M/s. Cornell Overseas Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 4453/DEL/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52546 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 18-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 06-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KRISHNA
• Assessee Lawyers: TARUN CHATURVEDI; VANDANA B HANDARI CAS
• Keywords: Transfer pricing
• Section: 143(3)

Judgement Text

BEFORE THE INCOME TAX APPELLATE TRIBUNAL, DELHI BENCH B, NEW DELHI BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO.4453/DEL.2010 (ASSESSMENT YEAR : 2006-07) M/S. CORNELL OVERSEAS PVT. LTD., VS. DCIT, CIRCLE 3 (1), B 235, OKHAL INDL. AREA, PHASE I, NEW DELHI. NEW DELHI 110 020. (PAN NO.AAACC0034F) (APELLANT) (RESPONDENT) ASSESSEE BY : SHRI TARUN CHATURVEDI & MS. VANDANA B HANDARI, CAS DEPARTMENT BY : SHRI KRISHNA, CIT DR O R D E R PER B.C. MEENA, ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED U/S 143(3) READ WITH SECTI ON 144C OF THE INCOME- TAX ACT DATED 26.07.2010. 2. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING, BUYING, SELLING, EXPORTING VARIOUS K INDS OF READYMADE GARMENTS AND HOME FURNISHINGS. 3. AT THE OUTSET OF THE HEARING, LEARNED AR SUBMITT ED THAT THE LEARNED DRP HAS PASSED A SUMMARY ORDER AND ALL THE OBJECTIO NS RAISED BY THE ASSESSEE HAVE NOT BEEN CONSIDERED BY THE DRP. HE A LSO POINTED OUT THAT EVEN IN THE CASE OF LEGAL AND PROFESSIONAL EXPENSES , THE DRP HAS GRANTED ITA NO.4453/DEL/2010 2 THE RELIEF OF ONLY RS.1 LACS WHEREAS OTHER EXPENSES OF SIMILAR NATURE WERE NOT CONSIDERED. ON THE ISSUE OF TRANSFER PRICING ALSO, THE OBJECTION OF THE ASSESSEE WAS SUMMARILY REJECTED AND PRAYED TO RESTO RE THE ISSUE TO THE FILE OF DRP FOR RECONSIDERATION. 4. ON THE OTHER HAND, THE LEARNED DR WAS ALSO NOT H AVING ANY SERIOUS OBJECTION TO THIS PROPOSITION. 5. WE HAVE HEARD BOTH THE SIDES AND ALSO GONE THROU GH THE ORDER OF THE DRP. THE LEARNED DRP HAS DECIDED THE ISSUE AS UNDER :- 07. ASSESSEE HAS FURNISHED DETAILED SUBMISSION IN SUPPORT OF GROUNDS OF OBJECTIONS. HOWEVER, AFTER GO ING THROUGH THE ORDER OF ASSESSING OFFICER, SUBMISSION OF THE ASSESSEE AND MATERIAL AVAILABLE ON RECORD, WE ARE O F THE OPINION THAT THE TP ADJUSTMENT HAS BEEN MADE BY THE TPO AFTER AFFORDING REASONABLE OPPORTUNITY TO THE ASSES SEE. TPO HAS CHOSEN PROPER COMPARABLES AND BENCHMARKING IS A LSO HELD TO BE IN ORDER. NO INTERFERENCE WITH THE ADJUS TMENT IS CALLED FOR. 08. AS REGARDS THE DISALLOWANCE OF LEGAL AND PROFESSIONAL EXPENSES ARE CONCERNED, WE DO NOT AGRE E WITH THE VIEW OF ASSESSING OFFICER THAT THESE ARE ALL CA PITAL EXPENSES. KEEPING IN VIEW THAT THE ASSESSEE IS IN T HE BUSINESS OF MANUFACTURING AND EXPORT OF READYMADE GARMENTS AND HOME FURNISHING, OF THE TOTAL EXPENSES OF RS.18,26,000/- WE FIND THAT RS.L,00,000/- PAID FOR HAND EMBROIDERY AND DESIGNING WORK SHOULD BE ALLOWED AS REVENUE EXPENSES AND DIRECT THE AO ACCORDINGLY. 09. AO HAS ADDED BACK RS.4,59,351/- UNDER THE HEAD REPAIR AND MAINTENANCE TREATING THEM AS CAPITAL IN NATURE. BEFORE US, ASSESSEE HAS EXPLAINED THAT MOST OF THE EXPENDITURE IS RECURRING AND CURRENT IN NATURE END IN THE NORMAL COURSE OF BUSINESS SUCH AS REPAIRING OF THE FACTORY FLOOR, REPLACEMENT OF COIL ETC OF THE BOILER AND RE PAIR AND POLISHING OF THEIR FACTORY AT OKHLA PHASE-I. THE MA TTER HAS ITA NO.4453/DEL/2010 3 BEEN CONSIDERED BY DRP WHICH HAS ACCORDINGLY ACCEPT ED THAT THE EXPENDITURE UNDER THIS HEAD ARE RECURRING AND CURRENT IN NATURE HENCE THE SAME IS TO BE ALLOWED A S REVENUE EXPENSES. AO IS DIRECTED ACCORDINGLY. 10. AS REGARDS THE DISALLOWANCE OF INTEREST ON ADVA NCE GIVEN TO SEVERAL PARTIES, WE DO NOT FIND ANY INFIRM ITY IN THE ORDER OF ASSESSING OFFICER AND DECLINE TO INTERFERE IN THE ORDER. SINCE BOTH THE SIDES HAD AGREED TO RESTORE THE ISSU E TO THE FILE OF THE DRP FOR MAKING A SPEAKING ORDER, WE RESTORE THE ISSUE T O THE FILE OF DRP WITH A DIRECTION THAT THE DRP MAY PASS A FRESH SPEAKING ORDER U/S 144C OF THE INCOME-TAX ACT PREFERABLY WITHIN A YEAR FROM THE DA TE OF THE SERVICE OF THE ORDER AFTER PROVIDING AN OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THE 18 TH DAY OF AUGUST, 2011. SD/- SD/- (RAJPAL YADAV) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : THE 18 TH DAY OF AUGUST, 2011 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.DRP-I, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR/ITAT