Instrument Research Associates P. Ltd.,, Bangalore v. ACIT, Bangalore

ITA 1158/BANG/2009 | 2005-2006
Pronouncement Date: 12-04-2010 | Result: Partly Allowed

Appeal Details

RSA Number 115821114 RSA 2009
Bench Bangalore
Appeal Number ITA 1158/BANG/2009
Duration Of Justice 4 month(s) 4 day(s)
Appellant Instrument Research Associates P. Ltd.,, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 12-04-2010
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 12-04-2010
Date Of Final Hearing 07-04-2010
Next Hearing Date 07-04-2010
Assessment Year 2005-2006
Appeal Filed On 08-12-2009
Judgment Text
PAGE 1 OF 7 ITA N O.1158/BANG/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH B' BEFORE DR. O K NARAYANAN VICE PRESIDENT AND SHRI GEORGE GEORGE K J.M. ITA NO.1158/BANG/09 (ASST. YEAR 2005-06) INSTRUMENT RESEARCH ASSOCIATES P. LTD. PLOT NO.73-F 'SUBHAVAN' ELECTRONIC CITY HOSUR ROAD BANGALORE. - APPELLANT VS THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE-11(4) BANGALORE. - RESPONDENT APPELLANT BY : SHRI R SATHYANARAYA MURTHI C.A. RESPONDENT BY : SMT. V S SREELEKHA ADDL.CIT O R D E R PER GEORGE GEORGE : THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST T HE CIT(A)'S ORDER DATED 22.9.2009 IN RELATION TO ASST. YEAR 200 5-06. 2. BRIEFLY STATED THE FACTS ARE AS FOLLOWS:- THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF ELECTRONIC MEASURING INSTRUMENTS DISPLAYS CNC MACHINES AND TRADING IN SIGNAGE BOARDS. THE ASSESS EE FILED ITS RETURN OF INCOME FOR THE CONCERNED ASST. YEAR ON 28.10.2005 D ECLARING A LOSS OF RS.1 45 590/-. THE ASSESSMENT WAS TAKEN UP FOR SCR UTINY AND ASSESSMENT ORDER WAS PASSED U/S 143(3) ON 3.12.2007 FIXING A TOTAL PAGE 2 OF 7 ITA N O.1158/BANG/2009 2 INCOME OF RS.6 39 595/- AND RAISING A DEMAND OF RS. 1 56 342/-. IN THE ASSESSMENT SO COMPLETED THE ASSESSING OFFICER MADE THE FOLLOWING DISALLOWANCES/ADDITIONS:- 1. DEPRECIATION ON PATENTS AMOUNTING TO RS.6 188/- 2. LOAN PROCESSING CHARGES OF RS.28 800/- 3. CAPITAL EXPENDITURE ON R&D OF RS.1 14 321/- 4. INCOME RECEIVED FROM IOCL OF RS.78 758/-. 3. THE FIRST APPELLATE AUTHORITY CONFIRMED THE ASS ESSING OFFICER'S ACTION IN RESPECT OF THE ADDITIONS MADE A BOVE AND DISMISSED THE APPEAL OF THE ASSESSEE. 4. THE ASSESSEE BEING AGGRIEVED FOR REDRESSAL IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS:- I) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I ERRED IN DISALLOWING DEPRECIATION ON PATENTS OF RS.6 188/- ON THE GROUND THAT THE PATENT WAS IN THE NAME OF THE DIRECTOR AND HAS BEEN USED AS AN ASSET OF THE COMPANY. THE PATENT WAS ISSUED FOR A DEVICE FOR PREVENTION OF PILFERAGE WHI CH IS ALSO AN ELECTRONIC MEASURING INSTRUMENT. II) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I ERRED IN CONFIRMING THE DISALLOWANCE OF RS.28 800/- AS LOAN PROCESSING CHARGES. THE LEARNED ASSESSING OFFICER ERRED IN NO T APPRECIATING THE CONTENTIONS OF THE ASSESSEE THAT T HE EXPENDITURE PERTAIN TO ASST. YEAR 2004-05 AND HAD NOT BEEN CLAIMED IN ASST. YEAR 2005-06. III) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I ERRED IN MAKING AN ADDITION OF RS.78 758/- BASED ON AIR REPORT. IV) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A)-I ERRED IN CONFIRMING THE PAGE 3 OF 7 ITA N O.1158/BANG/2009 3 DISALLOWANCE OF RS.1 14 321/- RELATING TO CAPITAL EXPENDITURE U/S 34(1)(IV). 5. THE FIRST GROUND RELATES TO THE ISSUE OF DISALL OWANCE OF CLAIM OF DEPRECIATION AMOUNTING TO RS.6 188/-. 5.1 THE ASSESSING OFFICER IN THE COURSE OF SCRUT INY ASSESSMENT NOTED THAT THE ASSESSEE COMPANY HAD CLA IMED DEPRECIATION OF A SUM OF RS.6 188/- ON ACCOUNT OF USE OF A PATEN T. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR TW O REASONS; (I) THE PATENT WAS IN THE NAME OF ONE OF THE DIRECTORS AND NOT IN THE NAME OF THE ASSESSEE COMPANY AND (II) THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THE USE OF PATENT IN ITS BUSINESS. 5.2 THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSI NG OFFICER. 5.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE BEFORE THE AUTHORITIES BELOW AS TO HOW THE PATENT O N WHICH DEPRECIATION IS CLAIMED IS USED FOR THE PURPOSE OF ASSESSEE'S BU SINESS. THE ASSESSEE IS A COMPANY INVOLVED IN THE MANUFACTURE OF ELECTRO NIC MEASURING INSTRUMENTS DISPLAYS CNC MACHINES AND TRADING IN SIGNAGE BOARDS. THESE PRODUCTS ARE IN NO WAY CONNECTED WITH THE PAT ENT WHICH IS GIVEN FOR A PILFERAGE PREVENTION DEVICE. ACCORDINGLY T HIS GROUND OF THE ASSESSEE IS DISMISSED. 6. IN GROUND NO.2 THE ASSESSEE QUESTIONS THE CONF IRMATION OF DISALLOWANCE OF RS.28 800/- CLAIMED AS LOAN PROCESS ING CHARGES. PAGE 4 OF 7 ITA N O.1158/BANG/2009 4 6.1 THE ASSESSING OFFICER IN THE ASSESSMENT ORDER STATES THAT IN THE LEDGER ACCOUNTS PRODUCED BY THE AUTHORIZED R EPRESENTATIVE A SUM OF RS.28 800/- WAS CLAIMED AS A LOAN PROCESSING CHA RGES. IT WAS FURTHER STATED THAT THE SAME PERTAINS TO ASST. YEAR 2004-05 AND NOT THE CONCERNED ASST. YEAR. THE ASSESSING OFFICER CONCLU DED THAT THE ABOVE SUM WAS A PRIOR PERIOD EXPENDITURE AND ALSO WAS CAP ITAL IN NATURE SINCE THE LOAN FROM KSFC WAS A TERM LOAN AND HENCE A SUM OF RS.28 800/- WAS DISALLOWED. 6.2 THE CIT(A) CONFIRMED THE ASSESSING OFFICER'S O RDER BY HOLDING THUS:- 'THE ASSESSING OFFICER HAS RIGHTLY POINTED OUT THAT THE EXPENDITURE PERTAINS TO ASST. YEAR 2004-05 AND NOT FOR THIS YEAR I.E. ASST. YEAR 2005-06 AND THEREFORE IT IS NOT ALLOWABLE'. 6.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. WE FIND THE ASSESSING OFFICER HAS ERRED IN DISALLOWING THE LOAN PROCESSING CHARGES OF RS.28 80 0/-. THE SAID AMOUNT PERTAINED TO PREVIOUS YEAR AND THE SAME HAS NOT BEEN CHARGED TO P&L ACCOUNT FOR THE CONCERNED YEAR ENDING NAMEL Y 31/3/2005. SINCE IT IS NOT CLAIMED AS A DEDUCTION THE AMOUNT CANNOT BE ADDED BACK. WE ARE OF THE VIEW THAT THE ORDER OF THE AUT HORITIES BELOW IS NOT CORRECT AND NOT IN ACCORDANCE WITH LAW. ACCORDINGL Y WE REVERSE THE SAME. 6.4 IN THE RESULT THIS GROUND OF THE ASSESSEE SUC CEEDS. PAGE 5 OF 7 ITA N O.1158/BANG/2009 5 7. THE 3RD GROUND MENTIONED ABOVE RELATES TO THE I SSUE OF ADDITION OF RS.78 758/- BASED ON AIR REPORT. 7.1. THE ASSESSING OFFICER WAS INFORMED THAT FOR THE SERVICES RENDERED TO IOCL THE ASSESSEE WAS IN RECEIPT OF A SUM OF RS.78 758/-. SINCE THERE WAS NO TDS CERTIFICATE FROM IOCL ENCLOS ED WITH THE RETURN THE ASSESSING OFFICER DIRECTED THE ASSESSEE TO PROVE WHETHER A SUM OF RS.78 758/- RECEIVED FOR SERVICES RENDERED T O IOCL IS INCLUDED IN THE INCOME DISCLOSED IN THE RETURN. SINCE THERE WAS NO RECONCILIATION GIVEN BY THE ASSESSEE COMPANY THE ASSESSING OFFICE R ASSUMED THAT THE INCOME IN RESPECT OF SERVICES RENDERED TO IOCL WAS NOT OFFERED TO TAX AND IN ABSENCE OF TDS CERTIFICATE FROM IOCL A SUM OF RS.78 758/- WAS ADDED TO THE INCOME. 7.2 EVEN BEFORE THE FIRST APPELLATE AUTHORITY THE ASSESSEE WAS NOT ABLE TO PROVE THE RECEIPT OF AMOUNT FROM IOCL WAS INCLUDED IN THE INCOME RETURNED AND HENCE THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. 7.3 HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD WE FIND NO INTERFERENCE IS CALL ED FOR IN THE ORDER OF THE CIT(A). NO EVIDENCE HAS BEEN PROVIDED EVEN AT THIS STAGE TO SUBSTANTIATE THAT THE AMOUNT RECEIVED FOR SERVICES RENDERED TO IOCL HAS BEEN INCLUDED IN THE INCOME RETURNED. THEREFOR E THIS GROUND OF THE ASSESSEE IS DISMISSED. 8. THE 4TH GROUND RELATES TO DISALLOWANCE OF CAPIT AL EXPENDITURE U/S 35(1)(IV) OF THE I T ACT AMOUNTING TO RS.1 14 121/-. PAGE 6 OF 7 ITA N O.1158/BANG/2009 6 8.1 IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAD MENTIONED THE CLAIM U/S 35D OF THE I T ACT. IN THE GROUNDS OF APPEAL THE ASSESSEE HAD STATED THAT THE CLAIM IS U/S 34(1) (IV). IT IS TO BE MENTIONED HERE THAT THE CLAIM OF THE ASSESSEE IS WI TH REGARD TO CAPITAL EXPENDITURE U/S 35(1)(IV) OF THE I T ACT. THE ACTI ON OF THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF DEDUCTION OF CA PITAL EXPENDITURE U/S 35(1)(IV) OF THE I T ACT WAS CONFIRMED BY