Shree Hanuman Sugar & Industries Ltd., Kolkata V. ACIT, Central Circle - XI, Kolkata, Kolkata

ITA 127/KOL/2010

• Counselvise Citation: [2013] 119 COUNSELVISE.COM (IT) 2945 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 1 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 05-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-01-2010
• Court: TRIBUNAL
• Department Lawyers: D K RAKSHIT
• Assessee Lawyers: S JHAJHARIA
• Keywords: Depreciation; Capital expenditure
• Section: 143(3)

Judgement Text

, B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA () BEFORE . . . . . . . . , ! /AND ' #!' , ) [BEFORE SHRI P. K. BANSAL, AM & SHRI MAHAVIR SINGH, JM] !$ !$ !$ !$ / I.T.A NO. 127/KOL/2010 #% &' #% &' #% &' #% &'/ // / ASSESSMENT YEAR: 2006-07 SHREE HANUMAN SUGAR & INDUSTRIES LTD. VS. ASSISTAN T COMMISSIONER OF INCOME-TAX, (PAN: AAECS0448M) C. C. XI, KOLKATA. ()* /APPELLANT ) (+,)*/ RESPONDENT ) DATE OF HEARING: 12.02.2013 DATE OF PRONOUNCEMENT: 15.03.2013 FOR THE APPELLANT: SHRI S. JHAJHARIA, FCA FOR THE RESPONDENT: SHRI D. K. RAKSHIT, JCIT, SR. DR - / ORDER PER BENCH: THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A), CENTRAL-I, KOLKATA IN APPEAL NO. 437/CC-XI/CIT(A),C-I/08-09 DATED 26.10.2009. AS SESSMENT WAS FRAMED BY ACIT, CC-XI, KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2006-07 VIDE HIS ORDER DATED 19.12. 2008. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ADDITION MADE BY AO ON ACCOUNT OF DISALLOWANCE OF E XPENDITURE BEING CAPITAL IN NATURE. FOR THIS ASSESSEE HAS RAISED FOLLOWING GROUND NO.1: 1. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN TREATING RS.33,535/- AS CAPITAL EXPENDITURE AND IN VIEW OF THE FACTS AN D IN THE CIRCUMSTANCES ALL SUCH EXPENDITURES BEING OF REVENUE IN NATURE, ANY SUCH D ISALLOWANCE BY TREATING THE SAME AS CAPITAL EXPENDITURE IS WHOLLY BAD, ILLEGAL, UNJUSTI FIED AND UNCALLED FOR AND IN VIEW OF THE FACTS AND IN THE CIRCUMSTANCES SUCH DISALLOWANCE MA Y KINDLY BE DELETED. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS MADE DISALLOWANCE OF RS.33,535/- BY HOLDING THE PURCHASE OF THE ASSETS I .E. NEW COLLAPSIBLE GATE AND FITTINGS INCLUDING DELIVERY CHARGES AT RS.3681/-, COST OF ST EEL ALMIRAH AT RS.4050/-, NOKIA HAND SET 2 ITA NO. 127/K/2010 SHREE HANUMAN SUGAR & IND. LTD., A.Y. 2006-07 RS.7500/- AND RS.4150/-, COST OF PAPER SHREDDER AT RS.13,500/- AND INSTALLMENT PAID FOR PURCHASE OF CAR AT RS.654/-. BEFORE CIT(A) IT WAS CONTENDED BY THE ASSESSEE THAT THESE ARE REPLACEMENT OF ASSETS LIKE THE ASSESSEE HAS REPLACE D OLD COLLAPSIBLE GATE BY A NEW ONE AND ALSO REPLACED OLD ALMIRAH WITH NEW ONE AND ALSO REPLACED PAPER SHREDDER. IN RESPECT TO PURCHASE OF NOKIA HAND SETS, THE ASSESSEE COULD NOT PROVIDE ANY INFORMATION THAT THESE WERE REPLACED. THE CIT(A) WITHOUT GOING INTO THIS ASPECT TREATED THAT ALL THE ASSETS PURCHASED/REPLACED HAS ITS INDEPENDENT EXISTENCE AND HENCE, TREATED THE EXPEND ITURE AS CAPITAL IN NATURE. HOWEVER, THE CIT(A) DIRECTED THE AO TO ALLOW DEPRECIATION ON THE SAME. WE FIND THAT ONCE THE ASSETS ARE REPLACED, WHICH IS NOT IN DISPUTE, THE EXPENDITURE CANNOT BE TREATED AS CAPITAL IN NATURE, THE SAME IS TO BE TREATED AS REVENUE NATURE. HOWEVER, THE ASSETS PURCHASED I.E. NOKIA HAND SETS AT RS.7500/- AND RS.4150/- IS CAPITAL IN NATURE BECAUS E THERE IS NO REPLACEMENT. FOR REST OF THE ASSETS I.E. NEW COLLAPSIBLE GATE, COST OF STEEL ALM IRAH AND COST OF PAPER SHREDDER WILL BE TREATED AS REVENUE IN NATURE. WE DIRECT ACCORDINGLY. THIS ISSUE OF ASSESSEES APPEAL IS PARTLY ALLOWED. 4. THE NEXT ISSUE IN THIS APPEAL OF ASSESSEE IS AGA INST THE ORDER OF CIT(A CONFIRMING THE DISALLOWANCE U/S. 40(A)(IA) OF THE ACT. FOR THIS, ASSESSEE HAS RAISED FOLLOWING GROUND NO.2: 2. FOR THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ACTION OF AO IN DISALLOWING RS.2,02,643/- U/S. 40(A)(IA) AND IN VIEW OF THE FAC TS AND IN THE CIRCUMSTANCES NO SUCH DISALLOWANCE COULD BE MADE U/S. 40(A)(IA) AND IN VI EW OF THE FACTS AND IN THE CIRCUMSTANCES PROVISIONS OF SECTION 40(A)(IA) WERE NOT AT APPLICABLE AND IN THE CIRCUMSTANCES OF THE CASE THE SAME MAY KINDLY BE DE LETED. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. IN THIS GROUND, THE FIRST ISSUE IS THE PAYMENT OF S ALARY TO MR. P. D. BALODIA, WHO WAS EMPLOYED AS LEGAL ADVISOR ON PAYMENT OF RS.99,643/-. THE LD . COUNSEL FOR THE ASSESSEE BEFORE US AS WELL AS BEFORE CIT(A) AND EVEN AO, IT WAS CLAIMED THAT S HRI P. D. BALODIA IS IN THE EMPLOYMENT OF ASSESSEE AND NO LEGAL FEE IS PAID. LD. COUNSEL FOR THE ASSESSEE BEFORE US STATED THAT THIS PAYMENT WAS MADE WITHIN THE DUE DATE AND NOTHING REMAINS PA YABLE AND HE RELIED ON THE DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERIL YN SHIPPING & TRANSPORTS VS. ADDL. CIT (VISAKHAPATNAM) (SB) REPORTED IN (2012) 136 ITD 23 (SB), WHEREIN IT IS HELD THAT THE TDS IS TO BE DEDUCTED ONLY IN RELATION TO PAYMENTS WHICH REMA INS PAYABLE AT THE END OF THE YEAR I.E. 31 ST MARCH OF THE RELEVANT FINANCIAL YEAR. IT WAS POIN TED OUT TO LD. COUNSEL THAT THE OPERATION OF THE ORDER OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA), IS STAYED BY HONBLE ANDHRA PRADESH HIGH COURT IN I .T.T.A.M.P. NO.908 OF 2012 IN I.T.T.A. 3 ITA NO. 127/K/2010 SHREE HANUMAN SUGAR & IND. LTD., A.Y. 2006-07 NO.384 OF 2012 WHEREIN HONBLE HIGH COURT OBSERVED, INTERIM SUSPENSION. NOTICE. VIDE DATED 8 TH OCTOBER, 2012. 6. ON THIS, THE LD. COUNSEL FOR THE ASSESSEE ARGUED THAT EFFECT OF THE ORDER STAYING A PENDING APPEAL BEFORE ANY HIGH COURT DOES NOT AMOUN T TO ANY DECLARATION OF LAW BUT IS ONLY BINDING UPON THE PARTIES TO THAT PROCEEDINGS AND SU CH INTERIM ORDER DOES NOT DESTROY THE BINDING EFFECT OF THE PRINCIPALS AS LAID DOWN IN TH E ORDER AS A PRECEDENT BECAUSE THE INTERIM ORDER HAD NO OCCASION TO LAY DOWN ANY PROPOSITION O F LAW. FOR THIS PROPOSITION, HE RELIED ON THE CASE LAW OF HONBLE CALCUTTA HIGH COURT IN THE CASE OF PIJUSH KANTI CHOWDHURY VS. STATE OF WEST BENGAL & ORS (2007) 2 CALLT 577 DATED 14 TH MAY, 2007 WHEREIN, AT PARA 10 AND 13, IT HAS BEEN HELD AS UNDER: 10. AFTER HEARING THE LEARNED COUNSEL FOR THE PART IES AND AFTER GOING THROUGH THE AFORESAID PROVISION WE FIND THAT THE SUPREME COURT BY THOSE INTERIM ORDERS HAS NO DOUBT STAYED THE OPERATION OF THE ORDER OF THE DIVISION B ENCH OF THIS COURT BY DIRECTING THE PARTIES TO MAINTAIN STATUS QUO AND AT THE SAME TIME , EVEN RESTRAINED THE STATE FROM INDUCTING THIRD PARTIES ON THE LANDS WHICH WERE THE SUBJECT-MATTERS BEFORE THE APEX COURT. SUCH INTERIM ORDER IS BINDING UPON THE PARTI ES TO THE PROCEEDINGS BUT THE LAW IS EQUALLY SETTLED THAT BY MERE PASSING OF AN INTERIM ORDER STAYING THE OPERATION OF A JUDGMENT WITH CERTAIN FURTHER CONDITIONS, THE EXIST ENCE OF THE SAID JUDGMENT IS NOT WIPED OUT AND AT THE SAME TIME, FOR SUCH INTERIM ORDERS I NTER PARTIES, THE AUTHORITY OF A DECISION AS A PRECEDENT IS NEVER UNDERMINED. UNLESS A DECISI ON IS SET ASIDE BY THE SUPERIOR COURT, THE SAID DECISION REMAINS BINDING AS A PRECEDENT TH OUGH MAY NOT BE BINDING UPON THE PARTIES TO THE PROCEEDINGS WHERE THE SUPERIOR COURT HAS GRANTED INTERIM ORDER. MOREOVER, ONCE A PROVISION HAS BEEN DECLARED ULTRA VIRES THE CONSTITUTION OF INDIA, THE STATE CANNOT INVOKE THE SAID ULTRA VIRES PROCEEDING AGAINST THE CITIZENS OF THE COUNTRY SIMPLY BECAUSE AN INTERIM ORDER OF STAY OF OPERATIO N ORDER DECLARING THE PROVISION AS ULTRA VIRES HAS BEEN PASSED IN AN APPEAL AGAINST SU CH ORDER. THE OBJECT OF GRANTING INTERIM ORDER I TO SEE THAT THE RELIEF CLAIMED IN THE APPEAL MAY NOT BECOME INAPPROPRIATE OR THE APPEAL DOES NOT BECOME INFRUCTUOUS FOR NOT G RANTING SUCH INTERIM ORDER; BUT BY MERE GRANT OF INTERIM STAY, THE EFFECT OF A BINDING PRECEDENT IS NOT DESTABILIZED. OVER AND ABOVE, THE INTERIM ORDERS OF THE STAY GRANTED BY TH E SUPREME COURT CLEARLY INDICATE THAT THE SAID COURT NEVER INTENDED THAT NOTWITHSTANDING THE DECISION OF THE HIGH COURT DECLARING A PART OF THE PROVISIONS OF VESTING AS UL TRA VIRES THE STATE WOULD NEVERTHELESS BE FREE TO PROCEED WITH THE PROCESS OF VESTING DURING THE PENDENCY O THE PROCEEDINGS BEFORE THE SUPREME COURT AND THAT IS WHY STATUS QUO AS REG ARDS POSSESSION HAS BEEN MAINTAINED AND EVEN, THE STATE HAS BEEN RESTRAINED FROM CREATI NG ANY THIRD PARTY INTEREST IN THE LANDS IN QUESTION. 13. THEREFORE, THE EFFECT OF THE ORDER OF STAY IN A PENDING APPEAL BEFORE THE APEX COURT DOES NOT AMOUNT TO ANY DECLARATION OF LAW BUT IS ONLY BINDING UPON THE PARTIES TO THE SAID PROCEEDINGS AND AT THE SAME TIME, SUCH INT ERIM ORDER DOES NOT DESTROY THE BINDING EFFECT OF THE JUDGMENT OF THE HIGH COURT AS A PRECEDENT BECAUSE WHILE GRANTING THE INTERIM ORDER, THE APEX COURT HAD NO OCCASION T O LAY DOWN ANY PROPOSITION OF LAW INCONSISTENT WITH THE ONE DECLARED BY THE HIGH COUR T WHICH IS IMPUGNED. 4 ITA NO. 127/K/2010 SHREE HANUMAN SUGAR & IND. LTD., A.Y. 2006-07 7. EVEN, HONBLE SUPREME COURT IN THE CASE SHREE CH AMUND MOPEDS LTD. VS. CHURCH OF SOUTH INDIA TRUST ASSOCIATION, MADRAS AIR 1992 SC 1439, 1444 HAS ANALYSED THE DIFFERENCE BETWEEN STAY OF OPERATION OF AN ORDER AND QUASHINGOF AN ORDER AND HELD THAT STAY OF ORDER OF AN APPELLATE AUTHORITY / COURT BY A HIGHER COU RT MEANS THAT THE ORDER PASSED BY THE APPELLATE AUTHORITY / LOWER COURT STILL CONTINUES T O EXIST IN LAW INSPITE OF THE STAY AND ITS EXISTENCE IS NOT DESTROYED. BUT WHERE THE ORDER OF THE APPELLATE / LOWER COURT IS QUASHED AND THE MATTER IS REMANDED BACK, IT MEANS THAT THE APPEAL D ISPOSED OF BY THE SAID ORDER OF THE APPELLATE AUTHORITY/LOWER COURT WOULD BE RESTORED AND IT CAN BE SAID TO BE PENDING BEFORE THE SAID AUTHORITY/LOWER COURT. 8. IN VIEW OF THE ABOVE, PARTICULARLY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF PIJUSH KANTI CHOWDHURY (SUPRA), AS A LSO IN OBEDIENCE TO DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF SHREE CHAMUND MOPEDS L TD. (SUPRA), WE ARE OF THE VIEW THAT THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN T HE CASE OF MERILYN SHIPPING & TRANSPORTS (SUPRA) STILL HOLDS GROUND AND ACCORDINGLY, TDS PRO VISIONS WILL APPLY, FOR THE PURPOSE OF INVOCATION OF THE PROVISIONS OF SECTION 40(A)(IA) O F THE ACT, ONLY ON THE AMOUNTS REMAINED PAYABLE AT THE END OF FINANCIAL YEAR AND NOT ON THE PAID AMOUNTS. HENCE, WE DIRECT THE AO TO RECOMPUTE THE DISALLOWANCE ACCORDINGLY. APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLO WED FOR STATISTICAL PURPOSE. 10. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.201 3. SD/- SD/- . . . . . . . . , ' ' ' ' #!' #!' #!' #!' , (P. K. BANSAL) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER ( . . . .) )) ) DATED : 15 TH MARCH, 2013 /0 #12 #3 JD.(SR.P.S.) 5 ITA NO. 127/K/2010 SHREE HANUMAN SUGAR & IND. LTD., A.Y. 2006-07 - 4 +##5 65&7- COPY OF THE ORDER FORWARDED TO: 1 . )* / APPELLANT SHREE HANUMAN SUGAR & INDUSTRIES LTD., C/O SALARPURIA JAJODIA & CO., 7, C. R. AVENUE, KOLKATA- 700 072 2 +,)* / RESPONDENT ACIT, CC-XI, KOLKATA. 3 . #- ( )/ THE CIT(A), KOLKATA 4. 5. #- / CIT KOLKATA 5 <#= +# / DR, KOLKATA BENCHES, KOLKATA ,5 +#/ TRUE COPY, ->/ BY ORDER, ' !2 /ASSTT. REGISTRAR .