Income Tax Appellate Tribunal - Kolkata
Bata India Ltd., Kolkata vs Assessee on 23 May, 2013
आयकर अपीलीय अधीकरण, Ûयायपीठ - " ", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "A", KOLKATA
[(सम¢) ौी के.के.गुƯा,
ा, लेखा सदःय, एवं ौी जाज[ माथन Ûयायीक सदःय]]
[Before Hon'ble Sri K.K.Gupta, AM & Hon'ble Sri George Mathan, JM]
आयकर अपील संÉया /ITA Nos.1826 & 1827& 1828/Kol/2012
िनधॉरण वषॅ/Assessment Years : 2005-06 & 2006-07
(अपीलाथȸ/APPELLANT ) -वनाम- (ू×यथȸ/RESPONDENT)
D.C.I.T., Circle-2, -versus- M/s. Bata India Ltd.
Kolkata Kolkata
(PAN: AABCB 1043 Q)
C.O. Nos.10 & 11/Kol/2013
आयकर अपील संÉया /A/o ITA Nos.1826&1827/Kol/2012
िनधॉरण वषॅ/Assessment Years :2005-06 & 2006-07
(अपीलाथȸ/Cross Objector ) (ू×यथȸ/RESPONDENT)
M/s. Bata India Ltd. .. -वनाम- D.C.I.T., Circle-2,
Kolkata -versus- Kolkata
(PAN: AABCB 1043 Q)
अपीलाथȸ कȧ ओर से/ For the Department Shri L.K.S.Dehiya, CIT
DR
ू×यथȸ कȧ ओर से/For the Assessee Shri S.Jhajharia, FCA
सुनवाई कȧ तारȣख/Date of Hearing : 23.05.2013
घोषणा कȧ तारȣख/Date of Pronouncement : 23.05.2013
आदे श/ORDER
Per Bench ITA No.1826/Kol/2012 is an appeal filed by the Revenue and C.O. No.10/Kol/2013 is a Cross Objection filed by the assesse. The Revenue's appeal is against the order of ld. C.I.T.(A)-I, Kolkata in Appeal No.476/CIT(A)-I/Circle- 2/2008-09 dated 04.09.2012 for Assessment year 2005-06.
2. ITA No.1827/Kol/2012 is an appeal filed by the Revenue and C.O. No.11/Kol/2013 is a Cross Objection filed by the assesse. The Revenue's appeal is against the order of ld. C.I.T.(A)-I, Kolkata in Appeal No.533/CIT(A)-I/Circle- 2/2009-10 dated 04.09.2012 for Assessment year 2006-07 u/s 154 of the IT Act..
ITA Nos1826-1828/Kol/2012 & C.O.Nos.10&11/Kol/2013 2 DCIT, Circle-2, Kolkata vs M/s. Bata India Ltd..
A.Yrs.2005-06 & 2006-07
3. ITA No.1828/Kol/2012 is an appeal filed by the Revenue against the order of ld. C.I.T.(A)-I, Kolkata in Appeal No.164/CIT(A)-I/Circle-2/2010-11 dated 04.09.2012 for Assessment year 2006-07.
4. Shri L.K.S.Dehiya, CIT(DR) represented on behalf of the Revenue and Shri S.Jhajharia, FCA represented on behalf of the assessee.
ITA No.1826/Kol/2012 and C.O.No.2013 :5. In the Revenue's appeal the revenue has raised the following grounds :-
"1. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in holding that contributions made by the assessee to Bata Workers Sickness Benefit Society is an allowable expenditure even though the Society in neither a body referred to u/s 36(1)(iv) or (v) and therefore, not allowable u/s 40A(9) nor does the society satisfy conditions of sub-section 10 of section 40A.
2. That on facts and in the circumstances of the case, the ld. CIT(A) erred in allowing depreciation on river embankment under the block of assets 'Building'.
3. That the appellant craves leave to add, alter, modify or amend any ground of appeal during the course of hearing of the case."
5.1. In the Cross Objection the assessee has raised the following grounds :-
"1. For that in view of the facts and circumstances of the case, the ld. CIT(A) erred in confirming the action of the AO in treating Rs.1,10,85,490/- of royalty payment as capital expenditure and such expenditure being fully allowable revenue expenditure it may kindly be held accordingly.
2. For that your petitioner craves the right to put additional grounds and./or to alter/amend/modify the present grounds at the time of hearing."
6. In regard to ground no.1 of the revenue's appeal against the action of the ld. CIT(A) in holding that the contribution made by the assessee to Bata Workers Sickness Benefit Society is an allowable expenditure, it was fairly agreed by both the sides that the issue is squarely covered by the decision of the Co-ordinate Bench of this Tribunal in assessee's own cas for A.Yrs. 1990-91 and 1991-92 in ITA No.329/Cal/1996 and ITA No.99/Cal/1997 dated 24th September, 2002 wherein in para 17 of the order the Coordinate Bench of this Tribunal has held as follows :-
"`17. In view of the above judicial decisions and considering the facts that there was a valid agreement entered into by the parties and enforceable in law against each other. It becomes legal obligation of the assessee company to make the contribution to the society and as such we are of the considered view that the contribution to the society is not hit by section 40A(9) of the Act as such an obligation falls within the last part of the ITA Nos1826-1828/Kol/2012 & C.O.Nos.10&11/Kol/2013 3 DCIT, Circle-2, Kolkata vs M/s. Bata India Ltd..
A.Yrs.2005-06 & 2006-07 said section that the contribution was made by the assessee company to a fund required to be set up by or under any other law for the time being in force. Besides, there is no dispute that the fund was constituted bonafidely for the welfare of its employees in the smooth running of the business and hence the said contribution is to be allowed u/s 37(1) of the Act."
7. As it is noticed that the issue is covered by the decision of the coordinate bench of this Tribunal referred to supra and the ld. CIT(A) has only followed the decision of the Coordinate Bench of this Tribunal in assessee's own case. We find no error in the findings of the ld. CIT(A) which call for any interference.
8. In the result ground no.1 in the Revenue's appeal stands dismissed.
9. In regard to ground no.2 of the revenue's appeal it was submitted that the issue was against the action of the ld. CIT(A) in allowing the depreciation on river embankment under the block of assets 'Building'.
10. It was submitted by the ld DR that the AO had disallowed the depreciation on the river embankment and the renovation as it was not a building, nor road or bridge or culvert etc. and there was no business requirement of such an embankment. It was the submission that the ld. CIT(A) had allowed the same by following the order of his predecessor for A.Yr.2007-08 dated 23.06.2011 by holding that the embankment was for the protection of the factory building. It was the submission that the order of the ld. CIT(A) was liable to be reversed.
11. In reply the ld. AR drew our attention to the order of the ld. CIT(A) for A.Yr.2007-08. It was the submission that this issue was not a subject matter of appeal by the Revenue for the A.yr. 2007-08. In reply the ld. DR submitted that due to the tax effect no appeal has been filed.
12. We have considered the rival submissions. A perusal of the order of the ld. CIT(A) for A.Yr. 2007-08 clearly shows that there were other issues which were a subject matter of appeal before the Tribunal for the A.Yr. 2007-08. Admittedly the ITA Nos1826-1828/Kol/2012 & C.O.Nos.10&11/Kol/2013 4 DCIT, Circle-2, Kolkata vs M/s. Bata India Ltd..
A.Yrs.2005-06 & 2006-07 issue of depreciation on the river embankment was a small one but the revenue has not filed any appeal against the same. The depreciation having been allowed for A.Yr. 2007-08, it cannot now be denied for the A.Yr. 2005-06 especially when it has been accepted as part of the block of assets. In the circumstances we are of the view that the findings of the ld. CIT(A) on this issue is on a right footing and does not call for any interference.
13. In the result ground no.2 of the revenue's appeal stands dismissed.
14. In the result the appeal of the revenue stands dismissed.
15. In the Cross Objection it was submitted by the ld. AR that the issue was against the action of the ld. CIT(A) in not allowing the royalty payment as revenue expenditure.
16. The ld. AR drew our attention to the royalty agreement which was at pages 8 to 28 of the paper book. He drew our attention to para 2.5 of the agreement which specifically says that all the drawings and other documents comprising the technical knowhow and all notes and copies made there from by licensee shall be marked with the words "Secret and Confidential-property of Wolverine World Wide, Inc.". He further drew our attention to Article 6.1 wherein it has been agreed that the technical know-how imparted to licensee is and shall remain the exclusive and valuable secret property of licensor. He drew our attention to para 6.5 wherein it has been specifically mentioned that on termination of the agreement the technical know-how papers, instruments, documents etc. both original and all copies and translations thereof and all shop or working notes shall be returned to the licensor. He further drew our attention to Article 11.6 when specified the effects of the termination to show that in the event of termination or expiry of the agreement the licensed products were not to be manufactured nor was its trade marks to be used and all to be returned to the licensor. It was the submission that in view of the decision of the Hon'ble Calcutta High Court in the case of CIT vs Hindusthan Motors Ltd. 192 ITR 619 it clearly ITA Nos1826-1828/Kol/2012 & C.O.Nos.10&11/Kol/2013 5 DCIT, Circle-2, Kolkata vs M/s. Bata India Ltd..
A.Yrs.2005-06 & 2006-07 shows that this royalty payment was a revenue expenditure as no capital assets came into being in the hands of the assessee.
17. In reply the ld. DR vehemently supported the orders of the AO as well as the ld. CIT(A).
18. We have heard the rival submissions. A perusal of the agreement in respect of the technical know-how and the manufacturing process clearly shows that the assesse has derived no enduring benefit nor has assessee obtained any capital asset on the basis of the payment of the royalty as per the agreement. The technical know-how trade marks denies drawings, notes etc. in respect of the agreement for which the assessee has paid the royalty belongs to the licensor being M/s. Wolverine World Wide, INC. Thus as the assessee has derived no enduring benefit the same cannot be treated as a capital expenditure but is clearly in the name of revenue expenditure and allowable. In the circumstances the AO is directed to allow the royalty paid by the assessee as revenue expenditure as claimed.
19. In the result the Cross Objection filed by the assessee stands allowed.
20. In ITA No.1827/Kol/2012 the revenue has raised the following grounds :-
"1. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in holding that contributions made by the assessee to Bata Workers Sickness Benefit Society is an allowable expenditure even though the Society in neither a body referred to u/s 36(1)(iv) or (v) and therefore, not allowable u/s 40A(9) nor does the society satisfy conditions of sub-section 10 of section 40A.
2. That on facts and in the circumstances of the case, the ld. CIT(A) erred in allowing depreciation on river embankment under the block of assets 'Building'.
3. That the appellant craves leave to add, alter, modify or amend any ground of appeal during the course of hearing of the case."
21. In the Cross Objection the assessee has raised the following grounds :-
"1. For that in view of the facts and circumstances of the case, the ld. CIT(A) erred in confirming the action of the AO in treating Rs.1,10,85,490/- of royalty payment as capital expenditure and such expenditure being fully allowable revenue expenditure it may kindly be held accordingly.
ITA Nos1826-1828/Kol/2012 & C.O.Nos.10&11/Kol/2013 6 DCIT, Circle-2, Kolkata vs M/s. Bata India Ltd..
A.Yrs.2005-06 & 2006-07
2. For that your petitioner craves the right to put additional grounds and./or to alter/amend/modify the present grounds at the time of hearing."
22. In respect to ground No.1 of the revenue's appeal it was fairly agreed by both the sides that this ground was identical to ground no.1 of the revenue's appeal in ITA NO,.1826/Kol/2012 for A.yr.2005-06. Consequently the finding therein will apply to this ground also. Consequently the said ground stands dismissed.
23. In respect to ground no.2 it was fairly agreed by both the sides that this ground was identical to ground no.2 of the revenue's appeal in ITA NO.1826/Kol/2012 for A.Yr.2005-06. Consequently the finding therein will apply to this ground also. Consequently the said ground stands dismissed.
24. In the result the appeal of the Revenue stands dismissed.
25. In respect of the Cross Objection it was fairly agreed by both the sides that this issue was identical to Cross Objection of the assessee's appeal in C.O.No.10/Kol/2013 for A.Yr.2005-06. Consequently our finding therein will apply to this ground also. Consequently the said ground stands allowed. In the result the Cross Objection of the assessee stands allowed.
26. In ITA No.1828/Kol/2012 the revenue has raised the following grounds :-
"1. That on the facts and in the circumstances of the case, the ld. CIT(A) erred in deleting the addition made on account of delayed payment of Employees' contribution to P.F. and ESCI in violation of section 36(1)(va) read with Section 2(24)(x) of the Income Tax Act, 1961.
2. That the appellant craves leave to add, alter, modify or amend any ground of appeal during the course of hearing of the case."
27. It was fairly agreed by both the sides that the issue in this appeal being against the action of the ld. CIT(A) in deleting the addition made on account of delayed payment of Employees' contribution to PF and ESIC which had been paid before the due date of filing of the return was squarely covered by the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Limited reported in 319 ITR 306 (SC). As it is noticed that the ld. CIT(A) has deleted the disallowance by considering the ITA Nos1826-1828/Kol/2012 & C.O.Nos.10&11/Kol/2013 7 DCIT, Circle-2, Kolkata vs M/s. Bata India Ltd..
A.Yrs.2005-06 & 2006-07 decision of the Hon'ble Supreme Court in the case of Vinay Cement Limited 213 CTR 268 (SC) as also the decision of the Hon'ble Supreme Court in the case of Alom Extrusions Limited (supra), the order of the ld. CIT(A) stands confirmed.
28. In the result the appeal of the revenue stands dismissed.
29. In the result the appeals of the revenue in ITA Nos.1826, 1827 and 1828 of 2012 stand dismissed and the Cross Objection filed by the assessee in C.O.No.10 & 11 of 2013 stand allowed.
Order pronounced in the open court on 23.05.2013.
Sd/- Sd/-
[ौी के.के.गुƯा,, लेखा सदःय ] [ौी.जाज[ माथन, Ûयायीक सदःय ]
[K.K.Gupta] [ George Mathan ]
Accountant Member Judicial Member
(तारȣख)
तारȣख)Date: 23.05.2013.
R.G.(.P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. M/s. Bata India Ltd., 6A, S.N.Banerjee Road, Kolkata-700013.
2 The D.C.I.T., Circle-2, Kolkata.
3. CIT Kolkata 4. CIT(A)- I, Kolkata.
5. DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches