HAS APPROACHED THE ITAT AGAI NST THE IMPUGNED ORDER AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE IMPUGNED ORDER PASSED BY THE LEARN ED CIT (A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE ADDITION OF RS. 3,478,817/- ON ACCOU NT OF ALLEGED EXCESS DEPRECIATION CLAIMED BY THE APPELLAN T. 3. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN DISALLOWING 4/5 TH OF THE AGRONOMY MANAGEMENT FEE AMOUNTING TO RS. 47,86,525/- PAID BY THE APPELLANT COMPANY. 4. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW AND IN FACTS IN DISALLOWING 4/5 TH OF THE PRODUCTION FACILITY MANAGEMENT FEE AMOUNTING TO RS. 17 , 62 , 065 /- PAID BY THE APPELLANT COMPANY. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 8 5. THAT THE LEARNED CIT (A) FURTHER ER RED IN LAW AND IN FACTS IN DISALLOWING 4/5 TH OF THE TECHNOLOGY ENHANCEMENT FEE AMOUNTING TO RS. 1,18,77,353/- PAID BY THE APPELLANT COMPANY. 6. THAT THE LEARNED CIT (A) FURTHER ERRED IN UPHO LDING THE ABOVE EXPENDITURE INCURRED ON AGRONOMY MANAGEMENT FEE, PRODUCTION FACILITY MANAGEMENT FEE AND TECHNOLOGY ENHANCEMENT FEE TO HAVE AN ENDURING BENEFIT. 7. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW A ND IN FACTS IN HOLDING THE LOOSE TOOLS AMOUNTING TO RS. 55 , 036/- TO BE OF CAPITAL NATURE AND ACCORDINGLY UPHOLDING THAT THE DEPRECIATION IS ALLOWABLE @ 25% ON THE SAME. 8. THAT THE SAID ACTION OF THE LEARNED CIT (A) WAS ARBITRARY, CONJECTURAL AND AGAINST LAW & FACTS OF THE CASE. 4.0 THE FACTS IN ASSESSMENT YEAR 2004-05 IN ITA NO . 3112/DEL/2013 ARE THAT THE ASSESSEE HAD MADE A PAYM ENT OF RS. 2,00,00,000/- TO ICICI BANK LIMITED AS AN UPFRONT F EE IN LIEU OF REDUCING THE RATE OF INTEREST PAYABLE FROM 10.5% TO 8.5% ON THE LOAN TAKEN FROM THE BANK. THE ASSESSEE HAD DEBITED THIS UPFRONT FEE TO THE PROFIT & LOSS ACCOUNT ON PRO RATA BASIS OVER THE TENURE OF THE LOAN AND THUS AN AMOUNT OF RS. 2,04,000/- WA S DEBITED AS EXPENDITURE DURING ASSESSMENT YEAR 2004-05. HOWEVE R, WHILE COMPUTING THE TAXABLE INCOME, THE ASSESSEE CLAIMED THE ENTIRE EXPENDITURE OF RS. 2,00,00,000/- AS BUSINESS DEDUCT ION DURING THE YEAR UNDER CONSIDERATION BUT THE ASSESSING OFFI CER WAS OF THE VIEW THAT THIS EXPENDITURE WAS TO BE ALLOWED ON PRO RATA BASIS SINCE THE BENEFIT OF REDUCTION OF INTEREST IN LIEU OF UPFRONT FEE WAS ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 9 ENDURING IN NATURE AND WAS TO BE ENJOYED BY THE ASS ESSEE OVER THE ENTIRE TENURE OF THE LOAN. THE ASSESSING OFFIC ER PROCEEDED TO DISALLOW UPFRONT FEE OF RS. 1,97,96,000/- AND ONLY ALLOWED RS. 2,04,000/-. THIS ACTION OF THE ASSESSING OFFICER W AS UPHELD BY THE LD. CIT (A). FURTHER, THE ASSESSING OFFICER AL SO MADE A DISALLOWANCE OF RS. 27,53,533/- ON ACCOUNT OF ALLEG ED EXCESS DEPRECIATION CLAIMED ON CAPITALIZATION OF PREOPERAT IVE EXPENSES. A FURTHER DISALLOWANCE OF RS. 6,181/- WAS MADE ON A CCOUNT OF AMORTIZATION OF LOOSE TOOLS. THE ASSESSING OFFICER ALSO MADE A DISALLOWANCE OF RS. 47,86,525/- ON ACCOUNT OF AGRON OMY MANAGEMENT FEE, RS. 17,26,065/- ON ACCOUNT OF PRODU CTION FACILITY MANAGEMENT FEE AND RS. 1,18,77,353/- PERTA INING TO TECHNOLOGY ENHANCEMENT FEE PAID BY THE ASSESSEE. T HE ASSESSING OFFICER ALLOWED ONLY 1/5 TH OF THESE AMOUNTS. THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER AND NOW, THE ASSESSEE IS BEFORE THE ITAT CHALLENGING THE ADJUDICATION BY THE LD. CIT(A) AND HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE IMPUGNED ORDER PASSED BY THE LEARNED CIT (A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE ADDITION OF RS. 27,53,533/- ON ACCOU NT OF ALLEGED EXCESS DEPRECIATION CLAIMED BY THE APPELLAN T. 3. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 10 SUSTAINING THE ADDITION OF RS 1,97,96,000/- ON PRO- RATA BASIS ON ACCOUNT OF UPFRONT FEE PAID BY THE APPELLA NT FOR REDUCING RATE OF INTEREST ON LOAN TAKEN BY THE COMP ANY FROM ICICI BANK. 4. THAT THE LEARNED CIT (A) FURTHER ERRED IN LAW A ND IN FACTS IN HOLDING THE LOOSE TOOLS TO BE OF CAPITAL NATURE AND ACCORDINGLY UPHOLDING THAT THE DEPRECIATION IS ALLO WABLE @ 25% ON THE SAME. WITHOUT PREJUDICE TO THE ABOVE THE LEARNED CIT (A) ERRED IN UPHOLDING THE ADDITION OF RS 6,181 /- AFTER ALLOWING DEPRECIATION @ 25%, AS THE ACTUAL COST OF LOOSE TOOLS IS RS 22,000/-. 5. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN F ACTS IN SUSTAINING THE DISALLOWANCE OF THE AGRONOMY MANAGEM ENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003- 04 AMOUNTING TO RS. 47,86,525/- AND CHARGING L/5 TH OF AGRONOMY MANAGEMENT FEE IN THE CURRENT A/Y. 6. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE PRODUCTION FACIL ITY MANAGEMENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNTING TO RS. 17,26,065/- AND CHARGING 1 /5 TH OF PRODUCTION FACILITY MANAGEMENT FEE IN THE CURRENT A /Y. 7. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE TECHNOLOGY ENHAN CEMENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNTING TO RS. 1,18,77,353/- AND CHARGING L/5 N OF TECHNOLOGY ENHANCEMENT FEE IN THE CURRENT A/Y. 8. THAT THE LEARNED CIT (A) FURTHER ERRED IN UPHOL DING THE ABOVE EXPENDITURE INCURRED ON AGRONOMY MANAGEMENT F EE, PRODUCTION FACILITY MANAGEMENT FEE AND TECHNOLOGY ENHANCEMENT FEE TO HAVE AN ENDURING BENEFIT. 9. THAT THE SAID ACTION OF THE LEARNED CIT (A) WAS ARBITRARY, CONJECTURAL AND AGAINST LAW & FACTS OF THE CASE. 10. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALT ER OR MODIFY THE ABOVE GROUNDS OF APPEAL. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 11 5.0 FOR ASSESSMENT YEAR 2005-06, IN ITA 3113/DEL/2 013, THE ISSUES ARE IDENTICAL AND THE ASSESSEE IS CHALLE NGING THE DISALLOWANCE OF RS. 11,250/- ON AMORTIZATION OF LOO SE TOOLS. THE ASSESSEE IS ALSO CHALLENGING THE ACTION OF THE LD. CIT(A) IN SUSTAINING THE ADDITION OF RS. 2,481,635/- ON ACCOU NT OF ALLEGED EXCESS DEPRECATION CLAIMED BY THE ASSESSEE ON PREOP ERATIVE EXPENSES CAPITALIZED. SIMILARLY, THE ASSESSEE IS A LSO CHALLENGING THE DISALLOWANCE OF RS. 47,86,525/- PAID ON ACCOUNT OF AGRONOMY MANAGEMENT FEE AND RS. 1,18,77,353/- PAID ON ACCOUN T OF TECHNOLOGY ENHANCEMENT FEE. IN THIS REGARD THE FOL LOWING GROUNDS HAVE BEEN RAISED:- 1. THAT THE IMPUGNED ORDER PASSED BY THE LEARNED CIT (A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 2. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN F ACTS IN HOLDING THE LOOSE TOOLS TO BE OF CAPITAL NATURE AND ACCORDI NGLY UPHOLDING THAT THE DEPRECIATION IS ALLOWABLE @ 25% ON THE SAM E. WITHOUT PREJUDICE TO THE ABOVE, THAT THE LEARNED CIT (A) ER RED IN UPHOLDING THE ADDITION OF RS 11,250 AFTER ALLOWING DEPRECIATION @ 25%, AS THE ACTUAL COST OF LOOSE TOOLS IS RS 15,0 00. 3. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FAC TS IN SUSTAINING THE ADDITION OF RS. 2,481,635/- ON ACCOU NT OF ALLEGED EXCESS DEPRECIATION CLAIMED BY THE APPELLAN T ON PRE- OPERATIVE EXPENSES. 4. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE AGRONOMY MANAGEM ENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNT ING TO RS. 47,86,525/- AND CHARGING L/5 TH OF AGRONOMY MANAGEMENT FEE IN THE CURRENT A/Y. 5. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE PRODUCTION FACIL ITY MANAGEMENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003- ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 12 04 AMOUNTING TO RS. 17,26,065/- AND CHARGING L/5 TH OF PRODUCTION FACILITY MANAGEMENT FEE IN THE CURRENT A /Y. 6. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE TECHNOLOGY ENHAN CEMENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNTING TO RS. 1,18,77,353/- AND CHARGING L/5 N OF TECHNOLOGY ENHANCEMENT FEE IN THE CURRENT A/Y. 7. THAT THE LEARNED CIT (A) FURTHER ERRED IN UPHOL DING THE ABOVE EXPENDITURE INCURRED ON AGRONOMY MANAGEMENT FEE, PRODUCTION FACILITY MANAGEMENT FEE AND TECHNOLOGY ENHANCEMENT FEE TO HAVE AN ENDURING BENEFIT. 8. THAT THE SAID ACTION OF THE LEARNED CIT (A) WAS ARBITRARY,CONJECTURAL AND AGAINST LAW & FACTS OF TH E CASE. 9. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALTE R OR MODIFY THE ABOVE GROUNDS OF APPEAL. 6.0 IN ASSESSMENT YEAR 2006-07, IN ITA NO. 3114/DE L/2013, AGAIN THE ISSUES ARE IDENTICAL. GROUND NO. 2 IS AG AINST THE ORDER OF THE LD. CIT (A) IN SUSTAINING THE DISALLOWANCE OF R S. 1,508,014/- ON ACCOUNT OF ALLEGED EXCESS DEPRECIATION ON CAPITALIZ ATION OF PREOPERATIVE EXPENSES. FURTHER, THE ASSESSEE IS AL SO CHALLENGING THE UPHOLDING THE DISALLOWANCES OF RS. 47,86,525/-, RS. 17,26,065/- AND RS. 1,18,77,353/- PERTAINING TO THE VARIOUS FEES PAID UNDER THE TERMS OF THE TWO AGREEMENTS WITH M/S TECHNICO. THE FOLLOWING GROUNDS OF APPEAL HAVE BEEN RAISED BY THE ASSESSEE:- 1. THAT THE IMPUGNED ORDER PASSED BY THE LEA RNED CIT (A) IS CONTRARY TO THE LAW AND FACTS OF THE CASE. 1. 2. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN F ACTS IN SUSTAINING THE ADDITION OF RS. 1,508,014/- ON ACCOU NT OF ALLEGED EXCESS DEPRECIATION CLAIMED BY THE APPELLAN T. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 13 2. 3. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN F ACTS IN SUSTAINING THE DISALLOWANCE OF THE AGRONOMY MANAGEM ENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNTING TO RS. 47,86,525/- AND CHARGING 1 /5 TH OF AGRONOMY MANAGEMENT FEE IN THE CURRENT A/Y. 4. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE PRODUCTION FACIL ITY MANAGEMENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNTING TO RS. 17,26,065/- AND CHARGING L /5 TH OF PRODUCTION FACILITY MANAGEMENT FEE IN THE CURRENT A /Y. 3. 5. THAT THE LEARNED CIT (A) ERRED IN LAW AND IN FA CTS IN SUSTAINING THE DISALLOWANCE OF THE TECHNOLOGY ENHAN CEMENT FEE PAID BY THE APPELLANT COMPANY IN A/Y 2003-04 AMOUNTING TO RS. 1,18,77,353/- AND CHARGING L/5 TH OF TECHNOLOGY ENHANCEMENT FEE IN THE CURRENT A/Y. 4. 