APTECH LTD, V. DCIT 8(1),

MA 462/MUM/2011

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 7573 (ITAT-MUMBAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: H
• Assessment Year: 2004-2005
• Appeal Filed On: 06-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P C MAURYA
• Assessee Lawyers: S C TIWARI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H, MUMBAI BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER. M.A. NOS. 462 & 463/MUM/2011. (ARISING OUT OF IT A NOS.7114 & 7316/MUM/2007) ASSESS MENT YEAR : 2004-05. M/S APTECH LTD., DY. COMMISSIONER OF 54-A, ELITE AUTO HOUSE, VS . INCOME-TAX, 8(1), SIR, M. VASANJI ROAD, MUMBAI. ANDHERI (E), MUMBAI 400 093. PAN-AADCA 0602L APPLICANT. RESPONDENT. APPLICANT BY : SHR I S.C. TIWARI. RESPONDENT BY : SHRI P.C.MAURYA. DATE OF HEA RING : 25-11-2011. DATE OF PRONOUNCEMENT : 13-01-2012 O R D E R PER P.M. JAGTAP, A.M. : BY THESE MISCELLANEOUS APPLICATIONS, THE ASSESSEE IS SEEKING RECTIFICATION OF THE MISTAKES ALLEGED TO HAVE CREPT IN THE COMMON OR DER OF THE TRIBUNAL DATED 25 TH JANUARY, 2010 DISPOSING OF THE CROSS APPEALS FILED FOR ASSESSMENT YEAR 2004-05 BEING ITA NOS. 7114 AND 7316/MUM/2007. 2 M.A.NOS.462 & 463/MUM/2011, 2. AS SUBMITTED IN THE PRESENT APPLICATIONS AND FUR THER REITERATED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING, TH E FIRST MISTAKE THAT HAS ALLEGEDLY OCCURRED IN THE ORDER OF THE TRIBUNAL IS AS UNDER : BOTH THE APPELLANT AS WELL AS THE REVENUE DISPUTE D THE ORDER OF CIT(A) WHEREBY HE REDUCED THE DISALLOWANCE AMOUNTING TO RS .15,705,866 MADE BY THE ASSESSING OFFICER IN RELATION TO THE FOREIGN EX CHANGE LOSS. THE APPELLANT CHALLENGED THE AMOUNT OF DISALLOWANCE SUSTAINED WHE REAS REVENUE CHALLENGED THE RELIEF GRANTED. THIS ISSUE HAS BEEN DECIDED BY HONBLE ITAT IN PARAGRAPH 11 IN RELATION TO THE ASSESSEES APPEA L AND IN PARAGRAPH 38 IN RELATION TO THE REVENUES APPEAL. THESE PARAGRAPHS ARE REPRODUCED BELOW: 11. WE FIND THAT THE PARTICULARS OF USAGE OF FUNDS IN THE SUBSEQUENT YEAR WERE NOT BEFORE THE AO. WE ALSO FEEL THAT WHE THER THE LOSS IN VALUE OF MONIES REALIZED FROM ISSUE OF SHARES AND K EPT ABROAD BY THE ASSESSEE ABROAD CAN BE CONSIDERED AS BUSINESS LOSS OF THE ASSESSEE HAS TO BE LOOKED INTO. THERE ARE VARIOUS ASPECTS WHICH REQUIRE FURTHER INVESTIGATION. WE THEREFORE DEEM FIT TO REMIT THE M ATTER TO THE FILES OF THE AO FOR DECIDING THE ISSUE AFRESH IN ACCORDANCE WITH LAW. 38. THE NEXT GROUND OF REVENUES APPEAL IS AGAINST CIT(A) DELETING THE DISALLOWANCE OF LOSS OF RS.63.69 LAKHS INCURRE D ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATIONS. WE FIND THE SAME ISS UE VIZ., LOSS ON ACCOUNT OF EXCHANGE FLUCTUATIONS IN RESPECT OF AMOU NTS KEPT ABROAD WAS CONSIDERED IN ASSESSEES APPEAL ALSO. WE FOUND THAT PARTICULARS ABOUT UTILIZATION ETC. WERE FURNISHED FIRST TIME BE FORE THE CIT(A) AND THE AO DIDNT HAVE AN OPPORTUNITY TO EXAMINE THE I SSUE. WE THEREFORE DEEM FIT, AS WAS DONE IN THE CASE OF ASSESSEES APP EAL, TO REMIT THE MATTER TO THE FILES OF THE AO FOR DECIDING THE ISSU E AFRESH IN ACCORDANCE WITH LAW. WE WOULD LIKE TO CLARIFY THAT WE HAVE NOT GIVEN OUR DECISION ON ANY OF THE ASPECTS OF THIS ISSUE AN D THE AO WILL DECIDE THE MATTER ON MERITS AFRESH IN ACCORDANCE WITH LAW. THE APPELLANT HUMBLY SUBMITS THAT HONBLE TRIBUNAL HAS PROCEEDED ON WRONG PREMISE THAT PARTICULARS OF USAGE OF FUNDS IN SUBSEQUENT YEARS WERE FURNISHED FOR THE FIRST TIME BEFORE CIT(A) AND ASSE SSING OFFICER DID NOT HAVE AN OPPORTUNITY TO EXAMINE THE ISSUE. THE FACT OF THE MATTER IS THAT THOSE VERY DETAILS WHICH WERE FURNISHED IN THIS RESPECT T O CIT(A) AND ENUMERATED IN THE ORDER OF CIT(A) AT PAGES 10 TO 13 HAD BEEN S UBMITTED BY THE APPELLANT TO THE ASSESSING OFFICER ALSO. THERE IS THUS MISTAK E APPARENT FROM RECORD AS 3 M.A.NOS.462 & 463/MUM/2011, AFORESAID IN THE ORDER OF THE TRIBUNAL WHICH IS REQ UIRED TO BE RECTIFIED U/S. 254(2) OF THE ACT. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE PARTICU LARS OF USAGE OF FUNDS IN SUBSEQUENT YEARS AS FURNISHED BY THE ASSESSEE BEFOR E THE LEARNED CIT(APPEALS) AND RELIED UPON BY THE LATER TO DECIDE THE ISSUE RELATI NG TO DISALLOWANCE ON ACCOUNT OF FOREIGN EXCHANGE LOSS DID NOT FIND ANY MENTION IN T HE ORDER OF THE AO. THIS ISSUE WAS DISCUSSED BY THE AO IN PARAGRAPH NO. 10 OF THE ASSESSMENT ORDER AND ALTHOUGH A REFERENCE WAS MADE BY HIM TO THE SUBMISSIONS MADE BY THE ASSESSEE ON THIS ISSUE VIDE LETTER DATED 11-12-2006 FILED IN HIS OFFICE ON 19-12-2006, THERE WAS NO MENTION WHATSOEVER REGARDING ANY PARTICULARS FURNIS HED BY THE ASSESSEE IN RESPECT OF USAGE OF FUNDS IN THE SUBSEQUENT YEARS. IT WAS, THEREFORE, OBSERVED BY THE TRIBUNAL THAT THE SAID PARTICULARS WERE FURNISHED B Y THE ASSESSEE FOR THE FIRST TIME BEFORE THE LEARNED CIT(APPEALS) AND SINCE THE AO WA S NOT GIVEN ANY OPPORTUNITY BY THE LEARNED CIT(APPEALS) TO EXAMINE/VERIFY THE S AID PARTICULARS, THE TRIBUNAL THOUGHT IT FIT TO RESTORE THE ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE AS WELL AS THAT OF THE REVENUE TO THE FILE OF THE AO FOR DECID ING THE SAME AFRESH IN THE LIGHT OF THE SAID PARTICULARS. A DEFINITE VIEW ON THE MATTER , THEREFORE, WAS TAKEN BY THE TRIBUNAL ON CONSIDERATION OF ALL THE FACTS AND MATE RIAL AVAILABLE ON RECORD AND, IN OUR OPINION, THERE IS NO MISTAKE MUCH LESS ANY MIST AKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL ON THIS ISSUE AS ALLEGEDLY PO INTED OUT BY THE ASSESSEE. 4. AS FURTHER SUBMITTED IN THE PRESENT APPLICATIONS AND REITERATED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING, TH E SECOND MISTAKE THAT HAS CREPT IN THE ORDER OF THE TRIBUNAL IS AS UNDER : THE SECOND MISTAKE WHICH HAS CREPT IN THE ORDER O F HONBLE TRIBUNAL IS IN RELATION TO REVENUES GROUND OF APPEAL AGAINS T LEARNED CIT(A) DELETING 4 M.A.NOS.462 & 463/MUM/2011, THE DISALLOWANCE OF RS.37,639,137 CLAIMED BY THE AP PELLANT U/S 35DD. HONBLE TRIBUNAL HAS DECIDED THIS ISSUE IN PARA 28 IN THE FOLLOWING WORDS: 28. AGGRIEVED THE REVENUE IS ON APPEAL BEFORE US. W E FIND THAT ALL THE PARTICULARS OF EXPENSES REGARDING DEMERGER WERE NOT CONSIDERED BY THE AO. FURTHER, THE DEMERGER HAS TAKEN PLACE WI TH EFFECT FROM 1.4.2001. AS PER SEC 35DD, 1/5 TH OF THE EXPENSES ARE ALLOWABLE IN THAT YEAR AND 4 SUCCEEDING ASSESSMENT YEARS. IT IS NOT C LEAR WHETHER THE EXPENSES WERE CLAIMED IN THE EARLIER YEARS AND IF S O THE RESULT THEREOF. WE FEEL THE MATTER REQUIRES TO GO BACK TO THE AO FO R FURTHER EXAMINATION AND DECIDE THE MATTER IN ACCORDANCE WIT H LAW. THE APPELLANT SUBMITS THAT DURING THE COURSE OF HEA RING THE ATTENTION OF HONBLE TRIBUNAL HAD BEEN SPECIFICALLY DRAWN TO PAG E 9 OF THE PAPER-BOOK IN ITA NO. 7316/MUM/2007 AND IT WAS SUBMITTED THAT TH E EXPENDITURE IN QUESTION HAD BEEN INCURRED DURING FINANCIAL YEAR 20 01-02 RELEVANT TO A.Y. 2002-03 AND FOR THAT ASSESSMENT YEAR THE APPELLANT S CLAIM O DEDUCTION U/S. 35DD HAD BEEN FULLY ALLOWED IN THE ASSESSMENT ORDER MADE U/S. 143(3). DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR A.Y . 2004-05 UNDER CONSIDERATION, THE ASSESSING OFFICER AGAIN ASKED FO R PARTICULARS OF EXPENSES AS INCURRED DURING F.Y. 2001-02. IN THE MEAN TIME, THERE HAD TAKEN PLACE SUBSTANTIAL DAMAGE TO THE BUSINESS PREMISES OF THE APPELLANT ON ACCOUNT OF THE HEAVY RAINFALL AND CONSEQUENT MASSIVE FLOOD ON 26 TH JULY 2005 THAT DEVASTATED THE SUBURBS OF MUMBAI. IT WAS FURTHER SU BMITTED THAT ON ACCOUNT OF THE APPELLANTS RECORDS FOR THE RELEVANT PERIOD HAVING BEEN COMPLETED WASHED AWAY IN FLOOD WATERS, THE APPELLANT WAS NOT IN A POSITION TO FURNISH DETAILS FOR THE SECOND TIME DURING THE COURSE OF AS SESSMENT PROCEEDINGS FOR ASSESSMENT YEAR UNDER CONSIDERATION. IN THIS CONNEC TION, THE ATTENTION OF HONBLE BENCH WAS DRAWN TO PAGES 110 TO 157 OF THE PAPER-BOOK EVIDENCING THE CONTENTION OF THE APPELLANT OF ITS RECORDS HAVI NG BEEN WASHED AWAY DURING THE COURSE OF FLOODS. IT WAS THEREFORE, URGE D THAT THE APPELLANTS CLAIM OF DEDUCTION SHOULD BE ALLOWED AS IT WAS PREVENTED BY SUFFICIENT CAUSE FROM COMPLYING WITH THE REQUISITION OF THE ASSESSING OFF ICER AND IN ANY CASE THE ISSUE IS ESSENTIALLY RELATED TO A.Y. 2002-03 DURING THE COURSE OF WHICH ALL RECORDS WERE AVAILABLE WITH THE ASSESSING OFFICER A ND THE ASSESSING OFFICER HAS ALREADY ALLOWED DEDUCTION U/S. 35DD FOR THAT YE AR. IT APPEARS THAT THIS MATERIAL ASPECT OF THE CASE HAS, THROUGH OVERSIGHT, ESCAPED CONSIDERATION BY THE HONBLE BENCH. 