Dy. Commissioner of Income Tax, Lucknow V. M/s PTC Industries Ltd, Lucknow

MA 132/LKW/2015

• Counselvise Citation: [2016] 124 COUNSELVISE.COM (IT) 3891 (ITAT-LUCKNOW)
• Duration Of Justice: 2 month(s) 21 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 12-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 21-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SWATI RATNA
• Assessee Lawyers: ARUN KUMAR GUPTA G M
• Keywords: Tax effect; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER M.A. NOS.132 & 133/LKW/2015 (ARISING OUT OF I.T.A.NOS.727 & 728/LKW/2014) ASSESSMENT YEAR:2010-2011 DY.C.I.T., RANGE-5, LUCKNOW. VS. M/S PTC INDUSTRIES LTD., MALVIYA NAGAR, AISHBAGH, LUCKNOW. PAN:AABCP4377K (APPLICANT) (RESPONDENT) APPLICANT BY SMT. SWATI RATNA, D. R. RESPONDENT BY S HRI ARUN KUMAR GUPTA, G.M. DATE OF HEARING 01/01/2016 DATE OF PRONOUNCEMENT 12/01/2016 O R D E R PER A. K. GARODIA, A.M. BOTH THESE MISC. APPLICATIONS ARE FILED BY THE REV ENUE AND BOTH OF THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE TAKE UP MISC. APPLICATION NO. 132/LKW/2 015. IN THIS MISC. APPLICATION, THE CONTENTION RAISED BY THE REVENUE I S THAT THIS APPEAL OF THE REVENUE WAS DISMISSED BY THE TRIBUNAL ON THE BASIS OF LOW TAX EFFECT BY SAYING THAT THE TAX EFFECT IS LESS THAN RS.4 LAC BU T IN FACT THE TAX EFFECT IS OF RS.4,61,015/- AND THEREFORE, THERE IS APPARENT MIST AKE IN THE TRIBUNAL ORDER. 3. IN COURSE OF HEARING BEFORE US, IT WAS POINTED O UT BY THE BENCH THAT NOW AS PER THE SUBSEQUENT BOARDS INSTRUCTIONS DATE D 10/12/2015, THE REVENUE IS NOT SUPPOSED TO FILE ANY APPEAL BEFORE T HE TRIBUNAL IF THE TAX [2] EFFECT IS BELOW RS.10 LAC AND IT IS MADE CLEAR IN T HIS BOARDS INSTRUCTIONS DATED 10/12/2015 THAT THESE INSTRUCTIONS ARE APPLIC ABLE TO ALL PENDING APPEALS ALSO. IT WAS POINTED OUT BY THE BENCH THAT EVEN IF THE MISC. APPLICATION IS ALLOWED AND THE TRIBUNAL ORDER IS RE CALLED FOR FRESH DECISION OF THE APPEAL OF THE REVENUE, IT WILL BE HIT BY THE BOARDS REVISED INSTRUCTIONS DATED 10/12/2015 RESULTING INTO SAME F ATE THAT THE APPEAL OF THE REVENUE IS NOT MAINTAINABLE BECAUSE OF LOW TAX EFFECT AND THE ENTIRE EXERCISE WILL BE OF ACADEMIC INTEREST ONLY. IN REP LY, LEARNED D. R. OF THE REVENUE HAD NOTHING TO SAY. 4. AS PER ABOVE DISCUSSION, IT IS SEEN THAT RECALLI NG OF THE TRIBUNAL ORDER BY ALLOWING THE MISC. APPLICATION OF THE REVE NUE WILL BE OF ACADEMIC EXERCISE AND HENCE, WE HOLD THAT IN THE FACTS OF TH E PRESENT CASE, THE MISC. APPLICATION OF THE REVENUE SHOULD BE DISMISSED. 5. IN THE RESULT, THE MISC. APPLICATION OF THE ASSE SSEE STANDS DISMISSED. 