Swaraj Engines Limited, Mohali V. Addl. CIT, Mohali

ITA 713/CHANDI/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68453 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 14-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Depreciation; Revised return; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD ACCOUNTANT MEMBER ITA NO.713/CHD/2013 ASSESSMENT YEAR : 2009-10 M/S SWARAJ ENGINES LTD., VS THE ADDL.CIT, PLOT NO.2, INDUSTRIAL FOCAL, RANGE VI, PHASE IX, MOHALI. SAS NAGAR-160059. PAN: AACCS-2990N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SUMEET KHUR ANA RESPONDENT BY : SHRI MANJIT SINGH DATE OF HEARING : 09.09.2013 DATE OF PRONOUNCEMENT : 11.09.2013 O R D E R PER T.R.SOOD, AM THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE OR DER DATED 28.03.2013, PASSED BY THE LD. CIT(APPEALS) CH ANDIGARH U/S 250(6) OF THE INCOME-TAX ACT,1961 ( IN SHORT T HE ACT ). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL : 1. THAT THE ORDER PASSED BY THE LD CIT(APPEALS) IS BAD IN LAW BEING BASED ON CONJECTURES AND SURMISES AND WITHOUT APPRECIATING MATERIAL ON RECORD. 2. THAT THE LD CIT(APPEALS) HAS ERRED IN LAW AND ON FACTS OF THE CASE IN UPHOLDING THE ORDER OF LD ASSESSING OFFICER IN REJECTING THE ENHANCED CLAIM OF THE APPELLANT COMPANY DURING THE COURSE OF ASSESSMENT PROCEEDINGS, ON RECORD OF REVENUE EXP ENDITURE INCURRED IN TERMS OF TECHNICAL ASSISTANCE AGREEMENT WITH M/S AVL LIST GMBH, AUSTRIA, WITH TOTAL DISREGARD TO THE EXISTING LEGAL POSITION AND DEPARTMENTAL CIRCULAR NO. 14(XL- 35) DATED 11.05.1955 . 2 3. AFTER HEARING BOTH THE PARTIES, WE FIND THAT IN THE ORIGINAL RETURN, ASSESSEE HAD CLAIMED 1/6 TH OF EXPENDITURE ON ACCOUNT OF TECHNICAL KNOW-HOW AMOUNTING TO RS. 22,33,921/- UNDER SECTION 35AB OF THE ACT. LATER ON, VIDE LETTER DAT ED 16.11.2011 A REVISED COMPUTATION OF TAX LIABILITY WAS FURNISHE D BEFORE THE ASSESSING OFFICER REDUCING TAXABLE INCOME BY RS. 82 ,75,231/- I.E. ON RS. 35,88,11,041/- AS PER INCOME TAX RETURN TO RS. 35,05,35,810/-. AS PER THIS LETTER, IT WAS SUBMITT ED THAT ASSESSEE ENTERED INTO A TECHNICAL ASSISTANCE AGREEM ENT WITH A FOREIGN COMPANY M/S AVL LIST GMBH , AUSTRIA FOR IMP ROVEMENT IN THE FUEL CONSUMPTION OF ITS SPECIFIC ENGINE MODE L AND TO MEET THE POLLUTION NORMS AND PAID AN AMOUNT OF RS. 1,34, 03,527/- INCLUDING AN AMOUNT OF TDS OF RS. 14,85,267/- TO TH E SAID FIRM DURING THE PREVIOUS YEAR 2008-09. HOWEVER, ASSESSE E COMPANY HAD WRONGLY CLAIMED 1/6 TH OF THIS EXPENDITURE UNDER SECTION 35AB OF THE ACT WHICH IS NON-OPERATIVE. IN THIS LE TTER, JUSTIFICATION FOR TREATING THE EXPENDITURE AS REVEN UE WAS ALSO GIVEN. THE ASSESSING OFFICER DID NOT ACCEPT THIS C LAIM FIRSTLY BECAUSE NO FRESH CLAIM CAN BE MADE WITHOUT FILING A REVISED RETURN IN VIEW OF THE DECISION OF HON'BLE SUPREME C OURT IN CASE OF M/S GOETZE (INDIA) LTD. VS CIT 284 ITR 323 (S.C) . THE ASSESSING OFFICER FURTHER OBSERVED THAT THE CONTENT S OF THE AGREEMENT REVEALS THAT THE PAYMENT WAS MADE TO CARR Y OUT THE DESIGN OF ENGINE SUBSYSTEMS LIKE CYLINDER HEAD, VAL VE MECHANISM, PISTON, CRANK SHARP, INTAKE AND EXHAUST SYSTEMS ETC. TO IMPROVE FUEL CONSUMPTION AND MEET TREM FOUR EMISSIONS. ACCORDING TO ASSESSING OFFICER, THIS KN OW-HOW WAS OF ENDURING NATURE AND THEREFORE, SAME WAS TO BE TR EATED AS 3 CAPITAL EXPENDITURE. IT WAS OBSERVED THAT ASSESSEE HAS ITSELF CLAIMED THE SAME IN THE ORIGINAL RETURN AS CAPITAL EXPENDITURE. THEREFORE, THIS EXPENDITURE WAS NOT ALLOWED. HOWEV ER, 25% OF THE ORIGINAL SUM OF RS. 22,33,921/- WAS ALLOWED AS DEPRECIATION. 4. ON APPEAL, THE LD CIT(APPEALS) CONFIRMED THE ACT ION OF THE ASSESSING OFFICER. 5. BEFORE US, LD. COUNSEL OF THE ASSESSEE MAINLY SU BMITTED THAT THERE WAS NO BAR ON MAKING THE CLAIM BEFORE TH E APPELLATE AUTHORITY DESPITE OF THE DECISION OF M/S GOETZE (IN DIA) LTD. (SUPRA) BECAUSE IT WAS HELD IN CASE OF NATIONAL THE RMAL POWER COMPANY LTD. VS CIT 229 ITR 383 THAT PURPOSE OF TH E APPEAL PROCEEDINGS IN TAX CASES IS TO DETERMINE THE CORREC T INCOME. HE STRONGLY RELIED ON THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN CASE OF DCI VS METALMAN AUTO (P) LTD. 78 ITD 327 (CHD ITAT) WHICH WAS CONFIRMED BY HON'BLE PUNJAB & HARYANA HIG H COURT IN CASE OF CIT VS METALMAN AUTO P.LTD. 336 ITR 434 (P&H). HE ALSO MADE SUBMISSIONS REGARDING THE MERIT OF ALLOWA BILITY OF CLAIM. ON THE OTHER HAND, LD. DR STRONGLY SUPPORTE D THE ORDER OF CIT(APPEALS). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFUL LY AND FIND FORCE IN THE SUBMISSIONS OF LD. COUNSEL OF THE ASSESSEE ON ADMISSIBILITY OF THE CLAIM. THE QUESTION BEFORE T HE HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT VS METAL MAN AUTO P.LTD. (SUPRA) WAS AS UNDER : (VII) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE, THE HON'BLE INCOME-TAX APPELLATE TRIBUNAL IS JUSTIFIED IN LAW IN ALLOWING EXEMPTION ON THE INCOME, I.E., DIVIDEND INCOME WHIC H WAS NOT CLAIMED AS EXEMPT IN THE RETURN OF INCOME FILED BY THE ASSESSEE AND THE 4 ASSESSING OFFICER HAD RIGHTLY NOT ALLOWED EXEMPTION OF DIVIDEND INCOME UNDER SECTION 10(35) IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. V. CIT [20 06] 284 ITR 323 (SC) ; [2006] 204 CTR (SC) 182 ? 7. ON THE ABOVE, THE HONBLE COURT MADE THE FOLLOWI NG OBSERVATIONS : WE HAVE CAREFULLY PERUSED THE JUDGMENT OF THE HON'B LE SUPREME COURT AND FIND THAT THE SAME RELATES TO THE POWER O F THE ASSESSING OFFICER TO ENTERTAIN A CLAIM NOT MADE IN THE RETURN OF INCOME AND, THEREFORE, IT DOES NOT MILITATE AGAINST THE ACTION OF THE COMMISSIONER OF INCOME-TAX(APPEALS) IN HAVING CONSIDERED THE IMP UGNED CLAIM. IN FACT, RELEVANT JUDICIAL PRONOUNCEMENT ON THIS POINT IS THE JUDGMENT OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT V. REWARI CENTRAL CO-OPERATIVE BANK LTD. [2003] 263 IT R 598 (P&H). HON'BLE HIGH COURT IN THIS CASE, WAS DEALING WITH A QUESTION AS TO WHETHER THE COMMISSIONER OF INCOME-T AX (APPEALS) WAS COMPETENT TO ADJUDICATE UPON AN ISSUE WHICH DID NOT ARISE OUT OF THE ORDER APPEALED AND THEREBY HOLDING THAT THE INCOME OF THE ASSESSES WAS EXEMPT UNDER SECTION 80P OF THE AC T. IN THAT CASE, THE PLEA RAISED BY THE ASSESSING OFFICER WAS THAT T HE CLAIM OF EXEMPTION UNDER SECTION 80P WAS NOT CONSIDERED DURI NG THE ASSESSMENT PROCEEDINGS WHEREAS THE COMMISSIONER OF INCOME-TAX (APPEALS) ENTERTAINED SUCH CLAIM AND HELD THE ASSES SEE WAS ENTITLED TO EXEMPTION UNDER SECTION 80P OF THE ACT. THE TRIBUNAL HAD UPHELD THE STAND OF THE COMMISSIONER OF INCOME- TAX (APPEALS) AND ON FURTHER CHALLENGE BEFORE THE HON'B LE HIGH COURT, IT WAS HELD THAT THE FAILURE OF THE ASSESSEE TO RAISE THE PLEA OF EXEMPTION BEFORE THE ASSESSING OFFICER CANNOT DI SENTITLE TO IT TO THE BENEFIT OF A STATUTORY EXEMPTION. CONSIDERED ON SIMILAR PARITY OF REASONING, IN THE INSTANT CASE, THE CLAIM OF THE ASSESSEE IS IN TERMS OF THE STATUTORY PROVISION CONTAINED IN SECTI ON 10(35) OF THE ACT AND THE ASSESSEE CANNOT BE DENIED THE SAME MERE LY BECAUSE IT WAS NOT RAISED BEFORE THE ASSESSING OFFICER. THUS, THE COMMISSION 7-INCOME-TAX (APPEALS) MADE NO MISTAKE I N ENTERTAINING THE PLEA OF THE ASSESSEE FOR EXEMPTION UNDER SECTION 10(35) OF THE ACT AND HOLDING THE ASSESSEE ELIGIBLE FOR THE SAME. 8. FROM THE ABOVE, IT IS CLEAR THAT APPELLATE AUTHO RITIES HAVE POWER TO ENTERTAIN A CLAIM WHICH WAS NOT MADE BEFOR E THE ASSESSING OFFICER. THEREFORE, IN OUR OPINION, LD C IT(APPEALS) SHOULD HAVE ENTERTAINED AND ADMITTED THIS CLAIM FOR ADJUDICATION. WE FURTHER FIND THAT THE LD CIT(APPEA LS) HAS NOT ADJUDICATED THE CLAIM ON MERITS BECAUSE DETAILS HAV E NOT BEEN CONSIDERED. THEREFORE, IN THE INTEREST OF JUSTICE, WE SET ASIDE THE ORDER OF LD CIT(APPEALS) AND REMIT THE MATTER B ACK TO HIS 5 FILE WITH A DIRECTION TO ADMIT THE ABOVE CLAIM FOR ADJUDICATION AND THEN ADJUDICATE THE SAME ON MERITS AFTER PROVID ING ADEQUATE OPPORTUNITY TO THE ASSESSEE. 9. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER,2013. SD/- SD/- (BHAVNESH SAINI) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 11 TH SEPTEMBER, 2013. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR ITA T,CHD.