M/s Ceratizit India (P) Ltd., New Delhi V. DCIT, New Delhi

ITA 5902/DEL/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58730 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 23-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI R.P. TOLANI AND SHRI A.N. PAHUJA ITA NO. 5902/DEL/2010 ASSTT. YR: 2006-07 M/S CERATIZIT INDIA (P) LTD. VS. DCIT, CIR. 3(1), 5 TH FLOOR, KIRTI MAHAL, NEW DELHI. 19, RAJENDRA PLACE, NEW DELHI. PAN/GIR NO. AACCC2210P (APPELLANT) ( RESPONDENT ) APPELLANT BY : SHRI V.P. GUPTA ADV. & SHRI BASANT KUMAR ADV. RESPONDENT BY : SHRI PRADEEP KUMAR SR. DR O R D E R PER R.P. TOLANI, J.M : THIS IS ASSESSEES APPEAL AGAINST CIT(A)S ORDER DATED 2-11-2010 RELATING TO A.Y. 2006-07. FOLLOWING EFFECTIVE GROUN DS ARE RAISED: 1. THAT THE CIT(A) ERRED IN HOLDING THAT DRAWINGS AND DESIGNS IN THE CASE OF THE APPELLANT WERE NOT IN TH E NATURE OF INTANGIBLE ASSETS ELIGIBLE FOR DEPRECIATION @ 25% A ND SAME WAS IN THE NATURE OF GENERAL PLANT AND MACHINERY AND DE PRECIATION THEREON WAS ALLOWABLE ONLY @ 15%. 2(A) THAT THE CIT(A) ERRED IN UPHOLDING DISALLOWANC E OF RS. 12,00,000/- MADE BY THE ASSESSING OFFICER ON ACCOUN T OF PROVISION FOR COMMISSION WITHOUT APPRECIATING THAT THE APPELLANT HAD GIVEN FULL DETAILS IN RESPECT OF PROV ISIONS MADE AND HAD ALSO GIVEN DETAILS OF ACTUAL PAYMENT MADE T O EACH OF THE PARTIES AGAINST THE PROVISION IN THE FOLLOWING YEAR. ITA 5902/DEL/10 CERATIZIT INDIA (P) LTD . 2 2.(B) THAT T HE CIT(A) ALSO ERRED IN NOT ALLOWING D EDUCTION TO THE EXTENT OF ACTUAL PAYMENT MADE BY THE COMPANY OF RS. 9,97,366/- AGAINST THE PROVISION OF RS. 12,00,000/- MADE ON ACCOUNT OF COMMISSION PAYABLE TO VARIOUS PARTIES. 2. APROPOS GROUND NO.1, LEARNED COUNSEL FOR THE ASS ESSEE CONTENDS THAT ASSESSEE IS ENGAGED IN THE MANUFACTURE OF TUNGSTEN CARBIDE GRADED TIPS, TOOLS ETC., WHICH ARE USED FOR CUTTING METALS AND OTHER M ATERIALS IN SEVERAL INDUSTRIES LIKE STEEL AND AUTOMOBILES. DURING THE Y EAR UNDER CONSIDERATION IT HAD IMPORTED CERTAIN DRAWINGS AND DESIGNS AND A BLO CK OF ASSETS WAS CREATED AMOUNTING TO RS. 1,96,619/-. THE ASSESSEE COULD HAV E CLAIMED THE SAME AS REVENUE EXPENDITURE, HOWEVER, AS A MATTER OF ABUN DANT CAUTION, THIS BLOCK OF ASSET WAS CREATED WHICH IS IN ACCORDANCE WITH AP PENDIX I, PART B, LAYING DOWN RATE OF DEPRECIATION FOR INTANGIBLE ASSETS, ELIGIBLE FOR DEPRECIATION @ 25%. ASSESSEE ACCORDINGLY CLAIMED A DEPRECIATION OF RS. 49,935/- AGAINST THIS BLOCK OF ASSETS. LOWER AUTHORITIES HAVE REJECT ED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT DESIGNS ACQUIRED BY THE ASSESSEE WOULD FALL UNDER BLOCK OF ASSETS I.E. PLANT AND MACHINERY ON WHICH DEPREC IATION @ 15% HAS BEEN ALLOWED. IT IS CONTENDED THAT THERE BEING A SPECIFI C ENTRY IN APPENDIX I, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION @ 25%. 2.1. APROPOS GROUND NOS. 2(A) & (B), IT IS PLEADED THAT ALL THE DETAILS ABOUT PAYMENT OF COMMISSION WERE FILED BEFORE AO AND CIT( A) AND BOTH THE ITA 5902/DEL/10 CERATIZIT INDIA (P) LTD . 