M/s Sartorious Mechtronics India (P) Ltd., V. DCIT,

ITA 982/BANG/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8686 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 9 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2001-2002
• Appeal Filed On: 18-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Depreciation; Reasonable cause; Condonation of delay
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI N.V. VASUDEVAN, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NOS. 982 TO 984/BANG/2013 ASSESSMENT YEARS : 2001-02 TO 2003-04 M/S. SARTORIOUS MECHATRONICS INDIA (P) LTD., NO.69/2 & 69/3, JAKKASANDRA, KUNIGAL ROAD, NELAMANGALA TALUK, BANGALORE 562 123. PAN: AAACG 6191P VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE 12(2), BANGALORE. APPELLANT RESPONDENT APPELLANT BY : SHRI NARENDRA SHARMA, ADVOCATE RESPONDENT BY : DR. P.K. SRIHARI, ADDL. CIT(DR) DATE OF HEARING : 17.03.2015 DATE OF PRONOUNCEMENT : 27.03.2015 O R D E R PER BENCH THESE ARE APPEALS BY THE ASSESSEE AGAINST THE COM MON ORDER DATED 28.03.2008 OF THE CIT(APPEALS)-III, BANGALORE RELATING TO ASSESSMENT YEARS 2001-02 TO 2003-04. 2. THERE IS A DELAY OF ABOUT 1836 DAYS IN FILING TH ESE APPEALS BY THE ASSESSEE BEFORE THE TRIBUNAL. THE REASONS FOR THE D ELAY IN FILING THE ITA NOS.982 TO 984/BANG/2013 PAGE 2 OF 9 APPEALS HAVE BEEN SET OUT IN THE APPLICATION FOR CO NDONATION OF DELAY FILED BY THE ASSESSEE. IT HAS BEEN STATED IN THE SAID AP PLICATION THAT THE COMMON ORDER OF CIT(APPEALS) WAS PASSED ON 28.3.200 8 AND RECEIVED BY THE ASSESSEE ON 3.4.2008. IT APPEARS THAT THE THEN GM(FINANCE) OF THE ASSESSEE, WHO IS ALSO A CHARTERED ACCOUNTANT, ADVIS ED THE ASSESSEE THAT THERE WAS NO PURPOSE IN FILING FURTHER APPEAL. THE ASSESSEE HAD APPROACHED THE PRESENT COUNSEL (WHO FILED THESE APP EALS) FOR SOME OTHER PROFESSIONAL ADVICE AND IN THE COURSE OF DISCUSSION , THE COMMON ORDER OF THE CIT(A) WAS SEEN BY THE PRESENT COUNSEL. THEREU PON, THE PRESENT COUNSEL ASKED THE ASSESSEE AS TO WHETHER ANY APPEAL HAS BEE PREFERRED AGAINST THE IMPUGNED ORDER OF CIT(A). IT WAS INFOR MED BY THE ASSESSEE TO THE PRESENT COUNSEL THAT IN VIEW OF THE ADVICE OF G M(FINANCE), NO APPEAL WAS FILED AGAINST THE ORDER OF CIT(A). THE PRESENT COUNSEL, HOWEVER, ADVISED THE ASSESSEE THAT IT HAD A GOOD CASE TO GO IN APPEAL. IMMEDIATELY ON RECEIPT OF SUCH ADVICE, THE ASSESSEE HAD FILED T HE PRESENT APPEALS BEFORE THE TRIBUNAL. 3. THE AVERMENTS STATED IN THE APPLICATION FOR COND ONATION OF DELAY HAVE BEEN VERIFIED AS TRUE BY AMIT CHATTERJEE, M.D. OF THE ASSESSEE. THE ASSESSEE HAS ALSO FILED BEFORE US AN INTER-OFFICE M EMO DATED 21.4.08 WHEREIN THE RELEVANT NOTINGS FOR NOT PREFERRING APP EALS TO THE TRIBUNAL HAVE BEEN MENTIONED. THE SAME WAS FILED BEFORE US BY TH E LD. COUNSEL FOR THE ASSESSEE. ITA NOS.982 TO 984/BANG/2013 PAGE 3 OF 9 4. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITT ED BEFORE US THAT IN THE MATTER OF CONDONATION OF DELAY IN FILING APPEAL S, THE TRIBUNAL SHOULD ADOPT A LIBERAL APPROACH. IT WAS SUBMITTED BY HIM IF THE EXPLANATION FURNISHED BY THE ASSESSEE DOES NOT SMACK OF MALAFID ES OR IT IS NOT PUT FORTH AS PART DILATORY STRATEGY, THE COURT MUST SHOW UTMO ST CONSIDERATION TO THE SUITOR. OUR ATTENTION WAS DRAWN TO THE DECISION OF THE HONBLE SUPREME COURT IN THIS REGARD IN RAMNATH SAO @ RAMNATH SAHU & ORS. V. GOVARDHAN SAO & ORS, AIR 2002 SC 1201 . RELIANCE WAS ALSO PLACED ON THE DECISION OF THE ITAT BANGALORE BENCH IN THE CASE OF RAGHAVENDRA CONSTRUCTIONS V. ITO, ITA NO.425/BANG/2012, ORDER D ATED 14.12.2012 , WHEREIN THE TRIBUNAL CONDONED THE DELAY OF ABOUT 6 78 DAYS IN FILING THE APPEAL. IN DOING SO, THE TRIBUNAL FOL LOWED THE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA RENDERED IN THE CAS E OF CIT V. ISRO SATELLITE CENTRE, ITA NO.532/2008 DATED 28.10.2011 , WHEREIN THE HONBLE HIGH COURT CONDONED THE DELAY OF FIVE YEARS IN FILING THE APPEAL. IN THE AFORESAID CASE, THE HONBLE COURT FOUND THAT TH E VERY LIABILITY OF THE ASSESSEE WAS NON-EXISTENT AND THEREFORE EXPRESSED T HE VIEW THAT IN SUCH CIRCUMSTANCES, THE DELAY IN FILING THE APPEAL SHOUL D BE CONDONED. 5. THE LD. COUNSEL FOR THE ASSESSEE ALSO DREW OUR A TTENTION TO THE FACT THAT THE ISSUE INVOLVED IN THE APPEAL WAS WITH REGA RD TO ALLOWING DEPRECIATION ON GOODWILL. THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THAT THE ASSESSEE PURCHASED THE BUSINESS ON WEIGHING DIVISION OF ITA NOS.982 TO 984/BANG/2013 PAGE 4 OF 9 PHILLIPS INDIA LTD. ON 1.7.1998 FOR A CONSIDERATION OF RS.3.7 CRORES. A SUM OF RS.64,93,760 WAS ATTRIBUTABLE TO THE VALUE OF GO ODWILL IN THE CONSIDERATION SO PAID. THE ASSESSEE CLAIMED THAT G OODWILL WAS AN ITEM OF ASSET ON WHICH DEPRECIATION U/S. 32(1) OF THE ACT H AD TO BE ALLOWED. THE REVENUE AUTHORITIES REJECTED THE CLAIM OF THE ASSES SEE ON THE GROUND THAT GOODWILL WAS NEITHER AN ITEM OF ASSET WITHIN THE DE FINITION OF TERM BLOCK OF ASSETS U/S. 2(11) AS WELL AS UNDER SECTION 32 OF T HE ACT. 6. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENT ION TO THE DECISION OF THE HONBLE SUPREME COURT RENDERED IN THE CASE O F CIT V. SMIFS SECURITIES LTD., 348 ITR 302 (SC) WHEREIN IT WAS HELD THAT GOODWILL IS AN ASSET ON WHICH DEPRECIATION IS ALLOWABLE U/S. 32 OF THE ACT. THE AFORESAID DEVELOPMENT OF LAW, CONSEQUENT TO THE DECISION OF H ONBLE SUPREME COURT RENDERED ON 22.8.2012, ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, WOULD ONLY MEAN THAT THE ASSESSEE WAS ENTITLED TO B ENEFIT OF DEPRECIATION BEYOND DOUBT. ACCORDING TO HIM, AS PER THE DECISIO N OF HONBLE HIGH COURT OF KARNATAKA RENDERED IN ISRO SATELLITE CENTRE (SUPRA) , THE DELAY IN FILING THE APPEALS OUGHT TO BE CONDONED, AS THE CLAIM OF A SSESSEE FOR DEPRECIATION COULD NOT BE DENIED ON THE GROUND ON W HICH THE REVENUE AUTHORITIES HAD DENIED THE CLAIM OF ASSESSEE. IT W AS THEREFORE SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE DELAY IN FILING THE APPEAL SHOULD BE CONDONED AND FURTHER IT SHOULD BE HELD THAT ASSESSE E IS ENTITLED TO BENEFIT OF DEPRECIATION ON GOODWILL. ITA NOS.982 TO 984/BANG/2013 PAGE 5 OF 9 7. THE LD. DR, HOWEVER, SUBMITTED THAT THE CIT(APPE ALS) HAD OBSERVED IN PARA 3.4 OF THE IMPUGNED ORDER THAT IN A.Y. 2002 -03 AND 2003-04, THE ASSESSEE ACCEPTED THE DISALLOWANCE OF DEPRECIATION ON GOODWILL. ACCORDING TO HIM, THE DELAY IN FILING THE APPEAL WA S INORDINATE AND THEREFORE SHOULD NOT BE CONDONED. 8. ON MERITS, THE LD. DR SUBMITTED THAT ALLOWANCE O F DEPRECIATION IS DEPENDENT UPON FULFILLMENT OF CONDITIONS THAT THE A SSESSEE IS OWNER OF THE ASSET ON WHICH DEPRECIATION IS CLAIMED AND THAT THE ASSESSEE HAS BEEN USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ACCORDING TO HIM, IN THE PRESENT CASE, THE AO AS WELL AS THE CIT(APPEALS) PR OCEEDED ON THE BASIS THAT GOODWILL WAS NOT AN ITEM OF ASSET, ON WHICH DE PRECIATION CAN BE ALLOWED U/S. 32 OF THE ACT AND THEREFORE, HAD NO OC CASION TO GO INTO THE QUESTION WHETHER THE ASSESSEE OWNED THE GOODWILL AN D HAD USED THE GOODWILL FOR THE PURPOSE OF BUSINESS. ACCORDING TO HIM, IN THE EVENT OF CLAIM OF THE ASSESSEE BEING ACCEPTED, THE ISSUE WIT H REGARD TO OWNERSHIP AND USE OF GOODWILL FOR THE PURPOSE OF BUSINESS SHO ULD BE DIRECTED TO BE EXAMINED BY THE AO. 9. WE HAVE GIVEN A VERY CAREFUL CONSIDERATION TO TH E RIVAL SUBMISSIONS. AS FAR AS THE DELAY IN FILING THE APPEALS IS CONCER NED, IT IS SEEN THAT THE IMPUGNED ORDER OF CIT(APPEALS) WAS PASSED ON 28.3.2 008 AND WAS SERVED ON 3.4.2008. ON 21.4.2008, THERE IS AN INTER-OFFIC E MEMO IN WHICH THE ADVICE OF GM(FINANCE) NOT TO FILE THE APPEAL AGAINS T THE IMPUGNED ORDER OF ITA NOS.982 TO 984/BANG/2013 PAGE 6 OF 9 CIT(APPEALS) HAS BEEN RECORDED. THE LAW WITH REGAR D TO ALLOWING DEPRECIATION ON GOODWILL CRYSTALLISED WITH THE DECI SION OF HONBLE SUPREME COURT IN THE CASE OF SMIFS SECURITIES LTD. (SUPRA) RENDERED ON 22.8.2012. THE APPEAL BEFORE THE TRIBUNAL HAD BEEN FILED BY TH E ASSESSEE ON 18.6.2013. IT IS THEREFORE PROBABLE THAT THE CLAIM OF ASSESSEE THAT APPEAL WAS NOT FILED DUE TO AN EARLIER ADVICE AND LATER ON FILED BECAUSE OF THE PROFESSIONAL ADVICE GIVEN BY THE PRESENT COUNSEL IS CORRECT. BY THE DECISION RENDERED BY THE HONBLE SUPREME COURT IN SMIFS SECURITIES LTD. (SUPRA) , ALLOWANCE OF DEPRECIATION ON GOODWILL IS NO LONGE R A MATTER OF DEBATE. IN SUCH CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE SHOULD NOT BE DENIED BENEFIT WHICH IT IS ENTITLED T O IN LAW PURELY ON TECHNICALITIES. WE ARE ALSO SATISFIED THAT THE DEL AY IN FILING THE APPEALS HAS OCCASIONED ON ACCOUNT OF REASONABLE CAUSE. IN THIS REGARD, WE FIND THAT IN RAGHAVENDRA CONSTRUCTIONS (SUPRA) , THIS TRIBUNAL ON IDENTICAL ISSUE HELD THAT SUBSEQUENT PROFESSIONAL ADVICE AND DELAY ON AC COUNT OF EARLIER IMPROPER PROFESSIONAL ADVICE WAS SUFFICIENT CAUSE T O CONDONE THE DELAY IN FILING HE APPEAL. FOLLOWING WERE THE RELEVANT OBSE RVATIONS OF THE TRIBUNAL:- 13. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A T THE OUTSET, WE OBSERVE THAT THE HONBLE SUPREME COURT, IN THE C ASE OF MST. KATIJI (SUPRA), HAS EXPLAINED THE PRINCIPLES THAT NEED TO BE KEPT IN MIND WHILE CONSIDERING AN APPLICATION FOR CONDONATI ON OF DELAY. THE HONBLE APEX COURT HAS EMPHASIZED THAT SUBSTANT IAL JUSTICE SHOULD PREVAIL OVER TECHNICAL CONSIDERATIONS. THE COURT HAS ALSO EXPLAINED THAT A LITIGANT DOES NOT STAND TO BENEFIT BY LODGING THE APPEAL LATE. THE COURT HAS ALSO EXPLAINED THAT EVE RY DAYS DELAY MUST BE EXPLAINED DOES NOT MEAN THAT A PEDANTIC APP ROACH SHOULD BE TAKEN. THE DOCTRINE MUST BE APPLIED IN A RATION AL COMMON ITA NOS.982 TO 984/BANG/2013 PAGE 7 OF 9 SENSE AND PRAGMATIC MANNER. IN THE CASE OF SHAKUNTALA HEGDE, L/R OF R.K. HEGDE V. ACIT, ITA NO.2785/BANG/2004 FO R THE A.Y. 1993-94 , THE HONBLE TRIBUNAL CONDONED THE DELAY OF ABOUT 1331 DAYS IN FILING THE APPEAL WHEREIN THE PL EA OF DELAY IN FILING APPEAL DUE TO ADVICE GIVEN BY A NEW COUNSEL WAS ACCEPTED AS SUFFICIENT. THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT V. ISRO SATELLITE CENTRE, ITA NO. 532/2008 DATE D 28.10.2011 HAS CONDONED THE DELAY OF FIVE YEARS IN FILING APPE AL BEFORE THEM WHICH WAS EXPLAINED DUE TO DELAY IN GET TING LEGAL ADVICE FROM ITS LEGAL ADVISORS AND GETTING APPROVAL FROM DEPARTMENT OF SCIENCE AND PMO. IN THE AFORESAID DE CISION, THE HONBLE COURT FOUND THAT THE VERY LIABILITY OF THE ASSESSEE WAS NON-EXISTENT AND THEREFORE CONDONED THE DELAY IN FI LING APPEAL. 14. KEEPING IN MIND THE AFORESAID PRINCIPLES, WE SHALL CONSIDER THE CLAIM OF THE ASSESSEE IN THE PRESENT C ASE. ADMITTEDLY THE ADVICE WAS GIVEN BY THE COUNSEL WHO APPEARED ON BEHALF OF THE ASSESSEE BEFORE THE HONBLE HIGH COURT. THE DE CISION OF THE HONBLE HIGH COURT WAS RENDERED ON 28.2.2012. THE APPEAL HAS BEEN FILED BY THE ASSESSEE BEFORE THE TRIBUNAL ON 2 6.3.2012. HENCE, WE FIND THAT THERE HAS BEEN NO WILLFUL NEGLE CT ON THE PART OF THE ASSESSEE. IN SUCH MATTERS THE ADVICE OF THE PROFESSIONAL WOULD BE THE POINT OF TIME AT WHICH THE ASSESSEE WO ULD BEGIN TO EXPLORE THE OPTION OF EXHAUSTING ALL LEGAL REMEDIES . WE ARE ALSO OF THE VIEW THAT BY CONDONATION OF DELAY THERE IS N O LOSS TO THE REVENUE AS LEGITIMATE TAXES PAYABLE IN ACCORDANCE W ITH LAW ALONE WOULD BE COLLECTED. WE THEREFORE ACCEPT THE REASON GIVEN FOR CONDONATION OF DELAY IN FILING THE APPEAL. THE DEL AY IN FILING THE APPEAL IS ACCORDINGLY CONDONED. 10. AS FAR AS MERITS OF THE APPEALS ARE CONCERNED, THE FACT THAT THE ASSESSEE ACQUIRED THE BUSINESS OF WEIGHING DIVISION OF PHILLIPS INDIA LTD. AND THAT A SUM OF RS.64,93,706 WAS PAID AS GOODWILL OF THE BUSINESS IS NOT IN DISPUTE. THE ASSESSEE IS IN THE BUSINESS OF SAL ES AND SERVICING OF ELECTRONIC WEIGHING SOLUTIONS. IT IS THEREFORE CLEA R THAT THE ASSESSEE OWNED GOODWILL AND HAD USED THE GOODWILL FOR THE PURPOSE OF ITS BUSINESS. IN SUCH ITA NOS.982 TO 984/BANG/2013 PAGE 8 OF 9 CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION ON GOODWILL. 11. WITH REGARD TO CLAIM OF LD. DR THAT THE ASSESSE E HAD NO OBJECTION FOR DISALLOWING OF DEPRECIATION IN A.YS. 2002-03 & 2003 -04, WE FIND THAT IN THE PROCEEDINGS FOR A.Y. 2002-03, THE AO HAS ONLY OBSER VED THAT DEPRECIATION IS ADDED TO THE INCOME IN THE EARLIER YEAR AND THER EFORE IS BEING ADDED IN AY 02-03 ALSO, FOR WHICH THE AR HAD NO OBJECTION. THE ORDER OF AO FOR A.Y. 2002-03 WAS PASSED ON 31.12.04. EVEN BEFORE THIS O RDER WAS PASSED, THE ASSESSEE HAD FILED AN APPEAL AGAINST THE ORDER OF A SSESSMENT FOR A.Y. 2001-02 DENYING DEPRECIATION ON 4.3.2004 ITSELF. I T IS THEREFORE NOT CORRECT ON THE PART OF THE LD. DR TO CONTEND THAT THE ASSES SEE HAD ACCEPTED THE DISALLOWANCE OF DEPRECIATION. IN OUR VIEW, TAX LI ABILITY CANNOT BE IMPOSED ON THE BASIS OF ADMISSION AND IT SHOULD BE STRICTLY IN ACCORDANCE WITH LAW. 12. FOR THE REASONS STATED ABOVE, WE ALLOW THE APPE ALS OF THE ASSESSEE. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF MARCH , 2015 . SD/- SD/- ( JASON P. BOAZ ) ( N.V. VASUDEVA N ) ACCOUNTANT MEMBER JUDICIAL MEMBE R BANGALORE, DATED, THE 27 TH MARCH , 2015 . /D S/ ITA NOS.982 TO 984/BANG/2013 PAGE 9 OF 9 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR/ SENIOR PRIVATE SECRETARY ITAT, BANGALORE.