6. THAT THE LEARNED CIT (A) FURTHER ERRED IN UPHOL DING THE ABOVE EXPENDITURE INCURRED ON AGRONOMY MANAGEMENT F EE, PRODUCTION FACILITY MANAGEMENT FEE AND TECHNOLOGY ENHANCEMENT FEE TO HAVE AN ENDURING BENEFIT. 5. 7. THAT THE SAID ACTION OF THE LEARNED CIT (A) WAS ARBITRARY, CONJECTURAL AND AGAINST LAW & FACTS OF THE CASE. 6. 8. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALTE R OR MODIFY THE ABOVE GROUNDS OF APPEAL. 7.0 AT THE OUTSET, THE LD. AR DREW OUR ATTENTION T O THE APPLICATION SUBMITTED BY THE ASSESSEE FOR ADMISSION OF ADDITIONAL EVIDENCE IN TERMS OF RULE 29 OF THE ITAT RULES, 196 3. THE LD. AR SUBMITTED THAT THE DETAILS OF PREOPERATIVE EXPENSES CAPITALISED TO FIXED ASSETS ALONG WITH THE INVOICES, BILLS AND VOU CHERS WERE BEING SOUGHT TO BE ADMITTED AS ADDITIONAL EVIDENCES . IT WAS ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 14 SUBMITTED THAT THESE ADDITIONAL EVIDENCES WERE RELE VANT FOR ADJUDICATION OF THE ISSUE RELATING TO CAPITALIZATIO N OF CERTAIN PREOPERATIVE EXPENSES TO FIXED ASSETS AND CONSEQUEN TIAL ALLOWABILITY OF DEPRECIATION THEREON. THE LD. AR S UBMITTED THAT AFTER THE SET ASIDE BY THE ITAT, THE ASSESSING OFFI CER HAD REQUIRED THE ASSESSEE TO FURNISH DETAILS IN RESPECT OF EXPEN SES ALONG WITH BILLS AND VOUCHERS OF AMOUNTS ABOVE RS. 1 LAKH AND THE ASSESSEE HAD FILED COMPLETE DETAILS OF THE PREOPERATIVE EXPE NSES CAPITALISED TO THE FIXED ASSETS AND EXPLAINED THE NATURE OF EAC H EXPENSE ESTABLISHING THE NEXUS WITH FIXED ASSETS. OUR ATTE NTION WAS DRAWN TO ASSESSEES REPLY DATED 20.11.2009 WHICH WA S PLACED AT PAGES 76-97 OF THE PAPER BOOK FILED BY THE ASSESSEE . THE LD. AR ALSO SUBMITTED THAT THE FACT THAT THE DETAILS WERE FILED BY THE ASSESSEE WAS ALSO RECORDED IN THE ORDER SHEET ENTRY DATED 20.11.2009. OUR ATTENTION AS DRAWN TO COPY OF THE ORDER SHEET PLACED AT PAGES 99 AND 99A OF THE ASSESSEES PAPER BOOK IN THIS REGARD. IT WAS SUBMITTED BY THE LD. AR THAT, HOWEV ER, THE ASSESSING OFFICER OBSERVED THAT THE RELEVANT DETAIL S WERE NOT FILED BY THE ASSESSEE AND IN APPEAL BEFORE THE LD. COMMIS SIONER OF INCOME TAX (A) ALSO, THE LD. COMMISSIONER OF INCOME TAX (A), AFTER CALLING FOR THE ASSESSMENT RECORD, HAD OBSERV ED THAT THE ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 15 ASSESSEE HAD DULY COMPLIED BY FILING ALL THE DETAIL S BUT OBSERVED THAT THE DETAILS WERE NOT BACKED BY INVOICES AND VO UCHERS AND HAD, THEREAFTER, UPHELD THE DISALLOWANCE. THE LD. AR SUBMITTED THAT IN VIEW OF THE FACTUAL MATRIX, IN THE PRESENT APPLICATION UNDER RULE 29 OF THE ITAT RULES, THE ASSESSEE SEEKS TO PLACE ON RECORD COPIES OF INVOICES AND VOUCHERS ON SAMPLE BA SIS WHICH, ALTHOUGH, WERE PRODUCED BEFORE THE LOWER AUTHORITIE S WERE NOT FILED BEFORE THEM. THE LD. AR SUBMITTED THAT IN TH E INTEREST OF JUSTICE, THESE ADDITIONAL EVIDENCES ADMITTED BY THE ITAT. 8.0 IN RESPONSE, THE LD. SENIOR DR OPPOSED THE ASS ESSEES APPLICATION FOR ADMITTING ADDITIONAL EVIDENCE AND S UBMITTED THAT THE ASSESSEE HAD NOT PRODUCED RELEVANT VOUCHERS AND INVOICES EVEN DURING THE SECOND ROUND OF ASSESSMENT PROCEEDI NGS AND, THEREFORE, NO FURTHER OPPORTUNITY SHOULD BE GIVEN T O THE ASSESSEE. 9.0 HAVING HEARD BOTH THE PARTIES ON THE ISSUE OF ADMITTING ADDITIONAL EVIDENCE, WE ARE OF THE CONSID ERED OPINION THAT IN VIEW OF THE FACTS OF THE CASE AND IN THE IN TEREST OF JUSTICE, IT IS NECESSARY TO ADMIT ADDITIONAL EVIDENCE WHICH IS BEING SOUGHT TO BE ADMITTED BY THE LD. AR ON BEHALF OF THE ASSES SEE. THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. TEX T HUNDRED INDIA PVT. LTD. IN 351 ITR 57(DEL) HAD HELD THAT RU LE 29 ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 16 PERMITTING THE TRIBUNAL TO ADMIT ADDITIONAL EVIDENC E IS MADE TO ENABLE THE TRIBUNAL TO ADMIT ANY ADDITIONAL EVIDENC E WHICH WOULD BE NECESSARY FOR SUBSTANTIAL JUSTICE IN THE M ATTER AND FURTHER HELD THAT IT WAS WELL SETTLED THAT PROCEDUR E SHOULD NOT BE CHOKED ONLY BECAUSE OF SOME INADVERTENT ERROR OR OM ISSION ON THE PART OF ONE OF THE PARTIES TO LEAD EVIDENCE AT THE APPROPRIATE STAGE. ACCORDINGLY, WE DEEM IT FIT TO ADMIT THE AD DITIONAL EVIDENCE WHICH HAS BEEN PLACED IN THE FORM OF PAPER BOOK BEFORE US. 9.1 IN VIEW OF THIS BENCH ADMITTING THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE, THE ISSUE IN DISPU TE MUST NECESSARILY BE SET ASIDE TO THE FILE OF THE ASSESSI NG OFFICER SO AS TO ENABLE HIM TO EXAMINE AND VERIFY THE SAME. ACCORDI NGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE DIRECTION TO EXAMINE THE DOCUMENTS AND THE SUBMISSI ONS OF THE ASSESSEE, KEEPING IN MIND THE DIRECTIONS OF THE ITA T IN THE FIRST ROUND OF PROCEEDINGS AND, THEREAFTER, ADJUDICATE TH E ISSUE AS PER LAW AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY, GROUND NOS. 2, 3 AND 4 IN ITA NO. 5847/DEL/2010, GR OUND NO. 2 IN ITA NO. 3111/DEL/2013, GROUND NO. 2 IN ITA NO. 3112/DEL/2013, GROUND NO. 3 IN ITA NO. 3113/DEL/201 3 AND ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 17 GROUND NO. 2 IN ITA NO. 3114/DEL/2013 STAND ALLOWED FOR STATISTICAL PURPOSES. 10.0 WITH RESPECT TO GROUND NOS. 3, 4, 5 AND 6 IN ASSESSMENT YEAR 2003-04 PERTAINING TO DISALLOWANCE OF 4/5 TH OF THE AGRONOMY MANAGEMENT FEE, PRODUCTION FACILITY MA NAGEMENT FEE AND TECHNOLOGY ENHANCEMENT FEE BY TREATING THE SAME AS DEFERRED REVENUE EXPENDITURE, THE LD. AR SUBMITTED THAT THE LICENCE FEE WAS PAID FOR GRANTING LICENCE TO CARRY OUT OPERATIONS FOR OPERATING HORTICULTURE AND AGRONOMIC COMMERCIAL PRODUCTION, MARKETING AND DISTRIBUTION OF MINIATURE POTATO SEED S. IT WAS SUBMITTED THAT IN VIEW OF THE LICENCE AGREEMENT, AL L THE TECHNOLOGY, IPRS, TRADEMARK ETC. VESTED WITH M/S TE CHNICO PTY. LTD. AND THE ASSESSEE WAS MERELY GRANTED LICENCE TO USE THE MARK IN THE PRESCRIBED MANNER. THE LD. AR FURTHER SUBMI TTED THAT THE LICENCE FEES PAID IN LUMP SUM WAS CAPITALISED BY TH E ASSESSEE AND THE SAME WAS ACCEPTED BY THE REVENUE ALSO. HOW EVER, APART FROM THE LICENCE FEE, THE ASSESSEE WAS ALSO OBLIGED TO PAY TECHNOLOGY ENHANCEMENT FEE WHICH WAS FOR PROVIDING/ SHARING IMPROVEMENTS IN THE EXISTING TECHNOLOGY AS A RESULT OF RESEARCH AND DEVELOPMENT ACTIVITIES BY M/S TECHNICO PTY. LTD . IT WAS ALSO SUBMITTED THAT THE PAYMENT OF TECHNOLOGY ENHANCEMEN T FEE WAS ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 18 LINKED TO PRODUCTION OF SEED POTATOES AND WAS, THER EFORE, CLEARLY REVENUE IN NATURE. FOR THIS PURPOSE, REFERENCE WAS MADE TO CLAUSE 9.1 OF THE LICENCE AGREEMENT. SIMILARLY, IT WAS SUBMITTED THAT AGRONOMY MANAGEMENT FEE WAS PAID UNDER THE SER VICE AGREEMENT FOR VARIOUS AGRONOMY SERVICES TO BE PROVI DED BY M/S TECHNICO PTY. LTD. WHICH INCLUDED TRAINING OF STAFF IN MODERN AGRONOMY PRACTICES, PROVIDING TRAINING PERSONNEL IN THE TERRITORY AT LOCATIONS IN INDIA AS WELL AS OUTSIDE INDIA, PRO VIDING AGRONOMY ADVICES ON REQUEST OF THE ASSESSEE. IT WAS SUBMITT ED THAT THESE SERVICES RELATE TO ROUTINE ACTIVITIES LIKE PLANTATI ON, HARVEST HANDLING AND STORAGE PROCESS AND THE SAME WAS PAID AS A STOP GAP ARRANGEMENT TILL RECRUITMENT OF REGULAR AGRONOM Y STAFF BY THE ASSESSEE. IT WAS ALSO SUBMITTED THAT THIS FEE WAS DETERMINED ON PER DAY BASIS. WITH RESPECT TO PRODUCTION FACILITY MANAGEMENT FEE, IT WAS SUBMITTED THAT THIS ALSO WAS PAID UNDER THE SERVICE AGREEMENT AND WAS PAID FOR MANAGEMENT OF PRODUCTION OF SEEDS, APPOINTING OF PRODUCTION FACILITY MANAGER FOR ASSIS TING IN DAY TO DAY MANAGEMENT, ASSISTANCE IN PREPARING PRODUCTION PLANS, PROGRAM TISSUE CULTURE OPERATIONS AND RECRUITMENT O F STAFF AND REVIEW USE OF TECHNOLOGY, REVIEW PROCESSES AND OPER ATIONS AND ADOPTION OF ENSURE BEST PRACTICES ETC. IT WAS SUBM ITTED THAT THIS ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 19 FEE WAS ALSO LINKED TO DAY TO DAY PRODUCTION AND WA S PAYABLE ANNUALLY IN FOUR EQUAL INSTALMENTS. THE LD. AR SUB MITTED THAT THIS FEE DID NOT RESULT IN CREATION OF ANY NEW CAPI TAL ASSET AND WAS FOR SERVICES RENDERED IN CONNECTION WITH OPERAT IONS AND PRODUCTION FACILITIES AND BEING SO, THEY WERE PUREL Y REVENUE IN NATURE AND WERE TO BE ALLOWED AS BUSINESS DEDUCTION IN THE YEAR IN WHICH THEY WERE CLAIMED. IT WAS ALSO SUBMITTED THAT THERE WAS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE UNDER TH E ACT AND FURTHER THESE PAYMENTS WERE ACCEPTED BY THE REVENUE AS AN ALLOWABLE DEDUCTION IN ASSESSMENT YEAR 2001-02 INIT IALLY U/S 143(3) OF THE ACT AND ALSO IN ASSESSMENT YEAR 2003- 04. THE LD. AR ALSO SUBMITTED THAT IN VIEW OF THE JUDGMENT OF T HE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. JC IT REPORTED IN 372 ITR 605(SC), THE IMPUGNED PAYMENTS WERE ALLOWAB LE AS DEDUCTION IN THE YEAR IN WHICH THEY WERE CLAIMED/SP ENT. 10.1 THE LD. AR ALSO SUBMITTED THAT THE GROUNDS IN ASSESSMENT YEAR 2003-04 WERE IDENTICAL TO GROUND NO . 5, 6, 7 & 8 IN ASSESSMENT YEAR 2004-05, GROUND NO. 4, 5, 6 AND 7 IN ASSESSMENT YEAR 2005-06 AND GROUND NO. 3, 4, 5, 6 I N ASSESSMENT YEAR 2006-07 AND THE ARGUMENTS WOULD BE IDENTICAL IN ALL THESE YEARS. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 20 10.2 IN RESPONSE, THE LD. SR. DR PLACED HEAVY RELI ANCE ON THE ORDERS OF BOTH THE AUTHORITIES BELOW AND VEHEME NTLY ARGUED THAT THE DISALLOWANCE HAD BEEN RIGHTLY MADE IN THIS REGARD. 10.3 WITH RESPECT TO GROUND NO. 7 IN ASSESSMENT YE AR 2003- 04, THE LD. AR SUBMITTED THAT THIS GROUND CHALLENGE D THE ACTION OF THE ASSESSING OFFICER IN CAPITALIZING THE EXPENS ES INCURRED ON LOOSE TOOLS. IT WAS SUBMITTED THAT THE LOWER AUTHO RITIES HAD FAILED TO APPRECIATE THAT THE LOOSE TOOLS WERE CONSUMABLE IN NATURE AND DID NOT HAVE A SPAN OF LIFE WHICH WAS MORE THAN ONE YEAR. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD ALSO CATEGORIS ED LOOSE TOOLS AS PART OF INVENTORY AND NOT AS CAPITAL ASSETS IN T HE BOOKS OF ACCOUNTS AND THE ACCOUNTING TREATMENT HAD BEEN APPR OVED BY THE STATUTORY AUDITORS WHO HAD NOT MADE ANY ADVERSE COMMENTS ON THE SAME. IT WAS PRAYED THAT THE ACTION OF THE ASSESSING OFFICER IN CAPITALIZING THE EXPENDITURE AND ALLOWIN G DEPRECIATION @25% THEREON DESERVES TO BE SET ASIDE. 