V. M. Salgaocar Sales International., Vasco V. The Assistant Commissioner of Income Tax, Circle-2(1), Panaji

CO 19/PAN/2015

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1532 (ITAT-PANAJI)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-10-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 18-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 14-05-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SIDDAPP A JI R N
• Assessee Lawyers: R MURALIDHAR
• Keywords: Capital asset; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PANAJI BENCH, PANAJI BEFORE SHRI N.S. SAINI, HON'BLE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, HONBLE JUDICIAL MEMBER ITA NOS. 56 & 57/PNJ/2015 : (A.YS 2007 - 08 & 2008 - 09) ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), PANAJI, GOA. (APPELLANT) VS. M/S. V.M. SALGAOCAR SALES INTERNATIONAL, SALGAOCAR HOUSE, DR. F.L. GOMES ROAD, VASCO DA GAMA (RESPONDENT) PAN : AAACV5950B C.O NO. 19/PNJ/2015 (IN ITA NO. 57 /PNJ/2015 ) : (A.Y 20 08 - 09 ) M/S. V.M. SALGAOCAR SALES INTERNATIONAL, SALGAOCAR HOUSE, DR. F.L. GOMES ROAD, VASCO DA GAMA (CROSS OBJECTOR) PAN : AAACV5950B VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 2(1), PANAJI, GOA. (RESPONDENT) ASSESSEES BY : R. MURALIDHAR, ADV. REVENUE BY : SIDDAPPAJI R.N, DR DATE OF HEARING : 0 7 /10/2015 DATE OF PRONOUNCEMENT : 0 7 /10/2015 O R D E R PER GEORGE MATHAN : 1. ITA NO. 56 /PNJ/2015 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), PANAJI - 1 IN ITA NO. 146 / MRG / 09 - 10 DT. 2 7 . 11 .201 4 FOR THE A.Y 20 07 - 08 AND ITA NO. 57 /PNJ/2015 IS AN APPEAL FILED BY THE 2 ITA NOS. 56 & 57/PNJ/2015 & CO NO. 19/PNJ/2015 (A.YS : 2007 - 08 & 2008 - 09) REVENUE AGAINST THE ORDER OF THE LD. CIT(A), PANAJI - 1 IN ITA NO. 215 / MRG /1 0 - 1 1 DT. 2 4 . 11 .201 4 FOR THE A.Y 20 08 - 09 . C.O NO. 19/PNJ/2015 IS THE CROSS OBJECTION FILED BY THE ASSESSEE IN REVENUES APPEAL BEING ITA NO. 57/PNJ/2015 FOR THE A.Y 2008 - 09. 2. AS BOTH THE APPEALS RELATE TO THE SAME ASSESSEE AND THE ISSU ES ARE IDENTICAL, THE APPEALS ARE DISPOSED OFF BY THIS COMMON ORDER. SHRI SIDDAPPAJI R.N, LD. DR REPRESENTED ON BEHALF OF THE REVENUE AND SHRI R. MURALIDHAR, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 3 . AT THE TIME OF HEARING, THE LD. AR ON BEHALF OF THE ASSESSEE SUBMITTED THAT HE DID NOT WISH TO PRESS THE CROSS OBJECTION. CONSEQUENTLY, THE SAME STANDS DISMISSED AS WITHDRAWN. 4. IN THE REVENUES APPEALS, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, WHETHER THE LEARNED CIT(A) WAS RIGHT IN TREATING THE PAYMENT TOWARDS LEASE RENT TAKEN ON BEHALF OF THE ASSESSEE AS BUSINESS EXPENDITURE U/S 37 OF THE I.T. ACT, WHEN THE HON'BLE ITAT, PUNE BENCH, IN THE CASE OF CIT VS. TATA HONEYWELL LTD. (2005) 93 ITD 507 HAS CLEARLY HELD THAT THE LEASEHOLD RIGHT IN A PROPERTY IS A CAPITAL ASSET AND PAYMENT MADE FOR ACQUISITION OF SUCH RIGHT (WITH RENEWAL CLAUSE) WOULD AMOUNT TO CAPITAL EXPENDITURE ? 