Nippo Batteries Company Limited, CHENNAI V. ACIT, CHENNAI

ITA 1181/CHNY/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 4983 (ITAT-CHENNAI)
• Duration Of Justice: 3 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-04-2017
• Appeal Filed By: Assessee
• Bench Allotted: D
• Next Hearing Date: 31-01-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 29-05-2013
• Court: TRIBUNAL
• Department Lawyers: R DURAI
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1)

Judgement Text

, , IN THE INCOME - TAX APPELLATE TRIBUNAL D BENCH, CHENNAI , . , BEFORE SHRI CHANDRA POOJARI , ACCOUNTANT MEMBER & SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ./ I.T.A.NO. 1181/MDS/2013 / ASSESSMENT YEAR :20 08 - 09 M/S. NIPPO BATTERIES CO. LTD., POTTIPATI PLAZA, 4 TH FLOOR, 77, NUNGAMBAKKAM HIGH ROAD, CHENNAI 600 034. [PAN: A AAC I2291L ] VS. THE ASSISTANT COMMISSIONER OF I NCOME TAX, CO MPANY CIRCLE IV(4 ), CHENNAI 600 034 . ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI ABHISHEK MURALI , SHRI VIKRAM VIJAYARAGHAVAN, ADVOCATE / RESPONDENT BY : SHRI R. DUR AI PANDIAN , J CIT / DATE OF HEARING : 3 1 . 0 1 .201 7 / DATE OF P RONOUNCEMENT : 12 . 0 4 .201 7 / O R D E R PER DUVVURU RL REDDY , JUDICIAL MEMBER : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) V , C HENNAI DATED 24 . 0 1 .201 3 RELEVANT TO THE ASSESSMENT YEAR 20 08 - 09 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: THE ORDER OF THE LEARNED C.I.T. (APPEALS) CONFIRMING THE ORDER OF THE A.O. IS NOT LEGALLY CORR ECT AND PROPER. DEPRECIATION ON MOULDS RS.4,45,359: I.T.A. NO . 1181 /M/ 1 3 2 THE LEARNED OFFICERS BELOW ERRED IN RESTRICTING THE APPELLANT'S CLAIM OF DEPRECIATION ON MOULDS FROM 30% TO 15%. THE APPELLANT SUBMITS THAT MOULDS ARE USED TO MANUFACTURE PLASTIC AND RUBBER COMPONENTS FOR THE PRODUCTS MANUFACTURED BY THE APPELLANT AND THEREFORE QUALIFIES FOR CLAIM OF DEPRECIATION @ 30%. DEPRECIATION ON ASSETS NOT OWNED RS.1,38,004: THE APPELLANT OBJECTS TO THE DISALLOWANCE OF CLAIM OF DEPRECIATION ON ASSETS (HARD FURNISHINGS) PROVI DED TO THE EMPLOYEES OF THE COMPANY. THE REASONING AND OBSERVATIONS OF THE LEARNED OFFICERS BELOW ARE NOT CORRECT AND PROPER. CLUB EXPENSES RS.46,896: THE LEARNED A.O ERRED III DISALLOWING THE CLAIM OF RS.46,896 REPRESENTING SUBSCRIPTIONS TO CLUBS WH ICH ARE EXPENSES INCURRED IN THE CLUBS BY THE DIRECTORS. THE LEARNED OFFICERS BELOW OUGHT TO HAVE SEEN THAT THE ABOVE CLUB EXPENSES HAVE BEEN CONSIDERED AS PERQUISITES IN THE HANDS OF DIRECTORS AND HAVE BEEN SUBJECTED TO TAX. DISALLOWANCE OF REVENUE EX PENDITURE RS.20,13,233: THE APPELLANT SUBMITS THAT THE SUM OF RS.23,68,509 CLAIMED AS REVENUE EXPENDITURE REPRESENTS REPAIRS, RENOVATIONS AND REPLACEMENTS MADE TO THE AIR - CONDITIONING PLANT IN THE FACTORY AT NELLORE. THE APPELLANT THEREFORE SUBMITS THA T THE ENTIRE EXPENDITURE IS IN THE NATURE OF CURRENT REPAIRS AND HAS THEREFORE BEEN CLAIMED AS REVENUE EXPENDITURE. THE LEARNED C.I.T. (APPEALS) HAS NOT PROPERLY APPRECIATED THE FACTS AND CIRCUMSTANCES RELATING TO THE CLAIM OF RENOVATIONS / REPAIRS INCUR RED FOR THE AIR - CONDITIONING PLANT. THE APPELLANT OBJECTS TO THE VARIOUS REASONING AND OBSERVATIONS OF THE LEARNED C.I.T. (APPEALS) IN THIS CONNECTION. DISALLOWANCE U/S 40A (IA) RS.14,88.800: - I.T.A. NO . 1181 /M/ 1 3 3 THE APPELLANT OBJECTS TO THE DISALLOWANCE OF RS.14,88,800 U/S 40A (IA) OF THE INCOME TAX ACT, 1961. THE APPELLANT OBJECTS TO THE LEVY OF INTEREST U/S 234C AT RS.39,025. THE APPELLANT CRAVES LEAVES TO FILE ADDITIONAL GROUNDS OF APPEAL, IF NECESSARY. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF DRY BATTERIES AND FILED ITS RETURN OF INCOME ADMITTING TOTAL INCOME OF .24,72,73,566/ - . THE RETURN OF INCOME FILED BY THE ASSESSEE WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 [ ACT IN SHORT]. THEREAFTER, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT DATED 12 .08.2009 WAS ISSUED. SUBSEQUENTLY, NOTICE UNDER SECTION 142(1) OF THE ACT DATED 26.07.2010 ALONG WITH A DETAILED QUESTIONNAIRE CALLED FOR VARIOUS CLARIFICATIONS HAVE BEEN SERVED ON THE ASSESSEE. IN RESPONSE THERETO, THE ASSESSEE FILED ALL DETAILS AS CALLED FOR. AFTER VERIFICATION OF DETAILS FILED BY THE ASSESSEE AND CONSIDERING THE SUBMISSIONS, THE ASSESSING OFFICER HAS COMPLETED THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT DATED 31.12.2010 ASSESSING TOTAL INCOME OF THE ASSESSEE AT .25,09,33,290/ - AFTER MAKING VARIOUS DISALLOWANCES. 3. THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE LD. CIT(A) WITH REGARD TO VARIOUS DISALLOWANCES. AFTER CONSIDERING THE SUBMISSIONS OF THE I.T.A. NO . 1181 /M/ 1 3 4 ASSESSEE, THE LD. CIT(A) DISMISSED THE APPEAL BY CONFIRMIN G THE DISALLOWANCES MADE BY THE ASSESSING OFFICER. 4. ON BEING AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE FIRST GROUND RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF DEPRECIATION ON MOULDS. IN THE ASSESSMENT OR DER, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 30% ON MOULDS WHICH WERE USED TO MANUFACTURE PLASTIC AND RUBBER COMPONENTS FOR THE PRODUCTS MANUFACTURED BY THE ASSESSEE. THE ASSESSING OFFICER HAS RESTRICTED THE DEPRECIA TION CLAIM OF THE ASSESSEE TO 15% BY OBSERVING THAT SINCE THE BLOCKS WERE BEING USED BY THE ASSESSEE IN THE BATTERY INDUSTRY AND ASSESSED 30% DEPRECIATION WAS NOT ELIGIBLE ON THIS BLOCK. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OFFIC ER. 5. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT ON SIMILAR ISSUE, THE COORDINATE BENCHES OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEARS 2003 - 04 IN I.T.A. NO. 1917/MDS/2012 ALLOWED DEPRECATION @ 25% AS AGAINST THE CLAIM OF 40% BY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL IN I.T.A. NO. 1436 TO 1438/MDS/2007 FOR THE ASSESSMENT YEARS 1999 - 2000, 2002 - 03 AND 2004 - 05. RESPECTFULLY FOLLOWING THE ABOVE DEC ISIONS OF THE TRIBUNAL, WE DIRECT THE ASSESSING OFFICER TO ALLOW I.T.A. NO . 1181 /M/ 1 3 5 25% OF DEPRECIATION ON MOULDS AGAINST THE CLAIM OF 30%. THE GROUND RAISED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 6. THE NEXT GROUND RAISED IN THE APPEAL OF THE ASSESSE E IS WITH REGARD TO THE DEPRECIATION ON ASSETS NOT OWNED BY THE ASSESSEE. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT AGAINST THE CLAIM OF THE ASSESSEE, THE INVOICES PRODUCED WERE IN THE NAMES OF SOME INDIVIDUALS. IT WAS SUBMITTED BEFO RE THE ASSESSING OFFICER THAT THOSE ITEMS WERE GIVEN BY THE ASSESSEE TO ITS EMPLOYEES TOWARDS FURNISHINGS AND WERE PURCHASED BY THE ASSESSEE IN THE NAMES OF EMPLOYEES. FURTHER, THE ASSESSING OFFICER HAS OBSERVED THAT SIMILAR DISALLOWANCE MADE IN THE EARLIE R ASSESSMENT YEAS HAD ALREADY BEEN UPHELD BY THE LD. CIT(A) AND THUS, FOR THE ASSESSMENT YEAR UNDER CONSIDERATION ALSO, THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS DISALLOWED ON THE GROUND THAT THE PURCHASE INVOICES ARE IN THE NAMES OF THE INDIVIDUALS AND NOT IN THE NAME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) UPHELD THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 6.1 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIND THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE ASSETS ACQUIRED IN THE NAMES OF THE INDIVIDUALS. SINCE THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS NOT IN ITS OWN NAME, THE ASSESSING OFFICER DISALLOWED THE SAME AS WAS DONE IN EARLIER ASSESSMENT YEARS AND CONFIRMED BY THE LD. CIT(A). SINCE WE DO NOT FIND ANY MATERIAL EVIDENCE HAVING AGITAT ED AGAINST THE DISALLOWANCE MADE IN EARLIER I.T.A. NO . 1181 /M/ 1 3 6 YEARS BEFORE ANY HIGHER FORUM, WHICH APPEARS TO HAVE BEEN ACCEPTED BY THE ASSESSEE FOR EARLIER ASSESSMENT YEARS. WE FURTHER OBSERVED THAT ONCE THE ASSETS ACQUIRED BY THE ASSESSEE ARE NOT IN THE ASSESSEE COMPANY S NAME, THE ASSESSEE COMPANY CANNOT CLAIM DEPRECIATION ON THE ABOVE ASSETS ACQUIRED. ACCORDINGLY, WE SUSTAIN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 7. THE NEXT GROUN D RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF CLUB EXPENSES OF .46,896/ - REPRESENTING SUBSCRIPTION TO CLUBS. THE ASSESSING OFFICER HAS DISALLOWED THIS EXPENDITURE HOLDING THAT THE SUBSCRIPTIONS WERE IN THE INDIVIDUAL NAMES OF THE MANAGING DIRECTOR/JOINT MANAGING DIRECTOR OF THE ASSESSEE COMPANY AND THE SCOPE FOR PERS ONAL UTILIZATION OF THE CLUB CANNOT BE RULED OUT. AS WAS DONE IN EARLIER YEARS, FOR THE CURRENT YEAR ALSO THE ASSESSING OFFICER DISALLOWED A SUM OF .46,896/ - , WHICH WAS CONFIRMED BY THE LD. CIT(A). SINCE THE ASSESSEE COMPANY HAS NOT SUBSCRIBED TO CLUB AN D THE SUBSCRIPTIONS WERE IN THE INDIVIDUAL NAMES OF THE MANAGING DIRECTOR/JOINT MANAGING DIRECTOR OF THE ASSESSEE, WE SUSTAIN THE DISALLOWANCE MADE ON THIS ACCOUNT. THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 8. THE NEXT GROUND RAISED IN THE A PPEAL OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF REVENUE EXPENDITURE OF .20,13,233/ - TREATING THE SAME AS I.T.A. NO . 1181 /M/ 1 3 7 CAPITAL EXPENDITURE. THE ASSESSEE HAS CLAIMED THE EXPENDITURE TOWARDS EXTENSIVE REPAIRS, RENOVATIONS AND REPLACEMENTS MADE TO THE AIR - CONDITIONING PLANT IN THE FACTORY AT NELLORE. ON VERIFICATION OF THE INVOICES FURNISHED BY THE ASSESSEE, THE ASSESSING OFFICER HAS NOTICED THAT THE SAID RENOVATION DID NOT AMOUNT TO MERE REPLACEMENT OF PARTS, REPAIRS, BUT NEW AIR - CONDITIONERS (WINDOWS/SPLIT A/CS AND COOLING UNITS) WERE ACTUALLY ACQUIRED AND INSTALLED IN THE PREMISES OF THE A SSESSEE. BY HOLDING THAT THE NEWLY ACQUIRED AIR - CONDITIONER UNITS, ETC. WOULD GIVE A LONG STANDING BENEFIT OF ENDURING NATURE TO THE ASSESSEE, THE ASSESSING OFFICER TREATED THE SAME AS CAPITAL EXPENDITURE AND DISALLOWED THE CLAIM MADE BY THE ASSESSEE. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE ON THIS ACCOUNT. 8.1 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL , THE ASSESSEE HAS NOT FILED COPIES OF INVOICES/BILLS SUBMITTED BEFORE THE ASSESSING OFFICER FOR CLAIMING DEDUCTION. ON VERIFICATION OF INVOICES FILED BY THE ASSESSEE, THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS PURCHASED NEW AIR - CONDITIONS [WINDOWS/ SPLIT A/CS AND COOLING UNITS) AND INSTALLED IN THE PREMISES OF THE ASSESSEE. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED A DETA ILED WRITTEN SUBMISSION NARRATING THE NATURE OF EXPENDITURE INCURRED BY THE ASSESSEE. HOWEVER, HE HAS REFUTED THAT NO AIR - CONDITIONER/COOLING UNITS HAVE BEEN PURCHASED. THE USAGE OF AIR - CONDITIONER/COOLING UNITS TO THE ASSESSEE COMPANY IS IMMATERIAL TO CON SIDER AS TO WHETHER THE EXPENDITURE INCURRED FOR I.T.A. NO . 1181 /M/ 1 3 8 ACQUIRING NEW AIR - CONDITIONER/COOLING UNIT IS CAPITAL OR REVENUE IN NATURE. ANY EXPENDITURE INCURRED TOWARDS REPLACEMENT OF PARTS IN THE EXISTING AIR - CONDITIONER/COOLING UNIT CAN BE HELD AS REVENUE IN NATURE. HOWEVER, ACQUIRING NEW AIR - CONDITIONER/COOLING UNITS CANNOT BE HELD AS REVENUE IN NATURE. ONCE IT WAS FOUND THAT THE ASSESSEE HAS PURCHASED NEW AIR - CONDITIONERS/COOLING UNITS IN THE INVOICES FURNISHED BY IT, THEN, THE SAME CANNOT BE HELD AS REVENU E EXPENDITURE. IN VIEW OF THE ABOVE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE EXPENDITURE INCURRED TOWARDS ACQUIRING NEW AIR - CONDITIONER/COOLING UNITS. THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 9. THE LAST ISSUE RAISED IN THE APPEAL OF THE ASSESSEE IS WITH REGARD TO DISALLOWANCE OF .14,88, 0 00/ - UNDER SECTION 40(A)(IA) OF THE ACT. UNDER THE HEAD PROFESSIONAL CHARGES, THE ASSESSEE HAS DEBITED A SUM OF .14,88,800/ - PAID TO ARMOISE TRUST TOWARDS HUM AN POTENTIAL DEVELOPMENT. HOWEVER, THE ASSESSEE HAS NOT DEDUCTED TDS UNDER SECTION 194J OF THE ACT. BEFORE THE ASSESSING OFFICER, THE ASSESSEE HAS SUBMITTED THAT THE PAYEE WAS A TRUST AND EXEMPTED FROM TDS. WHEN THE ASSESSEE WAS ASKED TO PRODUCE CERTIFICAT E UNDER SECTION 197 OF THE ACT ISSUED BY THE DEPARTMENT SPECIALLY EXEMPTING THE TRUST S PROFESSION RECEIPTS, THE ASSESSEE COULD NOT FURNISH THE CERTIFICATE IN SPITE OF SEVERAL OPPORTUNITIES AFFORDED. THEREFORE, THE ASSESSING OFFICER DISALLOWED THE SUM OF .14,88,000/ - UNDER SECTION I.T.A. NO . 1181 /M/ 1 3 9 40(A)(IA) OF THE ACT AND BROUGHT TO TAX, WHICH WAS FURTHER CONFIRMED BY THE LD. CIT(A) SINCE THE ASSESSEE COULD NOT PRODUCE THE CERTIFICATE UNDER SECTION 197 OF THE ACT. EVEN BEFORE THE TRIBUNAL, THE ASSESSEE COULD NOT PRODUCE THE CERTIFICATE UNDER SECTION 197 OF THE ACT, WE HAVE NO OTHER GO, BUT THE SUSTAIN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(A). THUS, THE GROUND RAISED BY THE ASSESSEE IS DISMISSED. 10. THE CHARGING OF INTEREST UNDER S ECTION 234C OF THE ACT IS MANDATORY AND CONSEQUENTIAL TO THE EXTENT OF DISALLOWANCES CONFIRMED. THE ASSESSING OFFICER IS DIRECTED TO REVISE THE SAME. 11 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THE 12 TH APRIL, 201 7 AT CHENNAI. SD/ - SD/ - ( CHANDRA POOJARI ) ACCOUNTANT MEMBER ( DUVVURU RL REDDY ) JUDICIAL MEMBER CHENNAI, DATED, THE 12 . 0 4 .201 7 VM/ - / COPY TO: 1. / APPELLANT , 2. / RESPON DENT , 3. ( ) / CIT(A) , 4. / CIT , 5. / DR & 6. / GF.