ACIT, CHENNAI V. TVS Motor Company Limited, CHENNAI

ITA 51/CHNY/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8009 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2017
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 08-01-2016
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN
• Keywords: Revised return; Capital expenditure
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . , ' # BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A. NO. 51/MDS/2016 / ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), NEW BLOCK, 4TH FLOOR, 121, MAHATMA GANDHI ROAD, NUNGAMBAKKAM, CHENNAI - 600 034. VS. M/S. TVS MOTOR COMPANY LIMITED, 'JAYALAKSHMI ESTATES' NO. 29, HADDOWS ROAD, CHENNAI - 600 006. [PAN: AAACS 7032B] ( / APPELLANT) ( / RESPONDENT) % & / APPELLANT BY : SHRI CLEMENT RAMESH KUMAR, ADDL.CIT )*% & / RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE & /DATE OF HEARING : 19.10.2016 & /DATE OF PRONOUNCEMENT : 16.01.2017 /O R D E R PER G. PAVAN KUMAR, JUDICIAL MEMBER: THE REVENUE HAS FILED AN APPEAL AGAINST THE ORDER O F COMMISSIONER OF INCOME TAX (APPEALS) - 11, CHENNAI IN ITA NO. 63 /CIT(A)-11/2014-15, DATED 14.10.2015 PASSED U/S. 143(3) R.W.S. 147 OF THE INC OME TAX ACT. :-2-: I.T.A. NO. 51/MDS/2016 2. BEFORE WE PROCEEDED FOR HEARING THERE IS A DELAY OF 4 DAYS IN FILING THE APPEAL BY THE REVENUE. THE LD. DR FILED CONDONATION PETITION AND EXPLAINED THE CIRCUMSTANCES FOR DELAY WHICH ARE NOT DELIBERATE. FURTHER, LD. AR OF THE ASSESSEE HAS NO SERIOUS OBJECTIONS FOR CONDONATION OF DELAY. AFTER HEARING THE SUBMISSIONS, WE ARE SATISFIED WITH THE REASONABLE C AUSE EXPLAINED IN AFFIDAVIT FOR FILING THE APPEAL BELATEDLY. THEREFORE, THE DELAY IS CONDONED AND APPEALS ARE ADMITTED. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 3.1 THE LD. CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF RS. 34,89,90,500/- CLAIMED U/S. 35(2AB) AS THE ASSESSE E COMPANY HAS NOT COMPLIED WITH THE ESSENTIAL CONDITIONS LAID DOWN I N SUB-RULE 7A(B) AND SUB-RULE 7A(C) OF RULE 6 OF THE INCOME TAX RULE, 1 962 FOR CLAIMING DEDUCTION U/S. 35(2AB). 3.2 THE LD. CIT(A) OUGHT TO HAVE SEEN THE FACT THE ASSESSEE COMPANY HAS NOT OBTAINED THE APPROVAL OF EXPENDITURE FROM PRES CRIBED AUTHORITY IN FORM 3CL WITHIN THE PRESCRIBED TIME LIMIT 3.3 THE LD. CIT(A) FAILED TO NOTE THE FACT THE ASSE SSEE COMPANY HAS NOT PRODUCED ANY DOCUMENT IN SUPPORT TO ESTABLISH THAT IT HAS SUBMITTED THE COPY OF AUDITED ACCOUNT MAINTAINED SEPARATELY IN RESPECT OF THE :-3-: I.T.A. NO. 51/MDS/2016 R&D UNIT TO THE SECRETARY, DSIR AS MANDATED IN SUB -RULE 7A(C) OF RULE 6. 4. THE BRIEF FACTS OF THE CASE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF AUTOMOBILES AND SPARE PARTS AND FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 ON 28.11.2006 WITH TOTAL INCOME OF RS. 122,86,28,659/-. SUBSEQUENTLY REVISED RETURN WAS F ILED ON 28.03.2008 WITH TOTAL INCOME OF RS 105,79,52,847/- AND ASSESSMENT WAS COM PLETED U/S. 143(3) R.W.S. 147 OF THE ACT DETERMINING INCOME OF RS. 112,03,30, 176/-. FURTHER, ONCE AGAIN THE ASSESSMENT WAS RE-OPENED U/S. 147 OF THE ACT BY ISSUE OF NOTICE U/S. 148 DATED 28.02.2013, RECORDING THE REASONS AS CLAIM OF WEIGHTED DEDUCTION U/S. 35(2AB) OF RS. 37,98,52,294/-. IN COMPLIANCE TO NO TICE, THE LD. AR OF THE ASSESSEE APPEARED FROM TIME TO TIME AND FILED REPLY EXPLAINING POINTS AND CASE WAS DISCUSSED. THE LD. AO ON EXAMINING OF THE FINA NCIAL STATEMENT, AND THE WRITTEN SUBMISSIONS OF THE ASSESSEE FOUND THAT THE ASSESSEE COMPANY CLAIMED DEDUCTION U/S. 35(2AB) OF THE ACT AND VERIFIED THE RELEVANT DOCUMENTS SENT THE DSIR, NEW DELHI WAS ONLY IN MARCH 2009 AND THE ACCO UNTS OF THE R & D CENTRE WERE AUDITED ON 09.03.2009. SINCE, THE FINANCIAL S TATEMENT/ACCOUNTS OF IN-HOUSE R & D CENTRE WERE AUDITED AND ASSESSEE HAS FILED TH E REQUISITE NECESSARY DOCUMENTS U/S. 35(2AB) OF THE ACT ONLY ON 12.03.200 9 AFTER STIPULATED DATE OF 31.10.2006 AS PER PROVISIONS OF RULE 6-7A(C) OF INC OME TAX RULES AND THEREFORE ASSESSEE IS NOT ELIGIBLE FOR WEIGHTED DEDUCTION AND MADE DISALLOWANCE :-4-: I.T.A. NO. 51/MDS/2016 CONSIDERING EARLIER AMOUNT AND DISALLOWED RS. 34,89 ,90,500/- AND PASSED ORDER U/S. 143(3) R.W.S. 147 OF THE ACT DATED 18.03.2014 WITH TOTAL INCOME OF RS. 146,93,20,676/-. 5. AGGRIEVED BY THE ORDER, THE ASSESSEE FILED AN AP PEAL WITH THE CIT(A). IN THE APPELLATE PROCEEDINGS, THE LD. AR ARGUED THE GROUNDS AND EXPLAINED THE FACTS AND SUBMISSIONS IN THE ASSESSMENT PROCEEDINGS . THE ASSESSEE COMPANY WAS RECOGNISED BY DSIR FOR CLAIM OF DEDUCTION U/S. 35(2AB) OF THE INCOME TAX ACT FOR THE PERIOD OF 29.09.2004 TO 31.03.2007 VIDE DSIR ORDER 17.04.2006 AND THEREFORE, AT THE TIME OF FILING RETURN OF INCOME, ASSESSEE HAS CLAIMED THE DEDUCTION. FURTHER, THE LD. AR SUBMITTED THAT THE ACCOUNTS OF THE R & D CENTRE WERE AUDITED AND CONSIDERED BY THE BOARD OF DIRECTO RS ON 26.06.2006. THE AUDITED REPORT EXPLAINED THE DETAILS OF R & D EXPE NDITURE WHICH WERE QUANTIFIED AND CLAIMED IN THE RETURN OF INCOME. THE ASSESSEE COMPANY ACCOUNTS WERE AUDITED IN JUNE 2006 AND THE CERTIFICATE WAS OBTAIN ED IN FORM 3CL ON 09.03.2009. FURTHER, THE ASSESSEE COMPANY HAS CLAI MED RELIED BASED ON THE AUDITED ACCOUNTS BUT THERE WAS DELAY IN FURNISHING REPORT TO THE DSIR AND CLAIM WAS CONSIDERED IN THE RETURN OF INCOME AND THE DSIR HAS ACCEPTED AND APPROVED R & D ACTIVITIES AND EXPENSES, AND CERTIFI ED BY THE DSIR ORDER DATED 24.08.2010. THE LD. CIT(A) RELIED ON THE FINDINGS OF THE EARLIER ORDER AND TRIBUNAL ORDER AT PARA 7.42 WHICH READ AS UNDER: :-5-: I.T.A. NO. 51/MDS/2016 '7.4.2 IN THE ORIGINAL ASSESSMENT COMPLETED U/S. 1 43(3) DATED 23.12.2008, THE AO HAS NOT RECOGNISED THE R & D WOR K-IN-PROGRESS AND R & D PENDING ALLOCATION EXPENSES, AND CONSEQUENTLY N OT ALLOWED THE DEDUCTION U/S. 35(1)(IV) AND WEIGHTED DEDUCTION U/S . 35(2AB) OF THE INCOME TAX ACT. HOWEVER, THE AO HAS GRANTED WEIGHT ED DEDUCTION U/S. 35(2AB) ON OTHER R & D CAPITAL EXPENDITURE. THE AP PELLANT WENT ON APPEAL TO CIT(A) AND THE CIT(A) HAS GIVEN A FINDING AS FOLLOWS: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSION OF THE LD. AR. I HAVE ALSO PERUSED THE DETAILS SUB MITTED BY THE APPELLANT. I HAVE ALSO GONE THROUGH THE ORDERS PAS SED BY MY LD. PREDECESSOR IN APPELLANT'S OWN CASE FOR ASSESSMENT YEAR 2000-01 AND 2005-06. THE HON'BLE ITAT IN ITS RECENT DECISION F OR ASSESSMENT YEAR 2005-06 IN ITA NOS. 697 & 757/MDS/1008 AND ITA NOS. 976 & 1017/MDS/2009 DATED 22.12.2010 HAD CONSIDERED THE I SSUE AT PARAS 7 TO 7(IV) AND HAS DECIDED IT IN FAVOUR OF THE APPELL ANT. FURTHER, THE DSIR HAS ALSO ISSUED FORM 3CL ON 24.08.2010 QUANTIF YING THE AMOUNT. IN VIEW OF THE ABOVE AND RESPECTFULLY FOLLOWING THE DECISIONS OF THE HON'BLE TRIBUNAL, THE AO IS DIRECTED TO ALLOW THE D EDUCTION AS QUANTIFIED BY THE DSIR IN FORM 3CL. ACCORDINGLY, T HIS GROUND IS ALLOWED FOR STATISTICAL PURPOSE. ' 7.4.3 ON FURTHER APPEAL TO THE ITAT BY THE DEPARTME NT, THE ITAT HAS HELD AS UNDER: 'WE HAVE PERUSED THE ORDERS AND HEARD THE SUBMISSI ON. INSOFAR AS WORK IN PROGRESS UNDER R & D WAS CONCERNED, WE ARE FOLLOWING ORDER OF THIS TRIBUNAL THAT THE CLAIM IS ALLOWABLE U/S. 3 5(1)(IV) OF THE ACT, DESPITE THE AMOUNT BEING SHOWN AS PENDING ALLOCATIO N IN BOOKS. THE CLAIM U/S. 35(2AB) IS ON SIMILAR FOOTING AND IT IS CLEARLY NOTED BY THE CIT(A) THAT ASSESSEE HAD SUBMITTED ALL DETAILS WITH REGARD TO CLAIM AND ALSO OBTAINED CERTIFICATE FROM DSIR IN FORM 3CL WHI CH QUANTIFIED THE :-6-: I.T.A. NO. 51/MDS/2016 AMOUNT OF ALLOWANCE. LD. CIT(A) HAD DIRECTED ALLOW ANCE OF AMOUNT BASED ON CERTIFICATE OF DSIR AND REMITTED THE MATTE R BACK TO THE FILE OF THE AO FOR CONSIDERING SUCH CERTIFICATE FOR DECIDIN G THE QUANTUM OF ALLOWANCE. WE DO NOT FIND ANY REASON TO INTERFERE SINCE CIT(A) HAD ONLY DIRECTED THE ASSESSING OFFICER TO GIVE THE ALL OWANCE IN ACCORDANCE WITH QUANTIFICATION DONE BY DSIR IN FORM NO. 3CL.' THE LD. CIT(A) IS OF THE OPINION THAT THE TRIBUNAL IN EARLIER YEARS DIRECTED THE ASSESSING OFFICER TO CONSIDER THE CLAIM IN ACCORDAN CE WITH THE CERTIFICATE ISSUED BY DSIR. WHEREAS, IN THE PRESENT CASE THE ASSESSEE HAS COMPLIED THE REQUISITE CONDITIONS FOR CLAIM OF DEDUCTION AS APPROVED BY DS IR. WHEREAS, THE TIME LIMIT PRESCRIBED UNDER THE RULE 6(7A)(C) MEANT ONLY FOR A PPROVAL OF DSIR AND THE LD. CIT(A) WITH THESE OBSERVATIONS RELIED ON THE FINDIN GS AND EARLIER ORDERS AND DELETED THE ADDITION DUE TO DISALLOWANCE U/S. 35(2A B) OF THE ACT AND ALLOWED THE APPEAL. 6. AGGRIEVED BY THE CIT(A) ORDER, THE REVENUE HAS F ILED AN APPEAL BEFORE THE TRIBUNAL. BEFORE US, THE LD. DR ARGUED THAT TH E LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 34,89,90,500/- CLAIMED U/S. 35(2AB) AS THE ASSESSEE COMPANY HAS NOT COMPLIED WITH THE ESSENTIAL CONDITI ONS IN RULE 6(7A)(B) AND 6(7A)(C) FOR CLAIM OF DEDUCTION AND HAS NOT OBTAINE D THE APPROVAL BY THE PRESCRIBED AUTHORITY IN FORM 3CL WITHIN THE TIME LI MIT AND PRAYED THE ORDER OF THE CIT(A) TO SET ASIDE AND ALLOW THE GROUND. CONTR A, THE LD. AR OF THE ASSESSEE :-7-: I.T.A. NO. 51/MDS/2016 RELIED BY THE CIT(A) AND TRIBUNAL ORDERS IN ASSESSE E'S OWN CASE AND OPPOSED TO THE GROUNDS. 7. WE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATE RIAL ON RECORD AND JUDICIAL DECISIONS CITED. THE LD. DR CONTENTION TH AT THE ASSESSEE HAS NOT COMPLIED THE ESSENTIAL CONDITIONS UNDER THE RULE 6( 7A)(B) & (C). WHEREAS, THE LD. AR SUBMITTED THAT THE ACCOUNTS ARE AUDITED AND HAS COMPLIED THE CONDITIONS PRESCRIBED UNDER THE LAW AND SUPPORTED WITH THE DEC ISION ON THE SIMILAR ISSUE BY THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR EARLIER ASS ESSMENT YEAR. WE PERUSED THE RULES APPLICABLE FOR THE CLAIM OF WEIGHTED DEDUCTIO N U/S. 35(2AB) AND WHERE RULE 6(7A)(B) & 6(7A)(C) OF INCOME TAX RULES PRESCR IBED, THE ASSESSEE HAS TO MAINTAIN SEPARATE ACCOUNTS FOR APPROVED FACILITIES AND FURNISH THE AUDITED ACCOUNTS TO THE DEPARTMENT OF DSIR BY 31ST OCTOBER OF EACH SUCCEEDING YEAR. 8. WE ARE OF THE VIEW THAT THE R & D FACILITIES AND THE COMPLIANCE ARE NECESSARY FOR OBTAINING PERMISSION FROM THE DSIR. THE LD. AR DREW OUR ATTENTION TO FILING OF THE AUDITED CERTIFICATE AND FORM 3CL AND WHEREAS THE FORM 3CL WAS ISSUED BY THE DSIR IN RESPECT OF IN-HOUSE R ESEARCH FACILITY FOR THE ASSESSMENT YEAR 2005-06, 2006-07, 2007-08 AND 2008- 09 BY LETTER DATED 24.08.2010 AND IT IS VERY IMPORTANT DOCUMENT FOR TH E ASSESSEE TO CLAIM DEDUCTION OF IN-HOUSE RESEARCH FACILITY, EXPENDITUR E ON LAND AND BUILDING. ON COMPARISON WITH THE CLAIM MADE BY THE ASSESSEE, THE FORM NO. 3CL IS REQUISITE :-8-: I.T.A. NO. 51/MDS/2016 UNDER THE RULE 6(7A)(B) & (C) OF THE INCOME TAX RUL ES. WHEREAS, THE ASSESSEE HAS OBTAINED FORM NO. 3CL REPORT OF GRANTING APPROV AL ONLY ON 24.08.2010 AND ALSO THERE IS NO DISPUTE OF MAINTAINING SEPARATE AC COUNTS AS PRESCRIBED. IN THE INTEREST OF THE JUSTICE, WE ARE OF THE OPINION THAT THE ASSESSING OFFICER HAS TO EXAMINE THE FACTS, CONDITIONS AND PROVISIONS UNDER THE INCOME TAX ACT AND INCOME TAX RULES FOR CLAIM OF WEIGHTED DEDUCTION U/ S. 35(2AB) OF THE ACT AND THE APPROVAL OF DSIR AUTHORITIES. ACCORDINGLY, WE SET ASIDE THE ORDERS OF CIT(A) AND REMIT THE DISPUTED ISSUE TO THE FILE OF THE ASS ESSING OFFICER TO EXAMINE THE COMPLIANCES AND CLAIMS AND THE ASSESSEE SHOULD BE P ROVIDED ADEQUATE OPPORTUNITY OF HEARING BEFORE PASSING THE ORDER ON MERITS. 9. IN THE RESULT, THE REVENUE APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON MONDAY, THE 16TH DAY OF JANUARY , 2017 AT CHENNAI. SD/- ( ' ) (CHANDRA POOJARI) $ / ACCOUNTANT MEMBER SD/ - ( . ) (G. PAVAN KUMAR) ) $ /JUDICIAL MEMBER /CHENNAI, 0 /DATED: 16TH JANUARY, 2017 JPV & )'23 43 /COPY TO: 1. APPELLANT 2. )*% /RESPONDENT 3. 5 ( )/CIT(A) 4. 5 /CIT 5. 3 )'' /DR 6. 9 /GF