3. THE APPELLATE CRAVES, LEAVE TO ADD, AMEND OR ALTER ANY OF THE GROUNDS OF APPEAL EITHER BEFORE OR AT THE TIME OF HEARING. 3 ITA NOS. 56 & 57/PNJ/2015 & CO NO. 19/PNJ/2015 (A.YS : 2007 - 08 & 2008 - 09) 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE CANCELLED AND THAT ORDER OF THE ASSESSING OFFICER RESTORED. 5. IT WAS SUBMITTED BY THE LD. DR THAT THE ONLY ISSUE IN THE REVENUES APPEALS WAS AGAINST THE ACTION OF THE LD. CIT(A) IN HOLDING THAT THE LEASE RENT PAID BY THE ASSESSEE TO M/S. SUZLON ENERGY LTD. FOR THE LAND ON WHICH A WIND MILL WAS INSTALLED WAS ALLOWABLE AS REVENUE EXPENDITURE. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD PURCHASED TWO WIND MILLS FROM M/S. SUZLON ENERGY LTD. THE ASSESSEE HAD PAID RS. 15 LACS E ACH FOR THE LEASE IN RESPECT OF THE LAND ON WHICH THE WIND MILLS WERE INSTALLED. IT WAS THE SUBMISSION THAT THE AO HAD IN THE COURSE OF THE ASSESSMENT DISALLOWED THE SAME ON THE GROUND THAT THE LEASE RENTALS WERE NOT CAPITAL EXPENDITURE ON WHICH DEPRECIAT ION COULD BE GRANTED AND THERE WAS NO PROVISION FOR ALLOWING THE SAID EXPENDITURE AS REVENUE EXPENDITURE. IT WAS THE SUBMISSION THAT THE LD. CIT(A) ERRED IN HOLDING THAT THE SAID EXPENDITURE WAS LIABLE TO BE ALLOWED AS REVENUE EXPENDITURE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 6. IN REPLY, THE LD. AR DREW OUR ATTENTION TO THE ORDER OF THE CO - ORDINATE BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. V.S. LAD & SONS IN ITA NO. 18 TO 20/BANG/2013 DT. 13.6.2014 WHEREIN IN PARA 37 OF THE SAID ORDER THE BANGALORE BENCH OF THIS TRIBUNAL HAD FOLLOWING THE DECISION OF THE HON'BLE KARNATAKA HIGH COURT IN HMT LTD. REPORTED IN 203 ITR 820 HAS HELD AS FOLLOWS: 37. WITH REGARD TO THE ALTERNATIVE CLAIM MADE BY THE ASSESSEE, THE CLAIM CANNOT FALL WITHIN THE PARAMETERS OF SECTION 30 OF THE ACT, BECAUSE THAT SECTION COVERS ONLY RENT PAID ON BUILDING. THE CLAIM HAS THEREFORE TO BE CONSIDERED U/S. 37(1) OF THE ACT. ON THIS ASPECT, WE FIND THAT THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF HMT LTD. (SUPRA), H AS CONSIDERED THE PREMIUM FOR ACQUIRING LEASEHOLD RIGHTS AS NOTHING BUT RENT PAID IN 4 ITA NOS. 56 & 57/PNJ/2015 & CO NO. 19/PNJ/2015 (A.YS : 2007 - 08 & 2008 - 09) ADVANCE. THE RENT PAID IN ADVANCE WAS FOR ACQUIRING LEASEHOLD RIGHTS OVER THE LAND. SUCH PAYMENT HAD BEEN CONSIDERED BY THE HO N BLE COURT AS REVENUE EXPENDITURE. IN VIEW O F THE AFORESAID DECISION OF THE HON'BLE HIGH COURT WHICH IS IN PAR I MATERIA WITH THE FACTS OF THE PRESENT CASE, WE ARE OF THE VIEW THAT THE LUMP SUM RENT PAID FOR THE ENTIRE PERIOD OF 30 YEARS HAS TO BE