Income Tax Appellate Tribunal - Mumbai
Tata Moters Limited (Formerly Known As ... vs Dy.Cit, (H.Q.).-2, Mumbai on 7 January, 2019
THE INCOME TAX APPELLATE TRIBUNAL, BENCH "E", MUMBAI
BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER
AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER
ITA No.3335/Mum/2011 (Assessment Year- 2004-05)
M/s Tata Motors Ltd. , DCIT, Range-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.4825/Mum/2011 (Assessment Year- 2004-05)
A.C.I.T., Range-2(3), M/s Tata Motors Ltd. ,
Aayakar Bhavan, M.K. Marg, Bombay House, 24, Homi Mody
Mumbai-400020. Vs. Street, Hutatma Chowk,
Mumbai-400001
PAN: AAACT2727Q
(Appellant) (Respondent)
Assessee by Shri Rajan Vora with Shri
:
Nikhil Tiwari (AR)
Revenue by : Shri R. Manjunatha Swamy
(CIT-DR)
Date of hearing : 07.01.2019
Date of Pronouncement : 07.01.2019
Order Under Section 254(1) of Income Tax Act
PER PAWAN SINGH, JUDICIAL MEMBER
1. These cross appeal are directed against the order of ld. CIT(A)-6, Mumbai dated 03.03.2011 for Assessment Year 2004-05.
2. At the outset of hering, the ld. AR of the assessee submits that ground of appeal raised by assessee as well as by revenue is covered by various decision of ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
Tribunal in assessee's own case, by special bench decision, or by the decisions of jurisdictional High Court or Hon'ble Supreme Court. The ld. AR of the assessee furnished that chart showing the narration of grounds of appeal and the reference of decision wherein the grounds of appeal is either covered in favour of assessee or against the revenue. On the other hand, the ld. DR for the Revenue after going through the chart furnished by ld. AR of the assessee, submits that the grounds of appeal raised by assessee as well as by revenue in its cross appeal are covered either in favour of assessee or against the assessee. First we shall taken the grounds of appeal raised by assessee in its appeal in ITA No. 3335/Mum/2011.
3. Ground No.1 relates to disallowance under section 14A of Rs. 3,20,05,061/-. The ld. AR of the assessee submits that this ground of appeal is covered by the decision of Tribunal in assessee's own case for A.Y. 2005-06 in ITA No. 630/Mum/2013, wherein the Tribunal on the basis of decision of Tribunal in assessee's own case for A.Y. 1999-2000 to 2002-03 dated 31.08.2013 restricted the disallowance under section 14A to 1% of the dividend income. On the other hand, the ld. DR for the Revenue submits that in some other year the disallowance was restricted to 2% of the dividend income.
4. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that in assessee's own case for A.Y. 2005-06, on identical facts, the Tribunal passed the following order:
16. We have considered the rival submission of the parties and have gone through the orders of authorities below. We have noted that similar ground of appeal was raised by the assessee in earlier assessment year as 2 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
submitted by learned AR of the assessee and the Tribunal in assessee's own case vide order dated 31 August 2017 passed the following order;
"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 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."
17. Considering the decision of Tribunal in assessee's own case as referred above, wherein the identical ground of appeal was dismissed in appeal for assessment years 1999-2000 to 2002-03. We direct the assessing officer to 3 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
restrict the disallowance under section 14 A to 1% of the dividend income. In the result the ground of appeal raised by assessee is allowed.
5. Respectfully following the decision of co-ordinate bench, we direct the Assessing Officer to restrict the disallowance under section 14A to 1% of the dividend income. In the result, this ground of appeal is allowed.
6. Ground No.2 relates to interest under section 244A of Rs. 58451536/-. The ld.
AR of the assessee submits that the interest under section 244A is taxable in the year in which it is received. The ld. AR further submits that the interest on income-tax refund pertaining to A.Y. 1997-98 was not offered to tax as against the order of ld. CIT(A), the department was in appeal before the Tribunal and the assessee has offered the interest income under section 244A to tax in A.Y. 2017- 18 in which the order of Tribunal for A.Y. 1997-98 was received. The ld. AR further submits that the appropriate direction may be given to the Assessing Officer to grant relief to the assessee wherein the assessee has suo-moto offered the tax in A.Y. 1917-18. The ld. AR of the assessee furnished the copy of computation of income for A.Y. 2017-18 as per page no. 48 & 49 of the Paper Book. In support of his submission, the ld. AR relied upon the decision of Special Bench in Avada Trading Company Pvt. Ltd. (100 ITD 131) (Mum SB).
7. On the contrary, the ld. DR for the revenue submits that the Assessing Officer may be directed to verify the fact and pass the order in accordance with law.
8. We have considered the rival submission of the parties and have gone through the order of lower authorities. We have noted that the ld. AR of the assessee has claimed to have offered the interest under section 244A in the return of income for A.Y. 2017-18 on the ground that order of Tribunal was received in A.Y. 4 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
2017-18. Therefore, we deem it appropriate to direct the Assessing Officer to verify the fact and pass the order in accordance with law by following the decision of Special Bench of Mumbai Tribunal in Avada Trading Company Pvt. Ltd.(supra). Needles to order that before passing the order, the Assessing Officer shall grant opportunity to the assessee. In the result, this ground of appeal is allowed for statistical purpose.
9. Ground No.3 relates to deduction under section 80HHC. The ld. AR of the assessee submits that this ground of appeal is covered against the assessee by the decision of Hon'ble Supreme Court in case of IPCA Laboratory Ltd. (266 ITR 521 (SC) & Shirke Construction Equipment Ltd. (291 ITR 380) (SC). On the other hand, the ld. DR for the Revenue submits that the assessee has fairly conceded that the issue is covered against the assessee. Therefore, this ground of appeal is dismissed.
10. We have considered the contention of both the parties. Considering the submission of ld. AR of the assessee that the issue of deduction under section 80HHC to be computed after set off of brought forward loss and unabsorbed depreciation is against the assessee by the decision of IPCA Laboratory Ltd. and & Shirke Construction Equipment Ltd. (supra). We confirmed the order of ld. CIT(A). In the result, this ground of appeal is dismissed.
11. Ground No.4 relates to reversal of provisions of doubtful debts not excluded from the book profit under section 115JB of Rs. 28,48,46,678/-. The ld. AR of the assessee submits that during the year the assessee claimed deduction for provision of doubtful debt while computing book profit under section 115JB. 5
ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
The Assessing Officer added back the same amount by treating it as un-ascertain liability, though, the ground of appeal was raised before the ld. CIT(A), but this ground of appeal was not pressed. In view of retrospective amendment the w.e.f. 01.04.2011 inserted by Finance Act 2009. However, subsequently it was submitted that consequent to the amendment, the reversal of provision for doubtful debts should also be excluded from calculating book profit under section 115JB. The ld. CIT(A) not entertain the ground that this claim was not made before the Assessing Officer and no such amendment is made in section 115JB to reduce the reversal of the provision and dismissed the same. The ld. AR of the assessee further submits that once it is held by the Finance Act, 2009 having retrospective effect from 01.04.200 1, that provision for doubtful debt is not allowable deduction while computing the book profit as per section 115JB, the reversal of provision for doubtful debt would also not be taxable. The treatment for the provision for doubtful debit and its reversal would go hand-in- hand and once during the course of CIT(A) proceeding, claim for provision for doubtful debt is not pressed, thereby offered to tax under book profit, then the reversal for provision of doubtful debt should be excluded from book profit as a natural corollary. The ld. AR further submits that in view of the decision of jurisdictional High Court in Pruthvi Brokers and Shareholder (P.) Ltd. 349 ITR 336 (Bom.) and Hon'ble Apex Court in Jute Corporation of India Ltd. 187 ITR 688 (SC) the assessee is entitled to raise additional ground of appeal.
12. On the other hand, the ld. DR for the Revenue strongly supported the order of authorities below.
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ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
13. We have considered the rival submission of the parties and have gone through the orders of authorities below. The ld. CIT(A) repudiated the claim of the assessee that no such claim was raised before Assessing Officer, thus cannot be entertained during the first appellate stage, secondly the amended provision do not provide for such allowance and dismissed the claim of assessee. Considering the decision of jurisdictional High Court Pruthvi Broker (supra) we admit the grounds of appeal related with claim of reversal of provision for doubtful debt and restore back the issue to the file of Assessing Officer to verify the fact and pass the order in accordance with law. Needless to order that before passing the order, the Assessing Officer shall grant opportunity of hering to the assessee. In the result, this ground of appeal is allowed for statistical purpose.
14. Ground No.5/additional ground relate to computing book profit under section 115JB on disallowance under section 14A. The ld. AR of the assessee submits that the Assessing Officer also make disallowance of section 14A while computing book profit under section 115JB on similar line as made while computing income under normal provision. The ld. AR of the assessee submits that this ground of appeal is also covered by the decision of ACIT vs. Virret Investment Pvt. Ltd. 165 ITD 27 (Del. SB).
15. On the other hand, the ld. DR for the Revenue strongly supported the order of authorities below.
16. We have considered the rival submission of the parties and have gone through the orders of authorities below. We find that neither any application for raising additional ground of appeal nor such additional ground of appeal is raised by the 7 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
assessee. The additional ground of appeal is mentioned only on the chart furnished at the time of hearing of the appeal. In our considered view, no relief can be extended to the parties in absence of specific grounds of appeal raised in the appeal. Therefore, we have no occasion to adjudicate such additional ground of appeal which is not mentioned in the ground of appeal nor the leave of the Tribunal is sought at the time of making submission. In the result, the alleged additional ground of appeal is not adjudicated / entertained.
17. In the result, appeal of the assessee is partly allowed.
ITA No 4825/M/2011 for AY 2004-05 by Revenue.
18. The revenue has raised the following grounds of appeal;
(1) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing assessee's claim of provision for warranty expenses, which was not conclusively proved to have been spent during the previous year.
(2) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in deleting the addition of the AO wherein he rightly treated the knowhow as an intangible asset necessitating depreciation. (3) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in holding the expenses towards issue of Foreign Currency Convertible Notes as revenue expense ignoring the fact that the same should be treated as capital expenditure.
(4) On the facts and in the circumstances of the case and in law, ld CIT (A) erred in allowing assessee's appeal in connection with the prior period expenses without appreciating AO's finding that the assessee could not substantiate the same during assessment proceeding.
19. 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 8 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
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.
20. The ground No. 1 relates to Provision for warranty expenses. The ld AR for the assessee submits that this ground of appeal is covered in favour of assessee by the decision of the Tribunal in assessee's own case for AY 1994-95 to 1997-98. The ld. AR further submits that on the basis of earlier years the assessee was allowed similar relief in appeal for A.Y. 2005-06 in ITA No. 4826/M/2011 dated 13.04.2018. The ld AR also relied on the decision of Hon'ble Supreme Court Rotork Controls (P) Ltd (314ITR 62 SC). The ld. DR for the revenue not disputed the submissions of the ld AR for the assessee.
21. We have considered the submissions of the parties and perused the order of the Tribunal in assessee's own case for A.Y. 2005-06 in ITA No. 4826/M/2011, wherein on identical ground of appeal, the co-ordinate bench of Tribunal passed the following order:
7. We have heard the Ld. Departmental Representative (DR) for the Revenue and Ld. Authorized Representative (AR) of the assessee and perused the material available on record. At the outset of hearing, the Ld. AR of the assessee submits that the grounds of appeal raised by Revenue is covered in favour of assessee in assessee's own case for A.Y's 1999-
2000 to 2002-03 in ITA Nos. 3329 to 3332/M/11 dated 31.08.17, ITA No. 3597 to 3601/M/11 & 1039 to 1041/M/13, ITA Nos. 6214 - 6504/M/03 for AYs 1997-98 and 1998-99 dated 06.01.17, ITA No. 7148-7441/M/04, ITA No. 1015/M/01 for Assessment Year 1996-97 dated. 31.07.07, ITA Nos. 2744/M/97 & 1962/M/2000 dated. 06.02.17 & ITA No. 7061/M/98 for Assessment Year 1994-95 dated 19.04.06. The Ld. DR for the Revenue on going through the chart furnished by Ld. DR. Considering that this ground of appeal is covered in favour of assessee. We have noted 9 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
that similar ground of appeal was raised by Revenue in A.Y. 1999-00 to 2002-03 and the co-ordinate bench of Tribunal passed the following order:
"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. 6214-6504IMJ2003 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; Next ground is about provision for warranty of Rs.35.61 crores. It is found that identical ground raised by the AG, was dismissed by the Tribunal, while deciding the appeal for AY 1996-97. We are reproducing paragraph no.2 of the pg. 10 of the said order and it reads as under:-
Ground No.7 in revenue's appeal relates la 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 AYs 1992-93, 1994-95 and 1995-96 (ITA No.961/M/03 dt. 23. 3. 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 a/the assessee and against the revenue."
Respectfully following the above order of the Tribunal, Ground No.7 is decided against the A.O."
21. Considering the decision of Tribunal in assessee's own case for Assessment Year 1997-98 and for Assessment Year 1998-99 and following the principal of consistency the ground of appeal raised by the revenue is dismissed."
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8. Considering the decision of Tribunal in assessee's own case as referred above, wherein the identical ground of appeal was dismissed in appeal for assessment years 1994-1995 to 2002-2002. Thus, following the order of the Tribunal, we do not find any merit in the grounds of appeal raised by Revenue.
22. In view of the decision of 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 which was followed in assessee's own case for A.Y. 2005-06, We have noted that the revenue has not brought any fact on record to show the material change in fact for the year under consideration. Therefore, we do not find any merits in the ground of appeal raised by revenue. In the result, this ground of appeal is dismissed.
23. Ground No.2 relates to allowability of product development expenses as revenue expenses as treatment by AO as intangible asset being knowhow. The ld. AR of the assessee submits that this ground of appeal is also covered by the decision of Tribunal in assessee's own case for A.Y. 1999-2000 to 2002-03 in ITA No. 3329 to 3332/Mum/2011 dated 31.08.2017. On the other hand, the ld. DR for the Revenue not disputed the contention of ld. AR of the assessee that similar issues were decided in favour of assessee in earlier years.
24. We have considered the submission of the parties and have gone through the orders of authorities below. We have noted that similar ground of appeal was decided by the Tribunal in assessee's own case for A.Y. 1999-2000 to 2002-03 in ITA No. 3329 to 3332/Mum/2011 dated 31.08.2017 by following the decision of Tribunal for A.Y. 1997-98 to 1999-2000 in ITA No. 4120-4122/Mum/2005 dated 16.05.2014 and passed the following order:
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ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
"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;
" 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 12 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
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 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."
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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 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.14
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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 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. 15
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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."
25. Considering the consistent view taken by decision in assessee's own case for earlier year, we do not find any merit in the ground of appeal raised by revenue. In the result, this ground of appeal is dismissed.
26. Ground No.3 relates to expenditure on issue of foreign currency. The ld. AR of the assessee submits that this ground of appeal is also covered by the decision of Tribunal in assessee's own case for A.Y. 2005-06, wherein the Tribunal decided the appeal on the basis of decision of earlier years in A.Y. 1987-88, 1989-90 and 1990-91.
27. On the other hand, the ld. DR for the Revenue not disputed the contention of ld.
AR of the assessee that similar issues were decided in favour of assessee in earlier years.
28. We have considered the submission of parties and find that on similar ground in assessee's own case for A.Y. 2005-06, the co-ordinate bench of Tribunal by 16 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
following the decision of earlier years dismissed the similar ground of appeal raised by revenue. The co-ordinate bench passed the following order:
"10. We have considered the submission of ld. representative of the parties and find that similar ground of appeal was raised in assessee's group companies in Tata Iron & Steel Company Ltd. Vs. DCIT in appeal for A.Y. 1987-88,m 1989- 90 & 1990-1991 in ITAs No. 3965-3967/Mum/2003 and 3982-3984/Mum/2003 and the Tribunal vide order dated 07.03.2014 allowed the similar relief. The ld. AR of the assessee has placed on record the copy of decision on record (Page 98 to 141 of Legal Paper Book).
11. The Hon'ble Rajasthan High Court in case of CIT Vs Secure Meters Ltd. (supra) while considering the allowability of expenditure in relation to conversion of debentures held that when debenture issued, whether it is convertible or non-convertible, it does not militate against the nature of debenture, being loan. The expenditure incurred would be admissible as revenue expenditure. The Hon'ble Court also referred and relied the decision of Hon'ble Calcutta High Court in case of CIT Vs East India Hotels (252 ITR 680). The Hon'ble Rajasthan High Court also referred and relied the decision of Hon'ble Supreme Court in India Cement Ltd. (supra) wherein it was held that the aspect from consideration by holding that it is irrelevant to consider the object, with which the loan was obtained. We have noted that the ld CIT(A) has allowed the relief to the assessee by following the decision of Hon'ble Rajasthan High Court in case of Secure Meters (supra), against which the appeal filed by Revenue was dismissed by the Hon'ble Supreme Court.
12. Considering the above legal and factual discussion, we do not find any merit in the grounds of appeal raised by Revenue".
29. In view of the consistent decision of Tribunal on the identical issue on identical fact, we do not find any illegality or infirmity in the order passed by ld. CIT(A). In the result, this ground of appeal is dismissed.
30. Ground No.4 relates to prior period expenditure. The ld. AR of the assessee submits that due to complexity and diversity in operations of the assessee, in 17 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
certain cases, exact ascertainment of approval of expenses before closing of accounts involved estimate and in such cases at the time of settlement of liability or credit, the exact amount to differ. There are certain expenses relating to earlier years in respect of which the liability crystallizes during the year under consideration. These expenses are disclosed as excess debits or short credits in respect of previous years and relevant disclosures are made in the financial statement. The AO disallowed the expenses holding that expenses relates to earlier years. The ld. CIT(A) allowed the relief to the assessee by following the order of ld. CIT(A) for A.Y. 1997-98, which was confirmed by Tribunal, thus, this ground of appeal is also covered in favour of assessee. The ld. AR submits that order of ld. CIT(A) for A.Y. 1997-98, which was affirmed by Tribunal in ITA No. 5368/Mum/2005 dated 08.05.2008 is placed on record. The ld. AR also relied upon the decision of Hon'ble Apex Court in Excel Industries Ltd. (358 ITR 295 (SC).
31. We have considered the rival submission of the parties and have gone through the orders of authorities below.
32. The Assessing Officer disallowed the expenses holding that expenses relates to earlier years. The ld. CIT(A) granted the relief to the assessee on the basis of order of ld. CIT(A) for A.Y. 1996-97 & 1997-98, holding that a detailed order was passed by his predecessor on identical grounds. We have noted that similar relief was granted to the assessee by ld. CIT(A) in A.Y. 1996-97 vide order dated 23.12.2004 vide Appeal reference "Tata Motors A.Y. 1996-97 No.CIT(A)- II/R-2(1)/IT-1/04-05", however, no appeal was filed by revenue against the said 18 ITA No. 3335 & 4825 Mum 2011-M/s Tata Motors Ltd.
order. No contrary fact is brought to our notice to take a contrary view, therefore, we do not find any illegality or infirmity in the order passed by ld. CIT(A). In the result, this ground of appeal is dismissed.
33. In the result, appeal of the revenue is dismissed.
Order pronounced in the open court on 7th day of January 2019.
Sd/- Sd/-
(G. MANJUNATHA) (PAWAN SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 07/01/2019
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 यािपत ित //True Copy/ ITAT, Mumbai
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