DCIT, New Delhi V. M/s. SMCC Construction India Ltd., New Delhi

ITA 4091/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3712 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 04-05-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 21-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S S RANA
• Assessee Lawyers: G C SRIVASTAVA
• Keywords: Depreciation; Capital expenditure
• Section: 143(3); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: G NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-4091/DEL/2014 ( ASSESSMENT YEAR: 2011-12) DCIT CIRCLE 9(1) NEW DELHI. VS SMCC CONSTRUCTION INDIA LTD. 23, LOCAL SHOPPING CENTRE, MADANGIR, NEW DELHI. AAACM7822P ASSESSEE BY SH. G.C. SRIVASTAVA, ADV. REVENUE BY SH. S.S. RANA, CIT DR ORDER PER SHRI K.N. CHARY, JUDICIAL MEMBER CHALLENGING THE ORDER DATED 16.04.2014 IN APPEAL NO . 582/2013-14 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)-XII, NEW DELHI (HEREINAFTER FOR SHORT CALLED AS THE LD. CIT (A)) , REVENUE PREFERRED THIS APPEAL ON THE FOLLOWING GROUNDS: 1. THE LD. CIT (A) ERRED ON FACTS AND IN LAW IN DE LETING THE ADDITION OF RS. 7,22,70,958/- MADE BY THE AO ON ACCOUNT OF FEE AND TECHNICAL KNOWHOW. 2. THE APPELLANT CRAVES TO AMEND MODIFY, ALTER, ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING HEARING OF THIS APPEAL. DATE OF HEARING 10.10.2017 DATE OF PRONOUNCEMENT 23.10.2017 2 ITA NO. 4091/DEL/2014 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS AN ENGINEERING AND CONSTRUCTION COMPANY AND WAS INCORPORATED ON 12.12. 1996 AS A JOINT VENTURE BETWEEN MITSUI CONSTRUCTION CO. LTD., JAPAN AND M/S KAIRALI CONSTRUCTION, INDIA. THE ASSESSEE COMMENCED ITS BU SINESS OPERATIONS IN AUGUST, 1997 AND THE FIRST YEAR OF ASSESSMENT WAS 1 998-99. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PROVIDING EN GINEERING SERVICES, UNDERTAKING TURNKEY CONSTRUCTION AND RENOVATION WOR KS OF INDUSTRIAL UNDERTAKINGS, ETC. AND EXECUTED A NUMBER OF ENGINEE RING PROJECTS THEREIN. FOR THE AY 2011-12 THEY HAVE FILED THEIR RETURN OF INCOME ON 30.11.2011 DECLARING A TOTAL INCOME OF RS. 22,66,60,231/- AND THE ASSESSMENT U/S 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT CALLE D AS THE ACT) WAS CONCLUDED BY WAY OF ORDER DATED 18.02.2014 WITH THE ADDITION OF RS. 1,34,307/- WHICH WAS HELD AS EXCESS DEPRECIATION, R S. 722,70,958/- TOWARDS THE ROYALTY AND FEE FOR TECHNICAL KNOWHOW A ND RS. 1,69,079/- TOWARDS THE DIFFERENCE IN THE INCOME SHOWN BY THE A SSESSEE AND THE DETAILS TO BE FOUND 26AS. IN THE APPEAL PREFERRED BY THE ASSESSEE BY WAY OF IMPUGNED ORDER, INTER-ALIA, THE LD. CIT (A) DELE TED THE ADDITION OF RS. 7,22,70,958/-, CHALLENGING WHICH THE REVENUE IS BEF ORE US IN THIS APPEAL. 3. LD. DR HEAVILY RELIED UPON THE ORDER OF THE AO A ND REASONING GIVEN BY THE AO FOR HOLDING THAT THE SAID EXPENDITURE OF RS. 7,22,70,958/- WAS 3 ITA NO. 4091/DEL/2014 INCURRED FOR ACQUIRING INTANGIBLE ASSETS WHICH ARE NOT ALLOWABLE AS EXPENDITURE U/S 37 OF THE ACT AND, THEREFORE, ARE L IABLE TO BE ADDED. ON THIS PREMISE HE PRAYED TO QUASH THE IMPUGNED ORDER. LD. AR SUBMITTED THAT LD. CIT (A) VIDE PARAGRAPH NO. 3.6 OF HIS ORDE R STATED THAT THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF ROYALTY AND FEE FOR T ECHNICAL SERVICES HAS ALREADY BEEN ALLOWED IN ASSESSEES OWN CASE BY THE LD. CIT (A) FOR THE ASSESSMENT YEARS 2008-08 TO 2010-11 AND SUCH A FIND ING WAS UPHELD BY THE DELHI BENCHES OF THE TRIBUNAL IN APPEAL. HE FUR THER SUBMITTED THAT THE FINDINGS OF THE LD. CIT (A) AND THE TRIBUNAL FOR TH E ASSESSMENT YEARS 2008-09 TO 2010-11 ARE UPHELD BY THE HONBLE JURISD ICTIONAL HIGH COURT IN IT(APPEAL) NOS. 439, 511 & 526/DEL/2014 BY WAY OF O RDER DATED 03.07.2015, REPORTED IN COMMISSIONER OF INCOME TAX- III VS. SMCC CONSTRUCTION INDIA LTD. (2015) 61 TAXMANN.COM 202 ( DELHI). 4. WE HAVE CAREFULLY GONE THROUGH THE RECORD. FOR DELETING THIS ADDITION OF RS. 7,22,70,958/- WHICH WAS ADDED ON AC COUNT OF ROYALTY AND FEE FOR TECHNICAL SERVICES, LD. CIT (A) REASONED TH AT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2008-09 TO 2010-11 HI S PREDECESSORS HAVE ALLOWED SUCH A CLAIM OF THE ASSESSEE AND SUCH ALLOWANCE OF THE CLAIM OF THE ASSESSEE WAS UPHELD BY THE COORDINATE BENCHES OF THIS TRIBUNAL. WE HAVE ALSO PERUSED THE DECISION OF THE HONBLE JURISDICTIONAL 4 ITA NO. 4091/DEL/2014 HIGH COURT IN ASSESSEES OWN CASE FOR AYS. 2008-09 TO 2010-11 REPORTED IN COMMISSIONER OF INCOME TAX-III VS. SMCC CONSTRUC TION INDIA LTD. (2015) 61 TAXMANN.COM 202 (DELHI), WHEREUNDER THE H ONBLE JURISDICTIONAL HIGH COURT HELD THAT A PERUSAL OF TH E TCA SHOWS THAT THE PAYMENT BY THE ASSESSEE TO SMCL IS FOR THE TECHNICA L KNOW-HOW GIVEN TO THE ASSESSEE AS A LICENSEE, AND ALTHOUGH THE PAYMEN T IS SPREAD OVER A PERIOD OF 10 YEARS, IT DOES NOT MAKE THE ASSESSEE T HE OWNER OF THE TECHNICAL KNOWHOW, SINCE THE VERY NATURE OF THE LIC ENSE AGREEMENT IS THAT IS NOT OF A PERMANENT NATURE. HONBLE HIGH COURT H ELD THAT THE VIEW TAKEN BY THE CIT (APPEALS), AND CONCURRED WITH BY THE ITA T, CANNOT IN THE CIRCUMSTANCES BE SAID TO BE IMPROBABLE OR CONTRARY TO THE SETTLED LEGAL POSITION. THE COURT, THEREFORE, CONCURRED WITH THE VIEW OF THE CIT (A) AND THE ITAT THAT THE BENEFIT TO THE ASSESSEE AS A RESU LT OF PAYMENT OF ROYALTY FOR TECHNICAL KNOWHOW WAS NOT OF AN ENDURING NATURE , AND, THEREFORE, CANNOT BE CONSTRUED TO BE A CAPITAL EXPENDITURE. 5. IN VIEW OF THIS DECISION OF THE HONBLE JURISDIC TIONAL HIGH COURT IN ASSESSEES OWN CASE, WE DO NOT FIND ANY ILLEGALITY OR IRREGULARITY IN THE FINDINGS OF THE LD. CIT (A) AND CONSEQUENTLY WE FIN D THAT THE APPEAL OF THE REVENUE IS DEVOID OF MERITS AND IS LIABLE TO BE DISMISSED. WE DO SO. 5 ITA NO. 4091/DEL/2014 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.10.2017 SD/- SD/- (G.D. AGRAWAL) (K.N. CHARY) PRESIDENT JUDICIAL MEMBER DATED: 23.10.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI