ACIT, Gurgaon v. M/s. Bellsonica Auto Component India Pvt. Ltd., Gurgaon

ITA 5844/DEL/2016 | 2012-2013
Pronouncement Date: 28-02-2020 | Result: Dismissed

Appeal Details

RSA Number 584420114 RSA 2016
Assessee PAN AACCB9442Q
Bench Delhi
Appeal Number ITA 5844/DEL/2016
Duration Of Justice 3 year(s) 3 month(s) 13 day(s)
Appellant ACIT, Gurgaon
Respondent M/s. Bellsonica Auto Component India Pvt. Ltd., Gurgaon
Appeal Type Income Tax Appeal
Pronouncement Date 28-02-2020
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 28-02-2020
Last Hearing Date 06-02-2020
First Hearing Date 06-02-2020
Assessment Year 2012-2013
Appeal Filed On 15-11-2016
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A NEW DELHI NEW DELHI NEW DELHI NEW DELHI BEFORE SHRI BEFORE SHRI BEFORE SHRI BEFORE SHRI BHAVNESH SAINI JUDICIAL MEMBER AND BHAVNESH SAINI JUDICIAL MEMBER AND BHAVNESH SAINI JUDICIAL MEMBER AND BHAVNESH SAINI JUDICIAL MEMBER AND SHRI SHRI SHRI SHRI R.K. PANDA ACCOUNTANT MEMBER R.K. PANDA ACCOUNTANT MEMBER R.K. PANDA ACCOUNTANT MEMBER R.K. PANDA ACCOUNTANT MEMBER ITA ITAITA ITA NO. NO. NO. NO.5844 5844 5844 5844/DEL/201 /DEL/201 /DEL/201 /DEL/2016 66 6 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2 22 2 0 00 0 12 1212 12 - -- - 13 1313 13 ACIT ACIT ACIT ACIT CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) GURGAON GURGAON GURGAON GURGAON VS. VS. VS. VS. M/S BELLSONICA AUTO CO M/S BELLSONICA AUTO CO M/S BELLSONICA AUTO CO M/S BELLSONICA AUTO CO MPONENT MPONENT MPONENT MPONENT INDIA PRIVATE LIMITED INDIA PRIVATE LIMITED INDIA PRIVATE LIMITED INDIA PRIVATE LIMITED PLOT NO.1 PHASE PLOT NO.1 PHASE PLOT NO.1 PHASE PLOT NO.1 PHASE- -- -3A IMT MANESAR 3A IMT MANESAR 3A IMT MANESAR 3A IMT MANESAR GURGAON HARYANA GURGAON HARYANA GURGAON HARYANA GURGAON HARYANA PAN: PAN: PAN: PAN:- -- -AACCB9442Q AACCB9442Q AACCB9442Q AACCB9442Q ( (( ( REVENUE REVENUE REVENUE REVENUE ) )) ) ( (( ( ASSESSEE ASSESSEE ASSESSEE ASSESSEE ) )) ) ITA NO. ITA NO. ITA NO. ITA NO.5 55 5946 946 946 946/DEL/201 /DEL/201 /DEL/201 /DEL/2016 66 6 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2 22 2 0 00 0 12 1212 12 - -- - 13 1313 13 M/S BELLSONICA AUTO M/S BELLSONICA AUTO M/S BELLSONICA AUTO M/S BELLSONICA AUTO COMPONENT INDIA PRIVATE COMPONENT INDIA PRIVATE COMPONENT INDIA PRIVATE COMPONENT INDIA PRIVATE LIMITED LIMITED LIMITED LIMITED PLOT NO.1 P PLOT NO.1 P PLOT NO.1 P PLOT NO.1 PHASE HASE HASE HASE- -- -3A IMT 3A IMT 3A IMT 3A IMT MANESAR GURGAON MANESAR GURGAON MANESAR GURGAON MANESAR GURGAON HARYANA HARYANA HARYANA HARYANA PAN: PAN: PAN: PAN:- -- -AACCB9442Q AACCB9442Q AACCB9442Q AACCB9442Q VS. VS. VS. VS. ACIT ACIT ACIT ACIT CIRCLE CIRCLE CIRCLE CIRCLE- -- -1(1) 1(1) 1(1) 1(1) GURGAON GURGAON GURGAON GURGAON ( (( ( ASSESSEE ASSESSEE ASSESSEE ASSESSEE ) )) ) (RE (RE (RE (RE VENUE VENUE VENUE VENUE ) )) ) REVENUE BY : SH. S.L. ANURAGI SR. DR . ASSESSEE BY : SH. VASUDEVAN SUBHASHSHREE DATE OF HEARING : 06/02/2020 DATE OF PRONOUNCEMENT : 28/02/2020 ORDER ORDER ORDER ORDER PER R.K. PANDA AM PER R.K. PANDA AM PER R.K. PANDA AM PER R.K. PANDA AM THESE ARE CROSS APPEAL. THE FIRST ONE IS FILED BY THE REVENUE AND THE SECOND ONE FILED BY THE ASSESSEE AND ARE DIRECT ED AGAINST THE ORDER ITA NOS.5844 & 5946/DEL/2016 2 DATED 14/09/2016 OF THE CIT(A)-1 GURGAON RELATING TO ASSESSMENT YEAR 2012-13. ITA NO.5844/DEL/2016 (BY THE REVENUE) 2. THE GROUND OF APPEAL NO.1 BY THE REVENUE IS AS U NDER:- 1. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED IN TREATING THE 75% OF THE EXPENSES ON ROYALTY PAYMENT FOR TECHNICAL KNOW HOW AS REVENUE EXPENDITU RE WITHOUT ANY BASIS FOR SUCH PERCENTAGE WHEREAS THE TOTAL EXPENDITURE WAS CAPITAL IN NATURE BEING INCURRED ON TEC HNICAL KNOW HOW AS DEFINED IN EXPLANATION-4 TO SECTION 3 2(1) OF THE INCOME TA ACT 1961. 3. THE GROUND OF APPEAL NO.2 AND 2.1 BY THE ASSESSEE WH ICH ARE CO- RELATED WITH THE ABOVE GROUND RAISED BY THE REVENUE ARE AS UNDER:- 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT DECIDING THE DISALLOWANCE OF EXPENDITURE INCURRED BY THE APPELLAN T TOWARDS PAYMENT ON ACCOUNT OF RUNNING ROYALTY. 2.1 THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN NOT CONSIDERI NG THE SUBMISSIONS MADE AND THE JUDICIAL PRECEDENTS CITED BY THE APPELLANT TO SHOW WHY THE PRECEDING YEARS ORDER OUGHT N OT TO BE FOLLOWED AS A GOOD PRECEDENT. 4. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS BOD Y PARTS FOR SMALL VEHICLES INCLUDING THE SIDE BUMPER FRAME WORKS REAR FRAME WORK CENER PILLAR ETC FOR MARUTI SUZUKI INDIA LTD. IT F ILED ITS RETURN OF INCOME ON 28/11/2012 DECLARING LOSS OF RS.52 48 917/-. THE A SSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT TH E ASSESSEE HAS DEBITED AN AMOUNT OF RS.3 73 97 245/- ON ACCOUNT OF ROYALTY ON SALES TO THE PROFIT & LOSS ACCOUNT. HE ASKED THE ASSESSEE TO EXPLAIN AS ITA NOS.5844 & 5946/DEL/2016 3 TO WHY ROYALTY PAID DURING THE YEAR SHOULD NOT BE CA PITALIZED TREATING THE SAME AS INTANGIBLE ASSETS. IN ABSENCE OF ANY EXPLANAT ION FROM THE ASSESSEE AND FOLLOWING THE ORDER OF HIS PREDECESSOR FOR A SSESSMENT YEAR 2011-12 ON THE SAME ISSUE WHERE THE ASSESSING OFFICER HAD ALLOWED DEPRECIATION @ 25% THE ASSESSING OFFICER ALLOWED THE D EPRECIATION OF RS.93 49 311/- BEING 25% OF RS.3 73 97 245/- AND ADD ED THE BALANCE AMOUNT OF RS.2 80 47 934/-. 5. IN APPEAL THE LD. CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2011-12 TREATED 25% O F THE TOTAL ROYALTY PAYMENT AS CAPITAL EXPENDITURE AND HEL D THE BALANCE AMOUNT AS REVENUE IN NATURE. 6. AGGRIEVED BY SUCH ORDER OF THE CIT(A) THE REVENU E IS IN APPEAL BEFORE THE TRIBUNAL. 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOT H THE SIDES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE ASSESSING OFFICER IN THE INSTANT CASE FOLLOWING THE ORDER OF HIS PREDECESSOR TREATED TH E ENTIRE ROYALTY EXPENSES OF RS.3 73 97 245/- AS CAPITAL IN NATURE AND A FTER ALLOWING DEPRECIATION OF RS.93 49 311/- MADE ADDITION OF RS.2 80 47 934/- TO THE TOTAL INCOME OF THE ASSESSEE. WE FIND IN APPEAL THE LD . CIT(A) FOLLOWING THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 2011-12 TREATED 25% OF SUCH ROYALTY PAYMENT AS CAPIT AL IN NATURE AND ITA NOS.5844 & 5946/DEL/2016 4 HELD THE BALANCE AMOUNT TO BE REVENUE IN NATURE. WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATE PRECEDING ASSESSMENT YEAR. WE FIND THE TRIBUN AL IN ITA NO.2210/DEL/2016 AND ITA NO.2329/DEL/2016 ORDER DA TED 27/07/2018 HAS DISCUSSED THE ISSUE AND ALLOWED THE ENTIRE ROYALTY PA YMENT AS REVENUE IN NATURE BY OBSERVING AS UNDER:- 11. THE FACTS OF THE ASSESSEES CASE ARE SIMILAR TO THESE DECISIONS. THE LD. CIT(A) HAS RELIED ON SUPREME COURT DECISION IN THE CASE OF SOUTHERN SWITCHGEAR LTD. VS. C IT 232 ITR 359 IS NOT APPLICABLE IN THE PRESENT CASE BECAUSE I N THAT CASE AGREEMENT WAS MADE FOR A PERIOD OF FIVE YEARS AND IT WAS EXPRESSLY STIPULATED THAT AFTER EXPIRY OF AGREEMENT THEMETHOD PRODUCTION PROCEDURE ETC. WOULD REMAIN WITH THE INDIAN ASSESSEE WHEREAS NO SUCH STIPULATION IS MADE I N THE AGREEMENTS MADE IN THE CASE BEFORE US SO AS TO OBSERV E ANY BENEFIT OF ENDURING NATURE WITH THE ASSESSEE. IN TH E PRESENT CASE THE ASSESSEE HAS ACQUIRED ONLY RIGHT TO USE O F TECHNICAL KNOWLEDGE OF THE FOREIGN COMPANY. THUS RESPECTFULLY FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT AND OF THE COORDINATE BENCH OF TRIBUNAL WE A RE OF THE CONSIDERED OPINION THAT THE ROYALTY PAID BY THE ASSESSEE IN THE PECULIAR FACTS AND CIRCUMSTANCES OF THE PRESENT CA SE WAS IN THE NATURE OF REVENUE EXPENDITURE INCURRED BY THE ASSESSEE. THEREFORE WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS ISSUE AND DECIDE IT IN FAVOUR OF THE ASSESSEE. ACCORDINGLY GROUND NO. 3 OF ASSESSEE IS ALLOWED AND GROUND NO. 1 OF THE REVENUE IS DISMISSED. 8. SINCE THE LD. CIT(A) HAS ALLOWED ONLY 75% OF TH E ROYALTY PAYMENT AS REVENUE IN NATURE THEREFORE RESPECTFULLY FOLLOWI NG THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECE DING ASSESSMENT YEAR WE HOLD THE ENTIRE ROYALTY PAYMENT AS R EVENUE IN NATURE. ACCORDINGLY THE GROUND RAISED BY THE ASSESSEE IS ALLOWED AND THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NOS.5844 & 5946/DEL/2016 5 9. IN THE RESULT GROUND RAISED BY THE REVENUE IS DISMI SSED AND THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. ITA NO.5946/DEL/2016 ITA NO.5946/DEL/2016 ITA NO.5946/DEL/2016 ITA NO.5946/DEL/2016(BY THE ASSESSEE) (BY THE ASSESSEE) (BY THE ASSESSEE) (BY THE ASSESSEE) 10. THE GROUNDS OF APPEAL NO.1 AND 1.1 BY THE ASSESSEE READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING TH E DISALLOWANCE OF RS.1 17 38 409/- WHICH THE ASSESSING OFFICE HAD TR EATED AS A PRIOR PERIOD EXPENDITURE BUT THE APPELLANT CONTENDED TO BE A BAD DEBT WRITTEN OFF. 1.1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED ON FACTS AND IN TAKING AN ADVERSE VI EW ON THE GROUND THAT THE APPELLANT HAD OFFERED DIFFERENT ARGUMENTS AGAINST THE DISALLOWANCE. 11. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSI NG OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAD DEBITED CERTAIN AMOUNT UNDER THE HEAD DISCOUNT AND D EDUCTIONS. ON BEING ASKED BY THE ASSESSING OFFICER TO EXPLAIN THE SAME THE ASSESSEE REPLIED THAT THIS AMOUNT WAS DEDUCTED BY MARUTI SUZUK I LTD. OUT OF WHICH AN AMOUNT OF RS.1 17 38 409.98 IS RELATED TO FI NANCIAL YEAR 2010- 11 WHICH WAS NOT CLAIMED IN THAT FINANCIAL YEAR AND RS.3 48 356.58/- IS RELATED TO FY 2011-12. SINCE THE AMOUNT OF RS.1 17 38 409/- PERTAINS TO THE EARLIER YEAR BEING NOT ALLOWABLE IN THE CURREN T YEAR UNDER REFERENCE THE ASSESSING OFFICER DISALLOWED THE SAME AND ADDED TO TH E TOTAL INCOME OF THE ASSESSEE. ITA NOS.5844 & 5946/DEL/2016 6 12. IN APPEAL THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER BY OBSERVING AS UNDER:- 4.3 I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUBM ISSIONS. THE APPELLANT HAS MADE THREE DIFFERENT SUBMISSIONS ON THE SAME ISSUE ONE DURING THE COURSE OF ASSESSMENT PROCEEDING S SECOND IN THE COURSE OF APPEAL PROCEEDINGS AND THE THIRD IN TH E SUBMISSIONS MADE VIDE LETTER DATED 20.07.2016. THE DED UCTION AMOUNTING TO RS. 1 17 38 409/- WAS A PART OF THE TOTAL DE DUCTION OF RS. 3 48 35 658/- CLAIMED IN THE RETURN OF INCOME UNDER THE HEAD DISCOUNTS AND DEDUCTION. THIS FACT HAS BEEN CLEA RLY MENTIONED BY THE A.O IN THE ASSESSMENT ORDER. THE APP ELLANT HAS NOT CONTROVERTED THESE FINDINGS OF FACT IN HIS WRITT EN SUBMISSIONS. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS THE APPELLANT SUBMITTED THAT THE AMOUNT OF RS. 1 17 3 8 409/- WAS THE AMOUNT DEDUCTED BY MARUTI SUZUKI LTD. IN F.Y 2010-11 WHICH WAS NOT CLAIMED IN THAT FINANCIAL YEAR. THUS AS PER TH E APPELLANTS SUBMISSIONS BEFORE THE A.O THE AMOUNT OF RS . 1 17 38 409/- REPRESENTED PRIOR PERIOD EXPENSES WHIC H WERE NOT CLAIMED IN THE EARLIER YEAR AND WERE THEREFORE BEING CLAIMED IN THE YEAR UNDER REFERENCE. HOWEVER IN THE GROUNDS OF APPEAL THE APPELLANT SUBMITTED A DIFFERENT FACT THAT THE DEBIT NOTES AMOUNTING TO RS. 1 17 38 409/- ALTHOUGH RELATED TO F.Y 2010-11 WERE ACTUALLY RAISED BY M/S MARUTI SUZUKI LTD DURING TH E YEAR UNDER REFERENCE. THIS CONTENTION WAS NEVER RAISED BE FORE THE A.O THEREAFTER IN THE WRITTEN SUBMISSIONS DATED 20.07. 016 THE APPELLANT ONCE AGAIN CHANGED THE CONTENTION AND SUBMITTED AS UNDER:- 2.5 IT WAS IN THESE CIRCUMSTANCES THAT WHEN THE ISSUE O F BALANCE OUTSTANDING FOR CONSIDERABLY A LONG PERIOD WA S BROACHED WITH MARUTI IT SAID THAT ACCORDING TO IT THERE WAS NO OUTSTANDING WITH REFERENCE TO THOSE BALANCES AS IT HAD ALREADY MADE FULL PAYMENT AGAINST INVOICES AFTER TAKIN G INTO ACCOUNT THE PRICE VARIATION THAT HAD TAKEN PLACE FROM TIME TO TIME. THEREFORE WHEN IT BECAME CLEAR THAT MARUTI WOULD NOT BE MAKING ANY MORE PAYMENTS AGAINST THE OUTSTANDING BALANCES SHOWN IN THE BOOKS OF ACCOUNTS OF THE APPELLANT THE APPELLANT HAD NO OTHER GO THAN TO WRITE OF F THE OUTSTANDING BALANCES AGAINST WHICH MARUTI STATED THAT THEY WOULD NOT BE MAKING ANY FURTHER PAYMENTS AGAINST THOSE BALANCES. 2.6 IMMEDIATELY UPON COMING TO KNOW THIS THE APPELLAN T WROTE OFF THE RECEIVABLE OUTSTANDING AGAINST MARUTI AND CLAIMED DEDUCTION IN THE INCOME TAX- RETURN FOR THE ASSESSMENT YEAR UNDER CONSIDERATION I.E. A.Y. 2012-1 3. SINCE THE ENTIRE PRICE RECEIVABLE AGAINST SUPPLIES MA DE TO ITA NOS.5844 & 5946/DEL/2016 7 MARUTI WAS ALREADY ACCOUNTED FOR AND OFFERED TO TAX TH E AMOUNT WRITTEN OFF WAS IN REALITY A DEBT THAT WAS NOT RECOVERABLE AND WAS ALLOWABLE UNDER SECTION 36(L)(VI I) OF THE ACT ON WRITING OFF. 4.4 THUS IN THE WRITTEN SUBMISSIONS THE APPELLANT HAS ONCE AGAIN CHANGED HIS CONTENTION AND SUBMITTED THAT THE AMOUNT WAS ALLOWABLE AS BAD DEBTS U/S 36(L)(VII) OF THE INCOME T AX ACT. 4.5 IT IS EVIDENT FROM THE FACTS DISCUSSED ABOVE THAT THE EXPENDITURE OF RS. 1 17 38 409/- REPRESENT THE PRIOR PERIOD EXPENSES I.E. EXPENDITURE PERTAINING TO F.Y 2010- 11 A ND THE SUBSEQUENT SUBMISSIONS IN THE GROUNDS OF APPEAL AS WE LL AS IN THE WRITTEN SUBMISSIONS ARE MERELY AN AFTERTHOUGHT AND MER E SELF- SERVING STATEMENTS. THE A.O WAS THEREFORE FULLY JUSTIFI ED IN DISALLOWING THIS EXPENDITURE THE DISALLOWANCE MADE BY THE A.O. IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 13. AGGRIEVED BY SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 14. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE A SSESSEE HAS CLAIMED THE EXPENDITURE IN THE CURRENT YEAR WHEREA S THE ASSESSING OFFICER TREATED THE SAME AS A PRIOR PERIOD EXPENDITUR E. HE SUBMITTED THAT THE ASSESSEE RAISED BILLS AGAINST THE SUPPLIERS AND WAS RECEIVING PERIODICALLY AMOUNT FROM MARUTI SUZUKI INDIA LTD. S INCE CERTAIN OUTSTANDING AMOUNTS WERE NOT RECEIVED EVEN AFTER CONS IDERABLE LONG TIME IT APPROACHED THE SAID COMPANY WHO REPLIED THA T NO SUCH OUTSTANDING IS THERE WITH REFERENCE TO THOSE BALANCES A S IT HAD ALREADY MADE FULL PAYMENT AGAINST INVOICES AFTER TAKING INTO ACCOUNT THE PRICE VARIATION THAT HAD TAKEN PLACE FROM TIME TO TIME. T HEREFORE WHEN IT BECAME CLEAR THAT MARUTI SUZUKI LTD. WOULD NOT BE M AKING ANY MORE PAYMENTS AGAINST THE OUTSTANDING BALANCES SHOWN IN THE B OOKS OF ACCOUNT OF THE ASSESSEE THE ASSESSEE WROTE OFF THE SAME. HE SUBMITTED ITA NOS.5844 & 5946/DEL/2016 8 THAT THE AMOUNT IS OTHERWISE DEDUCTIBLE AS BAD DEBT. REFERRING TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TRF LIMITED VS CIT [2010] 190 TAXMAN 391 (SC) HE SUBMITTED THAT ONLY T HE ACT OF WRITING OFF BAD DEBTS AS IRRECOVERABLE IS SUFFICIENT. THE ASSESSEE NEED NOT PROVE THAT IT IS IRRECOVERABLE. REFERRING TO THE DECISION O F THE DELHI BENCH OF THE TRIBUNAL IN FUJITSU CONSULTING INDIA (P.) LTD. VS ACIT [2019] 110 TAXMANN.COM 172(DEL. TRIB.) HE SUBMITTED THAT THE D UTY OF THE FIRST APPELLATE AUTHORITIES TO PASS A SPEAKING ORDER AFTER PROPER APPRECIATION OF FACTS. REFERRING TO THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF INDIAN TUBE CO. (P) LTD. VS CIT [1992] 60 TAX MAN 399 (SC) HE SUBMITTED THAT THE HON'BLE SUPREME COURT HAS HELD THA T TRUE NATURE AND CHARACTER OF THE DISPUTED CLAIM MUST BE DETERMINED W ITH REFERENCE TO THE SUBSTANCE OF THE MATTER AND NOT BY THE MERE ENTRY OR NOMENCLATURE WHICH THE ASSESSEE HAD CHOSEN TO GIVE. RELYING ON VARIOU S OTHER DECISIONS PLACED IN THE PAPER BOOK HE SUBMITTED THAT THE AMOUNT SHOULD BE ALLOWED AS BAD DEBT AND CANNOT BE DISALLOWED AS PRIOR PERIOD EXPENDITURE. HE FURTHER SUBMITTED THAT THE TAX RATES FOR THE CURRENT YEAR AS WELL AS PRECEDING YEAR ARE THE SAME AND THE ASSESSEE IS NOT GOING TO DERIVE ANY BENEFIT THEREFORE THE AMOUNT OF RS.1 17 38 409/- SHOULD BE ALLOWED AS DEDUCTION TO THE ASSESSEE. 15. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(A). HE SUBMITTED THAT THE ASSESSEE IS CHANGING ITS STAND TIME AND AGAIN. BEFORE THE ASSESSING O FFICER THE ITA NOS.5844 & 5946/DEL/2016 9 ASSESSEE HAS MENTIONED THAT THE AMOUNT WAS DEDUCTED BY MA RUTI SUZUKI LTD. AND BEFORE THE LD. CIT(A) THE ASSESSEE HAS MADE A SUBMISSION THAT THE DEBIT NOTES AMOUNTING TO RS.1 17 38 409/- ALTHOUGH RELATED TO F.Y. 2010-11 WERE ACTUALLY RAISED BY M/S M ARUTI SUZUKI LTD. DURING THE YEAR UNDER REFERENCE. THUS THE ASSESSEE IN H IS SUBMISSIONS BEFORE THE LD. CIT(A) HAS CHANGED ITS STAND FOR WHIC H HE UPHELD THE ACTION OF THE ASSESSING OFFICER. HE ACCORDINGLY SUBMITT ED THAT THE ORDER OF THE LD. CIT(A) SHOULD BE UPHELD. 16. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED THE VARI OUS DECISIONS CITED BEFORE US. WE FIND THE ASSESSING OFFICER IN THE IN STANT CASE MADE ADDITION OF RS.1 17 38 409/- TREATING THE SAME AS PRI OR PERIOD EXPENDITURE. WE FIND BEFORE THE LD. CIT(A) THE ASSESSE E SUBMITTED THAT THE DEBIT NOTES AMOUNTING TO RS.1 17 38 409/- WERE AC TUALLY RAISED BY M/S MARUTI SUZUKI LTD. DURING THE YEAR UNDER REFEREN CE ALTHOUGH RELATED TO F.Y. 2010-11. WE FIND THE LD. CIT(A) SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER THE REASONS OF WHICH HAVE ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. IT IS THE SUB MISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THE AMOUNT SO CLAIMED SHOU LD BE ALLOWED AS BAD DEBT U/S 36(1)(VII) OF THE INCOME TAX ACT 196 1. WE FIND THE ASSESSEE IS CHANGING ITS STAND FROM TIME TO TIME. HE HAS M ADE ONE STATEMENT BEFORE THE ASSESSING OFFICER WHEREAS BEFORE THE LD. CIT(A) HE ITA NOS.5844 & 5946/DEL/2016 10 HAS COME OUT WITH ANOTHER THEORY. IN ANY CASE THE ASSE SSEE HAS NOT SUBSTANTIATED THE REASONS FOR CHANGING ITS STAND BEFORE T HE TWO LOWER AUTHORITIES. IT IS NOT COMING OUT FROM THE RECORD AS T O WHEN AND HOW MARUTI SUZUKI LTD. COMPANY HAS STATED OR WRITTEN TO T HE ASSESSEE THAT THEY ARE NOT GOING TO MAKE ANY MORE PAYMENTS AGAINST THE OUTSTANDING BALANCE. SINCE NOTHING IS COMING OUT FROM THE RECOR D THEREFORE CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE AND IN THE INTEREST OF JUSTICE WE DEEM IT APPROPRIATE TO RESTORE THIS ISSUE T O THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO GIVE ONE MORE OPP ORTUNITY OF HEARING TO THE ASSESSEE TO SUBSTANTIATE THE CLAIM OF DED UCTION OF RS.1 17 38 409/-. THE ASSESSING OFFICER SHALL DECIDE THE ISSUE AS PER FACT AND LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. WE HOLD AND DIRECT ACCORDINGLY. THE GROUNDS RAISED BY TH E ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES ONLY. 17. THE GROUND RAISED BY THE ASSESSEE READ AS UNDER:- 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING TH E DISALLOWANCE OF THE EXPENDITURE INCURRED BY THE APPELL ANT ON STAFF WELFARE TO THE EXTENT OF RS.8 55 000/- ON THE GROUN D THAT THE EXPENDITURE TO THIS EXTENT DID NOT APPEAR TO BE IN ACCORDA NCE WITH THE ATTENDANCE POLICY OF THE APPELLANT. 18. THE FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HA S CLAIMED STAFF WELFARE EXPENDITURE OF RS.1 89 54 834/-. FROM T HE DETAILS FURNISHED BY THE ASSESSEE HE NOTED THAT THE AMOUNT OF RS.25 74 50 0/- HAS BEEN ITA NOS.5844 & 5946/DEL/2016 11 WITHDRAWN IN ITS ACCOUNT ON VARIOUS DATES WITHOUT ANY DESCRIPTION/MERITS AND NATURE OF EXPENSES. SINCE THE ASSESSEE COULD NOT SUBST ANTIATE EVIDENCE TO HIS SATISFACTION REGARDING THE WITHDRAWAL OF SUCH HUGE AMOUNT TOWARDS STAFF WELFARE EXPENSES THE AO MADE ADD ITION OF RS.25 74 500/- TREATING THE SAME AS EXPENDITURE OTHERW ISE THAN WHOLLY AND EXCLUSIVELY INCURRED FOR BUSINESS PURPOSES. 19. IN APPEAL THE LD. CIT(A) RESTRICTED SUCH DISALLOW ANCE TO RS.8 55 000/- BY OBSERVING AS UNDER:- 6.4. I HAVE CAREFULLY CONSIDERED THE APPELLANTS SUB MISSIONS. I HAVE ALSO PERUSED THE BACI ATTENDANCE POLICY A COPY OF WHICH WAS SUBMITTED BY THE LD. AR OF THE APPELLANT. AS PER THE POLICY THERE WAS A CONCEPT OF MONTHLY YEARLY ATTENDANCE REWARD AS UNDER:- MONTHLY LEAVE DAYS BACI POLICY AMOUNT (RS.) 100% ATTENDANCE (ZERO LEAVE) 500 0.5 TO 2 DAY (PLANNED LEAVE) YEARLY 100% ATTENDANCE (ZERO LEAVE) CERTIFICATE GIFT AND CASH R EQAD (RS.10 000/-) YEARLY 99% ATTENDANCE (0.5% TO 1 LEAVE) CERTIFICATE GIFT AND CASH REQAD (RS.5 000/-) 6.5 IT IS THEREFORE EVIDENT THAT THE CONCEPT OF ATTENDANCE REWARD WAS PREVALENT IN THE WORKING SYSTEM OF THE APP ELLANT AND THE EXPENSES INCURRED ARE ALLOWABLE AS BUSINESS EXPE NSE. THE APPELLANT ALSO FILED DETAILED BREAK UP OF EXPENSES CL AIMED AMOUNTING TO RS. 25 74 500/- ON ACCOUNT OF THE REWARDS . THE DETAILS SUBMITTED ARE ENCLOSED AS ANNEXURE-1 TO THIS ORD ER. 6.6 IT IS SEEN FROM THE DETAILS FILED BY THE APPELLANT THAT I N ADDITION TO THE YEARLY ATTENDANCE REWARD AND THE MONTHLY ATTENDANCE REWARD THE APPELLANT HAS ALSO CLAIMED REWAR D FOR SUNDAY WORKING AS PER THE FOLLOWING DETAILS:- ITA NOS.5844 & 5946/DEL/2016 12 6.7 IT IS FURTHER SEEN FROM THE DETAILS SUBMITTED BY THE APPELLANT THAT THESE EXPENSES HAVE BEEN CLAIMED ONLY IN THE MONTH OF FEBRUARY AND MARCH 2012. APPARENTLY THESE E XPENSES CLAIMED BY THE APPELLANT ARE NEITHER UNIFORM NOR IN AC CORDANCE WITH THE ATTENDANCE POLICY OF THE COMPANY. SUCH EXPENSE S CANNOT BE CONSIDERED AS BEING STAFF WELFARE EXPENSES. THE APPELLANT HAS NOT BEEN ABLE TO FURNISH ANY SATISFACTOR Y EXPLANATION WITH REGARD TO THE CLAIM OF THESE EXPENSES. THE DISALLOWANCE MADE BY THE A.O ON THIS ACCOUNT IS ACCORD INGLY RESTRICTED TO THE AMOUNT OF RS. 8 55 000/- BEING THE SUN DAY WORKING REWARDS. THIS GROUND OF APPEAL IS PARTLY ALL OWED. 20. AGGRIEVED BY SUCH ORDER OF THE LD. CIT(A) THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 21. THE LD. COUNSEL FOR THE ASSESSEE REFERRING TO PAGE 1 00 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO THE A TTENDANCE REWARD POLICY OF THE ASSESSEE COMPANY. REFERRING TO PAGE 101 OF THE PAPER BOOK DREW ATTENTION OF THE BENCH TO THE MONTHLY ATT ENDANCE REWARD OF THE ASSESSEE COMPANY WHICH IS DEBITED UNDER THE STAFF WEL FARE EXPENSES. REFERRING TO PAGE 103 TO 239 OF THE PAPER B OOK HE DREW ATTENTION OF THE BENCH TO THE DATE WISE AND MONTH WI SE ATTENDANCE REWARD WHICH IS AS PER POLICY OF THE ASSESSEE COMPANY. H E SUBMITTED S.NO. DATE AMOUNT 1. 13.03.2012 97 200/- 2. 20.02.2012 84 000/- 3. 05.03.2012 1 35 600/- 4. 17.03.2012 1 04 800/- 5. 17.03.2012 50 000/- 6. 27.03.2012 1 67 200/- 7. 29.03.2012 2 16 200/- TOTAL TOTAL TOTAL TOTAL 8 55 000/ 8 55 000/ 8 55 000/ 8 55 000/- -- - ITA NOS.5844 & 5946/DEL/2016 13 THAT THE EXPENDITURE BEING WHOLLY AND EXCLUSIVELY IN CURRED FOR THE PURPOSE OF BUSINESS SHOULD NOT HAVE BEEN DISALLOWED. 22. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE LD. CIT(A). 23. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BO TH THE SIDES PERUSED THE ORDERS OF THE AUTHORITIES BELOW AND THE PA PER BOOK FILED ON BEHALF OF THE ASSESSEE. WE FIND THE AO IN THE INSTANT C ASE MADE ADDITION OF RS.25 74 500/- OUT OF THE STAFF WELFARE EXPENSES OF RS.1.89 564 834/- WHICH WAS RESTRICTED BY THE LD. CIT(A) TO RS.8 55 000/ -. THE REASONS OF SUCH RELIEF GRANTED BY THE LD. CIT(A) HAS ALREADY BEE N REPRODUCED IN PRECEDING PARAGRAPHS AND THE REVENUE IS NOT IN APPEAL AGAINST THE SAME. SO FAR AS THE DISALLOWANCE OF RS.8 55 000/- IS CO NCERNED THE LD. COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOTICE THE ATTE NDANCE REWARD POLICY OF THE ASSESSEE COMPANY GIVING DATE WISE NAME WI SE AND DEPARTMENT WISE THE PAYMENT MADE FOR THE ENTIRE YEA R. IT IS THE INDUSTRY POLICY THAT WHEN THE STAFF WORKS FOR SOME EXTR A TIME DIFFERENT COMPANIES GIVE INCENTIVES TO THEIR EMPLOYEES WHICH THE ASSESSEE IN THE INSTANT CASE HAS FOLLOWED. UNDER SUCH CIRCUMSTANCES WE A RE OF THE CONSIDERED OPINION THAT THE ENTIRE AMOUNT SHOULD HAV E BEEN ALLOWED AS DEDUCTION AND THE LD. CIT(A) IS NOT JUSTIFIED IN SUSTA INING RS.8 55 000/-. WE THEREFORE SET-ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE AO TO ITA NOS.5844 & 5946/DEL/2016 14 DELETE THE DISALLOWANCE. THE GROUND RAISED BY THE ASSESSE E IS ACCORDINGLY ALLOWED. 24. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S DISMISSED AND THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PU RPOSES AS INDICATED ABOVE. DECISION PRONOUNCED IN THE OPEN COURT ON 28/02/2020. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - ( (( ( BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI BHAVNESH SAINI ) )) ) ( (( ( R.K. PANDA R.K. PANDA R.K. PANDA R.K. PANDA ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED: 28 TH FEBRUARY 2020 S.S. COPY FORWARDED TO: - 1. APPELLANT : ACIT CIRCLE-1(1) 2. RESPONDENT : M/S BELLSONICA AUTO COMPONENT INDIA PRIVATE LIMIT ED 3. CIT 4. CIT(A) 5. DR ITAT ASSISTANT REGISTRAR ITAT DELHI