Indo Count Industries Ltd., New Delhi V. ITO, New Delhi

ITA 124/DEL/2011

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0098 (ITAT-DELHI)
• Duration Of Justice: 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MONA MOHANTY
• Assessee Lawyers: O P MODY
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER I.T.A. NO.124/DEL/2011 ASSESSMENT YEAR : 2006-07 INDO COUNT INDUSTRIES LTD., ITO, 1206, PRAGATI TOWER, WARD-11 (4), 26-RAJENDRA PLACE, NEW DELHI. NEW DELHI. V. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AACI AACI AACI AACI- -- -0866 0866 0866 0866- -- -P PP P APPELLANT BY : SHRI O.P. MODY, ADVOCATE. RESPONDENT BY : SMT. MONA MOHANTY, SR. DR. ORDER PER A.K. GARODIA, AM: THIS IS AN ASSESSEE'S APPEAL FILED AGAINST THE ORDER OF LD CIT(A)XI, NEW DELHI DATED 18.10.2010 FOR ASSESSMENT YEA R 2006-07. 2. GROUND NO.1 OF THE APPEAL IS AS UNDER:- FOR THAT THE LD CIT(A) ERRED IN CONFIRMING THE ADD ITION OF `.5,89,194/- MADE BY THE LD ASSESSING OFFICER ON ACCOUN T OF FOREIGN EXCHANGE LOSS BY TREATING THE SAME TO BE A NOT IONAL LIABILITY NOT ADMISSIBLE AS DEDUCTION. FOR THAT THE A DDITION SO CONFIRMED BEING NOT TENABLE IS LIABLE TO BE DELETED. PAGE 2 OF 5 ITA NO124/DEL/11 3. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT THI S ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY JUDGMENT OF HON'B LE APEX COURT RENDERED IN THE CASE OF CIT V. WOODWORD GOVERNOR IND IA PVT. LTD. AS REPORTED IN 312 ITR 254 (DEL.). AS AGAINST THIS, LD D R OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENT OF HO N'BLE APEX COURT CITED BY LD AR OF THE ASSESSEE. IN THE CASE OF WOODWORD GOVERNOR INDIA (SUPRA), IT WAS HELD BY THE HON'BLE APEX COURT THAT LOSS ON ACCOUNT OF FOREIGN EXCHANGE RATE DIFFERENCE IN RESPE CT OF CURRENT ASSETS/LIABILITIES IS ALLOWABLE AS REVENUE EXPENDITURE BU T IF THE SAME IS IN RESPECT OF FIXED ASSETS OR CAPITAL ITEMS, THE SAME HAS TO BE CAPITALIZED. IN THE PRESENT CASE, THIS FACT IS NOT BROU GHT ON RECORD AS TO WHETHER THIS LOSS ON ACCOUNT OF EXCHANGE FLUCTUATION I S IN CONNECTION WITH CURRENT ASSETS/LIABILITIES OR IN RESPECT OF CAPITAL ITEMS. HENCE, WE FEEL THAT THIS MATTER SHOULD GO BACK TO THE FILE OF T HE ASSESSING OFFICER FOR A FRESH DECISION AFTER EXAMINING THE FACTUAL ASPEC T. IF IT IS FOUND THAT THIS LOSS WAS INCURRED BY THE ASSESSEE ON ACCOUNT OF CURRENT ASSETS/LIABILITIES, THE SAME SHOULD BE ALLOWED AS REVENUE EXPENDITURE IN THE PRESENT YEAR BUT IF IT IS FOUND THAT SUCH LOSS IS RELATABLE TO CAPITAL ITEMS THEN IT SHOULD BE CAPITALIZED AND ALLOWANCE OF DEPRECIATION SHOULD BE RE-WORKED AS PER LAW. WE ORDER ACCORDINGL Y. THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. GROUND NO.2 OF THE APPEAL IS AS UNDER:- FOR THAT THE LD CIT(A) ERRED IN CONFIRMING THE DISA LLOWANCE OF `.89,147/- MADE BY THE LD ASSESSING OFFICER ON ACCOUNT OF CLUB PAGE 3 OF 5 ITA NO124/DEL/11 FEES. FOR THAT THE DISALLOWANCE SO CONFIRMED BEING NOT TENABLE IS LIABLE TO BE DELETED. 6. BRIEF FACTS OF THE CASE ARE THAT IT IS NOTED BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER THAT A SUM OF `.89,147/- HAS BEE N DEBITED ON ACCOUNT OF CLUB FEES TO THE PROFIT & LOSS ACCOUNT. IT IS ALSO NOTED BY THE ASSESSING OFFICER THAT THE AUDITORS HAS CERTIFIED THAT TH E CLUB FEES EXPENSES ARE PERSONAL IN NATURE. ON THIS BASIS, THE ASSESSING OFFICER HELD THAT THE SAME IS NOT ALLOWABLE AND HE DISALLOWED THE SAME. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BE FORE LD CIT (A) BUT WITHOUT SUCCESS AND NOW THE ASSESSEE IS IN FURTHER AP PEAL BEFORE US. 7. IT IS SUBMITTED BY THE LD AR OF THE ASSESSEE THAT A C OPY OF TAX AUDIT REPORT IS AVAILABLE ON PAGE NO.10-45 OF THE PA PER BOOK AND AT SL. NO. 17B AT PAGE NO.4 OF THE TAX AUDIT REPORT, IT IS REPORTED BY THE AUDITOR THAT THE AMOUNT DEBITED TO P&L A/C BEING EX PENDITURE OF PERSONAL NATURE IS NIL. IT IS SUBMITTED THAT IN VIEW OF THIS, THE VERY BASIS ADOPTED BY THE ASSESSING OFFICER TO MAKE DISALLOWANC E IS NOT EXISTING. LD DR OF THE REVENUE SUPPORTED THE ORDERS O F THE AUTHORITIES BELOW. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE GONE TH ROUGH THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT IN COL N O.17B OF THE TAX AUDIT REPORT, IT HAS BEEN REPORTED BY THE AUDITOR TH AT THE EXPENDITURE OF PERSONAL NATURE DEBITED TO P&L A/C IS NIL. WE AL SO FIND THAT IN COL NO.17D OF THE TAX AUDIT REPORT IS THE REQUIREMENT RE GARDING DETAILS OF EXPENDITURE INCURRED ON CLUB. IN THAT COLUMN, IT HA S BEEN REPORTED BY THE TAX AUDITOR THAT THE DETAILS ARE AS PER ANNEXURE- V WHICH IS ANNEXED TO TAX AUDIT REPORT AND IS AVAILABLE ON PAGE NO.25 O F THE PAPER BOOK. PAGE 4 OF 5 ITA NO124/DEL/11 AS PER THIS OUT OF TOTAL AMOUNT OF `.89,1347/-, `.81 ,360/- IS PAID TO FOUR CLUBS TOWARDS ANNUAL MEMBERSHIP FEES AND THE BALANCE AM OUNT OF `.7787/- HAS BEEN PAID TOWARDS EXPENSES ON SNACKS ETC. IN THE CASE OF OTIS ELEVATOR CO. (INDIA) LTD. V. CIT AS REPORTED IN 195 ITR 682, IT WAS HELD THAT CLUB FEE IS ALLOWABLE EXPENDITURE. SINCE THE MAJOR AMOUNT WAS TOWARDS ANNUAL MEMBERSHIP FEES AND VERY SMALL AMOUN T WAS INCURRED TOWARDS EXPENDITURE ON CLUB, WE ARE OF THE CONSIDERED OPINION, THAT NO DISALLOWANCE IS CALLED FOR IN VIEW OF THIS DECISION OF THE HON'BLE BOMBAY HIGH COURT AND HENCE, WE DELETE THE SAME. THIS GROUND OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED IN THE TERMS AS INDICATED ABOVE. 10. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY 1 8 TH MARCH, 2011. SD/- SD/- (I.P. BANSAL) (A.K. GAR ODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 18.3.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). PAGE 5 OF 5 ITA NO124/DEL/11