DCIT, New Delhi V. M/s Central Electronics Ltd., New Delhi

ITA 485/DEL/2011

• Counselvise Citation: 48520114 RSA 2011
• Duration Of Justice: 1 year(s) 7 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-09-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-09-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 28-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI S.V.MEHROTRA, ACCOUNTANT MEMBER AND SHRI KULBHARAT, JUDICIAL MEMBER I.T.A .NO.- 485/DEL/2011 (ASSESSMENT YEAR-2003-04) DCIT VS. CENTRAL ELECTRONICS LTD. CIRCLE 3(1), 781, DESH BANDHU GUPTA ROAD, NEW DELHI. KAROL BAGH, NEW DELHI PAN-AAACC1261G (A PPELLANT) (RESPONDENT ) APPELLANT BY: SH. R.S.SINGHVI, CA RESPONDENT BY: SH. AROOP KR. SINHA, SR. DR APPEAL HEARD ON-04.09.2012 ORDER PRONOUNCED ON-14.09.2012 ORDER PER KULBHARAT, JM THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 31.11.2010 OF LD. CIT(A)-VI, NEW DELHI OF DELETION OF PENALTY OF RS, 4,04,617/-. 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF THE APPEAL:- (1). IN THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING PENALTY O F RS. 4,04,617/- IMPOSED U/S 271(1)(C) OF THE I.T.ACT , 1961 IGNORING THAT AS PER EXPLANATION 3 TO SECTION 32 OF THE I.T.ACT, TECHNICAL KNOW-HOW IS AN INTANGIBLE ASSET. RELI ANCE IS ALSO PLACE ON THE DECISION OF HONBLE SUPREME COURT IN S OUTHERN SWITCH GEAR LTD. VS CIT 232 ITR 359(SC); AND CIT VS POLYFORMATION PVT. LTD. 161 ITR 36(KER.). I.T.A .NO.- 485/DEL/2011 2 2). THE APPELLANT CRAVES LEAVE FOR RESERVING THE RI GHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S ) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS AP PEAL. 3. THE FACTS IN BRIEF ARE THAT THE ASSESSMENT U/S 1 43(3) IN THE INCOME TAX ACT, 1961 (HEREIN AFTER, REFER TO AS THE ACT) WAS M ADE ASSESSING AT LOSS OF RS. 2,15,39,913/-. WHILE FRAMING THE ASSESSMENT U/S 14 3(3) OF THE ACT, THE ASSESSING OFFICER MADE AN ADDITION AMOUNTING TO RS. 14,66,000/- ON ACCOUNT OF CAPITALIZATION OF TECHNICAL KNOW-HOW FEE. THE A SSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT. THE AFOREMENTIONED ADDITION WAS CONFIRMED BY THE LD. CIT(A), WITH THE DIRECTION TO ALLOW 25% DEPRECIATION AGAINST CAPITALIZATION OF TECHNICAL KN OW-HOW FEE. SUBSEQUENTLY, THE PENALTY WAS LEVIED BY THE ASSESSI NG OFFICER, ON THE BASIS THAT THE ASSESSEE HAD NOT FURNISHED ACCURATE PARTIC ULARS OF HIS INCOME. THE ASSESSEE AGGRIEVED BY THE PENALTY ORDER FILED AN AP PEAL BEFORE THE LD. CIT(A), WHO AFTER CONSIDERING THE VARIOUS JUDICIAL PRONOUNCEMENTS DELETED THE PENALTY AGAINST THE ORDER OF LD. CIT(A), THE RE VENUE HAS FILED THE PRESENT APPEAL. 4. LD. DR STRONGLY RELIED ON THE PENALTY ORDER. ON THE CONTRARY, LD. AR SUBMITTED THAT THE ISSUE IS CLEARLY COVERED BY THE DECISION OF THE HONBLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS DEB AN INTERNATIONAL LTD. [(2010) 2, DTLONLINE 140 (DELHI)] AND CIT VS H.M.A. UDYOG (P) LTD. [(2007) 159 TAXMAN 394 (DELHI)/(2007) 211 CTR 543 ( DELHI)]. HE I.T.A .NO.- 485/DEL/2011 3 SUBMITTED THAT THE HONBLE DELHI HIGH COURT IN ITA NO. 1060 OF 2006 HAS HELD THAT WHETHER QUESTION OF EXPENDITURE INCURRED BY THE ASSESSEE IS A REVENUE EXPENDITURE OR A CAPITAL EXPENDITURE IS A D EBATABLE ISSUE AND EVEN AFTER IT IS ULTIMATELY DECIDED AGAINST THE ASSESSEE , IT CAN NOT BE SAID THAT ASSESSEE HAS ATTEMPTED TO CONCEAL PARTICULARS OF HI S INCOME OR FURNISHED INACCURATE PARTICULARS SO AS TO ATTRACT PENAL PROVI SIONS OF SECTION 271(1)(C). SINCE IT HAS BEEN HELD BY THE HONBLE JURISDICTIONA L HIGH COURT THAT THE ISSUE OF WHETHER EXPENDITURE IS A CAPITAL EXPENDITURE OR REVENUE EXPENDITURE, IS A DEBATABLE ISSUE AND ON SUCH ISSUE, NO PENALTY IS LE VIABLE. 5. WE HAVE HEARD THE RIVAL CONTENTION PERUSED MATER IAL AVAILABLE ON RECORD AND THE JUDGEMENT CITED. WE FIND THAT THE L D. CIT(A) HAS OBSERVED THAT THE PENALTY IS IMPOSED ON THE AMOUNT DEBITED O N ACCOUNT OF TECHNICAL KNOW-HOW FEE WHICH WAS TREATED BY THE ASSESSING OFF ICER AS CAPITAL EXPENDITURE. LD. CIT(A) RELYING UPON THE VARIOUS JU DGEMENTS OF THE HONBLE JURISDICTIONAL HIGH COURT CAME TO CONCLUSION THAT T HE ISSUE AS TO WHETHER THE PAYMENT MADE TO M/S IMEC, BELGIUM FOR TECHNICAL KNO W-HOW IS A CAPITAL OR REVENUE EXPENDITURE IS A DEBATABLE ISSUE. 6. RESPECTFULLY, FOLLOWING THE DECISION OF THE HON BLE DELHI HIGH COURT RENDERED IN THE CASE OF CIT VS H.M.A.UDYOG (P) LTD. (SUPRA), WE FIND NO INFIRMITY IN THE ORDER OF LD. CIT(A). THE CASE LAW S AS RELIED UPON THE I.T.A .NO.- 485/DEL/2011 4 REVENUE, IS NOT APPLICABLE ON THE FACTS AND CIRCUMS TANCES OF THE PRESENT CASE. HENCE THIS GROUND OF THE REVENUES APPEAL IS DISMIS SED. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.09.2012. SD/- SD/- (S.V.MEHROTRA) (KULBHARAT) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 14/09/2012 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI