CIT, FARIDABAD vs. M/S MARK AUTO INDUSTRIES LTD. GURGAON

ITA/57/2009HC Punjab & HaryanaPHHC01084691200908 October 2012Author: MR. JUSTICE AJAY KUMAR MITTAL,MR. JUSTICE GURMEET SINGH SANDHAWALIA5 pages
AI SummaryDismissed

What were the facts?

The Revenue appealed to the High Court against an order of the Income Tax Appellate Tribunal (ITAT) for Assessment Year 2003-04. The ITAT had upheld the Commissioner of Income Tax (Appeals) [CIT(A)] order, which deleted an addition of Rs. 5,24,929/- on account of late payment of Provident Fund (PF) and also deleted an addition of Rs. 6,88,175/- on account of technical know-how. The assessee, M/s Mark Auto Industries Ltd., had filed its return declaring a loss. The Assessing Officer (AO) completed the assessment at a reduced loss. The CIT(A) allowed the assessee's appeal, directing verification of PF payments and allowing deduction if made within the grace period, and deleted the addition on technical know-how, holding Section 40(a)(i) inapplicable to capitalized expenditure. The Revenue's appeal to the ITAT was dismissed, leading to the present appeal.

What did the High Court hold?

The High Court held that for issue (i), the appeal stands settled by the Apex Court judgment in CIT v. Alom Extrusions Ltd. and its own judgment in CIT, Patiala v. Rai Agro Industries Ltd. Sangrur. It was held that the Second Proviso to Section 43B, omitted by the Finance Act, 2003, was clarificatory and retrospective. Therefore, the assessee was entitled to deduction for employer and employee's contribution to ESI and PF as they were deposited prior to the filing of the return under Section 139(1). Thus, this question was answered against the revenue. For issues (ii) and (iii), the Court noted that the ITAT had accepted the assessee's plea that the expenditure on technical know-how was capitalized and not claimed as revenue expenditure. Since the assessee had not claimed deduction for the amount paid, Section 40(a)(i) was not attracted. The Court found no error in the CIT(A)'s order, which was upheld by the ITAT, as the provision does not deal with the deduction of depreciation on capitalized expenditure. The Revenue's counsel could not substantiate the disallowance. Consequently, these questions were also answered against the revenue. The appeal was dismissed.

What were the issues?

The High Court had to decide the following substantial questions of law: 1. Whether the ITAT was correct in upholding the deletion of the addition of Rs. 5,24,929/- on account of late payment of PF, made by the AO under Section 2(24)(x) read with Section 36(1)(va) of the Income Tax Act, 1961, despite payments being made beyond the due date. 2. Whether the ITAT was correct in upholding the CIT(A)'s order that Section 40(a)(i) of the Income Tax Act, 1961, is not applicable to payments of technical know-how, simply because only a part of it is written off annually by way of depreciation under Section 32. 3. Whether the ITAT was correct in upholding the CIT(A)'s order, ignoring the legal position that Section 40 provides for non-deduction of amounts allowable under Sections 30 to 38, and Section 35AB falls within these sections. Assessee's arguments: For issue 1, the assessee contended that the PF payments were deposited prior to the filing of the return under Section 139(1). For issues 2 and 3, the assessee argued that the expenditure on technical know-how was capitalized and not claimed as revenue expenditure, thus Section 40(a)(i) was not attracted, and the provision does not deal with the deduction of depreciation. Revenue's arguments: For issue 1, the Revenue argued that payments were made beyond the due date. For issues 2 and 3, the Revenue contended that tax was not deducted at source on the capitalized technical know-how payments, and therefore, depreciation could not be deducted. The Revenue also argued that Section 40(a)(i) applies to all amounts allowable under Sections 30 to 38, including Section 35AB.

Which sections of the Income-tax Act were involved?

Section 2(24)(x),Section 36(1)(va),Section 43B,Section 139(1),Section 40(a)(i),Section 32,Section 40,Section 30,Section 38,Section 35AB,Section 260A

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH Date of Decision: 8.10.2012 Commissioner of Income Tax, Faridabad ....Appellant. Versus M/s Mark Auto Industries Ltd. ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE G.S. SANDHAWALIA. PRESENT: Mr. Tajender K. Joshi, Advocate for the appellant. None for the respondent. AJAY KUMAR MITTAL, J.

1.

This appeal has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 8.8.2008 passed by the Income Tax Appellate Tribunal, Delhi Bench “C”, Delhi (hereinafter referred to as “the Tribunal”) in ITA No. 4768/DEL/2007, for the assessment year 2003-04, claiming the following substantial questions of law:- (i) Whether, on the facts and in the circumstances of the case, the Ld. ITAT was right in law in upholding the order of the Ld. CIT(A) in deleting the addition of Rs.5,24,929/- on account of late payment of PF made by the Assessing Officer u/s 2(24)(x) read with section -2- 36(1)(va) of the Income Tax Act, 1961 without appreciating the fact that the payments were made

The order continues below.

Read the full judgment

A free account opens 10 full judgments a month. Re-reading one you have already opened does not count again.

Create a free accountSign in

See plans and prices

The summary, the parties, the sections and the citations above are open to everyone and always will be. Only the text of the order and the PDF are metered.

More judgments on Section 2(24)(x)

All 2,262 judgments and leading authorities on Section 2(24)(x) →

Recent GST High Court judgments

Search GST case law →