DCIT(LTU), New Delhi V. M/s. Sharda Motor Industriesf Ltd., New Delhi

ITA 3503/DEL/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6598 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 20-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 10-06-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R K KAPOOR
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : G NEW DELHI BEFORE SH. SUDHANSHU SRIVASTAVA , JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 3503 /DEL/ 2014 ASSESSMENT YEAR: 2010 - 11 DEPUTY COMMISSIONER OF INCOME TAX (LTU), NEW DELHI VS. M/S. SHARDA MOTOR INDUSTRIES LTD., D - 188, OKHLA INDUSTRIES AREA, PHASE - I, NEW DELHI PAN : AAACS6855J (APPELLANT) (RESPONDENT) APPELLANT BY SH. N.K. BANSAL, SR.DR RESPONDENT BY SH. R.K. KAPOOR, ADV. DATE OF HEARING 20.02.2017 DATE OF PRONOUNCEMENT 22.02.2017 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 16.04.2014 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - LTU, NEW DELHI, FOR ASSESSMENT YEAR 2010 - 11, RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION ON RS.43,64,204/ - , MADE BY ASSESSING OFFICER TREATING THE AMOUNT OF TECHNICAL AND CONSULTATION FEE PAID BY ASSES SEE AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE. 2. THE APPELLANT CRAVES LEAVE TO, ADD TO, ALTER, AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE TIME OF HEARING. 2 ITA NO. 3503/DEL/2014 AY: 2010 - 11 2. AT THE OUTSET, THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE SOLE ISSUE IN DISPUTE IS COVERED BY THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE IN ASSESSMENT YEAR 2009 - 10 AND ACCORDINGLY HE PRAYED THAT THE ORDER OF THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) ON ISSUE IN DISPUTE MAY BE UPHELD. 3. LEARNED SR. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED ON THE ORDER OF THE ASSESSING OFFICER. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECOR D. THE ISSUE IN DISPUTE IS WHETHER THE TECHNICAL CONSULTATION FEE OF RS.43,64,204/ - PAID BY THE ASSESSEE TO M/S. MAHINDRA & MAHINDRA ( IN SHORT M & M ) IS R E V E N U E IN NATURE OR NOT. THE ASSESSEE COMPANY ENTERED INTO TRIPARTITE AGREEMENT WITH M/S. M & M AND M/S. SAMLIP (A KOREAN COMPANY) IN 1998 FOR DESIGNING, DEVELOPMENT AND SUPPLY OF PRODUCTION TOOLING FOR MANUFACTURING OF VARIOUS AUTO PARTS INCLUDING THE IFS SUSPENSION SYSTEM. IT WAS SUBMITTED THAT IN TERMS OF TRIPARTITE AGREEMENT, SUCH PROTOTYPES TOOLING BECAME S O L E AND EXCLUSIVE PROPERTY OF M/S. M & M AND THE ASSESSEE GET RIGHT TO USE SUCH PROTOTYPE FOR MANUFACTURING OF IFS SUSPENSION SYSTEM FOR SCORPIO CAR VEHICLE AND AFTER EXPIRY OF THE AGREEMENT, THE SAME WAS TO BE DELIVERED BACK TO M/S. M & M BY THE APPELLATE COMPANY. ACCORDINGLY, IT WAS CLAIMED AS AN EXPENDITURE IN THE NATURE OF REVENUE AS THE ASSESSEE HAD ONLY RIGHT TO USE FOR THE PURPOSE OF MANUFACTURING DURING THE TENURE OF THE AGREEMENT. FROM THE IMPUGNED ORDER, WE FIND THAT THE LEARNED COMMISSIO NER OF INCOME TAX (APPEALS) HAS ALLOWED RELIEF TO THE ASSESSEE RELYING ON H I S OWN ORDER FOR THE ASSESSMENT YEAR 2009 - 10. ON PERUSAL OF THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2009 - 10 IN ITA NO. 2588/DEL/2013, WE FIND THAT IDENTICAL ISSUE WAS INVOLVED , W H I C H E M A N A T E D FROM THE SAME AGREEMENT WHICH IS IN CONSIDERATION IN THE CURRENT YEAR BEFORE US. THE REL EVANT PARA OF THE ORDER OF THE T RIBUNAL IS EXTRACTED BELOW: 3 ITA NO. 3503/DEL/2014 AY: 2010 - 11 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS), WE F IND THAT THE ASSESSEE COMPANY, BEING AUTO PART MANUFACTURER FOR M/S. MAHINDRA & MAHINDRA IS SOLELY DEPENDENT UPON THE BUSINESS GIVEN TO IT BY M/S. MAHINDRA & MAHINDRA AND IN VIEW OF THE REQUIRED MODERNIZATION IN THE IFS SYSTEM, THE SAID M/S. MAHINDRA & MAH INDRA MADE PAYMENT TO THE KOREAN COMPANY, M/S. SAMLIP FOR DEVELOPING THE PROTOTYPE TOOLING AND ALLOWED THE ASSESSEE TO USE THE SAME FOR MANUFACTURING THE IFS COMPONENTS AS PER THE REQUIREMENT OF M/S. MAHINDRA & MAHINDRA ON PAYMENT OF TECHNICAL FEE. CLEARLY IN SUCH A CASE, M/S. MAHINDRA & MAHINDRA GOT THE OWNERSHIP OVER THE ASSET AND THE ASSESSEE WAS GRANTED LIMITED RIGHTS BY MAHINDRA & MAHINDRA TO USE THE SAME TO MANUFACTURE IFS SYSTEM, IN ACCORDANCE WITH THEIR REQUIREMENT, ON PAYMENT OF TECHNICAL FEE . IN VIEW OF THE SAME, THE DECISION OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IN TREATING THE PAYMENT AS HELD TO BE REVENUE IN NATURE IS CORRECT ONE. EVEN OTHERWISE, THE ASSESSEE HAS BEEN MAKING SUCH PAYMENT FROM ASSESSMENT YEAR 1999 - 2000 ONWARDS, WHI CH HAVE BEEN ACCEPTED AS REVENUE IN NATURE BY THE DEPARTMENT IN THE EARLIER YEAR. ACCORDINGLY, WE ARE OF THE VIEW THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A WELL REASONS ORDER, WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE , WE UPHOLD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE IN DISPUTE AND DECIDE THE ISSUE IN DISPUTE AGAINST THE REVENUE. 5. RESPECTFULLY FOLLOWING THE FINDING OF THE TRIBUNAL (SUPRA), WE UPHOLD THE ORDER OF THE LEARNED COMM ISSIONER OF INCOME TAX (APPEALS) ON THE ISSUE IN DISPU TE. ACCORDINGLY, GROUND OF THE R EVENUE IS DISMISSED. 6. IN THE RESULT , APPEAL OF REVENUE IS DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 2 2 N D FEBRUARY , 201 7 . S D / - S D / - ( SUDHANSHU SRIVASTAVA ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 2 2 N D FEBRUARY , 201 7 . RK / - 4 ITA NO. 3503/DEL/2014 AY: 2010 - 11 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI