Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: Shri Joginder Singh & Shri Rajendra
आदेश / O R D E R Per Joginder Singh (Judicial Member) The assessee as well as Revenue is in cross appeal against the impugned order dated 18/10/2011 of the ld. First Appellate Authority, Mumbai.
First we shall take up the appeal of the assessee (ITA No.8508/Mum/2012), wherein, first ground pertains to upholding the depreciation on furnish, allowed at the rate of 15%, instead of 80% and thereby confirming the amount of Rs.8,67,468/-. During hearing, the ld. counsel for the assessee, Shri Kunal Shah along with Jigar Saiya, did not press this ground, therefore, this ground is dismissed as not pressed.
2.1. The next ground is with respect to deferred revenue expenditure for a period of three years as against claim as revenue expenditure. The crux of argument is identical to the ground raised. On the other hand, the ld. DR, Shri V.K. Agarwal, contended that the claim was allowed as per the books of the assessee, thus, there is no infirmity in the impugned order on the issue in hand.
2.2. We have considered the rival submissions and perused the material available on record. We find that before the ld. Assessing Officer though the brake up of deferred revenue expenses was furnished but no documentary evidence was furnished. It was found that the treatment given by the assessee in its books of accounts itself shows that the expenditure is not of revenue in nature, therefore, it was added to the income of the assessee. The deferred revenue expenditure was in respect of market development expenses amounting to Rs.59,87,154/-, new product development expenses amounting to Rs.10,68,044/-, rent paid amounting to Rs.32,35,094/-. The assessee acquired three entities, two partnership firm namely Parle tools International and Parle Pharma Machineries through slump sale, and one Private Limited Company Parle Tools International Pvt. Ltd. through amalgamation. Prior to the merger, it was engaged in manufacturing punches and dyes for pharmaceutical industries and Parle Pharma machineries was engaged in manufacturing of packaging machine. Due to strategic merger, the focus of the assessee company was realigned in that context and the assessee had deferred certain expenses based on specific development of new market or for new product development. We find that the Ld. Commissioner of Income Tax (Appeal) has discussed the decision in Addl. CIT vs Bihar Caustic & Chemicals Ltd. 44 SOT 27(Ranchi) and since the expenses were ascertainable for a period of three years, consequently, in view of accrual, matching principle, it was held that the entire claim of expenses as Revenue was not warranted, therefore, he allowed the deferred revenue expenditure as per books of accounts of the assessee. In view of this factual matrix, we find no infirmity in the claim of the assessee, because it was as per the treatment given by the assessee in its books of accounts, therefore, the stand of the Ld. Commissioner of Income Tax (Appeal) is affirmed.
The next ground i.e. ground no.3 is with respect to capitalization of expenses incurred in relation to installation of air-conditioners taken on rent amounting to Rs.1,02,144/-. This ground was not pressed by the ld. counsel for the assessee, therefore, dismissed as not presses.
No other ground was pressed by the assessee, therefore, the appeal of the assessee is dismissed.
Now, we shall take up appeal of the Revenue, wherein, first ground pertains to allowing deduction of the entire deferred revenue expenditure of Rs.1,02,90,292/-, as per books as revenue expenditure without appreciating the fact that the assessee would derive benefit of enduring nature from the said expenditure being capital in nature. In the light of the material facts available on record, we find that the Ld. Commissioner of Income Tax (Appeal) had made an elaborate discussion on the issue, therefore, considering the factual finding recorded in the impugned order in para 8.3 onwards, we find no infirmity in his conclusion, therefore, this ground of the Revenue is having no merit, consequently, dismissed.
The last ground raised by the Revenue is with respect to allowing Rs.91,25,388/- on account of estimation of net profit, subject to verification by the Assessing Officer. The ld. DR advanced arguments, which is identical to the ground raised. On the other hand, the ld. counsel for the assessee defended the counsel arrived at in the impugned order.
6.1. We have considered the rival submissions and perused the material available on record. The facts, in brief, are that the ld. Assessing Officer made addition of Rs.,91,25,388/- estimating the net profit applying the net profit ratio of previous year. It is noted that the ld. Assessing Officer has considered the submissions of the assessee as contained in para 15.2 (page-26 onwards) of the impugned order and found that vide submission dated 03/09/2010, the assessee furnished a note before the Assessing Officer mentioning the reasons for fall in net profit as comparison to previous year due to addition of business of Parle Pharma Machinery, Parle Tool International to the existing business and incurred additional expenditure such as rent and salaries which lead to fall in the net profit. Considering the factual finding recorded in the impugned order, broadly, we are in agreement with the direction to the Assessing Officer to verify the figures of expenditure and income of four entities before and after the merger. We find no infirmity in the direction, thus, the impugned ground is having no merit, consequently, dismissed.
Finally, the appeal of the assessee as well as of the Revenue is dismissed.
This order was pronounced in the open in the presence of ld. representatives from both sides at the conclusion of the hearing on 18/05/2016.