M/s. Swarn Chemicals, Pune V. Asst. Comm. of Income-tax, Pune

CO 58/PUN/2011

• Counselvise Citation: [2012] 122 COUNSELVISE.COM (IT) 7251 (ITAT-PUNE)
• Duration Of Justice: 7 month(s) 23 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 09-04-2012
• Assessment Year: 2000-2001
• Appeal Filed On: 02-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Keywords: Depreciation
• Section: 143(3); 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES, B PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, J.M. AND SHRI G.S. PANNU, A.M. I.T.A. NO. 1288/PN/2010 : A.Y. 2000-01 I.T.O. WARD 3(3) PUNE .. APPELLANT VS. SWARN CHEMICALS BARSANA APARTMENTS ASHOK NAGAR AUNDH, PUNE-411 007 PAN AAEFS 7991 N .. RESPONDENT C.O. NO. 58/PN/2011 ARISING OUT OF I.T.A. NO. 1288/PN/2010 : A.Y. 200 0-01 SWARN CHEMICALS BARSANA APARTMENTS ASHOK NAGAR AUNDH, PUNE-411 007 PAN AAEFS 7991 N CROSS OBJECTOR VS. ASSTT. CIT CIR. 4, PUNE RESPONDENT DEPARTMENT BY: MS ANN KAPT HUAMA ASSESSEE BY: SHRI S.N. PURANIK DATE OF HEARING : 09-04-2012 DATE OF PRONOUNCEMENT: ____-4-2012 ORDER PER SHAILENDRA KUMAR YADAV, JM THE APPEAL BY THE DEPARTMENT AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE CIT(A)-II PUNE DATED 19-7-2010. ITA NO. 1288/PN/2010 AND CO 58/PN/2011 SWARN CHEMICALS A.Y. 2000-01 2 ITA NO. 1288/PN/2010 (DEPARTMENTS APPEAL) 2. IN THIS APPEAL, THE R4EVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED CIT(A) IS CONTRARY TO LAW AND TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) GROSSLY ERRED IN DELETING THE ADDITION OF RS. 13,21,945/- MADE IN THE ASSESSMENT CONSEQUENT UPON THE PASSING OF THE ORIGINAL APPELLATE ORDER F THE CIT(A) DATED 19-1-2004 INSTEAD OF CONFIRMING THE SAID ADDITION. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE ASSESSEE HAD BOOKED LOSS IN RESPECT OF LEASING OUT NEW TANKERS TO ITS SISTER CONCERN WITH A VIEW TO REDUCING ITS INCOME FROM TRADING IN CHEMICAL BUSINESS AND PASSING OUT THE BENEFIT TO THE SISTER CONCERN WHO HAD NOT RETURNED TO THE ASSESSEE RECIPROCAL BENEFITS. 4. ON THE FACTS AN IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) GROSSLY ERRED IN FAILING TO APPRECIATE THAT THE LOSS THUS CLAIMED BY THE ASSESSEE ON THE LEASING OUT OF 4 NEW TANKERS COULD NOT BE CONSIDERED TO HAVE BEEN INCURRED IN THE NORMAL COURSE OF THE ASSESSEES BUSINESS AND, ON THE CONTRARY, WAS IN THE NATURE OF A COLOURABLE TRANSACTION WITHIN THE MEANING OF THE JUDGMENT OF THE HONBLE SUPREME COURT OF INDIA IN THE CASE OF MCDOWELL & CO. LTD. (144 ITR 148). 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) GROSSLY ITA NO. 1288/PN/2010 AND CO 58/PN/2011 SWARN CHEMICALS A.Y. 2000-01 3 ERRED IN DELETING THE ADDITION ON THE IRRELEVANT CONSIDERATION THAT BOTH THE ASSESSEE AS WELL AS THE SISTER CONCERN HAD RETURNED POSITIVE INCOME FOR THE RELEVANT ASSESSMENT YEAR AND WERE ALSO IN THE SAME TAX BRACKET. 6. FOR THESE AND SUCH OTHER GROUNDS AS MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF THE LEARNED CIT(A) MAY BE VACATED AND THAT OF THE AO BE RESTORED. 3. DURING THE FIRST ROUND OF LITIGATION BEFORE THE TRIBUNAL, THE ITAT VIDE ITS ORDER IN ITA NO. 438/PN/2004 DATED 19-10-2007 THE ISSUE OF ADDITION OF RS. 28,45,000/- ON ACCOUNT OF RECEIPTS FROM THE TRICKS WAS DECIDED. IT WAS OBSERVED BY TH E TRIBUNAL THAT THE ADDITION OF RS. 28,45,000/- MADE ON ESTIMATE BASIS FOR DIFFERENT TRUCKS BY THE ASSESSING OFFICER WAS SUBSTITUTED BY THE CIT(A) BY AN AMOUNT OF RS. 13,21,945/-. BEFORE THE CIT(A) IT WAS EXPLAINED BY THE ASSESSEE THAT BECAUSE OF THE FIRST YEAR OF THE NEW VEHICLES THERE WAS HIGHER DEPRECIATION WHICH RESULTED INTO THE LOSS WHICH HAS GOT NO RELATION TO ITS CHARGING LESS AMOUNT TO THE SISTER CONCERN AND LOSS WOULD HAVE BEEN ARISEN EVEN IF THE TRANSPORTATION ACTIVITY WOULD HAVE BEEN CARRIED OUT BY THE ASSESSEE ITSELF, ON ACCOUNT OF T HIS DEPRECIATION. THIS CONTENTION OF THE ASSESSEE WAS ACCEPTED BY THE CIT(A). IT WAS ALSO EXPLAINED BY T HE ASSESSEE THAT THE VEHICLES WERE HIRED TO SISTER CONCERN IN WHICH ALSO SCRUTINY ASSESSMENT WAS CARRIED OUT. IT WAS NOTICED THAT THE SISTER CONCER N ITA NO. 1288/PN/2010 AND CO 58/PN/2011 SWARN CHEMICALS A.Y. 2000-01 4 WAS A FIRM AND THE RETURNED INCOME FOR A.Y. 2000-01 WAS RS. 10,21,300/-. ON THE OTHER HAND, THE INCOME OF THE ASSESSEE FOR THIS YEAR WAS RS. 9,23,138/-. THEREFORE, EVEN AFTER PASSING OF THE S O- CALLED BENEFIT OF THE AMOUNT OF RS. 13,21,945/- BY THE ASSESSEE TO THE SISTER CONCERN THE ASSESSEE HAS SHOWN A POSITIVE INCOME OF RS. 9,23,138/-. THEREFORE, CONSIDERING THE FACT THAT IT IS A CASE WHERE THE LOSS OCCURRED ONLY BECAUSE SOME NEW TRUCKS WERE PURCHASED AND DEPRECIATION WAS HIGHER IN THE FIRST YEAR, WE UPHOLD THE ORDER OF THE CIT(A ) ON THIS ISSUE. 4. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. C.O NO. 58/PN/2011 ARISING OUT OF ITA O. 1288/PN/20 10 5. IN THE CROSS OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING SOLITARY GROUND: CROSS OBJECTOR PRAYS THAT CIT(A) HAS ERRED IN CONFIRMING ADDITION OF RS. 3,78,000/- AGAINST RS. 1,38,000/-, ADDITION OF RS. 2,40,000/- MAY PLEASE BE DELETED AS TANKERS ARE GIVEN ON HIRE FOR SIX MONTHS AND 12 MONTHS FOR THE YEAR UNDER CONSIDERATION. 6. IT WAS SUBMITTED BY THE LEARNED AR THAT THE CIT(A) HAS RIGHTLY CONSIDERED TANKER HIRE CHARGES A T THE RATE OF RS. 10,000/- PER MONTH PER TANKER AS ACCEPTED BY THE DEPARTMENT IN SUBSEQUENT 143(3) ORDER FOR A.Y. 2001-02 AND 2003-04. THE LEARNED AR ITA NO. 1288/PN/2010 AND CO 58/PN/2011 SWARN CHEMICALS A.Y. 2000-01 5 FURTHER SUBMITTED THAT THE CIT(A) HAS RIGHTLY CONSIDERED TANKER HIRE CHARGES AT THE RATE OF RS. 10,000/- PER MONTH PER TANKER AS ACCEPTED BY THE REVENUE IN SUBSEQUENT 143(3) ORDERS FOR A.Y. 2001- 02 AND 2003-04. THE ASSESSEE CONTENDED THAT HIRE CHARGES FOR SIX MONTHS AT RS. 1,38,000/- INSTEAD OF ONE YEAR AT RS. 3,78,000/- IS ACCEPTABLE TO IT. WE ALSO FIND FORCE IN THE CONTENTION OF THE ASSESSEE. WE ACCORDINGLY DECIDE THE ISSUE RAISED BY THE ASSESSEE IN ITS CROSS OBJECTION IN FAVOUR OF THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE DEPARTMENT IS DISMISSED WHILE THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. DECISION IS PRONOUNCED IN THE OPEN COURT ON 25 TH APRIL 2012. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE DATED THE 25 TH APRIL 2012. ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-(A) II PUNE 4. THE CIT II PUNE 4. THE D.R, ITAT PUNE BENCH, PUNE 6. GUARD FILE BY ORDER ITA NO. 1288/PN/2010 AND CO 58/PN/2011 SWARN CHEMICALS A.Y. 2000-01 6 SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL