Delhi High Court
Commissioner Of Income Tax, ... vs Denso Haryana Pvt. Ltd. on 5 November, 2009
Author: A.K.Sikri
* IN THE HIGH COURT OF DELHI AT NEW DELHI
+ ITA No.100/2008
Date of Decision: 5th November, 2009.
COMMISSIONER OF INCOME TAX, DELHI-IV ..... Appellant
Through: Mr. Sanjeev Sabharwal, Adv.
Versus
DENSO HARYANA PVT. LTD. ..... Respondent
Through: Mr. C.S. Aggarwal, Sr. Adv.
with Mr. Prakash Kumar,
Adv.
% CORAM
HON'BLE MR. JUSTICE A.K. SIKRI
HON'BLE MR. JUSTICE SIDDHARTH MRIDUL
1. Whether reporters of local papers may be allowed to see the
judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in the Digest?
JUDGMENT
A.K. SIKRI, J (ORAL)
1. Following questions are proposed to be raised by the Revenue in
this appeal on the plea that these are substantial question of law:
(a) Whether the ITAT was correct in law in deleting the
addition of Rs.69,62,655/- made by the Assessing Officer
under Section 92 read with Section 40A (2) of the Income
Tax Act, 1961?
(b) Whether the ITAT was correct in law in treating only
Rs.52,80,000/- out of the total amount of Rs.2,11,20,147/-
as capital expenditure?
(c) Whether the ITAT was correct in law in allowing loss of
Rs.1,91,24,374/- on account of foreign exchange rate
fluctuation?
2. Insofar as, the question No.(c) is concerned, on 3rd March,
2009 itself this Court has observed that it was covered by the decision
of this Court in Commissioner of Income Tax vs. Woodward
Governor India Pvt. Ltd.-249 ITR 451. We may only add that the
aforesaid decision of this Court has since been upheld by the Supreme
Court and the said judgment is reported as Commissioner of
Income Tax, Delhi vs. Woodward Governor India Pvt. Ltd.-(SC)
312 ITR 254.
3. Insofar as the first question is concerned, we may note
that the Assessing Officer had disallowed the addition of
Rs.69,62,655/- under Section 92 and 40A(2) of the Income Tax Act.
The reason for disallowing, as noted by the Assessing Officer, was
that the assessee had imported certain goods from M/s. Denso
Corporation, Japan, a holding company at a price higher than similar
goods purchased from local vendors. The CIT (Appeals) found it to be
factually incorrect, inasmuch as, the Assessing Officer while coming
to the aforesaid finding had compared the price of the goods at which
they were imported with the price of the goods in the local market in
the subsequent years. The very basis of such a comparison was faulty
and primarily influenced by this consideration the CIT (Appeals)
deleted the addition which is confirmed by the ITAT. The approach of
CIT (Appeals) is perfectly justified as the Assessing Officer had come
to the conclusion that the price at which the goods were imported
were higher by comparing the price with the price in the local market
which prevailed in the subsequent years. The Assessing Officer was
required to compare the said price which prevailed in the local market
in the same year. It is a pure finding of fact recorded by the two
Appellate Authorities below and, therefore, no question of law arises.
4. Insofar as, the question of law proposed at Sl. No.(b) is
concerned, the Tribunal has capitalized 25% of Rs.2,11,20,147/-
treating the same as capital expenditure. In support of this, the
Tribunal has referred to the judgment of Supreme Court in Southern
Switch Gear Ltd. vs. CIT-(1998) 232 ITR 359.
5. We may only note that the assessee had also filed appeal
against the aforesaid order of the ITAT, inasmuch as, the grievance of
the assessee was that the entire amount of Rs.2,11,20,147/- should
have been treated as revenue expenditure. The admitted facts are
that under the Agreements dated 25th December, 1998 titled as
"Agreement for Technical Service" and "Agreement for Personnel
Dispatching and Receiving", the assessee had paid total amount of
Rs.7.33 crore to M/s. Denso Corporation, Japan. Out of this Rs.2.11
crore was paid as technical assistance fee, which was to be provided
in terms of Article 1 of the said agreement. It is only this amount
which was claimed as revenue expenditure and balance amount of
Rs.5.22 crore was treated as capital expenditure by the assessee
itself.
6. In these circumstances, the only question would be as to
whether the entire expenditure is to be treated as revenue
expenditure or 25% thereof could be capitalized, as held by the
Tribunal. In either event, this entire expenditure could be treated as
capital expenditure. While this question shall be considered in the
appeal preferred by the assessee, Insofar as the appeal of Revenue is
concerned, we are of the opinion that no question of law arises.
8. The appeal is accordingly dismissed.
A.K. SIKRI, J.
SIDDHARTH MRIDUL, J.
November 05, 2009
dn
