DCIT, New Delhi V. M/s Minda Autogas ltd., Delhi

ITA 4306/DEL/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 7430 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 30-05-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 16-07-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: P DAM KANUNJNA
• Assessee Lawyers: R K KAPPOR
• Keywords: Opportunity of being heard; Additional evidence; Royalty expenses
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH E , NEW DELHI BEFORE SH. N. K. SAINI, AM AND SMT. BEENA PILLAI , JM IT A NO. 4306/DEL/2013 : ASSTT. YEAR : 2009 - 10 DEPUTY COMMISSIONER OF INCO ME TAX, CENTRAL CIRCLE - 21, NEW DELHI VS M/S MINDA AUTOGAS LTD., B - 64/1, WAZIRPUR INDUSTRIAL AREA, DELHI - 110052 (APPELLANT) (RESPONDENT) PAN NO. A A CCM5941R ASSESSEE BY : SH. R. K. KAPPOR, CA REVENUE BY : SH. P. DAM KANUNJNA , SR. DR DATE OF HEARING : 30.05 .201 6 DATE OF PRONOUNCE MENT : 31 .05 .201 6 ORDER PER N. K. SAINI, AM : THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE ORDER DATED 22.03.2013 OF LD. CIT(A) - IX, NEW DELHI. 2. THE ONLY EFFECTIVE GROUND RAIS ED IN THIS APPEAL READS AS UNDER : 1. THAT THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE ADDITION OF RS.1,50,00,000/ - MADE ON ACCOUNT OF DISALLOWANCE OF ROYALTY EXPENSES TO RELATED GROUP COMPANY. 3. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING CNG & LGP KITS ITA NO . 4306 /DE L/201 3 MINDA AUTOGAS LTD. 2 FOR AUTOMOBILES AND FILED THE RETURN OF INCOME ON 27.09.2009 DECLARING AN INCOME OF RS.6,70,16,230/ - . SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY A ND THE ASSESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE ORDER DATED 21.09.2011 BY THE AO AT AN INCOME OF RS.8,20,16,230/ - BY MAKING AN ADDITION OF RS.1,50,00,000/ - ON ACCOUNT OF ROYALTY. 4 . BEING A GGRIEVED THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) WHO ALLOWED THE RELIEF BY FOLLOWING THE DECISION OF HIS PREDECESSOR FOR THE ASSESSMENT YEARS 2007 - 08 AND 2008 - 09 IN ASSESSEE S OWN CASE. 5 . BEING AGGRIEVED THE DEPARTMENT IS IN APPEAL. THE LD. COU NSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE ITAT IN ASSESSEE S OWN CASE IN ITA NO. 1024/DEL/2011 FOR THE ASSESSMENT YEAR 2007 - 08 VIDE ORDER DATED 27.04.2012 (COPY OF THE SAID ORDER WAS F URNISHED WHICH IS PLACED ON RECORD). 6 . IN HIS RIVAL SUBMISSIONS THE LD. DR ALTHOUGH SUPPORTED THE ORDER OF THE AO BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. ITA NO . 4306 /DE L/201 3 MINDA AUTOGAS LTD. 3 7 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON THE RECORD. IT IS NOTICED THAT AN IDENTICAL ISSUE HAVING SIMILAR FACTS HAD ALREADY BEEN ADJUDICATED BY THIS BENCH OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARAS 10 AND 11 OF THE AFORESAID ORDER DATED 27.04.2012 WHICH READ AS UNDER: 10. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. LD. CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS REQUIRED THE ASSESSEE TO FILE DETAILS OF PERSONS WHO WERE EMPLOYED BY IT IN ORDER TO UNDERSTAND THE VERACITY OF ITS CLAIM. THE ASSESSEE HAD FILED LIST OF EMPLOYEES ON ITS ROLLS FROM WHERE LD. CIT(A) NOTED THAT NO SENIOR PERSON WAS EMPLOYED WITH THE ASSESS EE DURING THE PERIOD EXCEPT ONE PERSON. HE ALSO NOTED THAT THERE WAS NO TAX EVASION PLANNING INVOLVED IN THE PAYMENTS MADE TO MINDA INDUSTRIES LTD. FROM THESE FACTS IT IS EVIDENT IT IS CLEAR THAT LD. CIT(A) WHILE ADMITTING ADDITIONAL EVIDENCE HAS NOT CALLE D FOR COMMENTS OF THE AO. THE CONTENTION OF THE ASSESSEE THAT LD. CIT(A) HAD INVOKED RULE 46A(4) SECTION 250(4) OF THE ACT IS NOT BORNE OUT FROM RECORDS. HON BLE DELHI HIGH COURT IN THE CASE OF CIT VS. MANISH BUILD WELL PVT. LTD. HAS HELD THAT WHENEVER AN ASSESSEE WHO IS IN APPEAL BEFORE LD. CIT(A) INVOKES RULE 46A, IT IS INCUMBENT UPON THE COMMISSIONER TO COMPLY WITH THE REQUIREMENT OF THE RULE STRICTLY. ADDITIONAL EVIDENCE HAS BEEN ITA NO . 4306 /DE L/201 3 MINDA AUTOGAS LTD. 4 ADMITTED AND ACCEPTED AS GENUINE BY LD. CIT(A) WITHOUT OBTAINING THE COMME NTS OF THE ASSESSING OFFICER. THEREFORE, THE REQUIREMENT OF RULE 46A WERE NOT SATISFIED IN THE CASE BEFORE US. UNDER THESE CIRCUMSTANCES, WE FEEL IT APPROPRIATE TO SET ASIDE THE MATTER TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE EVID ENCE PLACED BEFORE LD. CIT(A). THE ASSESSING OFFICER IS ALSO DIRECTED TO EXAMINE THE CLAIM OF ASSESSEE ABOUT THE REASONABLENESS OF THE EXPENDITURE INCURRED FOR SERVICE RENDERED BY M/S. MINDA INDUSTRIES LTD. THE ASSESSING OFFICER WILL PASS SPEAKING ORDER AF TER EXAMINING THE ISSUE AS PER PROVISIONS OF LAW. 11. AS REGARDS THE PAYMENT OF ROYALTY TO MIL BY THE ASSESSEE, LD. CIT(A) HAS ALLOWED THE RELIEF MERELY ON THE BASIS OF CORRESPONDENCE BETWEEN THE MINDA INDUSTRIES LTD. AND MARUTI UDYOG LTD. HE HAS NOT EXA MINED THE TERMS OF AGREEMENT FOR PAYMENT OF ROYALTY BETWEEN THE ASSESSEE AND ITS PARENT COMPANY. THE TERM ROYALTY HAS BEEN DEFINED IN EXPLANATION 2 TO SECTION 9(1)(VI). HE HAS NOT EXAMINED THE SCOPE TERM ROYALTY AND ITS APPLICABILITY TO THE FACTS OF TH E ASSESEE S CASE. IN THE ABSENCE OF EVIDENCE JUSTIFYING THE PAYMENT OF ROYALTY, IN OUR CONSIDERED OPINION LD. CIT(A) SHOULD NOT HAVE ALLOWED RELIEF MERELY BASED ON CORRESPONDENCE. AT THE SAME TIME THE ASSESSING OFFICER HAD ALSO NOT EXAMINED THE ISSUE RELAT ING TO PAYMENT OF ROYALTY. MOREOVER LD. CTI(A) HAD ACCEPTED THE ADDITIONAL EVIDENCE WITHOUT CALLING FOR COMMENTS OF ASSESSING OFFICER AND HAD ACCEPTED THEM ON GENUINE AND SUFFICIENT. THUS THE PROVISIONS OF RULE 46A HAVE BEEN VIOLATED. THEREFORE, IN OUR CON SIDERED OPINION THE MATTER SHOULD BE RESTORED TO THE FILE OF ASSESSING OFFICER WITH THE DIRECTION TO ITA NO . 4306 /DE L/201 3 MINDA AUTOGAS LTD. 5 EXAMINE THE CASE OF ROYALTY PAYMENT AFRESH IN THE LIGHT OF PROVISIONS OF SECTION 9(1) (VI) OF THE ACT, TERMS OF AGREEMENT; SERVICES RENDERED; AND DECIDE TH E ISSUE ON MERITS AFTER AFFORDING THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD. WE ORDER ACCORDINGLY. 8. SINCE THE FACTS FOR THE YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS INVOLVED IN ITA NO. 1024/DE/2011 FOR THE ASSESSMENT YEAR 2007 - 08 I N ASSESSEE S OWN CASE. SO, RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DATED 27.04.2012, WE RESTORE THE ISSUE TO THE FILE OF THE AO TO BE ADJUDICATED IN ACCORDANCE WITH THE DIRECTIONS GIVEN IN THE AFORESAID REFERRED TO ORDER DATED 27.04.2012. 9 . IN THE RESULT, APPEAL OF THE DEPARTMENT IS ALLOWED FOR STATISTICAL PURPOSES . ( ORDER PRON OUNCED IN THE COURT ON 31 /05 / 2016 ) SD/ - S D/ - ( BEENA PILLAI ) ( N. K. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31 /05 /2016 *SUBODH* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR