ACIT, CHENNAI V. M/s. Siemens Building Tech P Ltd., CHENNAI

ITA 57/CHNY/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4774 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 23-06-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 13-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A.NO. 57/MDS/2011 ASSESSMENT YEAR : 2002-03 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(3), CHENNAI-34. VS. M/S.SIEMENS BUILDING TECH PVT. LTD., NO.22, ELDAMS ROAD,TEYNAMPET, CHENNAI 600 018. PAN AAACD 1235 B (APPELLANT) (RESPONDENT) C.O.NO.27/MDS/2011 (IN I.T.A.NO. 57/MDS/2011) ASSESSMENT YEAR : 2002-03 M/S.SIEMENS BUILDING TECH PVT. LTD., CHENNAI. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CHENNAI. (CROSS-OBJECTOR) (APPELLANT-IN-APPEAL) DEPARTMENT BY : SHRI K.E .B.RENGARAJAN, JR. STANDING COUNSEL ROSS-OBJECTOR BY : SHRI N . DEVANATHAN, ADVOCATE & SHRI A.RAJA, CA ITA 57 & CO 27/11 :- 2 -: O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THE APPEAL IS FILED BY THE REVENUE. THE CROSS OBJEC TION IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEA R IS 2002-03. THE APPEAL IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, AT CHENNA I DATED 6.10.2010 AND ARISES OUT OF THE ASSESSMENT COMPLETE D UNDER SEC.143(3) OF THE INCOME-TAX ACT, 1961. 2. THE FIRST ISSUE RAISED BY THE REVENUE IN THIS AP PEAL IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN DIRECTING THE ASSESSING OFFICER TO DELETE THE ADDITION OF ` 25 LAKHS AS RESEARCH AND DEVELOPMENT (R & D) EXPENDITURE ATTRIB UTABLE TO MANUFACTURING UNIT OF THE ASSESSEE. 3. THIS ISSUE HAS BEEN CONSIDERED IN DETAIL BY THE COMMISSIONER OF INCOME-TAX (APPEALS) AND HIS CONCLU SIONS HAVE BEEN SUMMARIZED IN PARAGRAPH 5.2 OF HIS ORDER AT PA GE 4. ACTUALLY, THE ASSESSEE-COMPANY WAS ELIGIBLE FOR REL IEF UNDER SEC.80IB FOR THE ASSESSMENT YEAR UNDER APPEAL IN RE SPECT OF ITS ITA 57 & CO 27/11 :- 3 -: MANUFACTURING UNIT WORKING IN PONDICHERRY AND THE A SSESSEE- COMPANY WAS ALSO CARRYING ON BUSINESS THROUGH ITS E XISTING UNITS WHICH ARE NOT ELIGIBLE FOR THE BENEFIT OF SEC.80IB. THE ASSESSEE HAS DEBITED ALL THE R & D EXPENDITURE TO ITS EXISTI NG UNITS WHEREAS THE ASSESSING OFFICER HAS ATTRIBUTED THE EXPENDITUR E TO THE MANUFACTURING UNIT AT PONDICHERRY WHICH IS THE ELIG IBLE UNIT FOR RELIEF UNDER SEC.80IB. AS POINTED OUT BY THE COMM ISSIONER OF INCOME-TAX (APPEALS), THE R & D WAS FUNCTIONING SIN CE 1994 AND THE ASSESSEE HAS ALREADY FURNISHED THE DETAILS OF S OFTWARE PRODUCTS DEVELOPED SINCE 1994 TILL DATE. IT SHOWS THAT THE R & D ESTABLISHMENT OF THE ASSESSEE WAS ALREADY EXISTING AND SUPPORTING THE ACTIVITIES OF THE NON ELIGIBLE UNITS OF THE ASSESSEE. THE ASSESSING OFFICER HAS NOT POINTED OUT THE EXACT NATURE OF THE R & D EXPENDITURE ATTRIBUTABLE TO ITS MANUFACTURING UNIT AT PONDICHERRY. THEREFORE, WE AGREE WITH THE FINDING OF THE COMMISSIONER OF INCOME-TAX (APPEALS) THAT THERE WAS NO COMPULSION FOR THE ASSESSING OFFICER TO ADJUST THE EXPENDITURE OF ` 25 LAKHS AGAINST THE PROFIT OF THE ELIGIBLE UNIT A ND THEREBY TO REDUCE THE AMOUNT OF BENEFIT, THAT COULD BE CLAIMED BY THE ASSESSEE. ACCORDINGLY, THE ORDER OF THE COMMISSIO NER OF INCOME-TAX (APPEALS) DELETING THE ADDITION OF ` 25 LAKHS IS UPHELD. ITA 57 & CO 27/11 :- 4 -: 4. THE SECOND GROUND RAISED BY THE REVENUE IS THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN D ELETING THE DISALLOWANCE OF ` 91,44,127/- UNDER SEC.40A(2)(A) & (B) OF THE ACT. THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS CAREFULLY CONSIDERED THIS ISSUE IN PARAGRAPH 6.2 OF HIS ORDER . EVEN THOUGH THE PROFITS OF THE ASSOCIATE FIRMS MAY BE HIGHER, T HE ASSESSING OFFICER HAS NOT BROUGHT ON RECORD ANY MATERIAL TO S HOW THAT THE PRICE PAID BY THE ASSESSEE WAS HIGHER THAN THE MARK ET RATE. ON THE OTHER HAND, THE ASSESSEE HAS PRODUCED THE DETAI LS TO SHOW THAT THE ASSOCIATE CONCERNS HAD SOLD THEIR PRODUCTS AT A HIGHER RATE TO OUTSIDE PARTIES COMPARED TO THE RATE QUOTED FOR THE PURCHASES MADE BY THE ASSESSEE. THEREFORE, AS RIGH TLY POINTED OUT BY THE COMMISSIONER OF INCOME-TAX (APPEALS), TH ERE IS NO BASIS OR MATERIAL TO HOLD THAT THE ASSESSEE HAS OVE RSTATED ITS PURCHASE VALUE MADE FROM THE SISTER CONCERNS. THER EFORE, IT IS SEEN THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS RIGHTLY DELETED THE SAID ADDITION. 5. IN RESULT, THIS APPEAL FILED BY THE REVENUE IS L IABLE TO BE DISMISSED. 6. IN THE CROSS OBJECTION FILED BY THE ASSESSEE, TH E ONLY GROUND RAISED BY THE ASSESSEE IS THAT THE COMMISSIONER OF INCOME-TAX ITA 57 & CO 27/11 :- 5 -: (APPEALS) HAS ERRED IN NOT DELETING THE DISALLOWANC E MADE BY THE ASSESSING AUTHORITY IN RESPECT OF PROVISION OF ` 93,815/- MADE FOR LEAVE ENCASHMENT AS PER EXISTING STATUTORY REQUIREM ENT AS HELD BY CALCUTTA HIGH COURT IN THE CASE OF EXIDE INDUSTR IES LTD. AND ANOTHER V. UNION O INDIA AND OTHERS (292 ITR 470). ON MERIT, THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY VIRTUE OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS V. COMMISSIONER OF INCOME-TAX (245 ITR 428) . IN LAW, THE ISSUE IS AGAIN IN FAVOUR OF THE ASSESSEE BY VIR TUE OF THE DECISION OF THE HON'BLE CALCUTTA HIGH COURT IN THE C ASE OF EXIDE INDUSTRIES LTD. AND ANOTHER VS. UNION OF INDIA AND OTHERS (292 ITR 470) WHEREIN THE HON'BLE COURT HAS STRUCK DOWN S EC.43B(F) WHICH STATED THAT LEAVE ENCASHMENT COULD BE ALLOWED ONLY ON ACTUAL PAYMENT. IN THESE CIRCUMSTANCES, WE DIRECT THE ASSESSING AUTHORITY TO GIVE DEDUCTION FOR THE PROVISION OF ` 93,815/- MADE BY THE ASSESSEE TOWARDS LEAVE ENCASHMENT. THE ASSESSE E IS SUCCESSFUL IN ITS CROSS-OBJECTION. 7. IN RESULT, THE APPEAL FILED BY THE REVENUE IS DI SMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWE D. ITA 57 & CO 27/11 :- 6 -: ORDER PRONOUNCED ON MONDAY, THE 27 TH DAY OF JUNE, 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 27 TH JUNE, 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR