Dy.CIT, Cir.8, Akurdi, Pune, Pune v. Sandvik Asia Ltd.,, Pune

ITA 140/PUN/2006 | 2000-2001
Pronouncement Date: 30-11-2011 | Result: Dismissed

Appeal Details

RSA Number 14024514 RSA 2006
Assessee PAN APRIL2008O
Bench Pune
Appeal Number ITA 140/PUN/2006
Duration Of Justice 5 year(s) 9 month(s) 26 day(s)
Appellant Dy.CIT, Cir.8, Akurdi, Pune, Pune
Respondent Sandvik Asia Ltd.,, Pune
Appeal Type Income Tax Appeal
Pronouncement Date 30-11-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 30-11-2011
Assessment Year 2000-2001
Appeal Filed On 03-02-2006
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B PUNE BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO ACCOUNTANT MEMBER ITA NO. 140/PN/2006 (ASSTT. YEAR: 2000-01) DY. COMMISSIONER OF INCOME-TAX APPELLANT CIRCLE 8 AKURDI PUNE V. SANDVIK A SIA LTD. ... RESPONDENT MUMBAI-PUNE ROAD DAPODI PUNE 411 012 APPELLANT BY : SHRI S.K. SINGH RESPONDENT BY : SHRI J.D. MISTRY DATE OF HEARING : 15.11.11 DATE OF PRONOUNCEMENT: .11.11 ORDER PER I.C. SUDHIR JM GROUND NO. 1 OF THE APPEAL HAS BEEN FIXED FOR HEAR ING BEFORE THE TRIBUNAL IN COMPLIANCE OF THE ORDER DATED 21 ST SEPTEMBER 2010 IN M.A. NO. 81/PN/2009 PREFERRED BY THE REVENUE ON THE BASIS THAT THERE IS MISTAKE APPARENT FROM RECORD IN THE ORDER DATED 22 ND APRIL 2008 OF THE TRIBUNAL AS GROUND NO. 1 RAISED IN THE APPEAL HAS REMAINED TO BE ADJUDICATED UPON. WE ACCORDINGL Y HEARD THE PARTIES ON THE ISSUE RAISED IN THE GROUND NO. 1 TO WHICH WE ARE CO NFINED TO ADJUDICATE UPON. 2. THE GROUND NO. 1 RAISED IS REPRODUCED HEREUNDER : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD CIT(A) ERRED IN DELETING ADDITION ON ACCOUNT OF VRS. 3. THE A.O. DISALLOWED THE ASSESSEES CLAIM OF DEDU CTION OF A SUM OF RS.5 52 66 000/- TOWARDS VOLUNTARY RETIREMENT COST. THE LD CIT(A) HAS HOWEVER ALLOWED THE SAME. AGGRIEVED REVENUE HAS PREFERRED APPEAL ON THIS GROUND. ITA . NO. 140 /PN/2006 SANDVIK ASIA LTD. A.Y. 2000-01 PAGE OF 5 2 4. HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW WE FIND THAT BEFORE THE A.O THE ASSESSEE HAD FURNISHED DETAILS OF THE S CHEME FLOATING DURING THE YEAR UNDER CONSIDERATION AND HAD ALSO FURNISHED DETAILS OF PAYMENT MADE. THIS SCHEME WAS DULY APPROVED BY THE LD CHIEF COMMISSIONER OF INCOME TAX PUNE. IT WAS SUBMITTED THAT THE PURPOSE OF THE SCHEME IS TO REDU CE THE SIZE OF ITS WORK FORCE TO ENABLE THE COMPANY TO MANAGE IT IN A MORE ECONOMIC AND SUFFICIENT MANNER. IT WAS SUBMITTED THAT BY VIRTUE OF THIS SCHEME THE C OMPANY HAS INCURRED THE EXPENDITURE WHICH WILL HELP TO REDUCE ITS MANPOWER AND HENCE BY MAKING THIS PAYMENT THE COMPANY IS GOING TO DRAW BENEFIT OF EN DURING NATURE. IT WAS SUBMITTED THAT THE EXPENSES INCURRED ARE WHOLLY AND EXCLUSIVELY FOR THE EFFICIENT RUNNING OF BUSINESS WHEREBY IT HAS ACHIEVED REDUCTI ON IN NUMBER OF ITS WORKMEN AND DID NOT CLOSE ANY PART OF ITS BUSINESS OPERATIO N. IT WAS SUBMITTED THAT JUST AS RECRUITMENT OF WORKERS IS REQUIRED FOR BUSINESS WHE RE THE WORK FORCE IS EXCESS A RATIONALIZATION IS ESSENTIAL AND ANY EXPENSES INCUR RED FOR THIS PURPOSE CANNOT BE REGARDED AS CAPITAL IN NATURE. THUS SUCH EXPENSES SHOULD BE ALLOWED AS DEDUCTIBLE U/S. 37 (1) OF THE ACT. THE A.O DID NOT AGREE WITH THIS EXPLANATION OF THE ASSESSEE. FOLLOWING THE DECISION ON AN IDENTICAL ISSUE IN TH E ASSESSMENT FOR THE A.Y. 1999- 2000 HE HELD THAT EXPENDITURE OF RS.5 52 66 000/- ON ACCOUNT OF VOLUNTARY RETIREMENT SCHEME IS CAPITAL EXPENDITURE AND HENCE CANNOT BE ALLOWED U/S. 37(1) OF THE ACT. 5. SIMILAR EXPLANATION HAS BEEN GIVEN BEFORE THE LD CIT(A). FOLLOWING DECISIONS CITED BEFORE THE A.O WERE ALSO RELIED UPON BEFORE T HE LD CIT(A) : (I) K. RAVINDRANATH NAIR VS. CIT (2001) 247 ITR 17 8(SC) (II) W.T. SUREN & CO. LTD. VS. CIT (1998) 230 ITR 643(SC) CONSIDERING THE ABOVE SUBMISSIONS THE LD CIT(A) H AS GIVEN HIS FINDING ON THE ISSUE IN PARA NO. 9.3 OF THE FIRST APPELLATE ORDER REPROD UCED HEREUNDER : 9.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SU BMISSIONS. I FIND THAT THE APPELLANT HAD CLAIMED DEDUCTION UNDER THE VERY SAME SCHEME FOR THE ITA . NO. 140 /PN/2006 SANDVIK ASIA LTD. A.Y. 2000-01 PAGE OF 5 3 PRECEDING ASSESSMENT YEAR AS WELL. IN THE APPELLA TE ORDER FOR THE ASSESSMENT YEAR 1999-00 IN I.T. APPEAL NO. PN/CIT(A )-III/CIR.8/28/02-03/369 DATED 12.7.2004 THE FACTS PERTAINING TO THIS ISSUE AS WELL AS THE VARIOUS ARGUMENTS ADVANCED BY THE APPELLANT THEREON HAVE BE EN DISCUSSED ELABORATELY. IT WAS HELD BY THE COMMISSIONER OF IN COME-TAX (APPEALS) THAT SINCE THE APPELLANT HAD FLOATED THE VOLUNTARY RETIR EMENT SCHEME IN ORDER TO REDUCE THE WORK FORCE WITH THE OBJECT OF RUNNING ITS BUSINESS EFFICIENTLY THE EXPENDITURE INCURRED BY WAY OF MAKING PAYMENTS TO THE RETIRING EMPLOYEES COULD ONLY BE SEEN AS DICTATED BY COMMERCIAL EXPEDI ENCY. THE BENEFIT CANNOT BE HELD TO BE IN THE CAPITAL FIELD EVEN THO UGH COULD BE ENDURING IN SOME SENSE. ACCORDINGLY THE ENTIRE CLAIM MADE FO R THE ASSESSMENT YEAR 1999-00 WAS HELD AS REVENUE EXPENDITURE HENCE ALLO WABLE. I AM IN FULL AGREEMENT WITH THE FINDING THUS GIVEN BY THE PREDE CESSOR COMMISSIONER OF INCOME-TAX (APPEALS). FOR THIS REASON AND ALSO AS THE FACTS PERTAINING TO THE PRESENT ASSESSMENT YEAR ARE SIMILAR THE FINDING GI VEN IN THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 1999-00 IS HEREBY FOLLOWE D. CONSEQUENTLY THE DISALLOWANCE OF RS.5 52 66 000/- MADE IN THE ASSESS MENT FOR THE ASSESSMENT YEAR 2000-01 IN THIS MATTER IS DELETED. 6. BEFORE US THE LD. D.R. HAS BASICALLY TRIED TO J USTIFY THE ASSESSMENT ORDER DISCUSSED ABOVE. THE LD. A.R. ON THE OTHER HAND P LACED RELIANCE ON THE FIRST APPELLATE ORDER ON THE ISSUE. IN ADDITION TO DECISI ONS CITED BEFORE THE AUTHORITIES BELOW HE ALSO PLACED RELIANCE ON THE FOLLOWING DEC ISIONS : I) CIT VS. SHRI RAMVILAS SERVICES LTD. 211 ITR PA GE 763 (MAD.) II) CIT VS. BHOR INDUSTIRES LTD. 264 ITR 180 (BOM ) 7. ON PERUSAL OF THE FIRST APPELLATE ORDER WE FIND THAT THE LD CIT(A) HAS FOLLOWED THE FINDING OF THE FIRST APPELLATE AUTHORI TY ON THE ISSUE IN THE CASE OF ASSESSEE ITSELF FOR THE A.Y. 1999-2000 PREFERRED AG AINST THE ASSESSMENT FOR THE SAID A.Y. WHICH HAS BEEN FOLLOWED BY THE A.O IN THE PRE SENT A.Y. EVEN BEFORE US THE MATERIAL FACT THAT THE ASSESSEE HAD FLOATED VOLUNTA RY RETIREMENT SCHEME IN ORDER ITA . NO. 140 /PN/2006 SANDVIK ASIA LTD. A.Y. 2000-01 PAGE OF 5 4 TO REDUCE THE WORK FORCE WITH THE OBJECT OF RUNNING ITS BUSINESS EFFICIENTLY HAS NOT BEEN REBUTTED. NOR IS THERE ANY REASON AVAILABLE O N RECORD TO DOUBT THE EXPLANATION OF THE ASSESSEE THAT THE EXPENDITURE INCURRED BY WA Y OF MAKING PAYMENTS TO THE RETIRING EMPLOYEES WAS DICTATED BY COMMERCIAL EXPED IENCY. IN THIS REGARD WE ALSO FIND SUPPORT FROM THE DECIS ION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BHOR INDUSTRIES LTD. (SUPRA) HOLDING THAT THE VOLUNTARY RETIREMENT SCHEME EXPENSES INCURRED BY THE ASSESSEE COMPANY TO SAVE ON THE EXPENSES BEING REVENUE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS ARE ALLOWABLE IN ITS ENTIRE TY IN THE YEAR IN QUESTION. THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SH RI RAMVILAS SERVICES LTD. (SUPRA) HAS ALSO BEEN PLEASED TO HOLD THAT THE RETRENCHMENT COMPENSATION PAID TO VOLUNTARY RETIREMENT EMPLOYEES AS PER SCHEME AGREED TO BETWEE N THE ASSESSEE AND THE EMPLOYEES ARE ADMISSIBLE AS BUSINESS EXPENDITURE AN D HENCE DEDUCTION IS ALLOWABLE. UNDER THESE CIRCUMSTANCES WE DO NOT FIND REASON TO INTERFERE WITH THE FIRST APPELLATE ORDER. THE SAME IS UPHELD. THE GROUND I S ACCORDINGLY REJECTED. 8. CONSEQUENTLY THE APPEAL ON GROUND NO. 1 IS DISM ISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 30TH NOVEMBER 2011. SD/- SD/- ( D. KARUNAKARA RAO ) ACCOUNTANT MEMBER (I.C. SUDHIR ) JUDICIAL MEMBER PUNE DATED THE 30TH NOVEMBER 2011 US COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT ITA . NO. 140 /PN/2006 SANDVIK ASIA LTD. A.Y. 2000-01 PAGE OF 5 5 3. THE CIT V PUNE 4. THE CIT(A)- III PUNE 4. THE D.R. B BENCH PUNE 5. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE