The Commissioner Of Income Taxchennai v. M/S.amalgamation Valeo Clutch P Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS CORAM THE HONOURABLE MR. JUSTICE R.SUDHAKARANDTHE HONOURABLE MS. JUSTICE K.B.K.VASUKI The Commissioner of Income TaxChennai. ... Appellant- Vs - M/s.Amalgamation Valeo Clutch P Ltd.134, 'J' GardensGNR Road, Chennai 600 110. ... Respondent Appeals filed under Section 260-A of the Income Tax Act againstthe order dated 13.10.2011 passed by the Income Tax AppellateTribunal, Chennai 'D' Bench, made in ITA No.242/Mds/2011 and ITANo.243/Mds/2011 against the Order of the Commissioner of Income Tax,(Appeals)-III, Chennai, made in ITA.No.278/08-09/A.III - Order dated26.11.2010 and against the order of the Commissioner of Income Tax(Appeals)-III, Chennai, made in ITA.No.146/07-08/A.III order dated26.11.2010, and against the order of the Deputy Commissioner ofIncomeTaxCompanyCircleI(1),Chennai,madeinPA/GIR.No.AAACA9038P/AX3-588 & AAACA9038P/AX3-588 order dated28.11.2008 and 30.08.2007 for the Assessment years 2006-07 & 2005-06respectively.(in TCA Nos.206 & 207 of 2015) For Appellant: Mr. T.RavikumarFor Respondent : Mr. R.Venkatanarayanan for M/s.Subbaraya Aiyar Padmanabhan JUDGMENT (DELIVERED BY R.SUDHAKAR, J.) Aggrieved by the order of the Tribunal in dismissing the appealsfiled by it, the appellant/Revenue is before this Court by filing thepresent appeals raising the following questions of law :-"1)Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal was rightin holding that the allowability of depreciation ontechnical know-how is to be allowed even though thesame was not put to use?2) Whether the finding of the Tribunal is propersince as per assessee's own claim the intangibleassets was under construction or its work is inprogress and cannot form part of fixed schedule tillit is converted into tangible assets fit for use andput to use?" 2. The facts, in a nutshell, are as hereunder :- The assessee is engaged in the business of manufacturing,trading and sale of clutches. The assessee filed its return ofincome for the assessment years 2005-2006 and 2006-2007, disclosingtotal income of Rs.12,75,64,358/= and Rs.23,41,24,562/= respectively,which were processed under Section 143 (1). The case was,thereafter, selected for scrutiny and notice under Section 143 (2)was issued. One of the major issues before the Assessing Officerrelated to depreciation on technical know-how. The assessee claimeddepreciation on technical know-how at the rate of 25% during theyear. However, the assessing officer held that the fee towards thetechnical know-how has not been paid during the relevant year as isevident from the notings made in the account books by the assesseestating that the balance technical know-how fee has not yet becomedue, as the technical know-how is in progress. In such view of thematter, the Assessing Officer recomputed the income and arrived atthe taxable income for the respective assessment years atRs.16,15,24,359/= and Rs.23,83,47,161/= respectively. 3. Aggrieved against the said orders, the assessee preferredappeals before the CIT (Appeals). The CIT (Appeals), following thedecision of the Tribunal in assessee's own case in ITA No.35 of 2008and M.P. No.45 of 2010, allowed the appeals and held in favour of theassessee. The Department, aggrieved by the said order, preferredappeals to the Tribunal. 4. The Tribunal, on a consideration of the issue, relying upon adecision of this Court in TC (A) No.1115 of 2010 dated 10.01.2011 inassessee's own case, which in turn relied on a decision of this Courtin TCA No.1009 of 2010, held that the assessee is entitled todepreciation on technical know-how and, accordingly, dismissed theappeals filed by the Department. Aggrieved by the said order, theDepartment is before this Court by filing the present appeals. 4. The Tribunal, on a consideration of the issue, relying upon adecision of this Court in TC (A) No.1115 of 2010 dated 10.01.2011 inassessee's own case, which in turn relied on a decision of this Courtin TCA No.1009 of 2010, held that the assessee is entitled todepreciation on technical know-how and, accordingly, dismissed theappeals filed by the Department. Aggrieved by the said order, theDepartment is before this Court by filing the present appeals. 5. Heard the learned standing counsel appearing for theappellant/Department and the learned counsel appearing for therespondent/assessee and perused the materials available on record asalso the decisions relied on by the learned counsel for the parties. 6. We find from the order of the Tribunal, the Tribunal hasrelied on a judgment of this Court in TCA No.1115 of 2010 dated10.01.2011 and held against the Revenue. We further find from theorder passed in TCA No.1115 of 2010, reference has been made to anorder passed by this Court in TCA No.1009 of 2010, wherein challengewas made as to whether the Tribunal has powers to rectify the mistakeapparent on record in exercise of powers under Section 254 (2) of theAct and directing the Assessing Officer to grant depreciation on theactual cost of acquisition of technical know-how. 7. In the case of Commissioner of Income Tax-I, Chennai - Vs -M/s.Amalgamations Valeo Clutch Ltd. (TCA No.1009 of 2010 dated08.11.2010), which pertains to the very same assessee, the power ofthe Tribunal to rectify a mistake by reviewing its own order by wayof a rectification application in exercise of powers under Section254 (2) and for direction on the Assessing Officer to grantdepreciation on the actual cost of acquisition of technical know-how,was considered and this Court held that the Tribunal had not exceededits jurisdiction in rectifying the mistake and, accordingly, answeredthe issue in favour of the assessee and against the Revenue. Forbetter clarity, the said portion of the order is extractedhereinbelow :- "5. In such circumstances, when the Tribunal in itsearlier order dated 9.10.2009 did not consider thesaid legal position, when it was brought to its noticein the rectification application, it was bound tocorrect the mistake in the application filed underSection 254 (2) of the Act. Therefore, such arectification carried out by the Tribunal in its orderdated 9.10.2009 by the order impugned in this appealcannot be held to be in violation of Section 254 (2)of the Act nor can it be held that by carrying out such a rectification, it exceeded its jurisdiction bygoing into the merits of the issue once over again.We therefore do not find any flaw and consequentlythere is no question of law much less substantialquestion of law to be examined in this appeal. Theappeal fails and the same is dismissed. No costs." 8. A conjoint reading of both the orders, viz., T.C.A. Nos.1009of 2010 and 1115 of 2010, would reveal that the issue relating togrant of depreciation on the actual cost of acquisition of technicalknow-how has already been answered by this Court in the affirmativein favour of the assessee and, therefore, the Revenue can no longerurge the same issue once over. Therefore, no question of law, muchless substantial question of law arise for consideration in theseappeals and, accordingly, the same deserves to be dismissed. 9. For the reasons aforesaid, these appeals fail and the sameare dismissed. Consequently connected miscellaneous petition isclosed. However, in the circumstances of the case, there shall be noorder as to costs. Sd/- Assistant Registrar(CS II) //True Copy// GLN Sub Assistant Registrar To 1. The Commissioner of Income Tax-I Chennai. 2. The Income Tax Appellate Tribunal Chennai 'D' Bench, Chennai. 3. The Commissioner of Income Tax(Appeals)-III, Chennai. 4. The Deputy Commissioner of Income Tax Company Circle I(1), Chennai. CA(CO)CA(25/08/2015) 9. For the reasons aforesaid, these appeals fail and the sameare dismissed. Consequently connected miscellaneous petition isclosed. However, in the circumstances of the case, there shall be noorder as to costs. Sd/- Assistant Registrar(CS II) //True Copy// GLN Sub Assistant Registrar To 1. The Commissioner of Income Tax-I Chennai. 2. The Income Tax Appellate Tribunal Chennai 'D' Bench, Chennai. 3. The Commissioner of Income Tax(Appeals)-III, Chennai. 4. The Deputy Commissioner of Income Tax Company Circle I(1), Chennai. CA(CO)CA(25/08/2015) T.C.A. NOS. 206 & 207 OF 2015