M/s Amco Industries Ltd., Ludhiana V. DCIT, Ludhiana

ITA 126/CHANDI/2010

• Counselvise Citation: 12621514 RSA 2010
• Duration Of Justice: 1 year(s) 11 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-01-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 02-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Keywords: Capital asset
• Section: 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH CH ANDIGARH BEFORE SHRI H.L. KARWA, VP AND SHRI D K SRIVASTAVA, AM ITA NO. 126/CHANDI/2010 ASSESSMENT YEAR: 2006-07 AMCO INDUSTRIES LTD. V. D.C.I.T. CIRCLE I, LUDHI ANA D-155, PHASE IV A FOCAL POINT, LUDHIANA AADCA 1650 N (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI ASHWANI KUMAR RESPONDENT BY: SHRI N.K. SAINI DATE OF HEARING: 18.1.2012 DATE OF PRONOUNCEMENT: 20 .1.2012 ORDER PER H.L. KARWA, V.P THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER PASSED BY THE LD. CIT(A)-I, LUDHIANA DATED 16.11.2009 RELATING TO AY 2006-07. 2. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER:- THAT THE LD. CIT(A) WAS NOT JUSTIFIED TO ARBITRARI LY UPHOLD THE ACTION OF THE AO IN DISALLOWING A SUM OF RS. 10,56,080/- INCURRED BY THE APPELLANT ON ACCOUNT OF SERVICE CHARGES RETAINED/DEDUCTED BY PSEB ON SURREN DER OF ELECTRIC CONNECTION 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF WOVEN FABRICS. THE RETURN OF INCOME WAS FILED ON 29.11.2006 DECLARING INCOME AT NIL. DURING THE YEA R NO MANUFACTURING HAD BEEN DONE BY THE ASSESSEE-COMPANY. THE OPENING STOCK OF THE FIXED ASSETS HAVE BEEN SOLD DURING THE YEAR IN CONSIDERATION. THE ASSESSE E-COMPANY WAS WINDING OF ITS BUSINESS ACTIVITIES BY SELLING OF ITS MACHINERY, LA ND AND BUILDING. THE ASSESSEE- COMPANY SURRENDERED THE ELECTRICAL CONNECTION WITH PUNJAB STATE ELECTRICITY BOARD AND IN TURN PUNJAB STATE ELECTRIC BOARD RETAINED/DE DUCTED A SUM OF RS. 10,56,080/- ON ACCOUNT OF SERVICE CHARGES OUT OF SECURITY DEPO SIT WHICH HAS BEEN DISALLOWED BY THE AO. 4. ON APPEAL, THE LD. CIT(A) UPHELD THE ORDER OF TH E AO, AND HENCE THE ASSESSEE IS IN APPEAL BEFORE THIS TRIBUNAL. ITA NO. 126ANDI/2010 AMCO INDUSTRIES V. DCIT 2 2 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. SHRI ASHWANI KUMAR, THE LD. C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THE EXPENDITURE ON SURRENDER/CANCELLATION OF T HE ALLEGED ELECTRIC CONNECTION IS NOT IN THE NATURE OF ANY OF THE EXCEPTIONS SPECIFIE D IN SECTION 37(1) OF THE INCOME-TAX ACT, 1961 (IN SHORT THE ACT), SINCE IT HAS BEEN I NCURRED IN THE NORMAL COURSE OF RUNNING BUSINESS IN AS MUCH AS THE ASSESSEE-COMPANY WAS CARRYING THE BUSINESS OF TRADING IN WOVEN FABRICS AND CANNOT BY ANY STRETCH OF FACTUAL EXTRAPOLATION OR LEGAL FICTION BE DEEMED IT TO BE EITHER CAPITAL OR PERSON AL EXPENDITURE. WE FIND SUBSTANCE IN THE ABOVE CONTENTION OF SHRI ASHWANI KUMAR, THE LD. COUNSEL FOR THE ASSESSEE. IN OUR OPINION BOTH THE LOWER AUTHORITIES WERE WRONG I N HOLDING THAT THE ASSESSEE HAS DERIVED BENEFIT OF ENDURING NATURE. EVEN IF THE TE ST OF ENDURING BENEFIT WAS TO BE FOLLOWED, IT IS CLEAR THAT NO ENDURING BENEFIT HAS BEEN DERIVED OR CAPITAL ASSET HAS COME INTO EXISTENCE AS A RESULT OF THE SAID EXPENDI TURE. THE EXPENDITURE WAS ESSENTIALLY IN THE NATURE OF ELECTRICAL EXPENDITURE WHICH IS REVENUE IN NATURE. WE ALSO HOLD THAT THE EXPENDITURE IN QUESTION IS NOT I N NATURE OF ANY OF THE EXCEPTIONS SPECIFIED IN SECTION 37(1) OF THE ACT. THEREFORE, IT CAN SAFELY BE HELD THAT THIS EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE WHOLL Y AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS AND HENCE ALLOWABLE U/S 37 OF T HE ACT. 6. CONSIDERING THE ENTIRE FACTS AND CIRCUMSTANCES O F THE ABOVE CASE, WE ALLOW THIS GROUND OF APPEAL HOLDING THAT THE EXPENDITURE IN QUESTION IS REVENUE IN NATURE. 7. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED ON 20.01.2012 SD/- SD/- (D K SRIVASTAVA) (H.L. KARWA) ACCOUNTANT MEMBER VICE PRESIDENT CHANDIGARH, 20 .01.2012 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE C IT(A)/ THE DR ITA NO. 126ANDI/2010 AMCO INDUSTRIES V. DCIT 3 3