Technico Agri Sciences Ltd., Chandigarh V. DCIT, New Delhi

ITA 3835/DEL/2016

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8047 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUSTAINED LEARNED CITA US C
• Keywords: Depreciation; Additional evidence; Revenue expenditure; Capital expenditure; Set aside
• Section: 271(1)(c); 37(1); 2

Judgement Text

~ 1 ~ IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E NEW DELHI BEFORE SHRI H. S. SIDHU, JUDICIAL MEMBER SHRI T. S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3832 TO 3835/DEL/2016 ASSESSMENT YEARS:2003-04 TO 2006-07 M/S TECHNICO AGRI SCIENCES LTD SCO 835, 1 ST & 2 ND FLOOR, NAC MANIMAJRA, CHANDIGARH. PAN:AAACC 9811 G VS. DY.C.I.T., CIRCLE-3(1), NEW DELHI. (APPELLANT) (RESPONDENT) O R D E R PER T. S. KAPOOR, A.M. THESE FOUR APPEALS ARE FILED BY THE ASSESSEE AGAINS T THE SEPARATE ORDERS OF LEARNED CIT(A)-IV, NEW DELHI ALL DATED 28 /02/2013. 2. AT THE OUTSET, LEARNED A.R. SUBMITTED THAT THESE APPEALS INVOLVE COMMON ISSUE WHICH IS THE PENALTY IMPOSED BY ASSESS ING OFFICER AND SUSTAINED BY LEARNED CIT(A) U/S 271(1)(C) OF THE AC T. LEARNED A.R. IN THIS RESPECT FILED A CHART SHOWING THE ISSUE-WISE DECISI ON OF HON'BLE TRIBUNAL IN RESPECT OF ALL FOUR YEARS. LEARNED A.R. SUBMITTED THE ISSUE NO. 2,3, 4 & 6 HAVE BEEN ALLOWED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE WHEREAS THE ISSUE NO. 1 & 5 HAVE BEEN SET ASIDE TO THE ASSESSIN G OFFICER FOR RE- EXAMINATION. IT WAS SUBMITTED THAT IN BOTH SCENARI O THE PENALTY SUSTAINED BY LEARNED CIT(A) NEEDS TO BE DELETED AS THE QUANTU M ITSELF HAS BEEN APPELLANT BY SHRI ROHIT JAIN, ADVOCATE MS. MEENAL GOYAL, C.A. RESPONDENT BY MS. RINKU SINGH, SR. D.R. DATE OF HEARING 16/04/2019 DATE OF PRONOUNCEMENT 18/04/2019 ~ 2 ~ DECIDED EITHER IN FAVOUR OF THE ASSESSEE OR HAS BEE N SET ASIDE TO THE ASSESSING OFFICER. 3. LEARNED D.R. THOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT WAS UNABLE TO CONTROVERT THE ARGUMENTS OF LEARN ED A.R. 4. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THROU GH THE MATERIAL PLACED ON RECORD. WE FIND THAT IN ALL THE APPEALS T HE ISSUE LISTED AT SL.NO. 1 TO 4 IN THE CHART ARE COMMON. OUT OF THESE FOUR IS SUES THE ISSUE OF EXCESS DEPRECIATION HAS BEEN SET ASIDE TO THE OFFICE OF TH E ASSESSING OFFICER. THE RELEVANT FINDINGS OF THE TRIBUNAL, AS CONTAINED IN PARA 91. ARE REPRODUCED BELOW: 9.1 IN VIEW OF THIS BENCH ADMITTING THE ADDITIONAL EVIDENCES FILED BY THE ASSESSEE, THE ISSUE IN DISPU TE MUST NECESSARILY BE SET ASIDE TO THE FILE OF THE ASSESSI NG OFFICER SO AS TO ENABLE HIM TO EXAMINE AND VERIFY THE SAME. AC CORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE DOCUMENTS AND THE SUBM ISSIONS OF THE ASSESSEE, KEEPING IN MIND THE DIRECTIONS OF THE ITAT IN THE FIRST ROUND OF PROCEEDINGS AND, THEREAFTER, ADJ UDICATE THE ISSUE AS PER LAW AFTER GIVING DUE OPPORTUNITY TO TH E ASSESSEE. ACCORDINGLY, GROUND NOS. 2, 3 AND 4 IN ITA NO. 5847 /DEL/2010, GROUND NO. 2 IN ITA NO. 3111/DEL/2013, GROUND NO. 2 IN ITA NO. 3112/DEL/2013, GROUND NO. 3 IN ITA NO. 3113/DEL /2013 AND GROUND NO. 2 IN ITA NO.3114/DEL/2013 STAND ALLO WED FOR STATISTICAL PURPOSES. 5. AS REGARDS THE ISSUE INVOLVED IN SL.NO. 2 TO 4, THESE ISSUES HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE RELEVA NT PARAGRAPHS OF THE FINDINGS OF HON'BLE TRIBUNAL, AS CONTAINED IN PARA 11 ARE REPRODUCED BELOW: 11. HAVING HEARD THE RIVAL SUBMISSIONS, WE TAKE UP THE ISSUES ONE BY ONE. IN ASSESSMENT YEAR 2003-04, THE ASSESSEE HAS CHALLENGED THE 4/5 TH DISALLOWANCE OUT OF TECHNOLOGY ENHANCEMENT FEE, AGRONOMY MANAGEMENT FEE AND PRODUCTION FACILITY MANAGEMENT FEE AND HAS RAISED T HE ISSUE ~ 3 ~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~ 4 ~ NUMBER OF YEARS AND THERE WAS A CONTINUING BENEFIT TO THE BUSINESS OF THE ASSESSEE COMPANY FOR A NUMBER OF YE ARS, THE LIABILITY SHOULD, THEREFORE, BE SPREAD OVER A PERIO D OF DEBENTURES. HOWEVER, WE FIND THAT THE INSTANT CASE IS SQUARELY COVERED BY THE JUDGMENT OF THE HONBLE APEX COURT I N THE CASE OF TAPARIA TOOLS LTD. VS JCIT (SUPRA) WHEREIN IT HAS BEEN LAID DOWN BY THE HONBLE APEX COURT THAT NORMALLY T HE REVENUE EXPENDITURE INCURRED IN A PARTICULAR YEAR H AS TO BE ALLOWED IN THE YEAR THE ASSESSEE CLAIMS THAT EXPEND ITURE AND THE DEPARTMENT CANNOT DENY THE SAME. THE HONBLE AP EX COURT WENT ON TO HOLD THAT EVEN THE FACT THAT THE A SSESSEE HAD DEFERRED THE EXPENDITURE IN THE BOOKS OF ACCOUNT WO ULD BE IRRELEVANT. IN THIS JUDGMENT, THE HONBLE APEX COUR T HAS ALSO TAKEN NOTE OF ITS EARLIER JUDGMENT RENDERED IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. C .I.T. (SUPRA) AND HAS, THEREAFTER, HELD THAT THE INCOME T AX ACT ENABLES AND ENTITLES THE ASSESSEE TO CLAIM ENTIRE E XPENDITURE IN THE MANNER IT IS CLAIMED U/S 37(1) OF THE ACT AS LONG AS THE SAME IS NOT CAPITAL IN NATURE. THEREFORE, RESPECTFU LLY FOLLOWING THE RATIO OF THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD. VS. JCIT (SUPRA), WE ARE UNAB LE TO CONCUR WITH THE FINDINGS OF THE LD. COMMISSIONER OF INCOME TAX (A) IN THIS REGARD AND WHILE SETTING ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (A) ON THIS ISSUE, W E DIRECT THE ASSESSING OFFICER TO ALLOW THE ENTIRE EXPENDITU RE IN THE ASSESSMENT YEAR IN WHICH IT IS CLAIMED. ACCORDINGLY , GROUND NOS. 3, 4, 5 AND 6 IN ASSESSMENT YEAR 200304 AND ID ENTICAL GROUND NOS. 5, 6, 7, AND 8 IN ASSESSMENT YEAR 05, G ROUND NOS. 4, 5, 6, 7 IN ASSESSMENT YEAR 2005-06 AND GROUND NO S. 3, 4, 5, AND 6 IN ASSESSMENT YEAR 2006-07 STAND ALLOWED. 6. THE ISSUE OF LOOSE TOOLS MENTIONED IN SL.NO. 5 I S INVOLVED ONLY IN THREE YEARS AND THE MATTER HAS BEEN SET ASIDE TO TH E ASSESSING OFFICER BY HON'BLE TRIBUNAL. THE RELEVANT FINDINGS OF HON'BLE TRIBUNAL, AS CONTAINED IN PARA 11.1, ARE REPRODUCED BELOW: GROUND NO. 7 IN ASSESSMENT YEAR 2003-04 CHALLENGES THE ACTION OF THE ASSESSING OFFICER IN HOLDING THE EXPE NDITURE WITH RESPECT TO LOOSE TOOLS AS BEING CAPITAL IN NATURE A ND ALLOWING DEPRECIATION @25% THEREON. A PERUSAL OF THE ASSESSM ENT ORDER SHOWS THAT THE ASSESSING OFFICER HAS SIMPLY M ENTIONED THAT THE EXPENDITURE ON LOOSE TOOLS IS OF CAPITAL N ATURE, THE SAME WAS TO BE CAPITALIZED AND DEPRECIATION HAD TO BE ALLOWED THEREON. THE LD. COMMISSIONER OF INCOME TAX (A), ~ 5 ~ WHILE UPHOLDING THE DISALLOWANCE, HAS NOTED THAT TH E ASSESSEE HAD SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE DEPRECIATED VALUE OF LOOSE TOOLS WAS ARRIVED AT ON THE BASIS OF AMORTISATION OF COST OVER A PERIOD OF THREE YEARS A S PER THE REGULAR ACCOUNTING POLICY BEING FOLLOWED BY THE ASS ESSEE COMPANY. THE LD. COMMISSIONER OF INCOME TAX (A) WEN T ON TO HOLD THAT SINCE THE ASSESSEE COMPANY ITSELF HAD ADMITTED THAT THEY WERE AMORTISING THE COST OF THE LOOSE TOO LS OVER A PERIOD OF THREE YEARS AS PER THE REGULAR ACCOUNTING POLICY, THE ASSESSING OFFICER WAS JUSTIFIED IN TREATING THE SAM E AS BEING CAPITAL IN NATURE AND ALLOWING 25% DEPRECIATION THE REON. THUS, APPARENTLY, THE ASSESSEE HAS TAKEN CONTRADICTORY ST ANDS BEFORE THE LOWER AUTHORITIES AND, THEREFORE, IT IS OUR CONSIDERED OPINION THAT IT WILL BE IN THE FITNESS OF THINGS IF THE ISSUE IS RE- EXAMINED BY THE ASSESSING OFFICER. ACCORDINGLY, WE RESTORE THE ISSUE OF EXPENDITURE ON LOOSE TOOLS HAVING BEEN TREATED AS CAPITAL EXPENDITURE BY THE AO/LD. CIT (A) TO THE FI LE OF THE ASSESSING OFFICER WITH THE DIRECTION TO RE-EXAMINE THE ISSUE AND, THEREAFTER, ADJUDICATE THE ISSUE AS PER LAW AF TER GIVING DUE OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE . ACCORDINGLY, GROUND NO. 7 IN ASSESSMENT YEAR 2003-0 4, AND IDENTICAL GROUND NO. 4 IN ASSESSMENT YEAR 2004-05, GROUND NO. 2 IN ASSESSMENT YEAR 2005-06 STAND ALLOWED FOR STATISTICAL PURPOSES. 7. THE ISSUE LISTED AT SL.NO. 6 ON UPFRONT FEE IS A LSO INVOLVED IN ONE YEAR I.E. ASSESSMENT YEAR 2004-05 WHICH HAS BEEN DE CIDED BY HON'BLE TRIBUNAL IN FAVOUR OF THE ASSESSEE. THE RELEVANT FINDINGS OF HON'BLE TRIBUNAL, AS CONTAINED IN PARA 11.2.1, ARE REPRODUC ED BELOW: 11.2.1ACCORDINGLY, RESPECTFULLY FOLLOWING THE JUDG MENT OF THE HONBLE APEX COURT AS AFOREMENTIONED, WE ARE OF THE CONSIDERED VIEWS THAT THE ENTIRE UPFRONT FEE WAS AL LOWABLE AS A DEDUCTION IN ASSESSMENT YEAR 2004-05 ITSELF AND ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. COMM ISSIONER OF INCOME TAX (A) ON THE ISSUE AND DIRECT THE ASSESSIN G OFFICER TO ALLOW THE ENTIRE AMOUNT IN THE YEAR UNDER CONSID ERATION. 8. THE FINDINGS OF HON'BLE TRIBUNAL CLEARLY DEMONST RATE THAT THE ISSUES HAVE BEEN EITHER ALLOWED OR SET ASIDE TO THE ASSESS ING OFFICER THEREFORE, THE PENALTY SUSTAINED BY LEARNED CIT(A) DO NOT SURV IVE AND HENCE THESE ~ 6 ~ ARE DELETED. THE ASSESSING OFFICER IN THE SET ASID E PROCEEDINGS MAY INITIATE PENALTIES AFTER COMPLETION OF ASSESSMENT I N ACCORDANCE WITH LAW. 9. IN THE RESULT, ALL THE APPEALS OF THE ASSESSEE A RE ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT ON 18/04/2019) SD/. SD/. ( H. S. SIDHU ) ( T. S. KAPOOR ) JUDICIAL MEMBER A CCOUNTANT MEMBER DATED:18/04/2019 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T.,