M/S BGR ENERGY SYSTEMS LTD, CHENNAI V. ACIT CENTRAL CIRCLE 3 (1), CHENNAI

CO 75/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6880 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 30 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 02-01-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 03-07-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S BHARATH
• Assessee Lawyers: JHARNA B HARILAL
• Keywords: Depreciation; Assessment record; Block assessment; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.261 & 262/CHNY/2018 ' (' / ASSESSMENT YEARS : 2008-09 & 2009-10 M/S BGR ENERGY SYSTEMS LTD., CORPORATE OFFICE, GUNA COMPLEX, 443, ANNA SALAI, TEYNAMPET, CHENNAI - 600 018. PAN : AABCG 2202 J V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(1), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) ./ ITA NOS.472 & 473/CHNY/2018 & C.O. NOS.74 & 75/CHNY/2018 (IN I.T.A. NOS.472 & 473/CHNY/2018) ' (' / ASSESSMENT YEARS : 2008-09 & 2009-10 THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 3(1), CHENNAI - 600 034. V. M/S BGR ENERGY SYSTEMS LTD., CORPORATE OFFICE, GUNA COMPLEX, 443, ANNA SALAI, TEYNAMPET, CHENNAI - 600 018. (*+/ APPELLANT) ( RESPONDENT & CROSS-OBJECTOR) './0 1 /ASSESSEE BY : MS. JHARNA B. HARILAL, FCA 20 1 /REVENUE BY : SHRI S. BHARATH, CIT 3 0 /$ / DATE OF HEARING : 27.12.2018 4!( 0 /$ / DATE OF PRONOUNCEMENT : 02.01.2019 2 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : BOTH THE ASSESSEE AND REVENUE FILED APPEALS FOR A SSESSMENT YEARS 2008-09 AND 2009-10 AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI, D ATED 14.11.2017. THE ASSESSEE HAS ALSO FILED CROSS-OBJECTIONS FOR BO TH THE ASSESSMENT YEARS TO SUPPORT THE ORDER OF THE CIT(APPEALS) WHER EIN CERTAIN ISSUES WERE DECIDED IN FAVOUR OF THE ASSESSEE. SINCE COMM ON ISSUES ARISE FOR CONSIDERATION IN ALL THESE APPEALS AND CROSS-OBJECT IONS, WE HEARD THESE APPEALS AND CROSS-OBJECTIONS TOGETHER AND DISPOSING THE SAME BY THIS COMMON ORDER. 2. LETS FIRST TAKE ASSESSEES APPEALS IN I.T.A. NO S.261 & 262/CHNY/2018. 3. THE FIRST ISSUE ARISES FOR CONSIDERATION FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10 IS WITH REGARD TO PROVISION FOR WARRANTY. 4. DURING THE COURSE OF HEARING, MS. JHARNA B. HARI LAL, THE LD. REPRESENTATIVE FOR THE ASSESSEE, VERY FAIRLY SUBMIT TED THAT THIS ISSUE WAS EXAMINED FOR THE VERY SAME ASSESSMENT YEARS BY THE HYDERABAD BENCH OF THIS TRIBUNAL IN I.T.A. NOS.1513/HYD/11 AND I.T. A. NO.985/HYD/12 AND DECIDED THE ISSUE AGAINST THE ASSESSEE. 3 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 5. WE HEARD SHRI S. BHARATH, THE LD. DEPARTMENTAL R EPRESENTATIVE ALSO. AS RIGHTLY SUBMITTED BY THE LD. REPRESENTATI VE FOR THE ASSESSEE, THE HYDERABAD BENCH OF THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR THE VERY SAME ASSESSMENT YEARS FOUND THAT THE PROVISION FOR WARRANTY CANNOT BE ALLOWED. IN FACT, THE HYDERABAD BENCH IN PARA 2 9 OF ITS ORDER DATED 05.09.2013 OBSERVED AS FOLLOWS:- 29. WE HEARD BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED OPIN ION THAT THIS ITEM OF DISALLOWANCE, VIZ. WARRANTY PROVISION, IS MERELY A PROVISION AND NOT AN EXPENDITURE ALREADY INCURRED AN D LAID OUT FOR THE PURPOSE OF BUSINESS. UNLESS THE LIABIL ITY FOR SUCH EXPENDITURE CRYSTALISES, ASSESSEE IS NOT ENTITL ED TO CLAIM FOR DEDUCTION IN RESPECT OF SUCH EXPENDITURE. THE CIT(A) HAS NOT GIVEN ANY VALID REASON FOR SUBSTANTI ATING HIS FINDING, WHILE ALLOWING THE CLAIM OF THE ASSESSEE. WE ACCORDINGLY, SET ASIDE THE IMPUGNED ORDER OF THE CI T(A), AND RESTORE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IN THIS BEHALF. REVENUES GROUND ON THIS ISSUE IS ALLOWED. 6. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 7. THE ASSESSEE HAS TAKEN ONE MORE GROUND WITH REGA RD TO INTEREST ON ADVANCES TO SUBSIDIARY COMPANIES FOR ASSESSMENT YEAR 2009-10. THE LD. REPRESENTATIVE FOR THE ASSESSEE VERY FAIRLY SUB MITTED THAT SHE IS NOT PRESSING THIS ISSUE. THE LD. REPRESENTATIVE HAS AL SO MADE AN 4 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 ENDORSEMENT TO THIS EFFECT ON THE GROUNDS APPEAL FI LED BEFORE THIS TRIBUNAL. THE LD. D.R. HAS NO OBJECTION TO DISMISS THIS GROUND AS NOT PRESSED. IN VIEW OF THE ABOVE, THE ISSUE WITH REGA RD TO INTEREST ON ADVANCES TO SUBSIDIARY COMPANIES IS DISMISSED AS NO T PRESSED. 8. NOW LETS TAKE REVENUES APPEALS IN I.T.A. NOS.4 72 & 473/CHNY/2018. 9. THE ONLY ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS IS WITH REGARD TO REPAYMENT OF PRINCIPAL AMOUNT FOR THE ASS ETS TAKEN ON LEASE BY THE ASSESSEE. 10. SHRI S. BHARATH, THE LD. D.R. SUBMITTED THAT BE FORE THE DATE OF SEARCH, THE ASSESSING OFFICER FOUND THAT THE PRINCI PAL AMOUNT PAID ON THE ASSETS TAKEN ON LEASE IS A CAPITAL EXPENDITURE AND THE ASSESSING OFFICER HAS ALSO ALLOWED DEPRECIATION. ACCORDING TO THE LD . D.R., THIS WAS CONFIRMED BY THE CIT(APPEALS) AND ALSO HYDERABAD BE NCH OF THIS TRIBUNAL IN I.T.A. NOS.1244 & 1513/HYD/11 AND I.T.A . NO.985/HYD/12 BY AN ORDER DATED 05.09.2013. THEREFORE, ACCORDING TO THE LD. D.R., THE ISSUE OF REPAYMENT OF AMOUNT IN RESPECT OF THE ASSE TS TAKEN ON LEASE IS NOT PENDING BEFORE THE ASSESSING OFFICER ON THE DAT E OF SEARCH. ACCORDING TO THE LD. D.R., THE ISSUE WAS CONCLUDED BY THE ORDER OF THIS TRIBUNAL DATED 05.09.2013. THE ASSESSEE HAS ALSO F ILED APPEAL BEFORE 5 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 THE HIGH COURT OF ANDHRA PRADESH AND THE SAME WAS A DMITTED AND PENDING FOR ADJUDICATION. THEREFORE, THE CIT(APPEA LS), ACCORDING TO THE LD. D.R., IS NOT JUSTIFIED IN DELETING THE ADDITION FOR THE YEARS UNDER CONSIDERATION. ACCORDING TO THE LD. D.R., THE CIT( APPEALS) OUGHT NOT TO HAVE DELETED THE ADDITION. 11. ON THE CONTRARY, MS. JHARNA B. HARILAL, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT ADMITTEDLY THE ISSUE O F REPAYMENT OF AMOUNT ON THE ASSETS TAKEN ON LEASE WAS THE SUBJECT MATTER OF ADJUDICATION BY THE ASSESSING OFFICER HIMSELF FOR T HE VERY SAME ASSESSMENT YEARS BEFORE THE DATE OF SEARCH. ACCORD ING TO THE LD. REPRESENTATIVE, THIS TRIBUNAL BY AN ORDER DATED 05. 09.2013 CONFIRMED THE ORDER OF THE ASSESSING OFFICER HOLDING THAT IT IS A CAPITAL IN NATURE, THEREFORE, THE ASSESSEE IS ELIGIBLE ONLY FOR DEPREC IATION. ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE HAS ALREADY FILED AN APPEAL BEFORE THE ANDHRA PRADESH HIGH COURT AND THE SAME IS PENDING F OR ADJUDICATION, THEREFORE, THE ASSESSING OFFICER CANNOT MAKE ANOTHE R ADDITION AFTER SEARCH PROCEEDING. ACCORDING TO THE LD. REPRESENTA TIVE, THE CONCLUDED ASSESSMENT ON THE DATE OF SEARCH CANNOT BE REOPENED AND MAKE FURTHER ADDITION IN THE BLOCK ASSESSMENT. THEREFORE, ACCOR DING TO THE LD. REPRESENTATIVE, THE CIT(APPEALS) HAS RIGHTLY DELETE D THE ADDITION MADE BY THE ASSESSING OFFICER. 6 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LD. D.R. AND THE LD. REPRESENTATIVE FOR THE ASSESSEE, THE VERY SAME ISSUE OF REPAYMENT OF PRINCIPAL AMOUNT AND INT EREST ON THE ASSETS TAKEN ON LEASE WAS THE SUBJECT MATTER OF ADJUDICATI ON BY THE ASSESSING OFFICER FOR THE VERY SAME ASSESSMENT YEARS BEFORE T HE DATE OF SEARCH. THE ASSESSING OFFICER FOUND THAT THE PAYMENT IS CAP ITAL IN NATURE. ACCORDINGLY, HE ALLOWED THE DEPRECIATION. THIS FIN DING OF THE ASSESSING OFFICER WAS CONFIRMED EVEN BY THE HYDERABAD BENCH O F THIS TRIBUNAL. THE ASSESSEE HAS ALREADY FILED AN APPEAL BEFORE THE ANDHRA PRADESH HIGH COURT WHICH WAS ADMITTED BY THE HIGH COURT AND PENDING FOR ADJUDICATION. CONSEQUENT TO THE SEARCH OPERATION, THE ASSESSMENT RECORDS WERE TRANSFERRED TO CHENNAI FOR CONSOLIDATE D INVESTIGATION. THE ASSESSING OFFICER FOR THE BLOCK PERIOD MADE VERY SA ME DISALLOWANCE WITH REGARD TO REPAYMENT OF LOAN ON THE ASSETS TAKEN ON LOAN. 13. THE QUESTION ARISES FOR CONSIDERATION IS WHEN T HE ISSUE OF REPAYMENT OF AMOUNT ON THE ASSETS TAKEN ON LEASE WA S CONCLUDED BY THE ASSESSING OFFICER, WHICH WAS FURTHER CONFIRMED BY T HE HYDERABAD BENCH OF THIS TRIBUNAL, CAN THE ASSESSING OFFICER AGAIN M AKE VERY SAME DISALLOWANCE FOR THE BLOCK PERIOD AFTER THE SEARCH? THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT ONCE THE PROCEEDING WAS TER MINATED AND IT IS NOT 7 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 PENDING BEFORE THE ASSESSING OFFICER DURING THE SEA RCH, THERE CANNOT BE ANY ADDITION IN RESPECT OF THE SAME ISSUE. THEREFO RE, THE CIT(APPEALS) HAS RIGHTLY DELETED THE ADDITION. IT IS NOT OPEN T O THE ASSESSING OFFICER TO REOPEN THE CONCLUDED ASSESSMENT. IN FACT, THIS ISS UE IS SAID TO BE PENDING BEFORE THE HIGH COURT AGAINST THE ORDER OF THE HYDERABAD BENCH OF THIS TRIBUNAL DATED 05.09.2013. IN VIEW OF THE ABOVE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 14. THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE ONLY TO SUPPORT THE ORDER OF THE CIT(APPEALS). SINCE THIS TRIBUNAL FIN DS NO REASON TO INTERFERE IN THE ORDER OF THE CIT(APPEALS), THE CROSS-OBJECTI ONS BECOME INFRUCTUOUS. 15. IN THE RESULT, THE APPEALS FILED BY BOTH THE AS SESSEE AND REVENUE AND THE CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE COURT ON 2 ND JANUARY, 2019 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 6 /DATED, THE 2 ND JANUARY, 2019. KRI. 8 I.T.A. NOS.261 & 262/CHNY/18 I.T.A. NOS.472 & 473/CHNY /18 C.O. NOS.74 & 75/CHNY/18 0 ,/78 98(/ /COPY TO: 1. './ /ASSESSEE 2. ASSESSING OFFICER 3. 3 :/ () /CIT(A)-19, CHENNAI-34 4. PRINCIPAL CIT, CENTRAL-1, CHENNAI 5. 8; ,/ /DR 6. <' = /GF.