Subscription   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
CGST - Acts + GST Rates GST Ntf. GST Forms GST - Manual GST - FAQ State GST Acts SGST Ntf. I. Tax Manual
Extracts
Home List
← Previous Next →

M/s. Michelin India Tyres Pvt. Ltd. Versus DCIT Circle 6 (1) New Delhi

Disallowance u/s 43B - Held that:- Deduction on account of contribution to EPF, though deposited late, is allowable u/s 36(1)(va), 43B of the Act. Consequently, we are of the considered view, addition made by the A.O. and confirmed by Ld. CIT(A) is to be allowed as deduction.

Loss of fixed asset - Held that:- The assessee claimed loss of fixed asset but the same has been made as addition to his income on the ground that the same has not been added back to the income of the assessee in .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

H, JM: The appellant M/s. Michelin India Tyres Pvt. Ltd. by filing the present appeal under the I. T. Act, 1961 (for short the Act ), sought to set aside the impugned order dated 14.02.2011 passed by Ld. CIT(A) IX, New Delhi qua the Assessment Year 2005-06 on the grounds inter alia that: 1. On the facts and circumstances of the case and in law, the Learned Commissioner of Income Tax (Appeals) ("CIT (A)") erred in confirming the order passed by the learned Assessing Officer ("AO&qu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

the purpose of establishing its business operations in India and thus cannot be treated as capital expenditure for the Assessee. 3. The Learned CIT(A) erred in concluding that these expenses incurred did not pertain to the existing business carried out by the Appellant and grossly erred in failing to appreciate that the expenses incurred were in the nature of fee for technical services and were not towards any new business. The expenses were in fact towards the Appellant's existing business .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

take cognizance of the fact that during the course of the transfer pricing proceedings, the Transfer Pricing Officer ("learned TPO") examined the benefits accruing to the Appellant from availing technical services and determined that payment made by the Appellant for availing Technical Services is at arm's length, thereby concluding that the payments made by the Appellant were not excessive and were for the bonafide purpose of the business operations. Accordingly, based on the fact .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

confirming the initiation of penalty proceedings under explanation 1 and explanation 7 to section 271 (1)( c) of the Act against the Appellant, which is bad in law. 8. The order of The Learned CIT(A)/AO IS contrary to the facts, law, and the principles of natural justice. 9. The above grounds of appeal are mutually exclusive & without prejudice to each other. 10. The Appellant craves for leave to amend, vary, omit or substitute any of the aforesaid grounds of appeal or add any further groun .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

urn of income filed by the assessee for the Assessment Year 2005-06, the case of the assessee was subjected to scrutiny and notice u/s 143(2) dated 01.05.2006 was issued to the assessee followed by detailed questionnaire along with notice u/s 142(1) dated 30.06.2004 and in response thereto, Shri Siddharth CA attended the proceedings as Authorized Representative, filed requisite details and the case was discussed with him. 3. Michelin-Apollo India is a joint venture between Michelin group of Fran .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

92CA(3) stating that no adverse inference is drawn in respect of international transaction undertaken by the assessee during the financial year 2004-05. 4. During the year of assessment the assessee stated to have paid an amount of ₹ 1,42,04,926/- towards technical fees under the head professional and legal expenses . Provisions of agreement entered into between the assessee and its partners go to prove that the technical fee paid by the assessee towards receipt of certain rights to use te .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

8377; 28.02 lacs and the balance for sales tax and excise registration on different locations but the same has been claimed to be capital in nature and as such amount of ₹ 28,02,000/- is added to the taxable income of the assessee. The assessee claimed an amount of ₹ 1,15,368/- as a provision being made for payment of gratuity. The assessee stated that the said amount was based on actual valuation and was not paid and as such the same has been disallowed and added an amount of ₹ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. The assessee challenged the order passed by A.O. before Ld. CIT(A) who has dismissed the appeal. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal. 7. Ld. A.R. challenging the impugned order contended inter alia that since there was no capital asset to be transferred nor there was any transfer of technical knowhow, Ld. CIT(A) has grossly erred in appreciating that the expenses incurred were in the nature of Revenue expenditure; that there was n .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

appellant at ₹ 6,08,24,758/- as assessed by the A.O. as against the declared loss of ₹ 7,81,94,190/-. 10. The appellant claimed to have paid an amount of ₹ 1,42,04,926/- during the period of assessment towards technical fee under the head professional and legal expenses . The A.O. relied upon the operative part of agreement entered into between the assessee and its partner M/s. Apollo Tyres Ltd., which is reproduced as under: .. WHEREAS, MATL has entered into a Michelin Technol .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in rights to use technology by the assessee for the manufacture of Tyres was expenditure which was clearly in the nature of capital expenditure and relied upon the judgements cited as KCP Ltd. Vs CIT 242 ITR 659 (S.C.) and CITS Vs Reinz Talbros Pvt. Ltd. 252 ITR 637 (Del.). 12. Ld. CIT(A) while confirming the order passed by A.O., observed in para 5.2 of the impugned order to the effect that the appellant itself has submitted that these expenses were incurred with a view to establish a manufactu .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

not allowable being in the nature of capital expenditure and relied upon the judgement cited as Triveni Engineering Works Ltd. Vs CIT 232 ITR 639 (Del.), 100 Taxman 90 (Del. H.C.). 13. Ld. A.R. by relying on the judgement of Hon ble Jurisdictional High Court cited as Indo Rama Synthetics (I) Ltd. Vs CIT 185 Taxman 277 (Del.) contended that in the identical circumstances, Hon'ble Jurisdictional High Court has discussed the case of Triveni Engineering Works Ltd. (supra) and CIT vs Modi Indust .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nufacturing of a new product which would have certainly required investment of fresh capital and coming into existence of additional fixed assets. 14. Now. Coming to the case at hand, the assessee claimed to have spent an amount of ₹ 1,42,04,926/- towards legal fee under the head professional New Delhi legal expenses , which have been treated as capital expenditure and added to the income of the assessee by the A.O. as well as Ld. CIT(A). 15. Ld. CIT(A) by relying upon the decision of Hon& .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

. 16. However, the Hon'ble Jurisdictional High Court in the case of Indo Rama Synthetics (I) Ltd. (supra) has made fine distinction in the capital and revenue expenditure in para 10 of the judgement reproduced in the preceding para of this order by observing that if the expenditure is incurred for starting of a new business not carried out by the assessee earlier, then such expenditure is held to be of capital in nature. However, if the expenditure incurred is in respect of the same business .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

venue is not straight. However, the test of "enduring benefit is largely accepted and applied by the courts. Further, if the expenditure is incurred with a view to bringing an asset or advantage into existence, it is to be treated as capital expenditure and while doing so, it is not necessary that such expenditure should have that result. 17. But in the instants case, the expenditure of ₹ 1,42,02,926/- expended on legal fees by the assessee, cannot be treated as capital expenditure fo .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

onal High Court in the case cited as Indo Rama Synthetics (I) Ltd (supra) and as such, the said expenditure on account of technical fee cannot be treated as capital expenditure. 18. The assessee further claimed an amount of ₹ 29,11,330/- on account of payment of legal fee paid to ROC for increasing the authorized capital for ₹ 28,02,000/- and the balance for Sales Tax And Excise Registration on different locations. 19. For the sake of repetition, it is reiterated that when the amount .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tion of ₹ 28,02,000/- made by the A.O. and confirmed by Ld. CIT(A) is not sustainable and hence, ordered to be deleted. 20. The assessee claimed an amount of ₹ 1,15,368/- as provision for payment of gratuity based on actual valuation. Undisputedly, the amount of ₹ 1,15,368/- claimed on account of making provision for payment of gratuity has never been paid. Provisions contained u/s 40A(7) of the Act explicitly says that no deduction shall be allowed in respect of any provision .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

wed the deduction amounting to ₹ 2,44,328/- on account of contribution to EPF on the ground of late deposit. However, the Hon'ble Jurisdictional High Court in the judgement cited as CIT Vs Aimil Ltd. (2010) 321 ITR 508 (Del.) decided the issue in controversy. The operative part of the judgement supra is reproduced as under: BUSINESS EXPENDITURE - DEDUCTION ONLY ON ACTUAL PAYMENT - PROVIDENT FUND AND ESI CONTRIBUTIONS MADE BEFORE FILING RETURN - ALLOWABLE - INCOME-TAX ACT, 1961, ss. 36( .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 



|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version