JT CIT OSD CIR 6(2), V. M/S CROMPTON GREAVES LTD,

ITA 4394/MUM/2003

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 3490 (ITAT-MUMBAI)
• Duration Of Justice: 12 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: J
• Next Hearing Date: 06-10-2015
• Assessment Year: 1999-2000
• Appeal Filed On: 05-06-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ALOK JOHRI
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

ITA NO. 4394 / MUM /20 0 3 ASSESSMEN T Y EAR: 199 9 - 2000 PAGE 1 O F 4 IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI J BENCH, MUMBAI [CORAM : PRAMOD KUMAR AM AND PAWAN SINGH JM] ITA NO. 4394 / MUM /20 0 3 AS SESSMENT Y EAR : 199 9 - 2000 JT. C OMMISSIONER OF INCOME TAX (OSD) ........ .APPELLANT CIRCLE 6(2), MUMBAI . VS. CR OMPTON GREAVES LIMITED, .......... . RESPONDENT 6 TH FLOOR, CG HOUSE , DR. A.B. ROAD, PRABHADEVI, MUMBAI. [PAN: A A ACC 3840 K ] APPEARANCES BY: ALOK JOHRI , FOR THE APPELLANT HIRO RAI , F OR THE RESPONDENT DATE OF CONCLUDING THE HEARING : JANUAR Y 14 TH , 201 6 DATE OF PRONOUNCING THE ORDER : FEBRUARY 29 TH , 201 6 O R D E R PER PRAMOD KUMAR AM : 1. TH IS APPEAL IS FILED BY THE ASSESSING OFFICER AND IS DIRECTED AGAINST THE ORDER DATED 10 TH FEBRUARY, 2002 PASSED BY THE LEARNED CIT(A) I N THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) , FOR THE ASSESSMENT YEAR 199 9 - 2000. THIS APPEAL WAS DISPOSED OF BY THE T RIBUNAL VIDE ORDER D A TED 8 TH FEBRUARY, 2012, BUT AS A RESUL T OF HON BLE BOMBAY HIGH COURT S DIRECTIONS DATE D 13 TH NOVEMBER , 2014, THIS APPEAL IS NOW FIXED BEFORE US FOR FRESH ADJUDICATION ON THE FOLLOWING ISSUE : - ON THE FA C TS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN ALLOWING THE ASSESSEE S CLAIM FOR DEDUCTIO N OF RS.53,74,474/ - AND DIRECTING THE ASSESSING OFFICER TO REWORK OUT THE DEDUCTION U/S. 35D RELATING TO TH E ITA NO. 4394 / MUM /20 0 3 ASSESSMEN T Y EAR: 199 9 - 2000 PAGE 2 O F 4 EXPENDITURE INCURRED ON GLOBAL DEPOSIT OR Y RECEIPTS, RELYING ON HIS ORDER FOR THE A.Y. 1998 - 99 IN THE ASSESSEE S OWN CASE, WHICH HAS NOT BEEN ACCEPT ED BY THE DEPARTMENT AND CONTESTED IN FUR T HER APPEAL TO THE ITAT. 2. L EARNED R EPRESENTATIVES FAIRLY AGREE THAT WHATEVER WE DECIDE IN ITA NO S .3624 & 3541/MUM/2002 FOR THE ASSESSMENT YEAR 1998 - 99, WHICH WE HAVE HEARD ALONG WITH THIS APPEAL, WILL APPLY, MU TATIS MUTANDIS , TO THIS ASSESSMENT YEAR AS WELL. IT IS AN AGREED POSITION THAT ALL THE RELEVANT MATERIAL FACTS ARE THE SAME IN THIS ASSESSMENT YEAR AS WELL. 3 . VIDE OUR ORDER OF EVEN DATE, AND IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 1998 - 99, WE HAVE OBSERVED AS FOLLOWS: - 12. WE NOW TAKE UP GROUND NO.6 OF THE ASSESSING OFFICER I.E. GRIEVANCE AGAINST DISALLOWANCE OF RS.53,74,474/ - , BEING 1/10 TH OF RS.5,37,44,740/ - INCURRED BY THE ASSESSEE ON GLOBAL DEPOSITORY RECEIPTS, WITHOUT APPRECIATING THAT T HE GDR IS NOTHING BUT INCREASE IN THE CAPITAL AND EXPENSES RELATING TO THE SAME IS CAPITAL IN NATURE 13. SO FAR AS THIS GRIEVANCE OF THE ASSESSING OFFICER IS CONCERNED, ONLY A FEW UNDISPUTED MATERIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT WHILE THE ASSESSEE HAS DEBITED GDR (GLOBAL DEPOSITORY RECEIPTS) SHARE ISSUE EXPENSES AMOUNTING TO RS.5,37,44,741/ - TO SHARE PREMIUM ACCOUNT, HE HAS CLAIMED DEDUCTION OF 1/10 TH OF THE GDR SHARE EXPENS ES, I.E. RS.53,74,474/ - . WHILE THE ASSESSING OFFICER ACCEPTED THAT THE SAID TREATMENT IS IN ACCORDANCE WITH THE ICAI GUIDELINES, HE WAS OF THE VIEW THAT THERE IS NO REASON FOR THE ASSESSEE TO DEVIATE FROM THE TREATMENT IN BOOKS OF ACCOUNTS . THE ASSESSI NG OFFICER FURTHER NOTED THAT THESE EXPENSES ARE CAPITAL IN NATURE, AS HELD BY THE HON BLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION LIMITED VS. CIT (225 ITR 792) AND BROOKE BOND INDIA LIMITED VS. CIT (225 ITR 798). THE CLAIM OF DEDUCTION WAS, ACCORDINGLY, DISALLOWED. IN APPEAL, HOWEVER, LEARNED CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE BY OBSERVING AS FOLLOWS : - GROUND NO.16 ON THE FACTS & CIRCUMSTANCES OF THE CASE, THE LD. JC HAS ERRED IN NOT ALLOWING A DEDUCTION OF RS.53,74,474/ - BEING AMORTISATION U/S 35D AT 1/10 OF RS.5,37,44,740/ - EXPENSES INCURRED ON GLOBAL DEPOSITORY RECEIPTS (GDR) AND DEBITED TO CAPITAL RESERVE. HE OUGHT NOT TO HAVE DONE SO. 18. AT THE TIME OF HEARING OF THIS APPEAL, THE LD. A.RS. OF THE APPE LLANT HAVE SUBMITTED THAT THE 1/10 TH EXPENDITURE ON THIS ACCOUNT HAS ALREADY BEEN ALLOWED BY THE A.O. IN THE A.Y. 97 - 98 AS BECAUSE, THIS EXPENDITURE WAS ITA NO. 4394 / MUM /20 0 3 ASSESSMEN T Y EAR: 199 9 - 2000 PAGE 3 O F 4 INCURRED IN F.Y. 96 - 97 RELEVANT TO A.Y. 97 - 98. THEY HAVE FURTHER SUBMITTED THAT THE COMPANY HAS ISSUED SHARES IN THE INTERNATIONAL MARKET WHICH HAVE BEEN PURCHASED BY THE PERSONS OF VARIOUS COUNTRIES ABROAD. THEY HAVE, THEREFORE, SUBMITTED THAT THIS CLAIM IS COVERED UNDER THE PROVISIONS OF SECTION 35D OF THE I.T. ACT AND ON THAT BASIS, 1/10 TH PORTION HAS B EEN CLAIMED AS EXPENDITURE FOR EACH ASSESSMENT YEAR. 18.1 CONSIDERING THE FACTS AND ARGUMENTS OF THE CASE, I AM ALSO OF THE VIEW THAT THIS IS THE EXPENDITURE COVERED BY THE PROVISIONS OF SECTION 35D OF THE ACT, AND, THEREFORE, AS PER THE PROVISIONS OF THA T SECTION, THE CLAIM HAS BEEN MADE BY THE APPELLANT. HENCE, THE GROUND OF APPEAL IS ALLOWED AND THE DISALLOWANCE MADE BY THE A.O. IS HEREBY DELETED. 14. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 15. WE HAVE NOTED THAT THE GRIE VANCE OF THE ASSESSEE IS CONFINED TO THE ISSUE THAT THESE EXPENSES ARE CAPITAL IN NATURE, AND HE HAS NOT EVEN DISPUTED APPLICABILITY OF SECTION 35D. HOWEVER, WHAT THE ASSESSING OFFICER HAS OVERLOOKED IS THAT THERE IS NO BAR ON CAPITAL EXPENSES BEING AMORT ISED UNDER SECTION 35D. SECTION 35D DEALS WITH AMORTISATION OF EXPENSES OVER A PERIOD OF TEN YEARS AND SUCH AN AMORTISATION IS NOT DEPENDENT UPON THE EXPENSES BEING REVENUE IN NATURE. SECTION 35D(2)(IV) CATEGORICALLY DEALS WITH THE EXPENSES IN CONNECTION WITH THE ISSUE, OR PUBLIC SUBSCRIPTION OF SHARES AND DEBENTURES OF THE COMPANY. IN VIEW OF THESE DISCUSSIONS, IN OUR CONSIDERED VIEW, GRIEVANCE OF THE ASSESSING OFFICER IS ILL CONCEIVED. AS REGARDS LEARNED DEPARTMENTAL REPRESENTATIVE S RELIANCE ON HON B LE DELHI HIGH COURT S JUDGEMENT IN THE CASE OF CIT VS. HINDUSTAN INSECTICIDES LIMITED (250 ITR 338), SUFFICE TO SAY THAT THE SHORT ISSUE IN THAT CASE WAS WHETHER FEE FOR ENHANCING SHARE CAPITAL CAN INDEED BE AMORTISED UNDER SECTION 35D(2)(III) AND THAT IS NOT EVEN THE CLAIM OF THE ASSESSEE BEFORE US. 16. GROUND NO.10 OF THE ASSESSING OFFICER IS THUS DISMISSED. 4 . WE SEE NO REASONS TO TAKE ANY OTHER VIEW OF THE MATTER THAN THE VIEW SO T A KEN IN ASSESSE E S OWN CASE. RESPECTFULLY FOLLOWING THE S A ME, WE DISM ISS THE GRIEVANCE OF T HE ASSESSING OFFICER. 5 . IN THE RESULT, APPEAL IS DISMISSE D ON THIS POINT. PRONOUNCED IN THE OPEN COURT TODAY 29 TH DAY OF FEBRUARY, 2016. SD/ - SD/ - PAWAN SINGH PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: THE 29 TH DAY OF FEBRUARY , 2016 . PBN/* ITA NO. 4394 / MUM /20 0 3 ASSESSMEN T Y EAR: 199 9 - 2000 PAGE 4 O F 4 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER DY./ ASSISTANT REGISTRAR INCOME TAX AP PELLATE TRIBUNAL MUMBAI B ENCHES, MUMBAI