PR COMMISSIONER OF INCOME TAX, DELHI-2 vs. M/S. CIENA INDIA PVT. LTD.

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ITA/909/2017HC DelhiDLHC01412550201730 October 2017Bench: HON'BLE MR. JUSTICE S. RAVINDRA BHAT,HON'BLE MR. JUSTICE SANJEEV SACHDEVA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arises from the ITAT's order. The Court noted that the DRP's directions, which affirmed the capitalization treatment, were binding by virtue of Section 144C(10) of the Income Tax Act. The Court also observed that the ITAT had examined the matter taking into account all the facts. Therefore, the Court was of the opinion that the appeal filed by the Revenue did not present a substantial question of law. Consequently, the appeal was dismissed. The operative direction was the dismissal of the appeal.

What were the facts?

The Revenue has appealed to the High Court under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had deleted an amount of ₹7,13,33,358/-. The Revenue contended that these amounts could not have been capitalized and were not added to the cost of capital under Section 43A in the closing balance of the previous year. The draft assessment order, passed by the Transfer Pricing Officer (TPO) under Section 144C, was examined by the Dispute Resolution Panel (DRP). The DRP had affirmed the capitalization treatment, considering payments for fixed assets (₹3,16,95,482/-) and reinstatement of creditors for fixed assets (₹3,96,37,875/-). The ITAT also examined these aspects.

What were the issues?

1. Whether the High Court should entertain an appeal under Section 260A of the Income Tax Act when no substantial question of law arises, considering the ITAT's order affirming the DRP's directions? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee, M/s. Ciena India Pvt. Ltd. Revenue's Contentions: The Revenue argued that the ITAT erred in law by deleting ₹7,13,33,358/-. It contended that these amounts could not have been capitalized and that the corresponding amounts were not added to the cost of capital under Section 43A in the closing balance to the previous year. The Revenue's appeal is based on the premise that the ITAT's order was erroneous.

Which sections of the Income-tax Act were involved?

Section 260A,Section 144C,Section 43A,Section 144C(10)

AI-generated summary — verify with the full judgment below

ITA No.909/2017 Page 1

$~28 * IN THE HIGH COURT OF DELHI AT NEW DELHI

+ ITA 909/2017 & CM Nos.38871-38872/2017

PR COMMISSIONER OF INCOME TAX, DELHI-2 ..... Appellant Through: Mr. Zoheb Hossain, Sr. Standing Counsel for Revenue.

versus

M/S. CIENA INDIA PVT. LTD.

..... Respondent

Through: None.

CORAM: HON'BLE MR. JUSTICE S. RAVINDRA BHAT HON'BLE MR. JUSTICE SANJEEV SACHDEVA

O R D E R %

30.10.2017

Terming the deletion of `7,13,33,358/-, by the impugned order of the Income Tax Appellate Tribunal (ITAT) as an error in law, the Revenue appeals to this Court under Section 260A of the Income Tax Act. The Revenue urges that the amounts could not have been capitalized and that the corresponding amounts were not added to the cost of capital under Section 43A, in the closing balance to the previous year.

This Court notices that the draft assessment order made under Section 144C by the Transfer Pricing Officer (TPO) was examined by the Dispute Resolution Panel (DRP) which affirmed the treatment of such capitalization. The DRP took into consideration the payment towards purchase of fixed assets (valued at `3,16,95,482/-) and also noticed that a sum of `3,96,37,875/- were re-instated on account of closing balance of creditors

ITA No.909/2017 Page 2

for fixed assets. These were examined by the ITAT.

The DRP’s directions, are binding by virtue of Section 144C(10) of the Income Tax Act. In these circumstances and also noting that the ITAT examined the matter, after taking into account all the facts, the Court is of the opinion that no substantial question of law arises. The appeal is therefore dismissed.

S. RAVINDRA BHAT, J

SANJEEV SACHDEVA, J OCTOBER 30, 2017 kks

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