The ACIT, (OSD)Circle-8, Ahmedabad V. Sayaji Industries Ltd., Ahmedabad

ITA 899/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5738 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 14-07-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 10-03-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DS CHAUDHARYDR
• Assessee Lawyers: MRS APARNA PARLEKAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI N.S.SAINI, ACCOUNTANT MEMBER DATE OF HEARING 14-7-10 DRAFTED ON: 14 -7-10. ITA NO.899 /AHD/2008 ASSESSMENT YEAR :2005-06 ASSISTANT COMMISSIONER OF INCOME TAX(OSD)CIR.8, 4 TH FLOOR AJANTA COMMERCIAL CENTRE, ASHRAMROAD, AHMEDABAD. VS. SAYAJI INDUSTRIES LTD., P.O. KATHWADA-MAIZE PRODUCTS, AHMEDABAD. PAN/GIR NO. : AADCS 0861 R (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI D.S. CHAUDHARY,D.R. RESPONDENT BY: MRS. APARNA PARLEKAR. O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE REVENUE AGAINST TH E ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-XIV ,AH MEDABAD DATED 24-01-2008. 2. GROUND NO. OF THE APPEAL READS AS UNDER:- THE LD. CIT (A) XIV, AHMEDABAD HAS ERRED IN LAW AN D ON FACTS IN DIRECTING THE ASSESSING OFFICER TO RECALCU LATE THE DISALLOWABLE AMOUNT AND ALLOW THE BENEFIT OF GRACE PERIOD TO THE APPELLANT. - 2 - 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS DECIDED THE ISSUE AS UNDER :- 2. THE FIRST GROUND OF APPEAL RELATES TO DISALLOWA NCE OF RS.57,71,811/- AND RS. 3,89,880/-,BEING EMPLOYEES CONTRIBUTION TO PF AND ESI RESPECTIVELY. THE LEARNE D ASSESSING OFFICER HAS DISALLOWED THE SAME ON THE BASIS THAT I T WAS PAID LATE. THE APPELLANT HAS SUBMITTED THAT THOUGH THE P AYMENT WAS LATE, IT WAS PAID WITHIN THE GRACE PERIOD OF 5 DAYS. IT WAS FURTHER SUBMITTED THAT THIS ISSUE IS COVERED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOR A. Y. 2004- 05 DT. 30-03-2007 WHEREIN IT WAS DECIDED IN FAVOUR OF THE APPELLANT. I HAVE CONSIDERED THE FACTS AND I AGREE WITH THE CONTENTION OF THE APPELLANT. SINCE THE ISSUE IS SIM ILAR AS THAT OF A.Y. 2004-05, BY FOLLOWING THE APPELLATE ORDER FOR A.Y. 2004- 05, THE LEARNED ASSESSING OFFICER IS DIRECTED TO DE LETE THE DISALLOWANCE MADE ON THIS COUNT. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED O N THE ORDER OF THE LEARNED ASSESSING OFFICER. 5. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASS ESSEE SUBMITTED THAT THE LEARNED COMMISSIONER OF INCOME T AX (APPEALS) HAS DELETED THE DISALLOWANCE BY FOLLOWING THE ORDER FOR ASSESSMENT YEAR 2004-05 DATED 30-03-2007. SHE ALSO SUBMITTED T HAT IN THE ASSESSMENT YEAR 2006-07 IN ASSESSEES OWN CASE IN I TA NO.1875/AHD/09 ORDER DATED 7-8-2009 THE TRIBUNAL UP HELD THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APP EALS) DELETING THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFI CER OF EMPLOYEES CONTRIBUTION TO PF AND ESI MADE BEYOND TH E DUE DATE OF PAYMENT OF 15 DAYS FROM THE DATE OF SALARY BUT WITH IN GRACE PERIOD OF 5 DAYS. THEREFORE, SHE SUBMITTED THAT THE GROUND OF APPEAL OF THE REVENUE SHOULD BE DISMISSED. - 3 - 5. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUSING THE MATERIAL AVAILABLE ON THE RECORD, WE FIND THAT IN THE INSTAN T CASE THE LEARNED ASSESSING OFFICER DISALLOWED DEDUCTION FOR PAYMENT OF RS.57,71,811/- OF EMPLOYEES CONTRIBUTION TO PF AND RS.3,89,990/- OF EMPLOYEES CONTRIBUTION TO ESI AS THE PAYMENTS WERE MADE BEYOND THE DUE DATE PRESCRIBED IN THE RESPECTIVE ACTS AND DID NOT ALLOW THE BENEFIT OF THE GRACE PERIOD. THE LEARNED ASSESSING OFFICER OBSERVED THAT THE ORDER OF THE LEARNED COMMISSIONER OF INCOM E TAX(APPEALS) FOR ASSESSMENT YEAR 2004-05 WHEREIN SIMILAR DISALL OWANCE MADE WAS DELETED WAS NOT ACCEPTED AND APPEAL HAS BEEN FI LED BEFORE THE TRIBUNAL, THEREFORE, HE DISALLOWED THE DEDUCTION I N THE YEAR UNDER APPEAL. WE FIND THAT SIMILAR ISSUE IN ASSESSEES OW N CASE HAD COME UP BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2006- 07 IN ITA NO.1875/AHD/09 ORDER DATED 7-8-2009 WHEREIN TRIBUNA L CONFIRMED THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETING THE DISALLOWANCE OF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESI PAID AFTER THE DUE DATE PRESCRIBED IN THE RESPE CTIVE ACTS BUT WITHIN THE GRACE PERIOD ALLOWED BY THE RESPECTIVE A CTS AND DISMISSED THE APPEAL OF THE REVENUE. THEREFORE, THE FACTS OF THE CASE OF THE YEAR UNDER APPEAL ARE IDENTICAL TO THE FACTS OF THE CASE IN ASSESSMENT YEAR 2006-07 AND THEREFORE, THE DECISION OF THE TRIBUNAL IN ASSESSMENT YEAR 2006-07 SQUARELY APPLIES IN THE YEAR UNDER CONSIDERATION. RESPECTFULLY FOLLOWING THE SAME WE C ONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. - 4 - 6. GROUND NO.2 OF THE APPEAL READS AS UNDER:_ THE LD. COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DIRECTIN G THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE O N ACCOUNT OF TECHNICAL KNOW HOW FEES AMOUNTING TO RS.11,50,87 5/-. 7. THE BRIEF FACTS OF THE CASE ARE THAT THE LEARNED ASSESSING OFFICER DISALLOWED DEDUCTION FOR RS.15,34,500/- CLA IMED BY THE ASSESSEE FOR PAYMENT OF TECHNICAL KNOW HOW FEES AS A REVENUE EXPENDITURE BY TREATING THE SAME AS CAPITAL EXPENDI TURE. HOWEVER, THE LEARNED ASSESSING OFFICER ALLOWED DEPRECIATION @ 25 % AMOUNTING TO RS.3,83,625/- AND THEREBY MADE DISALLOWANCE OF R S.11,50,875/-. 8 IN APPEAL, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2004-05 DAT ED 30-3-2007 ALLOWED THE CLAIM OF THE ASSESSEE FOR DEDUCTION OF TECHNICAL KNOW HOW FEES AS A REVENUE EXPENDITURE. 9. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTE D THAT THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE BY THE CONSOLIDATED ORDER OF THE TRIBUNAL DATED 3-11-2006 FOR ASSESSMENT YEAR 1997-98 AND 1998-99 IN ITA NOS.1068 AND 1069/A HD/2002 AND THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FO R A.Y. 2003-04 IN ITA NO.693/AHD/2007 ORDER DATED 21-9-2007. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE ASSESS EE CLAIMED DEDUCTION FOR TECHNICAL KNOW HOW FEE OF RS.15,34,500/- WHICH WAS DISALLOWED BY THE LEARNED ASSESSING OFFICER FOLLOWING HIS ORDE R FOR A.Y., 2004- - 5 - 05 BY TREATING THE SAME AS CAPITAL EXPENDITURE BUT ALLOWING DEPRECIATION @ 25% AMOUNTING TO RS.3,83,625/- AND T HEREBY MAKING DISALLOWANCE OF RS.11,50,875/-. ON APPEAL, THE LEAR NED COMMISSIONER OF INCOME TAX (APPEALS) VACATED THE DI SALLOWANCE BY FOLLOWING HIS ORDER FOR ASSESSMENT YEAR 2004-05 DAT ED 30-3-2007. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS CONCEDE D THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE D ECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1998-99 AND 2003-04 WHEREIN THE APPEAL OF THE REVENUE WAS DISMI SSED. WE FIND THAT IN THE ASSESSMENT YEAR 1998-99 THE TRIBUNAL HE LD AS UNDER :- 4. GROUND NO.2 IN BOTH THE YEARS RELATES TO THE DE LETION OF THE DISALLOWANCE MADE ON ACCOUNT TECHNICAL KNOW-HOW FEES AMOUNTING TO RS.14,42,534/- AND RS.29,16,375/- RESP ECTIVELY DURING THE ASSESSMENT YEARS 1997-98 AND 1998-99. 5. AT THE OUTSET, THE LD. A.R. FOR THE ASSESSEE CON TENDED THAT THIS ISSUE IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL IN ITA NO.5/AHD/1996 FOR THE ASSESSMENT YEAR 1992-9 3 IN THE CASE OF THE ASSESSEE. THE LD. D.R. WAS FAIR ENOUGH TO CONCEDE THE POSITION. 6. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSION S AND GOING THROUGH THE ORDER OF THIS TRIBUNAL IN ITA NO.5/AHD/1996 DATED 11-11-2003, WE FIND THAT THIS I SSUE IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1992-9 3 IN WHICH THE TRIBUNAL HAS HELD AS UNDER:- 4. WE HAVE HEARD BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF ITAT AHMEDABAD BENCH C IN ITA NO.3582/AHD/1992 FOR A.Y. 1989-90 IN THE ASSESSEES OWN CASE HELD AS UND ER :- 8. IN THE CASE BEFORE US, WE HAVE ALREADY NOTICED THAT ACCORDING TO THE ASSESSING OFFICER IT HAD NOT PURCHASED OR OBTAINED OWNERSHIP OF THE - 6 - TECHNICAL KNOW-HOW FROM THE FOREIGN COMPANY. ON THE OTHER HAND, THE ASSESSEE IS ONLY LICENSEE BY WHICH IT CAN USE THE KNOW-HOW FOR THE PURPOSE OF ITS BUSINESS TEMPORARILY FOR WHICH THE LUMPSUM PAYMENT HAS BEEN MADE. THEREFORE, THE PRESENT CASE IS NOT COVERED BY THE PROVISION OF SECTION 35AB AS RIGHTLY PAID BY THE TRIBUNAL,CALCUTTA BENCH. THEREFORE, CONSIDERING THE ENTIRE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT SECTION 35 AB HAS NO APPLICATION IN THE PRESENT CASE AND THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 37(1) OF THE ACT. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S. 37( 1) OF THE ACT. HENCE, THE APPEAL IS ALLOWED ON THIS GROUND. 7. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE AND THE F ACT THAT THERE IS NO DIFFERENCE IN THE FACTS AS COMPARED TO THE ASSESSMENT YEAR 1992-93, WE CONFIRM THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THI S ISSUE. THUS, GROUND NO.2 IN BOTH THE ASSESSMENT YEA RS STANDS ALLOWED. 11. IN THE ASSESSMENT YEAR 2003-04 THE TRIBUNAL HEL D AS UNDER: 3. AT THE OUTSET, THE LD. COUNSEL FOR THE ASSESSEE FILED A COPY OF THE ITAT AHMEDABAD B BENCH ORDER IN ASSES SEES OWN CASE (IN ITA NO.1068 AND 1069/AHD/2002)FOR THE A.Y. 1997-98 AND 1998-99 WHEREBY THE TRIBUNAL FOLLOWING ITS OWN DECISION FOR THE A.Y. 1992-93 ALLOWED THE APPEAL OF THE ASSESSEE, THE RELEVANT PARA-6 AND 7 OF THE TRIBUNAL S ORDER ARE AS UNDER :- 6. AFTER CAREFULLY CONSIDERING THE RIVAL SUBMISSION S AND GOING THROUGH THE ORDER OF THIS TRIBUNAL IN ITA NO.5/AHD/1996 DATED 11-11-2003, WE FIND THAT THIS I SSUE IS DULY COVERED BY THE DECISION OF THIS TRIBUNAL IN THE - 7 - CASE OF THE ASSESSEE FOR THE ASSESSMENT YEAR 1992-9 3 IN WHICH THE TRIBUNAL HAS HELD AS UNDER:- 4. WE HAVE HEARD BOTH THE PARTIES. LOOKING TO THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ISSUE IN CONTROVERSY IS COVERED BY THE DECISION OF ITAT AHMEDABAD BENCH C IN ITA NO.3582/AHD/1992 FOR A.Y. 1989-90 IN THE ASSESSEES OWN CASE HELD AS UND ER :- 8. IN THE CASE BEFORE US, WE HAVE ALREADY NOTICED THAT ACCORDING TO THE ASSESSING OFFICER IT HAD NOT PURCHASED OR OBTAINED OWNERSHIP OF THE TECHNICAL KNOW-HOW FROM THE FOREIGN COMPANY. ON THE OTHER HAND, THE ASSESSEE IS ONLY LICENSEE BY WHICH IT CAN USE THE KNOW-HOW FOR THE PURPOSE OF ITS BUSINESS TEMPORARILY FOR WHICH THE LUMPSUM PAYMENT HAS BEEN MADE. THEREFORE, THE PRESENT CASE IS NOT COVERED BY THE PROVISION OF SECTION 35AB AS RIGHTLY PAID BY THE TRIBUNAL, CALCUTTA BENCH. THEREFORE, CONSIDERING THE ENTIRE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT SECTION 35 AB HAS NO APPLICATION IN THE PRESENT CASE AND THE ASSESSEE IS ENTITLED TO DEDUCTION UNDER SECTION 37(1) OF THE ACT. RESPECTFULLY FOLLOWING THE SAME, WE HOLD THAT THE ASSESSEE IS NOT ENTITLED FOR THE DEDUCTION U/S. 37( 1) OF THE ACT. HENCE, THE APPEAL IS ALLOWED ON THIS GROUND. 7. RESPECTFULLY FOLLOWING THE AFORESAID DECISION OF THIS TRIBUNAL IN THE CASE OF THE ASSESSEE AND THE F ACT THAT THERE IS NO DIFFERENCE IN THE FACTS AS COMPARED TO THE ASSESSMENT YEAR 1992-93, WE CONFIRM THE ORDER OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ON THI S ISSUE. THUS, GROUND NO.2 IN BOTH THE ASSESSMENT YEA RS STANDS ALLOWED. 4. ON THE OTHER HAND, LD. D.R. FAIRLY STATED THAT T HE ISSUE IS COVERED BY THE DECISION OF THE TRIBUNAL BU T HE ARGUED THAT THIS ISSUE HAS BEEN AGITATED BEFORE THE HON'BLE HIGH COURT BY THE DEPARTMENT. HENCE, HE ALS O RELIED ON THE ORDERS OF THE LOWER AUTHORITIES. - 8 - 5. AFTER HEARING THE RIVAL CONTENTIONS AND GOING THROUGH THE TRIBUNALS ORDER, IT IS SEEN THAT THE F ACTS ARE EXACTLY IDENTICAL ONE THE PAYMENT OF TECHNICAL KNOW - HOW IS ARISING OUT OF THE SAME AGREEMENT AND THIS TECHNICAL KNOW-HOW PAYMENT IS DIRECTLY CONNECTED WI TH EARLIER YEARS. HENCE, TAKING A CONSISTENT VIEW AND RESPECTFULLY FOLLOWING THE ABOVE CITED TRIBUNALS DECISION IN ASSESSEES OWN CASE, WE UPHOLD THE ORDE R OF THE LD. CIT(A) ALLOWING THE ASSESSEES CLAIM. ACCORDINGLY, THIS ISSUE OF THE REVENUES APPEAL IS DISMISSED. 12. AS THE LEARNED DEPARTMENTAL REPRESENTATIVE ARGU ED THAT THE ISSUE IS COVERED BY THE ABOVE QUOTED ORDERS OF THE TRIBUNAL IN FAVOUR OF THE ASSESSEE, WE THEREFORE, CONFIRM THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AND DISMISS THI S GROUND OF APPEAL OF THE REVENUE. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 16 TH DAY OF JULY, 2010. SD/- SD/- (BHAVNESH SAINI) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 16 TH DAY OF JULY, 2010 PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)- 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD - 9 - DATE INITIALS 1. DRAFT DICTATED ON 14-7-10 2. DRAFT PLACED BEFORE AUTHORITY 14-7-10 3. DRAFT PROPOSED & PLACED 14-7-10 JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 14-7-10 JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 14-7-10 6. KEPT FOR PRONOUNCEMENT ON 16-7-10 7. FILE SENT TO THE BENCH CLERK 16-7-10 8. DATE ON WHICH FILE GOES TO THE 9. DATE OF DISPATCH OF ORDER