Income Tax Appellate Tribunal - Bangalore
M/S Advanta India Ltd.,, Bangalore vs Department Of Income Tax on 23 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCH "A"
BEFORE SHRI N.K.SAINI, ACCOUNTANT MEMBER AND
SMT. P. MADHAVI DEVI, JUDICIAL MEMBER
I.T.A. Nos.824 & 825/Bang/2010
(Assessment Years : 2003-04 & 2004-05)
Deputy Commissioner of Income Tax, M/s. Advanta India Ltd.
Circle 11(1), Bangalore. Vs. Agriculture Research Station, Koppa Road,
Begur P.O. Bangalore-560 068
PAN AACCA 7700 I
Appellant Respondent.
Appellant By : Mr.G.V. Gopala Rao.
Respondent By : Mr. Kirit R. Kamdhar.
Date of hearing : 23.11.2011.
Date of pronouncement : 23.11.2011.
O R D E R
Per N.K. Saini, A.M. :
These two appeals by the department are directed against the consolidated order dt.31.3.2010 for the Assessment Years 2003-04 & 2004-05 passed by the learned Commissioner of Income Tax (Appeals)-IV, Bangalore. The main issues in both these appeals is common and the appeals were heard together, so, they are being disposed of by this common order for the sake of convenience and brevity.
2. First we will deal with the ITA No.824/Bang/2010. The grounds Nos.1, 4 & 5 are general in nature and do not require any adjudication. The ground No.2 agitated by the department reads as under :
" The learned CIT(A) has erred in deleting the addition of Rs. 25,91,670 being 1/4th of Rs. 1,03,66,680 paid towards royalty, which was disallowed by the Assessing 2 ITA Nos.824 & 825/Bang/2010 Officer as capital expenditure, relying on the decision of the Hon'ble Supreme Court in the case of Southern Switch Gears Ltd in 232 ITR 359 (SC) without appreciating the facts and circumstances under which the addition was made by the Assessing Officer."
3. The facts of the case in brief are that the assessee was engaged in the development of hybrid seeds in addition to carrying out research activities in its farms. For the Asst. Year under consideration, the assessee filed return of income on 29.10.2004 declaring a profit of Rs.3,59,00,300. The said return was revised on 21.10.2004 declaring a profit of Rs.2,83,83,977. Later on the case was selected for scrutiny. The Assessing Officer framed the assessment at an income of Rs.2,11,82,410. While doing so, the Assessing Officer disallowed 1/4th of the royalty which was claimed at Rs.1,03,66,680 in the profit and loss account, the disallowance of Rs.25,91,670 was made out of royalty. Reliance was placed by the Assessing Officer on the decision of Hon'ble Supreme Court in the case of Southern Switch Gears Limited reported in 232 ITR 359.
3.1 The assessee carried the matter to the ld. CIT(A) who allowed the claim of the assessee and deleted the disallowance made by the Assessing Officer by observing that a similar disallowance made by the Assessing Officer in the Asst. Year 2002-03 was deleted by the then CIT(A), Hyderabad in assessee's own case. Being aggrieved the department is in appeal before us.
4. The learned counsel for the assessee, at the very outset stated that the issue is covered by the earlier order dt.31.10.2007 by the ITAT, Hyderabad Bench 'A' in assessee's own case in ITA No.316/Hyd/2005 for Asst. Year 2002-03. Our attention was drawn towards page Nos.13 to 3 ITA Nos.824 & 825/Bang/2010 18 of the assessee's compilation which is the copy of the aforesaid referred order. In his rival submission, the learned CIT, Departmental Representative could not controvert the contention of the learned counsel for the assessee.
5. After considering the submission of both parties and going through the material on record, it is noticed that the identical issue having similar facts was involved in the preceding assessment year i.e. A.Y. 2002-03 in assessee's own case which has been adjudicated by the ITAT, Hyderabad Bench 'A' in ITA No.316/Hyd/205 vide order dt.31.10.2007 wherein the relevant findings have been given in para 02 which are reproduced as under :
" 2. The first issue that arises for consideration is regarding disallowance of 25% of royalty. Shri H. Srinivasulu, learned Departmental Representative, submitted that the very same issue was considered by the Tribunal in the assessee's own case for the Assessment Year 1995-96 in ITA No.37/Hyd/1999 dt.21.2.2003. The CIT(A) has followed the above order of the Tribunal. Therefore, according to the learned Departmental Representative, this issue is covered against the Revenue by the order of this Tribunal in the assessee's own case for assessment year 1995-96. In view of the above submission of the learned Departmental Representative, this ground of appeal is rejected."
Respectfully following the aforesaid order and co-ordinate bench, we do not see any valid ground to interfere with the findings of the learned CIT(A) on this issue. Accordingly, we do not see any merit in this appeal of the department on this issue relating to the royalty.
6. The next issue vide ground No.3 relates to the charging of interest u/s. 234D of the Income Tax Act, 1961.
7. The facts relating to the issue in brief are that the Assessing Officer while framing the assessment charged interest amounting to Rs. 7,78,289 u/s.234D of the Income Tax Act, 1961. The assessee carried the matter to the learned CIT(A) who deleted the interest by observing in para 8.4 of the impugned order as under :
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ITA Nos.824 & 825/Bang/2010 " In respect of appeal on charging of interest u/s. 234D of the I.T. Act is concerned, it is observed that the relevant Assessment Years are 2003-04 and 2004-05 and section 234D of the I.T. Act was brought into statute by the Finance Act, 2003 w.e.f. 1.6.2003 i.e. A.Y. 2004-05 and therefore has been rightly applied to the case of A.Y. 2004-05 but not to the case of A.Y. 2003-04. Hence the appeal on this issue is allowed in A.Y. 2003-04 but dismissed in A.Y. 2004-05."
