Aditya Birla Retail Ltd ( Formerly Known ... vs Department Of Income Tax

Addl. CIT, Circle-2(2) M/s. Aditya Birla Retail Ltd. Room No. 577, 5th Floor Aditya Birla Retail Centre Àayakar Bhavan, M.K. Road Vs. Next to Le Meridian Hotel Mumbai 400020 Sahara Airport Road, Andheri (E) Mumbai 400099 PAN - AAACP2678Q Appellant Respondent

ITA No. 3718/Mum/2012 (Assessment Year: 2008-09)

M/s. Aditya Birla Retail Ltd. Addl. CIT, Circle-2(2) Skyline Icone, 5th & 6th Floor Room No. 548, 5th Floor 86/92 Andheri Kurla Road Vs. Àayakar Bhavan, M.K. Road Near Mittal Indl. Estate Mumbai 400020 Andheri (E), Mumbai 400059 PAN - AAACP2678Q Appellant Respondent

Appellant by: Ms. S. Padmaja Respondent by: None

Date of Hearing: 27.04.2015 Date of Pronouncement: 27.04.2015

ORDER

Per D. Manmohan, V.P.

These cross appeals are directed against the order passed by CIT(A)-5, Mumbai and they pertain to A.Y. 2008-09.

2. The case was adjourned from time to time at the request of the assessee and finally it was adjourned to 27.04.2015. However, on that date none appeared on behalf of the assessee. We have, therefore, no alternative except to dispose of the appeal exparte, qua assessee. We have heard the learned D.R. and carefully perused the record.

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3. The only ground urged in the appeal filed by Revenue reads as under:-

"On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in allowing depreciation @60% on all equipments falling under the head 'Computers' including 'Bizebra Weighing Scale' and ignoring the fact that the same is weighing scale and not included in the list of hardwares defined as 'computer'."

4. As could be noticed from the assessment order as well as order passed by the CIT(A), assessee claimed depreciation @60% on "Bizebra Weighing Scale" on the ground that they are part of computers. The AO considered the issue in para 7 of his order wherein he observed that as per the details furnished there are various items in the form of attachments of various types which do not form part of computer and independent of computers. He also observed that a computer, in common sense and as popularly understood, refers to any electronic or high speed data processing device which performs logical, arithmetic and memory functions on data whereas weighing scale fairly do not fall within the ambit of computer. These are only peripherals which draw support from computer for its functions. Most of the computers are used in coordinating with other machineries for weighing articles, generating cash memo, etc. Therefore the basic function of the weighing scale falls in the category of plant and machinery and depreciation @15% is allowed.

5. The learned CIT(A) merely reproduced the contentions of the assessee as well as the decision of the Special Bench of ITAT, Mumbai in the case of Datacraft India Ltd. and observed that weighing scale should be treated as computer hardware and accordingly allowed the claim of the assessee. It deserves to be noticed that the detailed functions of the weighing scale were not mentioned by the CIT(A). It is not known as to what are the substantial functions of the weighing scale and whether they can independently be operated or not, in order to consider as to whether they are part of computer hardware or not.

6. Having regard to the overall circumstances of the case, in the interest of justice we set aside the order of the CIT(A) and direct the AO to reconsider the matter by taking into consideration the technical details of the weighing 3 ITA No. 3572&3718/Mum/2012 M/s. Aditya Birla Retail Ltd.

scale and analyse the same in order to appreciate as to whether the functions of the weighing scale fall within the meaning of computer hardware as specified by the ITAT Special Bench in the case of Datacraft India Ltd. With these observations the appeal filed by the Revenue is treated as allowed for statistical purposes.

7. Three grounds were raised in the appeal filed by the assessee- company, i.e.: -

i. whether legal/professional and sales promotion expenses are to be treated as capital expenditure or revenue in nature, ii. whether foreign travelling expenditure is capital in nature or not on the ground that most of these expenditures were incurred to import capital goods, and iii. whether the CIT(A) erred in disallowing a sum of `9.33 crores as expenditure incurred for earning exempt income under section 14A read with Rule 8D.

8. The learned D.R. adverted our attention to the order of the AO as well as the CIT(A) to highlight that the issues urged before the Tribunal were analysed in detail by the AO as well as the CIT(A) in the correct perspective and hence the order passed by the learned CIT(A) does not call for any interference. In this regard the learned CIT-DR adverted our attention to page 5 of CIT(A)'s order, which is in relation to the claim of expenditure debited to legal and professional fees and sales promotion expenditure, and thereafter from para 4.3 onwards, to highlight that the assessee was planning to develop three new retail concepts for the domestic Indian market for which M/s. Fitch was asked to propose how the assessee would design and brand both store concepts which were to be opened in future in all major cities and towns in India. Since the payment made was before commencement of business and related to conceptualization and implementation of same, the learned CIT(A) observed that the payments were of capital nature and not an allowable expenditure.

9. Similarly, from the agreement with TKC it was noticed that the service to be rendered by TKC was project planning and monitoring support in the initial phases of ABG Retail and the payments made in that regard were for smooth opening of retail business and hence it was of capital nature.

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10. Similar agreement was entered into with M/s. A.T. Kerney Ltd. and the payment was made for the launch of the retail business and therefore it has to be treated as pre-operative expenditure and it gives the assessee an enduring benefit in which event the expenditure has to be treated as capital in nature. Though the assessee filed a paper book, as per Rule 18(6) of the Appellate Tribunal Rules, only those papers which were referred to and relied upon by the parties during the course of arguments shall alone be treated as part of the record of the Tribunal whereas in the instant case none appeared before us and no material, whatsoever, was brought to our notice and therefore the paper book cannot be taken into consideration. Thus, the assessee has not brought any material to controvert the findings of the learned D.R. Even otherwise the paper book consists of copies of the agreements with three parties and the same were already considered by the CIT(A).

11. Having regard to the circumstances of the case we do not find any infirmity in the order passed by the CIT(A) and accordingly we dismiss ground No. 1 of the assessee.

12. As regards ground No. 2, i.e. treating of foreign travelling expenditure as capital in nature, the learned CIT(A) considered the issue in para 5.3 of his order wherein he observed that foreign travel was for procuring capital goods and hence the AO was justified in disallowing an amount proportionate to the amount of capital goods imported. Here also no material was brought to our notice to controvert the findings of the CIT(A). We, therefore, do not find any justification to interfere with the order passed by the learned CIT(A) on this aspect. Therefore ground No. 2 of the assessee is rejected.

13. With regard to ground No. 3, i.e. disallowance computed under section 14A read with Rule 8D, the issue was considered by the learned CIT(A) from page 51 onwards wherein he observed that share application money is also an investment and it has to be considered in the investment while working out the average of investment and accordingly worked out the amount disallowable under section 14A read with Rule 8D. Here also no material, whatsoever, was placed to controvert the findings of the learned CIT(A). We, 5 ITA No. 3572&3718/Mum/2012 M/s. Aditya Birla Retail Ltd.

therefore, affirm the order of the learned CIT(A) on this aspect also and dismiss ground No. 3 of the assessee.

14. In the result, the appeal filed by the Revenue is allowed for statistical purposes and the appeal filed by the assessee is dismissed.

Order pronounced in the open court on 27th April, 2015.

Sd/- Sd/- (Rajendra) (D. Manmohan) Accountant Member Vice President

Mumbai, Dated: 27th April, 2015

Copy to:

1. The Appellant 2. The Respondent 3. The CIT(A) - 5, Mumbai 4. The CIT- 2, Mumbai City 5. The DR, "A" Bench, ITAT, Mumbai

By Order

//True Copy// Assistant Registrar ITAT, Mumbai Benches, Mumbai n.p.