Addl. CIT, New Delhi V. M/s. Mahle Filter Systems (India) Ltd., New Delhi

ITA 3572/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8448 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2008-2009
• Appeal Filed On: 05-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reassessment proceedings
• Section: 143(3); 195; 80IA; 80IC; 80IC; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: E, NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER ITA NO.3572/DEL/2017 ASSESSMENT YEAR: 2008-09 ADDL. CIT, SPECIAL RANGE-6, C.R. BUILDING, NEW DELHI VS. M/S. MAHLE FILTER SYSTEMS (INDIA) LTD., 1, SRI AURBINDO MARG, NEW DELHI PAN :AAACP5890Q (APPELLANT) (RESPONDENT) ORDER PER O.P. KANT, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER DATED 31.03.2017 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-6, DELHI [IN SHORT LEARNED CI T(A)] FOR ASSESSMENT YEAR 2008-09, RAISING FOLLOWING GROUNDS: 1. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN DELETING THE DISALLOWANCE O F RS. 6,16,41,506/- U/S 80IC OF THE INCOME TAX ACT, 1961 (THE ACT) BY IGNORING THE FACT THAT THE TRANSACTION WAS SHAM IN NATURE AND THE PURPOSE OF FOLLOWING THE CIRCUITOUS ROUTE OF FIRST MERGING M/S MAHLE FILTER SYSTEMS (INDIA) LTD., WITH M/S PUROLAT OR INDIA LTD. APPELLANT BY MS. RAKHI VIMAL, SR.DR RESPONDENT BY SHRI NEERAJ JAIN, ADV.; SHRI ANSHUL SACHAR, CA; AND SHRI KARAN JAIN, CA DATE OF HEARING 08.01.2020 DATE OF PRONOUNCEMENT 15.01.2020 2 ITA NO.3572/DEL/2017 AND THEN CHANGING THE NAME OF THE COMPANY TO M/S MA HLE FILTER SYSTEMS (INDIA) LTD., WAS TO GET THE BENEFIT OF DED UCTION U/S 801C OF THE ACT? 2. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN ALLOWING DEDUCTION U/S 80IC OF THE ACT TO THE ASSESSEE BY IGNORING A FACT THAT USE OF SUBSTANTIAL ASSETS AND MANPOWER OF AMALGAMATING UNDERTAKING (POONA UNIT) B Y THE AMALGAMATED (PARWANOO UNIT) CONSTITUTED RECONSTRUCT ION OF THE BUSINESS U/S 80 IC (4) OF THE ACT ? 3. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) IS JUSTIFIED IN ALLOWING DEDUCTION U/S 8 0IC OF THE ACT TO THE ASSESSEE BY IGNORING RATIO DECIDENDI OF APEX CO URT IN CASE M/S TEXTILE MACHINERY CORPORATION LIMITED VS CIT (1 997) 107 ITR 195 WHEREIN IT WAS HELD THAT TRANSFER AND USE OF SU BSTANTIAL ASSETS AND MANPOWER WILL AMOUNT TO RECONSTRUCTION O F THE BUSINESS? 4. WHETHER ON FACTS AND IN CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) IS LEGALLY JUSTIFIED IN ALLOWING RELIEF TO THE ASSE SSEE ON THE BASIS OF ITS EARLIER ORDER IN THE ASSESSEES OWN CASE DESPIT E THE FACT THAT PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE TO INCO ME TAX PROCEEDINGS AS EACH ASSESSMENT YEAR IS SEPARATE YEA R? 5. THAT THE APPELLANT CRAVES TO ADD, ALTER, AMEND O R FOREGO ANY GROUND(S) OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING OF APPEAL. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL INCO ME RS.3,78,48,953/-, AFTER CLAIMING DEDUCTION OF RS.6, 16,41,506/- UNDER CHAPTER VIA OF THE INCOME-TAX ACT, 1961 (FOR S HORT THE ACT). THE CASE WAS SELECTED FOR SCRUTINY AND ASSES SMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED AT TOTAL IN COME OF RS.10,13,65,643/- VIDE ORDER DATED 13.12.2019. SUBS EQUENTLY, THE CASE WAS RE-OPENED UNDER SECTION 147 OF THE ACT AFTER RECORDING REASONS BY THE ASSESSING OFFICER THAT IN VIEW OF THE DEDUCTION DISALLOWED UNDER 80IC IN ASSESSMENT YEAR 2009-10, DEDUCTION IN CURRENT YEAR WAS ALSO NOT ALLOWED. IN THE 3 ITA NO.3572/DEL/2017 REASSESSMENT PROCEEDINGS ORDER DATED 14.03.2014, TH E ASSESSING OFFICER DECLINED THE CLAIM OF DEDUCTION UNDER SECTI ON 80IC OF THE ACT. ON FURTHER APPEAL THE LD. CIT(A) VIDE IMPUGNED ORDER, ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING THE FINDING OF THE FIRST APPELLATE AUTHORITY IN ASSESSMENT YEAR 2009-10. BEI NG AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US, THE LD. DR SUBMITTED THAT ENTITY M/S. M AHLE FILTERS SYSTEMS (INDIA) LTD. HAS MERGED WITH M/S. P UROLATOR INDIA LTD. AND THEREAFTER NAME OF THE MERGED ENTITY WAS C HANGED TO M/S. MAHLE FILTERS SYSTEMS (INDIA) LTD. TO GET THE BENEFIT OF DEDUCTION UNDER SECTIN 80IC OF THE ACT AGAINST THE INTENTION OF LAW. 4. ON THE OTHER HAND, LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT THE TRIBUNAL IN ITA NO. 314/DEL/2015 FOR ASSESSMENT YEAR 2009-10 HAS UPHELD THE FINDING OF T HE LEARNED CIT(A) AND ALLOWED THE DEDUCTION UNDER SECTION 80IC OF THE ACT TO THE ASSESSEE. LEARNED COUNSEL FURTHER SUBMITTED THA T THE ISSUE IN DISPUTE IS SQUARELY COVERED IN FAVOUR OF THE ASSESS EE AND THE ORDER OF THE LEARNED CIT(A) MIGHT BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARN ED CIT(A) HAS DELETED THE ADDITIONS BY OBSERVING AS UNDER: SINCE, THE ACTION U/S 147/143(3) FOR AY 2008-09 WAS TAKEN ON THE BASIS OF REJECTION OF THE APPELLANTS CLAIM BY THE AO FOR AY 2009-10, CONSEQUENT TO ITS SUBSEQUENT DELETION BY T HE CIT(A) AND RESTORATION OF SAID EXEMPTION, THE ADDITION MADE FO R AY 2008-09 IS HEREBY, DELETED. THESE GROUNDS OF APPEAL ARE THEREF ORE, ALLOWED. 6. THUS, THERE IS NO DISPUTE THAT THE LEARNED CIT(A) HAS FOLLOWED THE FINDING OF THE LEARNED FIRST APPELLATE AUTHORITY IN 4 ITA NO.3572/DEL/2017 ASSESSMENT YEAR 2009-10. THE TRIBUNAL IN ITA NO. 314/DEL./2015 FOR ASSESSMENT YEAR 2009-10, DISMISSE D THE APPEAL OF THE REVENUE OBSERVING AS UNDER: 21. FIRST GROUND RAISED BY THE ASSESSEE RELATES TO THE DELETION OF DISALLOWANCE OF RS.2.96 CRORES U/S 80IC OF THE ACT. 22. ELEMENTS OF GROUD NO. 1 AND GROUND NO. 4 HAVE T HE SAME ISSUE. 23. WE ARE OF THE CONSIDERED OPINION THAT THE ASSES SING OFFICER HAS NOT APPRECIATED THE UNDERLYING FACTS IN ISSUE IN TR UE PERSPECTIVE. CORRECT FACTS ARE THAT THE MANUFACTURING UNIT AT PA RWANOO, HIMACHAL PRADESH WAS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT. THE SAID UNDERTAKING BELONGS TO M/S PUROLOTOR INDIA LTD. THE ASSESSING OFFICER PROCEEDED BY WRONG ASSUMPTION OF FACTS THAT M/S PUROLATOR INDIA LTD GOT AMALGAMATED WITH M/S MAHLE FILTER SYS TEMS [INDIA] LTD WHEREAS THE FACT OF THE MATTER IS THAT MAHLE FI LTER SYSTEMS [INDIA] LTD WAS THE TRANSFEROR COMPANY AND AMALGAMA TED WITH M/S PUROLATOR INDIA LTD WHICH WAS THE TRANSFEREE COMPAN Y BY ORDER OF THE HON'BLE HIGH COURT OF DELHI IN THE MATTER OF SC HEME OF AMALGAMATION OF COMPANY PETITION NO. 53/2008 CONNEC TED WITH COMPANY APPLICATION NO. 172/2007. SUBSEQUENTLY, THE NAME OF M/S PUROLATOR INDIA LTD WAS CHANGED TO M/S MAHLE FILTER SYSTEMS [INDIA] LTD. 24. ACCORDING TO THE ID. DR, THIS IS NOTHING BUT A SHAM TRANSACTION TO TAKE THE BENEFIT OF SECTION 80IC OF THE ACT. WE DO NOT FIND ANY FORCE IN THIS CONTENTION OF THE ID. DR. THE SCHEME OF AMA LGAMATION HAS BEEN APPROVED BY THE HON'BLE HIGH COURT OF DELHI AN D, THEREFORE, BY NO STRETCH OF IMAGINATION, THE TRANSACTION OF AMALG AMATION CAN BE CONSIDERED AS A COLOURABLE DEVICE OR A SHAM TRANSAC TION. THERE IS NO DISPUTE THAT THE MANUFACTURING UNIT AT PARWANOO WAS ELIGIBLE FOR DEDUCTION U/S 80IC OF THE ACT THE SAME ALWAYS BELON GED TO THE ASSESSEE, PREVIOUSLY KNOWN AS M/S PUROLATOR INDIA L TD.] 25. PROVISIONS OF SECTION 80IA(12) OF THE ACT HAVE BEEN WRONGLY APPLIED BY THE ASSESSING OFFICER BECAUSE THE SAID P ROVISION IS APPLICABLE WHERE ANY UNDERTAKING WHICH IS ENTITLED TO THE DEDUCTION U/S 80IA IS TRANSFERRED BEFORE EXPIRY OF THE PERIOD SPECIFIED THEREIN TO ANOTHER INDIA COMPANY IN A SCHEME OF AMALGAMATIO N OR DEMERGER, WHEREAS THE FACTS OF THE CASE IN HAND SHOW THAT THE MANUFACTURING UNIT AT PARWANOO, HP CONTINUED TO BELONG TO THE ASS ESSEE AND IT IS ONLY M/S MAHLE FILTER SYSTEMS [INDIA] LTD WHICH AMA LGAMATED WITH THE ASSESSEE M/S PUROLATOR INDIA LTD AND ONLY THE N AME HAS BEEN CHANGED TO M/S MAHLE FILTER SYSTEMS [INDIA] LTD. AC CORDINGLY, EVEN CONSEQUENT TO THE AMALGAMATION, THE UNIT AT PARWANO O WAS STILL OWNED AND MANAGED BY THE ASSESSEE IN THE SAME MANNE R AS IT WAS MANAGED PRIOR TO AMALGAMATION. CONSIDERING THE CORR ECT FACTS IN TRUE PERSPECTIVE, WE DO NOT FIND ANY ERROR OR INFIRMITY IN THE FINDINGS OF 5 ITA NO.3572/DEL/2017 THE CIT(A). GROUND NOS. 1 AND 4 RAISED BY THE REVEN UE STAND DISMISSED. 7. SINCE THE COORDINATE BENCH OF THE TRIBUNAL HAS ALR EADY DISMISSED THE APPEAL OF THE REVENUE ON IDENTICAL IS SUE IN AY 2009-10, FOLLOWING THE SAME, WE ALLOW THE CLAIM OF DEDUCTION UNDER SECTION 80IC TO THE ASSESSEE IN THE YEAR UNDE R CONSIDERATION AND UPHOLD THE FINDING OF THE LD. CIT (A) ON THE ISSUE IN DISPUTE. THE GROUNDS RAISED BY THE REVENUE ARE A CCORDINGLY DISMISSED. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 TH JANUARY, 2020. SD/- SD/- (AMIT SHUKLA) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 15 TH JANUARY, 2020. RK/-(D.T.D.) COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI