DCIT, New Delhi V. M/s. Shriram Pistons & Rings Ltd., New Delhi

ITA 3897/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3288 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 03-05-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 07-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G, NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER I.T.A. NO. 3897/DEL/2014 A.Y. : 2010-11 DCIT, CIRCLE 8(1), ROOM NO. 248, CR BUILDING, NEW DELHI VS. M/S SHRIRAM PISTONS & RINGS LTD, 3 RD FLOOR, HIMALYA HOUSE, 23, KASTURBA GANDHI MARG, NEW DELHI 110 001 (PAN: AAACS0229G) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. N.K. BANSAL, SR. DR ASSESSEE BY : SH. PRADEEP DINODIA, CA ORDER PER H.S. SIDHU : JM THE REVENUE HAS FILED THIS APPEAL AGAINST THE IMP UGNED ORDER DATED 24.4.2014 PASSED BY THE LD. CIT(A)-XI, NEW DE LHI RELEVANT TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS RAISED IN THE REVENUES APPEAL READ AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) HAS ERRED IN TREATING THE EXPENDITUR E ON DIES FOR NEW MODEL DEVELOPMENT AS REVENUE EXPENDITURE AND DELETING THE DISALLOWANCE EOF RS. 80,34,087/-. 2 2. THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITI ON ON ACCOUNT OF TOTAL PRODUCTIVITY MANAGEMENT PROGRAMME (TPM) AND ISO 9001 CERTIFICATION OF RS. 12,16,796/- TREATING IT AS REVENUE EXPENDITURE. 3. THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF MANUFACTURING VARIOUS AUTOMOBILE COMP ONENTS LIKE PISTON, PISTON RINGS, ENGINE VALUES. ETC. ASSESSEE FILED RETURN OF INCOME ON 07.10.2010 BY DECLARING AN INCOME OF RS. 1,07,86,14,180. THE RETURN WAS PROCESSED U/S. 143(1) OF THE I.T. AC T. THE CASE WAS SELECTED FOR SCRUTINY AND THE AO COMPLETED THE ASSE SSMENT U/S. 143(3) OF THE ACT, BY MAKING THE ADDITIONS/DISALLOW ANCES ON ACCOUNT OF EXPENDITURE ON DIES FOR NEW MODEL DEVELOPMENT OF RS. 80,34,087/- AND RS. 12,16,795/- ON ACCOUNT OF EXPENDITURE ON TO TAL PRODUCTIVITY MAINTENANCE AND COMPLETED THE ASSESSMENT AT RS. 1,0 9,00,41,290 U/S. 143(3) OF THE I.T. ACT, 1961 VIDE ORDER DATED 20.03.2013. 4. AGAINST THE SAID ORDER OF THE AO, ASSESSEE APPE ALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 24.4.2014 HAS DELETED THE ADDITIONS AND ALLOWED THE APPEAL OF THE ASSESSEE. 5. AGGRIEVED WITH THE AFORESAID ORDER OF THE LD. CI T(A), REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3 6. LD. DR RELIED UPON THE ORDER OF THE AO AND REITE RATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL AND STA TED THAT THE LD. CIT(A) HAS WRONGLY DELETED THE ADDITIONS. 7. ON THE CONTRARY, LD. COUNSEL OF THE ASSESSEE RE LIED UPON THE ORDER OF THE LD. CIT(A). HE STATED THAT THE ISSUE S IN DISPUTE ARE SQUARELY COVERED BY THE ITAT DECISION DATED 31.10.2 013 PASSED IN ITA IN ITA NO. 5438/DEL/2012 (AY 2009-10) IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10, WHICH THE LD. CIT(A) HAS F OLLOWED IN THE PRESENT ASSESSMENT YEAR I.E. 2010-11. FOR READY R EFERENCE, HE FILED THE COPY OF THE TRIBUNALS ORDER DATED 31.10.2013, AS AFORESAID. IN VIEW OF ABOVE, LD. COUNSEL OF THE ASSESSEE HAS REQU ESTED THAT BY FOLLOWING THE TRIBUNALS DECISION IN ASSESSEES OW N CASE FOR THE ASSESSMENT YEAR 2009-10, AS AFORESAID, THE ORDER OF THE LD. CIT(A) MAY BE UPHELD BY DISMISSING THE APPEAL OF THE REV ENUE. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RELEVANT RECORDS AVAILABLE WITH US, ESPECIALLY THE ORDERS OF THE REV ENUE AUTHORITIES. WE FIND THAT LD. CIT(A) HAS ELABORATELY DISCUSSED THE ISSUES IN DISPUTE VIDE PARA NO. 7.1 TO 8 IN THE IMPUGNED ORDER WHI CH READS AS UNDER:- 7.1. THE FACTS OF THE CASE AND THE WRITTEN SUBMISS IONS OF THE APPELLANT HAVE BEEN CAREFULLY CONSIDERED. GROUND NO. 1 OF THE APPEAL IS AGAINST THE DISALLOWA NCE OF RS. 80,34,087/- MADE BY THE AO UNDER THE HEAD 4 'EXPENDITURE ON DIES FOR NEW MODEL DEVELOPMENT'. IT IS OBSERVED THAT THE APPELLANT HAS INCURRED EXPENDITUR E OF RS.1,20,49,317/- ON ACCOUNT OF DIES FOR NEW MODE L DEVELOPMENT. HOWEVER, THE AO TREATED THIS EXPENDITURE AS CAPITAL EXPENDITURE IN NATURE AND THEREFORE, JUST ALLOWED DEPRECIATION ON THE AMOUNT AND DISALLOWED THE REMAINING AMOUNT OF RS. 80,34,087/-. IN THE ASSESSMENT ORDER, THE AO HA S NOT GIVEN ANY REASONING FOR TREATING SUCH EXPENDITU RE AS CAPITAL IN NATURE AND JUST MENTIONED THAT FOLLOW ING EARLIER ASSESSMENT ORDERS, MAINTAINING THE CONSISTE NCY AND TO KEEP THE ISSUE ALIVE HE IS TREATING THE EXPENDITURE AS CAPITAL IN NATURE. ON THE OTHER HAND , THE APPELLANT HAS ARGUED THAT THIS ISSUE OF EXPENDI TURE ON DIES AND MODELS HAS ALREADY BEEN DECIDED IN APPELLANT'S FAVOUR BY THE JURISDICTIONAL DELHI HIGH COURT IN ITA NO. 167/2008 FOR A Y 1998-99 AND IN IT A NO. 480/2003 IN AY 2000-01 IN APPELLANT'S OWN CASE. THE HON'BLE ITAT IN ITA NO. 5438/DEL/2012 FOR AY 2009-10 HAS AGAIN FOLLOWED THE DECISION OF HON'BLE HIGH COURT AND ALLOWED THE EXPENDITURE AS REVENUE EXPENDITURE. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISIONS OF HON'BLE ITAT AS WELL AS HON'BLE 5 JURISDICTIONAL HIGH COURT IN THE APPELLANT'S OWN CA SE IN EARLIER ASSESSMENT YEARS, THE AO'S ACTION IN TRE ATING THE EXPENDITURE ON DIES AND MODELS AS CAPITAL IN NATURE IS NOT JUSTIFIED. THE DISALLOWANCE OF RS. 80,34,087/- MADE BY THE AO IS DIRECTED TO BE DELETE D. GROUND NO. I OF THE APPEAL IS ALLOWED. 8. GROUND NO.2 OF THE APPEAL IS AGAINST THE DISALLOWANCE OF RS. 12,16,795/- UNDER THE HEAD 'EXPENDITURE ON TOTAL PRODUCTIVITY MAINTENANCE (TPM ) (RS. 1,45,795/-) AND EXPENSES UNDER 'ISO-9001' (RS. 10,71,400/-). THE AO HAS NOT GIVEN ANY BASIS FOR MAKING SUCH DISALLOWANCE AND JUST REPEATED THE SAME LOGIC THAT IN PRECEDING YEARS SUCH DISALLOWANCE WAS MADE BY THE AO AND THEREFORE, FOLLOWING THE PRINCIP LE OF CONSISTENCY AND JUST TO KEEP THE ISSUE ALIVE, HE MADE THE DISALLOWANCE. IN THE APPELLATE PROCEEDINGS , THE APPELLANT HAS PRODUCED THE DECISION OF HON'BLE ITAT, DELHI, IN ITA NO. 5438/DE1/2012, WHEREIN THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE APPELLANT. SINCE THE ISSUE IS SQUARELY COVERED BY T HE DECISION OF HIGHER JUDICIAL AUTHORITY, THE AO'S ACT ION IN DISALLOWING THE EXPENDITURE UNDER THE HEADS TPM AN D 6 ISO-9001, TOTAL AMOUNTING TO RS. 12,16,796/- IS NOT JUSTIFIED AND THE SAME IS DIRECTED TO BE DELETED. GROUND NO. 2 OF THE APPEAL IS ALLOWED. 8.1 ON PERUSING THE ABOVE FINDING OF THE LD. CIT(A) , WITH REGARD TO GROUND NO. 1 RELATING TO DELETION OF DISALLOWANCE O F RS. 80,34,087/- IS CONCERNED, WE FIND THAT THE ASSESSEE HAS INCURRED E XPENDITURE OF RS.1,20,49,317/- ON ACCOUNT OF DIES FOR NEW MODEL D EVELOPMENT. HOWEVER, THE AO TREATED THIS EXPENDITURE AS CAPITAL EXPENDITURE IN NATURE AND THEREFORE, JUST ALLOWED DEPRECIATION ON THE AMOUNT AND DISALLOWED THE REMAINING AMOUNT OF RS. 80,34,087/-. WE FURTHER NOTE THAT IN THE ASSESSMENT ORDER, THE AO HAS NOT GIVEN ANY REASONING FOR TREATING SUCH EXPENDITURE AS CAPITAL IN NATURE AND JUST MENTIONED THAT FOLLOWING EARLIER ASSESSMENT ORDERS, MAINTAINING TH E CONSISTENCY AND TO KEEP THE ISSUE ALIVE HE IS TREATING THE EXPENDIT URE AS CAPITAL IN NATURE. ON THE OTHER HAND, THE ASSESSEE HAS ARGUED THAT THIS ISSUE OF EXPENDITURE ON DIES AND MODELS HAS ALREADY BEEN DEC IDED IN ASSESSEES FAVOUR BY THE JURISDICTIONAL DELHI HIGH COURT IN ITA NO. 167/2008 FOR A Y 1998-99 AND IN ITA NO. 480/2003 IN AY 2000-01 IN ASSESSEES OWN CASE. WE FURTHER FIND THAT ITAT, DEL HI BENCH IN ITA NO. 5438/DEL/2012 FOR AY 2009-10 IN ASSESSEES OWN CASE HAS AGAIN FOLLOWED THE DECISION OF HON'BLE HIGH COURT AND ALL OWED THE EXPENDITURE AS REVENUE EXPENDITURE. THEREFORE, THE ISSUE IS SQUARELY 7 COVERED BY THE DECISIONS OF ITAT AS WELL AS HON'BLE JURISDICTIONAL HIGH COURT IN THE ASSESSEE'S OWN CASE IN EARLIER ASSESSM ENT YEARS, THE AO'S ACTION IN TREATING THE EXPENDITURE ON DIES AND MODE LS AS CAPITAL IN NATURE WAS NOT JUSTIFIED. HENCE, THE LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF RS. 80,34,087/- MADE BY THE AO, WHI CH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GRO UND NO. 1 RAISED BY THE REVENUE IN ITS APPEAL. 8.2 WITH REGARD TO GROUND NO. 2 RELATING TO DELETIO N OF DISALLOWANCE OF RS. 12,16,796/- IS CONCERNED, WE FIND THAT THE AO HAS NOT GIVEN ANY BASIS FOR MAKING SUCH DISALLOWANCE AND JUST REP EATED THE SAME LOGIC THAT IN PRECEDING YEARS SUCH DISALLOWANCE WAS MADE BY THE AO AND THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTEN CY AND JUST TO KEEP THE ISSUE ALIVE, HE MADE THE DISALLOWANCE. IN THE A PPELLATE PROCEEDINGS, THE ASSESSEE HAS PRODUCED THE DECISIO N OF ITAT, DELHI, IN ITA NO. 5438/DE1/2012 IN ASSESSEES OWN CASE, WHER EIN THE ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE. SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF HIGHER JUDICIAL AUTHORITY, THE AO'S ACTION IN DISALLOWING THE EXPENDITURE UNDER THE HEA DS TPM AND ISO- 9001, TOTAL AMOUNTING TO RS. 12,16,796/- WAS NOT JUSTIFIED. HENCE, THE LD. CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF RS. 12,16,796/- MADE BY THE AO, WHICH DOES NOT NEED ANY INTERFEREN CE ON OUR PART, 8 HENCE, WE UPHOLD THE ORDER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND NO. 2 RAISED BY THE REVENUE IN ITS APPEAL. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05/05/2017. SD/- SD/- [PRASHANT MAHARISHI] [H.S. SIDHU] ACCOUNTANT MEMBER JUDICI AL MEMBER DATE 05/05/2017 SRBHATNAGAR COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES