M/S. MARICO LTD, MUMBAI V. THE DCIT CEN CIR-35, MUMBAI

ITA 7640/MUM/2007

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71199 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: I
• Next Hearing Date: 05-09-2013
• Assessment Year: 2001-2002
• Appeal Filed On: 27-12-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 260A; 80IB; 263; 11

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL I II I BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . . ! ! ! ! , ' ' ' ' #$ #$ #$ #$ BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA N. K. BILLAIYA, AM , AM , AM , AM ./ I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.7640/MUM/2007 7640/MUM/2007 7640/MUM/2007 7640/MUM/2007 ( % % % % & & & & / ASSESSMENT YEAR :2001-02) M/S MARICO INDUSTRIES LIMITED,RANG SHARDA, K. C. MARG, BANDRA (W) MUMBAI-400050 / VS. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-35, AAYKAR BHAVAN, M. K. MARG MUMBAI-400020 ( '( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*'( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.992/MUM/2008 992/MUM/2008 992/MUM/2008 992/MUM/2008 ( % % % % & & & & / ASSESSMENT YEAR :2001-02) ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-35, AAYKAR BHAVAN, M. K. ROAD MUMBAI-400020 / VS. M/S MARICO INDUSTRIES LIMITED,RANG SHARDA, K. C. MARG, BANDRA (W) MUMBAI-400050 $' ' ./ + ./ PAN/GIR NO. : AAACM7493G ( '( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*'( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) '( '( '( '( , , , , / APPELLANT BY : SHRI NITESH JOSHI )*'( )*'( )*'( )*'( - -- - , , , , /RESPONDENT BY : SHRI O. P. SINGH - -- - .' .' .' .' / DATE OF HEARING : 5 TH SEPTEMBER 2013 /0& /0& /0& /0& - -- -.' .' .' .' /DATE OF PRONOUNCEMENT: 18 TH SEPTEMBER 2013 #1 / O R D E R PER : , . . / VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 26.11.2007 OF COMMISSIONER OF INCOME TAX(APPEALS) A RISING FROM ASSESSMENT ORDER PASSED IN PURSUANT TO THE ORDER PA SSED U/S 263 OF THE INCOME TAX ACT FOR THE ASSESSMENT YEAR 2001-02. ITA NO.7640/M/2007 & 992/M/2008 MARICO INDUSTIRES LT. 2 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFF ICER IN DISALLOWING A SUM OF RS. 23.39 LACS PAID AS INTERES T ON ACCOUNT OF BELATED PAYMENT OF PURCHASE OF BRAND NAMES AND TRAD EMARKS AS A CAPITAL EXPENDITURE. ON THE FACTS AND IN THE CIRC UMSTANCES OF THE CASE, THE SAME OUGHT TO BE ALLOWED AS REVENUE E XPENDITURE. WITHOUT PREJUDICE TO THE ABOVE, IN THE EVENT THE AF ORESAID EXPENDITURE OF RS. 23.39 LACS IS TREATED AS CAPITAL EXPENDITURE, LEARNED DCIT HAS ERRED IN NOT ALLOWING DEPRECIATION THEREON AT THE APPLICABLE RATES. DEPRECIATION ON THE SAID AMOU NT TREATED AS CAPITAL EXPENDITURE OUGHT TO HAVE BEEN ALLOWED. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER T HAT ADDING BACK THE PROVISION FOR ADVERTISEMENT AND SALES PROMOTION AND DISTRIBUTION EXPENSES (ASP) AMOUNTING TO RS.7,19,49 ,950/- TO THE PROFIT AS PER PROFIT AND LOSS ACCOUNT WHILE CALCULA TING BOOK PROFIT UNDER SECTION 11 5JB OF THE ACT ON THE GROUND THAT PROVISION FOR ASP CANNOT BE SAID TO BE ASCERTAINED LIABILITY. PRO VISION FOR ASP, NOT BEING COVERED BY ANY OF THE CLAUSE (A) TO (F) I N EXPLANATION TO SECTION 11 5JB(2), OUGHT NOT TO BE ADDED TO THE NET PROFIT AS PER THE PROFIT AND LOSS ACCOUNT WHILE DETERMINING BOOK PROFIT U/S 11 5JB. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DISPOSING OFF GROUND NO 6 & 7 BY DIRECTING THE A SSESSING OFFICER TO CHARGE INTEREST U/S 234C & 234D ONLY AS PER LAW. ON THE FACTS AND IN THE CIRCUMSTANCES, HE OUGHT TO HAV E DIRECTED THE ASSESSING OFFICER NOT TO LEVY ANY SUCH INTEREST. 3. GROUND NO. 1 REGARDING DISALLOWANCE OF ` 23.39 L ACS ON ACCOUNT OF INTEREST ON BELATED PAYMENT OF PURCHASE. WE HAVE HE ARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS ADDITION HAS BEEN MADE BY THE AO IN PURSUANT TO THE REVISION ORDER OF CIT(A) PASSED U/S 263. IN APPEAL FILED BY THE ASSES SEE AGAINST THE ORDER PASSED U/S 263 WAS INITIALLY DECIDED BY THIS TRIBUN AL VIDE ORDER DATED 15.6.2007. SUBSEQUENTLY, THE ASSESSEE FILED AN MA N O. 617/M/2010 POINTING OUT THAT CERTAIN ISSUES WERE NOT ADJUDICAT ED BY THE TRIBUNAL. ITA NO.7640/M/2007 & 992/M/2008 MARICO INDUSTIRES LT. 3 ACCORDINGLY, VIDE ORDER DATED 22.5.2011 THE TRIBUNA L HAS RECALLED THE ORDER DATED 15.6.2007 FOR LIMITED PURPOSE FOR DECID ING THE GROUND 3C, 3D, 5C AND 5D. THEREAFTER VIDE ORDER DATED 12.6.2013 TH ESE REMAINING GROUNDS HAS BEEN DISPOSED OFF BY THE TRIBUNAL. WE N OTE THAT THIS ISSUE HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL ON MER ITS VIDE ORDER DATED 12.6.2013 IN PARA 2.1 AS UNDER: 2.1 WE HAVE HEARD BOTH PARTIES IN THE MATTER, PERU SED THE RECORDS, CONSIDERED THE MATTER CAREFULLY. UNDER PRO VISIONS OF EXPLANATION-8 TO SECTION 43(1) ANY INTEREST PAYABLE IN CONNECTION WITH ACQUISITION OF AN ASSET UP TO THE PERIOD TILL THE ASSET IS FIRST PUT TO USE IS REQUIRED TO BE INCLUDED IN THE ACTUAL COST OF THE ASSET AND INTEREST PAID THEREAFTER HAS TO BE ALLOWE D AS REVENUE EXPENDITURE. IN THE PRESENT CASE FROM THE PERUSAL O F ORDER OF CIT IT IS NOT CLEAR AS TO WHETHER INTEREST HAD BEEN PAI D TILL THE DATE OF ACQUISITION OF THE ASSET OR THEREAFTER. BOTH THE PA RTIES AGREED THAT THE ISSUE MAY BE RESTORED TO FILE OF AO FOR FR ESH DECISION AFTER NECESSARY EXAMINATION. WE, THEREFORE SET ASID E THE ORDER OF CIT ON THIS POINT AND RESTORE THE MATTER BACK TO AO FOR PASSING A FRESH ORDER AFTER NECESSARY EXAMINATION OF THE MATT ER AND AFTER HEARING THE ASSESSEE. 4. IN VIEW OF THE ORDER OF THIS TRIBUNAL WHILE DECI DING THE APPEAL OF THE ASSESSEE AGAINST 263 ORDER THIS ISSUE STANDS DISPOS ED OFF IN TERMS OF THE ABOVE FINDING OF THE TRIBUNAL. ACCORDINGLY NO FURTH ER FINDING IS REQUIRED ON THIS ISSUE. 5. GROUND NO. 2 REGARDING ADDING BACK OF PROVISION FOR ADVERTISEMENT , SALES PROMOTION AND DISTRIBUTION EXPENSES WHILE COM PUTING BOOK PROFIT U/S 115JB. WE HAVE HEARD THE LD. AR AS WELL AS LD. DR A ND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS ISSUE HAS ALSO BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL ON MER ITS IN THE APPEAL ITA NO.7640/M/2007 & 992/M/2008 MARICO INDUSTIRES LT. 4 AGAINST 263 ORDER VIDE ORDER DATED 12.6.2013 IN PAR A 4.2 TO 5. THE CONCLUDING PART OF THE FINDING IN PARA 5 IS AS UNDE R: 5. IN VIEW OF THE FOREGOING DISCUSSION AND FOR THE REASONS GIVEN EARLIER WE ARE OF THE CONSIDERED VIEW THAT CIT ON T HE FACTS OF THE CASE WAS JUSTIFIED IN DIRECTING ASSESSING OFFICER T O MAKE ADDITION OF ` 7.19 CRORES TO THE BOOK PROFIT. ORDER OF CIT I S ACCORDINGLY UPHELD. 6. AS THIS ISSUE HAS BEEN DECIDED ON MERITS AGAINST THE ASSESSEE THEREFORE, NO FURTHER FINDING IS REQUIRED ON THIS I SSUE AS IT STANDS DECIDED AGAINST THE ASSESSEE. 7. GROUND NO. 3 REGARDING THE INTEREST U/S 234C AND 234D. THE LEVY OF INTEREST U/S 234C AND 234D IS MANDATORY IN NATURE. HOWEVER, THE INTEREST U/S 234C IS CONSEQUENTIAL THEREFORE, NO SPECIFIC FI NDING IS REQUIRED ON THIS ISSUE. 8. THE REVENUE HAS RAISED THE ONLY GROUND AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN ALLOWING ASSESSEES APPEAL IN RESPECT OF DEDUCTION U/S 80IB AND ALLOCATION OF ADMINISTRATION EXPENSES ONLY ON TECHNICAL GROUNDS IGNORING THE FACTS THAT T HE ORDER OF ITAT HAS NOT BEEN ACCEPTED AND REFERENCE U/S 260A H AS BEEN FILED BEFORE THE HONBLE BOMBAY HIGH COURT. 9. WE HAVE HEARD THE LD. DR AS WELL AS LD. AR AND C ONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ISSUE OF DEDUCTION U/S 80IB HAS BEEN CONSIDERED AND DECIDED BY THIS TRIBUNAL WHILE DECID ING THE APPEAL AGAINST THE ORDER PASSED U/S 263. THE CIT(A) HAS DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE ORDER OF THIS TRIBUNA L AGAINST 263 ORDERS IN PARA 6.4 AS UNDER: ITA NO.7640/M/2007 & 992/M/2008 MARICO INDUSTIRES LT. 5 6.4 SINCE AS A RESULT OF THE AFORESAID ORDER OF TH E TRIBUNAL, THE ORDER OF THE CIT(C)-III, MUMBAI PASSED U/S 263 WITH REFERENCE TO GROUNDS OF APPEAL NOS 1 & 2 VIZ. DEDUCTION U/S 80IB DOES NOT SURVIVE, THE ORDER OF THE A.O PASSED AS A CONSEQUEN CE OF THE SAID ORDER ALSO DOES NOT SURVIVE. HENCE THESE TWO G ROUNDS OF APPEAL SUCCEED. 10. THIS ISSUE HAS BEEN DECIDED ON MERIT BY THIS TR IBUNAL AND THE APPEAL FILED BY THE REVENUE BEFORE THE HONBLE HIGH COURT HAS BEEN DISMISSED VIDE ORDER DATED 18.4.2013. THEREFORE, TH IS ISSUE STANDS ADJUDICATED BY THE ORDER OF THIS TRIBUNAL IN THE AP PEAL AGAINST 263 ORDER. ACCORDINGLY WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SPOSED OFF AS BECOME INFRUCTUOUS AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 18 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( . . ! ) ' #$ (N. K. BILLAIYA) ACCOUNTANT MEMBER ( ) % #$ (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 18 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI