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Income Tax Appellate Tribunal, DELHI BENCH “G”, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI PRASHANT MAHARISHI
ORDER PER H.S. SIDHU : JM
The Revenue has filed this Appeal against the impugned Order dated 24.4.2014 passed by the Ld. CIT(A)-XI, New Delhi relevant to assessment year 2010-11.
The grounds raised in the Revenue’s Appeal read as under:-
On the facts and in the circumstances of the case, the Ld. CIT(A) has erred in treating the expenditure on dies for new model development as revenue expenditure and deleting the disallowance eof Rs. 80,34,087/-.
2. The Ld. CIT(A) has erred in deleting the addition on account of Total Productivity Management Programme (TPM) and ISO 9001 Certification of Rs. 12,16,796/- treating it as revenue expenditure.
3. The appellant craves to amend modify, alter, add or forego any ground(s) of appeal at any time before or during the hearing of this appeal.
The brief facts of the case are that the assessee is engaged in the business of manufacturing various automobile components like piston, piston rings, engine values. etc. Assessee filed return of income on 07.10.2010 by declaring an income of Rs. 1,07,86,14,180.
The return was processed u/s. 143(1) of the I.T. Act. The case was selected for scrutiny and the AO completed the assessment u/s. 143(3) of the Act, by making the additions/disallowances on account of expenditure on dies for new model development of Rs. 80,34,087/- and Rs. 12,16,795/- on account of expenditure on total productivity maintenance and completed the assessment at Rs. 1,09,00,41,290 u/s. 143(3) of the I.T. Act, 1961 vide order dated 20.03.2013.
Against the said order of the AO, assessee appealed before the Ld. CIT(A), who vide impugned order dated 24.4.2014 has deleted the additions and allowed the appeal of the assessee.
Aggrieved with the aforesaid order of the Ld. CIT(A), Revenue is in appeal before the Tribunal.
Ld. DR relied upon the Order of the AO and reiterated the contentions raised in the grounds of appeal and stated that the Ld. CIT(A) has wrongly deleted the additions.
7. On the contrary, Ld. Counsel of the assessee relied upon the order of the Ld. CIT(A). He stated that the issues in dispute are squarely covered by the ITAT decision dated 31.10.2013 passed in ITA in (AY 2009-10) in assessee’s own case for the assessment year 2009-10, which the Ld. CIT(A) has followed in the present assessment year i.e. 2010-11. For ready reference, he filed the copy of the Tribunal’s order dated 31.10.2013, as aforesaid. In view of above, ld. Counsel of the assessee has requested that by following the Tribunal’s decision in assessee’s own case for the assessment year 2009-10, as aforesaid, the order of the Ld. CIT(A) may be upheld by dismissing the appeal of the Revenue.
We have heard both the parties and perused the relevant records available with us, especially the orders of the revenue authorities. We find that Ld. CIT(A) has elaborately discussed the Issues in dispute vide para no. 7.1 to 8 in the impugned Order which reads as under:-
“7.1. The facts of the case and the written submissions of the appellant have been carefully considered.
Ground No. 1 of the appeal is against the disallowance of Rs. 80,34,087/- made by the AO under the head 3
'Expenditure on dies for new model development'. It is observed that the appellant has incurred expenditure of Rs.1,20,49,317/- on account of dies for new model development. However, the AO treated this expenditure as capital expenditure in nature and therefore, just allowed depreciation on the amount and disallowed the remaining amount of Rs. 80,34,087/-. In the assessment order, the AO has not given any reasoning for treating such expenditure as capital in nature and just mentioned that following earlier assessment orders, maintaining the consistency and to keep the issue alive he is treating the expenditure as capital in nature. On the other hand, the appellant has argued that this issue of expenditure on dies and models has already been decided in appellant's favour by the Jurisdictional Delhi High
Court in for A Y 1998-99 and in ITA No. 480/2003 in AY 2000-01 in appellant's own case. The Hon'ble ITAT in for AY 2009-10 has again followed the decision of Hon'ble
High Court and allowed the expenditure as revenue expenditure. Since the issue is squarely covered by the decisions of Hon'ble ITAT as well as Hon'ble
Jurisdictional High Court in the appellant's own case in earlier assessment years, the AO's action in treating the expenditure on dies and models as capital in nature is not justified. The disallowance of Rs.
