Bhaskar Power Projects Pvt.Ltd., Daman V. The ACIT., Vapi Circle, Vapi

CO 11/AHD/2007

• Counselvise Citation: [2010] 122 COUNSELVISE.COM (IT) 4318 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-01-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-01-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 01-02-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C K MISHRA
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Business expenditure
• Section: 143(3); 80IB; 37; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD - AHMEDABAD D BENCH (BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER) ITA NO.2391/AHD/2006 WITH CO NO.11/AHD/2007 [ASSTT.YEAR : 2003-2004] ACIT, VAPI CIRCLE VAPI. VS. BHASKAR POWER PROJECTS P. LTD.H-13, MAHATMA GANDHI UDYOG NAGAR INDUSTRIAL ESTATE, DABHEL, DAMAN UT OF DAMAN & DIU. REVENUE BY : SHRI C.K.MISHRA ASSESSEE BY : SHRI MEHUL K. PATEL DATE OF ORDER RESERVED : 05-01-2010 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT : THE APPEAL IS FILED BY THE REVENUE AND THE CROSS-OBJECTION IS FIL ED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2003-2004. THE APPEAL AND CROSS-OBJECTION ARE DIRECTED AGAINST THE ORDER OF THE CIT(A) AT VAL SAD DATED 31-8-2006 AND ARISE OUT OF ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. FIRST GROUND RAISED IN THE APPEAL FILED BY THE R EVENUE IS THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE ACTIVITY OF TH E ASSESSEE IS MANUFACTURING ACTIVITY WITHIN THE MEANING OF SECTIO N 80IB OF THE INCOME TAX ACT, 1961. IT IS THE CASE OF THE REVENUE THAT THE CIT(A) HAS ERRED IN NOT ACCEPTING THE FINDING OF THE AO THAT THE ACTIVI TIES CARRIED OUT BY THE ASSESSEE ARE NOTHING BUT ASSEMBLING. THIS ISSUE WA S CONSIDERED BY THE ITAT, AHMEDABAD, D BENCH IN ASSESSEES OWN CASE F OR THE ASSESSMENT PAGE - 2 ITA NO.2391/AHD/2006 WITH CO NO.11/AHD/2007 -2- YEARS 2000-2001, 2001-2002, 2002-2003 AND 2005-2006 . THE TRIBUNAL IN ITS COMMON ORDER IN ITA NO.2812/AHD/2008 AND OTHERS DATED 20-2-2009 HAS CONCLUDED IN PARAGRAPH-7 OF ITS ORDER THAT THE CLAIM OF THE ASSESSEE FOR THE DEDUCTION UNDER SECTION 80IB WAS IN ORDER A S THE ASSESSEE WAS CARRYING ON MANUFACTURING ACTIVITIES. THE TRIBUNAL HAS COME TO THE ABOVE CONCLUSION AFTER EXAMINING THE FACTS OF THE CASE, R ELEVANT LAW AND APPLICABLE DECISIONS AS REFLECTED FROM PAGE NOS.3 T O 19 OF ITS ORDER. IN THE LIGHT OF THE ABOVE, WE FIND THAT THE ISSUE IS COVER ED IN FAVOUR OF THE ASSESSEE AND ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS LIABLE TO BE REJECTED. 3. THE SECOND GROUND RAISED BY THE REVENUE IS THAT THE CIT(A) HAS ERRED IN HOLDING THAT THE BUSINESS OF UNIT-II IS NO T ON ACCOUNT OF SPLITTING UP AND RECONSTRUCTION OF THE OLD UNIT. IT IS THE C ASE OF THE REVENUE THAT THE CIT(A) HAS FAILED TO APPRECIATE THE FACTS DETAI LED BY THE AO IN HIS ORDER. 4. THIS ISSUE WAS ALSO CONSIDERED BY THE TRIBUNAL I N ASSESSEES OWN CASE FOR THE YEARS MENTIONED SUPRA. IN PARA-10 OF ITS COMMON ORDER, THE TRIBUNAL HAS MADE A FINDING OF FACT THAT THERE IS N O EVIDENCE TO HOLD THAT THE UNIT-II WAS ESTABLISHED BY SPLITTING UP AND REC ONSTRUCTION OF OLD EXISTING UNIT. THE GROUND OF THE REVENUE WAS REJEC TED BY THE TRIBUNAL. AS THE MATTER STANDS COVERED IN FAVOUR OF THE ASSES SEE, THIS GROUND RAISED BY THE REVENUE IS REJECTED. 5. THE THIRD GROUND RAISED BY THE REVENUE IS THAT T HE CIT(A) HAS ERRED IN HOLDING THAT THE PAYMENT TOWARDS PF AND ES IC AMOUNTING TO RS.2,69,595/- MADE BEFORE FILING THE RETURN WAS ELI GIBLE FOR DEDUCTION WITHOUT CONSIDERING THE FACT THAT THE DUE DATES IN THE RESPECTIVE ACTS FOR PAGE - 3 ITA NO.2391/AHD/2006 WITH CO NO.11/AHD/2007 -3- THE SAID PAYMENT IS 15 TH AND 21 ST OF EVERY MONTH. THE HONBLE SUPREME COURT IN THE CASE OF ALLIED MOTORS PVT. LTD. VS. CI T, 224 ITR 677 HAS HELD THAT THE PAYMENTS OF SUCH DUES BEFORE THE DUE DATE OF FILING OF THE RETURN IS QUALIFIED FOR DEDUCTION IN THE LIGHT OF T HE AMENDMENT PROVIDED IN FINANCE ACT, 2003 NOT ONLY PROSPECTIVELY BUT RETROS PECTIVELY AS WELL. THEREFORE, THE AMENDED LAW SHOULD APPLY TO THE PERI OD EVEN PRIOR TO THE DATE OF AMENDMENT. THE ABOVE POSITION HAS BEEN REI TERATED BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. ALOM E XTRUSIONS LTD., 319 ITR 306 (SC). IN VIEW OF THE JUDICIAL PRONOUNCEMEN TS STATED ABOVE, WE FIND THAT THE ORDER OF THE CIT(A) NEEDS TO BE UPHEL D. THE GROUND RAISED BY THE REVENUE FAILS. 6. THE LAST GROUND RAISED BY THE REVENUE IN ITS APP EAL IS THAT THE CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS .1,34,536/- MADE ON ACCOUNT OF NON-BUSINESS EXPENDITURE. WE CONSIDERED THIS ISSUE. THE AO HAS MADE THE ABOVE DISALLOWANCE TOWARDS PERSONAL US E OF VEHICLES/TELEPHONES/MOBILES. THE CIT(A) ON THE OTH ER HAND DELETED THE DISALLOWANCE ON THE GROUND THAT THE ASSESSEE BEING A COMPANY AND ARTIFICIAL JURIDICAL PERSON, THE ASSESSEE COULD NOT BE HELD TO HAVE ENJOYED THE FACILITIES OF VEHICLES, TELEPHONES, MOBILES ETC . THE LOGIC OF THE CORPORATE STATUS OF AN ASSESSEE CANNOT BE APPLIED A S A BLIND RULE. ONCE THE INCOME TAX LAW RECOGNIZES A COMPANY AS A SEPARA TE ASSESSABLE ENTITY, BY TREATING IT AS A PERSON, THEN IT IS NOT POSSIB LE ALL THE TIME TO ARGUE THAT THE COMPANY BEING AN ARTIFICIAL JURIDICAL PERS ON CANNOT EAT, DRINK OR SLEEP. THE PERSONAL USER IN THE CASE OF A COMPANY DOES NOT MEAN THAT THE ASSESSEE-COMPANY HAS LITERALLY ENJOYED THESE FACILI TIES. IT IMPLIES THAT THOSE EXPENSES WERE NOT INCURRED FOR THE PURPOSE OF THE BUSINESS CARRIED ON BY THE ASSESSEE-COMPANY. THE EXPENSES NOT EXCLU SIVELY INCURRED FOR PAGE - 4 ITA NO.2391/AHD/2006 WITH CO NO.11/AHD/2007 -4- THE PURPOSE OF CARRYING ON OF THE BUSINESS ARE LIAB LE TO BE DISALLOWED UNDER SECTION 37 OF THE INCOME TAX ACT, 1961. IN O RDER TO OVERCOME THIS WEB, IT IS NECESSARY FOR THE ASSESSEE-COMPANY TO SH OW THAT THE PERSONAL USE, IF ANY, HAS BEEN REFLECTED IN THE RETURNS OF T HE PERSONS WHO HAD REALLY ENJOYED THE FACILITY. IN THE ABSENCE OF SUCH DETA ILS, WE FIND THAT THE DISALLOWANCE OF RS.1,34,536/- IS JUSTIFIED. THE OR DER OF THE CIT(A) ON THIS POINT IS REVERSED AND THE GROUND OF THE REVENU E IS ALLOWED. 7. THE APPEAL FILED BY THE REVENUE IS PARTLY SUCCES SFUL. 8. AS FAR AS THE CROSS-OBJECTION FILED BY THE ASSES SEE IS CONCERNED, IT ONLY SUPPORTS THE ORDER PASSED BY THE CIT(A). AS T HE MAJOR GROUNDS RAISED BY THE REVENUE ARE DISMISSED, THE CROSS-OBJE CTION FILED BY THE ASSESSEE HAS BECOME ACADEMIC/INFRUCTOUS. IT IS ACC ORDINGLY REJECTED. 9. IN RESULT APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED AND THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY THIS SIXTH DAY OF JAN UARY, 2010. SD/- SD/- (MAHAVIR SINGH) JUDICIAL MEMBER (DR.O.K. NARAYANAN) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 06-01-2010 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER PAGE - 5 ITA NO.2391/AHD/2006 WITH CO NO.11/AHD/2007 -5- DR, ITAT, AHMEDABAD