Renault Nissan Technology & Business Centre India P. Ltd., Kancheepuram V. DCIT, CHENNAI

MA 155/CHNY/2018

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1507 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 27 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 06-12-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure
• Section: 10AA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , , ' BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER M.P. NO. 155 / CHNY /201 8 ( ./I.T.A. NO. 2500 & 3464/CHNY/2016) / ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE -5(1), CHENNAI 600 034. VS. M/S. RENAULT NISSAN TECHNOLOGY & BUSINESS CENTRE INDIA (P) LTD., ASCENDS MAHINDRA IT PARK, NATHAM SUB POST OFFICE, MAHINDRA WORLD CITY, KANCHIPURAM DISTRICT, TAMIL NADU 603 002. [PAN: AADCR 7253E] ( / APPELLANT) / RESPONDENT) REVENUE BY : SHRI ASHIK SHAH, CA ASSESSEE BY : SHRI AR V SREENIVASAN, JCIT $ /DATE OF HEARING : 02.11.2018 $ /DATE OF PRONOUNCEMENT : 06.12.2018 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE ASSESSEE FILED THIS MISCELLANEOUS PETITION AGA INST THE ORDER OF THIS TRIBUNAL IN ITA NO. 2500 & 3464/CHNY/2016 FOR ASSESSMENT YEARS 2010-11 & 2011-12 AND SUBMITTED AS UNDER: :-2-: MP. NO.155/CHNY/2018 6. THE PETITIONER HAD ENTERED INTO A TRIPARTITE AG REEMENT WITH MAHINDRA WORLD CITY AND VELANKANNI INFORMATION SYSTEMS PRIVA TE LIMITED (VISPL) FOR LEASE OF A PLOT OF LAND, FOR CONSTRUCTION OF A FACI LITY. IN THIS REGARD, THE PETITIONER HAD PAID CERTAIN AMOUNTS TO VISPL TOWARD S DEPOSIT. SUBSEQUENTLY, THE PROJECT WAS CANCELLED DUE TO ADVERSE ECONOMIC C ONDITIONS. IN THE MEANTIME, VISPL HAD SPENT INITIAL EXPENDITURE TOWAR DS DEVELOPMENT OF LAND, AS PER PROJECT DESIGN, REGISTRATION CHARGES AND TOW ARDS LIQUIDATED DAMAGES. THE PETITIONER HAD TO COMPENSATE VISPL FOR SUCH AMO UNTS / ADJUST THE SAME AGAINST DEPOSIT MONEY THAT WAS RECOVERED. 7. THE SAID EXPENSES, HAVING BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF THE PETITIONER, THE SAME WERE CLAIMED AS REVENUE EX PENDITURE. THE IA. AO HOWEVER DISALLOWED THE SAME BY TREATING IT TO BE CA PITAL IN NATURE. 8. IN THIS REGARD, THE PETITIONER WAS ON APPEAL BEF ORE YOUR HONOURS. IN THE IMPUGNED ORDER, YOUR HONOURS, BEING OF THE OPINION THAT THE IA. AO HAS NOT PROPERLY EXAMINED THE TRANSACTION AND THE RELATED D OCUMENTS, RESTORED THIS MATTER BACK TO THE LLLAO FOR FRESH EXAMINATION. WHI LE THE IMPUGNED ORDER HAS DEALT WITH THE EXAMINATION OF THE TRANSACTION B Y THE IA. AO, THE SAME DOES NOT CONTAIN A RULING ON THE CONNECTED GROUND R AISED BY THE PETITIONER ON THE SUBJECT, VIDE GROUND NO. 4.2, REGARDING THE MODE OF COMPUTATION OF THE BUSINESS PROFITS WHICH ARE ELIGIBLE FOR DEDUCTI ON UNDER SECTION 10AA OF THE ACT. AN EXTRACT OF THE SAME IS REPRODUCED BELOW : FURTHER, THE LD. CIT(A) ERRED IN DENYING THE ALTER NATE PLEA OF THE APPELLANT THAT THE SAID DISALLOWANCE OUGHT TO BE AD JUSTED WITH THE PROFITS AND GAINS FROM BUSINESS OF THE UNDERTAKING COMPUTED FOR CLAIMING DEDUCTION UNDER SECTION 10AA OF THE ACT. 9. IN VIEW OF THE ABOVE, AND IN ORDER TO BRING A FI NALITY TO THE REMAND PROCEEDINGS, IT IS PRAYED THAT YOUR HONOURS CONSIDE R THE ABOVE-MENTIONED CONNECTED GROUND, AND PROVIDE A RULING ON THE SAME. 2. PER CONTRA, THE DR SUPPORTED THE ORDER INVITING OUR ATTENTION TO THE RELEVANT PORTION OF THE ORDER, WHICH IS EXTRACTED A S UNDER: 7 THE NEXT ISSUE IS DISALLOWANCE OF DEPOSITS AND OT HER COSTS WRITTEN OFF : 7.1 IN THIS REGARD , THE ASSESSEES GROUNDS A RE AS UNDER : :-3-: MP. NO.155/CHNY/2018 4.1. THE LD. CIT (A) AND THE LD. AO ERRED IN DISALL OWING THE DEPOSITS WRITTEN OFF ALONG WITH REGISTRATION CHARGES AND LIQ UIDATED DAMAGES, WITHOUT APPRECIATING THE FACT THAT THE SAME HAD BEE N INCURRED FOR THE PURPOSE OF BUSINESS OF THE APPELLANT AND HAD BEEN W RITTEN OFF DUE TO BUSINESS AND COMMERCIAL REASONS. 4.2. FURTHER, THE LD. CIT (A) ERRED IN DENYING THE ALTERNATE PLEA OF THE APPELLANT THAT THE SAID DISALLOWANCE OUGHT TO BE AD JUSTED WITH THE PROFITS AND GAINS FROM BUSINESS OF THE UNDERTAKING COMPUTED FOR CLAIMING DEDUCTION UNDER SECTION 10AA OF THE ACT. 7.2 THE AR SUBMITTED THAT DURING THE AY 2010-11 , T HE ASSESSE HAD ENTERED INTO A TRIPARTITE AGREEMENT WITH MAHINDRA WORLD CIT Y AND VELANKANNI INFORMATION SYSTEMS PRIVATE LIMITED (VISPL) FOR LEASE OF A PLOT OF LAND FOR CONSTRUCTION OF A FACILITY TO BE USED FOR ESTABLISHING AN ENGINEERING DESIGN STUDIO / RESEARCH AND DEVELOPMENT FACILITY. THE ASSESSEE HAD PAID DEP OSIT MONEY TO VISPL PURSUANT TO THE ABOVE AGREEMENT, HOWEVER, THE PROJECT WAS CA NCELLED DUE TO ADVERSE ECONOMIC CONDITIONS. IN THE MEANTIME, VISPL HAD SPE NT INITIAL EXPENDITURE AT INR 2,95,57,200 TOWARDS DEVELOPMENT OF THE LAND AS PER THE PROJECT DESIGN, INR 46,13,120 TOWARDS REGISTRATION CHARGES AND INR 59,8 0,707 TOWARDS LIQUIDATED DAMAGES. THE ASSESSEE HAD TO COMPENSATE VISPL FOR SUCH AMOUNTS / ADJUST THE SAME AGAINST THE DEPOSIT MONEY THAT WAS RECOVERED, AS THE CASE MAY BE. SINCE, THESE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE O F BUSINESS THEY WERE CLAIMED AS REVENUE EXPENDITURE BY THE ASSESSEE. DU RING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD PROVIDED DETAILED SUBMISSIONS TO THE AO TOWARDS THE ABOVE CLAIM AND PLEADED THAT THERE SHOU LD NOT BE PERMANENT DISALLOWANCE FOR THE LEGITIMATE BUSINESS EXPENDITUR E MERELY BECAUSE THE SAME WAS INCURRED FOR THE PURPOSE OF BRINGING INTO EXIST ENCE AN ASSET WHICH NEVER CAME INTO EXISTENCE. THE AO, HOWEVER, DISREGARDED O UR SUBMISSIONS AND DISALLOWED THE ABOVE EXPENDITURE BY TREATING THEM A S CAPITAL IN NATURE. THE CIT (A) FOUND CONCURRENCE WITH THE FINDING OF AO THAT T HE DEPOSIT IS UTILISED FOR THE DEVELOPMENT OF LAND AND BUILDING OF THE FACTORY AND CONSEQUENTLY BECOMES A CAPITAL EXPENDITURE. FURTHER, THE CIT (A) ALSO DEN IED THE ALTERNATE CLAIM OF THE ASSESSEE TO ADJUST THE SAID DISALLOWANCE WITH THE PROFITS AND GAINS FROM BUSINESS OF THE UNDERTAKING COMPUTED FOR CLAIMING D EDUCTION UNDER SECTION 10AA , BY HOLDING THAT THE SAID ITEM DOES NOT RESULT IN ANY FOREIGN EXCHANGE AND HENCE NOT ELIGIBLE FOR DEDUCTION. IN SUPPORT OF HIS PLEA, THE AR RELIED ON CERTAIN CASE LAWS. PER CONTRA, THE DR SUPPORTED THE ORDERS OF TH E LOWER AUTHORITIES. 8. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH RELEVANT MATERIAL. THE AO SIMPLY RECORDS THAT THE ASSESSEE HAS MADE A CA PITAL EXPENDITURE FOR BUILDING :-4-: MP. NO.155/CHNY/2018 / DEVELOPING A FACTORY PREMISE BUT CLAIMED THE SAME AS REVENUE EXPENDITURE. THE AO HAS NOT EXAMINED WHETHER SUCH ACTIVITIES ARE IN CONNECTION WITH EXISTING BUSINESS OR IN NEW AREA . FURTHER, THE COPIES OF A GREEMENT PRODUCED IN SUPPORT OF THE ASSESSEES CLAIM CONTAIN CERTAIN CONDI TIONS. IT APPEARS THAT THE AO HAS NOT EXAMINED THEM AS TO WHETHER THE TERMS AND CONDI TIONS STIPULATED ARE COMPLIED AND ITS CONSEQUENCES ETC. IN THE FACTS AN D CIRCUMSTANCES, WE DEEM IT FIT TO RESTORE THIS MATTER BACK TO THE A O FOR A FRESH EXAMINATION AND TO PASS APPROPRIATE ORDERS, AFTER AFFORDING ADEQUATE O PPORTUNITY TO THE ASSESSEE. THE CORRESPONDING APPEAL GROUNDS ARE TREATED AS ALL OWED FOR STATISTICAL PURPOSES. 3. FROM THE ABOVE, IT IS CLEAR THAT SINCE ALL THE A SPECTS ON THE IMPUGNED ISSUE HAS NOT BEEN EXAMINED BY THE AO, THE MATTER WAS REMITTED BACK TO THE AO FOR A FRESH EXAMINATION AND TO PASS APPROPRIATE ORDERS, AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES, AND SINCE THE ASSESSEE HAS NOT ESTABLISHED ANY SPECIFIC DEFECT IN THE ORDER, THE MISCELLANEOUS PET ITION IS DISMISSED. 4. IN THE RESULT, THE ASSESSEES MISCELLANEOUS PET ITION IS DISMISSED. ORDER PRONOUNCED ON THURSDAY, THE 06 TH DAY OF DECEMBER, 2018 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER /CHENNAI, ) /DATED: 06 TH DECEMBER, 2018 JPV $*+,-, /COPY TO: 1. // APPELLANT 2. *1/ /RESPONDENT 3. 2 ) (/CIT(A) 4. 2 /CIT 5. ,* /DR 6. 5 /GF