M/s M.P.Laghu Udhog Nigam Limited, Bhopal V. The Assistant Commissioner of Income Tax, Bhopal

CO 31/IND/2010

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6625 (ITAT-INDORE)
• Duration Of Justice: 10 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 28-12-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN DEWAN
• Assessee Lawyers: R S JOSHI MANAGER
• Keywords: Depreciation; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AABCM1366K I.T.A.NO. 604/IND/2010 A.Y. : 2007-08 ACIT, M/S. M.P. LAGHU UDYOG NIGAM LIMITED, 2(1), VS BHOPAL. BHOPAL. APPELLANT RESPONDENT C.O.NO.31/IND/2010 (ARISING OUT OF I.T.A.NO. 604/IND/2010) A.Y. : 2007-08 M/S. M.P. LAGHU UDYOG NIGAM LIMITED, ACIT, BHOPAL. VS 2(1), BHOPAL. CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SHRI ARUN DEWAN, SR. DR ASSESSEE BY : SHRI R. S.JOSHI, MANAGER DATE OF HEARING : 18.10.2011 DATE OF PRONOUNCEMENT : 31.10.2011 -: 2: - 2 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE AGAINST THE ORDER OF CIT( A) DATED 3 RD FEBRUARY, 2010, FOR THE ASSESSMENT YEAR 2007-08, IN THE MATTER OF ORDER PASSED BY THE ASSESSING OFFICER U/ S 143(3) DATED 26.11.2009. 2. THE FIRST GROUND OF REVENUE RELATES TO DELETING DISALLOWANCE OF RS. 12,55,329/- AS PRIOR PERIOD EXP ENDITURE. THE AO NOTICED FROM THE AUDIT REPORT THAT THE ASSES SEE HAD CLAIMED A PRIOR PERIOD EXPENSES OF RS. 12,55,329/-. THE AO OBSERVED THAT THE ASSESSEE IS FOLLOWING THE MERCANT ILE SYSTEM OF ACCOUNTING AND ACCORDINGLY DISALLOWED THE SUM OF RS. 12,55,329/-. 3. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE AFTER HAVING THE FOLLOWING OBSERVATION S :- I HAVE CONSIDERED THE FACTS OF THE CASE. I FIND THA T THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE APPELLANT BY THE DECISION OF THE HON'BLE I.T.A.T. REFERRED TO ABOVE. AS HELD IN THE CASE OF TOYO ENGG ., -: 3: - 3 EVEN THOUGH A PREVIOUS YEAR EXPIRES ON 31 ST MARCH, EVERY YEAR, THE ACTUAL CARRYING ON OF BUSINESS IS A LIVE PROCESS, AND CANNOT BE CUT OFF PRECISELY ON TH AT DATE ESPECIALLY WHEN THE ASSESSEES BUSINESS ACTIVITIES ARE SPREAD OVER A LARGE GEOGRAPHICAL ARE A. IT WOULD BE NATURAL FOR AN OVERFLOW OF INFORMATION TO TAKE PLACE IN SUCH A CASE, AND AS LONG AS THE ASSESSEE IS CONSISTENTLY FOLLOWING THE PRACTICE OF ACCOUNTING FOR PRIOR PERIOD EXPENSES AS WELL AS INCOME ON THE RECEIPT OF THE RELEVANT INFORMATION, THERE IS NO INFIRMITY IN THE ASSESSEES ACTION. SIN CE THE DETAILS OF THE EXPENDITURE INCURRED WERE RECEIV ED IN THE FOLLOWING ACCOUNTING YEAR, THEY COULD BE ACCOUNTED FOR ONLY AT THAT POINT OF TIME. THE ASSES SEE HAS CONSISTENTLY FOLLOWED THIS PRACTICE, WHICH HAS ALSO BEEN ACCEPTED BY THE ASSESSING OFFICER IN THE PAST. ACCORDINGLY, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS NOT JUSTIFIED , AND THE SAME I S DELETED. THIS GROUND OF APPEAL IS THEREFORE ALLOWED . -: 4: - 4 4. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE EXPENDITURE WERE CRYSTALLIZED DURING YEAR UNDER CONSIDERATION, THEREFORE, THE SAME WAS DEBITED AND CLAIMED DURING THE YEAR. FOR SIMILAR EXPENDITURE, THE ASSES SEE WAS CONSISTENTLY FOLLOWING THIS PRACTICE, WHICH HAS BEE N ACCEPTED BY THE ASSESSING OFFICER IN THE PAST. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELET ING THE DISALLOWANCE OF EXPENDITURE CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. 5. IN THE CROSS OBJECTION, THE ASSESSEE HAS ALLEGED DISALLOWANCE OF REPAIR EXPENDITURE. THE ASSESSEE HA D CHARGED A SUM OF RS. 14,76,236/- TO THE PROFIT AND LOSS ACC OUNT UNDER THE HEAD OF REPAIR EXPENSES. ON EXAMINING THE DETAI LS THE AO NOTICED THAT A SUM OF RS. 7,48,042/- HAD BEEN INCUR RED ON 31.3.2007 TOWARDS REPAIR OF THE BUILDING. ON FURTHE R ENQUIRY, IT WAS FOUND THAT THE EXPENDITURE INCURRED WAS TOWA RDS CONSTRUCTION OF A LIFT IN THE BUILDING. ON THESE FA CTS, THE AO CAME TO THE CONCLUSION THAT THE EXPENDITURE WAS CAP ITAL IN NATURE AND THE SUM OF RS. 7,48,042/- WAS DISALLOWED AND -: 5: - 5 ADDED BACK TO THE INCOME. BY THE IMPUGNED ORDER THE LD. CIT(A) CONFIRMED THE ACTION OF AO. 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND FOUND THAT THE EXPENDITURE WAS INCURRED ON REPL ACEMENT OF OLD LIFT, WHICH AMOUNTS TO CAPITAL EXPENDITURE. THE LOWER AUTHORITIES WERE, THEREFORE, JUSTIFIED IN DISALLOWI NG THE SAME. WE DIRECT THE AO TO ALLOW CLAIM OF DEPRECIATION ON THE AMOUNT SPENT ON LIFT AS PER LAW. WE DIRECT ACCORDINGLY. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED, WHEREAS THE CROSS OBJECTION FILED BY THE ASSESSEE I S ALLOWED IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2011. SD/- SD/- (JOGINDER SINGH) ( R.C.SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 31 ST OCTOBER, 2011. CPU* 2031