DCIT, Bangalore V. M/s Advanta India Ltd., Bangalore

ITA 824/BANG/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51357 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 23-11-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 22-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: G V GOPALA RAO
• Assessee Lawyers: KIRIT R KAMDHAR
• Keywords: Capital expenditure
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NOS.824 & 825/BANG/2010 (ASSESSMENT YEARS : 2003-04 & 2004-05) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 11(1), BANGALORE. VS. M/S. ADVANTA INDIA LTD. AGRICULTURE RESEARCH STATION, KOPPA ROAD, BEGUR P.O. BANGALORE-560 068 PAN AACCA 7700 I APPELLANT RESPONDENT. APPELLANT BY : MR.G.V. GOPALA RAO. RESPONDENT BY : MR. KIRIT R. KAMDHAR. DATE OF HEARING : 23.11.2011. DATE OF PRONOUNCEMENT : 23.11.2011. O R D E R PER N.K. SAINI, A.M. : THESE TWO APPEALS BY THE DEPARTMENT ARE DIRECTED AGAINST THE CONSOLIDATED ORDER DT.31.3.2010 FOR THE ASSESSMENT YEARS 2003-04 & 200 4-05 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-IV, BANGALORE. THE MAIN IS SUES IN BOTH THESE APPEALS IS COMMON AND THE APPEALS WERE HEARD TOGETHER, SO, THEY ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. FIRST WE WILL DEAL WITH THE ITA NO.824/BANG/2010 . THE GROUNDS NOS.1, 4 & 5 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. THE GROUND NO.2 AGITATED BY THE DEPARTMENT READS AS UNDER : THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDI TION OF RS. 25,91,670 BEING 1/4 TH OF RS. 1,03,66,680 PAID TOWARDS ROYALTY, WHICH WAS DISALLOWED BY THE ASSESSING 2 ITA NOS.824 & 825/BANG/2010 OFFICER AS CAPITAL EXPENDITURE, RELYING ON THE DECI SION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN SWITCH GEARS LTD IN 232 ITR 359 (SC) WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADDITIO N WAS MADE BY THE ASSESSING OFFICER. 3. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSE SSEE WAS ENGAGED IN THE DEVELOPMENT OF HYBRID SEEDS IN ADDITION TO CARRYING OUT RESEARCH A CTIVITIES IN ITS FARMS. FOR THE ASST. YEAR UNDER CONSIDERATION, THE ASSESSEE FILED RETURN OF INCOME ON 29.10.2004 DECLARING A PROFIT OF RS.3,59,00,300. THE SAID RETURN WAS REVISED ON 21. 10.2004 DECLARING A PROFIT OF RS.2,83,83,977. LATER ON THE CASE WAS SELECTED FOR SCRUTINY. THE A SSESSING OFFICER FRAMED THE ASSESSMENT AT AN INCOME OF RS.2,11,82,410. WHILE DOING SO, THE ASSE SSING OFFICER DISALLOWED 1/4 TH OF THE ROYALTY WHICH WAS CLAIMED AT RS.1,03,66,680 IN THE PROFIT A ND LOSS ACCOUNT, THE DISALLOWANCE OF RS.25,91,670 WAS MADE OUT OF ROYALTY. RELIANCE WAS PLACED BY THE ASSESSING OFFICER ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF SO UTHERN SWITCH GEARS LIMITED REPORTED IN 232 ITR 359. 3.1 THE ASSESSEE CARRIED THE MATTER TO TH E LD. CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE AND DELETED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER BY OBSERVING THAT A SIMILAR DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THE ASST. YEAR 2002-03 WAS DELETED BY THE THEN CIT(A), HYDERABAD IN ASSESSEES OWN CASE. BEI NG AGGRIEVED THE DEPARTMENT IS IN APPEAL BEFORE US. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE VER Y OUTSET STATED THAT THE ISSUE IS COVERED BY THE EARLIER ORDER DT.31.10.2007 BY THE ITAT, HYD ERABAD BENCH A IN ASSESSEES OWN CASE IN ITA NO.316/HYD/2005 FOR ASST. YEAR 2002-03. OUR AT TENTION WAS DRAWN TOWARDS PAGE NOS.13 TO 3 ITA NOS.824 & 825/BANG/2010 18 OF THE ASSESSEES COMPILATION WHICH IS THE COPY OF THE AFORESAID REFERRED ORDER. IN HIS RIVAL SUBMISSION, THE LEARNED CIT, DEPARTMENTAL REPRESENT ATIVE COULD NOT CONTROVERT THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE. 5. AFTER CONSIDERING THE SUBMISSION OF BOTH PARTIES AND GOING THROUGH THE MATERIAL ON RECORD, IT IS NOTICED THAT THE IDENTICAL ISSUE HAVI NG SIMILAR FACTS WAS INVOLVED IN THE PRECEDING ASSESSMENT YEAR I.E. A.Y. 2002-03 IN ASSESSEES OWN CASE WHICH HAS BEEN ADJUDICATED BY THE ITAT, HYDERABAD BENCH A IN ITA NO.316/HYD/205 VID E ORDER DT.31.10.2007 WHEREIN THE RELEVANT FINDINGS HAVE BEEN GIVEN IN PARA 02 WHICH ARE REPRODUCED AS UNDER : 2. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION IS REGARDING DISALLOWANCE OF 25% OF ROYALTY. SHRI H. SRINIVASULU, LEARNED DEPARTMEN TAL REPRESENTATIVE, SUBMITTED THAT THE VERY SAME ISSUE WAS CONSIDERED BY THE TRIB UNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1995-96 IN ITA NO.37/H YD/1999 DT.21.2.2003. THE CIT(A) HAS FOLLOWED THE ABOVE ORDER OF THE TRIBUNAL . THEREFORE, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THIS ISSUE IS COVERED AGAINST THE REVENUE BY THE ORDER OF THIS TRIBUNAL IN THE ASSESSEES OWN CA SE FOR ASSESSMENT YEAR 1995-96. IN VIEW OF THE ABOVE SUBMISSION OF THE LEARNED DEPA RTMENTAL REPRESENTATIVE, THIS GROUND OF APPEAL IS REJECTED. RESPECTFULLY FOLLOWING THE AFORESAID ORDER AND CO-O RDINATE BENCH, WE DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LEARNE D CIT(A) ON THIS ISSUE. ACCORDINGLY, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTMENT ON T HIS ISSUE RELATING TO THE ROYALTY. 6. THE NEXT ISSUE VIDE GROUND NO.3 RELATES TO THE C HARGING OF INTEREST U/S. 234D OF THE INCOME TAX ACT, 1961. 7. THE FACTS RELATING TO THE ISSUE IN BRIEF ARE THA T THE ASSESSING OFFICER WHILE FRAMING THE ASSESSMENT CHARGED INTEREST AMOUNTING TO RS. 7,78,2 89 U/S.234D OF THE INCOME TAX ACT, 1961. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED CIT( A) WHO DELETED THE INTEREST BY OBSERVING IN PARA 8.4 OF THE IMPUGNED ORDER AS UNDER : 4 ITA NOS.824 & 825/BANG/2010 IN RESPECT OF APPEAL ON CHARGING OF INTEREST U/S. 234D OF THE I.T. ACT IS CONCERNED, IT IS OBSERVED THAT THE RELEVANT ASSESSM ENT YEARS ARE 2003-04 AND 2004-05 AND SECTION 234D OF THE I.T. ACT WAS BROUGH T INTO STATUTE BY THE FINANCE ACT, 2003 W.E.F. 1.6.2003 I.E. A.Y. 2004-05 AND THE REFORE HAS BEEN RIGHTLY APPLIED TO THE CASE OF A.Y. 2004-05 BUT NOT TO THE CASE OF A.Y. 2003-04. HENCE THE APPEAL ON THIS ISSUE IS ALLOWED IN A.Y. 2003-04 BUT DISMIS SED IN A.Y. 2004-05. NOW THE DEPARTMENT IS IN APPEAL BEFORE THE ITAT. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE WHILE SU PPORTING THE ORDER OF THE ASSESSING OFFICER STATED THAT INTEREST U/S. 234D WAS CHARGEAB LE FROM 1.6.2003. THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN CHARGING INTEREST U/S.234D AS THE ASSESSMENT WAS FRAMED ON 24.3.2006. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE KERA LA HIGH COURT IN THE CASE OF CIT VS. KERALA CHEMICALS AND PROTEINS LTD. (2010) 323 ITR 584 (KER ). 9. IN HIS RIVAL SUBMISSION, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE LEARNED CIT(A) AND SUBMITTED THAT SINCE SECTION 234 D WAS INTRODUCED BY FINANCE ACT, 2003 W.E.F. 1.6.2003. HENCE IT WAS NOT APPLICABLE IN AS SESSEES CASE BECAUSE THE PREVIOUS YEAR ENDS ON 31.3.2003 I.E. BEFORE THE DATE WHEN THE AMENDMEN T TO SECTION 234D WAS INTRODUCED. RELIANCE WAS PLACED ON THE JUDGMENT OF HON'BLE DELH I HIGH COURT IN THE CASE OF DIT VS. JACABS CIVIL INCORPORATED (2010) 235 CTR (DEL) 123 (COPY OF THE SAID ORDER WAS SUBMITTED.) IT WAS FURTHER STATED THAT EVEN IF TWO VIEW WERE AVAILABLE ON SAME ISSUE THE ONE WHICH FAVOUR THE ASSESSEE HAS TO BE ADOPTED AS PER THE RATIO LAID DO WN BY THE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. VEGETABLE PRODUCTS LIMITED (1973) 88 ITR 192 (SC). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND GO NE THROUGH THE MATERIAL ON RECORD. IN THE PRESENT CASE, IT IS NOT IN DISPUTE THAT THE ASS ESSMENT YEAR UNDER CONSIDERATION IS 2003-04 WHILE SECTION 234D WAS INTRODUCED BY THE FINANCE AC T, 2003 W.E.F 1.6.2003 WHICH LAYS DOWN THAT IF THE AMOUNT REFUNDED UNDER SECTION 143 EXCEE DS THE AMOUNT REFUNDABLE ON REGULAR 5 ITA NOS.824 & 825/BANG/2010 ASSESSMENT THE ASSESSEE SHOULD PAY SIMPLE INTEREST AT THE RATE OF ONE-HALF PER CENT ON THE WHOLE OR THE EXCESS AMOUNT SO REFUNDED, FOR EVERY M ONTH OR PART OF A MONTH COMPRISED IN THE PERIOD FROM THE DATE OF GRANT OF REFUND TO THE DATE OF SUCH REGULAR ASSESSMENT. 11. ON A SIMILAR ISSUE, THE HON'BLE DELHI HIGH COUR T IN THE CASE OF JACABS CIVIL INCORPORATED (SUPRA) HELD THAT SECTION 234D WAS APPLICABLE ONLY FROM ASSESSMENT YEAR 2004-05 ONWARDS AND NOT IN THE EARLIER ASSESSMENT YEARS AND THEREFORE N O INTEREST UNDER THAT SECTION COULD BE LEVIED FOR THE PERIOD PRIOR TO THE ASSESSMENT YEAR 2004-05 . IT ALSO APPEARS THAT ON A SIMILAR ISSUE THE HON'BLE KERALA HIGH COURT HAS TAKEN A DIFFERENT VIE W IN THE CASE OF KERALA CHEMICALS AND PROTEINS LTD (SUPRA) WHEREIN IT HAS BEEN HELD THAT INTEREST U/S. 234D WAS CHARGEABLE FROM 1.6.2003 TILL COMPLETION OF REGULAR ASSESSMENT AND THE FINDING OF THE TRIBUNAL THAT SECTION 234D WAS APPLICABLE ONLY FROM ASSESSMENT YEAR 2004-05 ON WARDS WAS VACATED. PRESENTLY, DIFFERENT VIEWS OF DIFFERENT HIGH COURTS ARE AVAILABLE. HOWE VER, THE VIEW WHICH FAVOURS THE ASSESSEE IS TO BE ADOPTED, AS PER THE RATIO LAID DOWN BY THE HON'B LE SUPREME COURT IN THE CASE OF VEGETABLE PRODUCTS LTD. (SUPRA) WHEREIN IT HAS BEEN HELD THAT -- IF THE COURT FINDS THAT THE LANGUAGE OF A TAXING PROVISION IS AMBIGUOUS OR CAPABLE OF MORE MEANINGS THAN ONE, THEN THE COURT HAS TO AD OPT THAT INTERPRETATION WHICH FAVOURS THE ASSESSEE, MORE PARTICULARLY SO WHERE TH E PROVISION RELATES TO THE IMPOSITION OF A PENALTY. 12. SIMILARLY, THE HON'BLE SUPREME COURT IN THE CAS E OF MYSORE MINERALS LTD VS. CIT (1999) 239 ITR 775 HELD THAT - SECTION 32 OF THE INCOME TAX ACT, 1961, CONFERS A BENEFIT ON THE ASSESSEE. THE PROVISION SHOULD BE SO INTERPRETED AND THE WORDS US ED THEREIN SHOULD BE ASSIGNED SUCH MEANING AS WOULD ENABLE THE ASSESSEE TO SECURE THE BENEFIT INTENDED TO BE GIVEN BY THE LEGISLATURE TO THE ASSESSEE. IT IS AL SO WELL-SETTLED THAT WHERE THERE ARE TWO POSSIBLE INTERPRETATIONS OF A TAXING PROVISION THE ONE WHICH IS FAVOURABLE TO THE ASSESSEE SHOULD BE PREFERRED. 6 ITA NOS.824 & 825/BANG/2010 WE, THEREFORE, KEEPING IN VIEW THE RATIO LAID DOWN BY THE HON'BLE SUPREME COURT IN THE AFORESAID DECISIONS AND BY KEEPING THE RATIO LAID D OWN BY THE HON'BLE DELHI HIGH COURT IN THE CASE OF JACABS CIVIL INCORPORATED (SUPRA), DO NOT S EE ANY MERIT IN THE GROUND NO.3 RAISED BY THE DEPARTMENT AND THIS GROUND OF APPEAL IS DISMISSED. 13. NOW WE TAKE UP ITA NO.825/BANG/2010 THE ONLY EFFECTIVE GROUND RAISED BY THE DEPARTMENT READS AS UNDER : THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDI TION OF RS. 34,71,068 BEING 1/4 TH OF RS. 1,38,84,273 PAID TOWARDS ROYALTY, WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AS CAPITAL EXPENDITURE RELYING ON THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF SOUTHERN SWITCH GEARS LTD. IN 232 IT R 359 (SC) WITHOUT APPRECIATING THE FACTS AND CIRCUMSTANCES UNDER WHICH THE ADDITIO N WAS MADE BY THE ASSESSING OFFICER. 14. THE FACTS RELATED TO THIS ISSUE ARE SIMILAR TO THE FACTS AS WERE INVOLVED IN ASSESSMENT YEAR 2003-04 IN ITA NO.824/BANG/2010 WHICH WE HAVE ALREADY ADJUDICATED IN THE FORMER PART OF THIS ORDER AND OUR FINDINGS GIVEN THEREIN SHALL APPLY FOR THE ASSESSMENT YEAR 2004-05 AS WELL. IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THE APPEAL OF THE DEPARTMENT. THE ISSUE RAISED IN THIS APPEAL IS DISMISSED. 15. IN THE RESULT, BOTH THE APPEALS OF DEPARTMENT A RE DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD NOV., 2011.) SD/- SD/- (P. MADHAVI DEVI) (N.K. SAINI) JUDICIAL MEMB ER ACCOUNTANT MEMBER BANGALORE, DATED: 23.11.2011. *REDDY GP 7 ITA NOS.824 & 825/BANG/2010 COPY TO : 1. APPELLANT 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, - A BENCH. 6. GUARD FILE. BY ORDER ASSTT. REGISTRAR, ITAT, BANGALORE 8 ITA NOS.824 & 825/BANG/2010 . DATE INITIALS DRAFT DICTATED ON 23.11.20 11 SR. P.S. DRAFT PLACED BEFORE THE AUTHOR SR. P.S. DRAFT PROPOSED AND PLACED BEFORE THE SECOND MEMBER AM/JM DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/JM APPROVED DRAFT COMES TO THE SR. PS SR. P.S. KEPT FOR PRONOUNCEMENT ON SR. P.S. FILE SENT TO THE BENCH CLERK SR. P.S. DATE ON WHICH FILE GOES TO THE HEAD CLERK DATE OF DISPATCH