5 M.A.NOS.462 & 463/MUM/2011, 5. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE EXPENDI TURE IN RESPECT OF WHICH DEDUCTION U/S 35DD WAS CLAIMED BY THE ASSESSEE IN T HE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2004-05 WAS ACTUALLY INCURRED BY THE ASSESSEE IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002-03 AND ACCORD INGLY DEDUCTION U/S 35DD WAS CLAIMED BY THE ASSESSEE INITIALLY IN ASSESSMENT YEA R 2002-03 AND SUBSEQUENTLY IN ASSESSMENT YEARS 2003-04, 2004-05, 2005-06 AND 2006 -07 TO THE EXTENT OF 1/5 TH OF THE TOTAL EXPENDITURE INCURRED. IN THIS REGARD ATTE NTION OF THE BENCH WAS DRAWN BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING OF THE APPEALS TO THE STATEMENT OF COMPUTATION OF TOTAL INCOME FOR ASSESS MENT YEAR 2002-03 PLACED AT PAGE NOS. 2 TO 9 OF HIS PAPER BOOK TO SHOW THAT TOT AL EXPENDITURE OF RS.18,81,95,686/- WAS INCURRED IN ASSESSMENT YEAR 2 002-03 IN CONNECTION WITH DEMERGER/TAKE OVER AS A PART OF SUBSTANTIVE EXPANSI ON AND DEDUCTION FOR THE SAME TO THE EXTENT OF RS.3,76,39,137/- BEING 1/5 TH OF THE TOTAL EXPENDITURE INCURRED WAS CLAIMED U/S 35DD IN ASSESSMENT YEAR 2002-03. IN THE ANNEXURE D FILED ALONG WITH THE COMPUTATION OF TOTAL INCOME, THE RELEVANT DETAILS WERE GIVEN SHOWING THAT THE REMAINING AMOUNT OF EXPENDITURE WAS TO BE CLAIM ED IN ASSESSMENT YEARS 2003- 04 TO 2006-07 BEING THE FOUR YEARS IMMEDIATELY SUCC EEDING ASSESSMENT YEAR 2002- 03 WHEREIN THE TOTAL EXPENDITURE WAS INCURRED. IT W AS ALSO SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE THAT THE DEDUCTION CLAIMED U/S 35DD IN ASSESSMENT YEAR 2002-03 WAS ALLOWED BY THE AO IN THE ASSESSMENT COM PLETED U/S 143(3). IT APPEARS THAT THIS VITAL AND MATERIAL FACT BROUGHT SPECIFICA LLY TO THE NOTICE OF THE TRIBUNAL, HOWEVER, APPEARS TO HAVE ESCAPED THE ATTENTION OF T HE BENCH AND THE MATTER HAS BEEN SENT BACK TO THE AO FOR FURTHER EXAMINATION AF TER OBSERVING THAT IT IS NOT CLEAR WHETHER THE EXPENSES WERE CLAIMED BY THE ASSESSEE I N THE EARLIER YEARS AND IF SO THE RESULT THEREOF. IN OUR OPINION, ONCE THE DEDUCTION U/S 35DD WAS ALLOWED IN THE INITIAL YEAR I.E. ASSESSMENT YEAR 2002-03 AFTER NEC ESSARY VERIFICATION/EXAMINATION IN 6 M.A.NOS.462 & 463/MUM/2011, THE ASSESSMENT COMPLETED U/S 143(3) WHEN THE TOTAL EXPENDITURE IS ELIGIBLE FOR THE SAID DEDUCTION WAS ACTUALLY INCURRED BY THE ASSESSE E, THE SAME COULD NOT BE DISALLOWED IN THE SUBSEQUENT YEARS FOR WANT OF RELE VANT DETAILS OR DOCUMENTARY EVIDENCE ESPECIALLY WHEN THE ASSESSMENT FOR THE INI TIAL YEAR ON THIS ISSUE WAS NOT DISTURBED OR MODIFIED. WE ARE, THEREFORE, INCLINED TO AGREE WITH THE ASSESSEE THAT THERE IS A MISTAKE IN THE ORDER OF THE TRIBUNAL IN DECIDING THIS ISSUE OVERLOOKING THE IMPORTANT AND MATERIAL ASPECT WHICH HAS A DIRECT BE ARING ON THE ULTIMATE DECISION AND THE SAME BEING APPARENT FROM RECORD, WE RECTIFY THE SAME BY DELETING THE EXISTING PARAGRAPH NO. 28 OF THE TRIBUNALS ORDER A ND REPLACING THE SAME WITH THE FOLLOWING : 28. AGGRIEVED BY THE RELIEF ALLOWED BY THE LEARNED CIT(APPEALS) TO THE ASSESSEE ON THIS ISSUE, THE REVENUE HAS RAISED ITS GRIEVANCE IN THIS APPEAL FILED BEFORE THE TRIBUNAL. WE HAVE HEARD THE ARGUM ENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. I T IS OBSERVED THAT THE EXPENDITURE IN RESPECT OF WHICH DEDUCTION U/S 35DD IS CLAIMED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION WAS INCURR ED IN ASSESSMENT YEAR 2002-03. AS SUBMITTED BY THE LEARNED COUNSEL FOR TH E ASSESSEE, DEDUCTION TO THE EXTENT OF 1/5 TH OF THE TOTAL EXPENDITURE INCURRED WAS INITIALLY CL AIMED U/S 35DD IN ASSESSMENT YEAR 2002-03 AND THE SAME WAS AL LOWED BY THE AO IN THE ASSESSMENT COMPLETED U/S 143(3) AFTER NECESSARY EXAMINATION/VERIFICATION. IN OUR OPINION, ONCE THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 35DD WAS ALLOWED IN THE INITIAL YEAR I.E. 2002-03 WHEN THE RELEVANT EXPENDITURE WAS ACTUALLY INCURRED IN THE A SSESSMENT COMPLETED U/S 143(3), THE DEDUCTION CLAIMED BY THE ASSESSEE IN SU BSEQUENT YEARS U/S 35DD COULD NOT BE DISALLOWED ESPECIALLY WHEN THE ASSESSM ENT MADE U/S 143(3) FOR ASSESSMENT YEAR 2002-03 WAS NOT DISTURBED OR MODIFI ED ON THIS ISSUE. WE, 7 M.A.NOS.462 & 463/MUM/2011, THEREFORE, RESTORE THIS ISSUE TO THE FILE OF THE AO WITH A DIRECTION TO VERIFY WHETHER THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/S 35DD WAS ALLOWED FOR ASSESSMENT YEAR 2002-03 IN THE ASSESSMENT MADE U/S 143(3). IF IT IS FOUND ON SUCH VERIFICATION THAT THE CLAIM OF THE ASSESSEE FO R DEDUCTION U/S 35DD WAS ALLOWED IN ASSESSMENT YEAR 2002-03 IN THE ASSESSMEN T MADE U/S 143(3), THE AO IS DIRECTED TO ALLOW THE SAME IN THE YEAR UNDER CONSIDERATION. 6. IN THE RESULT, THE MISCELLANEOUS APPLICATIONS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 13 TH DAY OF JANUARY, 2012. SD/- SD/- (VIJAY PAL RAO) (P.M. JAGTAP) JUDICIAL MEMBER ACCO UNTANT MEMBER MUMBAI, DATED : 13 TH JANUARY, 2012. WAKODE COPY TO : 1. APPLICANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, H-BENCH. (TRUE COPY) BY ORDE R ASSTT. REGI STRAR, ITAT, MUMBAI BEN CHES, MUMBAI ,