High Court Of Delhi
CIT vs. Denso Haryana (P) Ltd.
Section 37(1), 40A(2), 92, 260A
A.K. Sikri & Siddharth Mridul, JJ.
IT Appeal No. 100 of 2008
5th November, 2009
Counsel Appeared :
Sanjeev Sabharwal, for the Appellant : C.S. Aggarwal with Prakash Kumar, for the Respondent
JUDGMENT
A.K. SIKRI, J. :
Following questions are proposed to be raised by the Revenue in this appeal on the plea that these are substantial questions of law :
“(a) Whether the Tribunal was correct in law in deleting the addition of Rs. 69,62,655 made by the AO under s. 92 r/w s. 40A(2) of the IT Act, 1961 ?
(b) Whether the Tribunal was correct in law in treating only Rs. 52,80,000 out of the total amount of Rs. 2,11,20,147 as capital expenditure ?
(c) Whether the Tribunal was correct in law in allowing loss of Rs. 1,91,24,374 on account of foreign exchange rate fluctuation ?”
2. Insofar as, the question No. (c) is concerned, on 3rd March, 2009 itself this Court has observed that it was covered by the decision of this Court in CIT vs. Woodward Governor India (P) Ltd. (2007) 210 CTR (Del) 354 : (2007) 294 ITR 451 (Del). We may only add that the aforesaid decision of this Court has since been upheld by the Supreme Court and the said judgment is reported as CIT vs. Woodward Governor India (P) Ltd. (2009) 223 CTR (SC) 1 : (2009) 21 DTR (SC) 106 : (2009) 312 ITR 254 (SC).
Insofar as the first question is concerned, we may note that the AO had disallowed (sic) the addition of Rs. 69,62,655 under ss. 92 and 40A(2) of the IT Act. The reason for disallowing, as noted by the AO, was that the assessee had imported certain goods from M/s Denso Corporation, Japan, a holding company at a price higher than similar goods purchased from local vendors. The CIT(A) found it to be factually incorrect, in as much as the AO while coming to the aforesaid finding had compared the price of the goods at which they were imported with the price of the goods in the local market in the subsequent years. The very basis of such a comparison was faulty and primarily influenced by this consideration the CIT(A) deleted the addition which is confirmed by the Tribunal. The approach of CIT(A) is perfectly justified as the AO had come to the conclusion that the price at which the goods were imported were higher by comparing the price with the price in the local market which prevailed in the subsequent years. The AO was required to compare the said price, which prevailed in the local market in the same year. It is a pure finding of fact recorded by the two appellate authorities below and, therefore, no question of law arises.
Insofar as the question of law proposed at serial No. (b) is concerned, the Tribunal has capitalized 25 per cent of Rs. 2,11,20,147 treating the same as capital expenditure. In support of this, the Tribunal has referred to the judgment of Supreme Court in Southern Switchgear Ltd. vs. CIT (1998) 150 CTR (SC) 679 : (1998) 232 ITR 359 (SC).
We may only note that the assessee had also filed appeal against the aforesaid order of the Tribunal, in as much as the grievance of the assessee was that the entire amount of Rs. 2,11,20,147 should have been treated as revenue expenditure. The admitted facts are that under the agreements dt. 25th Dec., 1998 titled as “Agreement for technical service” and “Agreement for personnel dispatching and receiving”, the assessee had paid total amount of Rs.7.33 crore to M/s Denso Corporation, Japan. Out of this Rs. 2.11 crores was paid as technical assistance fee, which was to be provided in terms of art. 1 of the said agreement. It is only this amount which was claimed as revenue expenditure and balance amount of Rs. 5.22 crores was treated as capital expenditure by the assessee itself.
In these circumstances, the only question would be as to whether the entire expenditure is to be treated as revenue expenditure or 25 per cent thereof could be capitalized, as held by the Tribunal. In either event, this entire expenditure could be treated as capital expenditure. While this question shall be considered in the appeal preferred by the assessee, Insofar as the appeal of Revenue is concerned, we are of the opinion that no question of law arises.
The appeal is accordingly dismissed.
[Citation : 328 ITR 14]
