DCIT, New Delhi V. M/s. Skipper Electricals (I) Ltd., Gurgaon

ITA 1326/DEL/2012

• Counselvise Citation: 132620114 RSA 2012
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2005-2006
• Appeal Filed On: 19-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR PRABHA KANT
• Keywords: Depreciation; Difference of opinion; Unabsorbed depreciation; Change of opinion; Capital expenditure
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI R.K. GUPTA, JUDICIAL MEMBER AND SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER ITA NO. 1326/DEL/2012 ASSESSMENT YEAR: 2005-06 DCIT, CIRCLE 8(1), ROOM NO. 163, C.R. BLDG., NEW DELHI. VS. M/S SKIPPER ELECTRICALS (I) LTD., 301-302, VIPUL AGORA, MEHRAULI, GURGAON ROAD, GURGAON, HARYANA. PAN NO. AAKCS3970N (APPELLANT) (RESPONDENT) APPELLANT BY: DR. PRABHA KANT, SR. DR RESPONDENT BY: NONE O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A) DATED 09/12/2011 FOR A.Y. 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT M/S SKIPPER ELE CTRICALS (I) LTD. GOT MERGED WITH THE ASSESSEE COMPANY I.E. M/S SEIL POWE RGEARS LTD. (THE NAME OF WHICH HAD SUBSEQUENTLY BEEN AGAIN CHANGED BACK T O M/S SKIPPER ELECTRICALS (I) LTD.) AS PER THE ORDER OF HONBLE D ELHI HIGH COURT DATED 20 TH SEPTEMBER, 2006. THE EFFECTIVE DATE OF MERGER WAS 01/04/04. THE ASSESSEE HAD FILED CONSOLIDATED COMPUTATION OF INCO ME I.E. OF M/S SEIL POWER GEARS LTD., AMALGAMATED COMPANY AND M/S SKIPP ER ELECTRICALS (I) ITA NO. 1326/D/2012 2 LTD. AMALGAMATING COMPANY AND CONSOLIDATED BALANCE SHEET DECLARING TOTAL INCOME AT RS. 1,99,34,240/-. 3. THE ASSESSING OFFICER COMPLETED THE ASSESSMENT AT A TOTAL INCOME OF RS. 2,22,86,208/- AFTER ALLOWING SET OFF OF BROUGHT FORWARD LOSSES/UNABSORBED DEPRECIATION AND DEDUCTION U/S 80G, INTER-ALIA, MAK ING FOLLOWING ADDITIONS/DISALLOWANCES: - ON A/C OF EXPENSES CAPITALIZED 8,11,484/- ON A/C OF FOREIGN TRAVEL 2,49,116/- ON A/C OF BUSINESS PROMOTION EXP. 2,42,712/- ON A/C OF TELEPHONE EXP. 5,507/- ON A/C OF VEHICLE REPAIR MTC. & DEP. 1,47,863/- ON A/C OF PROVISIONS FOR GRATUITY 2,29,010 /- 16,85,692/- THE AO ALSO DISALLOWED DEDUCTION U/S 80IB CLAIMED B Y ASSESSEE IN RESPECT OF OTHER INCOME TOTALING TO RS. 12,45,217/- IN RE SPECT OF TESTING CHARGES, RENT, INTEREST AND DEPB. 4. HE ALSO INITIATED PENALTY PROCEEDINGS U/S 271(1) (C) FOR FURNISHING INACCURATE PARTICULARS OF INCOME BY THE ASSESSEE IN RESPECT OF AFOREMENTIONED ITEMS. THE ASSESSEE PREFERRED APPEA L BEFORE LD. CIT(A) WHO VIDE HIS ORDER DATED 8 TH MAY, 2008, ALLOWED FOLLOWING EXPENSES: - I) RS. 11,55,536/- DEDUCTION U/S 80IB; II) RS. 2,49,116/- FOREIGN TRAVEL EXPENSES; ITA NO. 1326/D/2012 3 III) RS. 73,931/- OUT OF VEHICLE REPAIR & MAINTENAN CE EXPENSES. 5. IN THE PENALTY PROCEEDINGS, THE ASSESSEE, INTER- ALIA, SUBMITTED THAT ALL THE INFORMATION WAS DISCLOSED IN THE BALANCE SHEET AND PRODUCED BEFORE THE AO AND THE AO DID NOT COME OUT WITH ANY FACT WHICH COULD LEAD TO THE INFERENCE OF CONCEALMENT OF INCOME. IT WAS SUBMITT ED THAT THERE WAS NO BOGUS ENTRY, NO SEPARATION OF FUNDS AND EVERYTHING WAS EXPLAINED TO THE AO. THE ASSESSEE SUBMITTED THAT THERE WAS FULL DISCLOSU RE OF FACTS AND SOME DISALLOWANCES WERE MADE ONLY DUE TO INTERPRETATION AND CHANGE OF OPINION. THEREFORE, PENALTY SHOULD NOT BE LEVIED AS ASSESSEE DID NOT SUPPRESS ANY INCOME. HOWEVER, AO DID NOT ACCEPT THE ASSESSEES EXPLANATION AND CONFIRMED THE PENALTY IN RESPECT OF VARIOUS DISALLO WANCES/ ADDITIONS. LD. CIT(A) WHILE PARTLY ALLOWING THE ASSESSEES APPEAL DELETED THE PENALTY APROPOS FOLLOWING ADDITIONS/DISALLOWANCES: - I) ADDITION ON ACCOUNT OF DISALLOWANCE U/S 80IB TO THE EXTENT SUSTAINED BY LD. CIT(A); II) DISALLOWANCE ON ACCOUNT OF REPAIRS AND MAINTEN ANCE BEING TREATED AS CAPITAL EXPENDITURE RATHER THAN THE REVENUE EXPE NDITURE AS CLAIMED BY ASSESSEE. III) DISALLOWANCE ON ACCOUNT OF BUSINESS PROMOTION EXPENSES, TELEPHONE EXPENSES AND REPAIRS AND MAINTENANCE. HOWEVER, SHE CONFIRMED THE PENALTY IN REGARD TO PRO VISION FOR GRATUITY. ITA NO. 1326/D/2012 4 6. BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A) ONL Y DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: - 1. THE LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE C ASE IN REDUCING THE PENALTY OF RS. 8,71,857/- TO RS. 99,674/- IMPOSED BY THE AO U/S 271(1)(C) OF THE I.T . ACT. 2. THE APPELLANT CRAVES TO AMEND, MODIFY, ALTER, ADD O R FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 7. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 8. THE FACTS ARE NOT IN DISPUTE. THE PENALTY HAD B EEN LEVIED MAINLY ON ACCOUNT OF VARIOUS ADDITIONS/DISALLOWANCES MADE BY AO WHICH WERE PARTLY ALLOWED IN APPEAL BY LD. CIT(A). THE PENALTY HAD B EEN LEVIED WITH REFERENCE TO ADDITIONS FINALLY SUSTAINED BY LD. CIT(A). IT I S WELL SETTLED LAW THAT PENALTY IS NOT AUTOMATICALLY ATTRACTED MERELY BECAUSE OF CE RTAIN ADDITIONS/ DISALLOWANCES BEING CONFIRMED BY LOWER REVENUE AUTH ORITIES. IN ORDER TO SADDLE THE ASSESSEE WITH PENALTY, IT IS INCUMBENT U PON THE DEPARTMENT TO ESTABLISH THAT THERE WAS DELIBERATE ATTEMPT ON THE PART OF ASSESSEE TO CONCEAL CERTAIN FACTS/INFORMATION FROM THE DEPARTME NT. IF THE ASSESSEE HAS FURNISHED ALL THE PARTICULARS OF HIS INCOME THEN ME RELY ON THE GROUND THAT ITA NO. 1326/D/2012 5 CERTAIN DEDUCTIONS AS CLAIMED BY THE ASSESSEE WERE NOT ALLOWED BECAUSE OF DIFFERENCE OF OPINION OR INTERPRETATION OF STATUTE OR ON ACCOUNT OF DISALLOWANCES ON THE BASIS OF ESTIMATION, THEN PENA LTY CANNOT AUTOMATICALLY BE ATTRACTED. IN THE PRESENT CASE, THE ASSESSE HAD CLAIMED DEDUCTION U/S 80IB IN RESPECT OF FOLLOWING INCOMES: - I) RENTAL INCOME; II) INTEREST INCOME; III) DEPB BENEFIT RECEIVED AGAINST EXPORT; IV) TESTING CHARGES RECEIVED . 9. AS REGARDS, TESTING CHARGES THE ASSESSEES CONTE NTION WAS THAT IT HAD RECEIVED RS. 10,74,364/- TOWARDS TESTING CHARGES FO R THE PRODUCTS BELONGING TO ITS CLIENTS. THE ASSESSEES CONTENTION WAS THAT IT WAS PART OF THE MANUFACTURING ACTIVITIES IN THE SENSE THAT IN THE T RANSFORMER THE UNINTERRUPTED FLOW OF ELECTRICITY IS THE MAIN FUNCTION OF THE TRA NSFORMER WHICH THE ASSESSEE MANUFACTURED. THEREFORE, EVERY TRANSFORMER MANUFAC TURED (ASSEMBLED) BY THE ASSESSEE HAS TO GO THROUGH THE PROCESS OF TESTI NG. THEREFORE, IT IS A PART OF THE MANUFACTURING ACTIVITIES. THE ASSESSEE HAD CLAIMED THE DEDUCTION ON THE BASIS OF A CERTIFICATE