ACIT (LTU), New Delhi v. M/s Honda Siel Cars India Ltd, Greater Noida

ITA 2372/DEL/2011 | 2006-2007
Pronouncement Date: 22-07-2011 | Result: Dismissed

Appeal Details

RSA Number 237220114 RSA 2011
Assessee PAN AAACH1765Q
Bench Delhi
Appeal Number ITA 2372/DEL/2011
Duration Of Justice 2 month(s) 12 day(s)
Appellant ACIT (LTU), New Delhi
Respondent M/s Honda Siel Cars India Ltd, Greater Noida
Appeal Type Income Tax Appeal
Pronouncement Date 22-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 22-07-2011
Date Of Final Hearing 18-07-2011
Next Hearing Date 18-07-2011
Assessment Year 2006-2007
Appeal Filed On 10-05-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI C.L. SETHI JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NO.2372/D/2011 ASSESSMENT YEAR: 2006-07 ASSTT. C.I.T.(LTU) VS. M/S HONDA SIEL CARS INDIA L TD. CIRCLE NOIDA A-1 SECTOR-40/41 SURAJPUR KASNA NEW DELHI ROAD GREATER NOIDA (UP) C.O. NO.227/D/2011 (IN I.T.A. NO.2372/D/2011) ASSESSMENT YEAR: 2006-07 M/S HONDA SIEL CARS INDIA LTD. VS. A.C.I.T.(LTU) A-1 SECTOR-40/41 SURAJPUR KASNA CIRCLE NOIDA ROAD GREATER NOIDA (UP). NEW DELHI PAN NO.AAACH 1765Q (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI RUPESH JAIN AR DEPARTMENT BY : NONE ORDER PER K.G. BANSAL: AM: THIS APPEAL OF THE REVENUE AND THE CROSS OBJECTION OF THE ASSESSEE EMANATE FROM THE ORDER OF CIT(A)-LTU NEW DELH I PASSED ON 28.02.2011 IN APPEAL NO.81/09-10. THE APPEALS WERE FIXED FOR HEARING ON 12.07.2011. THE ASSESSEE FILED A CASE-LAW PAPER BOOK WHILE THE LEARNED SR. DR SOUGHT ADJOURNMENT ON THE GROUND THAT HE HAS TO GO THROUGH PAPER BOOK FOR ASCERTAINING AS TO WHETHER ALL THE ISSUES IN THE APPEALS STAND COVERED BY VARIOUS ORDERS OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE AS CONTENDED BY THE LEARNED COUNSEL. ACCOR DINGLY THE CASE WAS ADJOURNED TO 18.07.2011 WITH THE DIRECTION T HAT NO FURTHER TIME SHALL BE GRANTED. HOWEVER THE LEARNED CIT-DR MOVED AN APPLICATION FOR ADJOURNMENT ON THIS DATE OF HEARING ON THE GROUND THAT 2372-227-2011-HSCI 2 HE IS ON CASUAL LEAVE. FURTHER THE LEARNED DR WHO WAS PRESENT WAS NOT ABLE TO EXPLAIN THE URGENCY BECAUSE OF WHICH THE LEAVE IS TAKEN. HE ALSO DID NOT ARGUE THE CASE ON THE GROUND THAT THE LEARNED CIT-DR IS SUPPOSED TO ARGUE AND HE IS NOT AVAILABLE TODAY. ON THE OTHER HAND THE LEARNED COUNSEL OPPOSED THE APPLICATION ON THE GR OUND THAT ALL THE ISSUES TAKEN UP IN BOTH THE APPEALS STAND COVERED BY VAR IOUS ORDERS OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF THEREFORE T HE SAME CAN BE DECIDED ON THE BASIS OF SUCH ORDERS. HAVING CONSIDERED THE RIVAL SUBMISSION AND THE FACT THAT BOTH THE PARTIES HAD AGREE D ON 12.07.2011 THAT THE CASE SHALL BE ARGUED ON 18.07.201 1 THE APPLICATION IS REJECTED. 1.1 WE PROCEED WITH THE APPEAL OF THE REVENUE AT TH E FIRST INSTANCE. IN THIS CONNECTION IT MAY ALSO BE MENTIONED THAT THE LEARNED COUNSEL ALSO FILED A CHART SHOWING THE ORDERS OF THE TRIBUNAL UNDER WHICH A PARTICULAR GROUND STANDS COVERED. WITH THE HELP OF T HIS CHART AND ASSISTANCE RENDERED BY HIM THE GROUNDS ARE DISPOSED OFF HEREUNDER. 2. GROUND NO.1 IS THAT THE LEARNED CIT(A) ERRED IN D ELETING THE ADDITION OF LUMP SUM FEES FOR TECHNICAL KNOW-HOW AMOU NTING TO `61 20 05 000/- AND ROYALTY OF `81 71 60 464/-. TH E LEARNED COUNSEL SUBMITTED THAT THIS ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE IN THE APPEALS FOR ASSESSMENT YEARS 2000-01 2001-02 2002-0 3 2003-04 AND 2005-06. IT IS STATED THAT THE AGREEMENTS ARE THE SAME AND THERE IS NO CHANGE IN THE FACTS. SIMILAR AVERMENT WAS ALSO M ADE BEFORE THE LEARNED CIT(A) WHEN IT WAS SUBMITTED THAT NO PART OF THE LUMP SUM FEE/ROYALTY PAID TO HMCL CAN BE CONSIDERED AS CAPITAL EXPENDITURE AND THE SAME IS DEDUCTIBLE IN FULL. IN IDENTICAL CIRCUMST ANCES THE TRIBUNAL HAD ALLOWED THE DEDUCTION OF EXPENSES IN ASSESSMENT YEAR 2003-04 IN I.T.A. NO.3173/D/07 DATED 16.05.2008. IN VIEW OF T HE SUBMISSION THE LEARNED CIT(A) DELETED THE DISALLOWANCE. 2372-227-2011-HSCI 3 2.1 WE HAVE CONSIDERED THE FACTS OF THE CASE. ON PERU SAL OF THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2005-06 IN I. T.A. NO.3030/D/09 DATED 23.10.2009 IT IS SEEN THAT GROUND NOS. 1 & 2 TAKEN BY THE REVENUE WERE AGAINST DISALLOWANCE OF LUM P SUM FEE FOR TECHNICAL GUIDANCE AMOUNTING TO `26 62 04 000/- AND ROYALTY AMOUNTING TO `44 27 31 000/-. THE HONBLE TRIBUNAL MENTIONED IN PARAGRAPH NO.5 THAT THE ISSUE AND FACTS INVOLVED IN TH IS APPEAL AND IN THE APPEALS FOR ASSESSMENT YEARS 2001-02 2002-03 AND 200 3-04 ARE IDENTICAL. THOSE APPEALS WERE DECIDED IN FAVOUR OF T HE ASSESSEE FOLLOWING THOSE ORDERS LEARNED CIT(A) ALLOWED RELIEF TO THE ASSESSEE. THEREFORE IT WAS HELD THAT THE LEARNED CIT(A) DID N OT COMMIT ANY ILLEGALITY OR INFIRMITY IN DECIDING THE ISSUES. RESPEC TFULLY FOLLOWING THESE ORDERS THE MATTER IS DECIDED AGAINST THE REVENUE IN THIS YEAR ALSO AND THUS GROUND NO.1 IS DISMISSED. 3. GROUND NO.2 IS AGAINST DEDUCTION OF A SUM OF `1 05 01 000/- U/S 43B IN RESPECT OF CUSTOMS DUTY PAID ON PROVISIONAL BASIS. IT HAS BEEN SUBMITTED BY THE LEARNED COUNSEL THAT THIS ISSUE STANDS CO VERED IN THE DECISION OF THE TRIBUNAL FOR ASSESSMENT YEAR 2005-06 IN THE CASE OF THE ASSESSEE A COPY OF WHICH HAS BEEN PLACED ON RECORD. IN REGARD TO THIS ISSUE THE TRIBUNAL MENTIONED THAT THE ASSESSING OFFICER DISALLOWED THE CLAIM OF `93 78 884/- IN RESPECT OF CUSTOMS DUTY PAID ON PROVISIONAL BASIS ON THE GROUND THAT IT WAS NOT AN ASCERTAINED LIAB ILITY. THE LEARNED CIT(A) FOUND THAT SUBSEQUENTLY THE CUSTOM AUTH ORITIES REFUNDED THE AMOUNT WHICH HAS BEEN OFFERED FOR TAXA TION BY THE ASSESSEE IN ASSESSMENT YEAR 2007-08. THE LEARNED CIT(A) CO NFIRMED THE DISALLOWANCE BUT DIRECTED THE ASSESSING OFFICER TO V ERIFY THE AFORESAID CONTENTION AND IF IT IS FOUND CORRECT TO E XCLUDE THE AFORESAID SUM FROM THE TOTAL INCOME OF ASSESSMENT YEAR 2007-08. T HE TRIBUNAL CONSIDERED THE DECISION OF SPECIAL BENCH IN THE CASE O F DCIT VS. GLAXO 2372-227-2011-HSCI 4 SMITHKLINE CONSUMER HEALTH CARE LTD. 107 ITD 343 (S B) AND CAME TO THE CONCLUSION THAT THE PAYMENT TO THE CUSTOM AUTHORI TY IN THE YEAR UNDER CONSIDERATION WAS DEDUCTIBLE U/S 43B. IN VIEW O F THIS FINDING THE ASSESSING OFFICER WAS ALSO DIRECTED NOT TO GRANT ANY RELI EF IN ASSESSMENT YEAR 2007-08 IN WHICH THE REFUNDED AMOUNT WA S OFFERED FOR TAXATION. IN OTHER WORDS THE PAYMENT WAS HELD T O BE DEDUCTIBLE IN ASSESSMENT YEAR 2005-06 AND TAXABLE IN ASSESSMENT YEAR 2007 -08. RESPECTFULLY FOLLOWING THIS DECISION IT IS HELD THAT T HE ASSESSEE IS ENTITLED TO DEDUCT THE AFORESAID AMOUNT OF `1 05 01 000/- IN COMPUTING THE TOTAL INCOME FOR THIS YEAR. IN CASE THIS AMOUNT I S REFUNDED IN ANY SUBSEQUENT YEAR THE SAME WILL BE LIABLE FOR TAX. 3.1 IN RESULT THIS GROUND IS ALSO DISMISSED. 4. GROUND NO.3 IS AGAINST THE DELETING OF THE AMOUNT OF `6 05 635/- IN RESPECT OF ENTRY TAX MADE BY THE ASSESSING OFFICER B Y INVOKING THE PROVISION CONTAINED IN SECTION 43B OF THE ACT. THE C ASE OF THE LEARNED COUNSEL IS THAT THE ASSESSING OFFICER DISALLOWED THE AMOUN T AS THE PAYMENT WAS MADE UNDER PROTEST. THE LEARNED CIT(A) M ENTIONED THAT THE ENTRY TAX WAS PAID ON A PROVISIONAL BASIS AND UNDER PROTEST. HE UPHELD THE ACTION OF THE ASSESSING OFFICER BY MENTIONIN G THAT IT WAS NOT AN ASCERTAINED LIABILITY. ACCORDINGLY IT WAS AR GUED THAT THERE IS NO OCCASION FOR THE REVENUE TO FILE THE APPEAL. SINCE THE DISALLOWANCE HAS BEEN UPHELD BY THE LD. CIT(A) THE GROUND TAKEN BY THE REVENUE IS MISPLACED AND IT DOES NOT REQUIRE ANY DECISION FROM US. 5. GROUND NO.4 IS THAT THE LEARNED CIT(A) ERRED IN D ELETING THE ADDITION OF `3 18 00 796/- ON ACCOUNT OF PROVISION F OR WARRANTY. IN THIS CONNECTION IT IS MENTIONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAD SHOWN THE PROVISION FOR WARRANTIES AMOUNTING TO `5 78 20 000/- AND DEBITED A SUM OF `9 71 90 000/-. IT WAS SUBMITTED THAT THE TOTAL 2372-227-2011-HSCI 5 PROVISION AS ON 31.03.2006 STOOD AT `5 78 19 629/-. O UT OF THIS SUM AN AMOUNT OF `3 18 00 796/- WAS DEBITED TO PROFIT AN D LOSS ACCOUNT AND THE BALANCE AMOUNT OF `2 60 18 833/- CONTINUES TO BE THE BALANCE SHEET ITEM. THE PROVISION AT THE END OF EACH YEAR IS REVERSED IN THE IMMEDIATELY SUCCEEDING YEAR AND THE CLAIMS RECEIVED I N THAT YEAR ARE BOOKED IN THE WARRANTY EXPENSES ACCOUNT. THIS WAS ILLU STRATED WITH REFERENCE TO THE PROVISION OF `5 69 65 605/- STANDING TO THE CREDITS OF THIS ACCOUNT ON 31.03.2005. THE ASSESSING OFFICER CONSIDE RED THE FACTS AND THE EXPLANATION. IT IS MENTIONED THAT THE ITAT ALLOWED SIMILAR CLAIM OF THE ASSESSEE BY CONSIDERING IT AS AN ASCERTAINED LIABILITY. HOWEVER THE REVENUE IS OF THE VIEW THAT SUCH A LIABI LITY IS AN UNASCERTAINED LIABILITY. THEREFORE APPEAL HAS BEEN MOVED BEFORE THE HIGH COURT. IN VIEW OF THE DEPARTMENTAL POSITION T HE AMOUNT OF `3 18 00 796/- HAS BEEN DISALLOWED. THIS ISSUE STANDS COV ERED BY THE ORDERS OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSE SSMENT YEARS 2001-02 TO 2005-06 COPIES OF WHICH HAVE BEEN PLACED BEFORE US. IN THE DECISION FOR AY 2005-06 ONE OF THE GROUNDS TAKEN BY THE REVENUE (GROUND NO.6) WAS THAT THE LEARNED CIT(A) ERRED IN A LLOWING THE RELIEF OF `5 69 65 605/- BY HOLDING THAT THE PROVISION OF WARR ANTY IS ASCERTAINED LIABILITY AS AGAINST CONTINGENT LIABILITY HELD BY THE ASSESSING OFFICER BY PLACING RELIANCE ON THE ORDER OF THE ITAT FOR ASSESSMEN T YEARS 2002-03 AND 2003-04 AGAINST WHICH DEPARTMENT HAS FILED APPEA L BEFORE HONBLE HIGH COURT. THIS GROUND WAS DISMISSED BY FOLLOW ING THE EARLIER ORDER OF THE TRIBUNAL. THEREFORE RESPECTFULLY FOLL OWING THE EARLIER DECISIONS OF THE TRIBUNAL FOR EARLIER YEARS IT IS HELD THAT THE PROVISION IS AN ASCERTAINED LIABILITY. THUS THIS GROUND IS ALSO DISM ISSED. 6. GROUND NO.5 IS THAT THE LEARNED CIT(A) ERRED IN D ELETING THE ADDITION OF `3 72 207/- IN RESPECT OF EXPORT COMMISSIO N MADE BY THE ASSESSING OFFICER. IN THIS CONNECTION IT HAS BEEN MENTI ONED IN THE ASSESSMENT ORDER THAT THE ASSESSEE EXPORTED GOODS TO AN ASSOCI ATED 2372-227-2011-HSCI 6 ENTERPRISE FOR WHICH COMMISSION OF `3 72 207/- WAS PAI D @3% OF THE FOB VALUE. THE AMOUNT WAS CREDITED TO THE ACCOUNT O F HONDA MOTOR COMPANY LIMITED JAPAN HOLDING COMPANY OF THE ASSESSEE . THE ITAT HAS ALLOWED SUCH DEDUCTIONS IN THE PAST BUT THE DECISIO NS HAVE NOT BEEN ACCEPTED AND APPEAL HAS BEEN MOVED TO THE HONB LE HIGH COURT. IN ORDER TO KEEP THE ISSUE ALIVE THE PAYMENT OF COMM ISSION WAS DISALLOWED. THIS ISSUE IS ALSO COVERED IN THE ORDERS OF T HE TRIBUNAL FOR ASSESSMENT YEARS 2001-02 TO 2005-06. GROUND NO.7 IN THE APPEAL OF THE REVENUE FOR ASSESSMENT YEAR 2005-06 WAS AGAINST THE R ELIEF OF `13 53 566/- GRANTED BY THE CIT(A) ON THIS ISSUE BY HO LDING THAT THE PAYMENT OF EXPORT COMMISSION WAS MADE WHOLLY AND EXCLU SIVELY FOR THE PURPOSE OF BUSINESS FOR ACQUIRING RIGHTS OUTSIDE THE COUNTRY FOR EXPORTING COMPONENTS AND CARS. THIS GROUND WAS DISMISSED BY THE TRIBUNAL. THEREFORE RELYING ON THIS AND EARLIER DE CISIONS IT IS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCT THE EXPORT COMMISSION I N COMPUTING ITS TOTAL INCOME. THUS THIS GROUND IS ALSO DISMISSED. 7. GROUND NO.6 IS AGAINST DELETING THE ADDITION OF `9 7 98 566/- MADE BY THE ASSESSING OFFICER IN RESPECT OF THE COST OF A IR FARES AND OTHER TRAVEL RELATED EXPENSES FORMING PART OF TECHNIC AL GUIDANCE FEE. IN THIS CONNECTION IT IS MENTIONED IN THE ASSESSMENT ORD ER THAT HONDA MOTOR COMPANY LIMITED JAPAN DEPUTED FOREIGN TECHNI CIANS FOR TECHNICAL NEEDS OF THE ASSESSEE. THE AIRFARE HAS BEEN DE BITED IN THE ACCOUNTS OF PURCHASE AND WORKS DEPARTMENT IN TERMS OF THE AGREEMENT DATED 08.04.2005. SUCH PAYMENTS HAVE BEEN ALLOWED IN THE PAST BY THE CIT(A) AND THE TRIBUNAL. HOWEVER T HE AGREEMENT MENTIONS TWO THINGS THAT THE PAYMENT OF AIRFARE HAS TO BE MUTUALLY DECIDED BY THE ASSESSEE COMPANY AND HONDA MOTORS COMPANY LIMITED JAPAN. ACCORDINGLY IT IS NOT ASCERTAINABLE AS TO WHETHER THE EXPENDITURE IS THAT OF THE ASSESSEE COMPANY OF THE FOREI GN COMPANY THEREFORE THE EXPENDITURE OF `97 98 566/- WAS DISALL OWED. THIS ISSUE 2372-227-2011-HSCI 7 STANDS COVERED BY THE DECISION OF THE TRIBUNAL FOR ASSESSM ENT YEAR 2005-06. IN THAT YEAR THE EXPENDITURE AMOUNTED TO `98 30 698/-. THE LEARNED CIT(A) HAD RETURNED THE FINDING THAT THE TR AVEL EXPENSES WERE BOOKED BY THE ASSESSEE COMPANY DIRECTLY. THEREFORE TH E OBSERVATION OF THE ASSESSING OFFICER THAT THE EXPENSES PERTAINED TO H ONDA MOTOR COMPANY LIMITED JAPAN IS NOT CORRECT. FURTHER LUM P SUM FEE FOR TECHNICAL KNOW-HOW AND ROYALTY HAD BEEN HELD TO BE REVENUE EXPENSES. THEREFORE THE TECHNICAL GUIDANCE FEE RELA TED TO LUMP SUM FEE PAID FOR TECHNICAL KNOW-HOW AND ROYALTY WILL AL SO BE REVENUE EXPENDITURE. THE TRIBUNAL CONSIDERED THE ORDERS OF T HE LOWER AUTHORITIES AND SUBMISSIONS OF THE RIVAL PARTIES. IT HAS BEEN MENTIONED THAT THE FINDINGS OF THE CIT(A) HAVE NOT BEEN CONTRO VERTED BY THE LEARNED DR. THE LUMP SUM FEE AND ROYALTY EXPENSES HAV E ALSO BEEN HELD TO BE REVENUE EXPENSES. THIS DECISION HAS A BEARIN G ON THE ISSUE AT HAND. THEREFORE THE ORDER OF THE LEARNED CIT(A ) WAS UPHELD. RESPECTFULLY FOLLOWING THIS DECISION GROUND NO.6 IS AL SO DISMISSED. 8. WE MAY NOW PROCEED WITH THE CROSS OBJECTION OF THE ASSESSEE THAT THE LEARNED CIT(A) ERRED IN DISALLOWING EXPENDI TURE OF `6 05 635/- MADE BY THE ASSESSING OFFICER IN RESPECT OF ENTRY TAX PA ID BY THE ASSESSEE UNDER PROTEST. THE CASE MADE OUT BEFORE US IS THA T THE ISSUE IS SIMILAR TO THE ISSUE OF PAYMENT OF CUSTOMS DUTY PAID UNDER PROTEST ON PROVISIONAL BASIS. BOTH THE ITEMS ARE COVERED U/S 43 B WHICH HAVE TO BE ALLOWED ON THE BASIS OF ACTUAL PAYMENT. THE FA CT THAT THE PAYMENT IS MADE ON PROVISIONAL BASIS IS ALSO IMMATERIAL B ECAUSE IT HAS BEEN MADE ON THE BASIS OF RULES AND REGULATIONS UNDER T HE RELEVANT STATUTE. WE ARE OF THE VIEW THAT DEDUCTION IN RESPE CT OF EITHER OF THE AFORESAID ITEMS DEPENDS UPON THE LANGUAGE OF SECTION 43 B WHICH PERMITS THE DEDUCTION OF DUTY OR TAX ON CASH BASIS. IF ANY AMOUNT IS FOUND REFUNDABLE SUBSEQUENTLY THE SAME IS LIABLE TO BE TAXED U/S 41(1) 2372-227-2011-HSCI 8 IN THE YEAR OF REFUND. ACCORDINGLY IT IS HELD THAT THE ASSESSEE IS ENTITLED TO DEDUCT THIS AMOUNT IN COMPUTING THE INCO ME. 9. IN RESULT THE APPEAL OF THE REVENUE IS DISMISSED AND CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 22.07.2011 . SD/- SD/- ( C.L. SETHI ) ( K.G. BANSA L ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.22.07.2011. NS COPY FORWARDED TO:- 1. M/S HONDA SIEL CARS INDIA LTD A-1 SECTOR-40/41 SURAJPUR KASNA ROAD GREATER NOIDA (UP). 2. ASSTT. CIT (LTU) CIRCLE NOIDA NEW DELHI. 3. THE CIT 4. THE CIT (A) NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY BY ORDER (ITAT NEW DELHI).