ACIT, New Delhi V. M/s. Sumi Motherson InnovativeEngg Ltd., New Delhi

ITA 4693/DEL/2012

• Counselvise Citation: 469320114 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 04-02-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 31-08-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PEEYUSH JAIN
• Assessee Lawyers: K M GUPTA SHRI KUNCHUN KAUSHAL
• Keywords: Depreciation; Transfer pricing
• Section: 80HHC; 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: I NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SHRI I. C. SUDHIR, JUDICIAL MEMBER ITA NO. 4693/DEL/2012 (ASSESSMENT YEAR-2004-05) & ITA NO. 4694/DEL/2012 (ASSESSMENT YEAR-2005-06) DCIT, CIRCLE 9(1) ROOM NO. 163, C. R. BUILDING, NEW DELHI VS M/S SUMI MOTHERSON INNOVATIVE ENGINEERING LTD., F-7, BLOCK B-1, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI-44 (APPELLANT) (RESPONDENT) CO NO. 431/DEL/2012 (ASSESSMENT YEAR-2004-05) M/S SUMI MOTHERSON INNOVATIVE ENGINEERING LTD., F-7, BLOCK B- 1, MOHAN COOPERATIVE INDUSTRIAL ESTATE, MATHURA ROAD, NEW DELHI-44 VS DCIT, CIRCLE 9(1) ROOM NO. 163, C. R. BUILDING, NEW DELHI (APPELLANT) (RESPONDENT) PAN NO: AAHCS2268L ASSESSEE BY: SHRI K. M. GUPTA, SHRI KUNCHUN KAUSHAL & SHRI TARUN KUMAR REVENUE BY: SHRI PEEYUSH JAIN DATE OF HEARING 4.2.2014 DATE OF PRONOUNCEMENT 11.2.2014 ORDER PER BENCH: THESE TWO APPEALS BY THE REVENUE FOR THE ASSESSMEN T YEARS 2004-05 AND 2005-06 AND ONE CROSS OBJECTION BY THE ASSESSEE FOR THE ASSESSMENT YEAR 2004-05 ARE DIRECTED AGAINST TH E COMMON 4693, 4694 & CO N O. 431/DEL/2012 2 ORDER PASSED BY THE CIT(A) ON 27.6.2012. SINCE SOME OF THE ISSUES RAISED IN THESE APPEALS ARE COMMON, WE ARE THEREFOR E, PROCEEDING TO DISPOSE THEM BY THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. BEFORE TAKING UP THESE APPEALS, IT IS RELEVANT TO MENTION THAT THE CROSS APPEALS FOR THE ASSESSMENT YEAR 2003-04 W ERE SIMULTANEOUSLY ARGUED. RATHER, THE ARGUMENTS ADVANC ED FOR THE ASSESSMENT YEAR 2003-04 HAVE BEEN ADOPTED FOR THE Y EARS UNDER QUESTION WITHOUT MAKING ANY SEPARATE DETAILED SUBMI SSIONS. WE HAVE PASSED A SEPARATE ORDER FOR THE ASSESSMENT YEA R 2003-04 DEALING WITH THE ISSUES AT LENGTH. THE DECISION TAK EN IN THE ORDER FOR THE SAID PRECEDING YEAR WILL BE FOLLOWED FOR SI MILAR GROUNDS IN RESPECT OF APPEALS FOR THE YEARS UNDER CONSIDERATIO N. ASSESSMENT YEAR 2004-05 3. FIRST GROUND OF THE REVENUES APPEAL IS AGAINST ALLOWING OF DEPRECIATION AT 40% AS AGAINST 25% ON MOLDS USED IN PLASTIC BUSINESS. THE FACTS AND CIRCUMSTANCES OF THIS GROUN D ARE ADMITTEDLY SIMILAR TO THOSE OF GROUND NO. 7 FOR THE ASSESSMENT YEAR 2003-04, WHICH HAS NOT BEEN ALLOWED BY US IN OUR SE PARATE ORDER. FOLLOWING THE VIEW TAKEN FOR THE ASSESSMENT YEAR 20 03-04, THIS GROUND IS NOT ALLOWED. 4693, 4694 & CO N O. 431/DEL/2012 3 4. GROUND NO. 2 IS AGAINST DELETION OF TRANSFER PRI CING ADDITION ON ACCOUNT OF ARMSS LENGTH PRICE AMOUNTING TO RS. 2,28,66,074/-. FOR THIS YEAR ALSO, THE ASSESSEE ADOPTED PROFIT LEV EL INDICATOR (PLI) OF CASH PROFIT TO SALES BY APPLYING TRANSACTIONAL N ET MARGIN METHOD (TNMM) IN RESPECT OF THE TOOLING DIVISION. THE LD. CIT(A) DELETED THE ADDITION BY GIVING THE SAME REASON AS W ERE GIVEN BY HIM FOR THE PRECEDING YEAR. NO DIFFERENCE IN THE FA CTS AND CIRCUMSTANCES FOR THE INSTANT YEAR HAS BEEN SHOWN VIS--VIS THAT FOR THE ASSESSMENT YEAR 2003-04. WE HAVE ALLOWED THIS G ROUND OF THE REVENUE FOR THE IMMEDIATELY PRECEDING YEAR. FOLLOWI NG THE VIEW TAKEN FOR SUCH EARLIER YEAR, THIS GROUND IS ALLOWED . 5. GROUND NO. 3 OF THE DEPARTMENTAL APPEAL IS AGAIN ST THE DISALLOWANCE OF DEDUCTION U/S 80HHC. THE ASSESSEE I N ITS CROSS OBJECTION HAS PUT FORTH A CLAIM AT 100% DEDUCTION O F THE EXPORT PROFIT U/S 80HHC FROM THE BOOK PROFITS AS COMPUTED U/S 115JB. SIMILAR GROUND WAS RAISED BY THE REVENUE AS GROUND NO. 2 FOR THE ASSESSMENT YEAR 2003-04. WE HAVE ACCEPTED THE ASSES SEES CONTENTION ABOUT THE CORRECTNESS OF THE LD. CIT(A) S ORDER ON THIS ISSUE IN ACCORDANCE WITH THE TRIBUNAL ORDER FOR THE STILL EARLIER YEAR. IT IS FURTHER NOTICED THAT THE HONBLE SUPREME COUR T IN AJANTA PHARMA LTD. VS CIT (2010) 327 ITR 305 HAS HELD ON THIS ISSUE THAT : `CLAUSE (IV) OF THE EXPLANATION TO S. 115JB COVER S FULL EXPORT PROFITS OF 100 PER CENT AS 'ELIGIBLE PROFITS' AND T HE SAME CANNOT BE 4693, 4694 & CO N O. 431/DEL/2012 4 REDUCED TO 80 PER CENT BY RELYING ON S. 80HHC(1B). RELYING ON THE ABOVE JUDGMENT, THE ASSESSEES CONTENTION FOR T HIS YEAR THROUGH ITS C.O IS THAT 100% OF THE EXPORT PROFIT SHOULD BE ALLOWED TO BE REDUCED FROM THE BOOK PROFITS FOR THE PURPOSE OF CO MPUTATION U/S 115JB. WE ADMIT THIS GROUND IN PRINCIPLE BEING A LE GAL ISSUE, THOUGH IT WAS NOT RAISED EITHER BEFORE THE AO OR BE FORE THE LD. CIT(A). HOWEVER, UNDER THE GIVEN FACTS, WE CONSIDE R IT EXPEDIENT TO SET ASIDE THE IMPUGNED ORDER ON THIS ISSUE AND R EMIT THIS MATTER TO THE FILE OF THE AO FOR DECIDING IT AFRESH IN THE LIGHT OF THE JUDGMENT OF HONBLE SUPREME COURT IN THE CASE OF AJANTA PHARMA LTD. (SUPRA). 6. IN THE RESULT THE APPEAL OF THE REVENUE IS PARTL Y ALLOWED AND THE CO OF THE ASSESSEE IS ALLOWED FOR STATISTICAL P URPOSES. ASSESSMENT YEAR 2005-06 7. FIRST GROUND OF THE REVENUES APPEAL IS AGAINST THE DELETION OF DISALLOWANCE OF TRAINING EXPENSES AMOUNTING TO R S. 5,31,500/-. IT IS NOTICED THAT SIMILAR ISSUE WAS INVOLVED IN TH E REVENUES APPEAL FOR THE ASSESSMENT YEAR 2003-04 THROUGH GROU ND NO. 5. WE HAVE UPHELD THE LD. CIT(A)S VIEW ON SUCH ISSUE TH EREBY DISMISSING REVENUES GROUND. FOLLOWING THE SAME, TH IS GROUND IS ALSO NOT ALLOWED. 4693, 4694 & CO N O. 431/DEL/2012 5 8. THE SECOND GROUND IS AGAINST THE INCREASE IN THE RATE OF DEPRECIATION TO 40% FROM 25% ON MOULDS USED FOR PLA STIC BUSINESS. SIMILAR GROUND HAS BEEN REJECTED BY US I N OUR ORDER FOR THE ASSESSMENT YEAR 2003-04. FOLLOWING THE SAME VI EW, THIS GROUND IS ALSO DISMISSED. 9. THE LAST GROUND OF THE REVENUES APPEAL IS AGAIN ST THE DELETION OF ADDITION OF RS. 1,11,41,680/- ON ACCOUN T OF TRANSFER PRICING ADJUSTMENT MADE BY THE TPO. FOR THIS YEAR A LSO THE ASSESSEE ADOPTED `CASH PROFIT TO SALES AS PLI IN R ESPECT OF TOOLING DIVISION, WHICH WAS NOT ACCEPTED BY THE TPO, WHO PR OCEEDED TO COMPUTE ALP WITH THE PLI OF `OP TO SALES. SIMILAR POSITION WAS PREVAILING IN THE IMMEDIATELY PRECEDING YEAR. WE HA VE APPROVED THE AOS STAND THEREBY CONFIRMING THE ADDITION WHIC H WAS DELETED BY THE LD. CIT(A). FOLLOWING THE SAME VIEW, WE REST ORE THE ADDITION OF RS.1.11 CRORE WHICH WAS DELETED BY THE LD. CIT(A). THIS GROUND IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11.2.2014. SD/- SD/- (I. C. SUDHIR) (R. S . SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11.2.2014 *SUBODH* 4693, 4694 & CO N O. 431/DEL/2012 6 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR DATE INITIAL 1. DRAFT DICTATED ON 4.2.2014 PS 2. DRAFT PLACED BEFORE AUTHOR 7.2.2014 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. *