80,34,087/- made by the AO is directed to be deleted.
Ground No. I of the appeal is allowed.
8. Ground No.2 of the appeal is against the disallowance of Rs. 12,16,795/- under the head
'Expenditure on Total Productivity Maintenance (TPM)
(Rs. 1,45,795/-) and expenses under 'ISO-9001' (Rs.
10,71,400/-). The AO has not given any basis for making such disallowance and just repeated the same logic that in preceding years such disallowance was made by the AO and therefore, following the principle of consistency and just to keep the issue alive, he made the disallowance. In the appellate proceedings, the appellant has produced the decision of Hon'ble
ITAT, Delhi, in wherein the issue has already been decided in favour of the appellant. Since the issue is squarely covered by the decision of higher judicial authority, the AO's action in disallowing the expenditure under the heads ‘TPM and ‘ISO-9001’, total amounting to Rs. 12,16,796/- is not justified and the same is directed to be deleted.
Ground no. 2 of the appeal is allowed.”
8.1 On perusing the above finding of the ld. CIT(A), with regard to ground no. 1 relating to deletion of disallowance of Rs. 80,34,087/- is concerned, we find that the assessee has incurred expenditure of Rs.1,20,49,317/- on account of dies for new model development.
However, the AO treated this expenditure as capital expenditure in nature and therefore, just allowed depreciation on the amount and disallowed the remaining amount of Rs. 80,34,087/-. We further note that in the assessment order, the AO has not given any reasoning for treating such expenditure as capital in nature and just mentioned that following earlier assessment orders, maintaining the consistency and to keep the issue alive he is treating the expenditure as capital in nature. On the other hand, the assessee has argued that this issue of expenditure on dies and models has already been decided in assessee’s favour by the Jurisdictional Delhi High Court in for A Y 1998-99 and in ITA No. 480/2003 in AY 2000-01 in assessee’s own case. We further find that ITAT, Delhi Bench in ITA No. 5438/Del/2012 for AY 2009-10 in assessee’s own case has again followed the decision of Hon'ble High Court and allowed the expenditure as revenue expenditure. Therefore, the issue is squarely covered by the decisions of ITAT as well as Hon'ble Jurisdictional High Court in the assessee's own case in earlier assessment years, the AO's action in treating the expenditure on dies and models as capital in nature was not justified. Hence, the Ld. CIT(A) has rightly deleted the disallowance of Rs. 80,34,087/- made by the AO, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 1 raised by the Revenue in its Appeal.
8.2 With regard to ground no. 2 relating to deletion of disallowance of Rs. 12,16,796/- is concerned, we find that the AO has not given any basis for making such disallowance and just repeated the same logic that in preceding years such disallowance was made by the AO and therefore, following the principle of consistency and just to keep the issue alive, he made the disallowance. In the appellate proceedings, the assessee has produced the decision of ITAT, Delhi, in in assessee’s own case, wherein the issue has already been decided in favour of the assessee. Since the issue is squarely covered by the decision of higher judicial authority, the AO's action in disallowing the expenditure under the heads ‘TPM and ‘ISO- 9001’, total amounting to Rs. 12,16,796/- was not justified. Hence, the Ld. CIT(A) has rightly deleted the disallowance of Rs. 12,16,796/- made by the AO, which does not need any interference on our part, hence, we uphold the order of the Ld. CIT(A) on the issue in dispute and dismiss the ground no. 2 raised by the Revenue in its Appeal.
In the result, the Appeal filed by the Revenue stands dismissed.
Order pronounced in the Open Court on 05/05/2017.