Now the department is in appeal before the ITAT.
8. The learned Departmental Representative while supporting the order of the Assessing Officer stated that interest u/s. 234D was chargeable from 1.6.2003. Therefore, the Assessing Officer was justified in charging interest u/s.234D as the assessment was framed on 24.3.2006. Reliance was placed on the judgment of Hon'ble Kerala High Court in the case of CIT Vs. Kerala Chemicals and Proteins Ltd. (2010) 323 ITR 584 (Ker).
9. In his rival submission, the learned counsel for the assessee supported the order of the learned CIT(A) and submitted that since section 234D was introduced by Finance Act, 2003 w.e.f. 1.6.2003. Hence it was not applicable in assessee's case because the previous year ends on 31.3.2003 i.e. before the date when the amendment to section 234D was introduced. Reliance was placed on the judgment of Hon'ble Delhi High Court in the case of DIT Vs. Jacabs Civil Incorporated (2010) 235 CTR (Del) 123 (copy of the said order was submitted.) it was further stated that even if two view were available on same issue the one which favour the assessee has to be adopted as per the ratio laid down by the Hon'ble Supreme Court in the case of CIT Vs. Vegetable Products Limited (1973) 88 ITR 192 (SC).
10. We have considered the rival submissions and gone through the material on record. In the present case, it is not in dispute that the assessment year under consideration is 2003-04 while section 234D was introduced by the Finance Act, 2003 w.e.f 1.6.2003 which lays down that if the amount refunded under section 143 exceeds the amount refundable on regular 5 ITA Nos.824 & 825/Bang/2010 assessment the assessee should pay simple interest at the rate of one-half per cent on the whole or the excess amount so refunded, for every month or part of a month comprised in the period from the date of grant of refund to the date of such regular assessment.
11. On a similar issue, the Hon'ble Delhi High Court in the case of Jacabs Civil Incorporated (supra) held that section 234D was applicable only from Assessment Year 2004-05 onwards and not in the earlier assessment years and therefore no interest under that section could be levied for the period prior to the Assessment Year 2004-05. It also appears that on a similar issue the Hon'ble Kerala High Court has taken a different view in the case of Kerala Chemicals and Proteins Ltd (supra) wherein it has been held that interest u/s. 234D was chargeable from 1.6.2003 till completion of regular assessment and the finding of the Tribunal that section 234D was applicable only from Assessment Year 2004-05 onwards was vacated. Presently, different views of different High Courts are available. However, the view which favours the assessee is to be adopted, as per the ratio laid down by the Hon'ble Supreme Court in the case of Vegetable Products Ltd. (supra) wherein it has been held that --
" If the court finds that the language of a taxing provision is ambiguous or capable of more meanings than one, then the court has to adopt that interpretation which favours the assessee, more particularly so where the provision relates to the imposition of a penalty."
12. Similarly, the Hon'ble Supreme Court in the case of Mysore Minerals Ltd Vs. CIT (1999) 239 ITR 775 held that -
" Section 32 of the Income Tax Act, 1961, confers a benefit on the assessee. The provision should be so interpreted and the words used therein should be assigned such meaning as would enable the assessee to secure the benefit intended to be given by the Legislature to the assessee. It is also well-settled that where there are two possible interpretations of a taxing provision the one which is favourable to the assessee should be preferred."6
ITA Nos.824 & 825/Bang/2010 We, therefore, keeping in view the ratio laid down by the Hon'ble Supreme Court in the aforesaid decisions and by keeping the ratio laid down by the Hon'ble Delhi High Court in the case of Jacabs Civil Incorporated (supra), do not see any merit in the ground No.3 raised by the department and this ground of appeal is dismissed.
13. Now we take up ITA No.825/Bang/2010 - the only effective ground raised by the department reads as under :
" The learned CIT(A) has erred in deleting the addition of Rs. 34,71,068 being 1/4th of Rs. 1,38,84,273 paid towards royalty, which was disallowed by the Assessing Officer as capital expenditure relying on the decision of the Hon'ble Supreme Court in the case of Southern Switch Gears Ltd. in 232 ITR 359 (SC) without appreciating the facts and circumstances under which the addition was made by the Assessing Officer."
14. The facts related to this issue are similar to the facts as were involved in Assessment Year 2003-04 in ITA No.824/Bang/2010 which we have already adjudicated in the former part of this order and our findings given therein shall apply for the assessment year 2004-05 as well. In that view of the matter, we do not see any merit in the appeal of the department. The issue raised in this appeal is dismissed.
15. In the result, both the appeals of department are dismissed.
(Order pronounced in the open court on 23rd Nov., 2011.) Sd/- Sd/-
(P. MADHAVI DEVI) (N.K. SAINI)
Judicial Member Accountant Member
Bangalore,
Dated: 23.11.2011.
*Reddy gp
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ITA Nos.824 & 825/Bang/2010
Copy to :
1. Appellant
2. Respondent
3. C.I.T.
4. CIT(A)
5. DR, - 'A' Bench.
6. Guard File.
By Order
Asstt. Registrar, ITAT, Bangalore
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ITA Nos.824 & 825/Bang/2010
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Date Initials
Draft dictated on 23.11.2011 Sr. P.S.
Draft placed before the author Sr. P.S.
Draft proposed and placed before the AM/JM
second Member
Draft discussed/approved by Second AM/JM
Member
Approved Draft comes to the Sr. PS Sr. P.S.
Kept for pronouncement on Sr. P.S.
File sent to the Bench Clerk Sr. P.S.
Date on which file goes to the Head Clerk
Date of dispatch