TATA MOTERS LIMITED (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), MUMBAI V. ACIT, RANGE-2(1), MUMBAI

ITA 3329/MUM/2011

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0086 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 06-05-2014
• Assessment Year: 1999-2000
• Appeal Filed On: 27-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH DAVAY
• Keywords: Capital asset; Depreciation; Rule of consistency; Earning of tax free income; Question of law; Capital receipt; Revised return; Revenue expenditure; Capital expenditure
• Section: 43B; 80HHC; 14A; 37

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MUMB AI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.3329/MUM/2011 (ASSESSMENT YEAR- 1999-2000) M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.3330/MUM/2011 (ASSESSMENT YEAR- 2000-2001) M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.3331/MUM/2011 (ASSESSMENT YEAR- 2001-2002) M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.3332/MUM/2011 (ASSESSMENT YEAR- 2002-2003) ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 2 M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.3597/MUM/2011 (ASSESSMENT YEAR- 1999-2000) A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. VS. M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q (APPELLANT) (RESPONDENT) ITA NO.3598/MUM/2011 (ASSESSMENT YEAR- 2000-2001) A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. VS. M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q (APPELLANT) (RESPONDENT) ITA NO.3599/MUM/2011 (ASSESSMENT YEAR- 2001-2002) A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. VS. M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 3 PAN: AAACT2727Q (APPELLANT) (RESPONDENT) ITA NO.3601/MUM/2011 (ASSESSMENT YEAR- 2002-2003) A.C.I.T., RANGE-2(1) , AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. VS. M/S TATA MOTORS LTD. (FORMERLY KNOWN AS TATA ENGINEERING & LOCOMOTIVE COMPANY LTD.), BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q (APPELLANT) (RESPONDENT) ITA NO.1039/MUM/2013 (ASSESSMENT YEAR- 1999-2000) M/S TATA MOTORS LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T.-2(3), AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.1040/MUM/2013 (ASSESSMENT YEAR- 2000-2001) M/S TATA MOTORS LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T.-2(3), AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ITA NO.1041/MUM/2013 (ASSESSMENT YEAR- 2001-2002) M/S TATA MOTORS LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 VS. A.C.I.T.-2(3), AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 4 PAN: AAACT2727Q (APPELLANT) (RESPONDENT) ITA NO.636/MUM/2013 (ASSESSMENT YEAR- 2002-2003) M/S TATA MOTORS LTD. BOMBAY HOUSE, 24, HOMI MODY STREET, HUTATMA CHOWK, MUMBAI-400001 PAN: AAACT2727Q VS. A.C.I.T.-2(3), AAYAKAR BHAVAN, M.K. MARG, MUMBAI-400020. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI DINESH VYAS WITH SHRI PRADEEP MITRA (AR) REVENUE BY : SHRI RAJESH DAVAY (CIT- DR) DATE OF HEARING : 21.08.2017 DATE OF PRONOUNCEMENT : 31.08.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER BENCH; 1. THIS GROUP OF TWELVE APPEALS CONSISTING COMMON GROU NDS OF APPEAL WERE HEARD TOGETHER AND ARE DECIDED IN A CONSOLIDATED ORDER FO R THE SAKE OF BREVITY. 2. FIRST WE SHALL DECIDE THE APPEALS FILED BY THE ASSE SSEE VIDE ITA NO. 1039, 1040, 1041 & 636/MUM/2013 FOR ASSESSMENT YEARS (AY) 1999- 2000 TO 2002-03 RESPECTIVELY. IN ALL APPEALS THE ASSESSEE HAS RAISE D THE IDENTICAL GROUNDS OF APPEAL RELATED TO DISALLOWANCE U/S 14A OF THE ACT. 3. FOR APPRECIATION OF FACTS, WE ARE REFERRING THE FAC T RELATED TO AY 2002-03 IN ITA NO. 636/MUM/2013, WHICH WAS TREATED AS LEAD CAS E BY LD. CIT(A) DURING FIRST APPELLATE STAGE. THE ASSESSEE HAS RAISED FO LLOWING GROUNDS OF APPEAL: I. DISALLOWANCE U/S 14A ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 5 THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ADHOC BASIS OF 5% OF THE EXEMPT INCOME UNDER THE PROVISIONS OF SECTION 1 4A OF THE INCOME- TAX ACT, 1961, DISREGARDING THE FACTS OF THE CASE T HAT NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME. 4. BRIEF FACTS OF THE CASE ARE THAT DURING THE RELEVAN T FINANCIAL YEAR THE ASSESSEE EARNED DIVIDEND INCOME OF RS.1,56,94,053/-. THE ASS ESSING OFFICER (AO) WHILE PASSING ASSESSMENT ORDER DISALLOWED THE 10% OF DIVI DEND INCOME U/S 14A OF THE ACT. ON APPEAL BEFORE THE LD. CIT(A), THE LD CI T(A) DIRECTED THE AO TO RESTRICT THE DISALLOWANCE ON REASONABLE BASIS IN VI EW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF M/S GODREJ & BOYCE MAN UFACTURING CO. LTD( 328 ITR 81 BOM). THE AO IN ORDER GIVING EFFECT TO THE ORDER OF LD CIT(A) RESTRICTED THE DISALLOWANCE @ 5% OF THE DIVIDEND IN COME VIDE ORDER DATED 20.06.2011. THE ASSESSEE AGAIN FILED APPEAL BEFORE LD. CIT(A) WHERE THE DISALLOWANCE MADE BY AO WAS CONFIRMED VIDE ORDER DA TED 20.11.2012, WHICH IS IMPUGNED BEFORE US. 5. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASSESSEE ARG UED THAT THE AO WHILE MAKING DISALLOWANCE HAS NOT RECORDED OBJECTIVE SATI SFACTION BEFORE MAKING DISALLOWANCE. THE ASSESSEE HAS OWN SUFFICIENT FUNDS AVAILABLE WITH IT AND NO INTEREST DISALLOWANCE WAS WARRANTED IN SUPPORT OF H IS SUBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HDFC BANK LTD. VS. CIT [389 ITR 529 (BOM)], CIT VS. HDFC BANK LTD. [366 ITR 505 (BOM) A ND RELIANCE UTILITY AND POWER LTD. [313 ITR 340 (BOM). IT WAS FURTHER A RGUED THAT MAJORITY INVESTMENTS ARE HISTORICAL IN NATURE AND MADE IN GR OUP COMPANIES. THE ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 6 INVESTMENT ACTIVITY IS MINUSCULE AS MAJORITY INVEST MENTS ARE STATIC INVESTMENT. THE LEAST ADMINISTRATIVE EXPENSES ARE INCURRED AND THEREFORE, DISALLOWANCE OF 5% OF EXEMPT INCOME IS NOT JUSTIFIED. THE LD. AR OF THE ASSESSEE FURTHER ARGUED THAT ONLY EXPENSES HAVING APPROXIMATE NEXUS TO BE D ISALLOWED. THE LD. AR OF THE ASSESSEE FINALLY ARGUED THAT DISALLOWANCE OUGHT TO HAVE BEEN RESTRICTED TO 1% OF THE EXEMPT INCOME WOULD BE SUFFICIENT FOR DIS ALLOWANCE UNDER SECTION 14A. IN SUPPORT OF HIS SUBMISSION, THE LD. AR OF TH E ASSESSEE RELIED UPON THE DECISION OF DCIT VS. ASHOKA TRADING CO. PVT. LTD. I N ITA NO. 2270 & 2271/KOL/2010, SAGRIKA GOODS & SERVICE PVT. LTD. VS . ITO IN ITA NO. 1278/KOL/2010, DCIT VS. DIAMOND COMPANY LTD. IN ITA NO. 1625/KOL/2010, S.R. BATLIBOI & CO. VS. DCIT IN ITA NO. 1595/KOL/20 11. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF A UTHORITIES BELOW. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF THE PAR TIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SEEN THAT DURING THE RELEVANT FINANCIAL YEAR THE ASSESSEE HAS EARNED DIVIDEND INCOME OF RS. 15.82 CRORE. THE AO WHILE GIVING EFFECT TO THE ORDER OF LD CIT(A) DISAL LOWED 5% OF DIVIDEND INCOME U/S 14A OF THE ACT. WE HAVE PERUSED THE FINANCIAL S TATEMENT OF ASSESSEE AS ON 31.03.2002. THE ASSESSEE WAS HAVING CAPITAL OF RS. 319.82 CRORE AND RESERVE & SURPLUS OF RS. 2145.24 CRORE. THUS, THE ASSESSEE HAS TOTAL CAPITAL, AND RESERVE & SURPLUS FUND OF RS. 2465.06 CRORE. THE AS SESSEE DURING THE RELEVANT FINANCIAL YEAR HAS MADE THE INVESTMENT OF RS. 1189. 92 CRORE. FROM THE PERUSAL OF FINANCIAL STATEMENT, WE HAVE NOTED THAT THE INTE REST FREE FUNDS AVAILABLE WITH THE ASSESSEE ARE MORE THAN THE INVESTMENT MADE DURI NG THE YEAR. THE HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITY AND POWER LTD (SUPRA) HELD THAT WHERE ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 7 BOTH THE INTEREST FREE FUNDS AND INTEREST BEARING F UNDS ARE AVAILABLE AND THE INTEREST FREE FUNDS ARE MORE THAN THE INVESTMENT MA DE THE PRESUMPTION IS THAT THE INVESTMENT IS MADE OUT OF INTEREST FREE FUNDS A VAILABLE WITH THE ASSESSEE. THE HIGH COURT FURTHER HELD THAT FOR THE YEARS FOR WHICH RULE 8D IS NOT APPLICABLE AND IN THE EVENT THE AO IS NOT SATISFIED WITH THE WORKING GIVEN BY THE ASSESSEE, THE DISALLOWANCE UNDER SECTION 14A HA S TO BE MADE ON REASONABLE BASIS. THE HONBLE JURISDICTIONAL HIGH COURT IN HD FC BANK LTD. (SUPRA) HELD THAT WHILE CONSIDERING DISALLOWANCE UNDER SECTION 3 6(1)(III) THE APPLICATION OF SECTION 14A OF THE ACT WOULD APPLY . CONSIDERING THE FACT THAT NO INTEREST BEARING FUNDS WERE UTILIZED IN EARNING THE EXEMPT I NCOME. THUS, NO INTEREST DISALLOWANCE CAN BE MADE WHILE DISALLOWANCE U/S 14A OF THE ACT. 7. WE HAVE FURTHER NOTICED THAT THE AO HAS NOT RECORDE D HIS DISSATISFACTION ABOUT THE CLAIM OF ASSESSEE, FURTHER THE LOWER AUTHORITY HAS NOT DISPUTED THAT THE MAJORITY INVESTMENTS ARE IN GROUP COMPANIES. WE HAV E NOTED THAT THE CO- ORDINATE BENCH OF KOLKATA TRIBUNAL IN ASHOKA TRADIN G CO. PVT. LTD., SAGRIKA GOODS & SERVICE PVT. LTD. , DIAMOND COMPANY LTD. AN D S.R. BATLIBOI & CO. (SUPRA), THE TRIBUNAL HAS TAKEN A CONSISTENT VIEW T O ALLOW REASONABLE DISALLOWANCE AND RESTRICTED THE DISALLOWANCE U/S 14 A OF THE ACT TO 1% OF THE DIVIDEND INCOME. THUS, RESPECTFULLY FOLLOWING THE D ECISION OF CO-ORDINATE BENCH, WE RESTRICT THE DISALLOWANCE U/S 14A TO 1% O F THE EXEMPT INCOME AND DIRECT THE AO TO WORK OUT THE DISALLOWANCE ACCORDIN GLY. 8. IN THE RESULT, THE GROUND OF APPEAL RAISED BY ASSES SEE IS PARTLY ALLOWED. ITA NO. 1039/MUM/2013 FOR AY 1999-2000BY ASSESSEE 9. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APP EAL: ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 8 I. DISALLOWANCE U/S 14A THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ADHOC BASIS OF 5% OF THE EXEMPT INCOME UNDER THE PROVISIONS OF SECTION 14A OF THE I NCOME-TAX ACT, 1961, DISREGARDING THE FACTS OF THE CASE THAT NO EXPENDIT URE HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME. II. DISALLOWANCE U/S 14A FOR THE PURPOSE OF MAT CO MPUTATION THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE BOOK PROFIT U/S 115JA IN RESPECT OF ADHOC DISALLOWANCE U/S 14A OF T HE ACT. 10. GROUND NO.1 RELATES TO DISALLOWANCE U/S 14A OF THE ACT (NORMAL DISALLOWANCE). WE HAVE SEEN THAT THIS GROUND OF APPEAL IS IDENTICA L TO THE GROUND NO,1 OF APPEAL IN ITA NO. 636/MUM/2013. THE FACTS OF THE A PPEAL UNDER CONSIDERATION ARE SIMILAR AS OF APPEAL FOR AY 2002-03, WHEREIN WE HAVE RESTRICTED THE DISALLOWANCE @ 1% OF THE EXEMPT INCOME. THUS, KEEPI NG IN VIEW THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL RAISED BY ASS ESSEE IS ALLOWED MUTATIS MUTANDIS AS ALLOWED IN ITA NO. 636/MUM/2013. 11. GROUND NO.2 RELATES TO DISALLOWANCE U/S 14A (MAT) W HILE DETERMINING BOOK PROFIT UNDER SECTION 115JA. IN THIS REGARD THE AO IS DIRECTED TO RE-WORK THE DISALLOWANCE FOLLOWING OUR DETERMINATION OF DISALLO WANCE U/S14A IN THE ABOVE PARAS UNDER THE NORMAL PROVISION OF THE ACT. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO. 1040/MUM/2013 FOR AY 2000-01BY ASSESSEE 12. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APP EAL: I. DISALLOWANCE U/S 14A THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ADHOC BASIS OF 5% OF THE EXEMPT INCOME UNDER THE PROVISIONS OF SECTION 14A OF THE INCOME-T AX ACT, 1961, DISREGARDING THE FACTS OF THE CASE THAT NO EXPENDIT URE HAD BEEN INCURRED IN RELATION TO EXEMPT INCOME. I. DISALLOWANCE U/S 14A FOR THE PURPOSE OF MAT COMPUT ATION THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRM ING THE BOOK PROFIT U/S 115JA IN RESPECT OF ADHOC DISALLOWANCE U/S 14A OF T HE ACT. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 9 13. GROUND NO.1 RELATES TO DISALLOWANCE U/S 14A OF THE ACT (NORMAL DISALLOWANCE). WE HAVE SEEN THAT THIS GROUND OF APPEAL IS IDENTICA L TO THE GROUND NO,1 OF APPEAL IN ITA NO. 636/MUM/2013. THE FACTS OF THE A PPEAL UNDER CONSIDERATION ARE SIMILAR AS OF APPEAL FOR AY 2002-03, WHEREIN WE HAVE RESTRICTED THE DISALLOWANCE @ 1% OF THE EXEMPT INCOME. THUS, KEEPI NG IN VIEW THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL RAISED BY ASS ESSEE IS ALLOWED MUTATIS MUTANDIS AS ALLOWED IN ITA NO. 636/MUM/2013. 14. GROUND NO.2 RELATES TO DISALLOWANCE U/S 14A (MAT) W HILE DETERMINING BOOK PROFIT UNDER SECTION 115JA. IN THIS REGARD THE AO I S DIRECTED TO RE-WORK THE DISALLOWANCE FOLLOWING OUR DETERMINATION OF DISALLO WANCE U/S14A IN THE ABOVE PARAS UNDER THE NORMAL PROVISION OF THE ACT. THUS, THIS GROUND OF APPEAL IS PARTLY ALLOWED. ITA NO. 1041/MUM/2013 FOR AY 2001-02 BY ASSESSEE 15. THE ASSESSEE HAS RAISED SOLE GROUND OF APPEAL WHICH RELATES TO DISALLOWANCE OF RS. 120,02,743/- U/S 14A OF THE ACT. WE HAVE SEEN T HAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO,1 OF APPEAL IN ITA NO. 6 36/MUM/2013. THE FACTS OF THE APPEAL UNDER CONSIDERATION ARE SIMILAR AS OF AP PEAL FOR AY 2002-03, WHEREIN WE HAVE RESTRICTED THE DISALLOWANCE @ 1% OF THE EXEMPT INCOME. THUS, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY, THIS GROUND OF APPEAL RAISED BY ASSESSEE IS ALLOWED MUTATIS MUTANDIS AS ALLOWED IN ITA NO. 636/MUM/2013. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. 16. NOW WE SHALL DECIDE THE APPEAL FILED BY REVENUE VID E APPEALS ITAS NO 3597,3598,3599 & 3600/M/2022 FOR AY 1999-2000 TO 20 02-03 RESPECTIVELY. IN ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 10 ALL APPEALS THE REVENUE HAVE RAISED IDENTICAL GROUN DS OF APPEAL, THE FACTS OF ALL THE ASSESSMENT YEARS ARE ALSO SIMILAR. ITA NO 3597/M/2011 FOR AY 1999-2000 BY REVENUE . 17. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL; (1) THE ORDER OF LD CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE WARRANTY EXPENSES, IGNORING T HE FACT, IT WAS PROVISIONAL AND CONTINGENT IN NATURE. (3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE VENDOR DEVELOPMENT EXPENSES I GNORING THE FACT THAT THESE ARE DEFERRED EXPENSES AND CAPITAL IN NATURE. (4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE CONSULTANCY FEES INCURRED FOR BUSINESS PROCESS RE- ENGINEERING, IGNORING THE FACT THAT NO NEW BUSINESS WAS STARTED BY THE COMPANY. (5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE PRODUCT DEVELOPMENT EXPENSES, IGNORING THE FACT THAT THESE ARE CAPITAL IN NATURE . 18. WE HAVE HEARD THE LD REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. THE LD AR OF THE ASSESSEE ARGUED THAT ALL THE GROUNDS O F APPEAL RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF THE ASSESSEE BY VA RIOUS DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER YEARS AS WELL AS BY ORDERS OF SUPERIOR COURTS. THE LD AR FOR THE ASSESSEE FILED A DETAILS IN THE FORM OF A CHART REFERRING THE DETAILS OF ORDER COVERING THE GROUNDS OF APPEALS. THE LD DR FOR THE REVENUE NOT DISPUTED THE DETAILS OF ORDERS OF VARIOUS TRIBUNAL IN FAVOUR OF ASSESSEE. 19. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD REPRES ENTATIVES OF THE PARTIES AND FURTHER PERUSED THE ORDER OF AUTHORITIES BELOW. FIR ST GROUND OF APPEAL IS GENERAL AND NEEDS NO SPECIFIC ADJUDICATION AND HENCE DISMIS SED. THE GROUND NO. 2 RELATES TO PROVISION OF WARRANTY. THE LD AR FOR THE ASSESSEE ARGUED THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE B Y THE DECISION OF THE ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 11 TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997-98 AND 1998-99 IN ITA NO. 6214- 6504/M/2003 AND ITA NO. 7148/M/2004 DATED 06.01.201 7. THE LD AR FURTHER RELIED ON THE DECISION OF HONBLE SUPREME COURT IN BHARAT EARTH MOVERS VS CIT (245ITR 428 SC) AND ROTORK CONTROLS (P) LTD (3 14ITR 62 SC). THE LD DR FOR THE REVENUE NOT DISPUTED THE SUBMISSIONS OF THE LD AR FOR THE ASSESSEE. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES A ND PERUSED THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997-98 AND 1998-99 IN ITA NO. 6214- 6504/M/2003 AND ITA NO. 7148/M/2004 DATED 06.01.201 7. THE PERUSAL OF THE ORDER SHOWS THAT SIMILAR DISALLOWANCE WAS MADE AGAI NST THE ASSESSEE FOR AY 1997-98 AND FOR AY 1998-99, HOWEVER ON APPEAL BEFOR E CIT(A) THE DISALLOWANCE WAS DELETED. THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL AND THE SAME WAS DISMISSED VIDE ORDER DATED 06.01.2017 BY F OLLOWING THE ORDER FOR AY 1996-97. THE APPEAL OF THE REVENUE WAS DISMISSED B Y THE COORDINATE BENCH OF THE TRIBUNAL WITH THE FOLLOWING ORDER; 14. NEXT GROUND IS ABOUT PROVISION FOR WARRANTY OF RS.35.61 CRORES. IT IS FOUND THAT IDENTICAL GROUND RAISED BY THE AO, WAS D ISMISSED BY THE TRIBUNAL, WHILE DECIDING THE APPEAL FOR AY. 1996-97.WE ARE RE PRODUCING PARAGRAPH NO.22 OF THE PG.10 OF THE SAID ORDER AND IT READS A S UNDER:- GROUND NO.7 IN REVENUES APPEAL RELATES TO PROVIS ION FOR WARRANTY EXPENSES OF RS. 12, 55, 68,000/-. BOTH THE PARTIES AGREED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY.S 1992-93, 1994-95 AND 1995-96 (ITA NO.961/M/03 DT.23.8.03, ITA NO.6705/M/98 DT.19.4.06 AND ITA NO. 1690/M/00 DT.6.2.07), WHEREIN THE TRIBUNAL HAS ALLOWED THE CLAIM OF THE A SSESSEE. FOLLOWING THE SAME, THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE. RESPECTFULLY FOLLOWING THE ABOVE ORDER OF THE TRIB UNAL, GROUND NO.7 IS DECIDED AGAINST THE AO . ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 12 21. CONSIDERING, THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997-98 AND FOR AY 1998-99 AND FOLLOWING THE PRINCIPAL OF C ONSISTENCY THE GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 22. GROUND NO.3 RELATES TO DISALLOWANCE OF VENDOR DEVEL OPMENT EXPENSES OF RS.9,02,32,000/-. THE LD. AR FOR THE ASSESSEE ARGUE D THAT IDENTICAL GROUND OF APPEAL WAS DECIDED IN FAVOUR OF ASSESSEE IN APPEAL FOR AY 1997-98 AND 1998- 99 IN ITA NO. 6214-6504/M/2003 AND ITA NO. 7148/M/2 004 DATED 06.01.2017. THE PERUSAL OF THE ORDER DATED 06.01.2 017 SHOWS THAT SIMILAR DISALLOWANCE WAS MADE AGAINST THE ASSESSEE FOR AY 1 997-98 AND FOR AY 1998- 99, HOWEVER ON APPEAL BEFORE CIT(A) THE DISALLOWANC E WAS DELETED. THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL AND THE SA ME WAS DISMISSED VIDE ORDER DATED 06.01.2017AY 1997-98 BY FOLLOWING ORDER; 28.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE MATERIALS BEFORE US. WE FIND THAT THE ASSESSEE HAD INCURRED AN EXPEN DITURE OF RS.37.70 CRORES, THAT IN THE BOOKS OF ACCOUNT IT HAD TREATED THE EXPENDITURE AS DEFERRED REVENUE EXPENDITURE, THAT IN THE COMPUTATI ON OF INCOME AND DURING THE ASSESSMENT PROCEEDINGS IT CLAIMED THAT EXPENDIT URE WAS OF REVENUE NATURE, THAT THE AO HAD NOT GIVEN ANY FINDING ABOUT ALLOWABILITY OF THE EXPENDITURE, THAT THE EXPENDITURE WAS INCURRED FOR DEVELOPING THE TOOLS/COMPONENTS. IN OUR OPINION, THE ENTRIES IN TH E BOOKS OF ACCOUNT DO NOT DECIDE ALLOWABILITY OF EXPENDITURE AS REVENUE EXPEN DITURE. NOR ARE THE BOOKS DECISIVE TO HOLD EXPENDITURE AS CAPITAL EXPEN DITURE. WHAT HAS TO BE SEEN IS THE NATURE OF EXPENDITURE. THE FAA HAS GIVE N CATEGORICAL FINDING OF FACT THAT EXPENDITURE DID NOT ADD TO THE FIXED CAPI TAL OF THE ASSESSEE OR HELPED IT IN ACQUIRING THE SOURCE OF PROFIT. THEREFORE, IN OUR OPINION THE FAA WAS JUSTI FIED IN ALLOWING THE EXPENDITURE AS REVENUE EXPENDITURE. GROUND NO.7 IS DECIDED AGAINST THE AO. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 13 23. CONSIDERING, THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997-98 AND FOR AY 1998-99, AND FOLLOWING THE PRINCIPAL OF CONSISTENCY DO NOT FIND ANY ILLEGALITY IN THE ORDER PASSED BY LD. CIT (A), HENC E, THIS GROUND OF APPEAL IS DISMISSED. 24. GROUND NO.4 RELATES TO DELETING THE DISALLOWANCE OF CONSULTANCY FEE FOR BUSINESS PROCESS RE-ENGINEERING OF RS.3,62,00,000/- . THE LD AR FOR THE ASSESSEE ARGUED THAT IDENTICAL GROUND OF APPEAL WAS DECIDED IN FAVOUR OF ASSESSEE IN APPEAL FOR AY 1997-98 AND 1998-99 IN IT A NO. 6214-6504/M/2003 AND ITA NO. 7148/M/2004 DATED 06.01.2017. THE PERU SAL OF THE ORDER DATED 06.01.2017 SHOWS THAT SIMILAR DISALLOWANCE WAS MADE AGAINST THE ASSESSEE FOR AY 1997-98 AND FOR AY 1998-99, HOWEVER ON APPEAL BE FORE CIT(A) THE DISALLOWANCE WAS DELETED. THE REVENUE FILED APPEAL BEFORE THE TRIBUNAL AND THE SAME WAS DISMISSED VIDE ORDER DATED 06.01.2017AY 19 97-98 BY FOLLOWING ORDER; 29.NEXT GROUND DEALS WITH DISALLOWANCE OF CO NSULTANCY FEE PAID ON ACCOUNT OF BUSINESS PROCESS RE-ENGINEERING, AMOUNTI NG TO RS.16.42 LAKHS. DURING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THA T THE ASSESSEE HAD APPOINTED M/S. ARTHUR ANDERSON A CONSULTANCY FIRM F OR REVIEW OF BUSINESS PROCEEDINGS, THAT IT HAD TREATED THE CONSIDERATION PAID TO CONSULTANCY FIRM AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACC OUNT, AND HAD AMORTISED IT FOR A PERIOD OF YEAR YEARS, THAT IN TH E COMPUTATION OF INCOME ASSESSEE CLAIMED ENTIRE AMOUNT AS REVENUE EXPENDITU RE. THE AO HELD THAT THE BENEFIT FROM EXPENDITURE WOULD BE AVAILABLE TO THE ASSESSEE OVER A PERIOD OF TIME, THAT IT WOULD BE OF AN ENDURING NA TURE. HOWEVER, HE ALLOWED HALF OF THE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION. 29.1. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE FAA .AFTER CONSIDERING THE AVAILABLE MATERIA L, THE FAA HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ACCOUNT OF CONSULTANCY FEE FOR ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 14 BUSINESS PROCESS REENGINEERING WAS REVENUE EXPENDIT URE , THAT IT HAD NOT STARTED ANY NEW LINE OF BUSINESS, THAT THE CONSULTA NCY FEE WAS ALSO NOT PAID FOR SETTING UP ANY NEW BUSINESS, THAT SAME WAS PAID FOR PURPOSES OF IMPROVING THE PROFITABILITY OF EXISTING BUSINESS. T HE FAA REFERRED TO THE CASE OF CROMPTON ENGINEERING CO. LTD.(242ITR 317)AN D ABBOT LABORATORIES P.LTD.(202ITR818)AND HELD THAT ENTIRE EXPENDITURE, EVEN IF SHOWN AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNT, HAD TO BE ALLOWED IN THE YEAR IN WHICH IT WAS INCURRED. BEFOR E US, THE DR AND THE AR SUPPORTED THE ORDERS OF AO AND THE FAA RESPECTIVELY . 29.2. WE FIND THAT THE AO HAD ALLOWED HALF OF THE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION, THAT THE ASSESSEE HAD AVAILED THE SERVICES OF A CONSULTANCY FIRM TO IMPROVE THE WORKING OF THE COMP ANY. AS THAT FEE WAS PAID FOR IMPROVING THE EXISTING SYSTEM, THEREFORE, IN OUR OPINION THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INFIRMITY . CONFIRMING THE SAME GROUND.NO.8 IS DECIDED AGAINST THE AO. AS A RESULT, APPEALS, FILED BY THE ASSESSEE AND THE AO, FOR THE AY.1997-98 STAND PARTL Y ALLOWED. APPEAL OF THE ASSESSEE FOR THE AY.1998-99 IS PARTLY ALLOWED A ND APPEAL OF THE AO IS DISMISSED. 25. CONSIDERING, THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 1997-98 AND FOR AY 1998-99, AND FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL IS PARTLY ALLOWED AS MUTATIS MUTANDIS AS PER ORDER DATED 06.01.2017. 26. GROUND NO. 5 RELATES TO PRODUCT DEVELOPMENT EXPENSE S OF RS. 37,14,83,200/-. THE ASSESSEE CLAIMED DEDUCTION OF PRODUCT DEVELOPME NT EXPENSES OF RS. 46,43,54,000/- U/S 37. THE ASSESSEE INCURRED THESE EXPENSES ON ENGINEERING RESEARCH CENTRE IN THE NORMAL COURSE OF BUSINESS. A S PER CONSISTENT METHOD THE ASSESSEE TREATED AS DEFERRED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNT. HOWEVER, THE ENTIRE EXPENSES WERE CONSIDERED AS REV ENUE EXPENDITURE FOR INCOME TAX PURPOSE. THE AO TREATED THE EXPENDITURE TO BE GOVERNED BY THE PROVISIONOF SECTION 35D AND ACCORDINGLY ALLOWED ONL Y1/5 TH OF TOTAL EXPENDITURE. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 15 THE AO DISALLOWED FOLLOWING THE DECISION IN LAST YE ARS ASSESSMENT. ON APPEAL BEFORE THE LD. CIT(A), THE DISALLOWANCE WAS DELETED FOLLOWING THE DECISION OF HIS PREDECESSOR FOR AY 1998-99. THE LD AR FOR THE ASSESSEE ARGUED THAT SIMILAR DISALLOWANCES WERE MADE FOR AY 2003-04 ON APPEAL BE FORE THE CIT(A) THE SIMILAR DISALLOWANCES WERE DELETED, HOWEVER, NO APP EAL IS FILED BY THE REVENUE FROM AY 2003-04 ONWARDS. IT WAS FURTHER ARGUED THAT THE IN A NUMBER OF CASES THE HONBLE SUPREME COURT, VARIOUS HIGH COURT AND T RIBUNAL DECIDED HAS ALLOWED THE SIMILAR RELIEF. THE LD AR RELIED ON TH E DECISIONS IN EMPIRE JUTE CO. LTD VS CIT (124ITR 1 SC), ALEMBIC CHEMICAL WORKS CO . LTD VS CIT (177 ITR 377 - SC ), CIT VS PRAGA TOOLS(157 ITR 282 AP) , EL FORGE LTD VS DCIT (35 TAXMAN.COM167) (MAD), CIT VS JCB INDIA LTD (376ITR 621) (DELHI), PARLE AGRO (P) VS ACIT 36 ITR(T)ITAT MUMB AI, TATA IRON AND STEEL CO LTD VS DCIT (ITA NO.7720-7747/M/2010)(ITAT MUMBAI) DATED 17.09.2014, TATA IRON AND STEEL CO LTD. VS DCIT (IT A NO.(S) 4119- 4122/M/2005 (ITAT MUMBAI) (AY 2001-02) DATED 17.09. 2014. THE LD DR FOR THE REVENUE RELIED ON THE ORDER OF THE AUTHORITIES BELOW. 27. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. REPRE SENTATIVES AND PERUSED THE ORDER OF THE AUTHORITIES BELOW. THE LD CIT(A) WHILE DECIDING THE RELEVANT GROUND OF APPEAL ( GROUND NO.8 BEFORE HIM) FOLLOWED THE ORDER OF EARLIER YEAR I.E. AY 1998-99 AND GRANTED RELIEF TO THE ASSESSEE ( PARA 11 OF THE IMPUGNED ORDER). WE HAVE SEEN THAT IN THE ASSESSEES GROUP C ASE I.E. IN TATA IRON &STEEL CO. LTD VS DCIT FOR AY 1997-98, 1998-1999,1999-2000 IN ITA NO 4120-22 /M/2005 DATED 16.05.2014 ON SIMILAR GROUNDS OF APPE AL PASSED THE FOLLOWING ORDER; ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 16 3. NOW, WE WOULD TAKE UP THE COMMON GROUNDS OF APPEAL RAISED IN DIFFERENT YEARS. FIRST OF THEM IS ABOUT FEES PAID T O CONSULTANTS FOR FEASIBILITY STUDIES FOR THE AY.S.1997-98,1998-1999 AND 2000-01 RESPECTIVELY. DURING THE ASSESSMENT PROCEEDINGS, AO .S FOUND THAT THE ASSESSEE HAD PAID RS.34.96 LAKHS, RS.34.94 AND RS.1 2.61 LAKHS TO THE CONSULTANTS FOR CONDUCTING FEASIBILITY STUDIES FOR THE YEARS UNDER APPEAL. AO.S WERE OF THE OPINION THAT THE EXPENDITURE WAS I NCURRED IN CONNECTION WITH THE EXPANSION OF THE INDUSTRIAL UNDERTAKING, T HAT SAME WAS CAPITAL EXPENDITURE, THAT THE EXPENDITURE INCURRED ON PREPA RATION OF FEASIBILITY/PROJECT REPORTS IN CONNECTION WITH THE EXPANSION OF INDUSTRIAL UNDERTAKINGS OR IN CONNECTION WITH THE SETTING UP O F A NEW UNITS WAS AN ADMISSIBLE DEDUCTION U/S.35D OF THE ACT. 3.1. IN THE APPELLATE PROCEEDINGS, UPHOLDING THE ORDER O F THE AO.S, FAA HELD THAT THE EXPENDITURE INCURRED WAS IN THE CAPIT AL FIELD. WE FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY US, WHILE ADJUD ICATING THE APPEALS FOR THE AY.1996-97 IN THE FOLLOWING MANNER: 5.2. BEFORE US, AR SUBMITTED THAT SIMILAR KIND OF EXPEND ITURE IN THE EARLIER YEARS WAS ALLOWED BY THE TRIBUNAL ,WHEREIN FAA HAD CONFIRMED THE ADDITIONS MADE BY THE AO IN SIMILAR FASHION. DR LEF T THE ISSUE TO THE DISCRETION OF THE BENCH. WE FIND THE IN THE EARLIER AY.S., WE HAVE DEALT THE ISSUE AS UNDER: 9. NEXT COMMON GROUND OF APPEAL (G.12-1991-92, G.9-199 4-95)IS ABOUT FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES. A O. FOUND THAT THE ASSESSEE HAD PAID RS.4.83 LAKHS AND RS.24.94 LAKHS TO THE CONSULTANTS FOR CONDUCTING FEASIBILITY STUDIES FOR THE YEARS UNDER APPEAL. AO.S WERE OF THE OPINION THAT THE EXPENDITURE WAS INCURRED IN CONNEC TION WITH THE EXPANSION OF THE INDUSTRIAL UNDERTAKING, THAT SAME WAS CAPITA L EXPENDITURE, THAT THE EXPENDITURE INCURRED ON PREPARATION OF FEASIBILITY/ PROJECT REPORTS IN CONNECTION WITH THE EXPANSION OF INDUSTRIAL UNDERTA KINGS OR IN CONNECTION WITH THE SETTING UP OF A NEW UNITS WAS AN ADMISSIBL E DEDUCTION U/S.35D OF THE ACT. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 17 9.1. IN THE APPELLATE PROCEEDINGS, UPHOLDING THE ORDER O F THE AO.S, FAA HELD THAT THE EXPENDITURE INCURRED WAS IN THE CAPIT AL FIELD. WE FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY US, WHILE ADJUD ICATING THE APPEALS FOR THE EARLIER THREE AY.S.I.E.-AY.S.1987-88,1989-09 AN D 1990-91(SUPRA)IN THE FOLLOWING MANNER: BEFORE US, AR AND DR AGREED THE IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER FOR THE AY.1986-87.WE FIN D THAT IN THE EARLIER AY, ISSUE OF EXPENDITURE INCURRED FOR MAKING PAYMEN TS TO CONSULTANTS FOR FEASIBILITY STUDIES, HAS BEEN DEALT IN FOLLOWING MA NNER: 16.2. BEFORE US, AR SUBMITTED THAT SIMILAR ISSUE WAS DECI DED IN FAVOUR OF THE ASSESSEE IN THE PRECEDING AY.DR DID NOT CONTROVERT THE FACT. WE FIND THAT IN THE AY.1985-86 ASSESSEE HAD PAID FEES FOR FEASIB ILITY STUDY TO THE SAME CONSULTANT TO WHOM FESS WAS PAID DURING THE YEAR AL SO. WHILE DECIDING THE APPEAL , TRIBUNAL AT PARAGRAPH 38 HAS HELD AS UNDER : WE HAVE PERUSED THE DETAILS O F THE EXPENSES A SUM OF RS.10 LAKHS WAS PAID FOR MODERNIZATION PROJECT PHASE-I.A SUM OF RS.2 LAKHS A ND RS.3 LAKHS WAS PAID FOR PROJECT REPORT FOR FEASIBILITY OF PLASTIC LINES AND COATED PIPES AND REVAMPING THE ERW MILL RESPECTIVELY. IN AY.1968-69 IN I.T.A. NO.2 068/BOM/74-75 THE HONBLE ITAT IN ASSESSEES OWN CASE CONSIDERED EXPE NDITURE ON REPORT FOR INCREASING PRODUCTION CAPACITY AND FUTURE DEVELOPME NT. AFTER ELABORATE DISCUSSION, THE TRIBUNAL CAME TO THE CONCLUSION THA T EXPENDITURE WAS NOT A CAPITAL EXPENDITURE AND ALLOWED DEDUCTION OF SAME AS A REVE NUE EXPENDITURE. FACTS AND CIRCUMSTANCES BEING IDENTICAL IN THIS YEAR, RESPECT FULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE HOLD THAT THE EXPENDITURE IN QUEST ION HAS TO BE ALLOWED AS A DEDUCTION BEING REVENUE EXPENDITURE. GROUND NO. 12 IS ALLOWED. FOLLOWING THE ABOVE, WE DECI DE GROUND NO.16, BEFORE US, IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE,G.14/G.1 3 FOR THE AY.S UNDER APPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING OUR ORDERS FOR THE EARLIER YEARS, WE DECIDE THE ISSUE OF PAYMENT OF F EES TO THE CONSULTANTS FOR CONDUCTING FEASIBILITY RE PORT IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE DECISION OF EARLIER YEARS, GROUND NO.7 IS DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING OUR ORDER FOR THE AS SESSMENT YEAR 1996-97, GROUNDS NO.9 (1997- 98) AND1(FOR 1998-99 AND 2000-01) IS ALLOWED. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 18 FURTHER, THE COORDINATE BENCH OF THE TRIBUNAL IN AS SESSEES GROUP CASE I.E. IN TATA IRON & STEEL COMPANY LTD VS DCIT IN ITA 7270&7 747/M/2010 FOR AY 2001-02 BY FOLLOWING THE DECISION OF EARLIER YEAR P ASSED THE FOLLOWING ORDER; 6. EFFECTIVE GROUND NO.1, FILED BY THE AO, IS ABOUT EXPENSES OF RS.4.90 LACS INCURRED ON TECHNO FEASIBILITY REPORT. BEFORE US, REPRESENTATIVES OF THE BOTH THE SIDES ADMITTED THAT THE IDENTICAL ISSU E WAS DECIDED BY THE TRIBUNAL WHILE ADJUDICATING THE APPEAL FOR YEARS 19 97-98 TO 2000-01 (SUPRA). WE FIND THAT IN THE APPEALS FOR THE ABOVE REFERRED FOUR YEARS, THE ISSUE WAS DEALT BY THE TRIBUNAL AS UNDER: 3. NOW, WE WOULD TAKE UP THE COMMON GROUNDS OF APPEAL RAISED IN DIFFERENT YEARS. FIRST OF THEM IS ABOUT FEES PAID T O CONSULTANTS FOR FEASIBILITY STUDIES FOR THE AY.S.1997-98,1998-1999 AND 2000-01 RESPECTIVELY .DURING THE ASSESSMENT PROCEEDINGS, AO .S FOUND THAT THE ASSESSEE HAD PAID RS.34.96 LAKHS,RS.34.94 AND RS.12 .61 LAKHS TO THE CONSULTANTS FOR CONDUCTING FEASIBILITY STUDIES FOR THE YEARS UNDER APPEAL. AO.S WERE OF THE OPINION THAT THE EXPENDITU RE WAS INCURRED IN CONNECTION WITH THE EXPANSION OF THE INDUSTRIAL UND ERTAKING, THAT SAME WAS CAPITAL EXPENDITURE, THAT THE EXPENDITURE INCUR RED ON PREPARATION OF FEASIBILITY/PROJECT REPORTS IN CONNECTION WITH T HE EXPANSION OF INDUSTRIAL UNDERTAKINGS OR IN CONNECTION WITH THE S ETTING UP OF A NEW UNITS WAS AN ADMISSIBLE DEDUCTION U/S.35D OF THE AC T. 3.1. IN THE APPELLATE PROCEEDINGS, UPHOLDING THE ORDER O F THE AO.S, FAA HELD THAT THE EXPENDITURE INCURRED WAS IN THE CAPIT AL FIELD. WE FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY US, WHILE ADJUD ICATING THE APPEALS FOR THE AY.1996-97 IN THE FOLLOWING MANNER: 5.2. BEFORE US, AR SUBMITTED THAT SIMILAR KIND OF EXPEND ITURE IN THE EARLIER YEARS WAS ALLOWED BY THE TRIBUNAL, WHEREIN FAA HAD CONFIRMED THE ADDITIONS MADE BY THE AO IN SIMILAR FASHION. DR LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. WE FIND THE IN THE EARLIER AY.S., WE HAVE DEALT THE ISSUE AS UNDER: 9. NEXT COMMON GROUND OF APPEAL (G.12-1991-92,G.9-1994 -95)IS ABOUT FEES PAID TO CONSULTANTS FOR FEASIBILITY STUDIES. A .O. FOUND THAT THE ASSESSEE HAD PAID RS.4.83 LAKHS AND RS.24.94 LAKHS TO THE CONSULTANTS FOR CONDUCTING FEASIBILITY STUDIES FOR THE YEARS UN DER APPEAL. AO.S WERE OF THE OPINION THAT THE EXPENDITURE WAS INCURRED IN CONNECTION WITH THE EXPANSION OF THE INDUSTRIAL UNDERTAKING, THAT SAME WAS CAPITAL ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 19 EXPENDITURE, THAT THE EXPENDITURE INCURRED ON PREPA RATION OF FEASIBILITY/ PROJECT REPORTS IN CONNECTION WITH THE EXPANSION OF INDUSTRIAL UNDERTAKINGS OR IN CONNECTION WITH THE SETTING UP O F A NEW UNITS WAS AN ADMISSIBLE DEDUCTION U/S.35D OF THE ACT. 9.1. IN THE APPELLATE PROCEEDINGS, UPHOLDING THE ORDER O F THE AO.S, FAA HELD THAT THE EXPENDITURE INCURRED WAS IN THE CAPIT AL FIELD. WE FIND THAT IDENTICAL ISSUE HAS BEEN DECIDED BY US, WHILE ADJUD ICATING THE APPEALS FOR THE EARLIER THREE AY.S.I.E.-AY.S.1987-88, 1989- 09 AND 1990- 91(SUPRA) IN THE FOLLOWING MANNER: BEFORE US, AR AND DR AGREED THE IDENTICAL ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER FOR THE AY.1986-87.WE FIND THAT IN THE EARLIER AY, ISSUE OF EXPENDITURE INCURRED FOR MAKIN G PAYMENTS TO CONSULTANTS FOR FEASIBILITY STUDIES, HAS BEEN DEALT IN FOLLOWING MANNER: 16.2. BEFORE US, AR SUBMITTED THAT SIMILAR ISSUE WAS DECI DED IN FAVOUR OF THE ASSESSEE IN THE PRECEDING AY.DR DID NOT CONTROV ERT THE FACT. WE FIND THAT IN THE AY.1985-86 ASSESSEE HAD PAID FEES FOR FEASIBILITY STUDY TO THE SAME CONSULTANT TO WHOM FESS WAS PAID DURING THE YEAR ALSO. WHILE DECIDING THE APPEAL, TRIBUNAL AT PARAGRAPH 38 HAS HELD AS UNDER: WE HAVE PERUSED THE DETAILS OF THE EXPE NSES. A SUM OF RS.10 LAKHS WAS PAID FOR MODERNIZATION PROJECT PHASE-I.A SUM OF RS.2 LAK HS AND RS.3 LAKHS WAS PAID FOR PROJECT REPORT FOR FEASIBILITY OF PLASTIC LINES AND COATED PIPES AND REVAMPING THE ERW MILL RESPECTIVELY. IN AY.1968-69 IN I.T.A. NO.2068/BOM/74-75 THE HONBLE ITAT IN ASSESSEES OW N CASE CONSIDERED EXPENDITURE ON REPORT FOR INCREASING PRODUCTION CAP ACITY AND FUTURE DEVELOPMENT. AFTER ELABORATE DISCUSSION, THE TRIBUN AL CAME TO THE CONCLUSION THAT EXPENDITURE WAS NOT A CAPITAL EXPENDITURE AND ALLOWED DEDUCTION OF SAME AS A REVENUE EXPENDITURE. FACTS AND CIRCUMSTANCES B EING IDENTICAL IN THIS YEAR, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL , WE HOLD THAT THE EXPENDITURE IN QUESTION HAS TO BE ALLOWED AS A DEDU CTION BEING A REVENUE EXPENDITURE. GROUND NO. 12 IS ALLOWED. FOLLOWING THE ABOVE, WE DECIDE GROUND NO.1 6, BEFORE US, IN FAVOUR OF THE ASSESSEE. IN VIEW OF THE ABOVE,G.14/G.13 FOR THE AY. S UNDER APPEAL ARE DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING OUR ORDERS FOR THE EARLIER YEAR S, WE DECIDE THE ISSUE OF PAYMENT OF FEES TO THE CONSULTANTS FOR CONDUCTING FEASIBILI TY REPORT IN FAVOUR OF THE ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 20 ASSESSEE. IN VIEW OF THE DECISION OF EARLIER YEAR S, GROUND NO.7 IS DECIDED IN FAVOUR OF THE ASSESSEE. FOLLOWING OUR ORDER FOR THE ASSESSMENT YEAR 1996-97, GROUNDS NO.9 (1997-98) AND 1 (FOR 1998-99 AND 2000-01) IS ALLOWE D. CONSIDERING THE EARLIER YEARS ORDERS, FIRS T EFFECTIVE GROUND [GOA2 (A) & 2(B)]FOR THE YEAR UNDER APPEAL IS DECIDED AGAINST THE AO. 28. IT IS NOTED THAT SIMILAR DISALLOWANCE MADE BY AO I N ASSESSMENT YEAR 2003-04 ONWARDS WHICH WERE DELETED BY FIRST APPELLATE AUTHO RITY, AND THE REVENUE HAS NOT FILED FURTHER APPEAL BEFORE THE TRIBUNAL. THE O RDERS IN ALL SUBSEQUENT YEARS HAVE ATTAINED FINALITY. THE PRODUCT DEVELOPMENT EXP ENSES INCLUDE EXPENSES ON DEVELOPMENT OF NEW PRODUCT AND VARIANTS OF EXISTING PRODUCT. IT HAS BEEN EXPLAINED THAT SUCH DEVELOPMENT TAKES A SPAN OF TIM E BEFORE COMMERCIAL PRODUCTION. IN OUR VIEW, SUCH AN EXPENDITURE IS A R EGULAR DEVELOPMENTAL ACTIVITY UNDER TAKEN BY THE ASSESSEE IN ITS EXISTING COURSE OF BUSINESS AND NOT A NEW LINE OF BUSINESS. THUS, ON THE BASIS OF PARITY OF REASON ING LAID DOWN IN THE CASE OF TATA IRON AND STEEL COMPANY (SUPRA), SUCH EXPENDITU RE IS REVENUE IN NATURE. CONSIDERING THAT THE REVENUE HAS ACCEPTED SUCH AN ORDER OF CIT(A) FOR ASSESSMENT YEAR 2003-04 ONWARDS, THE IMPUGNED ORDER OF LD CIT(A) DESERVE TO BE UPHELD. IN VIEW OF THE AFORESAID DISCUSSION, AN D FOR THE SAKE OF CONSISTENCY THE ORDER OF LD CIT(A) IS AFFIRMED. THUS, THE GROUN D OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 29. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. ITA NO. 3598/M/2011 FOR AY 2000-01 BY REVENUE . 30. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEALS ; 1. THE ORDER OF LD CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 21 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE WARRANTY EXPENSES, IGNORING T HE FACT, IT WAS PROVISIONAL AND CONTINGENT IN NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE VENDOR DEVELOPMENT EXPENSES I GNORING THE FACT THAT THESE ARE DEFERRED EXPENSES AND CAPITAL IN NAT URE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE PRODUCT DEVELOPMENT EXPENSES, IGNORING THE FACTS THAT THESE ARE CAPITAL IN NATURE . 31. THE LD AR FOR THE ASSESSEE SUBMITTED THAT ALL THE G ROUNDS OF APPEAL RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF ASSESSEE AND A GAINST THE REVENUE. THE LD AR FOR THE ASSESSEE FILED THE DETAILS OF CHART ALON G WITH THE DETAILS OF THE CASE BY VIRTUE OF WHICH THE GROUNDS OF APPEAL ARE COVERE D. THE LD DR FOR THE REVENUE HAS GONE THROUGH THE DETAILS SO FURNISHED A ND DISPUTED THE VARIOUS ORDERS. GROUND NO. 1 IS GENERAL AND NEEDS NO ADJUDI CATION AND THUS THE SAME IS DISMISSED BEING GENERAL. 32. GROUND NO.2 RELATES TO DISALLOWANCE OF THE WARRANTY EXPENSES OF RS.38,38,88,000/- WE HAVE SEEN THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 1 OF APPEAL IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (19-21) ABOVE. HENCE, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAIS ED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. 33. GROUND NO.3 RELATES TO VENDOR DEVELOPMENT EXPENSES OF RS. 57,78,26,000/-. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTIC AL TO THE GROUND NO.3 OF APPEAL IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHIC H WE HAVE ALREADY DISMISSED VIDE PARA NO. (22-23) ABOVE. HENCE, FOLLO WING THE PRINCIPAL OF ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 22 CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REV ENUE IS DISMISSED WITH SIMILAR OBSERVATION. 34. GROUND NO.4 RELATES TO PRODUCT DEVELOPMENT EXPENSES OF RS 39,81,52,000/-. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTIC AL TO THE GROUND NO.5 OF APPEAL BY REVENUE IN ITA NO.3597/M/2011 FOR AY 1999 -2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (27-28) ABOVE. HENC E, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. 35. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ITA NO. 3599/M/2011, AY 2001-02 BY REVENUE . 36. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL; 1. THE ORDER OF LD CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE WARRANTY EXPENSES, IGNORING T HE FACT, IT WAS PROVISIONAL AND CONTINGENT IN NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE VENDOR DEVELOPMENT EXPENSES I GNORING THE FACT THAT THESE ARE DEFERRED EXPENSES AND CAPITAL IN NAT URE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE PRODUCT DEVELOPMENT EXPENSES, IGNORING THE FACTS THAT THESE ARE CAPITAL IN NATURE . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN DELETING THE DISALLOWANCE OF EXPENDITURE O N FEEDER LINE, IGNORING THE FACT THAT THESE EXPENDITURE WERE CAPIT AL IN NATURE. 37. THE LD AR FOR THE ASSESSEE SUBMITTED THAT ALL THE G ROUNDS OF APPEAL RAISED BY THE REVENUE ARE COVERED IN FAVOUR OF ASSESSEE AND A GAINST THE REVENUE. THE LD AR FOR THE ASSESSEE FILED THE DETAILS OF CHART ALON G WITH THE DETAILS OF THE CASE BY VIRTUE OF WHICH THE GROUNDS OF APPEAL ARE COVERE D. THE LD DR FOR THE REVENUE HAS GONE THROUGH THE DETAILS SO FURNISHED A ND DISPUTED THE VARIOUS ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 23 ORDERS. GROUND NO. 1 IS GENERAL AND NEEDS NO ADJUDI CATION AND THUS THE SAME IS DISMISSED BEING GENERAL. 38. GROUND NO.2 RELATES TO DISALLOWANCE OF THE WARRANTY EXPENSES OF RS.12,80,40,000/- WE HAVE SEEN THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 1 OF APPEAL IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (19-21) ABOVE. FURTHER, WE HAVE DISMISSED THE IDENTICAL GROUNDS OF APPEAL RAISED BY REVENUE FOR AY 2000-01. HENCE, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. 39. GROUND NO.3 RELATES TO VENDOR DEVELOPMENT EXPENSES OF RS.4,60,00,000/-. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO.3 OF APPEAL BY REVENUE IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (22-23) ABOVE. FURTHER, WE HAVE DISMISSED THE IDENTICAL GROUNDS OF APPEAL RAISED BY REVENUE FOR A Y 2000-01. HENCE, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. 40. GROUND NO.4 RELATES TO PRODUCT DEVELOPMENT EXPENSES OF RS 63,59,00,000/-. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTIC AL TO THE GROUND NO.5 OF APPEAL BY REVENUE IN ITA NO.3597/M/2011 FOR AY 1999 -2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (27-28) ABOVE. FURT HER, WE HAVE DISMISSED THE IDENTICAL GROUNDS OF APPEAL RAISED BY REVENUE FOR A Y 2000-01. HENCE, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 24 41. GROUND NO.5 RELATES TO DELETING HE DISALLOWANCE ON FEEDER LINE FOR POWER SUPPLY BY TREATING IT AS CAPITAL EXPENDITURE. DURIN G THE RELEVANT PERIOD THE ASSESSEE INCURRED A SUM OF RS.3,55,07,775/- FOR A A UGMENTING POWER SUPPLY BY INSTALLING A FEEDER LINE AT JAMSHEDPUR. THE AO DISA LLOWED THE EXPENDITURE, TREATING IT AS CAPITAL IN NATURE, DESPITE TREATING IT CAPITAL IN NATURE DENIED DEPRECIATION. BEFORE FIRST APPELLATE AUTHORITY THE ASSESSEE SUBMITTED THAT EXPENSES WERE INCURRED FOR AUGMENTING THE POWER SUP PLY FOR THE PURPOSE OF BUSINESS. NO TANGIBLE ASSET WAS ACQUIRED BY THE ASS ESSEE AND THE ASSESSEE HAS NO OWNERSHIP ON THE FEEDER LINE. THE LD CIT (A) A LLOWED THE EXPENDITURE AS A REVENUE IN NATURE ON THE BASIS OF THE DECISION OF H ONBLE JURISDICTIONAL HIGH COURT IN CIT VS EXCEL INDUSTRIES LTD 122 ITR 995( B OM). THE HONBLE HIGH COURT HELD THAT WHEREIN ON EXPENDITURE NO CAPITAL A SSET IS ACQUIRED THE EXPENDITURE IS REVENUE IN NATURE. FURTHER, JURISDIC TIONAL HIGH COURT IN MAFATLAL FINE SPINNING & WEAVING CO. LTD VS CIT (69 TAXMAN 3 85) (BOM) HELD THAT CONTRIBUTION PAID TO STATE ELECTRICITY BOARD TOWAR DS LAYING OF ADDITIONAL CIRCUIT LINE IS REVENUE EXPENDITURE. 42. IN VIEW OF THE ABOVE DISCUSSION THE EXPENDITURE INC URRED ON FEEDER LINE FOR POWER SUPPLY IS NOT CAPITAL EXPENDITURE AS NO ASSET WAS ADDED IN THE ASSET OF THE ASSESSEE. THE EXPENSES INCURRED ON FEEDER LINE ARE REVENUE IN NATURE. HENCE, THIS GROUND OF APPEAL IS ALSO DISMISSED. 43. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ITA NO.3601/M/2011, AY 2002-03 BY REVENUE . 44. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPEAL. 1. THE ORDER OF LD CIT (A) IS OPPOSED TO LAW AND FACTS OF THE CASE. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 25 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE WARRANTY EXPENSES, IGNORING T HE FACT, IT WAS PROVISIONAL AND CONTINGENT IN NATURE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE VENDOR DEVELOPMENT EXPENSES I GNORING THE FACT THAT THESE ARE DEFERRED EXPENSES AND CAPITAL IN NAT URE. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE PRODUCT DEVELOPMENT EXPENSES, IGNORING THE FACTS THAT THESE ARE CAPITAL IN NATURE . 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, LD CIT (A) ERRED IN ALLOWING THE EXPENDITURE, BEING CONTRIBUTI ON FOR RAILWAY OVERBRIDGE, IGNORING THE FACT THAT IT WAS CAPITAL I N NATURE. 45. GROUND NO. 1 IS GENERAL AND NEEDS NO ADJUDICATION A ND THUS THE SAME IS DISMISSED BEING GENERAL. 46. GROUND NO.2 RELATES TO DISALLOWANCE OF THE WARRANTY EXPENSES OF RS.19,82,35,000/- WE HAVE SEEN THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO. 1 OF APPEAL IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (19-21) ABOVE. FURTHER, WE HAVE DISMISSED THE IDENTICAL GROUNDS OF APPEAL RAISED BY REVENUE FOR AY 2000-01 AND IN 2001-02. HENCE, FOLLOWING THE PRINCIPAL OF C ONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMI LAR OBSERVATION. 47. GROUND NO.3 RELATES TO VENDOR DEVELOPMENT EXPENSES OF RS.48,68,5,467/-. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO.3 OF APPEAL BY REVENUE IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (22-23) ABOVE. FURTHER, WE HAVE DISMISSED THE IDENTICAL GROUNDS OF APPEAL RAISED BY REVENUE FOR AY 2000-01A ND FOR 2001-02. HENCE, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 26 48. GROUND NO.4 RELATES TO PRODUCT DEVELOPMENT EXPENSES OF RS 36,73,01,680/-. WE HAVE NOTED THAT THIS GROUND OF APPEAL IS IDENTICAL TO THE GROUND NO.5 OF APPEAL BY REVENUE IN ITA NO.3597/M/2011 FOR AY 1999-2000, WHICH WE HAVE ALREADY DISMISSED VIDE PARA NO. (27-28) ABOVE. FURTHER, WE HAVE DISMISSED THE IDENTICAL GROUNDS OF APPEAL RAISED BY REVENUE FOR AY 2000-01A ND 2001-02. HENCE, FOLLOWING THE PRINCIPAL OF CONSISTENCY THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED WITH SIMILAR OBSERVATION. 49. GROUND NO.5 RELATES TO ALLOWING THE DISALLOWANCE OF CONTRIBUTION FOR RAILWAY BRIDGE OF RS.1,39,00,000/- DURING THE RELEVANT PERI OD THE ASSESSEE PAID AN AMOUNT OF RS.1,39,00,000/- AS SHARE OF EXPENSES FOR RECONSTRUCTION OF RAILWAY OVER BRIDGE AT TATANAGAR STATION. THE TOTAL ESTIMAT E OF BRIDGE WAS RS. 512 LACKS. ON THE BASIS OF PROPORTIONATE SHARE OF TATA STEEL AND OTHER ASSOCIATE COMPANY THE ASSESSEE AGREED TO SHARE RS.139 LAKHS. THE BRIDGE WAS IMPORTANT LINK TO EASTERN PART OF JAMSHEDPUR WHERE THE ASSESS EES TOWNSHIP IS SITUATED. THE CONSTRUCTION OF BRIDGE WAS ESSENTIAL TO THE FAM ILIES OF THE EMPLOYEE OF THE ASSESSEE. THE EXPENSES WERE CAPITALIZED AND WERE CL AIMED AS REVENUE EXPENDITURE. THE AO DISALLOWED IT BY TREATING IT AS CAPITAL EXPENDITURE. BEFORE FIRST APPELLATE STAGE IT WAS ARGUED THAT NO TANGIBL E ASSET WAS ACQUIRED AND THE ASSESSEE HAS NO OWNERSHIP OVER THE SAID RAILWAY BRI DGE. THE LD CIT(A) ALLOWED THE EXPENDITURE AS A REVENUE IN NATURE ON T HE BASIS OF THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN CIT VS EXCEL I NDUSTRIES LTD 122 ITR 995( BOM). SIMILAR VIEW WAS TAKEN BY HONBLE GAUHATI HIG H COURT IN CIT VS BONGAIGAON REFINERY AND PETROCHEMICAL LTD (222 ITR 208 GAU) FOR EXPENSES INCURRED FOR RAILWAY TRACK AND SIDING. FURTHER, THE HONBLE MADRAS HIGH COURT ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 27 IN CIT VS COATS VIYELLA INDIA LTD THAT EXPENDITURE INCURRED ON CONSTRUCTION OF NEW BRIDGE IN PLACE OF OLD ONE FOR MOVEMENT OF GOOD S AND WORKMEN IS REVENUE EXPENDITURE. WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSEE IS NEITHER THE OWNER OF THE BRIDGE NOR NEW CAPITAL ASSET WAS ADDED IN THE ASSET OF THE ASSESSEE. THUS, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER OF THE LD CIT(A). HENCE, THIS GROUND OF APPEAL IS DISMISSED. 50. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS DI SMISSED. 51. NOW WE SHALL DECIDE THE APPEALS ITA NO.(S) 3329 TO 3332/M/2011 FOR AY 1999-2000 TO 2002-03 FILED BY ASSESSEE. IN ITA NO.3329/M/2011 FOR AY 1999-2000 THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL ; (1) DISALLOWANCE UNDER SECTION 14A. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONCLUDING THAT DISALLOWANCE UNDER SECTION 14A IS APPLICABLE WITHOU T VERIFICATION OF THE DETAILS AND EVIDENCES SUBMITTED BY THE APPELLANT IN SUPPORT OF THE CLAIM THAT THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE IN R ELATION TO EXEMPT INCOME. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED ON THE BAS IS OF THE FACTS OF THE APPELLANT THAT IN VIEW OF THE DECISION OF THE BOMBA Y HIGH |COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD., NO DISALLOWANCE CAN B E MADE U/S. 14A WHERE NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXE MPT INCOME. (2) NON ADMISSION OF ADDITIONAL GROUNDS OF APPEAL THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N NOT ADMITTING THE ADDITIONAL GROUNDS OF APPEAL IN RESPECT OF THE CLAI M BY THE APPELLANT TOWARDS THE FOLLOWING: (I) CAPITAL RECEIPT ON BUY BACK AND CANCELLATION OF US BONDS (II) EXPENSES INCURRED ON ISSUE OF NON-CONVERTIBLE DEBEN TURE/ BONDS (III) PRO-RATA PREMIUM ON REDEMPTION OF DEBENTURES ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 28 THE ASSESSEES FURTHER VIDE ITS APPLICATION DATED 18 TH AUGUST 2017 HAS RAISED FOLLOWING GROUNDS OF APPEAL: (3) GROUND NO.3. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, DEDUCTION UNDER SECTION 80HHC OF THE INCOME TAX AC T OUGHT TO HAVE BEEN GRANTED TO THE APPELLANT WHILE COMPUTING BOOK PROFIT UNDER SECTION 115JA OF THE ACT AS PER CLAUSE (VIII) OF TH E EXPLANATION TO SECTION 115JA(2) OF THE ACT. (II) FURTHER, WHILE COMPUTING DEDUCTION UNDER SECTION 80 HHC OF THE ACT ON THE BASIS OF BOOK PROFIT UNDER SECTION 115JA OF THE ACT, THE ADJUSTED TOTAL TURNOVER AS PER THE AUDITED FINANCIAL STATEME NT FOR THE YEAR UNDER CONSIDERATION TO BE REDUCED BY THE ELEMENT OF EXCIS E DUTY; SINCE EXCISE DUTY DOES NOT FORM PART OF THE TURNOVER IS SETTLED BY HONBLE SUPREME COURT IN CASE OF CIT VS LAKSHMI MACHINE WOR KS (2007)(290 ITR 667) AND CIT VS SHIVA TAX YARN LTD (2012)(254 C TR 104). (III) THE ASSESSING OFFICER BE DIRECTED TO RE-COMPUTE DED UCTION U/S. 80HHC OF THE ACT CONSIDERING THE REVISED BUSINESS PROFITS AS PER SECTION 115JA OF THE ACT AND GRANT DEDUCTION OF THE SAME WH ILE COMPUTING BOOK PROFITS U/S. 115JA OF THE ACT. 52. WE HAVE HEARD LD REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. GROUND NO.1 RELATES TO DISALL OWANCE UNDER SECTION 14A. WE HAVE SEEN THAT SIMILAR GROUND OF APPEAL WAS RAIS ED BY ASSESSEE IN ITA NO. 1039/M/2013 FOR AY 1999-2000, WHICH WE HAVE ALREADY DECIDED IN FAVOUR OF ASSESSEE IN PARA (7 ) ABOVE. THUS, THIS GROUND OF A PPEAL HAS BECOME INFRUCTUOUS. 53. GROUND NO. 2 RELATES TO NON-ADMISSION OF ADDITIONAL GROUND OF APPEAL BY LD. CIT(A). THE LEARNED AR OF THE ASSESSEE ARGUED THAT ASSESSEE FILED APPLICATION DATED 1 ST JUNE 2005 FOR ADDITIONAL GROUND OF APPEAL ALONG WI TH THE STATEMENT OF FACTS. NO NEW FACTS WERE BROUGHT ON RECORD AND ONLY PURE QUESTION OF LAW IS ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 29 SOUGHT TO BE RAISED BASED ON THE MATERIAL AVAILABLE ON RECORD. THE LD CIT (A) NOT ADMITTED ADDITIONAL GROUND OF APPEAL, THE REASO NING FOR NOT ADMITTING THE GROUNDS OF APPEAL IS NOT SUSTAINABLE UNDER LAW. TH E LD AR IN SUPPORT OF HIS SUBMISSION RELIED UPON THE DECISION OF NATIONAL THE RMAL POWER CORPORATION (NTPC) VS CIT (229 ITR 383), JUTE CORPORATION OF IN DIA VERSUS CIT (187 ITR 688), CIT VERSUS PRUTHVI BROKERS AND SHAREHOLDERS W OULD (349 ITR 336 BOM) AND TATA INDUSTRIES LTD VERSUS ITO (181 TTJ 600) IT AT MUMBAI. THE LD DR SUPPORTED THE ORDER OF AUTHORITIES BELOW. 54. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D HAVE GONE THROUGH THE ORDER OF LD CIT(A). THE LD CIT(A) NOT ADMITTED THE ADDITIONAL GROUNDS HOLDING THAT THE ASSESSEE NOT RAISED THE CLAIM BEFO RE THE ASSESSING OFFICER EITHER BY WAY OF REVISE RETURN OR IN ANY OTHER MANNER. TH ERE IS NO REFERENCE IN THE ASSESSMENT ORDER ABOUT THE SAID CLAIM, THUS THE QUE STION OF PRESSING ANY ADDITIONAL GROUND OF APPEAL DOES NOT ARISE. THE APP ELLATE PROCEEDING IS NOT A SUBSTITUTE TO THE ASSESSMENT PROCEEDING AND IT IS N OT LEGISLATIVE INTENT TO MAKE IT OPEN ENDED PLATFORM TO MAKE SUCH CLAIM WHICH WERE N OT PREFERRED BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS . IN OUR ABOVE REASONING GIVEN BY LD CIT(A) IN IT S ORDER IS NOT SUSTAINABLE. WE HAVE NOTED THAT THE ASSESSEE HAS SPECIFICALLY CONTE NDED IN ITS APPLICATION DATED 1 JUNE 2005 THAT NO NEW FACTS WERE BROUGHT ON RECORD, THE ADDITIONAL GROUND OF APPEAL WAS PURELY LEGAL IN NATURE. IT IS SETTLED LA W THAT LEGAL CLAIM CAN ALWAYS BE RAISED BEFORE THE APPELLATE AUTHORITIES FOR THE FIRST TIME, EVEN THOSE CLAIMS WERE NOT RAISED DURING THE ASSESSMENT PROCEEDING, P ROVIDED THE ADDITIONAL GROUND/CLAIMS ARE PURELY LEGAL IN NATURE OR THE REL IEF RELATED WITH THE FACTS ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 30 AVAILABLE ON RECORD. THE POWER OF CIT(A) IS CO-TERM INUS WITH THE POWER OF ASSESSING OFFICER. THE LD. COMMISSIONER (APPEALS) E RRED IN LAW IN NOT ADMITTING THE ADDITIONAL GROUND OF APPEAL. CONSIDERING THE FA CTS OF THE CASE AND THE NATURE OF ADDITIONAL GROUNDS OF APPEAL, WE ADMIT THE ADDIT IONAL GROUNDS AND RESTORE THE ADDITIONAL GROUND OF APPEAL TO THE FILE OF LD. CIT( A) TO CONSIDER THE CLAIMS OF ASSESSEE AFRESH AND PASSED THE ORDER IN ACCORDANCE WITH LAW. NEEDLESS TO SAY THAT BEFORE PASSING THE ORDER THE LD. CIT(A) SHALL GRANT SUFFICIENT AND ADEQUATE OPPORTUNITY TO THE ASSESSEE. WITH THESE OBSERVATION S THE GROUND NO.2 RAISED BY ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 55. GROUND NO. 3 RELATES TO DEDUCTION UNDER SECTION 80 HHC. THE ASSESSEE HAS RAISED THIS GROUND OF APPEAL BEFORE TRIBUNAL FOR TH E FIRST TIME VIDE ITS APPLICATION DATED 18 AUGUST 2017. IN THE APPLICATIO N THE ASSESSEE HAS CONTENDED THAT THE ADDITIONAL GROUND OF APPEAL RELATES TO SAM E SET OF FACT AND MATERIAL WHICH ARE ALREADY AVAILABLE ON RECORD AND THAT NO N EW OR FRESH FACT WOULD BE REQUIRED TO BE INVESTIGATED. THE ASSESSEE FURTHER C ONTENDED THAT THE SIMILAR ISSUE HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSE SSEES OWN CASE FOR AY 1998-99 VIDE ORDER DATED 6 JANUARY 2017, WHEREIN TH E ASSESSING OFFICER HAS BEEN GIVEN NECESSARY DIRECTION TO CONSIDER THE CLAI M. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE NOT OPPOSED THE ADMISSIO N OF ADDITIONAL GROUND IF THE GROUND OF APPEAL IS RESTORED TO THE FILE OF ASS ESSING OFFICER FOR CONSIDERATION ON THE BASIS OF FACTS AVAILABLE ON RECORD. 56. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF THE PART IES AND HAVE GONE THROUGH THE APPLICATION FOR ADMISSION OF ADDITIONAL GROUND OF APPEAL, THE ADDITIONAL GROUNDS OF APPEAL. WE HAVE NOTED THAT THE ASSESSEE HAS NOT BROUGHT ANY NEW SET ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 31 OF FACTS ON RECORD AND SEEKING THE ADMISSION OF ADD ITIONAL GROUND ONLY ON THE BASIS OF FACTS AVAILABLE ON RECORD. WE HAVE SEEN TH AT THE HONBLE JURISDICTIONAL HIGH COURT IN CASE OF PRUTHVI BROKERS AND SHAREHOLD ERS PRIVATE LIMITED (SUPRA) HELD THAT EVEN IF THE CLAIM IS NOT MADE BEFORE THE ASSESSING OFFICER, IT CAN BE MADE BEFORE THE APPELLATE AUTHORITIES. THE JURISDIC TION OF THE APPELLATE AUTHORITIES TO ENTERTAIN SUCH A CLAIM IS NOT BARRED . THE HONBLE COURT FURTHER OBSERVED THAT DECISION OF HONBLE SUPREME COURT IN CASE OF GOETZE (INDIA) LTD VERSUS CIT (2006) TAXMAN 1, RELATING TO THE RESTRIC TION OF MAKING THE CLAIM THROUGH A REVISED RETURN WAS LIMITED TO THE POWERS OF ASSESSING OFFICER AND THE SAID JUDGMENT DOES NOT RESTRICT THE POWER OF APPELL ATE AUTHORITIES TO ENTERTAIN SUCH CLAIM BY WAY OF ADDITIONAL GROUND. CONSIDERING THE FACT THAT THE ASSESSEE HAS RAISED ADDITIONAL GROUND OF APPEAL RELATED TO D EDUCTION UNDER SECTION 80 HHC FOR THE FIRST TIME BEFORE THE TRIBUNAL, WE ADMI T THE ADDITIONAL GROUND OF APPEAL AND RESTORE THE SAME TO THE FILE OF ASSESSIN G OFFICER TO CONSIDER THESE ADDITIONAL GROUNDS OF APPEAL AS WELL AND PASS THE O RDER IN ACCORDANCE WITH LAW. THE AO SHALL GRANT SUFFICIENT OPPORTUNITY TO THE AS SESSEE BEFORE PASSING THE ORDER. WITH THESE OBSERVATION THE ADDITIONAL GROUND OF APPEAL RAISED BEFORE US ARE ALLOWED FOR STATISTICAL PURPOSE. 57. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ITA NO. 3330/M/2011 BY ASSESSEE FOR AY 2000-01. 58. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL ; (1) DISALLOWANCE UNDER SECTION 43B IN RESPECT OF SALES TAX COLLECTED UNDER U.P STATE GOVERNMENT SCHEME ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 32 THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N UPHOLDING THE DISALLOWANCE U/S 43B IN RESPECT OF SALES TAX COLLEC TED UNDER THE SCHEME NOTIFIED BY THE U.P. STATE GOVERNMENT. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED ON THE BASIS OF THE SCHEME NOTIFIED BY THE U.P. STATE GOVERNMENT READ WITH CIR CULAR NO. 674 DATED 29.12.1993 THAT IT IS ALLOWABLE AS DEDUCTION. (2) THE DISALLOWANCE UNDER SECTION 14A THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N CONCLUDING THAT DISALLOWANCE U/S 14A IS APPLICABLE WITHOUT VERIFICA TION OF THE DETAILS AND EVIDENCES SUBMITTED BY THE APPELLANT IN SUPPORT OF THE CLAIM THAT THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO EXE MPT INCOME. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED ON THE BAS IS OF THE FACTS OF THE APPELLANT THAT IN VIEW OF THE DECISION OF THE BOMBA Y HIGH COURT IN CAE OF GODREJ & BOYCE MFG. CO. LTD., NO DISALLOWANCE CAN B E MADE U/S. 14A WHERE NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXE MPT INCOME. (3) NON ADMISSION OF ADDITIONAL GROUNDS OF APPEAL THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N NOT ADMITTING THE ADDITIONAL GROUND OF APPEAL IN RESPECT OF THE CLAIM BY THE APPELLANT TOWARDS THE FOLLOWING: -CAPITAL RECEIPT ON BUY BACK AND CANCELLATION OF US BONDS. THE LD. CIT(A) OUGHT TO HAVE ADMITTED THE ABOVE ADD ITIONAL GROUND OF APPEAL IN VIEW OF THE POWERS VESTED UNDER SECTION 250. 59. WE HAVE HEARD LD REPRESENTATIVE OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. GROUND NO.1 RELATES TO THE DI SALLOWANCE UNDER SECTION 43B IN RESPECT OF SALES TAX COLLECTED UNDER UP STATE GO VERNMENT SCHEME FOR RS.1,78,45,919/-. THE LD AR OF THE ASSESSEE SUBMIT TED THAT THE LD CIT(A) HAS ALLOWED DEDUCTION IN AY 2001-02, BEING THE ASSESSME NT YEARS IN WHICH THE AGREEMENT FOR DEFERMENT OF SALE TAX HAS BEEN ENTERE D INTO WITH THE UP ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 33 GOVERNMENT, THUS THIS GROUND OF APPEAL HAS BECOME INFRUCTUOUS. CONSIDERING THE CONTENTION OF LD AR OF THE ASSESSEE THAT THIS GROUND OF APPEAL IS DISMISSED BEING INFRUCTUOUS. 60. GROUND NO.2 RELATES TO DISALLOWANCE UNDER SECTION 1 4A. WE HAVE SEEN THAT SIMILAR GROUND OF APPEAL WAS RAISED BY ASSESSEE IN ITA NO. 1040/M/2013 FOR AY 1999-2000, WHICH WE HAVE ALREADY DECIDED IN FAVO UR OF ASSESSEE IN PARA (7) ABOVE. THUS, THIS GROUND OF APPEAL HAS BECOME INFRU CTUOUS. 61. GROUND NO. 3 RELATES TO NON-ADMISSION OF ADDITIONAL GROUNDS OF APPEAL IN RESPECT OF CAPITAL RECEIPTS OF BUY-BACK AND CANCELL ATION OF US BONDS. WE HAVE NOTED THAT SIMILAR GROUND OF APPEAL IS RAISED BY AS SESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 1999-2000, WHICH WE HAVE ALREADY RE STORED TO THE FILE OF LD. CIT(A). THUS, KEEPING IN VIEW THE PRINCIPLE OF CONS ISTENCY THIS GROUND OF APPEAL IS ALSO RESTORED TO THE FILE OF LD. CIT(A) W ITH SIMILAR DIRECTIONS. HENCE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PU RPOSE. 62. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ITA NO.3331/M/2011 FOR AY 2001-02 BY ASSESSEE . 63. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL ; 1. DISALLOWANCE UNDER SECTION 43B IN RESPECT OF SAL ES TAX COLLECTED UNDER U.P STATE GOVERNMENT SCHEME THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N UPHOLDING THE DISALLOWANCE U/S 43B IN RESPECT OF SALES TAX COLLEC TED UNDER THE SCHEME NOTIFIED BY THE U.P. STATE GOVERNMENT. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED ON THE BASIS OF THE SCHEME NOTIFIED BY THE U.P. STATE GOVERNMENT READ WITH CIR CULAR NO. 674 DATED 29.12.1993 THAT IT IS ALLOWABLE AS DEDUCTION. 2. THE DISALLOWANCE U/S 14A ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 34 THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N CONCLUDING THAT DISALLOWANCE U/S 14A IS APPLICABLE WITHOUT VERIFICA TION OF THE DETAILS AND EVIDENCES SUBMITTED BY THE APPELLANT IN SUPPORT OF THE CLAIM THAT THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO EXE MPT INCOME. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED ON THE BAS IS OF THE FACTS OF THE APPELLANT THAT IN VIEW OF THE DECISION OF THE BOMBA Y HIGH COURT IN CAE OF GODREJ & BOYCE MFG. CO. LTD., NO DISALLOWANCE CAN B E MADE U/S. 14A WHERE NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXE MPT INCOME. 3. DISALLOWANCE OF RETIREMENT BENEFIT PAYMENTS THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N HOLDING THAT NORMAL RETIREMENT BENEFIT PAYMENTS MADE TO THE EMPLOYEES W HO HAD ACCEPTED THE VOLUNTARY RETIREMENT SCHEME WERE COVERED BY SECTION 35DDA. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE P AYMENT OF LAVE ENCASHMENT, GRATUITY AND PENSION TO THE EMPLOYEES U PON CESSATION OF EMPLOYMENT IS ALLOWABLE AS DEDUCTION UNDER SECTION 36 AND 37 OF THE ACT AND IT IS NOT COVERED BY SECTION 35DDA. NOT ADMITTING T HE ADDITIONAL GROUND OF APPEAL IN RESPECT OF THE CLAIM BY THE APPELLANT TOW ARDS THE FOLLOWING: 4. NON-ADMISSION OF ADDITIONAL GROUNDS OF APPEAL THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N NOT ADMITTING THE ADDITIONAL GROUND OF APPEAL IN RESPECT OF THE CLAIM BY THE APPELLANT TOWARDS THE FOLLOWING: -CAPITAL RECEIPT ON BUY BACK AND CANCELLATION OF US BONDS. THE LD. CIT(A) OUGHT TO HAVE ADMITTED THE ABOVE ADD ITIONAL GROUND OF APPEAL IN VIEW OF THE POWERS VESTED UNDER SECTION 250. 64. GROUND NO.1 RELATES TO DISALLOWANCE UNDER SECTION 4 3B IN RESPECT OF SALES TAX COLLECTED UNDER UP GOVERNMENT SCHEME. THE LEARNED AR OF THE ASSESSEE ARGUED THAT THIS GROUND HAS BECOME INFRUCTUOUS AS T HE ASSESSING OFFICER HAS ALLOWED DEDUCTION IN ASSESSMENT YEAR 2002-03, BEING THE ASSESSMENT YEAR IN WHICH AGREEMENT FOR DEFERMENT OF SALES TAX HAS BEEN ENTERED WITH THE UP ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 35 GOVERNMENT. CONSIDERING THE CONTENTION OF LD AR OF THE ASSESSEE THIS GROUND OF APPEAL IS DISMISSED BEING INFRUCTUOUS. 65. GROUND NO.2 RELATES TO DISALLOWANCE UNDER SECTION 1 4A. WE HAVE SEEN THAT SIMILAR GROUND OF APPEAL WAS RAISED BY ASSESSEE IN ITA NO. 1041/M/2011 FOR AY 2001-02, WHICH WE HAVE ALREADY DECIDED IN FAVOUR OF ASSESSEE IN PARA (15) ABOVE. THUS, THIS GROUND OF APPEAL HAS BECOME INFRU CTUOUS AND IS DISMISSED. 66. GROUND NO. 3 RELATES TO DISALLOWANCE OF RETIREMENT BENEFIT PAYMENT OF RS.16,65,20,824/-. THE LEARNED AND AR OF THE ASSESS EE SUBMITTED THAT THE ASSESSING OFFICER HAS ALLOWED DEDUCTION OF RS.416,3 0,206/-UNDER SECTION 35DDA OF THE ACT IN EACH OF THE 5 YEARS BEGINNING F ROM ASSESSMENT YEAR 2001- 02 TO 2005-06, THUS THIS GROUND OF APPEAL IS INFRUC TUOUS. CONSIDERING THE CONTENTION OF LD AR OF THE ASSESSEE THIS GROUND OF APPEAL IS DISMISSED AS INFRUCTUOUS. 67. GROUND NO. 4 RELATES TO NON-ADMISSION OF ADDITIONAL GROUND OF APPEAL IN RESPECT OF CAPITAL RECEIPT ON BUY-BACK AND CANCELLATION OF US BONDS. WE HAVE NOTED THAT SIMILAR GROUND OF APPEAL IS RAISED BY ASSESSEE IN ITS APPEAL FOR ASSESSMENT YEAR 1999-2000, WHICH WE HAVE ALREADY RESTORED TO T HE FILE OF LD. CIT(A). THUS, KEEPING IN VIEW THE PRINCIPLE OF CONSISTENCY THIS G ROUND OF APPEAL IS ALSO RESTORED TO THE FILE OF LD. CIT(A) WITH SIMILAR DIR ECTIONS. HENCE, THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 68. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ITA NO. 3332/M/2011 FOR AY 2002-03 BY ASSESSEE . 69. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEA L; ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 36 1. DISALLOWANCE UNDER SECTION 43B IN RESPECT OF SAL ES TAX COLLECTED UNDER U.P STATE GOVERNMENT SCHEME THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N UPHOLDING THE DISALLOWANCE U/S 43B IN RESPECT OF SALES TAX COLLEC TED UNDER THE SCHEME NOTIFIED BY THE U.P. STATE GOVERNMENT. THE LEARNED CIT(A) OUGHT TO HAVE APPRECIATED ON THE BASIS OF THE SCHEME NOTIFIED BY THE U.P. STATE GOVERNMENT READ WITH CIR CULAR NO. 674 DATED 29.12.1993 THAT IT IS ALLOWABLE AS DEDUCTION. 2. DISALLOWANCE OF SOFTWARE LICENSE FEES THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPH OLDING THE DISALLOWANCE OF SOFTWARE LICENSE FEES AS CAPITAL EXPENDITURE. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THE FACT T HAT THE APPELLANT HAD PAID LICENSE FEES FOR USE OF SOFTWARE WHICH FACILITATES VARIOUS TRANSACTIONS PROCESSING AND ACCOUNTING THEREOF IN THE NORMAL COU RSE OF BUSINESS AND HENCE THE UNDERLYING EXPENDITURE REPRESENTED REVENUE OUTG O. 3. DISALLOWANCE OF RETIREMENT BENEFIT PAYMENTS THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N HOLDING THAT NORMAL RETIREMENT BENEFIT PAYMENTS MADE TO THE EMPLOYEES W HO HAD ACCEPTED THE VOLUNTARY RETIREMENT SCHEME WERE COVERED BY SECTION 35DDA. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE P AYMENT OF LAVE ENCASHMENT, GRATUITY AND PENSION TO THE EMPLOYEES U PON CESSATION OF EMPLOYMENT IS ALLOWABLE AS DEDUCTION UNDER SECTION 36 AND 37 OF THE ACT AND IT IS NOT COVERED BY SECTION 35DDA. 4 . THE DISALLOWANCE U/S 14A THE LD. CIT(A) HAS ERRED BOTH IN LAW AND ON FACTS I N CONCLUDING THAT DISALLOWANCE U/S 14A IS APPLICABLE WITHOUT VERIFICA TION OF THE DETAILS AND EVIDENCES SUBMITTED BY THE APPELLANT IN SUPPORT OF THE CLAIM THAT THE APPELLANT HAD NOT INCURRED ANY EXPENDITURE IN RELATION TO EXE MPT INCOME. ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 37 THE LD. CIT(A) OUGHT TO HAVE APPRECIATED ON THE BAS IS OF THE FACTS OF THE APPELLANT THAT IN VIEW OF THE DECISION OF THE BOMBA Y HIGH COURT IN CASE OF GODREJ & BOYCE MFG. CO. LTD., NO DISALLOWANCE CAN B E MADE U/S. 14A WHERE NO EXPENDITURE HAD BEEN INCURRED IN RELATION TO EXE MPT INCOME. 70. GROUND NO.1 RELATES TO DISALLOWANCE UNDER SECTION 43B IN RESPECT OF SALES TAX COLLECTED UNDER UP GOVERNMENT SCHEME. THE LEARNED A ND AR OF THE ASSESSEE ARGUED THAT THIS GROUND HAS BECOME INFRUCTUOUS AS T HE ASSESSING OFFICER HAS ALLOWED DEDUCTION IN ASSESSMENT YEAR 2003-04, BEING THE ASSESSMENT YEAR IN WHICH AGREEMENT FOR DEFERMENT OF SALES TAX HAS BEEN ENTERED WITH THE UP GOVERNMENT. CONSIDERING THE CONTENTION OF LD AR OF THE ASSESSEE THIS GROUND OF APPEAL IS DISMISSED BEING INFRUCTUOUS. 71. GROUND NO. 2 RELATES TO DISALLOWANCE OF SOFTWARE LI CENSE FEES OF RS.8,30,71,712/-. THE LD AR OF THE ASSESSEE SUBMITT ED THAT THE ASSESSING OFFICER HAS ALLOWED DEPRECIATION ON THE SOFTWARE LICENSE FE ES IN SUBSEQUENT YEARS, HENCE THIS GROUND OF APPEAL HAS BECOME INFRUCTUOUS. CONSI DERING THE CONTENTION OF LD AR OF THE ASSESSEE THIS GROUND OF APPEAL IS DISMISS ED BEING INFRUCTUOUS. 72. GROUND NO. 3 RELATES TO DISALLOWANCE OF RETIREMENT BENEFIT PAYMENT OF RS.11,69,33,000/-. THE LEARNED AR OF THE ASSESSEE S UBMITTED THAT THE ASSESSING OFFICER HAS ALLOWED DEDUCTION OF RS.29,23,32,000/-U NDER SECTION 35DDA OF THE ACT IN EACH OF THE 5 YEARS BEGINNING FROM ASSESSMEN T YEAR 2002-03 TO 2006-07, THUS THIS GROUND OF APPEAL IS INFRUCTUOUS. CONSIDER ING THE CONTENTION OF LD. AR OF THE ASSESSEE THIS GROUND OF APPEAL IS DISMISSED AS INFRUCTUOUS. 73. GROUND NO.4 RELATES TO DISALLOWANCE UNDER SECTION 1 4A. WE HAVE SEEN THAT SIMILAR GROUND OF APPEAL WAS RAISED BY ASSESSEE IN ITA NO. 636/M/2011 FOR AY ITA NO.3329 TO 3332/M/2011 & ORS. - M/S TATA MOTORS LTD. 38 2002-03, WHICH WE HAVE ALREADY DECIDED IN FAVOUR OF ASSESSEE IN PARA (7) ABOVE. THUS, THIS GROUND OF APPEAL HAS BECOME INFRU CTUOUS AND DISMISSED. 74. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST DAY OF AUGUST 2017. S SD/- SD/- (G.S. PANNU) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 31/08/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/