DCIT 1(3)(1), MUMBAI V. SUMITOMO CHEMICAL INDIA P.LTD, MUMBAI

ITA 5846/MUM/2017

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 6629 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 13-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED
• Keywords: Capital asset; Depreciation; Additional depreciation; Revenue expenditure; Set aside
• Section: 142(1); 115JB; 143(1); 195; 201; 143(2); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA , AM AND SHRI AMARJIT SINGH , JM I.T.A. NO . 5846 / M/ 20 1 7 ( ASSESSMENT YEAR : 201 4 - 1 5 ) DCIT - 1(3)(1) ROOM NO.540, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 . VS. M/S. SUMITOMO CHEMICAL (I) PVT. LTD. 195 7 TH FLOOR, MOTI MAHAL JT ROAD, CHURCHGATE, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AAECS 3750 L ( APPELLANT ) .. ( RESPONDENT ) DATE OF HEARING : 10 . 01 .201 9 DATE OF PRONOUNCEMENT : 27. 02 . 201 9 O R D E R PER AMARJIT SINGH, JM: THE PRESENT APPEA L HA S BEEN FILED BY THE REVENUE AGAINST THE ORDER DATED 27 . 0 6 .201 7 PASSED BY THE COMMIS S IONER OF INCOME TAX (APPEALS) - 3 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 2014 - 15 . 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: - ' 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN DELETING THE DISALLOWANCE OF EXCESS CLAIM OF DEPRECIATION WITHOUT APPRECIATING THE FACT THAT THE ISSUE IS CLEARLY FOUND TO BE COVERED UNDER EXPLANATION 4A OF SECTION 43(1) OF THE I.T. ACT. ASSESSEE BY: SHRI PARAS S. SALVA DEPARTMENT BY: SHRI CHAUDHARY ARUN KUMAR SINGH ITA. NO. 5846 /M/201 7 A.Y. 2014 - 15 2 2. ONTHE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN LAW IN ALLOWING THE CLAIM OF DEPRECIATION ON GOODWILL WITHOUT APPRECIATING THE FACT THAT THE DECISION IS NOT APT IN TERMS OF PROVISO TO RULE 11 OF THE ITAT RULES, 1963 AND THE ISSUE INVOLVED OF DEPRECIATION ON GOODWILL AS REVENUE EXPENDITURE HAS NEVER BEEN EXAMI NED NEITHER AT THE ASSESSMENT STAGE, NOR IN FIRST APPEAL STAGE FOR A.Y. 2006 - 07 AS THE ASSESSEE RAISED THIS ADDITIONAL GROUND FOR THE FIRST TIME FOR A.Y. 2006 - 07. ' 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 28 . 11.201 4 FOR THE A.Y. 201 4 - 15 DECLARING TOTAL I NCOME TO THE TUNE OF RS.38,58,87,920 / - . THEREAFTER, THE RETURN WAS PROCESSED U/S 143(1) OF THE I.T. ACT, 1961. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS AND NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESS EE COMPANY IS ENGAGED IN THE BUSINESS OF TRADING AND MANUFACTURING OF HOUSEHOLD INSECTICIDES AND MANUFACTURING AND TRADING OF AGRICULTURE PESTICIDES AND PUBLIC HEALTH INSECTICIDES. DURING THE YEAR UNDER CONSI DERATION, THE ASSESSEE HAS SHOWN THE INCOME FROM BUSINESS TO THE TUNE OF RS.51,75,84,259/ - AND AFTER SETTING OFF THE BROUGHT FORWARD LOSS OF EARLIER YEARS SHOWN NET TAXABLE INCOME TO THE TUNE OF RS.38,58,87,919/ - UNDER NORMAL PROVISIONS AND DEEMED TOTAL IN COME U/S 115JB OF THE ACT TO THE TUNE OF RS.36,95,77,496/ - . THE ASSESSEE CLAIMED THE DEPRECIATION ON THE BILAG FACILITY GOODWILL . T HE CLAIM OF THE ASSESSEE WAS DECLINED AND THE INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.38,76,19,840/ - UNDER THE NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT U/S 115JB OF THE ACT TO THE TUNE OF RS.36,95,77,496/ - . FEELING AGGRIEVED, T HE ASSESSEE FILED AN APPEAL ITA. NO. 5846 /M/201 7 A.Y. 2014 - 15 3 BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 4 . UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE ALLOWANCE OF ADDITION DEPRECIATION CLAIM ON THE INCIDENTAL EXPENSES INCURRED IN RELATION TO THE ACQUISITION OF MANUFACTURING FACILITY FROM BILAG, INCURE AND CAPITALIZED IN A.Y. 2006 - 07. THE LD. REPRESENTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE FINDING OF THE CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW , HENCE , IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, TH E LD. REPRESENTATIVE OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. THE MATTER OF CONTROVERSY IS IN CONNECTION WITH THE ALLOWANCE OF THE CLAIM OF ASSESSEE WITH REGARD TO THE DEPRECIATION OF GOODWILL. BEFORE GOING FURTH ER, WE DEEMED IT NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 6 GROUND NO.1 RELATES TO DISALLOWANCE OF ADDITIONAL DEPRECIATION CLAIM ON THE INCIDENTAL EXPENSES INCURRED IN RELATION TO THE ACQUISITION OF MANUFACTURING FACILITY FROM BILAG, INCURE AND CAPITALIZED IN AY 2006 - 07. THE ISSUE HAS BEEN FOUND COVERED IN THE APP ELLANTS OWN CASE FOR AY. 2006 - 07, 2007 - 08 & 2008 - 09 IN FAVOUR OF THE APPELLANT BY THE HONBLE ITAT, MUMBAI AS PER ANNEXURE 2 PAGE 5 OF THE PAPER BOOK SUBMITTED BY THE APPELLANT. IN VIEW OF THE SAME GROUND NO. 1 IS ALLOWED. 5. ON APPRAISAL OF THE ABOVE SA ID FINDING, WE NOTICED THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF DECISION OF HONBLE ITAT MUMBAI IN THE APPELLANTS OWN CASE FOR THE A.Y. ITA. NO. 5846 /M/201 7 A.Y. 2014 - 15 4 2006 - 07, 2007 - 08 & 2008 - 09. THE COPY OF ORDER DATED 28.03.2014 PASSED BY THE HONBLE ITAT K BENCH, MUMBAI IN THE ASSESSEES OWN CASE FOR THE A.Y. 2006 - 07 IS ON THE FILE IN WHICH THE RELEVANT FINDING HAS BEEN GIVEN IN PARA NO. 31 TO 33 WHICH ARE HEREBY REPRODUCED BELOW .: - 31 WE HAVE HEARD THE ARGUMENTS AND HAVE PERUSED THE DETAILS AS APPENDED IN THE APR. THE ACQUISITION OF THE MACHINERY FROM BILAG IS NOT DISPUTED, IT IS ALSO NOT DISPUTED THAT THE MACHINERY IS A CAPITAL ASSET AND WHATEVER EXPENSE IS INCURRED ON SUCH OUTLAY, IT SHALL BEAR THE CHARACTER OF CAPITAL AND ADDED TO THE COST. SINCE THI S IS A FACT, THEN APPLYING THE RATIO LAID DOWN BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIBA OF INDIA LTD. VS CIT, REPORTED IN 70 TAXMAN 505 (BOM), WHEREIN IT HAS BEEN HELD '... THIS BEING SO, ... THIS AMOUNT WOULD FORM PAN OF THE COST OF THE ASSESSMENT FOR THE PURPOSE OF DEPRECIATION... 32. IN SUCH A CASE, THE ADDITIONAL DEPRECIATION, CLAIMED BY THE ASSESSEE ON BILAG MACHINERY IS TO BE ALLOWED. WE ALSO ACCEPT THAT THE ACTION OF THE ASSESSEE DID NOT SUFFER FROM ANY INFIRMITY. 33. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE DEPRECIATION ON THE MACHINERY THAT HAD BEEN ACQUIRED FROM BILAG, AND ALSO INCLUDE INCIDENTAL EXPENSES INCURRED ON ACQUISITION OF ASSETS, AS LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIBA (SUPRA). THIS WOULD ALSO INCLUDE LEGAL AND PROFESSIONAL EXPENSES OF RS.53,88,637/ - AS INCIDENTAL EXPENSES, RAISED AS AN ADDITIONAL GOA. 6. THE CLAIM OF THE ASSESSEE WAS FURTHER ALLOWED IN SUBSEQUENT A.Y. 2007 - 08 TO 2010 - 11. SINCE THE ISSUE IN QUESTION HAS BEEN DECIDED BY CIT(A) ON THE BASIS OF DECISION OF HONBLE ITAT AND FINDING NO DISTINGUISHABLE MATERIAL AVAILAB LE ON RECORD, W E ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE W ITH AT THIS ITA. NO. 5846 /M/201 7 A.Y. 2014 - 15 5 APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE . ISSUE NO.2 7 . ISSUE NO. 2 IS IN CONNECTION WITH THE ALLOWANCE OF THE CLAIM OF ASSESSEE BY THE CIT(A) ON DEPRECIATION OF GOODWILL. THE LD. REPRESE NTATIVE OF THE REVENUE HAS ARGUED THAT THE CIT(A) HAS WRONGLY ALLOWED THE CLAIM OF THE ASSESSEE, THEREFORE, THE FINDING OF THE CIT(A) IS NOT SUSTAINABLE IN THE EYES OF LAW , HENCE , IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIV E OF THE ASSESSEE HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. THE MATTER OF CONTROVERSY IS IN CONNECTION WITH THE ALLOWANCE OF THE CLAIM OF ASSESSEE WITH REGARD TO THE DEPRECIATION OF GOODWILL. BEFORE GOING FURTHER, WE DEEMED IT NE CESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RECORD.: - 7 GROUND NO. 2 RELATES TO DISALLOWANCE OF DEPRECIATION ON GOODWILL ACQUIRED IN THE AY 200 6 - 07 AS PER SECTION 32 OF THE A CT. THE ISSUE HAS BEEN FOUND COVERED IN APPELLANTS OWN CASE FOR AY 2006 - 07,2007 - 08 & 2008 - 09 IN FAVOUR OF THE APPELLANT BY THE HONBLE ITAT, MUMBAI AS PER THE ITAT ORDER (PARA 45 TO 48 ANNEXED AS ANNEXURE 2 OF THE PAPER BOOK SUBMITTED BY THE APPELLANT. IN VIEW OF THE SAME GROUND NO. 2 IS ALLOWED. 8 . ON APPRAISAL OF THE ABOVE SAID FINDING, WE NOTICED THAT THE CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE ON THE BASIS OF DECISION OF HONBLE ITAT MUMBAI IN THE APPELLANTS OWN CASE FOR THE A.Y. 2006 - 07, 2007 - 08 & 2008 - 09. THE COPY OF ORDER DATED 28.03.2014 ITA. NO. 5846 /M/201 7 A.Y. 2014 - 15 6 PASSED BY THE HONBLE ITAT K BENCH, MUMBAI IN THE ASSESSEES OWN CASE FOR THE A.Y. 2006 - 07 IS ON THE FILE IN WHICH THE RELEVANT FINDI NG HAS BEEN GIVEN IN PARA NO. 45 WHICH IS HEREBY REPRODUCED BELOW .: - 45. ( WE HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE ASSESSEE AND WE FIND THAT THE ISSUE OF GOODWILL STANDS COVERED BY THE HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. REPORTED IN 348 ITR 302, WHEREIN THE HONBLE SUPREME COURT HAS HELD THAT INTANGIBLE LIKE GOODWILL ARE ELIGIBLE FOR DEPRECIA TION. ) 9 . THE CLAIM OF THE ASSESSEE WAS FURTHER ALLOWED IN SUBSEQUENT A.Y. 2007 - 08 TO 2010 - 11. SINCE THE ISSUE IN QUESTION HAS BEEN DECIDED BY CIT(A) ON THE BASIS OF DECISION OF HONBLE ITAT AND FINDING NO DISTINGUISHABL E MATERIAL AVAILABLE ON RECORD, W E ARE OF THE VIEW THAT THE CIT(A) HAS DECIDED THE MATTER OF CONTROVERSY JUDICIOUSLY AND CORRECTLY WHICH IS NOT LIABLE TO BE INTERFERE WITH AT THIS APPELLATE STAGE. ACCORDINGLY, THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA. NO. 5846 /M/201 7 A.Y. 2014 - 15 7 10 . IN RE SULT, APPEAL FILED BY THE REVENUE IS HEREBY ORDERED TO BE DISMISSED . ORDER P RONOUNCED IN THE OPEN COURT ON 27. 02 .2019 . SD/ - SD/ - ( SHAMIM YAHYA ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 27. 02 .2019 VIJAY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI