The Jt.CIT.(OSD), Circle-4, Ahmedabad V. Hazira Port Pvt.Ltd., Ahmedabad

ITA 1290/AHD/2011

• Counselvise Citation: 129020514 RSA 2011
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2006-2007
• Appeal Filed On: 02-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Assessee Lawyers: P M MEHTA
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. L. GEHL OT, AM) ITA NO. 1290/AHD/2011 A. Y.: 2006-07 THE J. C.I. T.(OSD), CIRCLE-4, NAVJIVAN TRUST BUILDING, OFF ASHRAM ROAD, AHMEDABAD VS HAZIRA PORT PVT. LTD., 101-103, ABHIJEET II, MITHAKALI CIRCLE, NAVRANGPURA, AHMEDABAD PA NO. AAACH 9142 C (APPELLANT) (RESPONDENT) APPELLANT BY SHRI B. L. YADAV, SR. DR RESPONDENT BY SHRI P.M. MEHTA, AR DATE OF HEARING: 21-10-2011 DATE OF PRONOUNCEMENT: 31-10-2011 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)- V III, AHMEDABAD DATED 20-01-2011, FOR ASSESSMENT YEAR 2006-07, ON T HE FOLLOWING GROUND: 1. THE LD. CIT(A) VIII, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.92,62,716/- MADE BY THE ASSESSING OFFICER CLAIMED AS REVENUE EXPENSES BY THE ASSESSEE COMPANY, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIALS BROUGHT ON RECORD BY THE ASSESSING OFFICER. ITA NO.1290/AHD/2011 THE JCIT (OSD), CIR-4, AHMEDABAD VS HAZIRA PORT PVT . LTD. 2 2. THE AO OBSERVED THAT THE ASSESSEE HAS COMMENCED OPERATION ON 09-10-2005 AND IN THE BOOKS OF ACCOUNT IT HAS AMORTIZED/CAPITALIZED EXPENSES AS BEING INCURRED TI LL 08-10-2005. IT WAS STATED BY THE AO THAT SINCE THE OPERATIONAL ARE A OF THE ASSESSEE AND ITS ASSOCIATED CONCERNS ARE COMMON, THE EXPENSE S BOOKED BY ONE COMPANY AND THEN SHARED BY ALL THE ENTITIES USI NG SUCH FACILITIES. THE ASSESSEE HAD PAID SOME EXPENSES TO ITS SISTER C ONCERNS TOWARDS COST OF SHARING ARRANGEMENT FOR COMMON FUNCTIONS AN D THE AO HAS NOTICED THAT IT INCLUDED FOLLOWING EXPENSES WHICH ARE NOT ALLOWABLE AS REVENUE EXPENDITURE OR FOR CAPITALIZATION. I) DONATION RS. 26,834/- II) FBI RS.27,74,336/- III) LOSS ON SALE OF ASSETS RS.64,61,546/- RS.92,62,716/-' THE ASSESSEE IN THIS CONNECTION SUBMITTED AS UNDER: IN THIS CONNECTION THE APPELLANT SUBMITS THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS NO SPECIFIC NOTICE WAS ISSUED FOR MAKING SUCH DISALLOWANCE. IN ANY CASE TH E AMOUNT OF RS.92,52,716/- PAID TO THE ASSOCIATED CON CERNS REFERRED TO ABOVE, ARE TREATED BY THE APPELLANT AS CAPITAL EXPENDITURE IN THE BOOKS. HOWEVER, IN THE DEPRECIAT ION CALCULATION THIS AMOUNT HAS BEEN EXCLUDED. THE APPE LLANT SUBMITS THE FOLLOWING DETAILS: ITA NO.1290/AHD/2011 THE JCIT (OSD), CIR-4, AHMEDABAD VS HAZIRA PORT PVT . LTD. 3 FA AS PER SCHEDULE-4 PF AI DOTED ACCPIMTS PF FY 2005-06 10,939,769,276 LESS FE (GAIN) LOSS CAPITALIZED AS ON 31-3- 2006 (REVALUATION GAINS ON ECBS AS ON 31-3- 2006 WHICH WERE RECDUPTO 31 -3-2004) 107,405,445 180,808,097 FE INCLUDED IN PRE- OPS (REALIZED & UNREALISED FE INCLUDED IN PRE-OPS UPTO 3 1-3-2004) * 1,149,013 LESS 222,269,303 -69,645,923 -287,064,529 153,895,376 LESS 11,380,729,181 1.271,996 9,252,716 DEPRECIATION ON EXISTING ASSETS CAPITALIZED VIA PRE- OPS. ADDITIONAL PRE-OPS CAPITALISED FOR IT ONLY REALISED FE IN PRE-OPS (REALISED FE UPTO 8.10.2005) FE REALISED GAINS FROM 9-10-2005 TO 31-3- 2006 LOSS ON SALE OF ASSETS - DONATIONS - FBT TRFD VIA ITCC FROM SHG & HCL FA AS PER TAX BLOCK CONSIDERED FOR DEPRECIATION (TAX AUDIT) 11,371,476,465 IN SUPPORT OF THE ABOVE, THE ASSESSEE SUBMITTED COP Y OF BALANCE SHEET AND TAX AUDIT REPORT. THUS IT MAY SE EN THAT ITA NO.1290/AHD/2011 THE JCIT (OSD), CIR-4, AHMEDABAD VS HAZIRA PORT PVT . LTD. 4 THE AMOUNT OF RS.92,52,716 WHICH IS CAPITALIZED ON ACCOUNT OF SHARING OF EXPENSES STATED BY THE A.O., HAS BEEN REDUCED FROM THE GROSS BLOCK AND ONLY ON THE B ALANCE BLOCK, THE DEPRECIATION HAS BEEN CLAIMED. THUS IT MAY BE APPRECIATED THAT THE ABOVE AMOUNT HAS NOT BEEN CLAIMED AS REVENUE EXPENDITURE OR AS PART OF THE ASSETS ELIGIBLE FOR DEPRECIATION IN THE RETURN OF INCOME. CONSIDERING THIS FACT, THE DISALLOWANCE MADE IS NOT JUSTIFIED. IT MAY BE APPRECIATED THAT THE AMOUNT HAS NOT AT ALL BEEN CONSIDERED EITHER IN THE BOOKS OR IN THE RETURN AS REVENUE EXPENDITURE AND, THEREFORE, THERE W AS NO QUESTION OF HOLDING IT AS INADMISSIBLE EXPENDITURE AND REDUCING THE LOSS BY THIS AMOUNT.' 3. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE AND MATERIAL ON RECORD DIRECTED THE AO TO VERIFY THE CLAIM OF THE ASSESSEE. HIS FINDINGS IN PARA 4 ARE REPRODU CED AS UNDER: 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AN D THE ABOVE SUBMISSIONS. ON PERUSAL OF THE ABOVE WORKING AND THE CHART OF FIXED ASSETS AS PER AUDITED ACCOUNT AS ALSO DEPRECIATION CHART AS PER THE TAX AUDIT REPORT IT I S NOTICED THAT WHILE CALCULATING THE DEPRECIATION FOR THE RETURN OF INCOME, THE APPELLANT HAD ALREADY REDUCED THE IMPUGNED AMOUNT OF RS.92.53 LAKH FROM THE TOTAL BLO CK OF FIXED ASSETS AND CALCULATED DEPRECIATION ON THE RED UCED AMOUNT. IT IS ALSO NOTICED THAT THE APPELLANT HAS N OT DEBITED THIS AMOUNT AS REVENUE EXPENDITURE IN THE P ROFIT AND LOSS ACCOUNT. CONSIDERING THIS ASPECT WHEN THE ITA NO.1290/AHD/2011 THE JCIT (OSD), CIR-4, AHMEDABAD VS HAZIRA PORT PVT . LTD. 5 AMOUNT HAS NOT BEEN DEBITED TO THE PROFIT & LOSS AC COUNT THERE IS NO JUSTIFICATION TO MAKE ADJUSTMENT FOR THIS AMOUNT IN THE COMPUTATION OF TOTAL INCOME ON ACCOUN T OF DISALLOWANCE OF THE SAME. SO FAR AS THE CLAIM FOR DEPRECIATION IS CONCERNED, THE ABOVE EXPLANATIONS G IVE DETAILS THAT THIS AMOUNT HAS BEEN EXCLUDED WHILE CALCULATING DEPRECIATION. THE A.O. HAS NOT BEEN PRO VIDED THIS CALCULATION. THEREFORE, I HOLD THAT THE ADDITI ON MADE TO THE RETURNED INCOME DESERVES TO BE DELETED PARTI CULARLY WHEN IT IS NOT CLAIMED AS REVENUE EXPENDITURE. THE A.O. IS DIRECTED TO VERIFY THE CALCULATION OF DEPRECIATION IN THE LIGHT OF THE ABOVE CHART GIVEN IN THE APPELLANT'S SUBMISSION AND IF THE SAME IS FOUND TO BE CORRECT, THE ADDITION IS DIRECTED TO BE DELETED EVEN ON ACCOUNT OF DEPRECIATION. IT IS ALSO TO BE CLARIFIED THAT IF TH E A.O. IS OF THE VIEW THAT DEPRECIATION IS CLAIMED ON THIS AMOUN T, HE IS NOT JUSTIFIED IN DISALLOWING THE ENTIRE AMOUNT BUT HE COULD HAVE DISALLOWED DEPRECIATION RELATABLE TO THIS ITEM WHICH HE CAN RECALCULATE AFTER VERIFICATION. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LE ARNED CIT(A). THE EXPLANATION OF THE ASSESSEE BEFORE THE LEARNED CIT( A) CLEARLY SUPPORT THE FINDINGS OF THE LEARNED CIT(A) THAT THE ASSESSE E HAS NOT CLAIMED DEDUCTION OF THE AMOUNT IN QUESTION IN THE PROFIT & LOSS ACCOUNTS. THE LEARNED CIT(A) WAS, THEREFORE, JUSTIFIED IN DIRECTI NG THE AO TO VERIFY THE CALCULATION OF DEPRECIATION IN THE LIGHT OF THE CHART FURNISHED BY THE ASSESSEE. THE MATTER IS BEFORE THE AO FOR VERIFICAT ION OF THE CLAIM OF THE ASSESSEE AND AS SUCH THERE SHOULD NOT HAVE BEEN ANY GRIEVANCE FOR THE REVENUE TO PREFER THE PRESENT APPEAL. THE L EARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT COST MAY BE AWARDED AGA INST REVENUE FOR FILING FRIVOLOUS APPEAL. ITA NO.1290/AHD/2011 THE JCIT (OSD), CIR-4, AHMEDABAD VS HAZIRA PORT PVT . LTD. 6 5. CONSIDERING THE ABOVE DISCUSSIONS WE DO NOT FIND ANY MERIT IN THE APPEAL OF THE REVENUE. THE SAME IS ACCORDINGLY DISMISSED. HOWEVER, THERE IS NO ORDER FOR COST. 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. L. GEHLOT) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD ORDER PRONOU NCED IN OPEN COURT ON 31/10/11 SD/- SD/- (A. K. G.) (B. S.) A. M. J. M.