MAHINDRA & MAHINDRA LTD, V. JTCIT SP. RG 49,

MA 390/MUM/2010

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 4969 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2006-2007
• Appeal Filed On: 17-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: H P MAHAJANI

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'H' BENCH, MUMBAI BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER MA NO. 390/MUM/2010 (ARISING OUT OF ITA NOS. 3173 & 3829/MUM/2001) (ASSESSMENT YEAR: 1996-97) M/S. MAHINDRA & MAHINDRA LTD. JCIT,SPECIAL RANGE - 49 MAHINDRA TOWERS GR. FLOOR AAYAKAR BHAVAN, M.K. ROAD WORLI ROAD NO. 13, WORLI VS. MUMBAI 400020 MUMBAI 400020 PAN - AAACM 3025 E APPELLANT RESPONDENT APPELLANT BY: SHRI H.P. MAHAJANI RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER B. RAMAKOTAIAH, A.M. ASSESSEES MISCELLANEOUS APPLICATION IS AGAINST THE ORDER OF THE ITAT IN ITA NOS. 3173 & 3829/MUM/2001 FOR A.Y. 1996-97 DATE D 30 TH JUNE 2009. ASSESSEE HAS RAISED TWO MISTAKES IN CONSIDERING VAR IOUS GROUNDS IN THE CONSOLIDATED ORDER PASSED. 2. FIRST ISSUE IS WITH REFERENCE TO ALLOWING THE REVEN UES GROUND NO. 11 VIDE PARA 47 OF THE ORDER AS A COROLLARY TO ASSESSE ES GROUND NO. 12 (PARA 26). 3. WITH REFERENCE TO THIS ISSUE THE LEARNED COUNSEL SU BMITTED THAT THE ASSESSEE HAS MADE A PROVISION OF ` 6,37,82,000/- FOR LIABILITY ON ACCOUNT OF EARNED LEAVE FOR THE YEAR ENDED 31.03.1996 AS ESTIM ATED ON THE BASIS OF ACTUARIAL VALUATION. THE A.O. IN THE ASSESSMENT ORD ER ALLOWED 50% THEREOF (PARA 21 OF THE ASSESSMENT ORDER) AND DISALLOWED TH E REST. THE CIT(A), APPLYING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS 162 ITR 325 ALLOWED THE CLAIM FOR THE BALANCE 50% ALSO, HENCE, THE REVENUE WAS AGGRIEVED ON THE DELETION OF 50% OF THE DISALLOWANCE MADE BY THE A.O. AND ACCORDINGLY RAISED GROUND NO. 11. H OWEVER, THE ISSUE IN ASSESSEES APPEAL RAISED IN GROUND NO. 12 WAS WITH REFERENCE TO ADDITIONAL MA NO. 390/MUM/2010 M/S. MAHINDRA & MAHINDRA LTD. 2 LEAVE ENCASHMENT PROVISION OF ` 13,22,48,000/-. THIS GROUND HAS ARISEN IN VIEW OF THE CHANGE IN ACTUARIAL VALUATION IN THE YE AR ENDING MARCH 1999 AND ACCORDINGLY, THE ASSESSEE CLAIMED ADDITIONAL LIABIL ITY BEFORE THE CIT(A) AS AN ADDITIONAL GROUND AS THE LIABILITY PERTAINS TO A.Y. 1996-97. THE CIT(A), HOWEVER, TOOK THE VIEW THAT THE LIABILITY WAS ASCER TAINED ONLY IN THE ASSESSMENT YEAR 1999-2000 AND ACCORDINGLY THAT SHOU LD FALL IN A.Y. 1999- 2000 NOT WITHSTANDING THE FACT THAT SUCH INCREMENTA L LIABILITY PERTAINS TO A.Y. 1996-97. IN VIEW OF THIS THE ASSESSEE RAISED GROUND NO. 12 CLAIMING ADDITIONAL AMOUNT WHICH THE ITAT HAS CONCURRED WITH CIT(A)S DECISION ON THE BASIS OF BEING ASCERTAINED LIABILITY OF A.Y. 19 99-2000. ACCORDINGLY THE ORDER OF THE CIT(A) ON THIS ISSUE WAS UPHELD. IT WA S SUBMITTED THAT GROUND NO. 12 OF ASSESSEE WAS ENTIRELY DIFFERENT FROM GROU ND NO. 11 OF THE REVENUE BUT THE ITAT HAS EXTRACTED THE FINDINGS WITH REFERE NCE TO GROUND NO. 12 IN PARA 47 AND ALLOWED THE REVENUE APPEAL. IT WAS HIS SUBMISSION THAT THE ORIGINAL LIABILITY, WHICH WAS CLAIMED BUT DISALLOWE D TO THE EXTENT OF 50% BY THE A.O., WAS ALLOWED BY THE CIT(A) CONSEQUENT TO T HE HON'BLE SUPREME COURT ORDER IN THE CASE OF BHARAT EARTH MOVERS 162 ITR 32 5. ACCORDINGLY THE SAME SHOULD HAVE BEEN CONSIDERED AND REVENUES GROUND SH OULD HAVE BEEN DISMISSED. IT IS ALSO SUBMITTED THAT THE HON'BLE SU PREME COURT JUDGEMENT HAS NOT BEEN FOLLOWED WHILE CONSIDERING THE GROUND AND PROVISIONS OF SECTION 43B(F) ARE NOT APPLICABLE FOR THE YEAR UNDER CONSID ERATION. 4. WE HAVE CONSIDERED THE ISSUE. AS FAR AS GROUND NO. 11 RELATES TO THE PROVISION FOR LEAVE ENCASHMENT DISALLOWED BY THE A. O. AT 50% OF THE ORIGINAL PROVISION AND ALLOWED BY THE CIT(A) ON THE BASIS OF THE HON'BLE SUPREME COURT ORDER, BUT NOT ADDITIONAL PROVISION CLAIMED. THEREFORE THERE OCCURRED A MISTAKE IN CONSIDERING THE GROUND 11 BY NOT FOLLO WING THE HONBLE SUPREME COURT DECISION. PARA 47 IN THE ORDER WAS A S UNDER : - 47. GROUND 11 RELATES TO PROVISION FOR LEAVE ENCASHMEN T. GROUND 12 IN ITA 3173/MUM/2001 OF THE ASSESSEES IS LINKED TO THE GROUND UNDER CONSIDERATION. SAID GROUND 12 WAS ADJUDICATED AGAINST THE ASSESSEE HOLDING THAT THE QUESTION IS WHICH IS T HE CORRECT YEAR FOR SUCH CLAIM IE A.Y. 1999-00, THE YEAR OF ASCERTAININ G OF THE LIABILITY OF THE 1996-97, THE YEAR TO WHICH THE LIABILITY BELONG . IN OUR OPINION, CONSIDERING THE SETTLED POSITION OF LAW ON THE ISSU E, THE YEAR OF ASCERTAINING OF THE LIABILITY IS THE CORRECT YEAR. RESULTANTLY, THE DISALLOWANCE MADE BY THE REVENUE IN THE YEAR UNDER CONSIDERATION IS MA NO. 390/MUM/2010 M/S. MAHINDRA & MAHINDRA LTD. 3 JUSTIFIED. IN VIEW OF THE LIMITATION ON THE ISSUANC E OF DIRECTION RELATING TO THE OTHER AY, WHICH IS NOT BEFORE, THE PRAYER FO R SUCH ISSUANCE IS NOT ACTED UPON. IN ANY CASE, THE REVENUE HAS NO MANDATE TO DISALLOW THE SAME CLAIM IN TWO AYS, ACCORDINGLY, THE ORDER OF TH E CIT(A) DOES NOT CALL FOR ANY INTERFERENCE ON THIS ISSUE. THUS, THE GROUND 12 IS DISMISSED. CONSEQUENTLY, THE GROUND 11 OF THE REVEN UES APPEAL IS ALLOWED. THE SAME WAS MODIFIED AS: - 47. GROUND NO. 11 RELATES TO PROVISION FOR LEAVE EN CASHMENT. THE CIT(A) HAS RIGHTLY ALLOWED THE AMOUNT OF 50% OF THE CLAIM DISALLOWED BY THE A.O. WITHOUT ATTRIBUTING ANY REASON FOR DOING S O. IN THE LIGHT OF HON'BLE SUPREME COURT DECISION IN THE CASE OF BHARA T EARTH MOVERS 261 ITR 325, THE CIT(A)S DIRECTION THAT IT IS MANDATOR Y ON THE PART OF THE A.O. TO ALLOW THE ENTIRE CREDIT FOR LEAVE ENCASHMENT LIA BILITY, WHICH HAS BEEN WORKED OUT BY THE ASSESSEE ON THE BASIS OF ACTUARIA L VALUATION METHOD, IS CORRECT BOTH ON FACTS AND ON LAW. ACCORDINGLY RE VENUES GROUND 11 IS DISMISSED. 5. THE SECOND ISSUE WHICH WAS RAISED IN THE MISCELLANE OUS APPLICATION IS WITH REFERENCE TO GROUND NO. 7, SUB-GROUND (F) AND (G) IN ASSESSEES APPEAL IN ITA NO. 3173/MUN/2001. THIS GROUND DEALS WITH THE C LAIM OF DEDUCTION OF STAMP FEES OF ` 20,00,000/- AND REGISTRATION EXPENSES OF ` 30,00,000/- INCURRED IN THE CONTEXT OF INCREASE IN VARIOUS SHAR E CAPITAL OF THE COMPANY. THE A.O. DISALLOWED THE CLAIM VIDE PARA 8.6 IN PAGE 15 OF THE ASSESSMENT ORDER FOLLOWING THE JUDGEMENT IN THE CASE OF BROOK BOND INDIA LTD. 140 ITR 272 AND ALSO UNION CARBIDE INDIA LTD. VS. CIT 165 I TR 676. RELYING ON THE PRINCIPLES ESTABLISHED BY THE ABOVE TWO JUDGEMENTS THE A.O. DISALLOWED AN AMOUNT OF ` 50,00,000/- CLAIMED BY THE ASSESSEE. THE CIT(A) CON SIDERED THE ISSUE VIDE PARA 27 OF HIS ORDER WHEREIN IT WAS HELD THAT OUT OF THE TOTAL EXPENSES DISALLOWED BY THE A.O. ` 50,00,000/- PERTAINS TO STAMP DUTY EXPENSES AND REGISTRATION FEES ATTRIBUTABLE TO INCR EASE IN SHARE CAPITAL AND IN THE LIGHT OF THE HON'BLE SUPREME COURT DECISION IN THE CASE OF PUNJAB STATE INDUSTRIAL CORPORATION 225 ITR 792, THE DISAL LOWANCE OF ` 50,00,000/- WAS UPHELD. ASSESSEE CONTESTED THE SAME VIDE THE AB OVE GROUND 7 (F) & (G) AND ITAT CONSIDERED IT VIDE PARA 16 OF THE ORDER AS UNDER: - MA NO. 390/MUM/2010 M/S. MAHINDRA & MAHINDRA LTD. 4 16. COMING TO THE LATER PART OF THE GROUND 7 VIDE SUB-GROUNDS (F) AND (G), IT IS NOTICED THAT THE AO DISALLOWED THE CLAIM S RELATING TO STAMP FEE OF RS.20 LAKHS FOR INCREASING THE AUTHORIZED CAPITA L AND REGISTRATION EXPENSES OF RS.30 LAKHS FOR INCREASING AUTHORISED CAPITAL H OLDING THAT THE SAME ARE NOT REVENUE EXPENSES. DURING THE PROCE EDINGS BEFORE US, LEARNED COUNSEL FAIRLY MENTIONED THAT THESE ISSUES ARE COVERED IN FAVOUR OF THE REVENUE BY THE SUPREME COURT JUDGEMEN T IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION (22 5 ITR 792) (SC). HOWEVER, HE RELIED ON THE APEX COURTS JUDGEMENT IN THE CASE OF GENERAL INSURANCE CORPORATION 286 ITR 232 (SC) FOR THE PROP OSITION THAT THE EXPENSES INCURRED IN CONNECTION WITH THE ISSUE OF S HARES ARE REVENUE IN NATURE. LD DR STATED THAT THE JUDGEMENT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION (SUPRA) IS SQUAR ELY APPLICABLE TO THE FACTS OF THE CASE. WE HAVE GONE THROUGH THE FACTS O F THE CASE AS WELL AS THE ABOVE REFERRED JUDGEMENTS. IT IS A FACT THAT TH E JUDGEMENT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT CORPORATION (SUPRA) WAS DELIVERED IN THE CONTEXT OF THE AMOUNT PAID TO THE REGISTRAR OF COMPANIES FOR ENHANCEMENT OF CAPITAL IS CAPITAL IN NATURE, WH ICH IS THE CASE IN THE INSTANT CASE. THE JUDGMENT IN THE CASE OF GIC IS AD MITTEDLY IN THE CONTEXT OF INCURRING OF EXPENSES QUA THE BONUS SHARES. CONS IDERING THE ABOVE FACTUAL MATRIX AS WELL AS THE PRECEDENT ON THE ISSU E, WE ARE OF THE CONSIDERED OPINION THAT THESE SUB GROUNDS IE (F) AN D (G) OF THE GROUND 7 ARE DISMISSED . 6. THE LEARNED COUNSEL POINTED OUT THAT THE INCREASE I N SHARE CAPITAL WAS IN THE CONTEXT OF ISSUE OF BONUS SHARES AND THEREFO RE THE ASSESSEE CLAIMED THAT THE ISSUE WAS COVERED BY THE DECISION IN THE C ASE OF GENERAL INSURANCE CORPORATION 286 ITR 232 (SC) FOR THE PROPOSITION TH AT EXPENSES ON ISSUE OF BONUS SHARES ARE REVENUE IN NATURE. IT WAS HIS SUBM ISSION THAT THE INCREASE IN SHARE CAPITAL WAS NOT WITH REFERENCE TO ANY FRES H CAPITAL ISSUE BUT ISSUE OF BONUS SHARES AND THE LATER DECISION WAS APPLICABLE WHEREAS THE ITAT HAS NOT CONSIDERED THE DISTINGUISHING FEATURES BROUGHT OUT IN THE COURSE OF ARGUMENT. 7. THE LEARNED D.R., HOWEVER, SUBMITTED THAT THE ITAT HAS GIVEN A FINDING THAT THE LEARNED COUNSEL FAIRLY MENTIONED T HAT THESE ISSUES ARE COVERED IN FAVOUR OF THE REVENUE BY THE HON'BLE SUP REME COURT JUDGEMENT IN THE CASE OF PUNJAB INDUSTRIAL DEVELOPMENT CORPOR ATION LTD. 225 ITR 792 AND THE FACT THAT THE INCREASE IN AUTHORISED SHARE CAPITAL WAS BECAUSE OF BONUS SHARES WAS NOT AVAILABLE ON RECORD. IN VIEW O F THIS IT IS SUBMITTED THAT THE ORDER OF THE ITAT DOES NOT REQUIRE ANY MODIFICA TION. MA NO. 390/MUM/2010 M/S. MAHINDRA & MAHINDRA LTD. 5 8. WE HAVE CONSIDERED THE ISSUE. AS SEEN FROM THE ORDE RS OF THE A.O. AND THE CIT(A) THERE IS INCREASE IN SHARE CAPITAL FOR W HICH STAMP FEE OF ` 20,00,000/- AND REGISTRATION EXPENSES OR ` 30,00,000/- WAS INCURRED AS EXPENSES. WHETHER IT WAS ISSUE OF FRESH CAPITAL OR BY WAY OF BONUS SHARES WAS NOT CONSIDERED OR DISCUSSED EITHER BY THE A.O. OR BY THE CIT(A). THE ASSESSEE IS, HOWEVER, RELIED ON THE APEX COURT JUDG EMENT IN THE CASE OF GENERAL INSURANCE CORPORATION 286 ITR 232 (SC) FOR THE PROPOSITION THAT THE EXPENSES INCURRED IN CONNECTION WITH THE ISSUE OF B ONUS SHARES ARE REVENUE IN NATURE. IT IS STATED THAT THE ASSESSEE HAS PLACE D ON RECORD THE RELEVANT COMMUNICATION ON ISSUANCE OF BONUS SHARES AT THE TI ME OF ARGUMENTS BUT THIS IS NOT AVAILABLE ON RECORD. THE LEARNED COUNSE L SUBMITTED THAT THEIR CONTENTION WAS APPLICABILITY OF HON'BLE SUPREME COU RT JUDGEMENT IN THE CASE OF CIT VS. GENERAL INSURANCE CORPORATION 286 I TR 232, WHICH WAS RECORDED BY THE TRIBUNAL, BUT HAS NOT CONSIDERED ON FACTS. 9. EVENTHOUGH THE DISALLOWANCE MADE BY THE A.O. WAS WI TH REFERENCE TO THE INCREASE IN SHARE CAPITAL NOWHERE IT WAS STATED WHETHER THE INCREASE IN SHARE CAPITAL WAS BY WAY OF INITIAL ISSUE OF CAPITA L OR BY WAY OF ISSUANCE OF BONUS SHARES. SINCE THE JUDGEMENT OF THE HON'BLE SU PREME COURT HAS COME SUBSEQUENT TO THE ORDER THAT WAS PASSED IN THIS REG ARD BY THE REVENUE AUTHORITIES, IN THE INTEREST OF JUSTICE, WE MODIFY THE LAST SENTENCE OF PARA 16 IS MODIFIED TO READ AS UNDER: - CONSIDERING THE JUDICIAL PRINCIPLES AS WELL AS PREC EDENTS ON THE ISSUE WE ARE OF THE CONSIDERED OPINION THAT SUB-GROUNDS (F) & (G ) REQUIRE FRESH EXAMINATION BY THE A.O. AS TO THE FACTUAL ASPECTS INVOLVED IN I NCREASE OF SHARE CAPITAL. ACCORDINGLY THE ISSUE IN GROUND NO. 7 SUB-GROUNDS ( F) & (G) IS SET ASIDE TO THE FILE OF THE A.O. TO CONSIDER IT AFRESH IN THE LIGHT OF THE JUDICIAL PRINCIPLES ABOVE AFTER EXAMINING THE FACTS. GROUND 7 (F) & (G) IS CO NSIDERED ALLOWED . 10. IN THE RESULT, MA OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH SEPTEMBER 2010. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 17 TH SEPTEMBER 2010 MA NO. 390/MUM/2010 M/S. MAHINDRA & MAHINDRA LTD. 6 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) VI, MUMBAI 4. THE CIT VI, MUMBAI CITY 5. THE DR, H BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.