Income Tax Appellate Tribunal - Mumbai
Dcit 2(1), Mumbai vs Tata Motors Ltd ( Earlier Known As Tata ... on 31 August, 2017
THE INCOME TAX APPELLATE TRIBUNAL, BENCH "E", MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA No.3329/Mum/2011 (Assessment Year- 1999-2000) M/s Tata Motors Ltd. A.C.I.T., Range-2(1), (Formerly known as Tata Aayakar Bhavan, M.K. Marg, Engineering & Locomotive Mumbai-400020.
Company Ltd.), Bombay House, Vs.
24, Homi Mody Street, Hutatma
Chowk, Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.3330/Mum/2011 (Assessment Year- 2000-2001)
M/s Tata Motors Ltd. A.C.I.T., Range-2(1),
(Formerly known as Tata Aayakar Bhavan, M.K. Marg,
Engineering & Locomotive Mumbai-400020.
Company Ltd.), Bombay House, Vs.
24, Homi Mody Street, Hutatma
Chowk, Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.3331/Mum/2011 (Assessment Year- 2001-2002)
M/s Tata Motors Ltd. A.C.I.T., Range-2(1),
(Formerly known as Tata Aayakar Bhavan, M.K. Marg,
Engineering & Locomotive Mumbai-400020.
Company Ltd.), Bombay House, Vs.
24, Homi Mody Street, Hutatma
Chowk, Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.3332/Mum/2011 (Assessment Year- 2002-2003)
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
M/s Tata Motors Ltd. A.C.I.T., Range-2(1), (Formerly known as Tata Aayakar Bhavan, M.K. Marg, Engineering & Locomotive Mumbai-400020. Company Ltd.), Bombay House, Vs. 24, Homi Mody Street, Hutatma Chowk, Mumbai-400001 PAN: AAACT2727Q (Appellant) (Respondent) ITA No.3597/Mum/2011 (Assessment Year- 1999-2000) A.C.I.T., Range-2(1), M/s Tata Motors Ltd. Aayakar Bhavan, M.K. Marg, (Formerly known as Tata Mumbai-400020. Engineering & Locomotive Vs. Company Ltd.), Bombay House, 24, Homi Mody Street, Hutatma Chowk, Mumbai-400001 PAN: AAACT2727Q (Appellant) (Respondent) ITA No.3598/Mum/2011 (Assessment Year- 2000-2001) A.C.I.T., Range-2(1), M/s Tata Motors Ltd. Aayakar Bhavan, M.K. Marg, (Formerly known as Tata Mumbai-400020. Engineering & Locomotive Vs. Company Ltd.), Bombay House, 24, Homi Mody Street, Hutatma Chowk, Mumbai-400001 PAN: AAACT2727Q (Appellant) (Respondent) ITA No.3599/Mum/2011 (Assessment Year- 2001-2002) A.C.I.T., Range-2(1), M/s Tata Motors Ltd. Aayakar Bhavan, M.K. Marg, (Formerly known as Tata Mumbai-400020. Vs. Engineering & Locomotive Company Ltd.), Bombay House, 24, Homi Mody Street, Hutatma Chowk, Mumbai-400001 2
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.3601/Mum/2011 (Assessment Year- 2002-2003)
A.C.I.T., Range-2(1), M/s Tata Motors Ltd.
Aayakar Bhavan, M.K. Marg, (Formerly known as Tata
Mumbai-400020. Engineering & Locomotive
Vs. Company Ltd.), Bombay House,
24, Homi Mody Street, Hutatma
Chowk, Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.1039/Mum/2013 (Assessment Year- 1999-2000)
M/s Tata Motors Ltd. A.C.I.T.-2(3),
Bombay House, 24, Homi Mody Aayakar Bhavan, M.K. Marg,
Street, Hutatma Chowk, Vs. Mumbai-400020.
Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.1040/Mum/2013 (Assessment Year- 2000-2001)
M/s Tata Motors Ltd. A.C.I.T.-2(3),
Bombay House, 24, Homi Mody Aayakar Bhavan, M.K. Marg,
Street, Hutatma Chowk, Vs. Mumbai-400020.
Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.1041/Mum/2013 (Assessment Year- 2001-2002)
M/s Tata Motors Ltd. A.C.I.T.-2(3),
Bombay House, 24, Homi Mody Vs. Aayakar Bhavan, M.K. Marg, Street, Hutatma Chowk, Mumbai-400020.
Mumbai-400001 3 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
PAN: AAACT2727Q
(Appellant) (Respondent)
ITA No.636/Mum/2013 (Assessment Year- 2002-2003)
M/s Tata Motors Ltd. A.C.I.T.-2(3),
Bombay House, 24, Homi Mody Aayakar Bhavan, M.K. Marg,
Street, Hutatma Chowk, Vs. Mumbai-400020.
Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
Assessee by Shri Dinesh Vyas with Shri
:
Pradeep Mitra (AR)
Revenue by : Shri Rajesh Davay (CIT-DR)
Date of hearing : 21.08.2017
Date of Pronouncement : 31.08.2017
Order Under Section 254(1) of Income Tax Act
PER BENCH;
1. This group of twelve appeals consisting common grounds of appeal were heard together and are decided in a consolidated order for the sake of brevity.
2. First we shall decide the appeals filed by the assessee vide ITA No. 1039, 1040, 1041 & 636/Mum/2013 for Assessment Years (AY) 1999-2000 to 2002-03 respectively. In all appeals the assessee has raised the identical grounds of appeal related to disallowance u/s 14A of the Act.
3. For appreciation of facts, we are referring the fact related to AY 2002-03 in ITA No. 636/Mum/2013, which was treated as lead case by ld. CIT(A) during first appellate stage. The assessee has raised following grounds of appeal:
i. Disallowance u/s 14A 4 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. The ld. CIT(A) erred in law and on facts in confirming the disallowance made by the Assessing Officer on adhoc basis of 5% of the exempt income under the provisions of section 14A of the Income- tax Act, 1961, disregarding the facts of the case that no expenditure had been incurred in relation to exempt income.
4. Brief facts of the case are that during the relevant financial year the assessee earned dividend income of Rs.1,56,94,053/-. The Assessing Officer (AO) while passing assessment order disallowed the 10% of dividend income u/s 14A of the Act. On appeal before the ld. CIT(A), the ld CIT(A) directed the AO to restrict the disallowance on reasonable basis in view of the decision of Hon'ble Bombay High Court in case of M/s Godrej & Boyce Manufacturing Co. Ltd( 328 ITR 81 Bom). The AO in order giving effect to the order of Ld CIT(A) restricted the disallowance @ 5% of the dividend income vide order dated 20.06.2011. The assessee again filed appeal before ld. CIT(A) where the disallowance made by AO was confirmed vide order dated 20.11.2012, which is impugned before us.
5. We have heard the ld. Authorized Representative (AR) of the assessee and ld.
Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee argued that the AO while making disallowance has not recorded objective satisfaction before making disallowance. The assessee has own sufficient funds available with it and no interest disallowance was warranted in support of his submission, the ld. AR of the assessee relied upon the decision of HDFC Bank Ltd. vs. CIT [389 ITR 529 (Bom)], CIT vs. HDFC Bank Ltd. [366 ITR 505 (Bom) and Reliance Utility and Power Ltd. [313 ITR 340 (Bom). It was further argued that majority investments are historical in nature and made in group companies. The 5 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. investment activity is minuscule as majority investments are static investment. The least administrative expenses are incurred and therefore, disallowance of 5% of exempt income is not justified. The ld. AR of the assessee further argued that only expenses having approximate nexus to be disallowed. The ld. AR of the assessee finally argued that disallowance ought to have been restricted to 1% of the exempt income would be sufficient for disallowance under section 14A. In support of his submission, the ld. AR of the assessee relied upon the decision of DCIT vs. Ashoka Trading Co. Pvt. Ltd. in ITA No. 2270 & 2271/Kol/2010, Sagrika Goods & Service Pvt. Ltd. vs. ITO in ITA No. 1278/Kol/2010, DCIT vs. Diamond Company Ltd. in ITA No. 1625/Kol/2010, S.R. Batliboi & Co. vs. DCIT in ITA No. 1595/Kol/2011. On the other hand, the ld. DR for the Revenue supported the order of authorities below.
6. We have considered the rival submissions of the parties and have gone through the orders of authorities below. We have seen that during the relevant financial year the assessee has earned dividend income of Rs. 15.82 Crore. The AO while giving effect to the order of ld CIT(A) disallowed 5% of dividend income u/s 14A of the Act. We have perused the financial statement of assessee as on 31.03.2002. The assessee was having Capital of Rs. 319.82 Crore and Reserve & Surplus of Rs. 2145.24 Crore. Thus, the assessee has total Capital, and Reserve & Surplus fund of Rs. 2465.06 Crore. The assessee during the relevant financial year has made the investment of Rs. 1189.92 Crore. From the perusal of financial statement, we have noted that the interest free funds available with the assessee are more than the investment made during the year. The Hon'ble Bombay High Court in Reliance Utility and Power Ltd (supra) held that where 6 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. both the interest free funds and interest bearing funds are available and the interest free funds are more than the investment made the presumption is that the investment is made out of interest free funds available with the assessee. The High Court further held that for the years for which Rule 8D is not applicable and in the event the AO is not satisfied with the working given by the assessee, the disallowance under section 14A has to be made on reasonable basis. The Hon'ble jurisdictional High Court in HDFC Bank Ltd. (supra) held that while considering disallowance under Section 36(1)(iii) the application of Section 14A of the Act would apply. Considering the fact that no interest bearing funds were utilized in earning the exempt income. Thus, no interest disallowance can be made while disallowance u/s 14A of the Act.
7. We have further noticed that the AO has not recorded his dissatisfaction about the claim of assessee, further the lower authority has not disputed that the majority investments are in group companies. We have noted that the Co- ordinate Bench of Kolkata Tribunal in Ashoka Trading Co. Pvt. Ltd., Sagrika Goods & Service Pvt. Ltd. , Diamond Company Ltd. and S.R. Batliboi & Co. (supra), the Tribunal has taken a consistent view to allow reasonable disallowance and restricted the disallowance u/s 14A of the Act to 1% of the dividend income. Thus, respectfully following the decision of Co-ordinate Bench, we restrict the disallowance u/s 14A to 1% of the exempt income and direct the AO to work out the disallowance accordingly.
8. In the result, the ground of appeal raised by assessee is partly allowed. ITA No. 1039/Mum/2013 for AY 1999-2000by assessee
9. The assessee has raised the following ground of appeal: 7
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
i. Disallowance u/s 14A The ld. CIT(A) erred in law and on facts in confirming the disallowance made by the Assessing Officer on adhoc basis of 5% of the exempt income under the provisions of section 14A of the Income-tax Act, 1961, disregarding the facts of the case that no expenditure had been incurred in relation to exempt income.
ii. Disallowance u/s 14A for the purpose of MAT computation The ld. CIT(A) erred in law and on facts in confirming the book profit u/s 115JA in respect of adhoc disallowance u/s 14A of the Act.
10. Ground No.1 relates to disallowance u/s 14A of the Act (normal disallowance).
We have seen that this ground of appeal is identical to the ground No,1 of appeal in ITA No. 636/Mum/2013. The facts of the appeal under consideration are similar as of appeal for AY 2002-03, wherein we have restricted the disallowance @ 1% of the exempt income. Thus, keeping in view the principle of consistency, this ground of appeal raised by assessee is allowed mutatis mutandis as allowed in ITA No. 636/Mum/2013.
11. Ground No.2 relates to disallowance u/s 14A (MAT) while determining book profit under section 115JA. In this regard the AO is directed to re-work the disallowance following our determination of disallowance u/s14A in the above paras under the normal provision of the Act. Thus, this ground of appeal is partly allowed.
ITA No. 1040/Mum/2013 for AY 2000-01by assessee
12. The assessee has raised the following ground of appeal:
i. Disallowance u/s 14A The ld. CIT(A) erred in law and on facts in confirming the disallowance made by the Assessing Officer on adhoc basis of 5% of the exempt income under the provisions of section 14A of the Income-tax Act, 1961, disregarding the facts of the case that no expenditure had been incurred in relation to exempt income.
i. Disallowance u/s 14A for the purpose of MAT computation The ld. CIT(A) erred in law and on facts in confirming the book profit u/s 115JA in respect of adhoc disallowance u/s 14A of the Act. 8
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
13. Ground No.1 relates to disallowance u/s 14A of the Act (normal disallowance).
We have seen that this ground of appeal is identical to the ground No,1 of appeal in ITA No. 636/Mum/2013. The facts of the appeal under consideration are similar as of appeal for AY 2002-03, wherein we have restricted the disallowance @ 1% of the exempt income. Thus, keeping in view the principle of consistency, this ground of appeal raised by assessee is allowed mutatis mutandis as allowed in ITA No. 636/Mum/2013.
14. Ground No.2 relates to disallowance u/s 14A (MAT) while determining book profit under section 115JA. In this regard the AO is directed to re-work the disallowance following our determination of disallowance u/s14A in the above paras under the normal provision of the Act. Thus, this ground of appeal is partly allowed.
ITA No. 1041/Mum/2013 for AY 2001-02 by assessee
15. The assessee has raised sole ground of appeal which relates to disallowance of Rs. 120,02,743/- u/s 14A of the Act. We have seen that this ground of appeal is identical to the ground No,1 of appeal in ITA No. 636/Mum/2013. The facts of the appeal under consideration are similar as of appeal for AY 2002-03, wherein we have restricted the disallowance @ 1% of the exempt income. Thus, keeping in view the principle of consistency, this ground of appeal raised by assessee is allowed mutatis mutandis as allowed in ITA No. 636/Mum/2013. In the result, appeal filed by the assessee is allowed.
16. Now we shall decide the appeal filed by revenue vide appeals ITA's No 3597,3598,3599 & 3600/M/2022 for AY 1999-2000 to 2002-03 respectively. In 9 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. all appeals the revenue have raised identical grounds of appeal, the facts of all the assessment years are also similar.
ITA No 3597/M/2011 for AY 1999-2000 by Revenue.
17. The revenue has raised the following grounds of appeal;
(1) The order of ld CIT (A) is opposed to law and facts of the case. (2) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the warranty expenses, ignoring the fact, it was provisional and contingent in nature.
(3) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the vendor development expenses ignoring the fact that these are deferred expenses and capital in nature.
(4) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the consultancy fees incurred for business process re- engineering, ignoring the fact that no new business was started by the company.
(5) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the product development expenses, ignoring the fact that these are capital in nature.
18. We have heard the ld representatives of the parties and perused the record. The ld AR of the assessee argued that all the grounds of appeal raised by the revenue are covered in favour of the assessee by various decision of Tribunal in assessee's own case for earlier years as well as by orders of superior courts. The ld AR for the assessee filed a details in the form of a chart referring the details of order covering the grounds of appeals. The ld DR for the revenue not disputed the details of orders of various Tribunal in favour of assessee.
19. We have considered the submissions of the ld representatives of the parties and further perused the order of authorities below. First ground of appeal is general and needs no specific adjudication and hence dismissed. The ground No. 2 relates to Provision of warranty. The ld AR for the assessee argued that this ground of appeal is covered in favour of assessee by the decision of the 10 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. Tribunal in assessee's own case for AY 1997-98 and 1998-99 in ITA No. 6214- 6504/M/2003 and ITA No. 7148/M/2004 dated 06.01.2017. The ld AR further relied on the decision of Hon'ble Supreme Court in Bharat Earth Movers Vs CIT (245ITR 428 SC) and Rotork Controls (P) Ltd (314ITR 62 SC). The ld DR for the revenue not disputed the submissions of the ld AR for the assessee.
20. We have considered the submissions of the parties and perused the order of the Tribunal in assessee's own case for AY 1997-98 and 1998-99 in ITA No. 6214- 6504/M/2003 and ITA No. 7148/M/2004 dated 06.01.2017. The perusal of the order shows that similar disallowance was made against the assessee for AY 1997-98 and for AY 1998-99, however on appeal before CIT(A) the disallowance was deleted. The revenue filed appeal before the Tribunal and the same was dismissed vide order dated 06.01.2017 by following the order for AY 1996-97. The appeal of the revenue was dismissed by the coordinate bench of the Tribunal with the following order;
"14. Next ground is about provision for warranty of Rs.35.61 crores. It is found that identical ground raised by the AO, was dismissed by the Tribunal, while deciding the appeal for AY. 1996-97.We are reproducing paragraph no.22 of the pg.10 of the said order and it reads as under:-
"Ground No.7 in revenue's appeal relates to provision for warranty expenses of Rs. 12, 55, 68,000/-. Both the parties agreed that this issue is covered in favour of the assessee by the decision of the Tribunal in assessee's own case for the AY.s 1992-93, 1994-95 and 1995-96 (ITA No.961/M/03 dt.23.8.03, ITA No.6705/M/98 dt.19.4.06 and ITA No.1690/M/00 dt.6.2.07), wherein the Tribunal has allowed the claim of the assessee. Following the same, the issue is decided in favour of the assessee and against the revenue."
Respectfully following the above order of the Tribunal, Ground no.7 is decided against the AO."
11
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
21. Considering, the decision of Tribunal in assessee's own case for AY 1997-98 and for AY 1998-99 and following the principal of consistency the ground of appeal raised by the revenue is dismissed.
22. Ground No.3 relates to disallowance of vendor development expenses of Rs.9,02,32,000/-. The ld. AR for the assessee argued that identical ground of appeal was decided in favour of assessee in appeal for AY 1997-98 and 1998- 99 in ITA No. 6214-6504/M/2003 and ITA No. 7148/M/2004 dated 06.01.2017. The perusal of the order dated 06.01.2017 shows that similar disallowance was made against the assessee for AY 1997-98 and for AY 1998- 99, however on appeal before CIT(A) the disallowance was deleted. The revenue filed appeal before the Tribunal and the same was dismissed vide order dated 06.01.2017AY 1997-98 by following order;
" 28.3. We have heard the rival submissions and perused the materials before us. We find that the assessee had incurred an expenditure of Rs.37.70 crores, that in the books of account it had treated the expenditure as deferred revenue expenditure, that in the computation of income and during the assessment proceedings it claimed that expenditure was of revenue nature, that the AO had not given any finding about allowability of the expenditure, that the expenditure was incurred for developing the tools/components. In our opinion, the entries in the books of account do not decide allowability of expenditure as revenue expenditure. Nor are the books decisive to hold expenditure as capital expenditure. What has to be seen is the nature of expenditure. The FAA has given categorical finding of fact that expenditure did not add to the fixed capital of the assessee or helped it in acquiring the source of profit.
Therefore, in our opinion the FAA was justified in allowing the expenditure as revenue expenditure.
Ground No.7 is decided against the AO.12
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
23. Considering, the decision of Tribunal in assessee's own case for AY 1997-98 and for AY 1998-99, and following the principal of consistency do not find any illegality in the order passed by ld. CIT (A), hence, this ground of appeal is dismissed.
24. Ground No.4 relates to deleting the disallowance of consultancy fee for business process Re-engineering of Rs.3,62,00,000/-. The ld AR for the assessee argued that identical ground of appeal was decided in favour of assessee in appeal for AY 1997-98 and 1998-99 in ITA No. 6214-6504/M/2003 and ITA No. 7148/M/2004 dated 06.01.2017. The perusal of the order dated 06.01.2017 shows that similar disallowance was made against the assessee for AY 1997-98 and for AY 1998-99, however on appeal before CIT(A) the disallowance was deleted. The revenue filed appeal before the Tribunal and the same was dismissed vide order dated 06.01.2017AY 1997-98 by following order;
"29.Next Ground deals with disallowance of consultancy fee paid on account of business process re-engineering, amounting to Rs.16.42 lakhs. During the assessment proceedings, the AO found that the assessee had appointed M/s. Arthur Anderson a consultancy firm for review of business proceedings, that it had treated the consideration paid to consultancy firm as deferred revenue expenditure in the books of account, and had amortised it for a period of year years, that in the computation of income assessee claimed entire amount as revenue expenditure. The AO held that the benefit from expenditure would be available to the assessee over a period of time, that it would be of an enduring nature. However, he allowed half of the expenditure for the year under consideration. 29.1. Aggrieved by the order of the AO, the assessee preferred an appeal before FAA .After considering the available material, the FAA held that the expenditure incurred by the assessee on account of consultancy fee for 13 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
business process reengineering was revenue expenditure , that it had not started any new line of business, that the consultancy fee was also not paid for setting up any new business, that same was paid for purposes of improving the profitability of existing business. The FAA referred to the case of Crompton Engineering Co. Ltd.(242ITR 317)and Abbot Laboratories P.Ltd.(202ITR818)and held that entire expenditure, even if shown as deferred revenue expenditure in the books of account, had to be allowed in the year in which it was incurred. Before us, the DR and the AR supported the orders of AO and the FAA respectively.
29.2. We find that the AO had allowed half of the expenditure for the year under consideration, that the assessee had availed the services of a consultancy firm to improve the working of the company. As that fee was paid for improving the existing system, therefore, In our opinion the order of the FAA does not suffer from any legal infirmity. Confirming the same Ground.No.8 is decided against the AO. As a result, appeals, filed by the assessee and the AO, for the AY.1997-98 stand partly allowed. Appeal of the assessee for the AY.1998-99 is partly allowed and appeal of the AO is dismissed.
25. Considering, the decision of Tribunal in assessee's own case for AY 1997-98 and for AY 1998-99, and following the principal of consistency this ground of appeal is partly allowed as mutatis mutandis as per order dated 06.01.2017.
26. Ground No. 5 relates to Product Development Expenses of Rs. 37,14,83,200/-.
The assessee claimed deduction of Product Development Expenses of Rs.
46,43,54,000/- u/s 37. The assessee incurred these expenses on Engineering Research Centre in the normal course of business. As per consistent method the assessee treated as deferred revenue expenditure in the books of account.
However, the entire expenses were considered as revenue expenditure for income tax purpose. The AO treated the expenditure to be governed by the provisionof section 35D and accordingly allowed only1/5th of total expenditure.14
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
The AO disallowed following the decision in last year's assessment. On appeal before the ld. CIT(A), the disallowance was deleted following the decision of his predecessor for AY 1998-99. The ld AR for the assessee argued that similar disallowances were made for AY 2003-04 on appeal before the CIT(A) the similar disallowances were deleted, however, no appeal is filed by the revenue from AY 2003-04 onwards. It was further argued that the in a number of cases the Hon'ble Supreme Court, various High Court and Tribunal decided has allowed the similar relief. The ld AR relied on the decisions in Empire Jute Co.
Ltd Vs CIT (124ITR 1 SC), Alembic Chemical Works Co. Ltd Vs CIT (177 ITR 377 - SC ), CIT Vs Praga Tools(157 ITR 282 -AP), EL Forge Ltd Vs DCIT (35 taxman.com167) (Mad), CIT Vs JCB India Ltd (376ITR 621) (Delhi), Parle Agro (P) Vs ACIT 36 ITR(T)ITAT Mumbai, Tata Iron and Steel Co Ltd Vs DCIT (ITA No.7720-7747/M/2010)(ITAT Mumbai) dated 17.09.2014, Tata Iron and Steel Co Ltd. Vs DCIT (ITA No.(s) 4119-
4122/M/2005 (ITAT Mumbai) (AY 2001-02) dated 17.09.2014. The ld DR for the revenue relied on the order of the authorities below.
27. We have considered the submissions of the ld. representatives and perused the order of the authorities below. The ld CIT(A) while deciding the relevant ground of appeal ( Ground No.8 before him) followed the order of earlier year i.e. AY 1998-99 and granted relief to the assessee ( para 11 of the impugned order). We have seen that in the assessee's group case i.e. in Tata Iron &Steel Co. Ltd Vs DCIT for AY 1997-98, 1998-1999,1999-2000 in ITA No 4120-22 /M/2005 dated 16.05.2014 on similar grounds of appeal passed the following order;
15
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
" 3. Now, we would take up the common grounds of appeal raised in different years. First of them is about fees paid to consultants for feasibility studies for the AY.s.1997-98,1998-1999 and 2000-01 respectively. During the assessment proceedings, AO.s found that the assessee had paid Rs.34.96 lakhs, Rs.34.94 and Rs.12.61 lakhs to the consultants for conducting feasibility studies for the years under appeal. AO.s were of the opinion that the expenditure was incurred in connection with the expansion of the industrial undertaking, that same was capital expenditure, that the expenditure incurred on preparation of feasibility/project reports in connection with the expansion of industrial undertakings or in connection with the setting up of a new units was an admissible deduction u/s.35D of the Act.
3.1. In the appellate proceedings, upholding the order of the AO.s, FAA held that the expenditure incurred was in the capital field. We find that identical issue has been decided by us, while adjudicating the appeals for the AY.1996-97 in the following manner:
5.2.Before us, AR submitted that similar kind of expenditure in the earlier years was allowed by the Tribunal ,wherein FAA had confirmed the additions made by the AO in similar fashion. DR left the issue to the discretion of the Bench. We find the in the earlier AY.s., we have dealt the issue as under:
"9.Next common ground of appeal (G.12-1991-92, G.9-1994-95)is about Fees paid to Consultants for Feasibility Studies. AO. found that the assessee had paid Rs.4.83 lakhs and Rs.24.94 lakhs to the consultants for conducting feasibility studies for the years under appeal. AO.s were of the opinion that the expenditure was incurred in connection with the expansion of the industrial undertaking, that same was capital expenditure, that the expenditure incurred on preparation of feasibility/ project reports in connection with the expansion of industrial undertakings or in connection with the setting up of a new units was an admissible deduction u/s.35D of the Act.16
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. 9.1. In the appellate proceedings, upholding the order of the AO.s, FAA held that the expenditure incurred was in the capital field. We find that identical issue has been decided by us, while adjudicating the appeals for the earlier three AY.s.i.e.-AY.s.1987-88,1989-09 and 1990-91(supra)in the following manner:
Before us, AR and DR agreed the identical issue was decided in favour of the assessee by the order for the AY.1986-87.We find that in the earlier AY, issue of expenditure incurred for making payments to consultants for feasibility studies, has been dealt in following manner:
16.2.Before us, AR submitted that similar issue was decided in favour of the assessee in the preceding AY.DR did not controvert the fact. We find that in the AY.1985-86 assessee had paid fees for feasibility study to the same consultant to whom fess was paid during the year also. While deciding the appeal , Tribunal at paragraph 38 has held as under:
"We have perused the details of the expenses a sum of Rs.10 lakhs was paid for modernization project phase-I.A sum of Rs.2 lakhs and Rs.3 lakhs was paid for project report for feasibility of plastic lines and coated pipes and revamping the ERW Mill respectively. In AY.1968-69 in I.T.A. No.2068/Bom/74-75 the Hon'ble ITAT in assessee's own case considered expenditure on report for increasing production capacity and future development. After elaborate discussion, the Tribunal came to the conclusion that expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure. Facts and circumstances being identical in this year, respectfully following the decision of the Tribunal, we hold that the expenditure in question has to be allowed as a deduction being revenue expenditure. Ground No. 12 is allowed."
Following the above, we decide Ground no.16, before us, in favour of the assessee.
In view of the above,G.14/G.13 for the AY.s under appeal are decided in favour of the assessee."
Following our orders for the earlier years, we decide the issue of payment of fees to the consultants for conducting feasibility report in favour of the assessee." In view of the decision of earlier years, Ground no.7 is decided in favour of the assessee."
Following our order for the assessment year 1996-97, Grounds no.9 (1997-
98) and1(for 1998-99 and 2000-01) is allowed."
17
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. Further, the coordinate bench of the Tribunal in assessee's group case i.e. in Tata Iron & Steel Company ltd Vs DCIT in ITA 7270&7747/M/2010 for AY 2001-02 by following the decision of earlier year passed the following order;
"6. Effective Ground no.1, filed by the AO, is about expenses of Rs.4.90 lacs incurred on techno feasibility report. Before us, representatives of the both the sides admitted that the identical issue was decided by the Tribunal while adjudicating the appeal for years 1997-98 to 2000-01 (supra). We find that in the appeals for the above referred four years, the issue was dealt by the Tribunal as under:
"3.Now, we would take up the common grounds of appeal raised in different years. First of them is about fees paid to consultants for feasibility studies for the AY.s.1997-98,1998-1999 and 2000-01 respectively .During the assessment proceedings, AO.s found that the assessee had paid Rs.34.96 lakhs,Rs.34.94 and Rs.12.61 lakhs to the consultants for conducting feasibility studies for the years under appeal. AO.s were of the opinion that the expenditure was incurred in connection with the expansion of the industrial undertaking, that same was capital expenditure, that the expenditure incurred on preparation of feasibility/project reports in connection with the expansion of industrial undertakings or in connection with the setting up of a new units was an admissible deduction u/s.35D of the Act.
3.1. In the appellate proceedings, upholding the order of the AO.s, FAA held that the expenditure incurred was in the capital field. We find that identical issue has been decided by us, while adjudicating the appeals for the AY.1996-97 in the following manner:
5.2. Before us, AR submitted that similar kind of expenditure in the earlier years was allowed by the Tribunal, wherein FAA had confirmed the additions made by the AO in similar fashion. DR left the issue to the discretion of the Bench. We find the in the earlier AY.s., we have dealt the issue as under:
"9.Next common ground of appeal (G.12-1991-92,G.9-1994-95)is about Fees paid to Consultants for Feasibility Studies. A.O. found that the assessee had paid Rs.4.83 lakhs and Rs.24.94 lakhs to the consultants for conducting feasibility studies for the years under appeal. AO.s were of the opinion that the expenditure was incurred in connection with the expansion of the industrial undertaking, that same was capital 18 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
expenditure, that the expenditure incurred on preparation of feasibility/ project reports in connection with the expansion of industrial undertakings or in connection with the setting up of a new units was an admissible deduction u/s.35D of the Act.
9.1. In the appellate proceedings, upholding the order of the AO.s, FAA held that the expenditure incurred was in the capital field. We find that identical issue has been decided by us, while adjudicating the appeals for the earlier three AY.s.i.e.-AY.s.1987-88, 1989-09 and 1990- 91(supra) in the following manner:
Before us, AR and DR agreed the identical issue was decided in favour of the assessee by the order for the AY.1986-87.We find that in the earlier AY, issue of expenditure incurred for making payments to consultants for feasibility studies, has been dealt in following manner: 16.2. Before us, AR submitted that similar issue was decided in favour of the assessee in the preceding AY.DR did not controvert the fact. We find that in the AY.1985-86 assessee had paid fees for feasibility study to the same consultant to whom fess was paid during the year also. While deciding the appeal, Tribunal at paragraph 38 has held as under: " We have perused the details of the expenses. A sum of Rs.10 lakhs was paid for modernization project phase-I.A sum of Rs.2 lakhs and Rs.3 lakhs was paid for project report for feasibility of plastic lines and coated pipes and revamping the ERW Mill respectively. In AY.1968-69 in I.T.A. No.2068/Bom/74-75 the Hon'ble ITAT in assessee's own case considered expenditure on report for increasing production capacity and future development. After elaborate discussion, the Tribunal came to the conclusion that expenditure was not a capital expenditure and allowed deduction of same as a revenue expenditure. Facts and circumstances being identical in this year, respectfully following the decision of the Tribunal, we hold that the expenditure in question has to be allowed as a deduction being a revenue expenditure. Ground No. 12 is allowed."
Following the above, we decide Ground no.16, before us, in favour of the assessee.
In view of the above,G.14/G.13 for the AY.s under appeal are decided in favour of the assessee."
Following our orders for the earlier years, we decide the issue of payment of fees to the consultants for conducting feasibility report in favour of the 19 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. assessee."
In view of the decision of earlier years, Ground no.7 is decided in favour of the assessee."
Following our order for the assessment year 1996-97, Grounds no.9 (1997-98) and 1 (for 1998-99 and 2000-01) is allowed." Considering the earlier years' orders, first effective Ground [GOA2 (a) & 2(b)]for the year under appeal is decided against the AO.
28. It is noted that similar disallowance made by AO in assessment year 2003-04 onwards which were deleted by First Appellate Authority, and the revenue has not filed further appeal before the Tribunal. The orders in all subsequent years have attained finality. The product development expenses include expenses on development of new product and variants of existing product. It has been explained that such development takes a span of time before commercial production. In our view, such an expenditure is a regular developmental activity under taken by the assessee in its existing course of business and not a new line of business. Thus, on the basis of parity of reasoning laid down in the case of Tata Iron and Steel Company (supra), such expenditure is revenue in nature. Considering that the revenue has accepted such an order of CIT(A) for assessment year 2003-04 onwards, the impugned order of ld CIT(A) deserve to be upheld. In view of the aforesaid discussion, and for the sake of consistency the order of ld CIT(A) is affirmed. Thus, the Ground of appeal raised by the revenue is dismissed.
29. In the result the appeal filed by the revenue is dismissed. ITA No. 3598/M/2011 for AY 2000-01 by Revenue.
30. The revenue has raised following grounds of appeals;
1. The order of ld CIT (A) is opposed to law and facts of the case. 20
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
2. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the warranty expenses, ignoring the fact, it was provisional and contingent in nature.
3. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the vendor development expenses ignoring the fact that these are deferred expenses and capital in nature.
4. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the product development expenses, ignoring the facts that these are capital in nature.
31. The ld AR for the assessee submitted that all the grounds of appeal raised by the revenue are covered in favour of assessee and against the revenue. The ld AR for the assessee filed the details of chart along with the details of the case by virtue of which the grounds of appeal are covered. The ld DR for the revenue has gone through the details so furnished and disputed the various orders. Ground No. 1 is general and needs no adjudication and thus the same is dismissed being general.
32. Ground No.2 relates to disallowance of the warranty expenses of Rs.38,38,88,000/- We have seen that this ground of appeal is identical to the Ground No. 1 of appeal in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (19-21) above. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
33. Ground No.3 relates to vendor development expenses of Rs. 57,78,26,000/-.
We have noted that this ground of appeal is identical to the Ground No.3 of appeal in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (22-23) above. Hence, following the principal of 21 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. consistency this ground of appeal raised by the revenue is dismissed with similar observation.
34. Ground No.4 relates to product development expenses of Rs 39,81,52,000/-.
We have noted that this ground of appeal is identical to the Ground No.5 of appeal by revenue in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (27-28) above. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
35. In the result the appeal of the revenue is dismissed. ITA No. 3599/M/2011, AY 2001-02 by Revenue.
36. The revenue has raised following grounds of appeal;
1. The order of ld CIT (A) is opposed to law and facts of the case.
2. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the warranty expenses, ignoring the fact, it was provisional and contingent in nature.
3. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the vendor development expenses ignoring the fact that these are deferred expenses and capital in nature.
4. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the product development expenses, ignoring the facts that these are capital in nature.
5. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in deleting the disallowance of expenditure on feeder line, ignoring the fact that these expenditure were capital in nature.
37. The ld AR for the assessee submitted that all the grounds of appeal raised by the revenue are covered in favour of assessee and against the revenue. The ld AR for the assessee filed the details of chart along with the details of the case by virtue of which the grounds of appeal are covered. The ld DR for the revenue has gone through the details so furnished and disputed the various 22 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. orders. Ground No. 1 is general and needs no adjudication and thus the same is dismissed being general.
38. Ground No.2 relates to disallowance of the warranty expenses of Rs.12,80,40,000/- We have seen that this ground of appeal is identical to the Ground No. 1 of appeal in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (19-21) above. Further, we have dismissed the identical grounds of appeal raised by revenue for AY 2000-01. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
39. Ground No.3 relates to vendor development expenses of Rs.4,60,00,000/-. We have noted that this ground of appeal is identical to the Ground No.3 of appeal by revenue in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (22-23) above. Further, we have dismissed the identical grounds of appeal raised by revenue for AY 2000-01. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
40. Ground No.4 relates to product development expenses of Rs 63,59,00,000/-. We have noted that this ground of appeal is identical to the Ground No.5 of appeal by revenue in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (27-28) above. Further, we have dismissed the identical grounds of appeal raised by revenue for AY 2000-01. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
23
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
41. Ground No.5 relates to deleting he disallowance on feeder line for power supply by treating it as Capital expenditure. During the relevant period the assessee incurred a sum of Rs.3,55,07,775/- for a augmenting power supply by installing a Feeder Line at Jamshedpur. The AO disallowed the expenditure, treating it as capital in nature, despite treating it Capital in nature denied depreciation. Before First Appellate Authority the assessee submitted that expenses were incurred for augmenting the power supply for the purpose of business. No tangible asset was acquired by the assessee and the assessee has no ownership on the feeder line. The ld CIT (A) allowed the expenditure as a revenue in nature on the basis of the decision of Hon'ble Jurisdictional High Court in CIT Vs Excel Industries Ltd 122 ITR 995( Bom). The Hon'ble High Court held that wherein on expenditure no capital asset is acquired the expenditure is revenue in nature. Further, jurisdictional High Court in Mafatlal Fine Spinning & weaving Co. Ltd Vs CIT (69 Taxman 385) (Bom) held that contribution paid to State Electricity Board towards laying of additional circuit line is revenue expenditure.
42. In view of the above discussion the expenditure incurred on feeder line for power supply is not capital expenditure as no asset was added in the asset of the assessee. The expenses incurred on feeder line are revenue in nature. Hence, this ground of appeal is also dismissed.
43. In the result the appeal of the revenue is dismissed. ITA No.3601/M/2011, AY 2002-03 by Revenue.
44. The revenue has raised following grounds of appeal.
1. The order of ld CIT (A) is opposed to law and facts of the case. 24
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
2. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the warranty expenses, ignoring the fact, it was provisional and contingent in nature.
3. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the vendor development expenses ignoring the fact that these are deferred expenses and capital in nature.
4. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the product development expenses, ignoring the facts that these are capital in nature.
5. On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing the expenditure, being contribution for railway overbridge, ignoring the fact that it was capital in nature.
45. Ground No. 1 is general and needs no adjudication and thus the same is dismissed being general.
46. Ground No.2 relates to disallowance of the warranty expenses of Rs.19,82,35,000/- We have seen that this ground of appeal is identical to the Ground No. 1 of appeal in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (19-21) above. Further, we have dismissed the identical grounds of appeal raised by revenue for AY 2000-01 and in 2001-02. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
47. Ground No.3 relates to vendor development expenses of Rs.48,68,5,467/-. We have noted that this ground of appeal is identical to the Ground No.3 of appeal by revenue in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (22-23) above. Further, we have dismissed the identical grounds of appeal raised by revenue for AY 2000-01and for 2001-02. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
25
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
48. Ground No.4 relates to product development expenses of Rs 36,73,01,680/-. We have noted that this ground of appeal is identical to the Ground No.5 of appeal by revenue in ITA No.3597/M/2011 for AY 1999-2000, which we have already dismissed vide para No. (27-28) above. Further, we have dismissed the identical grounds of appeal raised by revenue for AY 2000-01and 2001-02. Hence, following the principal of consistency this ground of appeal raised by the revenue is dismissed with similar observation.
49. Ground No.5 relates to allowing the disallowance of contribution for Railway Bridge of Rs.1,39,00,000/- during the relevant period the assessee paid an amount of Rs.1,39,00,000/- as share of expenses for reconstruction of Railway Over bridge at Tatanagar Station. The total estimate of bridge was Rs. 512 lacks. On the basis of proportionate share of Tata Steel and other associate company the assessee agreed to share Rs.139 lakhs. The bridge was important link to eastern part of Jamshedpur where the assessee's township is situated. The construction of bridge was essential to the families of the employee of the assessee. The expenses were capitalized and were claimed as revenue expenditure. The AO disallowed it by treating it as capital expenditure. Before First Appellate stage it was argued that no tangible asset was acquired and the assessee has no ownership over the said Railway Bridge. The ld CIT(A) allowed the expenditure as a revenue in nature on the basis of the decision of Hon'ble Jurisdictional High Court in CIT Vs Excel Industries Ltd 122 ITR 995( Bom). Similar view was taken by Hon'ble Gauhati High Court in CIT Vs Bongaigaon Refinery and Petrochemical Ltd (222 ITR 208 Gau) for expenses incurred for Railway track and siding. Further, the Hon'ble Madras High Court 26 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. in CIT Vs Coats Viyella India Ltd that expenditure incurred on construction of new bridge in place of old one for movement of goods and workmen is revenue expenditure. We are of the considered view that the assessee is neither the owner of the bridge nor new capital asset was added in the asset of the assessee. Thus, we do not find any illegality or infirmity in the order of the ld CIT(A). Hence, this ground of appeal is dismissed.
50. In the result the appeal filed by the revenue is dismissed.
51. Now we shall decide the appeals ITA No.(s) 3329 to 3332/M/2011 for AY 1999-2000 to 2002-03 filed by assessee. In ITA No.3329/M/2011 for AY 1999-2000 the assessee has raised following grounds of appeal; (1) Disallowance under section 14A.
The learned CIT(A) has erred in law and on facts in concluding that disallowance under section 14A is applicable without verification of the details and evidences submitted by the Appellant in support of the claim that the appellant had not incurred any expenditure in relation to exempt income. The ld. CIT(A) ought to have appreciated on the basis of the facts of the appellant that in view of the decision of the Bombay High |Court in the case of Godrej & Boyce Mfg. Co. Ltd., no disallowance can be made u/s. 14A where no expenditure had been incurred in relation to exempt income. (2) Non admission of additional grounds of appeal The ld. CIT(A) has erred both in law and on facts in not admitting the additional grounds of appeal in respect of the claim by the appellant towards the following:
(i) Capital receipt on buy back and cancellation of US Bonds
(ii) Expenses incurred on issue of non-convertible debenture/ bonds
(iii) Pro-rata premium on redemption of debentures 27 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
The assessees further vide its application dated 18th August 2017 has raised following grounds of appeal:-
(3) Ground No.3.
(i) On the facts and in the circumstances of the case and in law, deduction under section 80HHC of the Income -tax Act ought to have been granted to the appellant while computing book profit under section 115JA of the Act as per clause (viii) of the Explanation to Section 115JA(2) of the Act.
(ii) Further, while computing deduction under section 80 HHC of the Act on the basis of book profit under section 115JA of the Act, the adjusted total turnover as per the audited financial statement for the year under consideration to be reduced by the element of Excise duty; since 'Excise duty' does not form part of the 'turnover' is settled by Hon'ble Supreme Court in case of CIT Vs Lakshmi Machine Works (2007)(290 ITR 667) and CIT Vs Shiva Tax Yarn Ltd (2012)(254 CTR 104).
(iii) The Assessing Officer be directed to re-compute deduction u/s. 80HHC of the Act considering the revised Business Profits as per section 115JA of the Act and grant deduction of the same while computing book profits u/s. 115JA of the Act.
52. We have heard ld representative of the parties and have gone through the orders of authorities below. Ground No.1 relates to disallowance under section 14A. We have seen that similar ground of appeal was raised by assessee in ITA No. 1039/M/2013 for AY 1999-2000, which we have already decided in favour of assessee in para (7 ) above. Thus, this ground of appeal has become infructuous.
53. Ground No. 2 relates to non-admission of additional ground of appeal by ld.
CIT(A). The learned AR of the assessee argued that assessee filed application dated 1st June 2005 for additional ground of appeal along with the statement of facts. No new facts were brought on record and only pure question of law is 28 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. sought to be raised based on the material available on record. The ld CIT (A) not admitted additional ground of appeal, the reasoning for not admitting the grounds of appeal is not sustainable under law. The ld AR in support of his submission relied upon the decision of National Thermal Power Corporation (NTPC) Vs CIT (229 ITR 383), Jute Corporation of India versus CIT (187 ITR
688), CIT Versus Pruthvi Brokers and Shareholders would (349 ITR 336 Bom) and Tata Industries Ltd Versus ITO (181 TTJ 600) ITAT Mumbai. The ld DR supported the order of authorities below.
54. We have considered the submission of the parties and have gone through the order of ld CIT(A). The ld CIT(A) not admitted the additional grounds holding that the assessee not raised the claim before the assessing officer either by way of revise return or in any other manner. There is no reference in the assessment order about the said claim, thus the question of pressing any additional ground of appeal does not arise. The appellate proceeding is not a substitute to the assessment proceeding and it is not legislative intent to make it open ended platform to make such claim which were not preferred before the assessing officer during the assessment proceedings. In our above reasoning given by ld CIT(A) in its order is not sustainable. We have noted that the assessee has specifically contended in its application dated 1 June 2005 that no new facts were brought on record, the additional ground of appeal was purely legal in nature. It is settled law that legal claim can always be raised before the appellate authorities for the first time, even those claims were not raised during the assessment proceeding, provided the additional ground/claims are purely legal in nature or the relief related with the facts 29 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. available on record. The power of CIT(A) is co-terminus with the power of assessing officer. The ld. Commissioner (Appeals) erred in law in not admitting the additional ground of appeal. Considering the facts of the case and the nature of additional grounds of appeal, we admit the additional grounds and restore the additional ground of appeal to the file of ld. CIT(A) to consider the claims of assessee afresh and passed the order in accordance with law. Needless to say that before passing the order the ld. CIT(A) shall grant sufficient and adequate opportunity to the assessee. With these observations the ground No.2 raised by assessee is allowed for statistical purpose.
55. Ground No. 3 relates to deduction under section 80 HHC. The assessee has raised this ground of appeal before Tribunal for the first time vide its application dated 18 August 2017. In the application the assessee has contended that the additional ground of appeal relates to same set of fact and material which are already available on record and that no new or fresh fact would be required to be investigated. The assessee further contended that the similar issue has already been considered by the Tribunal in assessee's own case for AY 1998-99 vide order dated 6 January 2017, wherein the assessing officer has been given necessary direction to consider the claim. On the other hand the learned DR for the revenue not opposed the admission of additional ground if the ground of appeal is restored to the file of assessing officer for consideration on the basis of facts available on record.
56. We have considered the rival submission of the parties and have gone through the application for admission of additional ground of appeal, the additional grounds of appeal. We have noted that the assessee has not brought any new set 30 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. of facts on record and seeking the admission of additional ground only on the basis of facts available on record. We have seen that the Hon'ble jurisdictional High Court in case of Pruthvi Brokers and Shareholders Private Limited (supra) held that even if the claim is not made before the assessing officer, it can be made before the appellate authorities. The jurisdiction of the appellate authorities to entertain such a claim is not barred. The Hon'ble Court further observed that decision of Hon'ble Supreme Court in case of Goetze (India) Ltd Versus CIT (2006) Taxman 1, relating to the restriction of making the claim through a revised return was limited to the powers of assessing officer and the said judgment does not restrict the power of appellate authorities to entertain such claim by way of additional ground. Considering the fact that the assessee has raised additional ground of appeal related to deduction under section 80 HHC for the first time before the Tribunal, we admit the additional ground of appeal and restore the same to the file of assessing officer to consider these additional grounds of appeal as well and pass the order in accordance with law. The AO shall grant sufficient opportunity to the assessee before passing the order. With these observation the additional ground of appeal raised before us are allowed for statistical purpose.
57. In the result appeal of the assessee is partly allowed. ITA No. 3330/M/2011 by assessee for AY 2000-01.
58. The assessee has raised following grounds of appeal;
(1) Disallowance under section 43B in respect of sales tax collected under U.P State Government scheme 31 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. The ld. CIT(A) has erred both in law and on facts in upholding the disallowance u/s 43B in respect of sales tax collected under the scheme notified by the U.P. State Government.
The learned CIT(A) ought to have appreciated on the basis of the scheme notified by the U.P. State Government read with Circular No. 674 dated 29.12.1993 that it is allowable as deduction.
(2) The disallowance under section 14A The ld. CIT(A) has erred both in law and on facts in concluding that disallowance u/s 14A is applicable without verification of the details and evidences submitted by the Appellant in support of the claim that the appellant had not incurred any expenditure in relation to exempt income. The ld. CIT(A) ought to have appreciated on the basis of the facts of the appellant that in view of the decision of the Bombay High Court in cae of Godrej & Boyce Mfg. Co. Ltd., no disallowance can be made u/s. 14A where no expenditure had been incurred in relation to exempt income. (3) Non admission of additional grounds of appeal The ld. CIT(A) has erred both in law and on facts in not admitting the additional ground of appeal in respect of the claim by the appellant towards the following:
-Capital receipt on buy back and cancellation of US Bonds. The ld. CIT(A) ought to have admitted the above additional ground of appeal in view of the powers vested under section 250.
59. We have heard ld representative of the parties and have gone through the orders of authorities below. Ground No.1 relates to the disallowance under section 43B in respect of Sales tax collected under UP State Government Scheme for Rs.1,78,45,919/-. The ld AR of the assessee submitted that the ld CIT(A) has allowed deduction in AY 2001-02, being the assessment years in which the agreement for deferment of sale tax has been entered into with the UP 32 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
Government, thus this ground of appeal has become infructuous. Considering the contention of ld AR of the assessee that this ground of appeal is dismissed being infructuous.
60. Ground No.2 relates to disallowance under section 14A. We have seen that similar ground of appeal was raised by assessee in ITA No. 1040/M/2013 for AY 1999-2000, which we have already decided in favour of assessee in para (7) above. Thus, this ground of appeal has become infructuous.
61. Ground No. 3 relates to non-admission of additional grounds of appeal in respect of Capital receipts of buy-back and cancellation of US Bonds. We have noted that similar ground of appeal is raised by assessee in its appeal for assessment year 1999-2000, which we have already restored to the file of ld. CIT(A). Thus, keeping in view the principle of consistency this ground of appeal is also restored to the file of ld. CIT(A) with similar directions. Hence, this ground of appeal is allowed for statistical purpose.
62. In the result appeal of the assessee is partly allowed. ITA No.3331/M/2011 for AY 2001-02 by assessee.
63. The assessee has raised following grounds of appeal;
1. Disallowance under section 43B in respect of sales tax collected under U.P State Government scheme The ld. CIT(A) has erred both in law and on facts in upholding the disallowance u/s 43B in respect of sales tax collected under the scheme notified by the U.P. State Government.
The learned CIT(A) ought to have appreciated on the basis of the scheme notified by the U.P. State Government read with Circular No. 674 dated 29.12.1993 that it is allowable as deduction.
2. The disallowance u/s 14A 33 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. The ld. CIT(A) has erred both in law and on facts in concluding that disallowance u/s 14A is applicable without verification of the details and evidences submitted by the Appellant in support of the claim that the appellant had not incurred any expenditure in relation to exempt income. The ld. CIT(A) ought to have appreciated on the basis of the facts of the appellant that in view of the decision of the Bombay High Court in cae of Godrej & Boyce Mfg. Co. Ltd., no disallowance can be made u/s. 14A where no expenditure had been incurred in relation to exempt income.
3. Disallowance of retirement benefit payments The ld. CIT(A) has erred both in law and on facts in holding that normal retirement benefit payments made to the employees who had accepted the voluntary retirement scheme were covered by Section 35DDA. The ld. CIT(A) ought to have appreciated that the payment of lave encashment, gratuity and pension to the employees upon cessation of employment is allowable as deduction under section 36 and 37 of the Act and it is not covered by section 35DDA. not admitting the additional ground of appeal in respect of the claim by the appellant towards the following:
4. Non-admission of additional grounds of appeal The ld. CIT(A) has erred both in law and on facts in not admitting the additional ground of appeal in respect of the claim by the appellant towards the following:
-Capital receipt on buy back and cancellation of US Bonds. The ld. CIT(A) ought to have admitted the above additional ground of appeal in view of the powers vested under section 250.
64. Ground No.1 relates to disallowance under section 43B in respect of Sales Tax collected under UP Government Scheme. The learned AR of the assessee argued that this ground has become infructuous as the assessing officer has allowed deduction in assessment year 2002-03, being the assessment year in which agreement for deferment of Sales tax has been entered with the UP 34 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
Government. Considering the contention of ld AR of the assessee this ground of appeal is dismissed being infructuous.
65. Ground No.2 relates to disallowance under section 14A. We have seen that similar ground of appeal was raised by assessee in ITA No. 1041/M/2011 for AY 2001-02, which we have already decided in favour of assessee in para (15) above. Thus, this ground of appeal has become infructuous and is dismissed.
66. Ground No. 3 relates to disallowance of retirement benefit payment of Rs.16,65,20,824/-. The learned and AR of the assessee submitted that the assessing officer has allowed deduction of Rs.416,30,206/-under section 35DDA of the Act in each of the 5 years beginning from assessment year 2001- 02 to 2005-06, thus this ground of appeal is infructuous. Considering the contention of ld AR of the assessee this ground of appeal is dismissed as infructuous.
67. Ground No. 4 relates to non-admission of additional ground of appeal in respect of Capital Receipt on buy-back and cancellation of US Bonds. We have noted that similar ground of appeal is raised by assessee in its appeal for assessment year 1999-2000, which we have already restored to the file of ld. CIT(A). Thus, keeping in view the principle of consistency this ground of appeal is also restored to the file of ld. CIT(A) with similar directions. Hence, this ground of appeal is allowed for statistical purpose.
68. In the result appeal of the assessee is partly allowed. ITA No. 3332/M/2011 for AY 2002-03 by assessee.
69. The assessee has raised following grounds of appeal; 35
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd.
1. Disallowance under section 43B in respect of sales tax collected under U.P State Government scheme The ld. CIT(A) has erred both in law and on facts in upholding the disallowance u/s 43B in respect of sales tax collected under the scheme notified by the U.P. State Government.
The learned CIT(A) ought to have appreciated on the basis of the scheme notified by the U.P. State Government read with Circular No. 674 dated 29.12.1993 that it is allowable as deduction.
2. Disallowance of software license fees The ld. CIT(A) has erred in law and on facts in upholding the disallowance of software license fees as capital expenditure.
The ld. CIT(A) ought to have appreciated the fact that the appellant had paid license fees for use of software which facilitates various transactions processing and accounting thereof in the normal course of business and hence the underlying expenditure represented revenue outgo.
3. Disallowance of retirement benefit payments The ld. CIT(A) has erred both in law and on facts in holding that normal retirement benefit payments made to the employees who had accepted the voluntary retirement scheme were covered by Section 35DDA. The ld. CIT(A) ought to have appreciated that the payment of lave encashment, gratuity and pension to the employees upon cessation of employment is allowable as deduction under section 36 and 37 of the Act and it is not covered by section 35DDA.
4. The disallowance u/s 14A The ld. CIT(A) has erred both in law and on facts in concluding that disallowance u/s 14A is applicable without verification of the details and evidences submitted by the Appellant in support of the claim that the appellant had not incurred any expenditure in relation to exempt income. 36
ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. The ld. CIT(A) ought to have appreciated on the basis of the facts of the appellant that in view of the decision of the Bombay High Court in case of Godrej & Boyce Mfg. Co. Ltd., no disallowance can be made u/s. 14A where no expenditure had been incurred in relation to exempt income.
70. Ground No.1 relates to disallowance under section 43B in respect of Sales Tax collected under UP Government Scheme. The learned and AR of the assessee argued that this ground has become infructuous as the assessing officer has allowed deduction in assessment year 2003-04, being the assessment year in which agreement for deferment of Sales tax has been entered with the UP Government. Considering the contention of ld AR of the assessee this ground of appeal is dismissed being infructuous.
71. Ground No. 2 relates to disallowance of Software license fees of Rs.8,30,71,712/-. The ld AR of the assessee submitted that the assessing officer has allowed depreciation on the software license fees in subsequent years, hence this ground of appeal has become infructuous. Considering the contention of ld AR of the assessee this ground of appeal is dismissed being infructuous.
72. Ground No. 3 relates to disallowance of retirement benefit payment of Rs.11,69,33,000/-. The learned AR of the assessee submitted that the assessing officer has allowed deduction of Rs.29,23,32,000/-under section 35DDA of the Act in each of the 5 years beginning from assessment year 2002-03 to 2006-07, thus this ground of appeal is infructuous. Considering the contention of ld. AR of the assessee this ground of appeal is dismissed as infructuous.
73. Ground No.4 relates to disallowance under section 14A. We have seen that similar ground of appeal was raised by assessee in ITA No. 636/M/2011 for AY 37 ITA No.3329 to 3332/M/2011 & Ors.- M/s Tata Motors Ltd. 2002-03, which we have already decided in favour of assessee in para (7) above. Thus, this ground of appeal has become infructuous and dismissed.
74. In the result the appeal of the revenue is dismissed.
Order pronounced in the open court on 31st day of August 2017.
SSd/- Sd/-
(G.S. PANNU) (PAWAN SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 31/08/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT BY ORDER,
5. DR, ITAT, Mumbai
6. Guard file. (Asstt.Registrar)
स या पत त //True Copy/ ITAT, Mumbai
38