DCIT, New Delhi V. M/s. Sharda Motor Industries Ltd., New Delhi

ITA 5575/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3555 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2011-2012
• Appeal Filed On: 14-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K KAPOOR
• Assessee Lawyers: S S RANA
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, DELHI BENCH G, NEW DELHI BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 5575/DEL./2014 ASSESSMENT YEAR: 2011-12 D.C.I.T., LTU, NEW DELHI VS. M/S. SHARDA MOTOR INDUSTRIES LTD., D - 188, OKHLA INDUSTRIAL AREA PHASE-I, NEW DELHI. PAN AAACS6855J ASSESSEE BY SH. S.S. RANA, CIT/DR REVENUE BY SH. R.K. KAPOOR, CA ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A), LTU, NEW DELHI DATED 19.08.2014 FOR THE ASSESSMENT YEAR 2011-12 ON THE FOLLOWING GROUND : 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF R S.1,14,82,814/-, MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF TECHNICAL AND CONSULTATION FEE PAID BY THE ASSESSEE AS CAPITAL EXPENDITURE, INSTEA D OF REVENUE EXPENDITURE CLAIMED BY THE ASSESSEE. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME OF RS.4,48,74,780/- AND A TOTAL INCOME OF RS.4,44,77,7 89/- AFTER CLAIMING DEDUCTION U/S. 80IC OF RS.3,96,991/- UNDER NORMAL P ROVISIONS OF THE ACT. THE DATE OF HEARING 05.12.2017 DATE OF PRONOUNCEMENT 01 .02.2018 ITA NO. 5575/DEL./2014 2 CASE WAS SELECTED FOR SCRUTINY AND STATUTORY NOTICE S WERE ISSUED TO THE ASSESSEE. THERE WAS NO CHANGE IN THE BUSINESS ACTIV ITIES OF THE ASSESSEE AS COMPARED TO THE PRECEDING ASSESSMENT YEAR. THE ASSE SSEE COMPANY CONTINUED MANUFACTURING OF AUTO PARTS AND ACCESSORIES OF MOTO R VEHICLES SUCH AS SOFT TOP CANOPIES, EXHAUST SYSTEM WITH CATALYTIC COVER E TC. FOR VARIOUS VEHICLE MANUFACTURERS. 3. DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE A SSESSING OFFICER OBSERVED THAT UNDER THE HEAD MISCELLANEOUS EXPENSES , A SUM OF RS.1,14,82,814/- TOWARDS TECHNICAL FEE/CONSULTATION FEE WAS INCLUDED AND CHARGED INTO THE PROFIT AND LOSS ACCOUNT AS REVENUE EXPENDITURE. THIS AMOUNT WAS INCURRED BY THE ASSESSEE FOR DESIGNING OF INDE PENDENT FRONT SUSPENSION FOR THE SCORPIO CAR AND WAS PAID BY THE ASSESSEE T O ONE OF ITS CLIENTS, M/S. MAHINDRA & MAHINDRA (M & M) THROUGH DEDUCTION FROM SALE BILLS. THIS EXPENDITURE WAS PAID AS PER AGREEMENT FOR DESIGN, D EVELOPMENT AND SUPPLY AGREEMENT DATED 21.03.1998. THE RELEVANT CLAUSE OF THE AGREEMENT IS MAINLY CLAUSE 15-21 WITH KORIAN COMPANY. THE ASSESSING OFF ICER WAS NOT AGREED FOR TREATING IT AS REVENUE EXPENDITURE AND AS PER HIS O PINION, IT SHOULD BE A CAPITAL EXPENDITURE. THEREFORE, HE MADE DISALLOWANCE OF RS. 1,14,82,814/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE APPEALED BEFORE THE LD. CIT(A).THE LD. CIT(A), AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE ITA NO. 5575/DEL./2014 3 ALLOWED THE APPEAL OBSERVING THAT THE ASSESSEE HAD BEEN MAKING SUCH PAYMENTS FROM ASSESSMENT YEAR 1999-2000 ONWARDS WHI CH HAVE BEEN ACCEPTED AS REVENUE IN NATURE BY THE DEPARTMENT IN THE EARLIER YEARS. THE APPEAL OF THE APPELLANT ON THIS GROUND HAS BEEN ALL OWED IN FAVOUR OF THE APPELLANT FOR A.YRS. 2009-10 AND 2010-11. BEING AGG RIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE RELIED ON THE ORDE R OF LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE LD. CIT(A). HE FURT HER SUBMITTED THAT THE COORDINATE BENCH HAS DISMISSED THE APPEALS OF THE R EVENUE FOR THE A.Y. 2009- 10 IN ITA NO. 2588/DEL./2013 AND A.Y. 2010-11 IN IT A NO. 3503/DEL./2014. 5. AFTER HEARING BOTH THE SIDES AND PERUSING THE MA TERIALS ON RECORD WE NOTED THAT THE COORDINATE BENCH OF ITAT IN THE SIMI LAR FACTS AND CIRCUMSTANCES, HAS DISMISSED THE APPEAL OF THE REVE NUE ON THE SAME ISSUE IN THE CASE OF ASSESSEE ITSELF FOR THE ASSESSMENT YEAR S 2009-10 AND 2010-11 VIDE ORDER DATED 13.12.2016 AND 22.02.2017 RESPECTIVELY. THE RELEVANT OBSERVATIONS OF THE COORDINATE BENCH IN APPEAL FOR A.Y. 2009-10 READ AS UNDER: 7.1 AFTER GOING THROUGH THE FINDINGS OF THE LD.CIT(A ), WE FIND THAT THE ASSESSEE COMPANY, BEING AUTO PART MANUFACTURER FOR M/S MAHIN DRA & MAHINDRA IS SOLELY DEPENDENT UPON THE BUSINESS GIVEN TO IT BY M/S MAHI NDRA & MAHINDRA AND IN VIEW OF THE REQUIRED MODERNIZATION IN THE IFS SYSTE M, THE SAID M/S MAHINDRA & ITA NO. 5575/DEL./2014 4 MAHINDRA MADE PAYMENT TO THE KOREAN COMPANY, M/S SA MLIP FOR DEVELOPING THE PROTOTYPE TOOLING AND ALLOWED THE ASSESSEE TO USE T HE SAME FOR MANUFACTURING THE IFS COMPONENTS AS PER THE REQUIREMENT OF M/S MA HINDRA & MAHINDRA ON PAYMENT OF TECHNICAL FEE. CLEARLY IN SUCH A CASE, M /S MAHINDRA & MAHINDRA GOT THE OWNERSHIP OVER THE ASSET AND THE ASSESSEE WAS GRANTED LIMITED RIGHTS BY MAHINDRA & MAHINDRA TO USE THE SAME TO MANUFACTUR I FS SYSTEM, IN ACCORDANCE WITH THEIR REQUIREMENT, ON PAYMENT OF TECHNICA1 FEE' . IN VIEW OF THE SAME, THE DECISION OF THE LD. CIT(A) IN TREATING THE PAYMENT A S HELD TO BE REVENUE IN NATURE IS CORRECT ONE. EVEN OTHERWISE, THE ASSESSEE HAS BEEN MAKING SUCH PAYMENT FROM AY 1999-2000 ONWARDS, WHICH HAVE BEEN ACCEPTED AS REVENUE IN NATURE BY THE DEPARTMENT IN THE EARLIER YEARS. ACC ORDINGLY, WE ARE OF THE VIEW THAT THE LD. CIT(A) HAS PASSED A WELL REASONED ORDER , WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ORD ER OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DECIDE THE ISSUE IN DISPUTE AG AINST THE REVENUE. 6. THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANC ES OF THE CASE AND THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH KOREAN COMPANY. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDINATE BENCH, THE APPEAL FILED BY THE REVENUE DESERVES TO BE DISMISSED. 7. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST FEBRUARY, 2018 SD/- SD/- (H.S. SIDHU) (L.P . SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 ST FEBRUARY, 2018 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI