L & T CONSTRUCTION EQUIPMENT LTD, MUMBAI V. JT CIT (OSD) 2(2), MUMBAI

ITA 3802/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 1335 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 27-05-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Depreciation; Revenue expenditure
• Section: 43B; 143(3); 37(1)

Judgement Text

INCOME-TAX APPELLATE TRIBUNAL A BENC H MUMBAI , , BEFORE S/SHJOGINDER SINGH,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER ./I.T.A./3802/MUM/2014 , /ASSESSMENT YEAR: 2008-09 L&T CONSTRUCTION EQUIPMENT LTD. (FORMERLY L&T KOMATSU LTD.) (TAXATION DEPARTMENT), L&T HOUSE, N.M. MARG,BALLARD ESTATE,MUMBAI-1. PAN:AAACL 4175 C VS. JCIT-(OSD)-2(2) AAYAKAR BHAVAN, M.K. ROAD MUMBAI-400 020. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: SHRI VIJAY MEHTA / DATE OF HEARING: 11.04.2017 / DATE OF PRONOUNCEMENT: 11.04.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 20.03.2014 OF CIT(A)-5, MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY,CARRYING ON BUSINES S OF MANUFACTURING OF CONSTRUCTION EQUIPMENT,FILED ITS RETURN OF INCOME ON 23.09.2008, OFFERING AN INCOME OF RS.205.81 CRORES. THE ASSESSING OFFICER (AO)COMPLETED THE ASSESSMENT ON 13.12.2011 U/S. 143(3) OF THE ACT, DETERMINING THE INCOME OF THE ASSESSEE AT RS.214.84 CRORES. 2. FIRST GROUND OF APPEAL IS ABOUT ADJUSTMENT TO BE M ADE ON ACCOUNT OF CENVAT CREDIT TO THE VALUE OF CLOSING STOCK U/S.145A OF THE ACT. R EPRESENTATIVES OF BOTH SIDES AGREED THAT IDENTICAL ISSUE HAD ARISEN IN THE APPEAL DECIDED BY TRIBUNAL FOR AY 2005-06 (ITA/ 3801/ MUM/2014, DT.9.3.2017).THE AUTHORISED REPRESENTATIV E FURTHER STATED THAT THE ASSESSEE HAD MADE PAYMENT BEFORE DUE DATE OF FILING OF RETURN, T HAT THE PROVISIONS OF SECTION 43B OF THE ACT WOULD BE APPLICABLE FOR DECIDING THE ISSUE. HE REFERRED TO THE CASE OF NCR CORPORATION INDIA (P) LTD. (293CTR225). WE WOULD LIKE TO REPROD UCE THE ORDER OF THE TRIBUNAL FOR THE AY 2005-06 (SUPRA) AND IT READS AS UNDER :- 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE (AR) ARGUED THAT ASSESSEE WAS FOLLOWING EXCLUSIVE METHOD WITH REGARD TO CENVAT CREDIT,THAT THE AO AND THE FAA HAD TAKEN A WRONG FIGURE OF RS.16.88 CRORES FOR CENVAT CREDIT PURPOSES,THAT THE ACTUAL FIGURE WAS RS.23.22 CRORES, THAT THE ASSESSEE HAD P AID EXCISE DUTIES ON VARIOUS DATES.HE REFERRED TO THE PAGE NO.1 TO 12 OF THE PAPER BOOK EVIDENCING THE PAYMENT OF EXCISE DUTY.HE FURTHER STATED THAT MATTER NEEDS VERIFICATION AT TH E END OF DEPARTMENTAL AUTHORITIES.THE DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE ISSUE TO THE DISCRETION OF THE BENCH. 3802/M/14(08-09) L&T CONSTRUCTION EQUIPMENT LTD. 2 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL BEFORE US.WE FIND THAT THE FAA HAS HELD THAT THERE WAS FALLACY IN THE ARGUMENT OF REVENUE NEUTRALITY, THAT HE HAD REDUCED THE ADDITION FROM RS.10.26 CRORES TO RS. 3. 26 CRORES ,THAT THE FACT OF PAYMENT OF EXCISE DUTY HAS NOT BEEN CONSIDERED BY THE AO/FAA.W E ARE OF THE OPINION THAT CONSIDERING THE PECULIAR FACTS OF THE CASE,THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION,IN THE INTEREST OF JUSTICE.HE IS DIREC TED TO VERIFY THE FIGURE AS TO WHETHER THE FIGURE SHOULD BE TAKEN AT RS.16.88 CRORES OR RS.23. 33CRORES IN THE TABLE APPEARING AT PAGE - 15 OF THE ORDER OF THE FAA.HE IS FURTHER DIRECTED T O AFFORD A REASONABLE OPPORTUNITY TO THE ASSESSEE,WHO WOULD PLACE ALL THE NECESSARY AND RELE VANT DOCUMENTS BEFORE THE AO. EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSES SEE,IN PART. RESPECTFULLY FOLLOWING THE ABOVE WE ARE RESTORING B ACK THE ISSUE TO FILE OF AO FOR FRESH ADJUDICATION,IN THE INTEREST OF JUSTICE,WITH A SIMI LAR DIRECTION GIVEN FOR AY.2005-06.HE WOULD DECIDE THE ISSUE AFTER AFFORDING A REASONABLE OPPOR TUNITY OF HEARING TO THE ASSESSEE AND AFTER CONSIDERING THE JUDGMENT OF NCR CORPORATION INDIA ( P) LTD. (SUPRA).FIRST GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE ,IN PART. 3. SECOND GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE U/S.35(1)(I) OF THE ACT.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESS EE HAD DEBITED AN AMOUNT OF RS.54.87 LAKHS ONWARDS FOR SCIENTIFIC RESEARCH EXPENDITURE H E DIRECTED ASSESSEE TO PROVIDE NECESSARY EVIDENCE IN THAT REGARD.IN ITS LETTER DT.12.12.2011 THE ASSESSEE STATED THAT IT HAD INCURRED AN EXPENDITURE OF RS.54,87,567/- TOWARDS R&D EXPENSES, THAT SAME WAS APPEARING IN THE AUDIT REPORT.DETAILS OF SPECIFIC AREA IN WHICH R&D ACTIVI TY WAS CARRIED OUT WAS FURNISHED ALONG WITH THE LETTER. AFTER CONSIDERING SUBMISSION OF AS SESSEE,THE AO HELD THAT THE ACTIVITIES OF THE ASSESSEE DID NOT QUALIFY FOR SCIENTIFIC RESEARCH, THAT IT HAD FAILED TO BRING ON RECORD AS TO WHAT RESEARCH IT WAS CARRYING ON FOR THE PURPOSE OF BUSI NESS. ACCORDINGLY, HE DISALLOWED THE CLAIM MADE BY THE ASSESSEE U/S.35(1)(I). HE CAPITALIZED THE EXPENDITURE AND ALLOWED DEPRECIATION @ 25%. 3.1. AGGRIEVED BY ORDER OF THE AO, ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA) WHO CONFIRMED THE ORDER OF THE AO H OLDING THAT THE ASSESSEE WAS NOT IN A POSITION TO PROVE THAT IT HAD CARRIED OUT RESEARCH WORK FOR ITS BUSINESS. 3.2. DURING THE COURSE OF HEARING BEFORE US,THE AR STATE D THAT SIMILAR EXPENDITURE WERE ALLOWED BY AO IN THE SUBSEQUENT AY.S AND THE EARLIE R AY.S. HE REFERRED TO THE ORDERS OF AY.S 2009-10 TO 2013-14 AND STATED THAT IN ALL THES E YEARS THE AO HAD ALLOWED THE R&D EXPENDITURE,THAT IN THE YEAR 2009-10 THE DRP ACCEP TED THE CLAIM MADE BY THE ASSESSEE AND THE DEPARTMENT HAD NOT PREFERRED ANY APPEAL IN THA T REGARD.ALTERNATIVELY, IT WAS ARGUED THAT EXPENDITURE SHOULD BE ALLOWED U/S. 37(1) OF THE ACT .THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE AO. 3802/M/14(08-09) L&T CONSTRUCTION EQUIPMENT LTD. 3 3.2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL BEFORE US.WE FIND THAT IN THE SUBSEQUENT AND EARLIER YEARS,WHILE COMPUTING AS SESSMENT U/S.143(3)OF THE ACT THE AO.S HADD NOT MADE SUCH A DISALLOWANCE, THAT DRP IN ITS DIRECTION DATED 31.12.2013 HAD HELD THAT THE DETAILS OF RESEARCH CARRIED OUT BY THE ASSESSEE WERE REPORTED IN DETAIL IN ANNEX -5 TO THE AUDIT REPORT,THAT SAME WERE MAINLY IN THE NATURE OF PRODUCT AND PROCESS ENHANCEMENT THROUGH SCIENTIFIC RESEARCH.,WE FIND THAT THE ASSESSEE HAD FILED AUDIT REPORT FOR THE YEAR UNDER APPEAL AND THE DETAILS OF RESEARCH CARRIED OUT BY IT BEFOR E THE AO DURING THE ASSESSMENT PROCEEDINGS. THEREFORE, IN OUR OPINION THERE WAS NO JUSTIFICATIO N FOR MAKING THE DISALLOWANCE. OTHERWISE ALSO,THE EXPENDITURE WOULD BE ALLOWABLE AS REVENUE EXPENDITURE, AS THE AO HAD NOT DOUBTED THE GENUINENESS OF INCURRING THE EXPENDITURE.HOWEVE R,CONSIDERING THE FACT THAT IN THE SUBSEQUENT AND EARLIER YEARS THE AO HIMSELF HAD ALL OWED THE EXPENDITURE,WE ARE OF THE OPINION THAT GROUND NO.2 SHOULD BE DECIDED IN FAVOU R OF THE ASSESSEE. AS A RESULT APPEAL FILED BY ASSESSEE STANDS PARTLY ALLOWED. . ORDER PRONOUNCED I N THE OPEN COURT ON 11 TH ,APRIL,2017. 11 , 2017 SD/- SD/- /JOGINDER SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /MUMBAI; /DATED : 11.04.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.