Kalyani Forge Limited, Pune V. DCIT, Pune

ITA 1283/PUN/2007

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3226 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-10-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 05-10-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: HEMANTKUMAR C LEUVA
• Keywords: Capital asset; Revised return; Revenue expenditure; Capital expenditure
• Section: 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C. SUDHIR AND SHRI D. KARUNAKARA RAO ITA NO. 1283/PN/07 (ASSTT. YEAR 2004-05) KALYANI FORGE LIMITED C-WING SHANGRILA GARDEN, 1 ST FLOOR, BUND GARDEN ROAD, PUNE- 411001 PAN NO. AAACK7311H .... APPELLANT VS. DCIT CIRCLE 11(1), PUNE . RESPONDENT APPELLANT BY : SHRI C.H. NANIWADEKAR RESPONDENT BY : SHRI HEMANTKUMAR C. LEUVA ORDER PER D. KARUNAKARA RAO AM THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF THE CIT(A)-I, PUNE DATED 18/07/2007 FOR A.Y 2004-05. THE GROUNDS RA ISED BY THE ASSESSEE ARE AS UNDER:- 1. THE LEARNED CIT(A) ERRED IN SIMPLY RELYING ON H IS ORDER FOR A.Y 2003-2004 IN CONFIRMING EXPENDITURE ON DIES AS CAPI TAL EXPENDITURE ONLY GOING BY THE NOMENCLATURE. 2. HE FAILED TO APPRECIATE THAT WHETHER AN ITEM IS A CAPITAL ASSET OR A CONSUMABLE ITEM WILL DEPEND ON THE NATURE OF THE BU SINESS AND ITS ROLE, PURPOSE AND USEFUL LIFE IN THAT BUSINESS. 3. THE LEARNED CIT(A) ERRED IN HOLDING THAT A CLAIM MADE THROUGH A LETTER WHICH FORMED PART OF RETURN OF INCOME PAPERS CANNOT BE ENTERTAINED. HE OUGHT TO HAVE HELD THAT DETERMINATI ON OF CORRECT TOTAL INCOME IS THE PRIMARY DUTY OF THE A.O IRRESPECTIVE OF CLAIMS MADE BY THE ASSESSEE OR THE VIEW AN ASSESSEE TAKES OF HIS LEGAL RIGHTS. 4. REASONS ASSIGNED FOR REJECTING THE CLAIMS ARE WRO NG, INSUFFICIENT AND CONTRARY TO FACTS AND LAW. ITA NO. 1283/PN/07 A.Y: 2004-05 PAGE 2 OF 4 2. AT THE VERY OUTSET, LD. COUNSEL MENTIONED THAT TH E GROUNDS 1 AND 2 RELATE TO WHETHER THE EXPENDITURE INCURRED ON DIES IS CAPITAL IN NATURE OR NOT. IN THIS REGARD, LD COUNSEL FILED A COPY OF THE ORDER OF THE PUN E BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO. 1407/PN/06 FOR THE A.Y 2003-04, ORDER DATED 29/05/2009, WHERE IDENTICAL GROUNDS WAS ADJUDICATED A ND DECIDED IN FAVOUR OF THE ASSESSEE. RELYING ON PARA 6 AND 7 OF THE SAID ORD ER AND CONSIDERING THE ABOVE SETTLED POSITION IN ASSESSEES OWN CASE, GROUN DS 1 & 2 SHOULD BE ALLOWED IN HIS FAVOUR. THE FOLLOWING EXTRACTION FROM THE SAID ORDER, WHICH WAS DECIDED RELYING ON THE DECISION IN THE CASE OF SUNBREAM AUTO LTD. VS. CIT (2006) 10 0 TTJ 209 IS AS FOLLOWS,- 6. . IN ANY CASE, THIS CHANGE IS NOT OUT OF TU NE WITH GROUND REALITIES OF BUSINESS AS EVIDENT FROM THE FOLLOWING OBSERVATIONS BY A CO ORDINATE BENCH IN THE CASE OF SUNBREAM AUTO LTD. VS . CIT (2006) 100 ITR 209 WHEREIN OUR DISTINGUISHED COLLEAGUES HAVE OBSER VED AS UNDER: EXPENSES ON REPLACEMENT OF WORN OUT DIES WHICH ADMITTEDLY HAD A LIFE SPAN OF APPROXIMATELY ONE YEAR CANNOT BE TREATED AS CAPITAL EXPENDITURE AND THEREFORE, CIT WAS NOT JUSTIFIED IN PASSING ORDER U/S 263 ON THE GROUND THAT THE A.O ALLOWED DEDUCTION FOR THE SAME AS REVENUE EXPENDITURE, MORE SO WHEN THE CIT HIMSELF COULD NOT COME TO A DEFINITE FINDING THAT THE SAID EXPENDITURE WAS A CA PITAL EXPENDITURE. 7. IN VIEW OF THE ABOVE DISCUSSIONS, AS ALSO BEARING IN MIND ENTITY OF THE CASE, WE ARE OF THE CONSIDERED VIEW THAT THE AU THORITIES BELOW WERE NOT JUSTIFIED IN DECLINING THIS CHANGE IN ACCOUNTIN G POLICY OF THE ASSESSEE, AND IN THUS DECLINING DEDUCTION, AS REVENUE EXPENDI TURE OF THE SAME. WE, THEREFORE DIRECT THE ASSESSING OFFICER TO DELETE TH E IMPUGNED DISALLOWANCE. 3. THE ABOVE FINDINGS ARE CLEAR THAT THE EXPENDITURE D ISALLOWED BY THE AO AS CAPITAL IN NATURE IN INSTANT CASE WAS NOT TO BE ENTE RTAINED IN THE ABSENCE OF ANY DEFINITE FINDING THAT THE SAID EXPENDITURE WAS A CAP ITAL EXPENDITURE AND NOT REVENUE. ACCORDINGLY, THE GROUNDS ARE ALLOWED . 4. IN GROUND NO. 3, THE ASSESSEE IS OF THE OPINION, THAT THE LEARNED CIT(A) ERRED IN HOLDING THAT A CLAIM MADE THROUGH A LETTER WHICH FORMED PART OF RETURN OF INCOME PAPERS CANNOT BE ENTERTAINED. IN THIS REGARD, HE ARGUED IN THE GROUNDS ITSELF THAT HE OUGHT TO HAVE HELD THAT DETERM INATION OF CORRECT TOTAL INCOME IS THE PRIMARY DUTY OF THE A.O IRRESPECTIVE OF CLAIMS MADE BY THE ASSESSEE OR THE VIEW AN ASSESSEE TAKES OF HIS LEGAL RIGHTS. IN THIS REGARD, THE ASSESSEE RELIED ON THE DECISION IN THE CASE OF GOET ZE (INDIA) LTD. VS. CIT (2006) ITA NO. 1283/PN/07 A.Y: 2004-05 PAGE 3 OF 4 284 ITR 323 (SC). ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. FROM THE ORDER OF THE CIT(A), IT IS EVIDENT THAT THE CLAIM IS OTHERWISE ALLOWABLE IN FAVOUR OF THE ASSESSEE AND THE ONLY OBJECTION THE CIT(A) HAS IS ONLY WITH REGARD TO THE MANNER OF MAKING OF THE CLAIM AND MAKING A CLAIM BY WAY OF A COVERING LETTER IS NOT ENTERTAINABLE. IN THIS REGARD, WE HAVE EXAMINED TH E SAID DECISION IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (SUPRA) AND FIND THERE IS ESSENTIALITY OF MAKING A CLAIM BY WAY OF FILING THE REVISING RETURN OF INCOME BEFORE THE APPELLATE AUTHORITIES. FURTHER, WE HAVE ALSO PERUSED THE RELEVANT DECISION OF THE SUPREME COURT AND FIND PARA 17 ON PAGE 4 IS RELEVANT WHICH RE ADS AS UNDER. 17. IN GOETZE (INDIA) LTD. VS. CIT (2006) 204 CTR (SC) 182 : (2006) 284 ITR 323 (SC), WHEREIN DEDUCTION CLAIMED BY WAY OF A LETTER BEFORE AO, WAS DISALLOWED ON THE GROUND THAT THERE WAS NO PROV ISION UNDER THE ACT TO MAKE AMENDMENT IN THE RETURN WITHOUT FILING A RE VISED RETURN. APPEAL TO THE SUPREME COURT, AS THE DECISION WAS UPHELD BY THE TRIBUNAL AND THE HIGH COURT, WAS DISMISSED MAKING CLEAR THAT THE DEC ISION WAS LIMITED TO THE POWER OF ASSESSING AUTHORITY TO ENTERTAIN CLAIM FOR DEDUCTION OTHERWISE THAN BY REVISED RETURN , AND DID NOT IMPINGE ON THE POWER OF TRIBUNAL 5. IN VIEW OF THE ABOVE JUDGMENT OF THE APEX COURT, IT IS EVIDENT THAT MAKING OF THE CLAIM BY WAY OF FILING OF THE RETURN OR REVISED RETURN IS MANDATORY BEFORE THE ASSESSING AUTHORITIES ONLY AND NOT BEFORE THE APP ELLATE AUTHORITY I.E. CIT(A), ITAT OR HIGHER JUDICIARY. IN OUR OPINION, THE CIT(A) TRA VELED INTO ERROR ZONE IN NOT APPLYING THE SAID RATIO PROPERLY. THEREFORE, CIT(A) IS NOT BARRED BY THE ABOVE JUDGMENT FROM ENTERTAINING AND ADJUDICATING THE CLAIM MADE OTHERWISE THAN BY FILING THE RETURN OR REVISED RETURN. THUS, THE MAKING A C LAIM WAY OF FILING A COVERING LETTER TO THE RETURN AS DONE BY THE PRESENT ASS ESSEE, IS IN ORDER. ACCORDINGLY, THE GROUND THREE IS ALLOWED . 6. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON 28 TH OCTOBER, 2010. SD/- SD/- (I.C. SUDHIR) (D.KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBE R PUNE DATED THE 28 TH OCTOBER, 2010 R ITA NO. 1283/PN/07 A.Y: 2004-05 PAGE 4 OF 4 COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE 2. DCIT, CIRCLE 11(1), PUNE 3 CIT-(A)-I, PUNE 4 CIT-I, PUNE 5 D.R. ITAT B BENCH BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE