Commissioner of Income-tax Non Corporate Ward – 10, Chennai v. Tagros Chemicals (India) Limited
[Citation -2017-LL-1128-24]

Citation 2017-LL-1128-24
Appellant Name Commissioner of Income-tax Non Corporate Ward – 10, Chennai
Respondent Name Tagros Chemicals (India) Limited
Court HIGH COURT OF MADRAS
Relevant Act Income-tax
Date of Order 28/11/2017
Judgment View Judgment
Keyword Tags revenue expenditure • intangible asset • taxable income • commercial right • depreciation allowance • registration fee
Bot Summary: In 5 to the Commissioner of Income-tax'), the said finding of the Assessing Officer was affirmed there is no independent finding rendered by the CIT. 5.On further appeal to the Tribunal, on the first issue with regard to the donation, the Tribunal has remanded the matter to the Assessing Officer for fresh consideration by following a decision in the case of M/s.Mangal Tech Park Pvt. Ltd. in I.T.A.No. With regard to the second aspect pertaining to the payment of registration fee charges, which the assessee claimed to be equitable to an intangible asset, the Tribunal granted the relief to the assessee by placing reliance on a decision of the Hon'ble Supreme Court in Techno Shares and Stocks Ltd., reported in 327 ITR 323. 6.After elaborately hearing the learned counsel for the parties, we find that the order of the Tribunal remitting the matter to the Assessing Officer on the first issue is just and proper. We are inclined to interfere with that portion of the direction issued by the Tribunal in paragraph 9 and declare that the first issue shall be remitted back to the Assessing Officer, who shall re-examine the matter independently and afresh, without being influenced by the observations made by him in the assessment order or the observations of the CIT or that of the observations of the Tribunal. In 7 the finding of the Tribunal in paragraph 13 on the second issue, in our considered opinion, has been rendered without going into the commercial aspect of the effect of the registration fee paid by the assessee, which, even according to the Assessing Officer, is a huge expense. 8.Thus, for the above reasons, we find that the substantial questions of law and as raised by the Revenue revolve on facts and we have sustained the order of the Tribunal remitting the matter to the Assessing Officer for fresh consideration making it clear that it is an unqualified remand leaving open all the issues to be decided by the Assessing Officer. We have found that a thorough exercise has not been done to examine the contention raised by the assessee and the Assessing Officer did not give independent reason for rejecting the alternate submission made by the Assessing Officer.


1 IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.11.2017 CORAM : Hon'ble MR.JUSTICE T.S.SIVAGNANAM AND Hon'ble MR.JUSTICE M.SUNDAR T.C.A.No.555 of 2017 Commissioner of Income Tax Non Corporate Ward 10, Chennai .. Appellant -vs- M/s.Tagros Chemicals (India) Limited, Jhaver Centre, Raja Annamalai Building, 19, New No.72, Marshals Road, Egmore, Chennai 600 008. .. Respondents Appeal filed under Section 260A of Income Tax Act, 1961, against order of Income Tax Appellate Tribunal 'A' Bench, Chennai, dated 06.02.2017 in I.T.A.No.528/Mds/2016 for Assessment Year 2010-11. For Appellant : Mr.M.Swaminathan For Respondent : Mr.M.P.Senthilkumar ***** http://www.judis.nic.in 2 JUDGMENT (Judgment of Court was delivered by T.S.SIVAGNANAM, J.) Heard Mr.M.Swaminathan, learned Standing Counsel appearing for appellant and Mr.M.P.Senthilkumar, learned counsel, accepting notice on behalf of respondent/assessee. With consent on either side, appeal itself is taken up for disposal. 2.The Revenue has filed this appeal against order passed by Income Tax Appellate Tribunal in I.T.A.No.528/Mds/2016 dated 06.02.2017, by framing following substantial questions of law: (i) Whether Tribunal was right in remitting issue to file of Assessing Officer to re-examine donation made u /s 35AC even though President of eligible Trust has not received such donation and informed that police complaint has been lodged for defrauding Trust name by unknown persons in connivance with private bank officials in Kolkata ? (ii)Whether Tribunal was right in remitting issue of donation made u/s.35AC back to file of Assessing Officer without considering fact that assessee has copy of certificate in Form 58A only http://www.judis.nic.in 3 to tune of Rs.1 crore whereas total claim of assessee was Rs.2.50 crores ? (iii)Whether Tribunal was right in holding that Registration Fees and other related payments constitute intangible assets and eligible for depreciation within meaning of business or commercial rights u/s 32(1)(ii) in view of fact that registration of pesticides in particular country cannot be termed as any intangible aseet listed in section 32(1)(ii) of Income Tax Act, 1961 ? 3.The facts which led to filing of present appeal are that assessee-company is in business of manufacturing pesticides and chemicals and had filed its return of income for Assessment Year 2010-11 on 23.09.2010 with taxable income of Rs.19,33,06,870/-. case was selected for scrutiny and notice under Section 143(2) was served on assessee. assessee claimed deduction for donation of Rs.2.5 crores to M/s.Mahila Utkarsh Sansthan Trust in Indore, Madhya Pradesh under Section 35AC of Income Tax Act, 1961. donations were made on various dates through assessee's bank account maintained with State Bank of India and Kotak Mahindra Bank at Kolkata. assessee has produced copy of Form 58A issued by President of Trust for amount of Rs.2.00 crores. Assessing Officer sent letter http://www.judis.nic.in 4 confirming entire donation of Rs.2.50 crores. President of Mahila Utkarsh Sansthan Trust, one Dr.Sonia Sharma, stated that bank account with Kotak Mahindra Bank has been fraudulently opened by unknown person with help of bank officials and money was withdrawn and that they have not received donation as claimed by assessee. said Trust also claimed that criminal complaint has been lodged with Kolkata police that their registered office is only in Indore and they have no other branches. assessee was confronted with this information and was called upon to prove that fund is utilised for intended purpose. 4.On above contention, Assessing Officer completed assessment by order dated 25.03.2013. Two issues arise for consideration, namely with regard to donation which has been given by assessee and same being denied by Trust. second issue being claim for depreciation with regard to payment of registration fee charges, which assessee claimed to be on account of intangible asset, as by virtue of such registration, they are entitled to export their products and market it in such countries where registration charges are being collected. Both issues were decided against assessee and assessment was completed. On appeal http://www.judis.nic.in 5 to Commissioner of Income-tax (Appeals) (in short 'CIT (A)'), said finding of Assessing Officer was affirmed, however, there is no independent finding rendered by CIT (A). 5.On further appeal to Tribunal, on first issue with regard to donation, Tribunal has remanded matter to Assessing Officer for fresh consideration by following decision in case of M/s.Mangal Tech Park Pvt. Ltd. in I.T.A.No.1439/Mds/2014 and 2084/Mds/2015 for Assessment Year 2008-09, vide order dated 17.06.2016. With regard to second aspect pertaining to payment of registration fee charges, which assessee claimed to be equitable to intangible asset, Tribunal granted relief to assessee by placing reliance on decision of Hon'ble Supreme Court in Techno Shares and Stocks Ltd., reported in (2010) 327 ITR 323 (SC). 6.After elaborately hearing learned counsel for parties, we find that order of Tribunal remitting matter to Assessing Officer on first issue is just and proper. However, we do not approve rider attached by Tribunal in paragraph 9 of its order while remitting issue to Assessing Officer. If, according http://www.judis.nic.in 6 to Tribunal, Assessing Officer has to conduct similar exercise as that was directed to be conducted in M/s.Mangal Tech Park Pvt. Ltd. (supra), it should have been open remand, but not qualified remand. Therefore, we are inclined to interfere with that portion of direction issued by Tribunal in paragraph 9 and declare that first issue shall be remitted back to Assessing Officer, who shall re-examine matter independently and afresh, without being influenced by observations made by him in assessment order or observations of CIT (A) or that of observations of Tribunal. 7.With regard to second issue, wherein assessee claimed that payment of registration fee to be equitable to intangible asset, we find that finding of Tribunal is not supported by reasons, especially on factual aspect as to what is effect of payment of registration fee for acquiring such licence. That apart, assessee's alternate claim that it should be treated as revenue expenditure has also been negatived by Assessing Officer. We find that Assessing Officer, in paragraph 4.2 of assessment order, has not given independent reason as to why alternate submission of assessee is not accepted. Therefore, we find that http://www.judis.nic.in 7 finding of Tribunal in paragraph 13 on second issue, in our considered opinion, has been rendered without going into commercial aspect of effect of registration fee paid by assessee, which, even according to Assessing Officer, is huge expense. Therefore, we feel that second issue also should be remanded to Assessing Officer for fresh consideration giving liberty to assessee to raise all issues including alternate plea that it should be treated as revenue expenditure. 8.Thus, for above reasons, we find that substantial questions of law (i) and (ii) as raised by Revenue revolve on facts and we have sustained order of Tribunal remitting matter to Assessing Officer for fresh consideration making it clear that it is unqualified remand leaving open all issues to be decided by Assessing Officer. With regard to question no. (iii), we have found that thorough exercise has not been done to examine contention raised by assessee and Assessing Officer did not give independent reason for rejecting alternate submission made by Assessing Officer. Therefore, on that aspect also, we remand matter to Assessing Officer for fresh consideration. http://www.judis.nic.in 8 9.With above observations and directions, this Tax Case Appeal stands disposed of. No costs. (T.S.S., J.) (M.S., J.) 28.11.2017 Index : Yes/No Website : Yes/No sra To 1.The Registrar, Income Tax Appellate Tribunal 'A' Bench, Chennai. 2.The Commissioner of Income-Tax (Appeals)-II, Chennai. 3.The Asstt. Commissioner of Income-Tax, Company Circle III (1), Chennai. http://www.judis.nic.in 9 T.S.Sivagnanam, J. and M.Sundar, J. (sra) T.C.A.No.555 of 2017 28.11.2017 http://www.judis.nic.in Commissioner of Income-tax Non Corporate Ward 10, Chennai v. Tagros Chemicals (India) Limited
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