6. NOW WE TAKE UP THE MISC. APPLICATION NO.133/LKW/ 2015. THIS MISC. APPLICATION READS AS UNDER: THAT WHILE MAKING THE ASSESSMENT ORDER U/S 143(3) OF THE ACT DISALLOWED THE CASE OF ASSESSEE OF REVENUE EXPE NDITURE OF RS.21,61,926/ OUT OF WHICH AN AMOUNT OF RS.19,23,71 1/- PERTAIN TO THE PAYMENT OF SALARY MADE TO THE DIRECT OR'S AND EMPLOYEES, RS.1,87,500/ FOR OUTSOURCING FROM M/S AK S TOOLS AND DESIGNS SOLUTIONS AND RS.50,715/- PAID TO M/S I MPARTIAL TESTINGS RESPECTIVELY REGARDING WHICH THE ASSESSING OFFICER HELD INELIGIBLE CLAIM FOR CLAIMING DEDUCTION U/S 35 (2AB) OF THE ACT. THEREFORE, THE AO DISALLOWED THE DEDUCTION U/S 35 (2AB) OF THE ACT. IN VIEW OF THESE FACTS, IT IS ERRONEOUS TO OBSERVE THAT THE AO HAS NEVER DOUBTED THE GENUINENESS OF ASSESSEE'S CLA IM OF EXPENSE AND THE ONLY SOLE REASON TO IMPOSE THE PENA LTY U/S 271(1)(C) WAS THAT NECESSARY APPROVAL FROM DSIR WAS NOT RECEIVED TILL THE COMPLETION OF SCRUTINY ASSESSMENT . AS SUCH THE RELIANCE PLACED BY THE ITAT ON THE DECISION OF HON'BLE [3] APEX COURT IN THE CASE OF CIT VS RELIANCE PETRO PRO DUCTS PVT. LTD [2010) 36 DTR 449(SC] IS NOT JUSTIFIABLE ON FAC TS. 7. IN COURSE OF HEARING BEFORE US, IT WAS SUBMITTED BY LEARNED D. R. OF THE REVENUE THAT THE REASON FOR NOT ALLOWING THE CL AIM OF THE ASSESSEE IS NOT THIS THAT THE ASSESSEE COULD NOT GET THE APPROV AL FROM DSIR TILL THE COMPLETION OF THE SCRUTINY ASSESSMENT, AS HAS BEEN HELD BY THE TRIBUNAL AND THEREFORE, THERE IS APPARENT MISTAKE IN THE TRI BUNAL ORDER. 8. LEARNED A. R. OF THE ASSESSEE SUBMITTED THAT THE RE IS NO APPARENT MISTAKE IN THE TRIBUNAL ORDER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FI ND THAT IN THE ASSESSMENT ORDER, IT IS OBSERVED BY THE ASSESSING O FFICER THAT SALARY PAID TO AFORESAID DIRECTOR/EMPLOYEE ARE NOT ELIGIBLE FOR DEDUCTION U/S 35(2AB) FOR THESE REASONS THAT NONE OF THE EMPLOYEES IS A N EW APPOINTEE AND ALL EMPLOYEES ARE OLD AND THEIR SALARIES IN EARLIER YEA RS HAS BEEN CLAIMED UNDER SALARIES HEAD AND NOT UNDER THE HEAD RESEARCH EXPENDITURE. THE SECOND REASON GIVEN BY THE ASSESSING OFFICER IS THA T IN LAST TWO YEARS, NO DEDUCTION ON SCIENTIFIC RESEARCH WAS CLAIMED BY THE ASSESSEE ON SALARY OF THESE EMPLOYEES AND ONLY CAPITAL EXPENDITURE HAS BE EN CLAIMED ON SCIENTIFIC RESEARCH U/S 35(1)(IV) IN ASSESSMENT YEA R 2008-09 AND 2009-10. THE THIRD REASON GIVEN BY THE ASSESSING OFFICER IS THAT IN ASSESSMENT YEAR 2009-10, REVENUE EXPENDITURE OF RS.69,850/- WAS CLA IMED AS DEDUCTION U/S 35(1)(II) AS REVENUE EXPENDITURE, WHICH WAS NOT ALLOWED BEING OUTSOURCED AND NO APPROVAL WAS OBTAINED. THE 4 TH REASON GIVEN IS THAT NONE OF THE EMPLOYEE HAS GOT ANY NEW DEGREE OF SCIE NTIST/DOCTORATE IN CASTING ENGINEERING DURING FINANCIAL YEAR 2008-09 O R IN ANY PRECEDING YEAR. FROM THESE OBJECTIONS OF THE ASSESSING OFFICER IN T HE ASSESSMENT ORDER FOR NOT ALLOWING THE CLAIM OF THE ASSESSEE REGARDING SA LARY PAID TO DIRECTOR/EMPLOYEES, IT COMES OUT THAT THE REASON IS NOT THIS THAT THE EXPENSES ARE NOT GENUINE BUT THE REASON GIVEN IS TH AT THESE EXPENSES ARE [4] NOT ELIGIBLE FOR DEDUCTION U/S 35(2AB) FOR VARIOUS REASONS. SIMILARLY IN RESPECT OF DISALLOWANCE OF DEDUCTION U/S 35(2AB) ON ACCOUNT OF OUTSOURCING OF SOME EXPENSES ALSO, THE REASON GIVEN BY THE ASSESSING OFFICER IS NOT THAT THE EXPENSES ARE NOT GENUINE. THE REASON GIVEN BY THE ASSESSING OFFICER IS THAT TWO FIRMS FROM WHOM THE W ORK WAS OUTSOURCED I.E. M/S AKS TOOLS & DESIGN SOLUTION AND M/S IMPART IAL TESTING ARE NOT APPROVED FOR SCIENTIFIC RESEARCH AS PER BOARDS LET TER DATED 05/09/2011 FOR THE PURPOSE OF SECTION 35(1)(II) AND 35(1)(III) OF THE ACT. HENCE, FOR THESE EXPENSES ALSO, THIS IS NOT THE OBJECTION OF THE ASS ESSING OFFICER THAT THE EXPENSES ARE NOT GENUINE. NOW IN THE LIGHT OF THES E FACTS, WE EXAMINE THE REASONING GIVEN BY THE TRIBUNAL IN DECIDING THE APP EAL OF THE REVENUE AS PER RELEVANT PARA REPRODUCED IN THE MISC. APPLICATI ON OF THE REVENUE. FROM THE SAME, IT IS SEEN THAT THE TRIBUNAL HAS STA TED THAT THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED BY THE ASSESSING OFFICER FOR THE SOLE REASON THAT THE ASSESSEE COULD NOT GET THE APPROVAL FROM D SIR TILL COMPLETION OF SCRUTINY ASSESSMENT PROCEEDINGS AND THEREFORE, THE JUDGMENT OF APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S PVT. LTD. IS SQUARELY APPLICABLE. NOW THE ARGUMENT ADVANCED BEFORE US IS THAT THE REASON OF THE ASSESSING OFFICER IS NOT THIS THAT APPROVAL FRO M DSIR WAS NOT OBTAINED BY THE ASSESSEE TILL COMPLETION OF THE SCRUTINY ASS ESSMENT. WE FIND THIS CONTENTION AS CORRECT ALSO BECAUSE IN THE ASSESSMEN T ORDER, THIS IS NOT THE BASIS OF THE ASSESSING OFFICER THAT APPROVAL FROM D SIR WAS NOT OBTAINED BY THE ASSESSEE AND THEREFORE, THE SALARY EXPENDITU RE AND OUTSOURCING EXPENSES ARE NOT ALLOWABLE U/S 35(2AB). HENCE, TO THIS EXTENT, WE MODIFY THE IMPUGNED TRIBUNAL ORDER BUT EVEN THEN, THE ULTI MATE CONCLUSION REMAINS THE SAME BECAUSE AS PER THE RATIO LAID DOWN BY HON'BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCT S PVT. LTD. 322 ITR 158, IT WAS HELD THAT MERELY BECAUSE THE ASSESSEE CLAIMS DEDUCTION OF INTEREST EXPENDITURE WHICH HAS NOT BEEN ACCEPTED BY THE REVE NUE, PENALTY U/S 271(1) (C) IS NOT ATTRACTED. IT WAS ALSO HELD THAT MERE MAKING OF CLAIM [5] WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. IN THE PRESENT CASE ALSO, EVEN AS PER THE REASONS GIVEN BY THE A.O. FOR WHICH DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER FOR DEDUCTION CLAIMED BY THE ASSESSEE U/S 35(2AB), THE FACT REMAINS THAT THE ASSESSEE CLAIMED CERTAIN DEDUCTION U/S 35(2AB), WHICH HAS NOT BEEN A CCEPTED BY REVENUE FOR VARIOUS REASONS AND THEREFORE, AS PER THIS JUDG MENT OF HON'BLE APEX COUNT, UNDER THESE FACTS ALSO, PENALTY U/S 271(1)(C ) IS NOT ATTRACTED. HENCE, ALTHOUGH THE REASONING GIVEN BY THE TRIBUNAL IN THE IMPUGNED ORDER IS AMENDED AS NOTED ABOVE, BUT THE ULTIMATE C ONCLUSION OF THE TRIBUNAL REMAINS THE SAME AND THEREFORE, WE HOLD TH AT THERE IS NO MERIT IN THE MISC. APPLICATION OF THE REVENUE BECAUSE WHEN T HE CONCLUSION DOES NOT CHANGE, MERE CHANGE IN REASONING OF THE TRIBUNA L IS OF ACADEMIC INTEREST ONLY. 10. IN THE RESULT, THIS MISC. APPLICATION IS ALSO D ISMISSED. 11. IN THE COMBINED RESULT, BOTH THE MISC. APPLICAT IONS OF THE REVENUE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED:12/01/2016 *SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. DR, ITAT, LUCKNOW ASSTT. REGISTRAR