THE CIT(A ) ON THE FOLLOWING REASONS:- 'FOR ALLOWANCE OF SUCH THE EXPENDITURE MUST BE FOR IN HOUSE SCIENTIFIC RESEARCH AND SECONDLY THE SAME MUST HAVE BEEN INCURRED AND CLAIMED IN THE PREVIOUS YEAR WITH CORROBORATIVE PROOFS. BEFORE THE AO NO CERTIFICATE OF APPROVAL OF DSIR WAS PRODUCED. ALSO NO COPY OF AGREEMENTS WITH OIL COMPANIES FOR MANUFACTURE OF MONOLITHS COULD BE PRODUCED TO JUSTIFY THE INCURRING OF EXPENDITURE ON PURCHASE OF HYDRAULIC CRANES AIR COMPRESSORS TRIPOD STAND ELECTRIC MOTOR AS SHOWN IN 3CD FORM RESULTING IN DISALLOWANCE AND ADDITION OF THE CLAIM. BEFORE ME A PHOTOCOPY OF A LETTER DATED MAY 12 2005 OF MINISTRY OF SCIENCE AND TECHNOLOGY IS PRODUCED MADE PART OF THIS ORDER AS ANNEXURE-I BUT NO COPY OF AGREEMENTS WITH OIL COMPANIES COULD BE PRODUCED TO JUSTIFY THAT IT WAS ASSIGNED THE CONTRACT TO MANUFACTURE 'MONOLITHS' WHICH IN TURN COULD ONLY BE DONE WITH THE HELP OF THE PURCHASED HEAVY MACHINES. THEREFORE I AM ALSO NOT CONVINCED THAT SUCH MACHINERIES WERE PURCHASED TO MANUFACTURE MONOLITHS'. 8.2 AGGRIEVED BY THE ORDER OF THE CIT(A) THE ASSE SSEE IS IN APPEAL BEFORE US RAISING THE ABOVE GROUND AND SUBMI TTED THAT THE ASSESSEE COMPANY IS A REGISTERED R&D UNIT. THE ASS ESSEE COMPANY HAD PAGE 7 OF 7 ITA N O.1158/BANG/2009 7 RECEIVED ORDER FROM OIL COMPANY WHICH REQUIRES CER TAIN RESEARCH WORK FOR WHICH CAPITAL EXPENDITURE WAS INCURRED. T HIS EXPENDITURE IS ALLOWABLE DEDUCTION U/S 35(1)(IV) OF THE I T ACT. 8.3 WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. THE CAPITAL EXPENDITURE CLAIME D U/S 35(1)(IV) OF THE ACT IS WITH REFERENCE TO THE PURCHASE OF HYDRAULIC CRANES AIR COMPRESSORS TRIPOD STAND ELECTRIC MOTOR AND THE S AME IS EVIDENT FROM THE REPORT OF FORM 3CD. AS RIGHTLY POINTED OU T BY THE CIT(A) ASSESSEE DID NOT PRODUCE ANY AGREEMENT COPY WITH TH E OIL COMPANIES WHICH STATES THAT THE ASSESSEE COMPANY WAS ASSIGNED THE CONTRACT TO MANUFACTURE 'MONOLITHS' WHICH IN TURN COULD ONLY BE PRODUCED WITH THE HELP OF THESE HEAVY MACHINES PURCHASED. IN OTH ER WORDS ASSESSEE HAS NOT BEEN ABLE TO SUBSTANTIATE THAT SUCH MACHINE S ON WHICH EXPENDITURE IS INCURRED WERE PURCHASED TO MANUFACT URE MONOLITHS. HENCE THE ADDITION IS CONFIRMED. ACCORDINGLY THI S GROUND OF THE ASSESSEE IS DISMISSED. 9. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED AS INDICATED ABOVE. THE ORDER IS PRONOUNCED ON ...12TH...APRIL 2010 SD/- SD/- (DR. O K NARAYANAN) (GEORGE GEORGE K) VICE PRESIDENT JUDICIAL MEMBE R COPY TO : 1. THE ASSESSEE 2.THE REVENUE 3. THE CI T(A) CONCERNED. 4. THE CIT CONCERNED. 5. THE DR 6. GUARD FILE. 7. GF ITAT NEW DELHI. MSP/9.4. BY ORDER ASST. REGISTRAR ITAT BANGALORE.