COMMISSIONER OF INCOIME TAX vs. JCB INDIA LTD.

$~ * IN THE HIGH COURT OF DELHI AT NEW DELHI 4. + ITA 195/2014 COMMISSIONER OF INCOME TAX -II ..... Appellant Through: Mr Kamal Sawhney, Senior Standing Counsel with Mr Raghvendra Singh, Junior Standing Counsel. versus JCB INDIA LTD. . .... Respondent Through: Mr M. S. Syali, Senior Advocate with Mr o Mayank Nagi and Mr Tarun Singh, Advocates. 5. o AND ITA 202/2014 COMMISSIONER OF INCOIME TAX ..... Appellant Through: Mr Kamal Sawhney, Senior Standing Counsel with Mr Raghvendra Singh, Junior Standing Counsel. versus JCB INDIA LTD. . .... Respondent CORAM: Through: Mr M. S. Syali, Senior Advocate with Mr Mayank Nagi and Mr Tarun Singh, Advocates. HON'BLE DR. JUSTICE S.MURALIDHAR HON'BLE MR. JUSTICE VIBHU BAKHRU ORDER 0/0 16.07.2015 1. These appeals by the Revenue pertain to Assessment Year ('A Y') 2007-08 (ITA No.202/2014) and AY 2008-09 (ITA No.195/2014) and arise of the common impugned order dated 18th September 2013 in ITA Nos. 95IDel/2012 and 6051IDe1l2012 respectively of the Income Tax Appellate Tribunal ITA Nos. 195 and 202 of 2014 Page I of5 Digitally Signed By:AMULYA Signature Not Verified

o ('IT AT'). The question answered by the IT AT in the said impugned order in favour of the Assessee was whether the addition made by the Assessing Officer ('AO') of the 'development charges' claimed by the Assessee to be revenue expenditure was justified. The case of the Revenue is that the said 'development charges' were in the nature of capital expenditure as the Assessee was thereby deriving benefit of an enduring nature. 2. In the impugned order, the IT AT has deleted the addition on the ground that in several previous A Y s the plea of the Assessee that it was revenue expenditure· was accepted. 3. Mr. Kamal Sawhney, learned Senior Standing counsel for the Department, submits that the Assessee gave no particulars of the development charges supposed to have been incurred by it in the relevant previous years and therefore failed to discharge the onus placed on it. He submitted that the rule of consistency would not apply where it can be shown that even the explanation offered by the Assessee in the previous years was not satisfactory. According to him, a wrong decision in the previous A Y s will not preclude the Revenue from seeking remand of the matter to the AO for re-examining the issue afresh after (3giving the Assessee an opportunity to provide further details. 4. Mr. M.S. Syali, learned Senior counsel for the Assessee, first referred to th~ order dated 23 rd February, 2004 passed by the ITAT in the Assessee's own case for A Y 1995-96 in which it was noted that for A Y 1993-94 also the IT AT had upheld the order of the CIT (A) deleting the addition made by the AO of the development expenses. Consequently, the addition made of the said head of expenses for A Y 1995-96 was also deleted. Mr. Syali also referred to a chart which showed that no disallowance of the development charges claimed as revenue expenditure was made from A Y s 2001-02 to 2004-05 and A Y s 2005-06 ITA Nos. 195 and 2020/2014 Page 2 0/5

and 2006-07. Although, in relation to A Y 2004-05, the issue was sought to be reopened by the Revenue, those proceedings ended in favour of the Assessee with the ITAT allowing the Assessee's appeal (ITA No. 3762IDel/2013) by an order dated 27the March, 2015. Mr. Syali further pointed out that for the subsequent A Y 2009-10, the AO has accepted the explanation offered by the Assessee and allowed the development charges as revenue expenditure. 5. The consistent explanation that has been offered by the AO in the years in which development expenses/charges was allowed as revenue expenditure is that it is a nomenclature for 'routine expenditure for research and testing of o equipment, components of the company on a year to year basis'. According to the Assessee, the expenditure under the said head, inter alia, includes expenses on: "Testing the performance of local components (vendor and lCB India vis-a-vis similar components used in lCB machines outside India. Component testing/research to improve performance, import substitution and monitor compliance with prescribed safety 0;' standards. Testing of competitor machines/components to benchmark performance of lCB machines/components." 6. It is seen that in the orders in assessment proceedings from which the present appeals arise, the AO did not hold that the details provided by the Assessee were inadequate. He only opined on the basis of the details furnished that there was a benefit of enduring nature to the Assessee thereby and that, therefore, it required to be treated as a capital expenditure. ITA Nos. 195 and 202 of 2014 Page 3 of5

r • .. 11. The appeals are, accordingly, dismissed. JULY 16,2015 MK ITA Nos. 195 and 202 of 2014 rJ S.MURALIDHAR, J VIBHU BAKHRU, J PageS of5