3 AUTHORITIES HAVE FAILED TO APPRECIATE THE SAME AND ON THE CONTRARY HAVE GIVEN A FINDING THAT NO EVIDENCE WAS FILED TO SUBSTANTIAT E THAT THE LIABILITY TO PAY COMMISSION HAD CRYSTALLIZED DURING THE YEAR. REFERE NCE IS INVITED TO PAPER BOOK, WHICH CONTAINS THE RELEVANT DETAILS ABOUT ALL OWABILITY OF COMMISSION FROM PAGES 5 TO 14. IT IS PLEADED THAT PAYMENT OF C OMMISSION HAS BEEN MADE FOR BUSINESS PURPOSE AND SUCH PAYMENTS HAVE BEEN AL LOWED IN EARLIER YEARS. IN THIS YEAR ALSO PAYMENTS OF COMMISSION OVER AFORE SAID PROVISION OF RS. 12 LACS HAS BEEN ALLOWED BY THE AO. IT IS STATED THAT PROVISION HAD BEEN MADE ON ACCOUNT OF COMMISSION PAYABLE TO VARIOUS PARTIES FOR SERVICES RENDERED DURING THE YEAR UNDER APPEAL. THE COMPANY HAD GIVEN BILLS OF ACTUAL PAYMENTS MADE TO EACH OF THE PARTIES AGAINST THE PR OVISION OF RS. 12 LACS IN THE FOLLOWING YEAR. AS PER DETAILS SUBMITTED VIDE A FORESAID STATEMENT, AGGREGATE AMOUNT OF RS. 9,97,366/- WAS PAID AND BA LANCE AMOUNT OF RS. 2,02,634/- HAS BEEN WRITTEN BACK BY CREDITING TO P& L A/C IN THE YEAR ENDED 31-3-2007. TAX HAD ALSO BEEN DULY DEDUCTED FROM PAY MENTS MADE TO THE PARTIES, WHICH IS DULY DEPOSITED WITH THE GOVERNME NT. MOST OF THE PAYMENTS HAVE BEEN MADE TO THE PARTIES BEFORE THE DUE DATE FOR FILING RETURN THAT WAS 30-11-2006 IN RESPECT OF ASSESSMENT YEAR UNDER APPE AL. THUS TDS IN RESPECT OF THESE PAYMENTS HAS BEEN DEPOSITED WITHI N THE PRESCRIBED TIME. 2.2. LD. COUNSEL THUS CONTENDS THAT: ITA 5902/DEL/10 CERATIZIT INDIA (P) LTD . 4 (I) ALL THE DETAILS WERE DULY FILED BEFORE THE LOWER AU THORITIES; THEIR OBSERVATIONS ARE CONTRARY TO RECORD AND WITHOUT CON SIDERATION OF THE MATERIAL. (II) PROVISION WAS MADE IN ACCORDANCE WITH THE METHOD OF ACCOUNTING FOLLOWED BY ASSESSEE AS EARLIER AND ON THE BASIS OF ASCERTAINED LIABILITY. (III) THE SAME BEING LAID OUT AND INCURRED WHOLLY AND EXC LUSIVELY FOR THE PURPOSES OF BUSINESS, WAS ELIGIBLE FOR DEDUCTIO N. 3. LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF LOWER AUTHORITIES. 4. WE HAVE HERD RIVAL CONTENTIONS AND GONE THROUGH THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS FAR AS ISSUE OF DEPRECIATIO N IS CONCERNED, WE FIND MERITS IN THE ARGUMENT OF THE LD. COUNSEL FOR THE A SSESSEE. PART B OF APPENDIX I OF THE I.T. RULES, PRESCRIBES RATE OF DE PRECIATION @ 25% ON BLOCK OF ASSETS UNDER THE HEAD INTANGIBLE ASSETS. THE ASS ESSEES DESIGNS CONSTITUTE INTANGIBLE ASSETS, ARE ELIGIBLE FOR DEPRECIATION @ 25%. IN VIEW THEREOF, THIS GROUND OF ASSESSEE IS ALLOWED. 4.1. APROPOS SECOND GROUND I.E. PROVISION OF COMMIS SION, THE FINDING OF LOWER AUTHORITIES THAT NO DETAILS WERE FILED BEFORE THEM IS UNFOUNDED AND CONTRARY TO THE RECORD. FROM THE PAPER BOOK, IT CLE ARLY EMERGES THAT THE ASSESSEE HAD FILED ALL THE DETAILS ABOUT PAYMENT OF COMMISSION. PAGES 8 TO 10 CONTAIN PARTY-WISE DETAILS OF THE COMMISSION FOR ORDER OR RECEIPT OF PAYMENT AGAINST EACH ENTRY. PAGE 11 CONTAINS THE DE TAILS OF PROVISION AS ON ITA 5902/DEL/10 CERATIZIT INDIA (P) LTD . 5 28-2-2006 TOGETHER WITH DETAILS OF SERVICES RENDER ED BY THE AGENTS. IT EMERGES FROM RECORD THAT THE ASSESSEE HAS BEEN PLEA DING BEFORE LOWER AUTHORITIES ABOUT THE DETAILS AND PAYMENT OF TDS BE FORE THE DUE DATE OF FILING OF RETURN, IN OUR CONSIDERED VIEW, THE PROVI SION OF COMMISSION MADE BY THE ASSESSEE DESERVES TO BE ALLOWED AS BUSINESS EXPENDITURE AS IT IS WHOLLY AND EXCLUSIVELY LAID OUT AND INCURRED FOR TH E PURPOSE OF BUSINESS. THIS GROUND OF THE ASSESSEE IS ALSO ALLOWED. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 24-02-2012. SD/- SD/- ( A.N. PAHUJA) ( R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 24-02-2012. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR ITA 5902/DEL/10 CERATIZIT INDIA (P) LTD . 6