M/s Electronics Corporation of India Limited, Hyderabad V. Addl.CIT, Range-2, Hyderabad

ITA 917/HYD/2013

• Counselvise Citation: 91722514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-10-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 31-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHARA REDDY
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Capital expenditure
• Section: 10

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SMT. P.MADHAVI DEVI, JUDICIAL MEMBER ITA NO.917/HYD/2013 (A SSESSMENT YEAR 2008 - 09) M/S. ELECTRONIC CORPORATION OF INDIA LTD., HYDERABAD ( PAN - AAACE 4809 L) V/S. ADDL. COMMISSIONER OF INCOME - TAX RANGE 2, HYDERABAD (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI C.P.RAMASWAMY RESPO NDENT BY : SHRI P.SOMASEKHARA REDDY DATE OF HEARING 01 . 1 0.2014 DATE OF PRONOUNCEMENT 01.10.2014 O R D E R PER P.MADHAVI DEVI, JUDICIAL MEMBER: THIS IS ASSESSEES APPEAL FOR THE ASSESSMENT YEAR 2008 - 09. 2. IN THIS APPEAL, ASSESSEE IS AGGRIEVE D BY THE ORDER OF THE CIT(A) IN CONFIRMING THE DISALLOWANCE OF (1) WEIGHTED DEDUCTION UNDER S.35(2AB) ; AND (2) PROVISION FOR WAGE REVISION ARREARS. 3. BRIEF FACTS OF TH E CA S E ARE T H A T THE ASSESSEE COMPANY , A CENTRAL PUBLIC SECTOR UNDERTAKING , IS IN TH E BU S IN E SS OF MANUFACTURE AND SALE OF ELECTRONIC GOODS AND COMPONENTS INCLUDIN G MAIN T ENANCE SERVI C ES AND COMPUTER EDUCATIONAL SER V ICES. THE RE T URN OF IN C OM E FOR THE ASSESSMENT YEAR 2008 - 09 WAS FILED ON I TA NO. 917 /HYD/2013 M /S. ELECTRONIC CORPORATION OF INDIA LTD., HYDERABAD 2 30.9.2008 ADMITTING AN INCOME OF R S .1,91,67,98,753. DURI NG TH E ASSESSMENT P R OCE E DIN G S UNDER S.143(3) OF THE INCOME TAX ACT,1961 , THE ASSESSING OFFICER OBSERVED THAT T HE ASSESSEE HAS CLAIMED WEIGHTED DE D UCT I ON UNDER S.35(2AB) OF THE A C T, IN RESPECT OF R&D EXPENDITURE OF R S .32,15,85,350 THE ASSESSING OFF ICER THEREFORE, ASKED THE ASSESSEE TO PRODUCE NECESSARY APPROVAL AND CERTIFICATION OF EXPENDITURE UNDER S.35(2AB) OF THE INCOME TAX ACT,1961. IN REPLY, TH E ASSESSEE FIL E D LETTER D A TED 21.12.2010 SUBMITTING FORM NOS.3CM AND 3CL ISSUED BY THE MINISTRY OF SCIENCE AND T E CHNOLOGY AN D DEPARTMENT OF SCIENTIFIC AND I NDUSTRIAL RESEAR C H TOWARDS APPROVAL OF IN - HOU S E RESEARCH AND DEVELOPM E N T FACILITIES UNDER S.35(2AB) OF TH E I.T. ACT . THE ASSESSING OFFICER OBSERVED THAT THE DEPARTMENT OF SCIENTIFIC AND INDUSTRIAL RESEARCH HAS CERTIFIED THAT THE AMOUNT CHARGEABLE TO R&D EXPENDITURE IS ONLY RS.2092.06 LAKHS AS AGAINST THE ASSESSEES CLAIM OF HIGHER AMOUNT. T HER E F O RE , THE ASSESSEE S EXPLANATION FOR THE DIFFERENCE WAS CALLED FOR. 4. THE ASSESSEE VIDE LETTER DATED 21 .12.2010 , EXPLAINED THAT THE AMOUNT O F CAPITAL GRANT AMOUNTING TO RS.51.84 LAKH S IS INCLUDED IN THE HEAD CAPITAL EXPENDITURE AND THE SAME HAS ALSO BEEN INCLUDED IN THE DEDUCTION AMOUNT OF RS.296.55 LAKHS , BUT THE DSIR HAS CONSIDERED AN AMOUNT O F RS .23. 94 LAKHS ONLY TOWARDS CAPITAL EXPENDITURE DUE TO WHICH THERE IS A DIFFERENCE IN THE CLAIM AND THE CERTIFICATE. THER E FORE, ACCORDING TO THE ASSESSEE, TH E RE WAS A MIST A KE APPAR E NT IN THE CERTIFICATE . THE ASSESSEE REQUE S TED THE ASSESSING OFFICER TO CON S I D ER THE SAME AND ALLOW THE ADDITIONAL BEN E FIT OF RS.51 , 84,187. THE ASSESSING OFFICER , HOWEVER , DID NO T ACCEPT THIS CONTENTION O F TH E ASSESSEE AND BASED ON FORM NO S .3CM LAND 3CL ISSUED AND CERTIFIED BY MINI S TRY OF SCIENCE AND TECHNOLOGY, HE ALLOWED THE ELIGIB LE DEDUCTION TO THE ASSESSEE ONLY I TA NO. 917 /HYD/2013 M /S. ELECTRONIC CORPORATION OF INDIA LTD., HYDERABAD 3 AS APPROVED AT R S .3,138.09 LAKH S BEING 150% OF RS.2092.06 LAKHS UNDER S.35(2AB) OF THE ACT AND BROUGHT THE EXCESS CLAIM OF DEDUCTION OF R S .77,76,281 AND ADDED IT TO THE RETURNED INCOME., 5. AGGRIEVED THE ASSESSEE PREFER RED APPEAL BEFORE THE CIT(A), WHO CONFIRMED THE ADDITION MADE BY THE ASSESSING OFFICER BY FOLLO W IN G THE DECIS I ON OF THE ITAT IN ASSESSEES OWN CA S E FOR THE ASSESSMENT YEAR 2007 - 08 ON IDENTICAL SET OF FACTS. 6. AGGRI E VED, THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR T H E ASSESSEE, SHRI C.P.RAMASWAMY, WHILE GRAC IOUSLY ADMITTING THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR EARLIER ASSESSMENT YEAR, VIZ. 2007 - 08 (ITA NOS.895 & 1106/HYD/2011 DATED 25/0/2 - 12) , SUBMITTED THAT THE DECISION O F TH E T RIBUNAL WAS PER IN CURIUM IN AS MUCH AS THE TRIBUNAL HAS MISINTERPRETED THE P R O V I SI ON S OF S.35(2AB) OF THE ACT. HE HAS DRAWN OUR ATTENTION TO THE P R OV I SION S OF S.35(2AB) TO SUBMIT THA T THE CERTIFICATION OF THE RESPECTIVE MIN IS TRY/PRESCRIBED AUTHORITY WAS ONLY TO FACILIT Y AND NOT TO THE QUANTUM OF ALLOWANCE. 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE ON TH E O T H E R HAN D , SUP P O R TED THE O R DERS O F THE AUTHO R I T I E S BELOW. 9. HAVING REGARD TO TH E CON T ENTION S OF BOTH THE PARTIES AND THE MATERIAL ON RECORD, WE FIND THAT THE VERY SAME SET O F FAC T S HAD EMERG E D IN TH E ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 AND THE T RIBUNAL AF T ER CONSIDERING THE P RO VI SI ON S OF S.35(2AB) HAS HELD THAT THE EXPENDITURE WHICH IS CERTIFIED BY THE MINISTRY IS ONLY TO B E CONSIDERED FOR ALLOWANCE OF THE EXEMPTION I TA NO. 917 /HYD/2013 M /S. ELECTRONIC CORPORATION OF INDIA LTD., HYDERABAD 4 UNDER S.35(2AB) OF THE ACT AND THEREFORE, IT CANNO T B E CON S ID E RED TO BE PER IN - CURIUM AS CANVASSED BY THE LEARNED COUNSEL FOR THE ASSESSEE . SIN C E TH E ISSUE IS COVERED IN FA V OU R O F TH E RE VENUE BY THE DECISION OF THE COOR D IN A TE BENCH O F TH E T RIBUNAL IN ASSESSEE S OWN CA S E, WE DO NO T SEE ANY REASON TO IN T ERFER E WITH THE O R DER OF THE CIT(A) ON THIS ISSUE. THIS GROUND OF APPEAL IS ACCORDINGLY REJECTED. 10 . THE SECOND GROUND OF TH E ASSESSEE I S AGAINST THE DISALLO W ANCE O F THE P R OVIS I ON FOR WAGE REVISION ARREARS BY TH E ASSESSING OFFICER ON TH E GROUND THAT THIS IS UNASCE R TAINED L IABILITY AND THEREFORE, CANNOT BE ALLOWED. THE CIT(A) HAS ALSO CONFIRMED THE SA ID DISALLOWANCE AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 11. THE LEARNED COUNSEL FOR TH E ASSESSEE SUB M I T TED THAT THIS ISSUE IS COVERED IN FAVOU R O F TH E ASSESSEE BY TH E DECISION OF TH E TRIBUN A L IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2007 - 08 (SUPRA) AND THE CIT(A) HAD NO T FOLLOWED THE SAME ONLY BY HOLDING THAT T HE WAGE REVISION LIABILITY WAS ASCERTAINED ONLY AFTER THE MEMORANDUM O F S E TTLEMENT WAS REACHED BETWEEN T H E MAN A GEMENT AND TH E EMPLOYEES OF TH E ASSESSEE COMPANY ON 24.9.2009, WHICH IS SUBSEQ UE NT TO THE RELEVANT FINANCIAL YEAR. THE LEARNED C OUN S EL FOR THE ASSESSEE S U BMI T TED THAT THE P R O VI SION FOR WAG E ARREARS WAS MADE ON THE BASIS OF TH E CHAR T ER OF DEMANDS RAISED BY THE EMPLOYEES OF THE ASSESSEE ON 30.6.2006 FOR TH E R E VISION O F WAGES F R O M 1.1.2007 AND ON THE B A SIS OF SUCH REPRESENTATION AND THE PAST HISTORY, THE P RO V I SION FOR W AGE REVISION ARREARS WAS MADE. HE SUBMITTED THAT THE P R O VI SION WAS MADE WITH EFFECT F R OM 1.1.2007 ON W ARDS AND THE P RO V I SION FOR THE W A G E REVISION ARREARS FOR THE P E RIOD F RO M 1.1.2007 TO 31.3.2007 WAS ALLOWED BY THE TRIBUNAL IN I TA NO. 917 /HYD/2013 M /S. ELECTRONIC CORPORATION OF INDIA LTD., HYDERABAD 5 THE EARLIER ASSESSMENT YEAR , VIZ. ASSESSMENT YEAR 2007 - 08, AND THE BALAN C E WAS CLAIMED DURING THE RELEVANT ASSESSMENT YEAR AND THER E FORE , THE SAME HAS TO BE ALLOWED DURING THE RELEVANT ASSESS MENT YEAR TOO. 12. THE LEARNED DEPARTMENTAL REPRESENTATIVE HOWEVER SUPPORTED THE O R DERS OF THE AUTHO R ITI E S BELOW AND SUBMITTED TH A T THE WAGE REVISION WAS AP P ROVED BY THE D. A . E . ONLY BY ORDERS DATED 1. 5 .2009 AND TH E R E FORE, THE P R O VI SION IS ONLY AN UNASC ERTAINED LIABILITY AS HELD BY THE ASSESSING OFFICER. 13. HAVING RE G ARD TO THE CON T ENTION S O F BOTH TH E PARTIES AND ALSO THE M A TERIAL ON RECORD, WE FIND THAT THE EMPLOYEES OF THE ASSESSEE COMPANY HAVE BEEN MAKIN G D EMAND FOR WAGE REVISION IN THE EARLIER A SSESSMENT YEAR TOO AND ON THE BASIS OF SUCH A DEMAND, THE ASSESSEE HAS BEEN R E VISING WAGES AND TILL A FINAL DECISION HAS BEEN TAKEN, A P R O VI SION FOR SUCH WAGE REVISION ARREARS HAS BEEN MADE BY TH E ASSESSEE. WE FIND THAT THE ASSESSEE HAS MADE PROVISION FOR THE SAME C ALEN D AR YEAR, AND FOR THE BROKEN PERIOD , I.E. 1.1.2007 TO 31.3.2007, THE TRIBUNAL HAS AL R EADY ALLOWED THE PROVISION BY HOL D IN G IT TO BE AN ASCERTAINED LIABILITY. SI N CE THE F A CTS AND CIR C UM S TANCES DURING THE RELEVANT ASSESSMENT YEAR ARE SIMILAR AND THE WAGE REVISION IS CONSEQUENT TO THE CHA RTE R O F DEMAND BY THE EMPLOYEES, WHICH IS THE BASIS FOR MAKING OF THE PROVISION PART OF WHICH WAS ALLOWED BY THE TRIBUNAL IN THE EARLIER ASSESSMENT YEAR, WE DO NO T SEE ANY R E ASON TO TAKE A DIFFER E NT VIEW IN THIS Y E AR. RESPE C T F ULLY FOLLO W IN G TH E DECISION OF TH E COO R DIN A TE BENCH IN ASSESSEE S OWN CA S E FOR THE PRECEDING YEAR (SUPRA) , WE ALLOW THE GROUND OF THE ASSESSEE ON THIS ISSUE AND DIR E CT THE ASSESSING OFFICER TO DEDUCTION OF THE PROVISION FOR WAGE REVISIO N ARREARS . I TA NO. 917 /HYD/2013 M /S. ELECTRONIC CORPORATION OF INDIA LTD., HYDERABAD 6 14. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST O C TO BER, 2014 SD/ - SD/ - ( P.M .JAGTAP ) ( P.M ADHAVI DEVI ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT/ - 1 ST OCTOBER , 2014 COPY FORWARDED TO: 1. M/S. ELECTRONIC CORPORATION OF INDIA LTD., C/O. DR.C.P.RAMASWAMY, ADVOCATE, FLAT NO.303, GITANJALI APTS., PLOT NO.108, SRINAGAR COLONY, HYDERABAD - 500 072. 2 . ADDL . COMMISSIONER OF INCOME - TAX RANGE 2 , HYDERABAD 3. 4. COMMISSIONER OF INCOME - TAX(APPEALS) III HYDERABAD COMMISSIONER OF INCOME - TAX II HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE, ITAT, HYDERABAD. B.V.S