Chiripal Industries Ltd., Ahmedabad V. The Addl.CIT., Range-1, Ahmedabad

ITA 1332/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6238 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 30-03-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAMLESH MAKWANA SR DR
• Assessee Lawyers: GAURAV NAHTA AR
• Keywords: Deemed owner of house property; Opportunity of being heard; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO.1332/AHD/2013 ( / ASSESSMENT YEAR : 2008-09) CHIRIPAL INDUSTRIES LTD. SURVEY NO.199/200/1, 2 SAIJPUR GOPALPUR PIRANA ROAD, PIPLEJ AHMEDABAD 382 405 / VS. THE ADDL.CIT RANGE-1 AHMEDABAD # ./ ./ PAN/GIR NO. : AAACC 8513 B ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : SHRI GAURAV NAHTA, AR '#& )( / RESPONDENT BY : SHRI KAMLESH MAKWANA,SR.DR *+ ), / DATE OF HEARING 30/03/2017 -./0 ), / DATE OF PRONOUNCEMENT 05/ 04 /2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE ASSESSEE FILED THE PRESENT APPEAL AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-VI, AHMEDABAD [ CIT(A) IN SHORT] DATED 26/03/2013 FOR THE ASSESSMENT YEAR (AY) 2008-09 BY RAISING FOLLOWING GRIEVANCES:- ITA NO.1332/AHD /2013 CHIRIPAL INDUSTRIES LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 2 - 1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CON FIRMING ONE FIFTH OF ADDITION OF ROC EXPENSES OF RS.7,50,000/-. 2) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRMING DISALLOWANCE OF PRIOR PERIOD EXPENSES OF RS.163283/ -. 3) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONF IRM ADDITION ON ACCOUNT OF NOTIONAL RENT INCOME OF RS.168000/-. 2. GROUND NO.1 RELATES TO DISALLOWANCE OF EXPENSE S INCURRED TOWARDS INCREASE IN AUTHORIZED SHARE CAPITAL OF TH E COMPANY. THE HONBLE SUPREME COURT IN THE CASE OF BROOKE BOND (I NDIA) LTD. VS. CIT 225 ITR 798(SC) HAS HELD THAT EXPENDITURE IS INCURR ED FOR EXPANSION OF THE CAPITAL BASE OF THE COMPANY RETAINS THE CHARACT ER OF CAPITAL EXPENDITURE AND THEREFORE CANNOT BE ALLOWED AS REVE NUE EXPENDITURE. 3. THE AFORESAID GROUND NO.1 OF ASSESSEES APPEAL I S ACCORDINGLY DISMISSED. 4. GROUND NO.2 RELATES TO PRIOR PERIOD EXPENSES OF RS.1,63,283/-. AS POINTED OUT ON BEHALF OF THE ASSESSEE IN THE COURSE OF HEARING THAT TREATMENT OF PRIOR PERIOD EXPENSES AND PRIOR PERIOD INCOME SHOULD BE ON THE SAME LINE. IT WAS SUBMITTED THAT THE PRIOR PER IOD EXPENSES ARE SOUGHT TO BE DISALLOWED BY THE ASSESSING OFFICER (AO) SINC E IT DOES NOT RELATE TO CURRENT YEAR AND THE MATCHING PRINCIPLES OF ACCOUNT ING FORBIDS THE ALLOWABILITY OF CLAIM. ON BEHALF OF ASSESSEE, IT WAS CLAIMED THAT THE PRIOR PERIOD EXPENSES AMOUNTING TO RS.1,63,283/- WH ICH RELATES TO PRIOR ITA NO.1332/AHD /2013 CHIRIPAL INDUSTRIES LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 3 - PERIOD SHOULD BE ALLOWED TO BE SET OFF AGAINST PRIO R PERIOD INCOME SIMULTANEOUSLY REPORTED AT RS.10,34,663/-. 5. WE FIND RATIONALE IN THE ARGUMENT ON BEHALF OF T HE ASSESSEE. WHEN THERE IS PRIOR PERIOD EXPENDITURE AS WELL AS INCOME OF SIMILAR NATURE, THE NET PRIOR PERIOD EXPENDITURE ORDINARILY SHOULD BE D ISALLOWED. THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CAS E OF CIT VS. EXXON MOBIL LUBRICANTS PVT.LTD. (2010)328 ITR 17 (DELHI) SEEKS TO HOLD THAT WHEN PRIOR PERIOD INCOME IS TAXED, PRIOR PERIOD EXP ENSES SHOULD BE ALLOWED TO SET OFF. ACCORDINGLY, GROUND NO.2 OF AS SESSEES APPEAL IS ALLOWED. 6. GROUND NO.3 RELATES TO ADDITION OF DEEMED HOUSE PROPERTY INCOME ON VACANT FLATS HELD BY THE ASSESSEE-COMPANY. IT I S THE CASE ON BEHALF OF ASSESSEE THAT WHILE ONE FLAT HAS BEEN GIVEN ON RENT , OTHER FLATS ARE KEPT READY FOR BEING USED AS GUEST HOUSE. THUS, OTHER F LATS HAVE NOT BEEN LET OUT FOR COMMERCIAL EXPLOITATION. IT IS THE CASE OF THE ASSESSEE THAT THE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF YARN AND PROCESSING OF CLOTHS AND OTHER FABRICS. IT CLAIM S TO HAVE EXPORT TURNOVER FOR WHICH FOREIGN BUYERS ALSO VISIT INDIA TO SEE TH E FACTORY FOR MANUFACTURING FACILITY. THE GUEST-HOUSE ARE KEPT F OR STAYING PURPOSES OF THE VISITORS AND THEREFORE USED FOR THE PURPOSE OF BUSINESS. IT IS ALSO CLAIMED THAT GUEST HOUSE EXPENDITURE OF RS.1,64,015 /- HAS BEEN INCURRED ITA NO.1332/AHD /2013 CHIRIPAL INDUSTRIES LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 4 - ON WHICH FRINGE BENEFIT TAX HAS ALSO BEEN PAID. IT WAS SIMULTANEOUSLY POINTED OUT BY THE LD.AR FOR THE ASSESSEE THAT IDEN TICAL ISSUE AROSE IN AY 2006-07 IN ITA NO.400/AHD/2011 FOR AY 2006-07, ORDE R DATED 13/06/2014, WHEREIN THE COORDINATE BENCH OF TRIBUNA L HAS REMITTED BACK TO THE FILE OF AO FOR FRESH CONSIDERATION OF THE IS SUE IN ACCORDANCE WITH LAW AND HAVING REGARD TO THE FACTS OF THE CASE. IN PARITY, WE CONSIDER IT EXPEDIENT TO RESTORE THE AFORESAID ISSUE TO THE FIL E OF THE AO FOR FRESH ADJUDICATION OF THE ISSUE IN ACCORDANCE WITH LAW AF TER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCORDINGLY, GROUN D NO.3 IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOW ED. THIS ORDER PRONOUNCED IN OPEN COURT ON 05/ 04 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 05/ 04 /2017 4..*,.*../ T.C. NAIR, SR. PS ITA NO.1332/AHD /2013 CHIRIPAL INDUSTRIES LTD. VS. ADDL.CIT ASST.YEAR 2008-09 - 5 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-VI, AHMEDABAD 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 4.4.17(DICTATION-PAD PAG ES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 4.4.17 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.5.4.17 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 5.4.17 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER