Emas Expressway Pvt. Ltd., Kolkata V. DCIT, Circle - 8, Kolkata, Kolkata

ITA 1325/KOL/2007

• Counselvise Citation: 132523514 RSA 2007
• Duration Of Justice: 7 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 30-04-2013
• Assessment Year: 2004-2005
• Appeal Filed On: 25-05-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G BANERJEE F
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 145

Judgement Text

I.T.A. NO . 1325 /KOL./20 0 7 ASSESSMENT YEAR: 200 4 - 2 0 0 5 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI SHAMIM YAHYA (ACCOUNTANT MEMBER) , AND SHRI GEORGE MATHAN (JUDICIAL MEMBER) I.T.A. NO. 1325 /KOL . / 20 0 7 ASSESSMENT YEAR : 200 4 - 20 0 5 EMAS EXPRESSWAY PVT. LIMITED,... ........... ..... ..... ...... .. .APP ELL ANT 53A, MIRZA GHALIB STREET, 2 ND FLOOR, KOLKATA - 700 016 - VS. - DEPUTY COMMISSIONER OF INCOME TAX, ............... . RESPONDENT CIRCLE - 8, KOLKATA, P - 7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA - 700 069 APPEARANCES BY: SHRI G. BANERJEE , F. C.A. , FOR THE ASSESSEE SHRI UDAY KUMAR SARDAR , J CIT , SR. D.R , FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : DEC EM BER 1 7 , 2 01 4 DATE OF PRONOUNCING THE ORDER : DEC EM BER 19 , 201 4 O R D E R PER GEORGE MATHAN : THIS IS AN APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - VI II , KOLKATA IN APPEAL NO. 1 33 / CIT(A) - VIII/KOL/CIRCLE - 8/2006 - 07 DATED 30.03.2007 FOR TH E ASSESSMENT YEAR 200 4 - 0 5 . 2 . SHRI G. BANERJEE , F. C.A. , REPRESENTED ON B EHALF OF THE ASSESSEE AND SHRI UDAY KUMAR SARDAR , J CIT , SR. D.R. , REPRESENTED ON BEHALF OF THE REVENUE. 3 . AT THE TIME OF HEARING, IT WAS SUBMITTED BY THE LD. A.R. THAT THE ONLY ISSUE IN THE ASSESSEE S APPEAL WAS AGAINST THE ACTION OF THE LD. CIT(APPEALS) IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF DEPRECIATION MADE BY THE ASSESESE AND SET OFF AGAINST THE INTEREST INCOME. IT WAS THE I.T.A. NO . 1325 /KOL./20 0 7 ASSESSMENT YEAR: 200 4 - 2 0 0 5 PAGE 2 OF 4 SUBMISSION THAT THE ASSESESE - COMPANY IS AN INFRASTRUCTURE DEVELOPMENT COMPANY ENGAGED IN THE CONSTRUCTION AND DEVELOPMENT OF THE DURGAPUR EXPRESSWAY. IT WAS THE SUBMISSION THAT THE ASSESSEE HAD RECEIVED THE INTEREST INCOME ON SHORT - TERM DEPOSIT AND THE ASSESSEE HAD CLAIMED THE DEPRECIATION ON THE ASSETS ACQUIRED BY THE ASSESSEE - COMPANY, WHICH WERE PUT IN USE FOR THE PROJECT W ORK OF THE CONSTRUCTION AND DEVELOPMENT OF THE DURGAPUR EXPRESSWAY. IT WAS THE SUBMISSION THAT THE ASSESSING OFFICER HAD DISALLOWED THE CLAIM OF DEPRECIATION. IT WAS THE SUBMISSION THAT ON SIMILAR FACTS IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE, NA MELY MAPEX INFRASTRUCTURE PVT. LTD. IN ITA NO. 447 OF 2007 IN THE HIGH COURT AT CALCUTTA [SPECIAL JURISDICTION (INCOME TAX) ORIGINAL SIDE] , THE HON BLE JURISDICTIONAL HIGH COURT VIDE JUDGMENT DATED 19.10.2012 HAD HELD AS FOLLOWS: - AFTER HEARING THE LEARN ED COUNSEL FOR THE PARTIES AND READING THE JUDGMENT OF ALL THE AUTHORITIES BELOW WE FEEL THAT THE ASSESSING OFFICER AS WELL AS THE CIT (APPEALS) DISALLOWED THE CLAIM OF DEPRECIATION BECAUSE IN ITS OWN ACCOUNTING SYSTEM (MERCANTILE, OF COURSE) AND ALSO IN T HE PROFIT AND LOSS THE ASSESSEE ITSELF HAS SHOWN THE AFORESAID DEPRECIATION WAS CAPITALIZED AND THIS WAS SHOWN UNDER THE HEADING NATIONAL HIGHWAY DEVELOPMENT ACCOUNT . IN OTHER WORDS, THE AUTHORITY CONCERNED BY NECESSARY IMPLICATION HELD THAT ASSESSEE AFT ER HAVING SHOWN IN ITS OWN ACCOUNT IS ESTOPPED FROM CLAIMING DEPRECIATION IN THE INCOME TAX RETURNS CONSEQUENTLY, DISALLOWED CARRY FORWARD OF THE BALANCE LOSS. THEREFORE, CARDINAL QUESTION TO BE ANSWERED IN THIS APPEAL IS WHETHER IN VIEW OF THE AFORESAID C APITALIZATION IN ITS ACCOUNT DEBAR THE APPELLANT FROM CLAIMING ALLOWANCE OF DEPRECIATION IN THE RETURN BEFORE OFFICER CONCERNED. ON FACT IT IS NOT DISPUTED THAT THE PLANT AND MACHINERY EQUIPMENTS ARE ASSETS AND IT WAS UTILIZED FOR THE BUSINESS. THE ABOVE Q UESTION WE HAVE SUMMARIZED HAS BEEN ANSWERED BY THE DIVISION BENCH OF THE MADRAS HIGH COURT IN CASE OF COMMISSIONER OF INCOME TAX V. SAKTHI SOYAS LTD. REPORTED IN [2006] 283 ITR 194 (MAD). IN THAT JUDGMENT IT WAS HELD ON THE PRINCIPLE OF LAW AS FOLLOWS: - CAPITALISATION OF THOSE EXPENDITURE IN THE BOOKS OF ACCOUNT ALONE WAS NOT THE DECISIVE FACTOR IN EXAMINING AN EXPENDITURE FOR THE PURPOSE OF INCOME - TAX. THE NAME GIVEN TO AN EXPENDITURE OR A NOMENCLATURE GIVEN TO AN EXPENDITURE IN THE BOOKS OF ACCOUNT OF T HE ASSESSEE IS NOT THE LITMUS TEST TO DECIDE THE EXACT NATURE OF EXPENDITURE FOR THEPURPOSE OF INCOME - TAX. THE PURPOSE OF THE COMPANIES ACT IS DIFFERENT FROM THE PURPOSE OF THE INCOME - TAX ACT. THEREFORE, THE CLASSIFICATION OF THOSE EXPENSES AS CAPITAL IN N ATURE FOR THE PURPOSE OF THE COMPANIES ACT, DOES NOT IPSO FACTO MAKE THAT EXPENDITURE A CAPITAL EXPENDITURE FOR THE PURPOSE OF THE INCOME - TAX ACT. IN THE CASE BEFORE MADRAS HIGH COURT THE AFORESAID DECISION WAS RENDERED ON THE FACTUAL ASPECT THAT ASSESSE E THEREIN FILED A RETURN OF INCOME ADMITTING A TOTAL I.T.A. NO . 1325 /KOL./20 0 7 ASSESSMENT YEAR: 200 4 - 2 0 0 5 PAGE 3 OF 4 LOSS OF RS.8,58,41,145/ - . THE ASSESSING OFFICER DISALLOWED THE CLAIM OF EXPENDITURE TO THE EXTENT OF RS.20,36,157/ - TOWARDS CROP DEVELOPMENT EXPENSES ON THE GROUND THAT THE SAME WAS NOT CONSIDERED AS A R EVENUE EXPENDITURE BY THE ASSESSEE IN ITS ACCOUNTS. HOWEVER, THE ASSESSEE CLAIMED IT AS REVENUE IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME. THE ASSESSING OFFICER HOWEVER DISALLOWED THE EXPENSES INCURRED AMOUNTING TO RS.16,41,125/ - TOWARDS ADVERTISEMEN T IN RESPECT OF THE SOYA PRODUCTS AND SALES PROMOTIONAL EXPENSES. ON FACT IN THOSE CASES AUTHORITIES BELOW TOOK NOTE OF WHAT WAS STATED IN THE AUDITED ACCOUNT NOT WHAT WAS CLAIMED IN THE RETURNS. OUR HIGH COURT IN CASE OF COMMISSIONER OF INCOME - TAX V. BER GER PAINTS (INDIA) LTD. REPORTED IN [2002] 254 ITR PAGE 503 WHILE TAKING NOTE OF THE OLD DECISION OF THE SUPREME COURT IN CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD. V. CIT AND CIT V. INDIA DISCOUNT CO. LTD. REPORTED IN [1971] 82 ITR 363 (SC) AND [1970] 75 ITR 191 (SC) HELD THAT IF ACCORDING TO THE REVENUE LAWS THE ASSESSEE IS ENTITLED TO TREAT A SUM AS A REVENUE EXPENDITURE, THEN THAT LEGAL RIGHT OF THE ASSESSEE IS NOT SELF ESTOPPED BY THE TREATMENT GIVEN BY THE ASSESSEE TO IT IN ITS OWN BOOKS OF ACCOUNT . IT APPEARS THAT THE AUTHORITIES BELOW HAVE HEAVILY RELIED ON THE ACCOUNT IN VIEW OF SECTION 145 OF THE ACT. IN VIEW OF SUB - SECTION (3) OF THE SAME THE SAID SUBSECTION HAS GIVEN AMPLE DISCRETION OF THE ASSESSEE WITH REGARD TO CORRECTNESS AND COMPLETENESS OF ANY ACCOUNT OF THE ASSESSEE IN CASE WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB - SECTION (1) OR ACCOUNTING STANDARDS AS NOTIFIED UNDER SUB - SECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN T HE MANNER PROVIDED IN SECTION 144. WE THINK THAT THE AFORESAID SUB - SECTION (3) IN THIS CASE HAS NO MANNER OF APPLICATION AS IT IS NOT A CASE HERE THAT THE APPELLANT HAS FREQUENTLY SHIFTING ITS ACCOUNTING PROCESS AND METHOD. IN THIS CASE THE ACCOUNTING SYST EM IS UNIFORM HOWEVER, WHILE FILING RETURNS THE DEPRECIATION OF THOSE ASSETS HAVE BEEN CLAIMED UNDER THE PROVISIONS OF THE LAW IN ITS RETURN. THE AFORESAID TWO PRONOUNCEMENTS HAVE CLEARLY ANSWERED THIS QUESTION. WE FEEL IN THIS CASE WHILE MAKING ASSESSMEN T OF ANY RETURNS ANY DEDUCTION IS SOUGHT FOR IT IS THE DUTY OF THE REVENUE OFFICIAL TO EXAMINE NOT ONLY THE ACCOUNT BUT ALSO SUBSTANTIVE RIGHT OF CLAIMING DEDUCTION UNDER THE ACT ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. IT IS NOT A CASE THAT THE SAID A SSETS AND PROPERTIES DO NOT BELONG TO THE APPELLANT, THEREFORE DEPRECIATION IN ANY ASSETS AND PROPERTIES IS A REGULAR PHENOMENON AND DEDUCTION ON THIS ACCOUNT IS ALLOWABLE UNDER SECTION 32 AUTOMATICALLY. IT APPEARS THAT LEARNED TRIBUNAL WHILE READING SECT ION 32 OF THE ACT HAS ACCEPTED THE LEGAL PRINCIPLE BUT UNFORTUNATELY WHILE GRANTING RELIEF AS RIGHTLY POINTED OUT BY MR. KHAITAN HAS NOT ALLOWED THE SETTING OFF OF THE INTEREST INCOME AS REGARD THE AFORESAID AMOUNT OF DEPRECIATION. WE THEREFORE ALLOW THIS APPEAL AND SET ASIDE THE JUDGMENT AND ORDER OF THE AUTHORITIES BELOW. WE DIRECT THE A.O. TO WORK OUT AGAIN ALLOWING THE DEDUCTION AND SETTING OFF OF THE AMOUNT OF INTEREST INCOME AND TO ALLOW CARRY FORWARD. THUS THE APPEAL IS ALLOWED WITHOUT ANY ORDER AS T O COSTS . IT WAS THE SUBMISSION THAT THE CLAIM OF SET OFF OF THE DEPRECIATION AGAINST THE INTEREST INCOME WAS LIABLE TO BE ALLOWED. I.T.A. NO . 1325 /KOL./20 0 7 ASSESSMENT YEAR: 200 4 - 2 0 0 5 PAGE 4 OF 4 5. IN REPLY, LD. SR. D.R. VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND LD. CIT(APPEALS). 6 . WE HAVE CONSI DERED THE RIVAL SUBMISSIONS. AS IT IS NOTICED THAT THE ISSUE IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAPEX INFRASTRUCTURE PVT. LIMITED, RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON BLE CA LCUTTA HIGH COURT THE ISSUE IN THIS APPEAL IS RESTORED TO THE FILE OF THE ASSESSING OFFICER IN LINE WITH THE DIRECTIONS OF THE HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF MAPEX INFRASTRUCTURE P VT. LIMITED REFERRED TO SUPRA . 7 . IN THE RESULT, THE APPE AL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DEC EM BER, 2014. SD/ - SD/ - SHAMIM YAHYA GEORGE MATHAN ( ACCOUNTANT MEMBER) ( JUDICIAL MEMBER) KOLKATA, THE 19 TH D AY OF DEC EM B ER , 201 4 COPIES TO : (1) EMAS EXPRESSWAY PVT. LIMITED,. 5 3A, MIRZA GHALIB STREET, 2 ND FLOOR, KOLKATA - 700 016 (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE - 8, KOLKATA, P - 7, CHOWRINGHEE SQUARE, AAYAKAR BHAWAN, KOLKATA - 700 069 (3) COMMISS IONER OF INCOME - T AX (APPEALS) (4) COMMISSIONER OF INCOME TAX ( 5 ) THE DEPARTMENTAL REPRESENTATIVE ( 6 ) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.