10.4 THE LD. AR ALSO SUBMITTED THAT THIS GROUND WA S ALSO IDENTICAL TO GROUND NO. 4 IN ASSESSMENT YEAR 2004-0 5, GROUND NO. 2 IN ASSESSMENT YEAR 2005-06 AND THE ARGUMENTS WOUL D BE IDENTICAL. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 21 10.5 IN RESPONSE, THE LD. SR. DR PLACED RELIANCE O N THE ORDERS OF THE AUTHORITIES BELOW. 10.6 WITH RESPECT TO GROUND NO. 3 IN ASSESSEES AP PEAL FOR ASSESSMENT YEAR 2004-05 PERTAINING TO DISALLOWANCE RELATING TO UPFRONT FEE PAID TO ICICI BANK LTD. IN LIEU OF REDU CING THE RATE OF INTEREST PAYABLE FROM 10.5% TO 8.5%, THE LD. AR SUB MITTED THAT THE IMPUGNED UPFRONT FEE WAS ALLOWABLE AS A REVENUE EXPENDITURE BECAUSE THERE WAS NO CONCEPT OF DEFERRED REVENUE EX PENDITURE IN THE INCOME TAX ACT AND FURTHER BECAUSE NO CAPITAL A SSET HAD COME INTO EXISTENCE IN LIEU OF INCURRENCE OF THE UP FRONT FEE. THE LD. AR ALSO SUBMITTED THAT THE ASSESSING OFFICER, W HILE DISALLOWING THE IMPUGNED AMOUNT, HAD PRIMARILY RELI ED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF TAPARIA TOOLS LTD. VS. JCIT WHEREIN SIMILAR UPFRONT FEE PAYABLE FOR REDUCTION OF INTEREST HAD BEEN DISALLOWED BUT T HIS JUDGMENT OF THE HONBLE BOMBAY HIGH COURT HAD BEEN REVERSED BY THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. JC IT REPORTED IN 372 ITR 605 WHEREIN IT WAS HELD THAT ONE TIME UPFRO NT INTEREST PAYMENT WAS TO BE ALLOWED AS DEDUCTION IN THE YEAR OF PAYMENT ITSELF AND, THEREFORE, THE IMPUGNED DISALLOWANCE DE SERVED TO BE DELETED. ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 22 10.7 IN RESPONSE, THE LD. SR. DR PLACED RELIANCE O N THE FINDINGS AND OBSERVATIONS OF BOTH THE LOWER AUTHORI TIES. 11.0 HAVING HEARD THE RIVAL SUBMISSIONS, WE TAKE U P THE ISSUES ONE BY ONE. IN ASSESSMENT YEAR 2003-04, THE ASSESSEE HAS CHALLENGED THE 4/5 TH DISALLOWANCE OUT OF TECHNOLOGY ENHANCEMENT FEE, AGRONOMY MANAGEMENT FEE AND PRODUC TION FACILITY MANAGEMENT FEE AND HAS RAISED THE ISSUE IN GROUNDS 3,4,5 AND 6. THE LD. AR HAS DRAWN OUR ATTENTION TO THE LICENCE FEE AGREEMENT AS WELL AS THE SERVICE AGREEMENT AND HAS EMPHASISED THAT THE AMOUNTS PAID HAD BEEN PAID UNDE R THE TERMS OF THE TWO AGREEMENTS. IT IS THE CONTENTION OF THE LD. AR THAT ALTHOUGH THE LICENCE FEE PAID BY THE ASSESSEE HAS BEEN ACCEPTED BY THE DEPARTMENT IN EARLIER YEARS, THE OT HER FEES WERE NOT ALLOWED ON THE GROUND THAT THE BENEFIT WAS OF E NDURING NATURE AND COULD NOT BE SAID TO HAVE ACCRUED ONLY I N ONE YEAR. IT IS THE CONTENTION OF THE LD. AR THAT THE IMPUGNED F EES HAVE BEEN PAID FOR THE PURPOSE OF PROVIDING AND SHARING IMPRO VEMENTS IN TECHNOLOGY, TRAINING OF STAFF, PRODUCTION FACILITY MANAGEMENT, TECHNOLOGY REVIEW ETC. IT IS SEEN THAT THE ASSESSI NG OFFICER, WHILE MAKING THE DISALLOWANCE, HAS OBSERVED THAT TECHNICA L SERVICES ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 23 AND TRAINING PROVIDED BY M/S TECHNICO TO THE ASSESS EE COMPANY HAD PROVIDED ENDURING ADVANTAGE TO THE ASSESSEE COM PANY WHICH WOULD BENEFIT THE ASSESSEE OVER A NUMBER OF YEARS A ND, THEREFORE, ALLOWING THE ENTIRE EXPENDITURE IN ONE YEAR MIGHT G IVE A DISTORTED PICTURE OF PROFITS IN A PARTICULAR YEAR. WHILE MAK ING THE DISALLOWANCE, THE ASSESSING OFFICER HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION VS. COMMISSIONER OF INCOME TAX REPORTED IN 225 ITR 802 (SC). THE LD. COMMISSI ONER OF INCOME TAX (A), WHILE UPHOLDING THE DISALLOWANCE, A LSO SECONDED THE VIEW TAKEN BY THE ASSESSING OFFICER. THUS, APA RT FROM OBSERVING THAT THE IMPUGNED FEES GAVE AN ENDURING B ENEFIT TO THE ASSESSEE COMPANY AND, THEREFORE, THE ALLOWABILITY O F EXPENDITURE HAD TO BE SPREAD OVER 5 YEARS, THE LOWER AUTHORITIE S HAVE NOT GIVEN ANY COGENT REASON FOR MAKING THE DISALLOWANCE . UNDISPUTEDLY, THE FACTUM OF THE FEES HAVING BEEN PA ID IS NOT DISPUTED. NOR IT IS DISPUTED THAT THE IMPUGNED FEE S WERE PAID FOR SERVICES WHICH WERE, IN FACT, RENDERED BY TECHNICO PTY. LTD. TO THE ASSESSEE COMPANY. UNDISPUTEDLY, THE IMPUGNED EXPEN DITURE IS NOT IN THE NATURE OF CAPITAL EXPENDITURE. THE LOWER AUTHORITIES HAVE PLACED RELIANCE ON THE JUDGEMENT OF THE HONBL E APEX COURT ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 24 IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD. V S. CIT (SUPRA) WHILE HOLDING THAT SINCE THE BENEFIT WAS ACCRUING T O THE ASSESSEE OVER A NUMBER OF YEARS, THE SAME COULD NOT BE ALLOW ED AS A DEDUCTION IN ONE YEAR. HOWEVER, IT IS SEEN THAT TH E JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF MADRAS INDUST RIAL CORPORATION LTD. VS. C.I.T. (SUPRA) WAS RENDERED IN THE CONTEXT OF ALLOWABILITY OF DISCOUNT ON DEBENTURES AND, ADMITTE DLY IN THIS CASE, THE LIABILITY WAS TO ACCRUE FROM YEAR TO YEAR FOR A PERIOD OF 12 YEARS. IT IS IN THIS CONTEXT THAT THE HONBLE A PEX COURT HELD THAT SINCE THE PAYMENT WAS TO SECURE A BENEFIT OVER A NUMBER OF YEARS AND THERE WAS A CONTINUING BENEFIT TO THE BUS INESS OF THE ASSESSEE COMPANY FOR A NUMBER OF YEARS, THE LIABILI TY SHOULD, THEREFORE, BE SPREAD OVER A PERIOD OF DEBENTURES. HOWEVER, WE FIND THAT THE INSTANT CASE IS SQUARELY COVERED BY T HE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. VS JCIT (SUPRA) WHEREIN IT HAS BEEN LAID DOWN BY THE HONBL E APEX COURT THAT NORMALLY THE REVENUE EXPENDITURE INCURRED IN A PARTICULAR YEAR HAS TO BE ALLOWED IN THE YEAR THE ASSESSEE CLA IMS THAT EXPENDITURE AND THE DEPARTMENT CANNOT DENY THE SAME . THE HONBLE APEX COURT WENT ON TO HOLD THAT EVEN THE FA CT THAT THE ASSESSEE HAD DEFERRED THE EXPENDITURE IN THE BOOKS OF ACCOUNT ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 25 WOULD BE IRRELEVANT. IN THIS JUDGMENT, THE HONBLE APEX COURT HAS ALSO TAKEN NOTE OF ITS EARLIER JUDGMENT RENDERE D IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. C .I.T. (SUPRA) AND HAS, THEREAFTER, HELD THAT THE INCOME TAX ACT E NABLES AND ENTITLES THE ASSESSEE TO CLAIM ENTIRE EXPENDITURE I N THE MANNER IT IS CLAIMED U/S 37(1) OF THE ACT AS LONG AS THE SAME IS NOT CAPITAL IN NATURE. THEREFORE, RESPECTFULLY FOLLOWING THE R ATIO OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF T APARIA TOOLS LTD. VS. JCIT (SUPRA), WE ARE UNABLE TO CONCUR WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) IN THIS REGA RD AND WHILE SETTING ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE, WE DIRECT THE ASSESSING OFFICER TO A LLOW THE ENTIRE EXPENDITURE IN THE ASSESSMENT YEAR IN WHICH IT IS C LAIMED. ACCORDINGLY, GROUND NOS. 3, 4, 5 AND 6 IN ASSESSMEN T YEAR 2003- 04 AND IDENTICAL GROUND NOS. 5, 6, 7, AND 8 IN ASSE SSMENT YEAR 2004-05, GROUND NOS. 4, 5, 6, 7 IN ASSESSMENT YEAR 2005-06 AND GROUND NOS. 3, 4, 5, AND 6 IN ASSESSMENT YEAR 2006- 07 STAND ALLOWED. 11.1 GROUND NO. 7 IN ASSESSMENT YEAR 2003-04 CHALL ENGES THE ACTION OF THE ASSESSING OFFICER IN HOLDING THE EXPENDITURE WITH RESPECT TO LOOSE TOOLS AS BEING CAPITAL IN NAT URE AND ALLOWING ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 26 DEPRECIATION @25% THEREON. A PERUSAL OF THE ASSESS MENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS SIMPLY MENTION ED THAT THE EXPENDITURE ON LOOSE TOOLS IS OF CAPITAL NATURE, TH E SAME WAS TO BE CAPITALIZED AND DEPRECIATION HAD TO BE ALLOWED T HEREON. THE LD. COMMISSIONER OF INCOME TAX (A), WHILE UPHOLDING THE DISALLOWANCE, HAS NOTED THAT THE ASSESSEE HAD SUBMI TTED BEFORE THE ASSESSING OFFICER THAT THE DEPRECIATED VALUE OF LOOSE TOOLS WAS ARRIVED AT ON THE BASIS OF AMORTISATION OF COST OVE R A PERIOD OF THREE YEARS AS PER THE REGULAR ACCOUNTING POLICY BE ING FOLLOWED BY THE ASSESSEE COMPANY. THE LD. COMMISSIONER OF INCO ME TAX (A) WENT ON TO HOLD THAT SINCE THE ASSESSEE COMPANY ITS ELF HAD ADMITTED THAT THEY WERE AMORTISING THE COST OF THE LOOSE TOOLS OVER A PERIOD OF THREE YEARS AS PER THE REGULAR ACC OUNTING POLICY, THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE SAME AS BEING CAPITAL IN NATURE AND ALLOWING 25% DEPRECIATION THE REON. THUS, APPARENTLY, THE ASSESSEE HAS TAKEN CONTRADICTORY ST ANDS BEFORE THE LOWER AUTHORITIES AND, THEREFORE, IT IS OUR CON SIDERED OPINION THAT IT WILL BE IN THE FITNESS OF THINGS IF THE ISS UE IS RE-EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, WE RESTORE THE ISSUE OF EXPENDITURE ON LOOSE TOOLS HAVING BEEN TREATED AS C APITAL EXPENDITURE BY THE AO/LD. CIT (A) TO THE FILE OF TH E ASSESSING ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 27 OFFICER WITH THE DIRECTION TO RE-EXAMINE THE ISSUE AND, THEREAFTER, ADJUDICATE THE ISSUE AS PER LAW AFTER GIVING DUE OP PORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE. ACCORDINGLY, GROUND NO. 7 IN ASSESSMENT YEAR 2003-04, AND IDENTICAL GROUND NO. 4 IN ASSESSMENT YEAR 2004-05, GROUND NO. 2 IN ASSESSMENT YEAR 2005-06 STAND ALLOWED FOR STATISTICAL PURPOSES. 11.2 GROUND NO. 3 IN ASSESSMENT YEAR 2004-05 CHALL ENGES THE ACTION OF THE DEPARTMENT IN DIS-ALLOWING THE UP FRONT FEE OF RS. 2,00,00,000/- PAID TO ICICI BANK LTD. FOR REDUCING THE RATE OF INTEREST PAYABLE ON PRO RATA BASIS AND SPREADING THE SAME OVER THE ENTIRE PERIOD OF THE LOAN. WE FIND THAT THIS I SSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE JUDGMENT O F THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. JC IT (SUPRA) WHEREIN THE HONBLE APEX COURT HELD THAT THE TREATME NT IN THE BOOKS OF ACCOUNTS WAS NOT DETERMINATIVE OF THE TAXA BILITY. THE RELEVANT OBSERVATIONS OF THE HONBLE APEX COURT ARE CONTAINED IN PARA, 10,11,12,15,16, 18, 19 20 AND 21 AND THE SAME ARE BEING REPRODUCED HEREUNDER FOR A READY REFERENCE:- 10. THE ONLY REASON WHICH PERSUADED THE AO TO STAG GER AND SPREAD THE INTEREST OVER A PERIOD OF FIVE YEARS WAS THAT THE TERM OF DEBENTURES WAS FIVE YEARS AND THAT THE ASSESSEE HAD ITSELF GIVEN THIS VERY TREATMENT IN TH E BOOKS OF ACCOUNT, VIZ, SPREADING IT OVER A PERIOD O F FIVE YEARS IN ITS FINAL ACCOUNTS BY NOT DEBITING THE ENT IRE ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 28 AMOUNT IN THE FIRST YEAR TO THE PROFIT AND LOSS ACC OUNT AND IT HAS, IN FACT, DEBITED L/5TH OF THE INTEREST PAID TO THE PROFIT AND LOSS ACCOUNT FROM THE SECOND YEAR ONWARDS. THE HIGH COURT, IN ITS IMPUGNED JUDGMENT, HAS BASED ITS REASONING ON THE SECOND ASPECT AND APPLIE D THE PRINCIPLE OF 'MATCHING CONCEPT' TO SUPPORT THIS CONCLUSION. 11. INSOFAR AS THE FIRST REASON, NAMELY, NON-CONV ERTIBLE DEBENTURES WERE ISSUED FOR A PERIOD OF FIVE YEARS I S CONCERNED, THAT IS CLEARLY NOT TENABLE. WHILE TAKIN G THIS VIEW, THE AO CLEARLY ERRED AS HE IGNORED BY IGNORIN G THE TERMS ON WHICH DEBENTURES WERE ISSUED. AS NOTED ABOVE, THERE WERE TWO METHODS OF PAYMENT OF INTERES T STIPULATED IN THE DEBENTURE ISSUED. DEBENTURE HOLDE R WAS ENTITLED TO RECEIVE PERIODICAL INTEREST AFTER E VERY HALF YEAR @ 18% PER ANNUM FOR FIVE YEARS, OR ELSE, THE DEBENTURE HOLDER COULD OPT FOR UPFRONT PAYMENT OF R S. 55 PER DEBENTURE TOWARDS INTEREST AS ONE TIME PAYMENT. BY ALLOWING ONLY L/5TH OF THE UPFRONT PAYMENT ACTUALLY INCURRED, THOUGH THE ENTIRE AMOUNT OF INTEREST IS A CTUALLY INCURRED IN THE VERY FIRST YEAR, THE AO, IN FACT, T REATED BOTH THE METHODS OF PAYMENT AT PAR, WHICH WAS CLEAR LY UNSUSTAINABLE. BY DOING SO, THE AO, IN FACT, TAMPER ED WITH THE TERMS OF ISSUE, WHICH WAS BEYOND HIS DOMAI N. IT IS OBVIOUS THAT ON EXERCISE OF THE OPTION OF UPF RONT PAYMENT OF INTEREST BY THE SUBSCRIBER IN THE VERY F IRST YEAR, THE ASSESSEE PAID THAT AMOUNT IN TERMS OF THE DEBENTURE ISSUE AND BY DOING SO HE WAS SIMPLY DISCHARGING THE INTEREST LIABILITY IN THAT YEAR THE REBY SAVING THE RECURRING LIABILITY OF INTEREST FOR THE REMAINING LIFE OF THE DEBENTURES BECAUSE FOR THE REMAINING PE RIOD THE ASSESSEE WAS NOT REQUIRED TO PAY INTEREST ON TH E BORROWED AMOUNT. 12. THE NEXT QUESTION WHICH ARISES FOR CONSIDERAT ION IS AS TO WHETHER THE ASSESSEE WAS ESTOPPED FROM CLAIMI NG DEDUCTION FOR THE ENTIRE INTEREST PAID IN THE YEAR IN WHICH IT WAS PAID MERELY BECAUSE IT HAD SPREAD OVER THIS INTEREST IN ITS BOOKS OF ACCOUNT OVER A PERIOD OF F IVE YEARS. HERE, THE SUBMISSION OF LEARNED COUNSEL FOR THE ASSESSEE WAS THAT THERE IS NO SUCH ESTOPPEL, INASMU CH ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 29 AS, THE TREATMENT OF A PARTICULAR ENTRY (OR FOR THA T MATTER INTEREST ENTERED IN THE INSTANT CASE) IN THE BOOKS OF ACCOUNT IS ENTIRELY DIFFERENT FROM THE TREATMENT WH ICH IS TO BE GIVEN TO SUCH ENTRY/EXPENDITURE UNDER THE ACT . HIS CONTENTION WAS THAT ASSESSMENT WAS TO BE MADE IN ACCORDANCE WITH THE PROVISIONS OF THE ACT AND NOT O N THE BASIS OF ENTRIES IN THE BOOKS OF ACCOUNT. HIS FURTH ER ARGUMENT WAS THAT HAD THE ASSESSEE NOT CLAIMED THE PAYMENT OF ENTIRE INTEREST AMOUNT AS TAX IN THE INC OME TAX RETURNS AND HAD CLAIMED DEDUCTION OVER A PERIOD OF FIVE YEARS TREATING IT AS DEFERRED INTEREST PAYMENT , PERHAPS THE AO WOULD HAVE BEEN RIGHT IN ACCEPTING T HE SAME IN CONSONANCE WITH THE ACCOUNTING TREATMENT WHICH WAS GIVEN. HOWEVER, LEARNED COUNSEL POINTED O UT THAT IN THE INSTANT CASE THE ASSESSEE HAD FILED THE INCOME TAX RETURN CLAIMING THE ENTIRE DEDUCTION WHI CH WAS ALLOWABLE TO IT UNDER THE PROVISIONS OF SECTION 36(L)(III) OF THE ACT AS ALL THE CONDITIONS THEREOF WERE FULFILLED AND, THUS, IT WAS EXERCISING THE STATUTOR Y RIGHT WHICH COULD NOT BE DENIED. 15. WHAT IS TO BE BORNE IN MIND IS THAT THE MOMENT SECOND OPTION WAS EXERCISED BY THE DEBENTURE HOLDER TO RECEIVE THE PAYMENT UPFRONT, LIABILITY OF THE ASSES SEE TO MAKE THE PAYMENT IN THAT VERY YEAR, ON EXERCISING O F THIS OPTION, HAS ARISEN AND THIS LIABILITY WAS TO PAY TH E INTEREST @ RS. 55 PER DEBENTURE. IN BHARAT EARTH MO VERS V. CIT [2000] 245 ITR 428/112 TAXMAN 61 (SC), THIS COURT HAD CATEGORICALLY HELD THAT IF A BUSINESS LIA BILITY HAS ARISEN IN THE ACCOUNTING YEAR, THE DEDUCTION SH OULD BE ALLOWED EVEN IF SUCH A LIABILITY MAY HAVE TO BE QUANTIFIED AND DISCHARGED AT A FUTURE DATE. . 16. JUDGMENT IN MADRAS INDUSTRIAL INVESTMENT CORPN . LTD. V. CIT [1997] 225 ITR 802/91 TAXMAN 340 (SC) W AS CITED BY THE LEARNED COUNSEL FOR THE REVENUE TO JUS TIFY THE DECISION TAKEN BY THE COURTS BELOW. WE FIND THA T THE COURT CATEGORICALLY HELD EVEN IN THAT CASE THAT THE GENERAL PRINCIPLE IS THAT ORDINARILY REVENUE EXPEND ITURE ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 30 INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS IS TO BE ALLOWED IN THE YEAR IN WHICH IT I S INCURRED. HOWEVER, SOME EXCEPTIONAL CASES CAN JUSTI FY SPREADING THE EXPENDITURE AND CLAIMING IT OVER A PE RIOD OF ENSUING YEARS. IT IS IMPORTANT TO NOTE THAT IN T HAT JUDGMENT, IT WAS THE ASSESSEE WHO WANTED SPREADING THE EXPENDITURE OVER A PERIOD OF TIME AND HAD JUSTI FIED THE SAME. IT WAS A CASE OF ISSUING DEBENTURES AT DISCOUNT; WHEREAS THE ASSESSEE HAD ACTUALLY INCURRE D THE LIABILITY TO PAY THE DISCOUNT IN THE YEAR OF IS SUE OF DEBENTURES ITSELF. THE COURT FOUND THAT THE ASSESSE E COULD STILL BE ALLOWED TO SPREAD THE SAID EXPENDITU RE OVER THE ENTIRE PERIOD OF FIVE YEARS, AT THE END OF WHICH THE DEBENTURES WERE TO BE REDEEMED. BY RAISING THE MONEY COLLECTED UNDER THE SAID DEBENTURES, THE ASSESSEE COULD UTILISE THE SAID AMOUNT AND SECURE T HE BENEFIT OVER NUMBER OF YEARS. THIS IS DISCERNIBLE F ROM THE FOLLOWING PASSAGE IN THAT JUDGMENT ON WHICH RELIANC E WAS PLACED BY THE LEARNED COUNSEL FOR THE REVENUE HERSELF: 18. WHAT FOLLOWS FROM THE ABOVE IS THAT NORMALLY T HE ORDINARY RULE IS TO BE APPLIED, NAMELY, REVENUE EXPENDITURE INCURRED IN A PARTICULAR YEAR IS TO BE ALLOWED IN THAT YEAR. THUS, IF THE ASSESSEE CLAIMS THAT EXPENDITURE IN THAT YEAR, THE IT DEPARTMENT CANNOT DENY THE SAME. HOWEVER, IN THOSE CASES WHERE THE ASSESSE E HIMSELF WANTS TO SPREAD THE EXPENDITURE OVER A PERI OD OF ENSUING YEARS, IT CAN BE ALLOWED ONLY IF THE PRINCI PLE OF 'MATCHING CONCEPT' IS SATISFIED, WHICH UPTO NOW HAS BEEN RESTRICTED TO THE CASES OF DEBENTURES. 19. IN THE INSTANT CASE, AS NOTICED ABOVE, THE AS SESSEE DID NOT WANT SPREAD OVER OF THIS EXPENDITURE OVER A PERIOD OF FIVE YEARS AS IN THE RETURN FILED BY IT, IT HAD CLAIMED THE ENTIRE INTEREST PAID UPFRONT AS DEDUCTI BLE EXPENDITURE IN THE SAME YEAR. IN SUCH A SITUATION, WHEN THIS COURSE OF ACTION WAS PERMISSIBLE IN LAW TO THE ASSESSEE AS IT WAS IN CONSONANCE WITH THE PROVISION S OF THE ACT WHICH PERMIT THE ASSESSEE TO CLAIM THE EXPENDITURE IN THE YEAR IN WHICH IT WAS INCURRED, M ERELY ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 31 BECAUSE A DIFFERENT TREATMENT WAS GIVEN IN THE BOOK S OF ACCOUNT CANNOT BE A FACTOR WHICH WOULD DEPRIVE THE ASSESSEE FROM CLAIMING THE ENTIRE EXPENDITURE AS A DEDUCTION. IT HAS BEEN HELD REPEATEDLY BY THIS COUR T THAT ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT DETERMINATI VE OR CONCLUSIVE AND THE MATTER IS TO BE EXAMINED ON THE TOUCHSTONE OF PROVISIONS CONTAINED IN THE ACT [SEE - KEDARNATH JUTE MFG. CO. LTD. V. CIT[1971] 82 ITR 36 3 (SC); TUTICORIN ALKALI CHEMICALS & FERTILIZERS LTD. V. CIT [1997] 227 ITR 172/93 TAXMAN 502 (SC); SUTLEJ COTTO N MILLS LTD. V. CIT [1979] 116 ITR 1 (SC) AND UNITED COMMERCIAL BANK V. CIT [1999] 240 ITR 355/106 TAXMAN 601 (SC). 20. AT THE MOST, AN INFERENCE CAN BE DRAWN THAT B Y SHOWING THIS EXPENDITURE IN A SPREAD OVER MANNER IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAD INITIALLY INTEND ED TO MAKE SUCH AN OPTION. HOWEVER, IT ABANDONED THE SAME BEFORE REACHING THE CRUCIAL STAGE, INASMUCH AS, IN THE INCOME TAX RETURN FILED BY THE ASSESSEE, IT CHOSE T O CLAIM THE ENTIRE EXPENDITURE IN THE YEAR IN WHICH IT WAS SPENT/PAID BY INVOKING THE PROVISIONS OF SECTION 36 (L)(III) OF THE ACT. ONCE A RETURN IN THAT MANNER WAS FILED, THE AO WAS BOUND TO CARRY OUT THE ASSESSMENT BY APPLYIN G THE PROVISIONS OF THAT ACT AND NOT TO GO BEYOND THE SAID RETURN. THERE IS NO ESTOPPEL AGAINST THE STATUTE AN D THE ACT ENABLES AND ENTITLES THE ASSESSEE TO CLAIM THE ENTIRE EXPENDITURE IN THE MANNER IT IS CLAIMED. 21. IN VIEW OF THE AFORESAID DISCUSSION, WE ARE OF THE OPINION THAT THE JUDGMENT AND THE ORDERS OF THE HIG H COURT AND THE AUTHORITIES BELOW DO NOT LAY DOWN COR RECT POSITION IN LAW. THE ASSESSEE WOULD BE ENTITLED TO DEDUCTION OF THE ENTIRE EXPENDITURE OF RS. 2,72,25, 000 AND RS. 55,00,000 RESPECTIVELY IN THE YEAR IN WHICH THE AMOUNT WAS ACTUALLY PAID. THE APPEALS ARE ALLOWED I N THE AFORESAID TERMS WITH NO ORDERS AS TO COSTS/' (EMPHASIS SUPPLIED) 11.2.1 ACCORDINGLY, RESPECTFULLY FOLLOWING THE JUD GMENT ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 32 OF THE HONBLE APEX COURT AS AFOREMENTIONED, WE ARE OF THE CONSIDERED VIEWS THAT THE ENTIRE UPFRONT FEE WAS AL LOWABLE AS A DEDUCTION IN ASSESSMENT YEAR 2004-05 ITSELF AND ACC ORDINGLY, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (A) ON THE ISSUE AND DIRECT THE ASSESSING OFFICER TO ALLOW THE ENTIRE AMOUNT IN THE YEAR UNDER CONSIDERATION. 11.3 GROUND NO. 1 IN ASSESSMENT YEAR 2001-02, GROU ND NOS. 1,8 ,9 IN ASSESSMENT YEAR 2003-04, GROUND NOS. 1, 9 AND 10 IN ASSESSMENT YEAR 2004-05, GROUND NOS. 1,8 AND 9 I N ASSESSMENT YEAR 2005-06 AND GROUND NOS. 1, 7 AND 8 IN ASSESSMENT YEAR 2006-07 ARE GENERAL IN NATURE AND D O NOT REQUIRE ANY ADJUDICATION. 12.0 IN THE RESULT, ALL THE FIVE APPEALS OF THE AS SESSEE STAND PARTLY ALLOWED IN TERMS OF OUR OBSERVATIONS CONTAIN ED IN THE PRECEDING PARAGRAPHS. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH NOVEMBER, 2018. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) VICE PRESIDENT JUDICIAL MEMBE R DATED: 19 TH NOVEMBER, 2018 GS ITA NO. 5847/DEL/2010 3111 TO 3114/DEL/2013 AY:2001-02 03-04,04-05,05-06,06-07 33 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR