The ACIT, Circle-1, RAJKOT-GUJARAT V. M/s. Atul Auto Ltd., RAJKOT-GUJARAT

ITA 365/RJT/2012

• Counselvise Citation: 36524914 RSA 2012
• Duration Of Justice: 1 year(s) 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-07-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 11-07-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 01-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AVINASH KUMAR DR S
• Assessee Lawyers: P M MAHARISHI CA S Y
• Keywords: Capital expenditure
• Section: 37; 6

Judgement Text

Y I , IN THE INCOME TAX APPELLATE TRIBU N AL; RAJKOT BENCH, RAJKOT. BEFORE SHRI T. K. SHARMA, JM AND SHRI D. K. SRIVASTAVA, AM IT A NO . 365 / RJT/20 12 / ASSESSMENT YEAR : 2009 - 10 ACIT, CIRCLE - 1, RAJKOT ( E / APPELLANT) VS. M/S. ATUL AUTO LTD., PLOT NO.1 TO 4, SURVEY NO.86, NR. MICROWAVE TOWER, NH 8 - B, SHAPAR VERAVAL, RAJKOT PAN : AACCA 3018 M RCE / RESPONDENT 6 S / REVENUE BY SHRI AVINASH KUMAR, DR S / ASSESSEE BY SHRI P M MAHARISHI, CA S Y /DATE OF HEARING 1 1 . 0 7 .2013 S Y / DATE OF PRONOUNCEMENT 12 . 07 . 2013 / ORDER . . [ , SE / T. K. SHARMA, J. M . : THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER DATED 2 8 . 0 3 .201 2 OF LD CIT(A) - I, RAJKOT FOR THE ASSESSMENT YEAR 200 9 - 1 0. THE ONLY GROUND RAISED IN THE APPEAL IS AS UNDER: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT(A) ERRED IN DELETING THE ADDITION OF RS.19,00,934/ - ON ACCOUNT OF EXPENDI TURE FOR SCIENTIFIC SEARCH. 2. AT THE OUTSET, ON BEHALF OF ASSESSEE SHRI P. M. MAHARISH I , CA APPEARED AND POINTED OUT THAT THE CONTROVERSY INVOLVED IN THE AFORESAID GROUND OF APPEAL IS SQUARELY COVERED BY THE DECISION OF ITAT, RAJKOT BENCH IN ITA NO. 9 21/RJT/2010 FOR THE ASSESSMENT YEAR 2007 - 08 IN THE ASSESSEES OWN CASE. THE RELEVANT DISCUSSION IS CONTAINED IN PARAGRAPH 8 AND 9 OF THE ORDER WHICH READS AS UNDER: - 8. WE HAVE HEARD BOTH THE PARTIES. SECTION 35 DEALS WITH EXPENDITURE ON SCIENTIFIC RESE ARCH. ACCORDING TO SEC.35(1)(I), ANY EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS OF AN ASSESSEE IS ELIGIBLE FOR DEDUCTION. ACCORDING TO SECTION 35(1)(IV), ANY EXPENDITURE OF CAPITAL NATURE ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS CARRIED ON BY THE ASSESSEE IS ALSO ELIGIBLE FOR DEDUCTION SUBJECT TO THE PROVISIONS OF SUB - SECTION (2) OF SECTION 35. SECTION 35 CAN BE PRESSED INTO SERVICE ONLY WHEN IT IS ESTABLISHED THAT THE EXPENDITURE CLAIMED AS DEDUCTION HAS 365 - RJT - 2012 - ATUL AUTO LTD 2 BEEN INCURRED ON SCIENTIFIC RESEARCH. IN THE CASE BEFORE US, THE DEPARTMENT HAS TAKEN THE VIEW THAT PUNE OFFICE OF THE ASSESSEE IS ONLY AN ADMINISTRATIVE UNIT. ACCORDING TO THE REVENUE, THE NATURE OF EXPENDITURE INC URRED IN RESPECT OF PUNE OFFICE IS SUCH THAT IT COULD NOT BE SAID TO BE EXPENDITURE ON SCIENTIFIC RESEARCH. THE LD. CIT (A) HAS HOWEVER ACCEPTED THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S.35 WITHOUT PROPER SCRUTINY AND EXAMINATION TO FIND OUT AS TO WHETHE R PUNE OFFICE OF THE ASSESSEE WAS AN OFFICE ENGAGED IN SCIENTIFIC RESEARCH OR AS TO WHETHER THE EXPENDITURE INCURRED BY THE ASSESSEE FOR PUNE OFFICE COULD BE SAID TO BE EXPENDITURE LAID OUT OR EXPENDED ON SCIENTIFIC RESEARCH RELATED TO THE BUSINESS OF THE ASSESSEE. IN THIS VIEW OF THE MATTER, THE ORDER OF THE CIT (A) CANNOT BE SUSTAINED. SIMILARLY, THE LD. CIT (A) HAS ALSO COME TO A CONCLUSION THAT THE IMPUGNED EXPENDITURE WAS ELIGIBLE FOR DEDUCTION U/S.37 OF THE INCOME - TAX ACT WITHOUT RECORDING ANY FINDING AS TO WHETHER THE IMPUGNED EXPENSES WERE IN REVENUE FIELD OR CAPITAL FIELD. SECTION 37 ALLOWS DEDUCTION OF THOSE EXPENSES ONLY WHICH ARE NOT IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL NATURE AND WHICH ARE OTHERWISE NOT IN THE NATURE OF EXPENDITURE D ESCRIBED IN SECTIONS 30 TO 36. IN THE ABSENCE OF PROPER FINDING WITH REGARD TO THE SATISFACTION OF THE CONDITIONS LAID DOWN IN SECTION 37 OF THE INCOME - TAX ACT, THE ORDER OF THE CIT(A) REGARDING ALLOWABILITY OF IMPUGNED EXPENDITURE AS DEDUCTION U/S 37 CANN OT BE SUSTAINED. 9. IN VIEW OF THE FOREGOING, THE ORDER OF THE CIT (A) DESERVES TO BE VACATED AND IS ACCORDINGLY VACATED. THE MATTER IS RESTORED TO HIS FILE FOR A FRESH DECISION IN CONFORMITY WITH THE PROVISIONS OF SECTIONS 35 AND 37 OF THE INCOME - TAX ACT AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO BOTH THE PARTIES. GROUND NOS.1 AND 2 TAKEN BY THE DEPARTMENT ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 3. THE LD COUNSEL OF THE ASSESSEE SUBMITTED THAT , FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08 (ORDER DTD 28.09.2012) , THE MATTER BE RESTORED TO THE FILE OF THE LD CIT(A) FOR A FRESH DECISION IN CONFORMITY WITH THE PROVISIONS OF SECTIONS 35 AND 37 OF THE INCOME - TAX ACT, 1961. 4. THE LD DEPARTMENTAL R EPRESENTATIVE COULD NOT CONTROVERT THE AFORESAID SUBMISSION MADE BY THE LD COUNSEL OF THE ASSESSEE. 5. WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND THE ORDER OF THIS TRIBUNAL AS REFERRED BY LD COUNSEL OF THE ASSESSEE. ADMITTEDLY , IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2007 - 08, THE IDENTICAL ISSUE INVOLVED IS RESTORED TO THE FILE OF THE LD CIT(A). WE, THEREFORE, FOLLOWING THE DECISION OF THE TRIBUNAL ORDER DATED 28.09.2012 FOR ASSESSMENT YEAR 2007 - 08 IN ASSESSEES OWN CASE (S UPRA) , WE RESTORE THE CONTROVERSY INVOLVED IN TO THE FILE OF LD CIT(A) WITH THE DIRECTION THAT HE WILL TAKE A FRESH DECISION IN CONFORMITY WITH 365 - RJT - 2012 - ATUL AUTO LTD 3 THE PROVISIONS OF SECTIONS 35 AND 37 OF THE INCOME - TAX ACT AFTER GIVING REASONABLE OPPORTUNITY OF HEARING TO BOT H THE PARTIES. 6 . IN THE RESULT, THE APPEAL OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED HEREINABOVE. SD/ - SD/ - ( D. K. SRIVASTAVA ) (T. K. SHARMA) FOR / ACCOUNTANT MEMBER 6 / JUDICIAL MEMBER / ORDER DATE 12 . 0 7 .2013 . /RAJKOT *B T B PSJO O / COPY OF ORDER FOR WARDED TO: - 1 . E / APPELLANT - ACIT, CIRCLE - 1, RAJKOT 2 . RCE / RESPONDENT - M/S. ATUL AUTO LTD., SHAPAR VERAVAL, RAJKOT 3 . I / CONCERNED CIT - I, RAJKOT 4 . - / CIT (A) - I , RAJKOT 5 . RI , Y I , / DR, ITAT, RAJKOT 6 . / GUARD FILE. / BY ORDER , TRUE COPY PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, RAJKOT