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Income Tax Appellate Tribunal, MUMBAI ‘J’ BENCH, MUMBAI
These three appeals pertain to the same assessee, involve a common issue and were heard together. As a matter of convenience, therefore, all the three appeals are being disposed of together by way of this consolidated order.
These appeals were originally disposed of by the Tribunal vide order dated 11th April 2. 2019, but subsequently, vide order dated 22nd January 2020 on the miscellaneous application nos. 461 to 463/Mum/2019, the aforesaid order was recalled for the limited purposes for deciding the ground of appeals regarding disallowance of connectivity charges. While so recalling the order, the Tribunal had, in the order dated 22nd January 2020, observed as follows:
,1785/Mum/16, and 2162/Mum/17 Assessment years: 2010-11, 2011-12 and 2012-13 Page 2 of 3 6. As regards the disallowance of E-connectivity charges, it is the submission of the ld. Counsel of the assessee that it has been submitted that the issue was decided by this Tribunal in assessee’s own case in assessee’s favour but the Tribunal had ignored the same.
We find that on this issue, the Tribunal has noted that there were no convincing arguments by the ld. Counsel of the assessee, hence, the ITAT had upheld the order of the authorities below. Now, since it is the contention of the ld. Counsel of the assessee, assessee’s own case which was in favour of assessee on the said issue has not been considered, in our considered opinion, there is a mistake apparent from the record in the order of the Tribunal. Hence, on the conclusion of the decision of Apex Court in the case of Honda Siel Power Products Ltd 165 Taxman 307(SC). Accordingly, we recall the order of the disallowance of e-connectivity charges.
In the result, …..... the issue relating to disallowance of e-connectivity charges is only recalled for fresh consideration. 2 3. That is how we have come be in seisin of the matter. 4. The short issue we are thus required to adjudicate is whether the e-connectivity charges paid by the assessee appellant to its parent company UCB SA, Belgium, was allowable as revenue expenditure, or, as held by the DRP, the same was required to be treated as capital expenditure. The quantum of this expenditure, in appeal before us, is Rs 1,46,78,376 for the assessment year 2010-11, Rs 1,81,31,790 for the assessment year 2011-12 and Rs 2,33,95,265 for the assessment year 2012-13.
Learned representatives fairly agree that this issue is covered by a series of orders of the Tribunal, in assessee’s own cases for the assessment years 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 and 2009-10. Copies of these orders were placed before us at pages 1 to 35 of the paperbook. In all these decisions, the coordinate benches have consistently held that the e connectivity expenditure, on the facts of this case, is a revenue expenditure, that there is no justification in capitalization of this expenditure.
We see no reasons to take any other view of the matter than the view so taken by the coordinate benches. We, therefore, uphold the grievances of the assessee and direct the Assessing Officer to allow the deduction of these expenses as revenue expenditure, rather than ,1785/Mum/16, and 2162/Mum/17 Assessment years: 2010-11, 2011-12 and 2012-13 Page 3 of 3 treating the same as capital expenditure and only allowing depreciation thereon. The Assessing Officer is directed to give effect to these directions, allow the revenue deduction, and reverse the depreciation allowed, if any.