FROM A QUALIFIED CHARTER ED ACCOUNTANT. THEREFORE, LD. CIT(A) HAS RIGHTLY OBSERVED THAT IT WAS NOT A C ASE WHERE INACCURATE PARTICULARS WERE FURNISHED OR ANY MALAFIDE ATTRIBUT ED. THE AO ONLY DID NOT ACCEPT THE ASSESSEES CONTENTIONS, INTER-ALIA, OBSE RVING THAT THERE COULD BE INSTANCES WHERE THE ASSESEE DID NOT MANUFACTURE ANY THING IN HOUSE AND JUST ITA NO. 1326/D/2012 6 PROVIDED SERVICES BY UNDERTAKING INDUSTRIAL JOBS. HOWEVER, HE DID NOT POINT OUT ANY SPECIFIC INSTANCE IN THAT REGARD. THE ASSE SSEE HAD NOT CONCEALED ANY FACT FROM THE DEPARTMENT. THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LTD. HAS, INT ER-ALIA, OBSERVED THAT THE AMOUNT OF CLAIM BY THE ASSESSEE OR DISALLOWANCE BY THE AO DOES NOT AMOUNT TO FURNISHING OF ANY INACCURATE PARTICULARS IN THE RETURN FOR THE PURPOSE OF IMPOSITION OF PENALTY UNDER THE PROVISIO NS OF INCOME TAX ACT. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A) ON T HIS ISSUE. 10. THE SECOND ISSUE WAS AS REGARDS THE DISALLOWANC E OF RS. 8,11,484/- BEING TREATED AS CAPITAL EXPENDITURE AS AGAINST REV ENUE EXPENDITURE CLAIMED BY THE ASSESSEE. BRIEF FACTS IN REGARD TO THIS ISS UE ARE THAT THE ASSESSEE HAD DEBITED AN AMOUNT OF RS. 9,01,648/- UNDER THE H EAD REPAIR AND MAINTENANCE OF THE FACTORY. FROM THE DETAILS FILE D BY THE ASSESSEE THE AO FOUND THAT CERTAIN EXPENSES WERE ON ACCOUNT OF CEME NT, STEEL, BUILDING MATERIAL, ELECTRICAL FITTINGS ETC. AFTER CONSIDERI NG THE ASSESSEES SUBMISSION THAT THE EXPENSES WERE FOR REPAIR OF EXISTING STRUC TURE, THE AO DID NOT ACCEPT THE SAME ON ACCOUNT OF A HUGE QUANTITY OF CEMENT, S TEEL ETC. CONSUMED FOR THE ALLEGED REPAIR WORK. HOWEVER, THE ASSESSEES C ONTENTION THAT THE EXPENSES WERE INCURRED ON PURCHASE OF STEEL BARS, C EMENT, RODI ETC. FOR REPAIR OF EXISTING STRUCTURE ON ACCOUNT OF ACCUMULA TED REPAIRS WAS NOT FOUND TO BE FALSE. THEREFORE, PENALTY LEVIED APROPOS THI S ADDITION WAS RIGHTLY ITA NO. 1326/D/2012 7 DELETED BY LD. CIT(A), INTER-ALIA, OBSERVING THAT I T WAS ON ACCOUNT OF MERE DIFFERENCE OF OPINION AND THE GENUINENESS OF EXPENS ES WAS NOT IN DOUBT. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A) APRO POS DELETION OF PENALTY ON THIS COUNT ALSO. 11. THE THIRD DISALLOWANCE APROPOS WHICH PENALTY WA S LEVIED WAS ON ACCOUNT OF DISALLOWANCE OF 20% OF BUSINESS PROMOTIO N EXPENSES, 50% OF TELEPHONE EXPENSES AND 10% OF REPAIR AND MAINTENANC E. THESE DISALLOWANCES WERE MADE ON ACCOUNT OF ALLEGED PERSO NAL USE OF THE FACILITIES. HOWEVER, THE AO DID NOT POINT OUT ANY S PECIFIC INSTANCE OF PERSONAL USE AND MADE THE DISALLOWANCES ON ESTIMATE BASIS. THEREFORE, MERELY ON DISALLOWANCE BEING MADE ON ESTIMATE BASIS, IT COULD NOT BE INFERRED THAT ASSESSEE HAD ACTUALLY CLAIMED CERTAIN PERSONAL EXPE NSES UNDER THESE HEADS. WE, THEREFORE, DO NOT FIND ANY REASON TO IN TERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE ALSO. 12. IN VIEW OF THE ABOVE DISCUSSION, THE DEPARTMENT AL APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 14.12.2012 SD/- SD/- (R.K. GUPTA) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 14.12.2012 *KAVITA ITA NO. 1326/D/2012 8 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR