Tca/555/2017 Of Commissioner Of Income Tax v. M/S. Tagros Chemicals India

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 28.11.2017 CORAM : The Hon'ble MR.JUSTICE T.S.SIVAGNANAMANDThe Hon'ble MR.JUSTICE M.SUNDAR T.C.A.No.555 of 2017 Commissioner of Income TaxNon Corporate Ward – 10,Chennai.. Appellant/Respondent-vs- M/s.Tagros Chemicals (India) Limited,Jhaver Centre, Raja Annamalai Building,19, New No.72, Marshals Road,Egmore, Chennai 600 008. .. Respondents/Appellant Prayer:Appeal filed under Section 260A of the Income Tax Act,1961, against the order of the Income Tax Appellate Tribunal 'A'Bench, Chennai, dated 06.02.2017 in I.T.A.No.528/Mds/2016 forthe Assessment Year 2010-11 against the order of theCommissioner of Income-Tax (Appeals) dated 29.1.2016 in order ofthe CIT(A) in Old.ITA.No.1913/13-14 & New I.T.A.No.680/13-14against the order dated 25.3.2013 passed by the JointCommissioner of Income Tax, Company Range-III, Chennai-34, forthe Assessment year 2010-2011 against PAN- . Heard Mr.M.Swaminathan, learned Standing Counsel appearingfor the appellant and Mr.M.P.Senthilkumar, learned counsel,accepting notice on behalf of the respondent/assessee. With theconsent on either side, the appeal itself is taken up fordisposal. https://hcservices.ecourts.gov.in/hcservices/ 2.The Revenue has filed this appeal against the order passedby the Income Tax Appellate Tribunal in I.T.A.No.528/Mds/2016dated 06.02.2017, by framing the following substantial questionsof law: (i)Whether the Tribunal was right in remitting theissue to the file of the Assessing Officer to re-examine the donation made u /s 35AC even thoughthe President of the eligible Trust has notreceived such donation and informed that policecomplaint has been lodged for defrauding the Trustname by unknown persons in connivance with theprivate bank officials in Kolkata ?(ii)Whether the Tribunal was right in remitting theissue of donation made u/s.35AC back to the fileof the Assessing Officer without considering thefact that the assessee has copy of certificate inForm 58A only to the tune of Rs.1 crore whereasthe total claim of the assessee was Rs.2.50 crores? (iii)Whether the Tribunal was right in holding thatthe Registration Fees and other related paymentsconstitute intangible assets and eligible fordepreciation within the meaning of “business orcommercial rights” u/s 32(1)(ii) in view of thefact that registration of pesticides in aparticular country cannot be termed as anyintangible aseet listed in section 32(1)(ii) ofthe Income Tax Act, 1961 ? 3.The facts which led to the filing of the present appealare that the assessee-company is in the business ofmanufacturing pesticides and chemicals and had filed its returnof income for the Assessment Year 2010-11 on 23.09.2010 with ataxable income of Rs.19,33,06,870/-. The case was selected forscrutiny and notice under Section 143(2) was served on theassessee. The assessee claimed deduction for donation of Rs.2.5crores to M/s.Mahila Utkarsh Sansthan Trust in Indore, MadhyaPradesh under Section 35AC of the Income Tax Act, 1961. Thedonations were made on various dates through the assessee's bankaccount maintained with the State Bank of India and the KotakMahindra Bank at Kolkata. The assessee has produced a copy ofForm 58A issued by the President of the Trust for an amount ofRs.2.00 crores. The Assessing Officer sent a letter confirmingthe entire donation of Rs.2.50 crores. The President of MahilaUtkarsh Sansthan Trust, one Dr.Sonia Sharma, stated that thebank account with Kotak Mahindra Bank has been fraudulentlyopened by unknown person with the help of bank officials and themoney was withdrawn and that they have not received donation asclaimed by the assessee. The said Trust also claimed that a criminal complaint has been lodged with the Kolkata police thattheir registered office is only in Indore and they have no otherbranches. The assessee was confronted with this information andwas called upon to prove that the fund is utilised for theintended purpose. 4.On the above contention, the Assessing Officer completedthe assessment by order dated 25.03.2013. Two issues arise forconsideration, namely with regard to the donation which has beengiven by the assessee and the same being denied by the Trust.The second issue being the claim for depreciation with regard topayment of registration fee charges, which the assessee claimedto be on account of intangible asset, as by virtue of suchregistration, they are entitled to export their products andmarket it in such countries where registration charges are beingcollected. Both the issues were decided against the assesseeand the assessment was completed. On appeal to the Commissionerof Income-tax (Appeals) (in short 'CIT (A)'), the said findingof the Assessing Officer was affirmed, however, there is noindependent finding rendered by the CIT (A). 5.On further appeal to the Tribunal, on the first issue withregard to the donation, the Tribunal has remanded the matter tothe Assessing Officer for fresh consideration by following adecision in the case of M/s.Mangal Tech Park Pvt. Ltd. inI.T.A.No.1439/Mds/2014 and 2084/Mds/2015 for the Assessment Year2008-09, vide order dated 17.06.2016. With regard to the secondaspect pertaining to the payment of registration fee charges,which the assessee claimed to be equitable to an intangibleasset, the Tribunal granted the relief to the assessee byplacing reliance on a decision of the Hon'ble Supreme Court inTechno Shares and Stocks Ltd., reported in (2010) 327 ITR 323(SC). 6.After elaborately hearing the learned counsel for theparties, we find that the order of the Tribunal remitting thematter to the Assessing Officer on the first issue is just andproper. However, we do not approve the rider attached by theTribunal in paragraph 9 of its order while remitting the issueto the Assessing Officer. If, according to the Tribunal, theAssessing Officer has to conduct a similar exercise as that wasdirected to be conducted in M/s.Mangal Tech Park Pvt. Ltd.(supra), it should have been an open remand, but not a qualifiedremand. Therefore, we are inclined to interfere with thatportion of the direction issued by the Tribunal in paragraph 9and declare that the first issue shall be remitted back to theAssessing Officer, who shall re-examine the matter independentlyand afresh, without being influenced by the observations made byhim in the assessment order or the observations of the CIT (A)or that of the observations of the Tribunal. 7.With regard to the second issue, wherein the assesseeclaimed that the payment of registration fee to be equitable toan intangible asset, we find that the finding of the Tribunal isnot supported by reasons, especially on the factual aspect as towhat is the effect of payment of the registration fee foracquiring such a licence. That apart, the assessee's alternateclaim that it should be treated as a revenue expenditure hasalso been negatived by the Assessing Officer. We find that theAssessing Officer, in paragraph 4.2 of the assessment order, hasnot given independent reason as to why the alternate submissionof the assessee is not accepted. Therefore, we find that thefinding of the Tribunal in paragraph 13 on the second issue, inour considered opinion, has been rendered without going into thecommercial aspect of the effect of the registration fee paid bythe assessee, which, even according to the Assessing Officer, isa huge expense. Therefore, we feel that the second issue alsoshould be remanded to the Assessing Officer for freshconsideration giving liberty to the assessee to raise all issuesincluding the alternate plea that it should be treated as arevenue expenditure. 8.Thus, for the above reasons, we find that the substantialquestions of law (i) and (ii) as raised by the Revenue revolveon facts and we have sustained the order of the Tribunalremitting the matter to the Assessing Officer for freshconsideration making it clear that it is an unqualified remandleaving open all the issues to be decided by the AssessingOfficer. With regard to question no. (iii), we have found thata thorough exercise has not been done to examine the contentionraised by the assessee and the Assessing Officer did not giveindependent reason for rejecting the alternate submission madeby the Assessing Officer. Therefore, on that aspect also, weremand the matter to the Assessing Officer for freshconsideration. 9.With the above observations and directions, this Tax CaseAppeal stands disposed of. No costs. //True Copy// sra https://hcservices.ecourts.gov.in/hcservices/ To 1.The Registrar, Income Tax Appellate Tribunal 'A' Bench, Chennai. 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 Company Circle III (1), Chennai 4.The Joint Commissioner of Income Tax, Company Range -III, Chennai-34. Company Range -III, Chennai-34. +1cc to Mr.G.Baskar, Advocate SR.No.84632 +1cc to Mr.M.Swaminathan, Advocate SR.No.84516 MR(CO)sm:18.12.2017 T.C.A.No.555 of 2017