DCIT, NEW DELHI vs. M/S. METZELER AUTOMOTIVE PROFILES INDIA PVT. LTD., NEW DELHI

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ITA 5898/DEL/2013Status: DisposedITAT Delhi10 November 2017AY 2010-118 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that royalty payments for a specified period with no lump-sum payment do not create enduring benefit and should be treated as revenue expenditure. It also upheld the deletion of disallowances related to UPS depreciation and provisions for gratuity, warranty, and earned leave, remanding the latter for verification.

What were the facts?

The Revenue appealed against the CIT(A)'s deletion of additions made by the AO. The additions pertained to capitalizing royalty payments, disallowing depreciation on UPS, and issues related to book profit computation under Section 115JB.

What were the issues?

Whether royalty payments are capital or revenue expenditure, and the applicability of Section 79 in computing book profits under Section 115JB.

Which sections of the Income-tax Act were involved?

Section 115JB,Section 79

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, DELHI BENCH ‘E’ : NEW DELHI

Before: HON’BLE, SHRI G.D. AGRAWAL & SHRI KULDIP SINGH

For Appellant: Shri P.N. Mehta, CA
For Respondent: Ms. Shefali Swroop, CIT DR
Hearing: 01.11.2017

per the book profit to be reduced and not as per Income-tax record which have been computed under the provisions of the act and as

per books of account, it is only the loss which is to be considered and not the amount i.e. not allowable under any provisions of the Act.

1.

11. Identical issue has come up before the Tribunal in assessee’s own case in AY 2009-10 in order dated 31.05.2013 decided in favour of the assessee by returning the following findings :-

“10. Ld. Counsel submitted that sec. 79 which disentitles a company in which public is not substantially interested to carry forward and set of the losses against current years income in case there is change in shareholding, is not applicable while computing book profits u/s 115JB. In this regard he submitted that sec. 79 starts with the words “notwithstanding anything contained in this chapter”, whereas sec. 115JB starts with the words “notwithstanding anything contained in any other provision of this Act”. He, therefore, submitted that applicability of sec. 79 is confined to Chapter VI, whereas section 115JB is a code and, therefore, the book profits have to be computed as per the provisions contained therein. In this regard he relied on the decision in the case of N.J. Jose & Co. (P) Ltd. vs. Asstt. CIT, 321 ITR 132.

11.

We have considered the submissions of both the parties and have perused the record of the case.

12.

We find that AO has not disallowed the assessee’s claim invoking section 79 but on account of no details being there of business loss in the return as well as in the computation of income. Therefore, we need not to go into this issue.” 12. The assessee has brought on record the details of carry forward profit / loss up to 31.03.2009 as per books of account, copy of actuarial valuation of the earned leave liability including compensated absence for the period from 01.04.2009 to 31.03.2010 as per AS-15 (R), copy of actuarial valuation of the gratuity liability for the period from 01.04.2009 to 31.03.2010 as per AS-15 (R) and copy of annual accounts for the period ending 31.03.2010, available at pages 46 to 72 of the paper book. We are of the considered view that all these documents are required to be verified by the AO as to the figures of brought forward business loss or depreciation, actuarial valuation of the earned leave liability and actuarial valuation of the gratuity liability to recompute the book profit u/s 115JB. So, following the decision rendered by the coordinate Bench of the Tribunal in assessee’s own case for AY 2009-10 (supra), grounds no.3 & 3.1 are determined against the Revenue as per observation made herein above.

13.

Resultantly, the appeal filed by the Revenue is dismissed. Order pronounced in open court on this 10th day of November, 2017.

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