MAHINDRA & MAHINDRA LTD, MUMBAI V. ACIT CIR 2(2)2, MUMBAI

MA 50/MUM/2021

• Counselvise Citation: [2022] 104 COUNSELVISE.COM (IT) 4662 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 3 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 21-04-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: J
• Assessment Year: 2011-2012
• Appeal Filed On: 18-02-2021
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; TDS
• Section: 251; 254(2); 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, „J „ BENCH MUMBAI BEFORE: SHRI MAHAVIR SINGH, VICE PRESIDENT & SHRI M.BALAGANESH, ACCOUNTANT MEMBER MA No.50/Mum/2021 (Arising out of ITA No.1449/Mum/2016) (Asse ssment Year : 2011-12) M/s. Mahindra & Mahindra Limited Mahindra Towers, Worli Mumbai – 400 018 Vs. ACIT, CIT 2(2)(2) Aayakar Bhavan M.K.Road, Mumbai-400020 PAN/GIR No.AAACM3025E (Appellant) .. (Respondent) Assessee by Shri H.P. Mahajani Revenue by Shri S.R. Iyengar Date of Hearing 16/07/2021 Date of Pronouncement 22/ 04/2022 आदेश / O R D E R PER M. BALAGANESH (A.M): By virtue of this Miscellaneous Application, the assessee seeks modification of the order passed by this Tribunal in ITA No.1449/Mum/2016 for A.Y.2011-12 dated 19/06/2020 in respect of the following mistakes apparent on record. MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 2 2. In Para 22 page 44 of this Tribunal order dated 19/06/2020, we had placed reliance on the decision rendered for A.Y.2013-14 but erroneously mentioned the ground Numbers thereon. Hence para 22, page 44 of our Tribunal order dated 19/06/2020 stands modified as under:- “22. The concise grounds 1-8 raised by the assessee for A.Y.2011-12 are exactly similar to concise grounds No.1-6, 8 & 9 raised for A.Y.2013-14 in ITA No.7382/Mum/2017. The decision rendered for A.Y.2013-14 would apply with equal force for A.Y.2011-12 also except with variance in figures. The Ld. AO is directed to suitably replace the figures based on the facts provided by the assessee in the fact sheet before us. This direction is given for the sake of brevity and to avoid repetition and especially in view of the fact that the ld DR had not disputed the primary facts and figures applicable for the Asst Year 2011- 12 mentioned in the assessee‟s fact sheet filed before us.” 3. In Para 26.1 page 50 of this Tribunal order dated 19/06/2020, we had considered the additional ground raised for non-taxability of interest on tax free bonds in the sum of Rs.3,47,19,107/- for computation of income both under normal provisions of the Act as well as in the computation of book profits u/s.115JB of the Act. While addressing this issue, this Tribunal had erroneously mentioned the ground Numbers thereon. Hence para 26.1, page 50 last 2 lines read as „additional ground No.2 raised by the assessee is allowed‟ instead of mentioning „additional ground No.1 raised by the assessee is allowed‟. This mistake was rightly pointed by the ld. AR before us. Accordingly, we hold that in para 26.1 last two lines should be read as „additional ground No.1 raised by the assessee is allowed.‟ Para 26.1. of the Tribunal order dated 19/06/2020 stands modified accordingly. MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 3 4. Disallowance of expenditure of Rs.27,68,37,585/-: We find that this Tribunal had addressed this issue in para 22 page 44 & 45 of its order dated 19/06/2020 wherein this Tribunal had merely placed reliance on the decision rendered for A.Y.2013-14 and directed the ld. AO to suitably replace the figures thereon. But, as rightly pointed out by the ld. AR before us that the reliance on the decision of A.Y.2013-14 Tribunal order would be relevant only for the sum of Rs.21,98,97,327/- (as detailed herein below) and the remaining sum of Rs.5,69,40,258/- (as detailed herein below) which are purely of revenue nature, were not adjudicated thereon. Hence, we deem it fit to adjudicate the remaining sum i.e. Rs.5,69,40,258/- by way of this Miscellaneous Application. For the sake of convenience, the entire details of total expenditure of Rs.27,68,37,585/-; details of expenditure of Rs.21,98,97,327/- adjudicated by this Tribunal in its order dated 19/06/2020 and details of expenditure of Rs.5,69,40,258/- to be adjudicated in this Miscellaneous Application are tabulated hereunder:- No Particulars Amount Decided by ITAT in Principal order To be decided vide MA A Automotive Division Marketing 1 Exp incurred for acquisition of project Ssangyong 19,20,05,942 19,20,05,942 B Head Office MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 4 Legal fees 95,820 95,820 Professional fees 3,47,57,072 59,49,938 2,88,07,134 Towards strategy and Market development Revenue Professional fees other 2,16,92,939 18,80,297 SAP upgradation- 183,22,747 Website Modification - 11,30,816 SAP development - 2,26,036 Upgradation of software -Rs.1,33,043 Revenue Professional fees - retainer fees 1,18,19,238 50,01,213 Strategic planning workshop- 15,91,920 Quality control training- 18,13,742 Brand Promotion expenses - 12,01,363 Paid to speaker for conference- Rs.22,11,000 Revenue Directors travelling 12,88,523 12,88,523 Revenue c Farm Equipment Sector EPC Acquisition related Prof Fees 1,05,00,000 105,00,000 EPC Acquisition related Legal fees 44,64,117 44,64,117 MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 5 D Farm Equipment Sector - Nagpur Repairs & Maintenance Others 2,13,934 2,13,934 Revenue TOTAL 27,68,37,585 21,98,97,327 5,69,40,253 4.1. We find the details of all these expenditures were already placed on record by the ld. AR vide pages 164 & 168-176 of the paper book filed before us. The genuineness of the aforesaid expenditure and its incurrence as wholly and exclusively for the purpose of business of the assessee has not been doubted by the Revenue before us. In this regard, the ld. AR rightly placed reliance on the following decisions in support of its contentions:- a) Decision of Hon‟ble Jurisdictional High Court in the case of Raychem RPG reported in 346 ITR 138. b) Decision of Hon‟ble Delhi High Court in the case of Asahi India Safety Glass Ltd., reported in 203 Taxman 277. c) Decision of Hon‟ble Supreme Court in the case of Empire Jute Co. Ltd., reported in 124 ITR 1. 