Commissioner Of Income Tax vs Harig Crank Shafts Ltd.
2008 Latest Caselaw 722 Del

JUDGMENT

Madan B. Lokur, J.

1. The Revenue is aggrieved by an order dated 17th June, 2005 passed by the Income Tax Appellate Tribunal, Delhi Bench 'G' in ITA No. 2774 and 2775/Del/2003 relevant for the Assessment Year 1997-98 and 1998-99.

2. The assessed had incurred some expenditure to the extent of about Rs. 6.9 crores towards product development. It appears that the assessed was not financially sound and was a loss making concern and therefore, instead of claiming the entire deduction for product development expenses as a revenue expenditure in one year, it claimed the deduction on a deferred revenue basis.

3. In the first Assessment Year 1996-97, the Assessing Officer passed an assessment order under Section 143(3) of the Income Tax Act, 1961, accepting the submission of the assessed and 10% of the expenses were allowed.

4. In the subsequent years (which is what we are concerned with) the Assessing Officer apparently treated the claim of the assessed as being under Section 35D of the Income Tax Act, 1961. On this basis, he disallowed the expenditure claimed by the assessed as having been incurred in earlier years. This view was upheld by the Commissioner of Income Tax (Appeals) [CIT (A)].

5. Aggrieved by the view taken by the Assessing Officer and the CIT (A), the assessed filed an appeal before the Income Tax Appellate Tribunal and that was decided in favor of the assessed. It is for this reason that the Revenue is now before us.

6. The Tribunal was of the view that there was nothing to show that the expenditure incurred by the assessed was bogus. On the other hand, it was found as a matter of fact that the expenditure was genuine. In these circumstances, the claim made by the assessed was required to be allowed.

7. The Tribunal also found that the claim was not under Section 35 D of the Act as mentioned by the Assessing Officer and by the CIT (A) and that there was some confusion in this regard. The claim under Section 35 D of the Act was for preliminary expenses and not for product development expenses.

8. The Tribunal also noted that for the Assessment year 1996-97, the claim made by the assessed had been allowed by the Assessing Officer and following the decision of the Supreme Court in Radhasoami Satsang v. Commissioner of Income Tax it was held that there should be some consistency in the view taken by the Assessing Authority. The decision of the Supreme Court has been followed by this Court in several cases, including in Commissioner of Income Tax v. A.R.J Security Printers .

9. To get out of this situation, learned Counsel for the Revenue went to the extent of contending that the Assessing Officer did not apply his mind while passing the Assessment Order relevant for the assessment year 1996-97. We are unable to accept this contention since the order was passed under Section 143(3) of the Income Tax Act. Learned Counsel for the Revenue then clarified her contention by saying that this particular aspect of allowing the deduction claimed by the assessed was not specifically dealt with by the Assessing Officer.

10. We are of the opinion that in view of the decision of this Court in Commissioner of Income Tax v. Kelvinator of India Ltd. [2002] 256 ITR 1 and Commissioner of Income Tax v. Eicher Ltd. [2007] 294 ITR 310, this contention is not open to the Revenue.

11. In the circumstances, the expenditure having been found to be genuine, the expenditure not having been claimed under Section 35 D of the Act and in view of the fact that the expenditure has been accepted earlier by the Assessing Officer, we are of the opinion that no substantial question of law arises for consideration.

12. This appeal is accordingly disposed of with costs of Rs. 5000/-. The costs shall be deposited by the Revenue within four weeks by way of a cheque drawn in favor of Registrar General of this Court who will utilise the amount for juvenile justice.

13. List this matter for compliance on 28th May, 2008.