Scooters India Limited, Lucknow V. Dy. Commissioner Of Income Tax-IV, Lucknow

ITA 90/LKW/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70563 (ITAT-LUCKNOW)
• Duration Of Justice: 8 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 24-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 21-02-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: V B BHARGAVA
• Keywords: Business expenditure; Opportunity of being heard

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A , LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.90 /LKW/201 3 A.Y.: 2009 - 10 M/S SCOOTERS INDIA LIMITED SAROJINI NAGAR, LUCKNOW. PAN:AADCS7796R VS. DY.C.I.T. - IV, LUCKNOW. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI V. B. BHARGAVA, C.A. RESPONDENT BY SHRI MANOJ KUMAR GUPTA, CIT, D.R. DATE OF HEARING 25/10/2013 DATE OF PRONOUNCEMENT 1 3 /11/2013 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF LEARNED CIT(A) - II, LUCKNOW DATED 26/12/2012 FOR ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. BECAUSE THE LEARNED CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN CONFIRMING THE DEDUCTION OFRS.22,29,121/ - AS CLAIMED BY THE APPELLANT U/S 35(2AB) OF THE I.T. ACT BY MENTIONING THAT NO IN HOUSE SCIENTIFIC RESEARCH HAS BEEN CARRIED OUT BY THE APPELLANT. MOREOVER, THE EXPENDITURE INCU RRED IS FOR CERTIFICATION PURPOSES. 2. BECAUSE THE LEARNED CIT(A) DID NOT APPLY HIS MIND IN UNDERSTANDING THE CONCEPT OF BENEVOLENT EXPENSES AND ERRED IN FACTS AND LAW IN CONFIRMING THE DISALLOWANCE OF RS.7,91,600/ - BY STATING THAT THE EXPENDITURE CANNOT BE [ 2 ] SAID TO HAVE BEEN LAID WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. 2. REGARDING GROUND NO. 1, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE DETAILS OF THE EXPENSES IN RESPECT OF SCIENTIFIC RESEARCH IS AVAILABLE ON PAGE NO. 8 OF THE PAPER BOOK. FOR THE SAKE OF READY REFERENCE, THESE DETAILS ARE REPRODUCED BELOW: S.NO. PARTICULARS AMOUNT (RS.) AMOUNT (RS.) 1. A) B) C) D) E) AMOUNT PAID TO ARAI PUNE: DEVELOPMENT MASS EMISSION TEST ON VIKRAM 1500 CG (AUTORICKSHAW) CNG APPLICATION DEVELOPMENT MASS EMISSION TEXT ON VIKRAM 1500 CG CNG 3 WHEELER CASE FOR TYPE APPROVAL OF VIKKRAM 1500 CG AUTORICKSHAW STEERING WHEEL MODEL (DRIVER+6 PASSANGER) & ITS 3 VARIANT CASE FOR TYPE APPROVAL OF NEW CNG VEHICLE VIKRAM 1000CG DEVELOPMENT TEST ON VIKRAM 1000 CG AND VIKRAM 1000 LG (LOAD CARRIER) 40,337.00 40,337.00 3,03,173.00 3,90,083.00 80,674.00 8,54,604.00 2. PROVISION FOR STATUS OF 2 - STROKE 5 - PORT PETROL ENGINE 13,55,711.00 3. MISC. ITEMS/PETROL PURCHASEDFOR TESTING 32,902.54 4. PETROL & DIESEL FOR TESTINGOF VEHICLE 1,84,896.00 5. FREIGHT CHARGES PAID TO N.M.R.C. & P.N.R.C. FOR VEHICLES SENT TO ARAI, PUNE 26,990.00 6. AMOUNT PAID TO PUBJAB BODY BUILDERS FOR BODY CONSTRUCTION OF DETACHABLE AUTORICKSHAW FOR 3 - WHEELER (3 - SEATER CNG) 22,500.00 7. AMOUNT PAID TO INTERNATIONAL CENTRE FOR AUTOMOTIVE TECHNOLOGY FOR COP, MASS EMISSION TEST ON 3 - WHEELER 750D AC & 750D WC BSII 3,63,759.84 8. AMOUNT PAID TO MAVERIC SOLUTION INC. FOR PHOTOGRAMMETRY, WHITE LIGHT SCAN & 3D MODELING 67,416.00 9. AMOUNT PAID TO GASCON AUTO LTD. FOR PURCHASE OF CNG KIT VIKRAM 1500 CG 50 NOS. & CNG KIT FOR CG 1000 GREAVES GL 400 11,46,649.00 10. AMOUNT PAID TO M/S VRDE FOR DEVELOPMENT WORK AND CERTIFICATION TEST CHARGES FOR BALANCE SHEET - II NORMS ON VIKRAM 400 - G WITH OPEN LOOP & CLOSED LOOP CNG CIRCUIT 4,44,200.00 TOTAL LESS:SERVICE TAX 44,99,628.38 41,386.80 44,58,241.58 2.1 A QUERY WAS RAISED BY THE BENCH THAT FROM THESE DETAILS OF EXPENSES , HOW IT COMES OUT THAT THESE EXPENSES ARE INCURRED FOR IN - HOUSE [ 3 ] RESEARCH & DEVELOPMENT AS REQUIRED THE PROVISIONS OF SECTION 35(2A B ) OF THE I.T. ACT. IN REPLY, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT APPROVAL WAS OBTAINED PROPERLY AND, THEREFORE, IT HAS TO BE ACCEPTED THAT THE EXPENSES ARE INCURRED FOR IN - HOUSE RESEARCH & DEVELOPMENT. 3. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE C ONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE AUTHORITIES BELOW ON THE BASIS THAT THE ASSESSEE HAS NOT S EPARATELY SHOWN EXPENDITURE FOR IN - HOUSE RESEARCH & DEVELOPMENT. AS PER THE DETAILS, IT IS SEEN THAT THERE IS NO EXPENDITURE INCURRED FOR ANY SALARY FOR ANY PERSON WHO WAS THERE TO CARRY OUT IN - HOUSE RESEARCH & DEVELOPMENT. FROM THE DETAILS OF EXPENSES , IT IS SEEN THAT THE AMOUNT WAS PAID TO ARAI, PUNE AND FOR PURCHASING CERTAIN ITEMS FROM THE MARKET FROM VARIOUS PARTIES. MERELY GETTING APPROVAL FROM ARAI AND PURCHASING CERTAIN MATERIAL FROM THE MARKET CANNOT BE SAID TO BE CARRYING OUT IN - HOUSE RESEARCH & DEVELOPMENT ACTIVITY. IN OUR CONSIDERED OPINION, RESEARCH & DEVELOPMENT MEANS TO CARRY OUT RESEARCH TO FIND OUT SOME NEW TECHNOLOGY OR NEW EQUIPMENT OR PRODUCT AND THAT SHOULD BE CARRIED OUT IN - HOUSE AS PER THE REQUIREMENT OF SECTION 35(2A B ) OF THE ACT. FROM THE DETAILS MADE AVAILABLE TO US, IT HAS NOT COME OUT THAT ANY RESEARCH & DEVELOPMENT ACTIVITY WAS CARRIED OUT BY THE ASSESSEE AND THEREFORE, THE ASSESSEE IS NOT ELIGIBLE FOR WEIGHTED DEDUCTION U/S 35(2A B ) OF THE ACT. ACCORDINGLY, THIS GROUND OF TH E ASSESSEE IS REJECTED. 5. REGARDING GROUND NO. 2, IT WAS SUBMITTED BY LEARNED A.R. OF THE ASSESSEE THAT THE CLAIM OF THE ASSESSEE WAS REJECTED BY THE AUTHORITIES [ 4 ] BELOW ON THE BASIS THAT THIS EXPEND ITURE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS. IT WAS SUBMITTED THAT AS PER FACTORY ORDER PART - II DATED 20/01/2001, AVAILABLE ON PAGE NO. 34 OF THE PAPER BOOK, THE ASSESSEE IS REQUIRED TO COLLECT RS.25/ - TO RS.50/ - PER EMPLOYEE FROM THE EMPLOYEES AND THE ASSESSEE WAS REQUIRED TO CONTRIBUTE THE MATCHING AMOUNT AND SUCH AMOUNT WAS REQUIRED TO BE GIVEN TO THE LEGAL HEIR OF THE DECEASED EMPLOYEE. HE SUBMITTED THAT WHEN SOME RELIEF IS ALLOWED TO A DECEASED EMPLOYEE AND ITS DEPENDENT, IT HAS TO BE ACCEPTED THAT THIS IS FOR BUSINESS PURPOSE. A QUERY WAS RAISED BY THE BENCH REGARDING THE AMOUNT COLLECTED BY THE ASSESSEE FROM EMPLOYEES AND CONTRIBUTION MADE BY THE ASSESSEE COMPANY, IN REPLY, THE LEARNED A.R. OF THE ASSESSEE HAS SUBMITTED CERTAIN DETAILS BUT H E COULD NOT RECONCILE THE SAME IN RESPECT OF COLLECTION FROM THE EMPLOYEES AND THE CONTRIBUTION FROM THE EMPLOYER. 6. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MA TERIAL AVAILABLE ON RECORD AND HAVE ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT IN VIEW OF THIS FACTORY ORDER PART - II DATED 20/01/2001, AVAILABLE ON PAGE 34 OF THE PAPER BOOK, IT CANNOT BE SAID THAT THE EXPENSES INCURRED BY THE ASS ESSEE COMPANY ON ACCOUNT OF DEATH RELIEF TO THE EMPLOYEE, IS NOT BUSINESS EXPENDITURE AND, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY LEARNED CIT(A) ON THIS BASIS IS NOT JUSTIFIED. BUT STILL WE FEEL THAT THE DETAILS OF COLL ECTION FROM THE EMPLOYEES AND THE CONTRIBUTION BY THE EMPLOYER ARE TO BE EXAMINED BY THE ASSESSING OFFICER BECAUSE THE SAME WAS NOT EXAMINED BY HIM IN VIEW OF HIS OUTRIGHT REJECTION OF THE ASSESSEES CLAIM. THOUGH THE DETAILS WERE BROUGHT ON RECORD BEFORE US BUT THE SAME COULD NOT BE RECONCILED AND THEREFORE, WE FEEL IT PROPER THAT FOR THIS LIMITED ASPECT, THE [ 5 ] MATTER SHOULD GO BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION. WE ACCORDINGLY SET ASIDE THE ORDER OF LEARNED CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE ASSESSING OFFICER FOR FRESH DECISION. WE HOLD THAT THESE EXPENSES ARE TO BE ACCEPTED AS INCURRED FOR BUSINESS PURPOSE BUT REGARDING QUANTUM OF EXPENDITURE , THE ASSESSEE HAS TO BRING ON RECORD FULL DETAILS IN RESPECT OF COLLE CTION FROM EMPLOYEES AND CONTRIBUTION BY THE EMPLOYER COMPANY AND ALSO THE PROOF OF PAYMENT TO THE LEGAL HEIR OF THE DECEASED EMPLOYEE AND TO THE EXTENT CONTRIBUTION BY ASSESSEE IS IN ACCORDANCE WITH FACTORY ORDER, THE DEDUCTION SHOULD BE ALLOWED. THE ASS ESSING OFFICER SHOULD PASS NECESSARY ORDER AS PER LAW AS PER ABOVE DISCUSSION AFTER PROVIDING PROPER OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. GROUND NO. 2 OF THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 1 3 / 1 1 / 2 0 1 3 *C.L.SINGH COPY OF THE O RDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A ) 5. DR, ITAT, LUCKNOW A SSTT. REGISTRAR