×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
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This appeal by Revenue is directed against the order of CIT(A)-4, Bangalore, dated 27.07.2016 for Assessment Year 2008-09. The assessee has field Cross Objections (C.O.) in respect of the impugned order. Order on Revenue’s Application for condonation of delay in filing the appeal for Assessment Year 2008-09
2.1 Admittedly Revenue’s appeal for Assessment Year 2008-09 has been filed belatedly by 51 days before the Tribunal. A petition has been filed by the Assessing Officer (AO) seeking condonation of the delay in filing the appeal accompanied by an Affidavit sworn to dated 08.05.2017. In its Petition / Affidavit Revenue has put forth the following reasons for the delay in filing the appeal:-
“3. I pray for condonation of delay in filing of appeal to the Hon’ble Income Tax Appellate Tribunal. The delay is due to the fact that the time barring date for completion of assessments during the last financial year was 31st December 2016 and also since there were continuous holidays during the months of October and November 2016 due to festivals, the available staff were on long leave. Since there is sufficient cause for delay in filing the appeal, it is requested that the delay in filing the appeal may be condoned.”
2.2 We have considered the rival submissions in the matter of condonation of the delay of 51 days on the part of Revenue in filing the instant appeal for Assessment Year 2008-09 before the Tribunal. Taking into account the facts and circumstances involved, the reasons/explanations put forth by Revenue and the principles laid down by the Hon’ble Apex Court in the case of MST Katiji and Others (167 ITR 471) (SC) for dealing with matters relating to condonation of delay, we are of the view that Revenue had reasonable and sufficient cause for filing the appeal for Assessment Year 2008-09 belatedly. In this view of the matter and respectfully following the principles laid down by the Hon’ble Apex Court in its decision in the case of MST Katiji and Others (supra), we condone the delay of 51 days on the part of Revenue in filing this appeal before the Tribunal and admit its appeal for Assessment Year 2008-09 for consideration / adjudication.
O R D E R
3. Briefly stated, the facts of the case are as under:-
3.1 The assessee, a company, engaged in the business of providing signaling systems solutions to the Railways, filed its return of income for Assessment Year 2008-09 on 01.10.2008 declaring loss of (-)Rs.2,02,01,133/- under normal provisions and ‘Book Profits’ under MAT provisions at Rs.4,98,44,075/-. The assessee filed a revised return of income on 19.01.2009. The case was selected for scrutiny for this Assessment Year. In the course of assessment proceedings, the Assessing Officer (AO) observed that the assessee had claimed certain items of expenditure as deduction in the computation of income even though it had capitalized the same as intangible assets in its books of account. On being queried in this regard, the assessee submitted that it had incurred huge expenses on training and salaries of employees and related certifications to meet with international standards. Since the benefit from these expenditures has an enduring effect and was deferred over a number of years, these costs / expenditures were capitalized in the assessee’s books of accounts However, these expenses were actually revenue in nature and were therefore claimed as deductions in the computation of income. The explanations put forth by the assessee did not find favour with the AO who held that these expenditures were capital in nature and while disallowing the same, allowed depreciation thereon @ 25%. The assessment was accordingly concluded under section 143(3) of the Income Tax Act, 1961 (in short ‘the Act’) vide order dated 25.03.2010, wherein the assessee’s income was determined at Rs.34,13,815/-.
3.2.1 Aggrieved by the order of assessment dated 25.03.2010 for Assessment Year 2008-09, the assessee filed an appeal before the CIT(A)- 4, Bangalore. The CIT(A) disposed off the appeal vide the impugned order dated 27.07.2016, allowing the assessee partial relief. The relevant issue on which CIT(A) allowed relief to the assessee was in respect of expenditure of Rs.98,88,226/- claimed by the assessee in respect of salaries and training cost of employees. While doing so, the CIT(A) rendered the following observations / findings:-
(i) An examination of the said expenditure shows that it pertains to IRSE assessment cost and salaries / training cost of employees and that such expenses are in line with the normal business activity of the assessee.
(ii) Merely because these expenses inculcate better skills to employees and long term indirect benefit to the assessee; that in itself does not render the expenses to be disallowable as capital investment.
(iii) The tra ned manpower is not a capital asset of the assessee and the assessee does not get to own any exclusive or absolute rights on the trained staff.
(iv) The expenditure has to be tested by the yardstick of commercial expediency and business purpose, as was held by the Hon’ble Apex Court in the case of Travancore Titanium Products Ltd., Vs. CIT (60 ITR 277) (SC).
(v) In the background of the facts and circumstances of the case, the expenditure made towards salary, training and skill enhancement of employees is revenue in nature.