CONSIDERED AS REVENUE EXPENDITURE. THE CIT(A) WRONGLY DISTINGUISHED THIS DECISION AS A CASE OF LEASE OF FACTORY BUILDING. WE THEREFORE ACCEPT THE ALTERNATIVE PRAYER OF THE ASSESSEE. THUS, THE RELEVANT GROUNDS OF APPEAL IN ALL THE THREE ASSESSMENT YEARS ARE TREATED AS ALLOWED ON THE ALTERNATIVE GROUND. THE LD. AR DREW OUR ATTENTION TO PAGE 34 OF THE PAPER BOOK WHICH IS THE COPY OF THE DEBIT NOTE ISSUED BY M/S. SUZLON ENERGY LTD. ON THE ASSESSEE AS ALSO THE PURCHASE ORDER AT PAGE 25 OF THE PAPER BOOK WHEREIN AT PAGE 29 IN CLAUSE NO. 14 THE LEASE OF THE LAND I N RESPECT OF EACH WIND MILL HAS BEEN SPECIFIED. THE LD. AR ALSO DREW OUR ATTENTION TO THE TRANSFER OF LEASE DEED FOR TEMPORARY OCCUPATION OF FORESTLAND MADE FOR NON - FORESTRY PURPOSE BETWEEN M/S. SUZLON ENERGY LTD. AND THE ASSESSEE AS ALSO THE GOVERNMENT O RDER APPROVING THE TRANSFER OF THE FOREST LAND UNDER THE LEASE DEED. IT WAS THE SUBMISSION THAT THE ORDER OF THE LD. CIT(A) WAS LIABLE TO BE SUSTAINED. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERUSAL OF THE LEASE DEED ALONGWITH THE PURCHASE ORDER SHOWS THAT THE FACTS OF THE ASSESSEES CASE ARE IDENTICAL TO THE FACTS IN THE CASE OF M/S. V.S. LAD & SONS IN ITA NO. 18 TO 20/BANG/2013 DT. 13.6.2014 WHEREIN IN PARA 37 OF THE SAID ORDER THE BANGALORE BENCH OF THIS TRIBUNAL HAS ALLOWED THE PRAYER OF THE ASSESSEE THAT THE LEASE RENTALS WERE LIABLE TO BE ALLOWED U/S 37(1) OF THE ACT AS REVENUE EXPENDITURE. IN THE CIRCUMSTANCES, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BANGALORE BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. V.S. LAD & SONS REFERR ED TO SUPRA , THE FINDING OF THE LD. CIT(A) STANDS CONFIRMED. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DISMISSED. 5 ITA NOS. 56 & 57/PNJ/2015 & CO NO. 19/PNJ/2015 (A.YS : 2007 - 08 & 2008 - 09) 8. IN THE RESULT, THE APPEALS OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 7 /10/2015. S D / - (N.S. SAINI) ACCOUNTANT MEMBER S D / - (GEORGE MATHAN) JUDICIAL MEMBER PLACE : PANAJI / GOA DATED : 0 7 /10/2015 *SSL* COPY TO : (1) APPELLANT (2) RESPONDENT (3) CIT(A) CONCERNED (4) CIT CONCERNED (5) D.R (6) GUARD FILE TRUE COPY, BY ORDER, 6 ITA NOS. 56 & 57/PNJ/2015 & CO NO. 19/PNJ/2015 (A.YS : 2007 - 08 & 2008 - 09) DATE INITIAL ORIGINAL DICTATION PAD & DRAFT ORDER ARE ENCLOSED IN THE FILE 1. DRAFT DICTATED ON 0 7 /10/2015 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 0 7 /10/2015 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 0 7 /10/2015 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 0 8 /10/2015 JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 0 8 /10/2015 SR.PS 6. DATE OF PRONOUNCEMENT 07/10/2015 SR.PS 7. FILE SENT TO THE BENCH CLERK 0 8 /10/2015 SR.PS 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER