DCIT, New Delhi V. M/s. First Grade Force (P) Ltd., New Delhi

ITA 1107/DEL/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69305 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 26-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS Y KAKKAR
• Assessee Lawyers: ALOK MITTALCA
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B: NEW DELHI) BEFORE SHRI U. B. S. BEDI, JUDICIAL MEMBER AND SHRI T. S. KAPOOR, ACCOUNTANT MEMBER ITA NO. 1107/DEL/ 2013 (ASSESSMENT YEAR: 2009-10 ) DCIT VS. FIRST GRADE FORCE (PVT.) LTD. CIRCLE-11(1), ROOM NO. 312, E-27, C. R. BUILDING, DEFENCE COLONY NEW DELHI. NEW DELHI. PAN: AAACF1391G (APPELLANT) (RESPONDENT) ASSESSEE BY :SHRI ALOK MITTAL,CA, REVENUE BY : MRS. Y. KAKKAR, SR.DR. ORDER PER T. S. KAPOOR, AM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XIII, NEW DELH I DATED 10.12.2012 FOR THE ASSESSMENT YEAR 2009-10. THE GRO UNDS TAKEN BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND I N LAW, THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF R S.18,57,597/- MADE ON ACCOUNT OF TRAINING EXPENSES BEING TREATED AS CAPITAL IN NATURE. ITA NO.1107 /DEL/2013 2 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AME ND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARIN G. 2. BRIEF FACTS OF THE CASE AS EMERGING FROM ASSESSM ENT ORDER ARE THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF PROVIDING S ECURITY SERVICES. THE RETURN OF INCOME WAS FILED SHOWING A TOTAL INCOME O F RS.88,45,039/-. THE CASE WAS SELECTED FOR SCRUTINY. 3. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER OBSERVED THAT ASSESSEE HAD CLAIMED AN AMOUNT OF RS.23,22,118/- AS SECURITY HIRE CHARGES. THE ASSESSEE WAS ASKED TO FILE DETAILS OF THESE EXP ENSES. FROM THE DETAIL OF EXPENSES THE ASSESSING OFFICER OBSERVED THAT SOME O F THE EXPENSES WERE IN THE FORM OF HIRING SENIOR TRAINED GUARDS FROM OUT S IDE, WHO WERE HIRED TO TRAIN EXISTING GUARDS OF THE ASSESSEE AND, THEREFOR E, ASSESSING OFFICER HELD THAT BENEFIT OF THESE EXPENSES WAS OF ENDURING NATU RE AND, THEREFORE, HE DISALLOWED AN AMOUNT OF RS.18,57,694/- REPRESENTING 20% OF SUCH EXPENSES. 4. DISSATISFIED WITH THE ORDER, THE ASSESSEE FILED APPEAL BEFORE CIT (A) AND SUBMITTED THAT THE EXPENSES INCURRED BY THE ASS ESSEE WERE OF REVENUE NATURE. IT WAS FURTHER SUBMITTED THAT THERE WAS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE UNDER THE INCOME TAX ACT AND EX PENDITURE CAN BE EITHER CAPITAL OR REVENUE IN NATURE. IT WAS FURTHER SUBMITTED THAT EXPENDITURE INCURRED ON TRAINING CANNOT BE CAPITAL IN NATURE AS NO NEW ASSETS HAD COME INTO EXISTENCE. ITA NO.1107 /DEL/2013 3 5. THE LD. CIT (A) AFTER GOING THROUGH THE SUBMISSI ONS DELETED THE ADDITION MADE BY ASSESSING OFFICER BY HOLDING AS UN DER: I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT AND OBSERVATION OF THE ASSESSING OFFICER. IT IS SEEN TH AT APPELLANT HAS PAID RS.23,22,118/- TO M/S G4S SECURITY SERVICE S INDIA PVT. LTD. AND ASIAN SECURITY AND INTELLIGENCE LTD. FOR T RAINING THE EXISTING GUARDS OF THE APPELLANT COMPANY. THE APPEL LANT CLAIMS THAT THESE EXPENSES WERE PAID TO UPGRADE THE SKILLS OF SECURITY GUARDS OWNED BY THE APPELLANT COMPANY. THE APPELLAN T ALSO CLAIMED THAT THERE IS NO CONCEPT OF DEFERRED REVENU E EXPENDITURE UNDER THE INCOME TAX ACT. IN THE IT ACT THE EXPENDITURE CAN BE EITHER CAPITAL OR REVENUE. THE E XPENDITURE INCURRED ON TRAINING CANNOT BE CAPITAL IN NATURE AS NO NEW ASSETS HAS BEEN PURCHASED OR CONSTRUCTED BY THE APPELLANT. THE ONLY TREATMENT AVAILABLE TO SUCH EXPENDITURE IS REVENUE EXPENDITURE. THE TRAINING GIVEN TO THE EXISTING GUARDS OF THE AP PELLANT COMPANY CANNOT BE OF ENDURING NATURE AND EVERY YEAR THE SKILLS OF SECURITY SERVICES AND TECHNOLOGY KEEPS ON CHANGI NG. THE EXPENSES INCURRED ON TRAINING ARE WHOLLY AND EXCLUS IVELY FOR BUSINESS PURPOSES OF THE APPELLANT COMPANY AND SAME HAS TO BE ALLOWED IN TOTO. THEREFORE, THE ASSESSING OFFICER W AS NOT JUSTIFIED IN TREATING TRAINING EXPENSES AS DEFERRED REVENUE EXPENSES. THE EXPENSES ARE FULLY ALLOWABLE AS REVEN UE EXPENDITURE IN THE YEAR UNDER CONSIDERATION. HENCE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS DELET ED. 6. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. T HE LD. DEPARTMENTAL REPRESENTATIVE AT THE OUTSET ARGUED THAT EXPENSES I NCURRED BY ASSESSEE WAS IN THE NATURE OF KNOW HOW WHICH IS ELIGIBLE FOR DEPREC IATION AS PER THE PROVISIONS OF SECTION 32(1) AND, THEREFORE ASSESSIN G OFFICER HAD RIGHTLY MADE THE ADDITION. ITA NO.1107 /DEL/2013 4 7. THE LD. AR ON THE OTHER HAND ARGUED THAT THE TRA INING EXPENSES CANNOT BE SET TO BE CAPITAL IN NATURE AS TRAINING I S AN ON GOING PROCESS WHICH IS PROVIDED TO THE PERSONNEL OF THE ASSESSEE COMPAN Y ON A REGULAR BASIS. THEREFORE, EXPENDITURE INCURRED WAS REVENUE EXPENDI TURE AND, THEREFORE, RIGHTLY DELETED BY LD. CIT (A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE ARE IN AG REEMENT WITH THE ARGUMENTS OF LD. AR THAT TRAINING EXPENSES CANNOT B E SAID TO BE CAPITAL IN NATURE AND RATHER IT IS A REGULAR REVENUE EXPENDITU RE WHICH IS INCURRED FROM TIME TO TIME TO TRAIN THE EXISTING AS WELL AS NEW E MPLOYEES OF A PERSON. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDE R OF CIT (A). IN VIEW OF THE ABOVE, THE APPEAL FILED BY REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20 TH /09/ 2013 SD/- SD/- (U. B. S. BEDI) (T.S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 20 TH DAY OF SEPTEMBER, 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI.