Southern Drugs & Pharmaceticals, V. THE ACIT, Rajahmundry

CO 7/VIZ/2015

• Counselvise Citation: [2016] 112 COUNSELVISE.COM (IT) 4196 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 3 month(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 29-04-2015
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Depreciation; Reasonable cause; TDS
• Section: 40(a)(ia)

Judgement Text

ITA NO.536/VIZAG/2014 & CO NO.7/VIZAG/2015 M/S. SOUTHERN DRUGS & PHARMACEUTICALS, DOWLAISWARAM 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . , . , $ BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ./I.T.A.NO.536/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) ACIT, CIRCLE - 1, RAJAHMUNDRY VS. M/S. SOUTHERN DRUGS & PHARMACEUTICALS DOWLAISWARAM [PAN: AALFS6132L ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.7/VIZAG/20 15 1515 15 (ARISING OUT OF I.T.A.NO.536/VIZAG/2014) ( / ASSESSMENT YEAR: 2010-11) M/S. S OUTHERN DRUGS & PHARMACEUTICALS DOWLAISWARAM VS. ACIT, CIRCLE - 1, RAJAHMUNDRY ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.N. MURTHY NAIK, DR / RESPONDENT BY : SHRI G.V.N. HARI, AR / DATE OF HEARING : 28.07.2016 / DATE OF PRONOUNCEMENT : 29.07.2016 ITA NO.536/VIZAG/2014 & CO NO.7/VIZAG/2015 M/S. SOUTHERN DRUGS & PHARMACEUTICALS, DOWLAISWARAM 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A), VISAKHAPATNAM DATED 15.7.2014 FOR THE ASSES SMENT YEAR 2010- 11 AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF LD. CIT(A). 2. WHEN THIS APPEAL IS TAKEN UP FOR HEARING, IT IS F OUND THAT THERE IS A DELAY OF 8 DAYS IN FILING THE APPEAL BY THE REVENUE . THE LD. D.R. BY WAY OF AN AFFIDAVIT SUBMITTED THAT THE DELAY MAY BE CON DONED. WE HAVE GONE THROUGH THE AFFIDAVIT FILED BY THE DEPARTMENT AND WE FIND THAT THERE IS A REASONABLE CAUSE TO CONDONE THE DELAY. ACCORDINGLY, THE DELAY OF 8 DAYS IS CONDONED. 3. FACTS ARE IN BRIEF THAT THE ASSESSEE FIRM ENGAGE D IN THE BUSINESS OF ENO PACKAGE (FOR M/S. GLAXO SMITHKLINE) AND WIND PO WER GENERATION, HAD FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 OF ` 33,23,520/-. IN THE ASSESSMENT ORDER, THE A.O. HAS OBSERVED THAT THE ASSESSEE HAD INCURRED AN AMOUNT OF ` 88,82,810/- FOR ERECTION AND COMMISSION CHARGES PAID TO SHRIRAM EPC LTD. AND NO TDS WAS DEDUCTED ITA NO.536/VIZAG/2014 & CO NO.7/VIZAG/2015 M/S. SOUTHERN DRUGS & PHARMACEUTICALS, DOWLAISWARAM 3 AND THEREFORE THE EXPENDITURE INCURRED BY THE ASSES SEE WAS DISALLOWED. ASSESSEE CARRIED MATTER IN APPEAL BEFORE THE LD. CI T(A). 4. IT WAS SUBMITTED BEFORE THE LD. CIT(A) THAT THE ASSESSEE HAD PURCHASED TWO WIND TURBINES FOR ` 2,40,00,000/- WHICH INCLUDE AN AMOUNT PAID TOWARDS ERECTION AND OTHER TECHNICAL SE RVICES OF ` 88,82,810/-. IT WAS FURTHER SUBMITTED BEFORE THE LD. CIT(A) THAT THE EXPENDITURE OF ` 88,82,810/- SO INCURRED WAS CAPITALIZED AND NO TDS PROVISIONS ARE APPLICABLE. THE LD. CIT(A) AFTER CO NSIDERING THE EXPLANATION OF THE ASSESSEE, HE HAS OBSERVED THAT A S PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE INCOME TAX ACT, 1961 (H EREINAFTER CALLED AS 'THE ACT'), THE EXPENDITURE REFERRED IN SECTION 36 TO 38 OF THE ACT ARE LIABLE FOR DISALLOWANCE, IF TDS WAS NOT EFFECTED. THE SCOPE OF SECTION 40(A)(IA) OF THE ACT WOULD NOT APPLY TO CAPITAL EXP ENDITURE. THE DEPRECIATION SCHEDULE FILED BY THE ASSESSEE SHOWS T HAT THE ABOVE EXPENDITURE WAS CAPITALIZED. THEREFORE, IT IS HELD THAT THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING THE IMPUGNED DIS ALLOWANCE OF ` 88,82,810/-. AS A RESULT, THE ASSESSING OFFICER I S DIRECTED TO DELETE THE IMPUGNED DISALLOWANCE. ITA NO.536/VIZAG/2014 & CO NO.7/VIZAG/2015 M/S. SOUTHERN DRUGS & PHARMACEUTICALS, DOWLAISWARAM 4 5. ON BEING AGGRIEVED, REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. D.R. HAS SUPPORTED THE ORDER PASSED BY T HE A.O. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS ST RONGLY SUPPORTED THE ORDER PASSED BY THE LD. CIT(A). 7. WE HAVE HEARD BOTH THE PARTIES, PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. IN THIS CASE, THE A.O. HAS INVOKED SECTION 40(A)(IA) OF THE ACT ON THE GROUND THAT ASSESSEE HAS INCURRED AN AMOUNT OF ` 88,82,810/- FOR ERECTION AND COMMISSION CHARGES PAID TO SHRIRAM EPC LTD. IT WAS SUBMITTED BEFORE THE A.O. THAT THE ABOVE EXPENDITURE IS INCURRED IN CONNECTION WITH THE ERECTION OF WIND MILL TURBINES AND THE EXPENDITURE I NCURRED WAS CAPITALIZED. HOWEVER, A.O. WAS OF THE OPINION THAT SECTION 40(A)(IA) OF THE ACT APPLIES TO THE ASSESSEES CASE. ON APPEAL, THE LD. CIT(A) HAS HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS CAPITAL IN NATURE AND SECTION 40(A)(IA) OF THE ACT HAS NO APPLICATION . WE FIND THAT THE LD. CIT(A) CORRECTLY HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS CAPITAL IN NATURE AND SECTION 40(A)(IA) OF THE ACT HAS NO APPLICATION. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE L D. CIT(A). ITA NO.536/VIZAG/2014 & CO NO.7/VIZAG/2015 M/S. SOUTHERN DRUGS & PHARMACEUTICALS, DOWLAISWARAM 5 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. 9. THE CROSS OBJECTION FILED BY THE ASSESSEE IS ONL Y SUPPORTIVE TO THE ORDER OF LD. CIT(A). IN VIEW OF THE ABOVE, CO FILE D BY THE ASSESSEE IS ALSO DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH JUL16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 29.07.2016 VG/SPS '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT, CIRCLE-1, RAJAHMUNDRY 2. / THE RESPONDENT M/S. SOUTHERN DRUGS & PHARMACEU TICALS, INDUSTRIAL DEVELOPMENT AREA, DOWLAISWARAM 3. ) / THE CIT, RAJAHMUNDRY 4. ) ( ) / THE CIT(A), VISAKHAPATNAM 5. ! , , , , ! / DR, ITAT, VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 , (SR.PRIVATE SECRETARY) , , ! / ITAT, VISAKHAPATNAM