Deputy Commissioner of Income Tax Circle-7(1)(1), Bangalore V. M/s Technoart Constructions Pvt Ltd , Banaglore

ITA 1200/BANG/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7093 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-03-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 26-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R CHANDRASEKHAR
• Keywords: Depreciation; Business expenditure; TDS
• Section: 12

Judgement Text

ITA NOS.1199 & 1200(B)/2017 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCHES : B, BANGALORE BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SMT BEENA PILLAI, JUDICAL MEMBER ITA NO S . 1199 & 1200 (BANG)/201 7 (ASSESSMENT YEAR S : 201 1 - 12 & 2012 - 13 ) THE DEPUTY COMMISSIONER OF INCOME TAX , CIRCLE - 7(1)(1), BANGALORE APPELLANT VS M/S TECHNO A RT CONSTRUCTIONS PVT.LTD., NO. 19 & 19/1, III FLOOR, SOU TH END ROAD, BASAVANAGUDI, BANGALORE - 560 004 PAN NO.A AACT5910B RESPONDENT REVENUE BY : SRI R.N.SIDDA P PAJI, ADDL.CIT APPELLANT BY : SHRI R . CHANDRASEKHAR, ADVOCATE DATE OF HEARING : 0 8 - 07 -- 2019 DATE OF PRONOUNCEMENT : O R D E R PER SMT BEENA PILLAI, JUDICIAL MEMBER PRESENT APPEALS HAS BEEN FILED BY REVENUE AGAINST ORDER DATED 16/02/17 PASSED BY LD. CIT (A) - 7, BANGALORE ROUTE FOR ASSESSMENT YEARS 2011 - 12 AND 2012 - 13 ON FOLLOWING GROUNDS OF APPEAL: ITA NOS.1199 & 1200(B)/2017 2 ITA N O .1199(B)/2017 (ASSESSMENT YEAR 20 11 - 12) 1. THE ORDER OF THE LEARNED CIT(A) IS OPPOSED TO LAW AND FACTS OF THE CASE. 2. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN LAW IN ALLOWING THE INTEREST ATTRIBUTABLE TO INVENTORY, ONLY ON THE CONTENTION THAT IDEN TICAL ISSUE WAS INVOLVED AND THE SAME WAS ALLOWED IN PRECEEDING YEARS?' 3. 'THE CIT(A) ERRED IN LAW IN ALLOWING THE APPEAL OF THE ASSESSEE ON THE ABOVE ISSUE, ONLY ON THE CONTENTION THAT IDENTICAL ISSUE WAS INVOLVED AND THE SAME WAS ALLOWED IN PRECEEDING YEARS?' 4. 'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS JUSTIFIED IN LAW IN ALLOWING 30% DEDUCTION OF THE TOTAL CONTRACT RECEIPTS, AS AGAINST 10% ALLOWED BY THE AO'? 5. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE CIT(A) IN SO FAR AS IT RELATES TO THE ABOVE GROUNDS MAY BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND AND/OR DELETE ANY OF THE GROUNDS MENTIONED ABOVE. IN ITA NO.1200(B)/2017 (ASSESSMENT YEAR 2012 - 13) 1. THE LEARNED ASSESSING AUTHORITY E RRED IN DETERMINING THE TOTAL INCOME OF THE APPELLANT AT RS. 2,76,04,930/ - AS AGAINST RS.2,36,04,930/ - RETURNED BY THE APPELLANT FOR THE AY: 2012 - 13. ITA NOS.1199 & 1200(B)/2017 3 2. THE LEARNED ASSESSING AUTHORITY ERRED IN DETERMINING SUM OF RS.40,00,000/ - UNDER THE CAPTION INTEREST ATTRIBUTABLE TO INVENTORY IN THE AY: 2012 - 123. CHARGE OF INTEREST ON STOCK INVENTORY HOLDING ON 31 ST MARCH IS WHOLLY OPPOSED TO LAW AND IS NOT WARRANTED. SIMILAR ADDITION MADE IN AY: 2008 - 09 HAS BEEN DELETED BY THE CIT(A) - III VIDE ORDER DATED 05/03/2012. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE, LEVY OF INTEREST U/S 234(B) IS NOT WARRANTED. THE APPELLANT PAYS LEAVE OF HIS HONBLE CIT(A) TO PERMIT TO ADD/DELETE/MODIFY ANY G R OUND/S AT THE TIME OF HEARING. BOTH PARTIES SUBMITTED THAT ISSUES CONSIDERED IN BOTH THE YEARS UNDER CONSIDERATION ARE IDENTICAL AND SIMILAR. IT IS ALSO AN ADMITTED FACT THAT THE FACTUAL M E TRICS ALSO ARE IDENTICAL. WE ARE THEREFORE INCLINED TO DISPOSE OF THESE APPEALS BY WAY OF COMMON ORDER AS UNDER. FOR THE SAKE OF CONVENIENCE, FACTS INVOLVED IN ASSESSMENT YEAR 2011 - 12 ARE BEING CONSIDERED. ASSESSEE IS A PRIVATE LIMITED COMPANY CARRYING ON BUSINESS AS USUAL CONTRACTOR AND DESIGNER. FOR ASSESSMENT YEAR 2011 - 12 ASSESSEE FILED ITS RETURN OF INCOME ON 28/09/1 1 DECLARING TOTAL INCOME OF RS.1,85,17, 830/ - . THE RETURN WAS PROCESSED AND SELECTED FOR SCRUTINY. SUBSEQUENTLY, NOTICE UNDER SECTION 143 (2) AND 142 (1) ALONG WITH QUESTIO NNAIRE WAS ISSUED TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICES, REPRESENTATIVE OF ASSESSEE APPEARED BEFORE LD. AO AND FILED RELEVANT DETAILS AND PARTICULARS AS CALLED FOR. LD.AO COMPLETED ASSESSMENT BY MAKING FOLLOWING ADDITIONS: ITA NOS.1199 & 1200(B)/2017 4 ADDITION UNDER THE HEAD DEPRECIATION - RS. 9,46,891/ - ADDITION UNDER THE HEAD WAGES - - RS1,10,95,149/ - ADDITION UNDER THE HEAD INTEREST ATTRIBUTABLE PAYMENTS - RS. 44,56,875/ - A GGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A) WHO ALLOWED ASSESSEES CLAIM BY DELETING ADDITION MADE ON ACCOUNT OF INTEREST ATTRIBUTABLE TO INVENTORY AND ADDITION MADE UNDER THE HEAD WAGES HOWEVER DISALLOWED THE CLAIM OF ASS ESSEE REGARDING DEPRECIATION. AGGRIEVED BY THE ORDER OF LD. CIT (A) REVENUE IS IN APPEAL BEFORE US NOW. GROUND NO. 1 IS GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. GROUND NO. 2 - 3 IS IN RESPECT OF ADDITION ON ACCOUNT OF INTEREST ATTRIB UTABLE TO INVENTORY BEING DELETED BY LD. CIT (A). IT HAS BEEN SUBMITTED AT THE OUTSET BY LD. AR THAT LD. CIT (A) IN THE IMPUGNED ORDER WHILE DECIDING THIS ISSUE HAS FOLLOWED THE VIEW TAKEN BY HIS PREDECESSOR IN PRECEDING ASSESSMENT YEAR BEING ASSESSMENT YE AR 2008 - 09 AND 2009 - 10 IN ASSESSEES OWN CASE FOR ALLOWING THE CLAIM. IT HAS ALSO BEEN SUBMITTED THAT REVENUE HAS NOT CHALLENGED THE SAID ORDER BEFORE THIS TRIBUNAL AND THEREFORE HAS ATTAINED FINALITY. LD. SENIOR DR THOUGH SUPPORTED THE VIEW ADOPTED BY LD . AEO HOWEVER COULD NOT CONTROVERT THEREFORE STATED OBSERVATIONS BY LD. CIT (A) IN THE IMPUGNED ORDER. ITA NOS.1199 & 1200(B)/2017 5 WE HAVE PERUSED SUBMISSIONS ADVANCED BY BOTH SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US. IT IS OBSERVED THAT LD. CIT (A) WHILE DECIDING THIS ISSU E HAS PLACED RELIANCE UPON THE ORDER OF HIS PREDECESSOR IN ASSESSEES OWN CASE IN IMMEDIATELY PRECEDING ASSESSMENT YEARS AGAINST WHICH REVENUE HAS NOT FILED ANY APPEAL BEFORE THIS TRIBUNAL. LEARN CIT (A) OBSERVED AS UNDER: NO APPEAL WAS FILED BY THE DEPA RTMENT AGAINST THE ORDER OF CIT(A) FOR THE A.Y. 2008 - 09. IN THE A.Y. 2008 - 09, THE CIT(A) - III, BANGALORE IN ITA NO 166/ C 12(4)/CIT(A) - III /BNG/10 - 11 , DATED 05 - 03 - 2012 HAS DISCUSSED THE ISSUE AT L E NG T H AND ALLOWED THE CLAIM OF THE APPELLANT. IN AY: 2009 - 10, THE CIT(A) - III, BANGALORE IN ITA NO. 194/ C - 12(4)/CIT(A) - III/BNG/11 - 12 DATED 27.08.2013 HAS FOLLOWED THE DECISION OF A.Y. 2008 - 09. IN THE ORDER OF A.Y. 2008 - 09, THE C1T(A) - III, BANGALORE HAS HELD THAT : '4.7.2 FROM THE ABOVE SUBMISSION IT IS SEEN THAT THE INTEREST CHARGES HAD BEEN SEPARATED FROM THE BANK CHARGES (INCLUDING LOAN PROCESSING CHARGES OF RS. 2,58,333/ - ALREADY DEALT AT GROUND 2 ABOVE). ON A N EXAMINATION OF THE ISSUE, AND HAVING PAYROLLS TO THE ASSESSMENT ORDER, IT APPEARS THAT THE AO HAS MADE THE DISALLOWANCE (RECITING THE WORK IN PROGRESS AS A CAPITOL ITEM. HOWEVER, I AGREE WITH THE APPELLANT DULL SINCE THE WORK IN PROGRESS AS PART OF THE PROFIT AND LOSS ACCOUNT WHICH GENERATES THE INCOME, AND THE EXPENDITURE INCURRED TOWARDS THIS ITA NOS.1199 & 1200(B)/2017 6 PURPOSE IS VERY MUCH IN THE NATURE OF A REGULAR BUSINESS EXPENDITURE, THE .4(3 .SHOULD HAVE SPECIFIED WHY HE FEELS THAT ANY PARTICULAR ITEM OF THE WORK IN PROGRESS SHOULD CARRY A CAPITAL NATURE, WHEN IT IS WELL KNOWN THAT WORK IN PROGRESS IS A PART OF THE CURRENT ASSET OF A BUSINESS. AS SUCH, I DO NOT FIND THE ADDITION MADE BY THE AO TO B E BASED ON .SOLID GROUNDS OR EVIDENCE, AND WITHOUT GOING INTO THE MERITS OF THE COMMITTEE COLOUR ACCURACY OF THE FIGURES ADOPT ED BY HIM (AND A CHALLENGE BY THE APPELLANT), I DIRECT THE AO TO EXCLUDE THE ADDITION OF RS. 42,81,492/ - F ROM THE TOTAL INCOME OLDIE APPELLANT. ' 6.3 AS THE FACTS ARE IDENTICAL, I AM OF THE CONSIDERED OPINION THAT THERE IS NO OCCASION TO DEFER _M THE FINDINGS OF MY PREDECESSOR CIT(A)S AND THEREFORE THE ADDITION MADE ON THIS ACCOUNT FOR BOTH THE A SSESSMENT YEARS UND E R CONSIDERATION IS DIRECTED TO BE DELETED . THE ISSUE THAT HAS BEEN CONSIDERED IS THAT ASSESSEE CLAIMED A SUM OF RS.57,89,080 / - AS EXPENSES UNDER THE HEAD INTEREST, FINANCE CHARGES AND BANK CHARGES. IT WAS SUBMITTED BY ASSESSEE THAT THE ENTIRE BORROWED FUNDS HAS BEEN UTILISED FOR THE PURPOSE OF BUSINESS OF ASSESSEES. ASSESSEE HAD ALSO PLACED RELIANCE UPON DECISION OF HONBLE SU PREME COURT IN CASE OF DCIT VS CARE HEALTHCARE LTD., REPORTED IN 298 ITR 194. BOTH PARTIES AT THE OUTSET AGREES THAT THE FACTUAL METRICS FOR YEAR UNDER CONSIDERATION IS SAME WITH THAT OF IMMEDIATELY PRECEDING ASSESSMENT YEARS. ON PERUSAL OF ASSESSMENT ORD ER IS OBSERVED THAT ITA NOS.1199 & 1200(B)/2017 7 SIMILAR DISALLOWANCE HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEARS ALSO. LD. CIT (A) REFERRING TO HIS PREDECESSORS VIEW HAS UPHELD THAT ENTIRE BORROWED FUNDS HAS BEEN UTILISED BY ASSESSEE FOR THE PURPOSES OF BUSINESS. REVENUE HAS NOT BROUGHT ON RECORD ANY MATERIAL FACTS TO ESTABLISH ANYTHING CONTRARY TO WHAT HAS BEEN OBSERVED BY LD. CIT (A). WE ALSO NOTE THAT REVENUE HAS ADMITTED THE VIEW IN PRECEDING ASSESSMENT YEARS, THEREBY ATTAINING FINALITY. UNDER SUCH CIRCUMSTANCES WE DO NOT FIN D ANY REASON TO DIFFER WITH THE VIEW TAKEN BY LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY, THESE GROUNDS RAISED BY REVENUE STANDS DISMISSED. GROUND NO.4 RELATES TO ALLOWING 30% DEDUCTION OF TOTAL CONTRACT RECEIPTS, AS AGAINST 10% BY LD.AO. BOTH SIDES S UBMITTED THAT THIS ISSUE HAS BEEN DEALT WITH BY THIS TRIBUNAL IN ASSESSEES OWN CASE, IN PRECEDING ASSESSMENT YEARS, WHEREIN THIS TRIBUNAL HAS DECIDED AS UNDER: THE FACTUAL POSITION WITH REGARD TO THE TOTAL RECEIPT OF THE ASSESSEE IN RE S PECT OF CONTRACT WORKS AND THE WAGES PAID AS PERCENTAGE OF TOTAL CONTRACT RECEIPTS ARE AS FOLLOWS: 1 TOTAL RECEIPTS UNDER WORKS COMPLETED AS PER PROFIT & LOS AC/C. RS.23,12,20,732 2 WAGES PAID IN THE YEAR AS PER PROFIT & LOSS A/C RS. 05,96,77,524 3 WORKS OUT TO 25.81% IT CAN BE SEEN FROM THE ORDER OF THE TRIBUNAL FOR AY: 2007 - 08 THAT A VIEW WAS TAK E N THAT 30% OF THE TOTAL CONTRA C T R ECEIPTS CAN BE TAKEN AS TOWARDS LABOUR CHARGES. PERCENTAGE OF LABOUR CHARGES O THE CONTRACT R ECEIPTS IN THE PRESENT AY: IS LESS THAN 30%. THER E FORE, THE DECISION RENDER E D BY THE TRIBUNAL FOR AY: 2007 - 08 IS SQUARELY ITA NOS.1199 & 1200(B)/2017 8 APPLICA B L E TO THE PRES E NT ASSESSMENT YEAR ALSO. WE ARE THEREFORE, OF THE VIEW THAT THE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE A O. HER ORDER DOES NOT CALL FOR ANY INTERFERENCE. CONS E QUENTLY, THE APPEAL BY THE REVENUE IS DISMISSED . NOTHING CONTRARY HAS BEEN BROUGHT ON RECORD BY REVENUE IN ORDER TO DEVIATE WITH THE AFORESTATED VIEW. LEARN ED CIT (A) FOLLOWING THE AFORESTATED VIEW HAS DELETED THE ADDITION. RESPECTFULLY FOLLOWING THE SAME, WE DO NOT FIND ANY INFIRMITY IN THE VIEW ADOPTED BY LD. CIT (A) AND THE SAME IS UPHELD. ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. GROUND NUMBERS 5 - 6 ARE GENERAL IN NATURE A ND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. IN THE RESULT APPEAL FILED BY REVENUE FOR ASSESSMENT YEAR 2011 - 12 STANDS DISMISSED. ASSESSMENT YEAR 2012 - 13 GROUND NO. 2 ISSUE RAISED BY REVENUE IS REGARDING DELETION OF INTEREST ATTRIBUTABLE TO INVENTORY BY LD . CIT (A). WE HAVE DEALT WITH THIS ISSUE HEREINABOVE, AND FACTS BEING IDENTICAL AND SIMILAR WITH THE YEAR UNDER CONSIDERATION, VIEW TAKEN THEREIN IS FOLLOWED MUTATIS MUTANDIS . ACCORDINGLY THIS GROUND RAISED BY REVENUE STANDS DISMISSED. GROUND NO. 1, 3, 4, 5 ARE GENERAL IN NATURE AND THEREFORE DO NOT REQUIRE ANY ADJUDICATION. IN THE RESULT APPEAL FILED BY REVENUE FOR ASSESSMENT YEAR 2012 - 13 STANDS DISMISSED. ITA NOS.1199 & 1200(B)/2017 9 ORDER PRONOUNCED IN THE OPEN COURT ON (B.R.BASKARAN) (BEENA PILLAI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: *AM COPY OF THE ORDER FORWARDED TO: 1.APPELLANT; 2.RESPONDENT; 3.CIT; 4.CIT(A); 5. DR 6. ITO (TDS) 7.GUARD FILE BY ORDER ASST. REGISTRAR