DOW CHEMICAL INTERNATIONAL P. LTD, MUMBAI V. ADDL CIT RG 10(2), MUMBAI

ITA 7460/MUM/2010

• Counselvise Citation: 746019914 RSA 2010
• Duration Of Justice: 4 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-03-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 01-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LOVE KUMAR
• Keywords: Opportunity of being heard; Revised return; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUM BAI BEFORE S/SHRI B.R.BASKARAN (AM) AND SANJAY GARG, ( JM) . . , , ./I.T.A. NO.7460/MUM/2010 ( / ASSESSMENT YEAR : 2006-07) DOW CHEMICAL INTERNATIONAL PRIVATE LIMITED, UNIT NO.1, CORPORATE PARK, V N PURAV MARG, CHEMBUR, MUMBAI-400071 / VS. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE-10(2), AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( / APPELLANT) .. ( ! / RESPONDENT) ./ ' ./PAN/GIR NO. :AAACD4467B # / APPELLANT BY SHRI M P LOHIA ! $ # / RESPONDENT BY SHRI LOVE KUMAR % & $ '( / DATE OF HEARING : 10.3.2015 )* $ '( /DATE OF PRONOUNCEMENT :10.3.2015 / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ASSESSMENT ORDER PASSED U/S 143(3) READ WITH SECTION 144C(13) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE ASSESSEE HAS RAISED SIX GROUNDS. THE GROUNDS NO.4 AND 5 RELATING TO CHARGING OF INTEREST ARE CONSEQUENTIAL IN NATURE AND HENCE THEY DO NOT REQUIRE ANY ADJUDICATION. GROUND NO.6 RELATI NG TO INITIATION OF ITA. NO.7460/MUM/2010 2 PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IS PREMATURE AT THIS STAGE. THE REMAINING THREE GROUNDS RELATE TO T HE FOLLOWING THREE ISSUES: A) DISALLOWANCE OF LEASE PAYMENT; B) DISALLOWANCE OF EMPLOYEES CONTRIBUTION TO PROVID ENT FUND; AND C) REJECTION OF CLAIM FOR DEDUCTION OF EXPENDITURE RELATING TO REIMBURSEMENT OF DEPUTED STAFF COST. 3. WE HEARD THE PARTIES AND PERUSED THE RECORD. TH E FIRST ISSUE RELATES TO DISALLOWANCE OF LEASE PAYMENT MADE TO M/S IBM FO R TAKING COMPUTER ON LEASE, TREATING THE SAME AS CAPITAL EXPENDITURE. TH E ASSESSEE HAD TAKEN COMPUTERS ON LEASE FROM M/S IBM. IN THE BOOKS OF A CCOUNT, THE ASSESSEE TREATED THE SAME AS FINANCIAL LEASE AND ACCORDING LY IT CLAIMED ONLY INTEREST PORTION AS EXPENDITURE IN THE PROFIT AND L OSS ACCOUNT. HOWEVER, IN THE INCOME TAX COMPUTATION, THE ASSESSEE TREATED IT AS OPERATING LEASE AND ACCORDINGLY CLAIMED ENTIRE LEASE RENTAL (PRINCI PAL + INTEREST PORTION) AS REVENUE EXPENDITURE. HOWEVER, THE AO TREATED THE LE ASE AS FINANCIAL LEASE AND ACCORDINGLY, DISALLOWED THE CLAIM FOR DEDUCTION OF PRINCIPAL PORTION. THE DRP ALSO CONFIRMED THE SAME. 4. AT THE TIME OF HEARING, THE LD A.R PLACED S TRONG RELIANCE ON THE LEASE AGREEMENT AND SUBMITTED THAT THE TERMS OF THE LEASE AGREEMENT CLEARLY SHOW THAT THE SAME WAS AN OPERATING LEASE ONLY. HOWEVER, WE NOTICE FROM THE ORDERS OF TAX AUTHORITIES THAT THEY HAVE NOT EXAMINED THE LEASE AGREEMENT IN ORDER TO FIND OUT THE ACTUAL NAT URE OF THE LEASE I.E. WHETHER IT WAS A FINANCIAL LEASE OR AN OPERATING LE ASE. THE LD. COUNSEL ITA. NO.7460/MUM/2010 3 SUBMITTED THAT THE DRP HAS CONFIRMED THE ORDER OF T HE AO ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO EXPLAIN AS TO WHA T WOULD BE THE TREATMENT TO THE COMPUTER AFTER THE EXPIRY OF LEASE PERIOD. THE LD. COUNSEL SUBMITTED THAT THE LEASE AGREEMENT SPECIFIC ALLY PROVIDES THAT THE COMPUTER WOULD BE RETURNED BACK TO M/S IBM. HE FUR THER SUBMITTED THAT THE ASSESSEE HAS ALSO OBTAINED A CERTIFICATE TO THA T EFFECT FROM M/S IBM. THUS, IN OUR VIEW, THE PRESENT DISPUTE COULD BE RES OLVED ONLY IF A DEFINITE FINDING ABOUT THE NATURE OF LEASE IS GIVEN. WE HAV E ALREADY NOTICED THAT BOTH THE AUTHORITIES HAVE FAILED TO EXAMINE THE LEA SE AGREEMENT WHICH, IN OUR VIEW, IS ESSENTIAL. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE REQUIRES FRESH EXAMINATION AT THE END OF THE AO. A CCORDINGLY, WE SET ASIDE THE ORDER OF THE AO AND RESTORE THIS ISSUE TO THE F ILE OF THE AO/DRP WITH A DIRECTION TO DECIDE THE SAME AFRESH BY DULY CONSIDE RING THE LEASE AGREEMENT, CERTIFICATE GIVEN BY THE M/S IBM AND ANY OTHER INFORMATION/EXPLANATIONS THAT MAY BE FURNISHED BY T HE ASSESSEE. 5. THE NEXT ISSUE RELATES TO DISALLOWANCE OF EMPLOY EES CONTRIBUTION TO PROVIDENT FUND. WE NOTICE THAT THE AO HAS DISALLOWE D THE CLAIM ON THE REASONING THAT THE ASSESSEE FAILED TO PAY EMPLOYEES CONTRIBUTION BEFORE THE DUE DATE PRESCRIBED UNDER THE PROVIDENT FUND AC T. 6. THE LD. COUNSEL SUBMITTED THAT THE ASSESSEE HAS PAID THE AMOUNT BEFORE THE END OF THE RELEVANT FINANCIAL YEAR AND H ENCE THE AO WAS NOT JUSTIFIED IN DISALLOWING THE CLAIM IN VIEW OF THE D ECISIONS RENDERED BY THE ITA. NO.7460/MUM/2010 4 JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S GH ATGE PATIL TRANSPORT LTD, DATED 14 OCTOBER, 2014 IN INCOME TAX APPEAL NOS.100 2 OF 2012 AND 1034 OF 2012 AND CIT V/S HINDUSTAN ORGANICS CHEMI CALS LTD REPORTED IN (2014) 366 ITR 1 (BOM). THUS, WE NOTICE THAT THE I MPUGNED ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFORESAID DECISIONS OF THE HONBLE JURISDICTIONAL HIGH COURT. ACCORDINGLY, WE SET ASI DE THE ORDER OF THE LD. CIT(A) ON THIS ISSUE AND DIRECT THE AO TO DELETE TH IS ADDITION. 7. THE NEXT ISSUE RELATES TO CLAIM FOR DEDUCTION OF EXPENDITURE INCURRED TOWARDS REIMBURSEMENT OF DEPUTED STAFF COST. THE AS SESSEE DID NOT CLAIM THE SAME IN THE ORIGINAL RETURN AS DEDUCTION. HOWEV ER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE FILED REVIS ED COMPUTATION OF INCOME BY CLAIMING THE ABOVE SAID DEDUCTION. THE AO REJECTED THE CLAIM ON THE GROUND THAT THE ASSESSEE COULD HAVE MADE THE CLAIM ONLY BY FILING REVISED RETURN OF INCOME. THE DRP ALSO CONFIRMED TH E SAME. 8. BEFORE US, THE LD. COUNSEL SUBMITTED THAT THE AO HAS REJECTED THE CLAIM BY FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD V/S CIT (2006) 284 ITR 323 (SC), WHEREIN IT WAS HELD THAT THE ASSESSEE SHOULD MAKE ANY ADDITIONAL CLAIM BY FILING REVISED RETURN OF INCOME. HOWEVER, THE JURISDICTIONAL HIGH COURT HAS HELD IN THE CASE OF CIT V/S PRUTHVI BROKERS AND SHAREHOLDERS (P) LTD ( 2012) 349 ITR 336(BOM) THAT APPELLATE AUTHORITY IS ENTITLED TO CO NSIDER THE ADDITIONAL CLAIM, IF ANY AND ADJUDICATE THE SAME. ACCORDINGLY , WE ARE OF THE VIEW ITA. NO.7460/MUM/2010 5 THAT THE CLAIM FOR DEDUCTION PUT FORTH BY THE ASSES SEE SHOULD BE ADMITTED. FURTHER, SINCE THE SAME NEEDS TO BE EXAMINED, WE TH INK IT FIT AND PROPER TO RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE THE CLAIM PUT FORTH FOR DEDUCTION BY THE ASSESSEE AND T AKE APPROPRIATE DECISION IN ACCORDANCE WITH LAW. 9. NEEDLESS TO MENTION THAT THE ASSESSEE SHOULD BE GIVEN NECESSARY OPPORTUNITY OF BEING HEARD. 10. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 10TH MAR, 2015. )* % + , -.10TH MARCH, 2015 * $ & 3 SD SD ( / SANJAY GARG ) ( . . / B.R. BASKARAN) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + % & MUMBAI:10TH MARCH,2015. . . ./ SRL , SR. PS !'#$ %$&' / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. ! / THE RESPONDENT. 3. % 5 ' ( ) / THE CIT(A)- CONCERNED 4. % 6' / CIT CONCERNED 5. 78 '9 , ( 9 , + % & / DR, ITAT, MUMBAI CONCERNED 6. :& / GUARD FILE. ; % / BY ORDER, TRUE COPY < (ASSTT. REGISTRAR) ( 9 , + % & /ITAT, MUMBAI