4.2. We hold that non-consideration of a decision of Hon‟ble Jurisdictional High Court would constitute mistake apparent on record warranting rectification u/s.254(2) of the Act. The aforesaid tabulation, in our considered opinion, is self-explanatory. Accordingly, the aforesaid expenditure of Rs.5,69,40,258/-, being the expenditure adjudicated herein, would be allowed as a Revenue expenditure. MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 6 4.3. Hence, we direct the ld. AO to read this Miscellaneous Application order together with the Tribunal Order dated 19/06/2020 while giving effect to the order of this Tribunal. Accordingly, the grounds raised by the assessee in this regard are disposed of in the abovementioned manner. 5. In para 8-12 of this Miscellaneous Application filed by the assessee for A.Y.2011-12, the assessee seeks to modify the Tribunal order passed wherein the Arm‟s Length Price (ALP) of corporate guarantee transaction was fixed at a particular percentage by placing reliance on Tribunal decision for A.Y.2013-14. In A.Y.2013-14, this Tribunal found that in respect of fresh corporate guarantees issued by the assessee and the assessee itself has determined the ALP at 1% in its return of income and accordingly, the same was upheld by this Tribunal. Whereas, in A.Y.2011- 12, i.e. the year under consideration before us now, no suomoto disallowance was made by the assessee in the return of income in respect of corporate guarantee fee. Accordingly, it was pointed out that reliance placed by this Tribunal on the decision of A.Y.2013-14 is misplaced. We have gone through the files and we find that the said decision of adopting ALP @1% was taken by this Tribunal based on the acceptance by the ld. AR before us at the time of hearing which was also in consonance with the consistent stand taken by this Tribunal in earlier and subsequent years. Any tinkering of this rate in the Miscellaneous Application proceedings, would, in our considered opinion, amount to review, as rightly pointed by the ld. DR, which does not fall within the scope of Section 254(2) of the Act. Hence, this plea of the assessee is dismissed. 6. In para 13-18 of this Miscellaneous Application filed by the Assessee for A.Y.2011-12, the assessee seeks to modify the Tribunal order passed in MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 7 respect of disallowance of weighted deduction u/s.36(2AB) of the Act vide Ground No.6 of the Tribunal Order dated 19/06/2020. We find that this Ground No.6 has been adjudicated by this Tribunal in page 44 para 22 of the order dated 19/06/2020 by placing reliance on the decision of this Tribunal in assessee‟s own case. In this regard, we find that the ld. AR had made a detailed submission explaining the correct facts of the case at the time of original appellate proceedings before us, which were overlooked by inadvertence, by us. We find that there is a slight variation in the facts prevailing in A.Y.2013-14 vis-à-vis A.Y.2011-12 on the impugned issue. Hence, the reliance placed by this Tribunal on A.Y.2013- 14 Tribunal decision is incorrect while adjudicating this ground, warranting rectification u/s.254(2) of the Act. Moreover, the ld. AR while addressing those facts had also placed reliance on the decision of Hon‟ble Gujarat High Court in the case of Claris Life Sciences Ltd., reported in 326 ITR 251 (Guj) and the decision of Mumbai Tribunal in the case of Meco Instruments Pvt. Ltd. in ITA No.4246/Mum/2009. Similarly, the ld. AR also drew our attention to pages 320 & 321 of the paper book filed during course of appellate proceedings before us in respect of application made for Mahindra Research Valley Centre for which also weighted deduction u/s.35(2AB) of the Act was claimed. These differentiating facts with A.Y.2013-14 were indeed not considered by us while passing the order on 19/06/2020. Hence, we deem it fit to adjudicate this issue in this Miscellaneous Application. 6.1. We find from the factual submissions made by the ld. AR before us, that assessee had incurred Research and Development (R & D) expenditure in respect of Mahindra Research Valley Centre to the tune of Rs.148.73 Crores. What is relevant is the fact of approval of the project and the period for which Form 3CM was received is not relevant. The law MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 8 is very well settled that once the assessee applies for approval in Form 3CK and the competent authority grants approval to the activity carried by the assessee on a particular date, it would apply for earlier assessment years also. We find that the ld. AR had indeed rightly placed reliance on the decision of Hon‟ble Gujarat High Court Claris Life Sciences Ltd., reported in 326 ITR 251 (Guj) wherein it was held as under:- “7. The Tribunal has considered the submissions made on behalf of the assessee and took the view that section speaks of (i) development of facility; (ii) incurring of expenditure by the assessee for development of such facility; (iii) approval of the facility by the prescribed authority, which is "DSIR"; and (iv) allowance of weighted deduction on the expenditure so incurred by the assessee. The provisions nowhere suggest or imply that "R & D" facility is to be approved from a particular date and in other words, it is nowhere suggested that date of approval only will be cut-off date for eligibility of weighted deduction on the expenses incurred from that date onwards. A plain reading clearly manifests that the assessee has to develop facility, which presupposes incurring expenditure in this behalf, application to the prescribed authority, who after following proper procedure will approve the facility or otherwise and the assessee will be entitled to weighted deduction of any and all expenditure so incurred. The Tribunal has, therefore, come to the conclusion that on plain reading of section itself, the assessee is entitled to weighted deduction on expenditure so incurred by the assessee for development of facility. The Tribunal has also considered rule 6(5A) and Form No. 3CM and come to the conclusion that a plain and harmonious reading of rule and Form clearly suggests that once facility is approved, the entire expenditure so incurred on development of "R & D" facility has to be allowed for weighted deduction as provided by section 35(2AB). The Tribunal has also considered the legislative intention behind above enactment and observed that to boost up R & D facility in India, the Legislature has provided this provision to encourage the development of the facility by providing deduction of weighted expenditure. Since what is stated to be promoted was development of facility, intention of the Legislature by making above amendment is very clear that the entire expenditure incurred by the assessee on development of facility, if approved, has to be allowed for the purpose of weighted deduction. 8. We are in full agreement with the reasoning given by the Tribunal and we are of the view that there is no scope for any other interpretation and since the approval is granted during the previous year relevant to the assessment year in question, we are of the view that the assessee is entitled to claim weighted deduction in respect of the entire expenditure incurred under section 35(2AB) of the Act by the assessee. MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 9 9. We are, therefore, of the view that no substantial question of law arises out of the order of the Tribunal. This appeal is, therefore, dismissed. 6.2. The ld. DR vehemently opposed by stating that decision of non- jurisdictional High Court would not make the order of the Tribunal erroneous warranting rectification u/s.254(2) of the Act. This submission of the ld. DR would be correct in case if the decision of non-jurisdictional High Court was relied by the assessee for the first time in Miscellaneous Application proceedings. But in the instant case, this decision of Hon‟ble Gujarat High Court was already on record forming part and parcel of written submissions of the assessee filed during original appellate proceedings before us. Hence, non-consideration of those judgements relied upon, in the order of the Tribunal, makes the order erroneous, warranting rectification u/s.254(2) of the Act. Hence, the objection raised by the ld. DR is hereby dismissed. 6.3. Respectfully following the aforesaid decisions, we direct the ld. AO to grant weighted deduction u/s.35(2AB) of the Act in the case of Mahindra Research Valley Centre. 6.4. This order should be read together with para 22 page 44 of the Tribunal order dated 19/06/2020 as far as adjudication of ground No.6 originally raised by the assessee in respect of weighted deduction u/s. 35(2AB) of the Act. 7. In para Nos.19-22 of the Miscellaneous Application on the issue of short credit of TDS, the assessee seeks to modify the order passed by this Tribunal on the ground that the issue of short credit of TDS was “never stated to be not pressed” at the time of hearing. It was specifically pointed out that the said issue was not pressed by the MA Nos. 50/Mum/2021 M/s. Mahindra & Mahindra Ltd., 10 assessee only for A.Y.2013-14 and not for A.Y.2011-12. This is a factual error committed by this Tribunal while passing its order on 19/06/2020 warranting rectification u/s.254(2) of the Act. Hence, we are inclined to accept the contentions raised in para 19-22 of the Miscellaneous Application of the Assessee for A.Y.2011-12 and direct the ld. AO to grant credit for TDS in accordance with law. 8. In the result, the Miscellaneous Application of the assessee for A.Y.2011-12 in M.A. No.50/Mum/2021 is partly allowed. Order pronounced on 22/04/2022 by way of proper mentioning in the notice board. Sd/- (MAHAVIR SINGH) Sd/- (M.BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER Mumbai; Dated 22/ 04/2022 KARUNA, sr.ps Copy of the Order forwarded to : BY ORDER, (Asstt. Registrar) ITAT, Mumbai 1. The Appellant 2. The Respondent. 3. The CIT(A), Mumbai. 4. CIT 5. DR, ITAT, Mumbai 6. Guard file. //True Copy//