The Assistant Comissioner of Income Tax, Circle-2, JAMNAGAR V. Saurashtra Cement Ltd., PORBANDAR

ITA 12/RJT/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6836 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 11 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 03-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANJIT SINGH
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH , RAJKOT BEFORE: SHRI S.S. GODARA, JUDICIAL MEMBER AND S H RI AMARJIT SINGH , ACCOUNTANT MEMBER [CONDUCTED THROUGH E - COURT AT AHMEDABAD] ACIT, CIRCLE - 2 , JAMNAGAR (APPELLANT) VS SAURASHTRA CEMENT LTD. NR. RAILWAY STATION, RANAVAV, PORBANDAR P AN: AAHFS5211J (RESPONDENT) REVENUE BY : S H RI RANJIT SINGH , CIT - D . R. ASSESSEE BY: S H RI VIMAL DESAI , A.R. DATE OF HEARING : 2 2 - 1 1 - 2 017 DATE OF PRONOUNCEMENT : 18 - 12 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THI S REVENUE S APPEAL FOR A.Y. 2007 - 08 , AR ISES FROM ORDER OF THE CIT(A), JAMNAGAR DATED 21 - 10 - 2013 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE REVE NUE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - I T A NO . 12 / RJT /20 14 A SSESSMENT YEAR 200 7 - 08 I.T.A NO. 12 /RJT /20 14 A.Y. 2007 - 08 PAGE NO ACI T VS. SAUR ASHTRA CEMENT LTD. 2 1. THE LD. CIT(A) HAS ERRED ON THE FACTS AND LAW BY DELETING THE DISALLOWANCE OF RS. 46,74,750/ - BEING EXPENSES INCURRED ON ISSUE OF DEBENTURES MADE BY THE A.O. 2. THE LD. CIT(A) HAS ERRED ON THE FACTS AND LAW BY DELETING THE ADDITION OF RS. 2,58,08,278/ - BEING CLOSING CENVAT CREDIT ON ACCOUNT OF ADJUSTMENT TO THE VALUE OF CLOSING STOCK U/S. 145A MADE BY THE A.O. 3. IT IS THEREFORE PRAYED THAT THE ORDER OF THE ID. CIT (A) BE SET ASIDE AND THAT OF THE ASSESSING O FFICER BE RESTORED. DISALLOWANCE OF EXPENSES ON ISSUING OF DEBENTURE 3. IN THIS CASE, RETURN OF INCOME DECLARING LOSS OF RS. 50,77,39,288/ - WAS FILED ON 28 TH AUGUST, 2007. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143( 2) OF THE ACT ON 3 RD JULY, 2008. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTICED THAT ASSESSEE HA S DEBITED A SUM OF RS. 46,74,750 / - ON ISSUE OF SHARE AND DEBENTURE. ON CLARIFICATION, THE ASSESSEE EXPLAINED THAT DEBENTURE EX PENSES CONSIST OF CONSULTATION FEES PAID FOR ARRANGING FUNDS FOR EXISTING BUSINESS OF ASSESSEE - COMPANY. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND STATED THAT THE NATURE OF EXPENSES CLAIMED BY THE ASSESSEE IS CAPITAL IN NAT URE, THEREFORE , THE SAME WAS DISALLOWED AS NO N REVENUE EXPENDITURE. 4. AGGRIEVED ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DELETED THE ADDITION AS UNDER: - 5. I HAVE DULY CONSIDERED THE ISSUE AND PERUSED THE DECISIONS RELIED UPON BY THE APPELLANT AS PER THE DIRECTIONS OF THE HON'BLE TRIBUNAL, RAJKOT. AS PER THE RATIO LAID DOWN BY THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SECURE METERS LIMITED (334 ITR 109), THE EXPENDITURE INCURRED IN ISSUING ANY DEBENTURES AND RAISING LOAN A S DEBENTURE IS ADMISSIBLE AS REVENUE EXPENDITURE. THE ID. AR OF THE APPELLANT HAS FURTHER STATED THAT SLP AGAINST THE SAID DECISION HAS BEEN DISMISSED BY THE HON'BLE SUPREME COURT. HE FURTHER STATED THAT THE SAID DECISION OF THE HON'BLE RAJASTHAN HIGH COUR T HAS BEEN FOLLOWED BY HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. ITC HOTELS LTD. (334 ITR 109). FURTHER, THE I.T.A NO. 12 /RJT /20 14 A.Y. 2007 - 08 PAGE NO ACI T VS. SAUR ASHTRA CEMENT LTD. 3 DECISIONS RELIED UPON BY MY, PREDECESSOR CIT(A) WHILE CONFIRMING THE DISALLOWANCE HAVE BEEN RENDERED BY THE TRIBUNAL PRIOR TO THE DECISIO NS OF THE HON'BLE RAJASTHAN HIGH COURT (SUPRA). RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE RAJASTHAN HIGH COURT IN THE CASE OF SECURE METERS LIMITED, IT IS HELD THAT THE EXPENDITURE INCURRED ON ISSUE OF DEBENTURES TO BE ALLOWABLE AS REVENUE EXPENDI TURE. THE A.O. IS ACCORDINGLY DIRECTED TO ALLOW THE SAME . UN - UTILIZED CENVAT CREDIT 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS OBSERVED THAT ASSESSEE HAS SHOWN AN AMOUNT OF RS. 2 , 58 , 08 , 27 8 / - AS UN - UTILIZED CENVAT CREDIT AT THE END OF THE YEAR. THE ASSESSEE EXPLAINED THAT AS PER AUDIT REPORT CENVAT CREDIT REPRESENT CLOSING BALANCE IN RESPECT OF CAPITAL GOODS INPUTS AND SERVICES TAX FOR UTILIZATION IN THE SUBSEQUENT YEARS. THE SAME WAS DEBITED TO SEPARATE RECEIVABLE ACCOU NT (DEBIT BALANCE) FOR AVAILING CREDIT THEREOF AGAINST OUTPUT TAX/CESS. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND CONCLUDED THAT AS PER CLAUSE ( B ) OF SECTION 145A R.W. EXPLANATION TO THE SAID SECTION , IN VALUATION OF THE STOCK ANY AMOUNT OF TAX DUTY ETC. IS REQUIRED TO BE INCLUDED BY VIRTUE OF PAYMENT OF THE SAID TAX DUE ETC . THEREFORE, THE ASSESSING OFFICER CONCLUDED THAT UN - REALIZED CREDIT IS REQUIRED TO BE INCLUDED IN THE VALUE OF C LOSING STOCK. IN APPELLATE PROCEEDINGS, THE LD. CIT(A) HAS DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THERE WAS NO IMPACT OF FOLLOWING EITHER EXCLUSIVE OR INCLUSIVE METHOD OF ACCOUNTING ON THE PROFIT OR LOSS OF THE COMPANY AND THAT EFFECT OF SECTION 145A IS TAX NEUTRAL. 6. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. COUNSEL HAS SUBMITTED PAPER BOOK CONTAINING DETAILS OF SUBMISSION MADE BEFORE I.T.A NO. 12 /RJT /20 14 A.Y. 2007 - 08 PAGE NO ACI T VS. SAUR ASHTRA CEMENT LTD. 4 THE ASSESSING OFFICER AND THE LD. CIT(A) AND COPIES OF JUDICIAL PRONOUNCE MENTS. HE ALSO SUPPORTED THE ORDER OF LD. CIT(A). ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF ASSESSING OFFICER. 7 . WE HAVE HEAR D BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD CAREFULLY. WE OBSERVED THAT THE ASSE SSEE HAS CLAIMED EXPENSES INCURRED IN ISSUING OF DEBENTURE AS REVENUE EXPENDITURE HOWEVER, WE FIND THAT THE LD. CIT(A) HAS DELETED THE ADDITION BY MAKING REFERENCE OF THE DECISION OF HON BLE SUPREME COURT WHEREIN THE APPEAL OF REVENUE WAS DISMISSED AGA INST THE DECISION OF HON BLE RAJASTHAN HIGH COURT IN WHICH IT WAS HELD THAT EXPENDITURE INCURRED IN ISSUING ANY DEBENTURE AND LOAN ARE A LLOWABLE AS REVENUE EXPENDITURE. IN VIEW OF THE ABOVE FACTS AND LEGAL FINDINGS WE ARE INCLINED WITH THE DECISION OF THE LD. CIT(A). 8. REGARDING SECOND ISSUE OF CENVAT CREDIT, WE OBSERVED THAT THE ASSESSEE HAS FOLLOWED EXCLUSIVE METHOD OF ACCOUNTING AS AGAINST INCLUSIVE METHOD OF ACCOUNTING AS PRESCRIBED IN THE PROVISION OF SECTION 145A OF THE ACT. WE OBSERVED THAT BY I NCLUSION OF EXCISE DUTY IN THE CLOSING STOCK WILL HAVE NO EFFECT IN THE PROFIT AND LOSS ACCOUNT AS THE CORRESPONDING AMOUNT WILL ALSO BE INCLUDED IN THE PURC HASES . WE FIND THAT THE COORDINATE BENCHES OF THE ITAT AHMEDABAD HAS DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE VIDE ALPANI INDUSTRIES VS. ACIT IN ITA NOS. 169 &170/AHD/2005 AND SACHDEVA STEEL PRODUCT VS. ACIT IN ITA NO. 1360/AHD/2009. AFTER CONSIDERING I.T.A NO. 12 /RJT /20 14 A.Y. 2007 - 08 PAGE NO ACI T VS. SAUR ASHTRA CEMENT LTD. 5 THE CIRCUMSTAN CES AND THE LEGAL FINDINGS THAT FACTS OF THE CASE OF THE ASSESSEE ARE ID ENTICAL WITH THE FACTS OF THE AFORESAID DECISION OF THE COORDINATE BENCHES , WE DO NOT FIND ANY ERROR IN THE JUDGMENT OF LD. CIT(A). THEREFORE, BOTH THE GROUND S OF APPEAL OF THE REVENUE ARE DISMISSED. 9 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PR ONOUNCED IN THE OPEN C OUR T ON 18 - 12 - 201 7 SD/ - SD/ - (S.S. GODARA ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 18 /12 /201 7 / COPY OF O RDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, RAJKOT