Danfoss Industries Pvt. Ltd. Chennai

0
3
Print Friendly
FullScreen Mode
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH ‘A’ CHENNAI

Before Dr. O. K. Narayanan, Vice President and
Shri George Mathan, Judicial Member
…..

I.T.A. No. 702/Mds/2010
Assessment Year : 2004-05

M/s. Danfoss Industries Pvt. Ltd., The Assistant Commissioner of
296, Old Mahabalipuram Road, v. Income-tax,
Sholingnallur, Chennai-600 119. Company Circle-I(4), Chennai.

(PAN: AAACE6648P)

(Appellant) (Respondent)

Appellant by : Shri T. Banusekar
Respondent by : Shri Shaji P. Jacob

O R D E R

PER GEORGE MATHAN, JUDICIAL MEMBER :

This is an appeal filed by the assessee against the order of the learned

Commissioner of Income-tax, Chennai-I in C. No. 218(63)/CIT-I/263/09-10 dated

16.3.2010 for the assessment year 2004-05.

2. Shri T. Banusekar, FCA represented on behalf of the assessee and Shri

Shaji P. Jacob, learned Sr. DR represented on behalf of the Revenue.

3. It was submitted by the learned authorised representative that the

assessment in the case of the assessee had been completed u/s. 143(3) read

with section 147 of the Income Tax Act, 1961 on 27-9-2007. Subsequently, the
———————Page 2———————

2

I.T.A. No.702/Mds/2010

learned CIT invoked his power under section 263 of the Act and had issued a

show cause notice dated 25-2-2010 wherein he had held that the order passed

by the Assessing Officer was erroneous and prejudicial to the interests of the

Revenue in regard to the software expenses and the licence fee for using the

software as also the warranty expenses. It was the submission that in the

course of the assessment proceeding notice u/s. 142(1) had been issued on the

assessee on 5-2-2007 by the Assessing Officer, wherein the Assessing Officer

had examined the issue of the warranty expenses. He drew our attention to

pages 32 and 33 of the paper book containing the notice under section 142(1).

He further drew our attention to the reply to the 142(1) notice at page 31

wherein the assessee had explained the issue of warranty expenses claimed. He

further drew our attention to the assessment order passed u/s. 143(3) read with

sectin 147, wherein at page 3 the Assessing Officer has mentioned regarding the

issue of the clarification given by the assessee regarding the justification for not

adding back the provision for warranty. He further drew our attention to the

reply given in the course of assessment proceedings to submit that the actual

provision for warranty was only ` 30,29,000/- whereas the actual expenses in

regard to the warranty was ` 37,89,000/-. It was the submission that the

Assessing Officer had examined the issue and had also considered the replies

given by the assessee and the view having not been shown by the learned CIT

as erroneous, the provisions of sec. 263 could not be invoked on the issue.
———————Page 3———————

3

I.T.A. No.702/Mds/2010

4. In regard to the software expenses it was submitted that this issue was

also considered by the Assessing Officer in the notice issued u/s. 142(1). It was

the further submission that the assessee had also replied to the same and also

produced the details vide letter dated 2-3-2007, the copy of which is found at

pages 8 to 29 of the paper book. It was the submission that as this issue has

also been considered by the Assessing Officer in the course of assessment

proceedings, the same was not liable to be considered in the proceedings u/s.

263 insofar as the learned CIT had not pointed out what was the error. It was

thus the submission that the order passed under section 263 on 16-3-2010

directing the Assessing Officer to examine the issues was in fact a direction to re-

examine the issue which was not permissible. It was the submission that the

order passed u/s. 263 was liable to be cancelled.

5. In reply, the learned DR vehemently supported the order of the learned

CIT at page 3 of the order, wherein the learned CIT has given a specific finding

that there is no discussion made by the Assessing Officer either in the order

sheet noting or in the assessment order. It was the submission that the learned

CIT has specifically given a finding that the Assessing Officer had not examined

the question of allowability of software expenses claimed by the assessee and

there being a specific finding by the learned CIT that the Assessing Officer has

not examined the same, the order passed by the learned CIT u/s. 263 was liable

to be upheld. It was the submission that the assessee had also not filed any
———————Page 4———————

4

I.T.A. No.702/Mds/2010

affidavit claiming that the details had been filed even though he has enclosed the

letter dated 2.3.2007 in the paper book.

6. We have considered the rival submissions. A perusal of the assessment

order passed by the Assessing Officer u/s. 143(3) read with section 147 at page

2 clearly shows that the issue of warranty has been considered by him. This is

also supported by the notice issued u/s. 142(1) and the reply given by the

assessee at page 321 of the paper book. In the circumstances as it is noticed

that the issue has been considered by the Assessing Officer in the course of

assessment proceedings and an opinion has been reached by him, unless this

opinion as reached by the Assessing Officer is found to be erroneous or against

legal principles laid down, the power under the provisions of section 263 cannot

be invoked by the learned CIT for disturbing the finding of the Assessing Officer

on the issue. In the circumstances, the direction of the learned CIT in regard to

the claim of expenses towards warranty is found to be erroneous and

consequently the order of the learned CIT in regard to the warranty expenses

stands cancelled.

7. Even on merits it is noticed that the actual warranty expenses claimed is `

37,89,000/- as against the provision of ` 30,29,000/- and as the actual

expenditure is more then the provision, obviously, the expenses are allowable

expenses. Consequently, even on this ground the direction of the learned CIT

on the issue of warranty expenses stands cancelled.
———————Page 5———————

5

I.T.A. No.702/Mds/2010

8. In regard to the issue of the software expenses it is noticed that the

learned CIT has given a specific finding that either in the order sheet noting or in

the assessment order there is no discussion made by the Assessing Officer.

True, in the 142(1) notice at clause (6) the issue has been raised by the

Assessing Officer and the assessee has filed a reply dated 2.3.2007 as per the

paper book filed. However, when the learned CIT has given a specific finding of

fact and this finding of fact has not been disturbed by filing of the necessary

affidavit as also on account of the fact that the records are not before us, we re

unable to find any error in the direction given by the learned CIT in regard to the

issue of software expenses. In the circumstances, the direction of the learned

CIT in regard to the software expenses is upheld. In the circumstances, the

appeal of the assessee is partly allowed and the order of the learned CIT passed

u/s. 263 stands consequently modified.

9. The order was pronounced in the court on 23/12/10.

Sd/- Sd/-
(Dr. O. K. Narayanan) (George Mathan)
Vice President Judicial Member

Chennai,
rd
Dated the 23 December, 2010.

H.
Copy to: Assessee/AO/CIT (A)/CIT/D.R./Guard file

NO COMMENTS

LEAVE A REPLY