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Income Tax Appellate Tribunal, DELHI BENCH ‘F’: NEW DELHI
Appellant by Mr. Himanshu Garg, CA Respondent by Mr. Sanjay Kumar, Senior Departmental Representative (“Sr. DR”, for short) ORDER PER BENCH: (A) These four appeals by Assessee are filed against the common order dated 27/02/2019 of Learned Commissioner of Income Tax (Appeals)-1, Gurgaon [“Ld. CIT(A)”, for short], for Assessment Years 2012-13, 2013-14, 2014-15 and 2016-17 respectively. For the sake of convenience, these four appeals are hereby disposed off through this common and consolidated order.
The grounds of appeals taken in these appeals are as under:
ITA No.3882/Del/2019 for AY 2012-13
“1. That on the facts and circumstances of the case, the order passed by Ld. CIT(A) under section 250 of the Act is bad in law. 2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the assessment order passed by Learned Deputy Commissioner of Income Tax, Circle-2(1), Gurgaon [ Ld. AO ] in disallowing the amount of depreciation amounting to Rs. 24,75,000 in AY 2012-13. The Page 2 of 9 , 3883, 3884, 3885/Del/2019 M/s Plastic Omnium Auto Inergy Manufacturing India Pvt. Ltd. vs. DCIT said amount o depreciation was on account of international transaction pertaining to payment of development expenses amounting to Rs.1,98,00,000 entered into by the Appellant with its associated enterprise in AY 2011-12.
That on the facts and circumstances of the case and in law, the Ld. DCIT/the Learned Additional Commissioner of Income Tax, Transfer Pricing Officer-1(3), New Delhi [“Ld. TPO] in AY 2011-12, erred in holding that the transaction pertaining to payment of development expenses does not satisfy the arm’s length principle (‘ALP’) envisaged under the Act and considered its ALP at NIL. Consequent to the above, the depreciation on cost of aforesaid development expenses has been disallowed in AY 2012- 13.
That on the facts and circumstances of the case, the Ld. C1T(A) grossly erred in interpreting that the grounds of appeal
filed before him were not relevant to the appeal filed for subject year (i.e. AY 2012-13) citing that the Transfer Pricing adjustment made by TPO in AY 2011-12 is not pending before him and thereby dismissed the appeal for subject year. The Ld. CIT(A) failed to appreciate that the disallowance made in AY 2012- 13 is consequential to the adjustment made in AY 2011-12.
5. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in not adjudicating penalty proceedings under section 271(1)(c) initiated in the assessment order passed by Ld. AO. That the above grounds are independent and without prejudice to one another. The Appellant craves leave to add, amend, alter and or modify any of the grounds of appeal on or before the hearing.” AY 2013-14 “1. That on the facts and circumstances of the case, the order passed by Ld. CIT(A) under section 250 of the Act is bad in law.
2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the assessment order passed by Learned Deputy Commissioner of Income Tax, Circle-2(1), Gurgaon [ Ld. AO ] in disallowing the amount of depreciation amounting to Rs.43,31,250 in AY 2013-14. The said amount o depreciation was on account of international transaction pertaining to payment of development expenses amounting to Rs.1,98,00,000 entered into by the Appellant with its associated enterprise in AY 2011-12.
3. That on the facts and circumstances of the case and in law, the Ld. DCIT/the Learned Additional Commissioner of Income Tax, Transfer Pricing Officer-1(3), New Delhi [“Ld. TPO ] in AY 2011-12, erred in holding that the transaction pertaining to payment of development expenses does ITA Nos.3882, 3883, 3884, 3885/Del/2019 M/s Plastic Omnium Auto Inergy Manufacturing India Pvt. Ltd. vs. DCIT not satisfy the arm’s length principle (‘ALP’) envisaged under the Act and considered its ALP at NIL Consequent to the above, the depreciation on WDV of aforesaid development expenses has been disallowed in AY 2012- 13. 4. That on the facts and circumstances of the case, the Ld. CIT(A) grossly erred in interpreting that the grounds of appeal
filed before him were not relevant to the appeal filed for subject year (i.e. AY 2013-14) citing that the Transfer Pricing adjustment made by TPO in AY 2011-12 is not pending before him and thereby dismissed the appeal for subject year. The Ld. CIT(A) failed to appreciate that the disallowance made in AY 2013- 14 is consequential to the adjustment made in AY 2011-12.
5. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in not adjudicating penalty proceedings under section 271(1)(c) and interest charged under section 234C in the assessment order passed by Ld. AO. That the above grounds are independent and without prejudice to one another. The Appellant craves leave to add, amend, alter and or modify any of the grounds of appeal on or before the hearing.” for AY 2014-15 “1. That on the facts and circumstances of the case, the order passed by Ld. CIT(A) under section 250 of the Act is bad in law.
2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the assessment order passed by Learned Deputy Commissioner of Income Tax, Circle-2(1), Gurgaon [ Ld. AO ] in disallowing the amount of depreciation amounting to Rs.32,48,438 in AY 2014-15. The said amount of depreciation was on account of international transaction pertaining to payment of development expenses amounting to Rs.1,98,00,000 entered into by the Appellant with its associated enterprise in AY 2011-12.
3. That on the facts and circumstances of the case and in law, the Ld. DCIT/the Learned Additional Commissioner of Income Tax, Transfer Pricing Officer-1(3), New Delhi [“Ld. TPO ] in AY 2011-12, erred in holding that the transaction pertaining to payment of development expenses does not satisfy the arm’s length principle (‘ALP’) envisaged under the Act and considered its ALP at NIL Consequent to the above, the depreciation on WDV of aforesaid development expenses has been disallowed in AY 2014- 15.
4. That on the facts and circumstances of the case, the Ld. CIT(A) grossly erred in interpreting that the grounds of appeal filed before him were not relevant to the appeal filed for subject year (i.e. AY 2014-15) citing that the Transfer Pricing adjustment made by TPO in AY 2011-12 is Page 4 of 9 , 3883, 3884, 3885/Del/2019 M/s Plastic Omnium Auto Inergy Manufacturing India Pvt. Ltd. vs. DCIT not pending before him and thereby dismissed the appeal for subject year. The Ld. CIT(A) failed to appreciate that the disallowance made in AY 2014- 15 is consequential to the adjustment made in AY 2011-12.
That on the facts and circumstances of the case, the Ld. CIT(A) has erred in not adjudicating on the interest charged under section 234A and 234B of the Act in the assessment order passed by Ld. AO. That the above grounds are independent and without prejudice to one another. The Appellant craves leave to add, amend, alter and or modify any of the grounds of appeal on or before the hearing.”
ITA No.3885/Del/2019 for AY 2016-17 “1. That on the facts and circumstances of the case, the order passed by Ld. CIT(A) under section 250 of the Act is bad in law.
2. That on the facts and circumstances of the case, the Ld. CIT(A) has erred in upholding the assessment order passed by Learned Deputy Commissioner of Income Tax, Circle-2(1), Gurgaon [ Ld. AO ] in disallowing the amount of depreciation amounting to Rs.18,27,246 in AY 2016-17. The said amount of depreciation was on account of international transaction pertaining to payment of development expenses amounting to Rs.1,98,00,000 entered into by the Appellant with its associated enterprise in AY 2011-12.
3. That on the facts and circumstances of the case and in law, the Ld. DCIT/the Learned Additional Commissioner of Income Tax, Transfer Pricing Officer-1(3), New Delhi [“Ld. TPO ] in AY 2011-12, erred in holding that the transaction pertaining to payment of development expenses does not satisfy the arm’s length principle (‘ALP’) envisaged under the Act and considered its ALP at NIL. Consequent to the above, the depreciation on WDV of aforesaid development expenses has been disallowed in AY 2016- 17.
4. That on the facts and circumstances of the case, the Ld. CIT(A) grossly erred in interpreting that the grounds of appeal filed before him were not relevant to the appeal filed for subject year (i.e. AY 2016-17) citing that the Transfer Pricing adjustment made by TPO in AY 2011-12 is not pending before him and thereby dismissed the appeal for subject year. The Ld. CIT(A) failed to appreciate that the disallowance made in AY 2016- 17 is consequential to the adjustment made in AY 2011-12. That the above grounds are independent and without prejudice to one another. The Appellant craves leave to add, amend, alter and or modify any of the grounds of appeal on or before the hearing.”
ITA Nos.3882, 3883, 3884, 3885/Del/2019 M/s Plastic Omnium Auto Inergy Manufacturing India Pvt. Ltd. vs. DCIT (B) The issues involved in these four appeals are common, and are related to the transfer pricing issue arising in the case of the assessee for AY 2011-12. In AY 2011-12, the assessee under took international transactions with its Associated Enterprise (“AE”) namely Inergy Japan, relating to payment of development expenses amounting to Rs.1,98,00,000/-. The assessee capitalized these expenses. Deprecation on the capitalized amount has been claimed in AYs 2012-13, 2013-14, 2014-15 and 2016-17, to which the present four appeals before us pertain. On perusal of records, we find that the dispute regarding capitalization of expenses, in AY 2011-12, reached Income Tax Appellate Tribunal (“ITAT”, for short); and vide order dated 14/10/2019 of Co-ordinate Bench of ITAT, Delhi in assessee’s case vide for AY 2011- 12, the issue in dispute was restored to the file of the Ld. CIT(A).
The relevant portion of the aforesaid order dated 14/10/2019 of Co- ordinate Bench of ITAT, Delhi is reproduced as under:
“13. In our considered view once the assessee has challenged the enhancement of its income by ALP adjustment, it was incumbent upon the CIT(A) to decide the appeal on merits of the case. We are of the considered view that CIT(A) ought not have dismissed the appeal. In the interest of justice and fair play we restore the entire issue to the files of the CIT(A). Page 6 of 9 , 3883, 3884, 3885/Del/2019 M/s Plastic Omnium Auto Inergy Manufacturing India Pvt. Ltd. vs. DCIT The CIT(A) is directed to decide the appeal afresh considering the merits of the quarrel after giving a reasonable and sufficient opportunity of being heard to the assessee.”
(B.1) At the time of hearing before us, the assessee was represented by Mr. Himanshu Garg, CA and Revenue was represented by Mr. Sanjay Kumar, Sr. DR. After hearing both sides, we are of the view that the issue regarding claim of depreciation in AY 2012-13, 2013-14, 2014-15 and 2016-17, to which the present appeals pertain, cannot be decided until the dispute regarding capitalization of aforesaid expenses amounting to Rs.1,98,00,000/- in assessment order is decided. We further find that the aforesaid dispute regarding capitalization of expenses amounting to Rs.1,98,00,000/- is restored to the file of the Ld. CIT(A) vide aforesaid order dated 27/02/2019 of Co-ordinate Bench of ITAT, Delhi. In the fitness of things, therefore, in the facts and circumstances of the present appeals before us, the issues in dispute in the present four appeals before us should also be restored to the file of the Ld. CIT(A) for fresh order in accordance with law, consistent with the view taken by Ld. CIT(A) in AY 2011- 12, after providing reasonable opportunity to the assessee. , 3883, 3884, 3885/Del/2019 M/s Plastic Omnium Auto Inergy Manufacturing India Pvt. Ltd. vs. DCIT Accordingly, we set aside the impugned appellate orders of the Ld. CIT(A) in the present four appeals before us and restore all the issues in dispute to the file of the Ld. CIT(A) with the direction to pass a fresh order in accordance with law, after providing reasonable opportunity to the assessee, consistent with view taken by Ld. CIT(A) in AY 2011-12 pursuant to aforesaid order dated 27/02/2019 of Co-ordinate Bench of ITAT, Delhi.
(C) All grounds of appeal are treated as disposed off in accordance with aforesaid directions.
(D) For statistical purposes, all the four appeals are treated as partly allowed.
Order pronounced in Open Court on 22/03/23.