DCIT - 5(1), MUMBAI vs. M/S INTER JEWEL (MUMBAI) PVT.LTD. (NOW KNOWN AS D.NAVICHANDRA GEMS PVT. LTD), MUMBAI

ITA 2755/MUM/2013Status: DisposedITAT Mumbai30 October 2015AY 2009-104 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 upheld the CIT(A)'s decision, finding no reason to interfere. It noted that the genuineness of the expenditure was not in doubt and the CIT(A) followed the principle of consistency by allowing the claim as in previous years.

What were the facts?

The assessee claimed deferred revenue expenditure written off. The Assessing Officer disallowed the claim, stating that all adjustments related to amalgamation were made in the previous assessment year. The CIT(A) allowed the claim, noting that similar expenses were allowed in earlier years.

What were the issues?

Whether deferred revenue expenditure, previously allowed in earlier assessment years, can be disallowed in the current year based on technical grounds related to amalgamation adjustments.

Which sections of the Income-tax Act were involved?

Section 143(3)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “I”, BENCH MUMBAI

Before: SHRI JOGINDER SINGH, JM & SHRI R.C.SHARMA, AM

आदेश / O R D E R

Per R.C.Sharma, AM

This is an appeal filed by the revenue against the order of CIT(A), Mumbai, dated 17-1-2013, for the assessment year 2009-2010, in the matter of order passed u/s.143(3) of the IT Act, wherein following grounds have been taken by the revenue :-

1. Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the Assessing Officer to allow the deffered revenue expenditure at Rs.1,12,28,405/- without appreciating the facts that the 2 assessee could not justify the claim with the help of supporting evidences? “Whether on the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in directing the Assessing Officer to allow the deffered the revenue expenditure at Rs.1,12,28,405/- without appreciating the fact that it is evident from the records of the case that there was no adjustment left post amalgamation and all the adjustments have already been adjusted in A.Y.2008-09? 2. Rival contentions have been heard and record perused. From the record we found that the assessee had claimed deferred revenue expenditure written off of Rs.1,53,65,032/- in the profit and loss account. The assessee was asked as to why the same should not be disallowed. The assessee mentioned vide letter dated 13.10.2011 that the amount related to Ira Diamond Jewellery P. Ltd. After amalgamation, the said company is now D. Navinchandra Gems P. Ltd and the whole amount has been written off during the year as business expense except for Rs. 41,36,626/-, which has been disallowed in the computation. The AO rejected the submissions made by the assessee as during the scrutiny assessment for AY. 2008-09, all the adjustments made with reference to the amalgamation were considered in AY. 2008-09. Therefore, there is no adjustment left to be made in AY. 2009-10. Therefore, the AO disallowed the balance amount of Rs.1,12,28,4061- in the assessment.

By the impugned order the CIT(A) allowed assessee’s claim after having the following observations :- “6.2 I have considered the submissions of the appellant and the order of the AO. The expense of Rs. 4,49,13,622/- was incurred by the Ira Diamond Jewellery, the firm which was later converted into a private limited company named Ira Diamond Jewellery P. Ltd. The expenditure of Rs. 4,49,13,622/- was incurred by the company for creating a brand "IRA" in national and international market and was 3 for the purpose of business. This company was amalgamated with the appellant and subsequently renamed as D. Navinchandra Gems P. Ltd. The above amalgamation was approved by the Hon'ble High Court of Bombay with effect from 1.1.2008 However, the amount of Rs. 2,95,48,589/- was claimed and allowed in assessment u/s. 143(3) for the following years as under :- A.Y. Amount (Rs.) 2006-07 70,91,779 2007-08 1,12,28,405 2008-09 1,12,28,405 6.3 Hence, the balance amount of Rs.1,53,65,033/- remained to be claimed, which was debited to the profit and loss account and out of which Rs. 41,36,628/- was disallowed by the appellant and the balance amount of Rs.1,12,28,405/- was claimed. This is the amount which was disallowed by the AO. 6.4 The AO has himself in the earlier years already allowed the claim of the appellant regarding the deferred revenue expenditure. The claim of the appellant and the way it was dealt is as under :- DETAILS OF DEFERRED REVENUE EXPENDITURE AY 2006-07 AY 2007-08 AY 2008-09 AY 2009-10 Opening - 21,275,336 26,593,4378 15,365,033 balance Add: 28,367,115 16,546,507 - Addition during the year Less : 7,091,779 7,091,779 7,091,779 7,091,779 Claim in P/Los A/c 4,136,626 4,136,626 4,136,626 (1/4 of the expenses) Closing 21,275,336 26,593,438 15,365,033 4,136,628 balance Allowed in 70,91,179 1,12,28,405 1,12,28,405 assessmen t 6.5 It can be seen from the above chart that the deferred revenue expenditure were divided and 1/4th of the expense was claimed every year and now only balance of Rs.41,36,628/- remains to be claimed after completion of assessment year 2009-10. In all the earlier years the claim has been examined and allowed. Though the principle of res judicata does not apply to taxation law but following the principles of consistency the AO has not doubted the genuineness of the said expenses but is only on the technical issue that the deferred revenue expenditure has been disallowed. Hence, the claim of the appellant is allowed and ground of appeal of the appellant is allowed.”

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