Income Tax Appellate Tribunal - Delhi
Yamaha Motor India Pvt. Ltd., New Delhi vs Department Of Income Tax on 24 June, 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH 'H
'H' : NEW DELHI
BEFORE SHRI G.D.AGRAWAL,
G.D.AGRAWAL, VICE PRESIDENT AND
SHRI H.S. SIDHU,
SIDHU, JUDICIAL MEMBER
ITA Nos
Nos.2663/Del/2012 & 2664/Del/2012
Assessment Years
Years : 2003-
2003-04 & 2004-
2004-05
Assistant Commissioner of Vs. M/s Yamaha Motor India Pvt.Ltd.,
Income
Income Tax, First Floor, The Great Eastern
Circle-
Circle-18(1), Centre,
New Delhi. 70, Nehru Place, Behind IFCI
Tower,
New Delhi - 110 019.
PAN : AAACE1647C.
(Appellant) (Respondent)
Appellant by : Shri Ved Jain, CA and
Shri V. Mohan, Advocate.
Respondent by : Shri R.S. Meena, CIT-DR.
ORDER
PER G.D.AGRAWAL, G.D.AGRAWAL, VP :
ITA No.2663/Del/2012 - (Revenue's appeal for AY 2003-2003-04) :-
:-
This appeal by the Revenue is directed against the order of learned CIT(A)-XXI, New Delhi dated 27th March, 2012 for the AY 2003-
04.
2. The Revenue has raised the following grounds of appeal:-
"1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that the rejection of books of account by the AO was not proper and thereby deleting the addition of Rs.1,36,51,37,400/- made by the AO on estimated profits.
1.1 On the facts and in the circumstances of the case and in law the learned CIT(A) erred in following the appellate order in assessee's own case for AY 2006-07 2 ITA-2663 & 2664/D/2012 without appreciating the fact that the Department has filed appeal before the Hon'ble ITAT against the said appellate order for the assessment year 2006-07.
1.2 On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs.1,36,51,37,400/- without appreciating the fact that the Assessing Officer has given due allowance for the change in product mix, competition and the assessee's smaller scale of operation while estimating the average profit of 4600/- per Motor Cycle sold and that logical and acceptable comparison has been made with M/s Hero Honda Motors Ltd. whose products are identical to that of the assessee i.e. Motor Cycles and both these companies are operating in the same market condition i.e. Indian Two Wheeler Market.
2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the disallowance of Rs.19,06,59,918/- made on account of royalty payments by the assessee company to its 100% holding company viz M/s Yamaha Motor Co.Ltd., Japan simply following its own order in the assessee's own case for the assessment year 2006-07 without appreciating the fact that there was no evidence and details of actual services rendered by the said holding company to the assessee company, in lieu of the royalty.
3. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in allowing the claim of the assessee in respect of carry forward and set off of brought forward business losses from AY 2001-02 onwards and unabsorbed depreciation from AY 1997-98 onwards.
4. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal."
3. At the outset, it was pointed out by the learned counsel for the assessee that all the three grounds raised in this appeal by the Revenue are covered in favour of the assessee by the decision of ITAT in assessee's own case for AY 2006-07 vide ITA No.3166/Del/2011. He stated that the assessment of the year under consideration was 3 ITA-2663 & 2664/D/2012 reopened on the basis of the finding of the Assessing Officer for AY 2006-07 and in respect of all the three grounds while rejecting the books of account and making the addition, the Assessing Officer relied upon the finding of his predecessor for AY 2006-07. That the CIT(A) has allowed the relief following his own order for AY 2006-07 which is upheld by the ITAT.
4. Learned DR, on the other hand, relied upon the order of the Assessing Officer.
5. We have carefully considered the submissions of both the sides and perused relevant material placed before us. Ground Nos.1, 1.1 & 1.2 are against the rejection of books of account and the deletion of addition of `1,36,51,37,400/- which was made by the Assessing Officer on account of estimated profits. From a perusal of the assessment order, we find that in paragraph 4.1, the Assessing Officer relied upon the order of the Assessing Officer for AY 2006-07 and allowed an opportunity to the assessee why the finding of his predecessor for AY 2006-07 may not be adopted in this year also. Though the assessee objected to the Assessing Officer's proposal, however, the Assessing Officer, after rejecting the assessee's objection, relied upon his own finding for AY 2006-07 and made the addition of `1,36,51,37,400/-. The conclusion of the Assessing Officer is recorded in paragraph 4.4 of the assessment order as under:-
"4.4 On a careful consideration of the facts and circumstances of the case and also in view of lack of effective rebuttal to the findings as detailed in the assessment order of A.Y. 2006-07, I am convinced that the Books of A/cs and the details submitted does not reveal the correct position of profit earned by the assessee company. Therefore, I am constrained to estimate the suppression of profits for the current year at Rs.136,51,37,400/- being 4 ITA-2663 & 2664/D/2012 average profit of Rs.4,600/- (based on average profits per Bike of Hero Honda Motors Ltd) on the total no. of Motorcycles sold by the assessee company. While arriving at the average profit per bike of the assessee company, an allowance @ 14% has been given to the assessee company considering the difference in the level of activity and market share of the assessee company vis-a-vis M/s Hero Honda Motors Ltd."
6. Learned CIT(A) allowed the relief following his own order for AY 2006-07. We find that in AY 2006-07, the Revenue, aggrieved with the order of CIT(A), had filed the appeal. However, the ITAT approved the order of the CIT(A) on this point and rejected Revenue's ground of appeal which was raised against the deletion of the trading addition made by the Assessing Officer in that year by estimating the profit. The relevant finding of the ITAT reads as under:-
"10. Thus, it is seen that apropos the first ground for rejection of assessee's books of account, i.e., the alleged difference in the quantity shown in Form No.3CEB and the quantitative details furnished by the assessee, as per the Assessing Officer, during the quarter April-June, 2005, as per the 3 CEB report, the figure was of 3138 motorcycles, whereas the quantitative details of 07.12.2009 showed a figure of `1025 motorcycles, giving a discrepancy of 2113 motorcycles and there was a similar discrepancy for July- December, 2005 and January-March, 2006. The assessee, in its letter dated 17.12.2009, had stated that the details contained in Form 3 CEB were with reference to the royalty paid/payable by the assessee company and they were not the details of production, i.e., not the number of motorcycles produced by the assessee company. A reconciliation had been filed by the assessee regarding the sale on which royalty had been paid and the sales during the year. The Assessing Officer did not meet this explanation of the assessee and rather concluded, without any basis, that the assessee was maintaining different sets of books of account. Before the ld.CIT(A), Annexure V to the Form 3CEB was pointed out to show that in the Form 3CEB, the number of motorcycles produced had nowhere been stated. In its written submissions filed before the 5 ITA-2663 & 2664/D/2012 ld.CIT(A), the assessee requested for calling for a specific comment by the Assessing Officer in this regard. The CIT(A) called for a remand report from the Assessing Officer. The Assessing Officer submitted not one, but two remand reports. However, the contention of the assessee was nowhere rebutted in either of these remand reports. In the first remand report, as noted by the ld.CIT(A), the assessee's contention was not even dealt with and even in the second one, it was not rebutted. In response thereof, the ld.CIT(A) found the stand taken by the assessee to be correct. The Form 3CEB filed before the Assessing Officer was found to be not about the number of motorcycles produced by the assessee during the period, rather, it was found to be concerning the royalty paid by the assessee company during the relevant quarter. The ld.CIT(A) noted that besides, the assessee had furnished a complete reconciliation before the Assessing Officer, as also incorporated in the assessment order. This reconciliation had, however, been arbitrarily rejected by the Assessing Officer. It was in these circumstances, that the ld.CIT(A) held and, in our considered opinion, for the aforegoing discussions, correctly so, that the Assessing Officer had erred in concluding that there had been a difference in the sales and quantitative details of the assessee.
11. Coming to the second ground for rejection of the books of account, the Assessing Officer had observed that the average sales of motorcycles by the assessee during the year was low, as compared to the preceding assessment year. The Assessing Officer, on figures discussed, had computed a suppression of sale value by `1,461 per motorcycle. This amounted to a total alleged suppression of `33,77,32,063/-. The ld.CIT(A) noticed that in response to this query by the Assessing Officer, the assessee had replied vide letter dated 23.11.2009, whereafter, no further query was raised by the Assessing Officer in the show cause notice dated 11.12.2009, but in the assessment order, the said reply of the assessee had been totally ignored and the Assessing Officer had, referring to other non-relevant replies of the assessee company, drawn an adverse inference against the assessee. This fact of reference to a wrong reply of the assessee was nowhere rebutted in the remand report dated 22.09.2010 by the Assessing Officer. Pertinently, in the said reply dated 23.11.2009, the assessee had maintained that there had been a change in the product 6 ITA-2663 & 2664/D/2012 mix during the year; that in the preceding year, the motorcycle 'Enticer' had been sold, which was not so in the year under consideration; that there had been a decrease in the sale price to meet the competition in the market; that the figures were based on the books of account, in which, no discrepancy had been found; that the assessee had not been shown to have charged from its dealers any price more than that stated in the sale invoice and the books of account; and that the Assessing Officer had not pointed out any error in respect of any sale. It was on the basis of this, that the ld.CIT(A) observed that there was no justification for the Assessing Officer to make an assumption that the sale price charged by the assessee during the year was lower than that in the preceding year. Now, when the Assessing Officer has, neither in the assessment order, nor in either of the remand reports, been able to rebut the categorical assertions of the assessee in this regard, as to how the ld.CIT(A) has erred in accepting the assessee's contention, has not been made out before us. Obviously, merely since the realization per motor cycle for the year under consideration was low as compared to that in the preceding year, this by itself cannot lead the Assessing Officer to assume that the sale price charged by the assessee company was under-stated and the Assessing Officer evidently erred in making such assumption. As correctly noted by the ld.CIT(A), unless there is material evidence to disprove the contention of the assessee, the sale stated in the books of account needs must be accepted. Therefore, the ld.CIT(A) has rightly held that on this score, the books were rejected by the Assessing Officer merely by indulging in surmises.
12. Coming to the next reason adopted by the Assessing Officer for rejecting the books of account, according to the Assessing Officer, the assessee's explanation regarding the losses incurred by it as compared to the profits earned by other competitors, was not acceptable. Here, the CIT(A) has noted that the Assessing Officer downloaded the balance sheets of Hero Honda Motors Ltd. and Bajaj Auto Ltd., and by taking Hero Honda Motors as an example, worked out the profit at `470 per motorcycle, where, on applying a rate of `4,000/- to 2,65,212 motorcycles sold by the assessee during the year, estimated a profit of `106,08,48,000/-. The reasons for the loss suffered by the assessee company, as contended, were low market share, low capacity utilization, very high debtors' turnover ratio,
7 ITA-2663 & 2664/D/2012 high inventory ratio, shift in technology, higher personnel cost due to VRS and labour unions problem, advertisement and publicity cost, high material cost due to low volumes and high overhead cost because of dealer network and after sales service, etc. The Assessing Officer, it was taken note of by the ld.CIT(A), had totally ignored all these contentions of the assessee and in the remand reports, he had not been able to rebut any of such contentions. These contentions were dubbed by the Assessing Officer as being general in nature. No other comment was made. The ld.CIT(A) held such an approach to be no correct. Before us, nothing has been brought to support this action of the Assessing Officer. Obviously, profit can only be made when there is ability to do so. The factors pointed out by the assessee for not being able to make sales, have not been refuted. Therefore, in the presence of the said factors, without a doubt, the losses suffered by the assessee cannot be said to be either bogus, or inflated. The Assessing Officer did not prove otherwise. No discrepancy was pointed out in the books of account of the assessee company concerning the expenditure incurred and claimed by the assessee. Nothing was brought to establish that the assessee had been charging a sale price higher than that noted in the books of account. Rather, the Assessing Officer arbitrarily compared the case of the assessee with other successful companies, which can never lead to appropriate estimation of profit of a loss bearing company like the assessee.
13. In view of the above, on this issue also, the ld.CIT(A) has correctly held the rejection of the books of the assessee by the Assessing Officer to be incorrect. About the last ground raised by the Assessing Officer for rejecting the assessee's books of account, it was held that the assessee had been selling motorcycles at a lower price to its holding and subsidiary companies as compared to its domestic sales. The ld.CIT(A) has noted that the assessee, in its reply dated 17.12.2009, had pointed out that the export price was more than the domestic price, even in spite of the fact that the domestic sale price was inclusive of excise duty. A comparative chart, as follows, had been submitted :-
Name of the motorcycle Average domestic sale Average Export price (Rs.) model price (Rs.) Fazer STD 5(YY5) 35,296/- 36,690/-
8 ITA-2663 & 2664/D/2012
Fazer STD (5YY9) 35,339/- 42,230/-
Crux (5KA3) 27,869/- 38,456/-
Libero (5TS3) 32,234/- 38,456/-
Crux FBD(5KA3) 27,283/- 38,456/-
Crux SJP (5KA3) 27,284/- 38,456/-
14. The assessee had stated that it was entitled to DEPB benefits in respect of its export sales and if the total DEPB benefits were added to the export sale price, the effective export price would be substantially higher in comparison to the domestic sale price. The TPO's order dated 13.11.2009 was also brought forth, wherein, on considering the export sales made by the assessee company to its holding company and subsidiary companies, the TPO had accepted the price of export shown by the assessee as being at arm's length. These contentions of the assessee as well as the TPO's order were found by the ld.CIT(A) to have been ignored by the Assessing Officer. The comparative charge submitted by the assessee had also not been found by the Assessing Officer to contain any discrepancy. In the remand report dated 22.09.2010 also, the Assessing Officer was not found to have entered any rebuttal to the assessee's contentions. After rejoinder to the remand report even in the second remand report, the Assessing Officer was found to have passed only peripheral orders of estimation of profit without answering the assessee's submission. It was on this that the ld.CIT(A) correctly held that in absence of material, the Assessing Officer could not tinker with the price determined by the TPO.
15. It has gone unrebutted before us also, that if the contention of the Assessing Officer were to be accepted, the whole purpose of determination of arm's length price by the TPO would get defeated. To reiterate, the TPO has accepted, vide order dated 13.11.2009 (supra), the prices of export shown by the assessee to be at arm's length.
16. In view of the above, even on this score, the rejection of books of account of the assessee by the Assessing Officer does not hold good and such action of the Assessing Officer has correctly been cancelled by the ld.CIT(A).
17. For the above discussion, finding no merit therein, Ground Nos.1 and 2 raised by the Department are rejected."
9 ITA-2663 & 2664/D/2012
7. Admittedly, the facts of the year under consideration are identical to the facts in AY 2006-07, the Assessing Officer himself has relied upon the finding recorded in the assessment order for AY 2006- 07 for rejecting the books of account and for estimating the profit. The CIT(A) also relied upon his own order for AY 2006-07. Therefore, we do not find any justification to take a view different than the view taken by the ITAT in AY 2006-07. Respectfully following the same, we uphold the order of learned CIT(A) on this point and reject ground Nos.1, 1.1 & 1.2 of the Revenue's appeal.
8. Ground No.2 of the Revenue's appeal is against the deletion of the disallowance of `19,06,59,918/- made on account of royalty payment by the assessee company to its 100% holding company viz., M/s Yamaha Motor Co.Ltd., Japan. With regard to this ground also, the facts are identical to AY 2006-07. The Assessing Officer himself in paragraph 5.1 of the assessment order recorded the following finding:-
"5.1 For the detailed reasoning given in the assessment year 2006-07, the royalty paid, was disallowed and added back to the returned income, by holding that the same was paid to the holding company of the assessee, which was owning the entire 100% of the assessee's shares, thereby indicating that the said royalty was nothing but a colourable device to reduce profits by making a payment to own-self."
9. Thus, it is evident that the Assessing Officer, relying upon the finding in the assessment order for AY 2006-07, disallowed the royalty payment of `19,06,59,918/-. On appeal, the CIT(A) allowed the relief following the appellate order for AY 2006-07. The Revenue's appeal for AY 2006-07 on this ground was rejected by the ITAT with the following finding:-
10 ITA-2663 & 2664/D/2012 "24. We do not find any error, as seen above, in the order of the ld.CIT(A) in this regard. It cannot be gainsaid that any expenditure incurred wholly and exclusively for the purposes of business is an allowable expenditure, even though, as in the present case, the payment is made to a 100% shareholding company of the payer. That apart, u/s 40A(2) of the Act, it is only the fair value of such expenditure, which is allowable. Besides, the arm's length price provisions take care of the payment in such transactions being at arm's length, as has been done in the present case by the TPO. The Assessing Officer proceeded merely on assumptions, surmises and conjectures which, undeniably, can never substitute hard evidence, which is entirely absent here. Neither Section 40(a)(i) nor Section 2(22)(e) of the Act are applicable, as observed. Therefore, finding no merit therein, Ground No.4 taken by the department stands rejected."
10. When admittedly the facts of the year under consideration are identical to the assessment year 2006-07, we do not find any justification to take a view different than the view taken by the ITAT for AY 2006-07. We, therefore, respectfully following the above finding of the ITAT in assessee's own case, uphold the order of learned CIT(A) on this point and reject ground No.2 of the Revenue's appeal.
11. Ground No.3 of the Revenue's appeal is against the set off of brought forward business losses from AY 2001-02 onwards and unabsorbed depreciation from AY 1997-98 onwards. On this point also, the Assessing Officer relied upon the finding of the Assessing Officer for AY 2006-07 and again, the CIT(A) allowed the relief following his own order. On appeal, the learned Judicial Member decided the issue in favour of the assessee by rejecting the Revenue's ground of appeal. However, the learned Accountant Member did not agree with the same and proposed that this issue needs to be set aside to the file of the Assessing Officer because examination of relevant facts is required.
11 ITA-2663 & 2664/D/2012 The matter was referred to the Third Member to give his opinion on the following question:-
"1. Whether the issue challenging the CIT(A)'s action in allowing the assessee's claim of carried forward and set off brought forward losses and unabsorbed depreciation (Ground No.5 in the Department's Appeal in ITA No.3166/Del/2011) requires to be remitted to the Assessing Officer to examine the record maintained under the Companies Act and record a finding as to the percentage of shares held by M/s Yamaha Motor Co., Japan in the year of occurrence of loss and in the year of setting off of loss."
12. The Third Member, vide his order dated 29th April, 2014, agreed with the learned Judicial Member with the following finding:-
"2.5. Now I espouse the issue for my opinion on merits. From the above conflicting opinions of my ld. Brothers, one thing is vivid that both of them have agreed on the legal prescription of sec. 79 of the Act by holding that the benefit of set off of the brought forward loss from assessment year 2001-02 be allowed if the claim of the assessee about YMC holding 74% of the share capital on 26.5.2000 turns out to be correct. Whereas the ld. JM upheld the order of the CIT(A) by accepting that, in fact, YMC held 24% of the shares of the assessee's company on 26.5.2000, the ld. AM remitted the matter to the file of the A.O for necessary verification in this regard with suitable direction. The question which looms large before me is as to whether the contention of the assessee about YMC holding 74% shares on 26.5.2000 should be accepted without any further verification or the matter should be sent back to the Assessing Officer for a de novo examination. In this regard, it is relevant to note that when the A.O raised query as to why brought forward loss should not be disallowed, the assessee submitted its reply, the relevant part of which is on page 536 of the paper book. The following is the extract of the reply advanced by the assessee before the Assessing Officer :
"In this regard, we would like to mention that initially the Assessee Company was incorporated as a 50:50 joint 12 ITA-2663 & 2664/D/2012 venture between Escorts Ltd. and Yamaha Motor Co., Ltd, Japan (YMC) in 1995. On may 26, 2000, 64,80,000 equity shares of the Assessee Company representing 24% of its total issued and paid up equity share capital were transferred by Escorts Ltd. in favour of YMC. Accordingly, with effect from May 26, 2000, the equity shares of the Assessee Company were held by 70,20,000 equity shares representing balance 26% of the total issued and paid up equity share capital of the Assessee Company, and the Assessee Company became a wholly owned subsidiary of YMC. Accordingly, from the assessment year 2001-2002 onwards, the Assessee Company is entitled to claim accumulated losses, since with effect from May 26, 2000, (at all times) more than 51% of the total issued and paid up equity share capital of the Assessee Company is being held by YMC."
2.6. It can be clearly seen from the above reply that the assessee made it unequivocal that 64,80,000/- equity shares of the assessee company, representing 24% of its total paid up capital, were transferred by M/s Escorts Ltd. in favour of YMC Japan on 26.5.2000 and as such the total shareholding of YMC Japan swell to 74% on that date. Remaining 26% were claimed to have been acquired by YMC on 15.6.2001. Despite this categorical submission, the Assessing Officer chose to brand the assessee's explanation as a 'cooked up story' without showing as to how the same was incorrect. There is no semblance of any verification having been carried out by the AO to examine the correctness of the assessee's version. The assessee reiterated its stand before the ld. CIT(A) through written submissions, the relevant part of which is available on page 775 of the paper book. It was again stated that on26.5.2000, 24% of the shareholding of the assessee company was transferred by M/s Escorts Ltd. in favour of YMC Japan. The ld. CIT(A), instead of directly acting on the same, chose to seek remand report from the Assessing Officer by sending such written submissions to him. The Assessing Officer dealt with this issue in his first remand report with the following observations as are extracted below from page 823 of the paper book:
" No further comment is being made now on this issue, as all contentions of assessee need an independent adjudication by the ld. CIT(A)."
13 ITA-2663 & 2664/D/2012 2.7. It can be seen that when the position about YMC acquiring 24% of shares from M/s Escorts Ltd. on 26.5.2000 was restated in remand proceedings, the AO did not make any adverse comment on the same. When the assessee submitted its rejoinder to the AO's remand report, the ld. CIT(A) once again sent such rejoinder to the AO for a second remand report. The Assessing Officer made the following comments in the second remand report, as are available on page 836 of the paper book :
"VIII. Set-off of accumulated losses/unabsorbed depreciation (Ground No. 11) No further comments is required on this issue, as the assessee has only reiterated its earlier contentions, which has been duly answered to in the Assessment Order."
2.8. There is no dispute on the legal position that on YMC holding 74% shares of the assessee company on 31.3.2001 and continuing to hold so up to 31.3.2006, there can be no bar on the claim of set off of brought forward loss for the assessment year 2001-02 against the income for the assessment year 2006-07. From the above narration of facts, it is palpable that the Assessing Officer got three opportunities to examine the assessee's contention about YMC acquiring further 24% shares on 26.5.2000 apart from its original holding of 50%., firstly during the course of assessment proceedings and then during two remand proceedings. The assessee's pointed submission in this regard came to be rejected by the Assessing Officer during the original assessment proceedings without any reason worth the name and the same position continued during the two remand proceedings as well. It is trite that when an assessee furnishes an explanation on a specific query, the same is treated as accepted unless some inconsistencies are found by the AO on its vetting or the assessee fails to substantiate the same on being called upon to do so. If the Officer does not dispute the correctness of the specific explanation tendered by the assessee, the same is considered as correct and binding of the AO. It is totally impermissible to dub the explanation given by the assessee as a cooked up story without any evidence to the contrary. Here is a case in which the Assessing Officer got three opportunities of examining the assessee's contention in this regard. If he was not satisfied with the same, he was duty bound to bring the investigation to a 14 ITA-2663 & 2664/D/2012 higher level and call for further corroboration. Having not done so, he could not have characterized the assessee's explanation as false. Even if it is presumed without agreeing that the AO was under some misconception qua the assessee's explanation during the assessment proceedings, he could have verified the same when remand reports were called for. Restoration to the A.O. would have been justified if despite his requiring the assessee to lead further evidence in support of its explanation, the assessee had failed to do so and the ld. CIT(A) had accepted the assessee's contention without getting comments from the AO. But in the facts of the instant case, the Assessing Officer did not raise any further query on the submissions repeatedly made before him in this regard. Even the ld. DR has brought no material on record to demonstrate any fallacy in the explanation tendered on behalf of the assessee. Since the ld. CIT(A) has accepted the same explanation as was given to the AO and both the ld. Members agree that the claim of the assessee is acceptable if such explanation is correct, I am of the considered opinion that no useful purpose will be served in once again sending the matter back to the AO for carrying out the examination of the claim for the fourth time. I, therefore, agree with the opinion expressed by the ld. JM on the first question."
13. In view of the above, the issue raised by the Revenue vide ground No.3 is also covered in favour of the assessee by the decision of Third Member of ITAT. Respectfully following the same, we uphold the order of learned CIT(A) on this point and reject ground No.3 of the Revenue's appeal.
ITA No.2664/Del/2012 - Revenue's appeal for AY 2004-2004-05 :-
:-
14. In this year, the Revenue has raised the following grounds:-
"1. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in holding that the rejection of books of account by the AO was not proper and thereby deleting the addition of Rs.1,17,69,78,000/- made by the AO on estimated profits.
15 ITA-2663 & 2664/D/2012 1.1 On the facts and in the circumstances of the case and in law the learned CIT(A) erred in following the appellate order in assessee's own case for AY 2006-07 without appreciating the fact that the Department has filed appeal before the Hon'ble ITAT against the said appellate order for the assessment year 2006-07.
1.2 On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the addition of Rs.1,36,51,37,400/- without appreciating the fact that the Assessing Officer has given due allowance for the change in product mix, competition and the assessee's smaller scale of operation while estimating the average profit of 4400/- per Motor Cycle sold and that logical and acceptable comparison has been made with M/s Hero Honda Motors Ltd. whose products are identical to that of the assessee i.e. Motor Cycles and both these companies are operating in the same market condition i.e. Indian Two Wheeler Market.
2. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in deleting the disallowance of Rs.18,23,80,966/- made on account of royalty payments by the assessee company to its 100% holding company viz M/s Yamaha Motor Co.Ltd., Japan simply following its own order in the assessee's own case for the assessment year 2006-07 without appreciating the fact that there was no evidence and details of actual services rendered by the said holding company to the assessee company, in lieu of the royalty.
3. On the facts and in the circumstances of the case and in law the learned CIT(A) erred in allowing the claim of the assessee in respect of carry forward and set off of brought forward business losses from AY 2001-02 onwards and unabsorbed depreciation from AY 1997-98 onwards.
4. The appellant craves leave for reserving the right to amend, modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of appeal."
15. Ground No.1 & 1.1 are identical to ground Nos.1 & 1.1 of the Revenue's appeal for AY 2003-04. Ground No.1.2 appears to be misconceived because in this year, the Assessing Officer made the 16 ITA-2663 & 2664/D/2012 addition of `1,17,69,78,000/- on account of estimated profits which was deleted by the CIT(A) and deletion is challenged by the Revenue in ground No.1 & 1.1. In ground No.1.2, the Revenue has challenged the deletion of addition of `1,36,51,37,400/-. No such addition was made by the Assessing Officer in this year. So, the question of deletion of above addition in AY 2004-05 did not arise. The addition of `1,36,51,37,400/- was made by the Assessing Officer in AY 2003-04 and which was deleted by the CIT(A) in that year. It seems that grounds for both the years have been drafted simultaneously on 29th May, 2012 and, therefore, in AY 2004-05, by mistake, ground No.1.2 is raised. So far as ground Nos.1 & 1.1 are concerned, the same are rejected for the detailed discussion in paragraph Nos.5 to 7 above. Ground No.1.2 is rejected being misconceived and not arising from the order of the CIT(A) for AY 2004-05.
16. Ground No.2 is identical to ground No.2 for AY 2003-04 and, for the detailed discussion in paragraph Nos.8 to 10 above, this ground is rejected.
17. Ground No.3 is similar to ground No.3 for AY 2003-04 and, for the detailed discussion in paragraph Nos.11 to 13 above, this ground of the Revenue's appeal is rejected.
18. In the result, both the appeals of the Revenue are dismissed.
Decision pronounced in the open Court on 24th June, 2014.
Sd/- Sd/-
(H.S. SIDHU)
SIDHU) (G.D.AGRAWAL)
JUDICIAL MEMBER VICE PRESIDENT
Dated : 24.06.2014
VK.
17 ITA-2663 & 2664/D/2012
Copy forwarded to: -
1. Appellant : Assistant Commissioner of Income Tax, Circle--18(1), New Delhi.
Circle
2. Respondent : M/s Yamaha Motor India Pvt.Ltd., First Floor, The Great Eastern Centre, 70, Nehru Place, Behind IFCI Tower, New Delhi - 110 019.
3. CIT
4. CIT(A)
5. DR, ITAT Assistant Registrar