Joint Commissioner of Income Tax Circle-4(1)(1), Bangalore V. M/s Kingfisher Airlines Limited , Bangalore

ITA 1351/BANG/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 7793 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 19-01-2021
• Assessment Year: 2011-2012
• Appeal Filed On: 27-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: N O N E
• Keywords: Depreciation; Principle of natural justice; Tax effect; Set aside

Judgement Text

ITA NOS.1349 TO 1352/BANG/2018 M/S. KINGFISHER AIRLINES LIMITED, BANGALORE IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NOS.1349 TO 1352/BANG/2018 ASSESSMENT YEAR: 2009-10 TO 2012-13 JCIT (OSD) CIRCLE-4(1)(1) BANGALORE VS. M/S. KINGFISHER AIRLINES LIMITED THE OFFICIAL LIQUIDATOR, HIGH COURT OF KARNATAKA, CORPORATE BHAVAN, NO.26-27, 12 TH FLOOR RAHEJA TOWERS, M.G. ROAD BANGALORE-560001 PAN NO : AAACD5301J APPELLANT RESPONDENT APPELLANT BY : MS. NEERA MALHOTRA, D.R. RESPONDENT BY : N O N E DATE OF HEARING : 19.01.2021 DATE OF PRONOUNCEMENT : 19.01.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: ALL THE FOUR APPEALS FILED BY THE REVENUE ARE DIREC TED AGAINST THE ORDERS PASSED BY LD CIT(A)-4, BANGALORE AND THE Y RELATE TO THE ASSESSMENT YEARS 2009-10 TO 2012-13. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, EVE N THOUGH THE ADJOURNMENT WAS GRANTED ON THE LAST OCCASION ON THE SPECIFIC REQUEST OF THE ASSESSEE. HENCE, WE PROCEED TO DISPOSE OF T HE APPEAL EX-PARTE, WITHOUT THE PRESENCE OF THE ASSESSEE. ITA NOS.1349 TO 1352/BANG/2018 M/S. KINGFISHER AIRLINES LIMITED, BANGALORE PAGE 2 OF 6 3. SINCE ONE OF THE ISSUES URGED IN ALL THESE APPEA LS ARE IDENTICAL IN NATURE, THEY WERE HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS COMMON ORDER, FOR THE SAKE OF CONVENIENCE. 4. WE HEARD LD. D.R. AND PERUSED THE RECORD. THE A SSESSEE COMPANY IS ENGAGED IN AIRLINE BUSINESS. 5. THE COMMON ISSUE URGED IN ALL THE FOUR APPEALS R ELATE TO RELIEF GRANTED BY LD. CIT(A) IN RESPECT OF DISALLOWANCE OF REPAIRS & MAINTENANCE EXPENSES CLAIMED BY THE ASSESSEE. THE A.O. TOOK THE VIEW THAT THE ASSESSEE HAS GOT ENDURING BENEFIT BY INCURRING THE REPAIRS & MAINTENANCE EXPENSES AND HENCE THEY ARE C APITAL IN NATURE. ACCORDINGLY, HE TOOK THE VIEW THAT THE REP AIRS EXPENSES CLAIMED BY THE ASSESSEE IN ALL THE FOUR YEARS NEEDS TO BE DISALLOWED. SINCE THEY WERE TAKEN AS CAPITAL IN NATURE, THE A.O . ALLOWED DEPRECIATION THEREON AND ACCORDINGLY DISALLOWED ONL Y NET AMOUNT. THE DETAILS OF DISALLOWANCE MADE BY THE A.O. IN ALL THE YEARS UNDER CONSIDERATION ARE TABULATED BELOW: ASSESSMENT YEAR REPAIRS EXPENSES DEPRECIATION DISALLOWANCE 2009-10 4,63,10,048 23,15,503 4,39,94,545 2010-11 1,44,73,000 7,23,650 1,37,49,350 2011-12 67,70,000 6,77,000 60,93,000 2012-13 35,33,000 3,17,970 31,79,700 (AS PER WORKINGS MADE BY A.O.) 6. THE LD. CIT(A) HOWEVER DELETED THE DISALLOWANCE WITH THE FOLLOWING OBSERVATIONS:- HAVING CONSIDERED THE RIVAL SUBMISSIONS, IT IS APP ARENT THAT THERE IS NO SPECIFIC REASON OR EVIDENCE AVAILABLE S O AS TO DISCERN WHETHER THE NATURE OF REPAIRS/MAINTENANCE I TEMS WAS SUCH THAT COULD LEAD TO PERMANENT CREATION OF AN AS SET. IT IS APPARENT THAT THE ASSESSEES BUSINESS SET UP IS HUG E AND TO RUN, THE BUILDING ESTABLISHMENT, SUCH MAINTENANCE/REPAIR ACTIVITY IS A ROUTINE MATTER. ITA NOS.1349 TO 1352/BANG/2018 M/S. KINGFISHER AIRLINES LIMITED, BANGALORE PAGE 3 OF 6 7. IN ASSESSMENT YEAR 2009-10, THE REVENUE IS ALSO AGGRIEVED BY THE DECISION OF LD. CIT(A) IN DELETING THE DISALLOW ANCE OF RS.10 CRORES RELATING TO HELICOPTER EXPENSES. THE FACTS RELATIN G THERETO ARE THAT THE A.O. NOTICED THAT THE ASSESSEE HAS PURCHASED TWO HE LICOPTERS DURING THE YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10. THOUGH THE ASSESSEE HAD CLAIMED DEPRECIATION ON PURCHASE OF HE LICOPTERS, IT DID NOT DECLARE ANY REVENUE THERE FROM. HENCE THE A.O. ASKED THE ASSESSEE TO SUBMIT DGCA RECORDS TO PROVE THAT THERE WAS NO REVENUE. THE A.O. ALSO ASKED THE ASSESSEE TO FURNISH THE DET AILS OF EXPENDITURE INCURRED THEREON. HOWEVER, THE ASSESSEE DID NOT PR ODUCE THE DETAILS CALLED FOR. SINCE THE ASSESSEE WAS UNABLE TO PROVE THE BUSINESS EXPEDIENCY IN PURCHASING THE HELICOPTERS, THE A.O. DISALLOWED THE DEPRECIATION CLAIMED ON THE COST OF HELICOPTERS. I N THE ABSENCE OF ANY OTHER INFORMATION, THE A.O. ALSO DISALLOWED AN ADHO C AMOUNT OF RS.10 CRORES AS EXPENSES RELATING TO OPERATION OF HELICOP TERS DURING THE YEAR UNDER CONSIDERATION. 8. IN THE APPELLATE PROCEEDINGS THE LD. CIT(A) CONF IRMED THE DISALLOWANCE OF DEPRECIATION. HOWEVER, HE DELETED THE ADHOC DISALLOWANCE OF EXPENSES OF RS.10 CRORES ON THE REA SONING THAT THE A.O. DID NOT FURNISH ANY VALID BASIS FOR ARRIVING A T THIS FIGURE. 9. AGGRIEVED BY THE ORDER PASSED BY LD. CIT(A) ON T HE ABOVE SAID ISSUES, THE REVENUE HAS FILED THESE APPEALS BEFORE US. 10. WE NOTICE THAT THE REVENUE IS CONTESTING THE DE CISION RENDERED BY LD. CIT(A) IN RESPECT OF HELICOPTER EXPENSES AND REPAIRS & MAINTENANCE EXPENSES IN ASSESSMENT YEAR 2009-10. I N OTHER THREE YEARS, THE REVENUE IS CONTESTING THE DECISION RENDE RED BY LD. CIT(A) IN RESPECT OF REPAIRS & MAINTENANCE EXPENSES ONLY. ITA NOS.1349 TO 1352/BANG/2018 M/S. KINGFISHER AIRLINES LIMITED, BANGALORE PAGE 4 OF 6 11. WE NOTICE THAT THE AMOUNT IN DISPUTE IN ASSESSM ENT YEARS 2010-11 TO 2012-13 IS AS UNDER: ASSESSMENT YEAR REPAIRS EXPENSES DEPRECIATION DISALLOWANCE 2010-11 1,44,73,000 7,23,650 1,37,49,350 2011 - 12 67,70,000 6,77,000 60,93,000 2012-13 35,33,000 3,17,970 31,79,700 ADMITTEDLY, THE TAX EFFECT INVOLVED IN RESPECT OF T HE ISSUE CONTESTED BY THE REVENUE IN ASSESSMENT YEARS 2010-11 TO 2012-13 IS LESS THAN RS.50 LAKHS. ACCORDINGLY, IN VIEW OF THE CIRCULAR NO.17/2019 DATED 8.8.2019 ISSUED BY CBDT, THE REVENUE IS PRECLUDED F ROM PURSUING THESE THREE APPEALS. ACCORDINGLY, WE DISMISS THE A PPEALS FILED BY THE REVENUE FOR ASSESSMENT YEARS 2010-11 TO 2012-13 IN LIMINE, ON ACCOUNT OF LOW TAX EFFECT. 12. WE SHALL TAKE UP THE APPEAL FILED BY THE REVENU E FOR A.Y. 2009-10. THE FIRST ISSUE IS RELATED TO DISALLOWANC E OF HELICOPTER EXPENSES. WE NOTICE THAT THE A.O. WAS CONSTRAINED TO MAKE ADHOC DISALLOWANCE SINCE THE ASSESSEE HAS FAILED TO FURNI SH DETAILS CALLED FOR BY THE A.O. WE ALSO NOTICE THAT THE ASSESSEE DID N OT APPEAR BEFORE LD. CIT(A) ALSO. IN EFFECT, THE ASSESSEE DID NOT F URNISH DETAILS OF HELICOPTER EXPENSES AS SOUGHT BY THE A.O. EVEN BEFO RE THE LD. CIT(A). UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT T HE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE. HOWEVE R, IN THE INTEREST OF NATURAL JUSTICE, WE ARE OF THE VIEW THAT THE ASSESS EE MAY BE PROVIDED WITH ONE MORE OPPORTUNITY TO FURNISH THE DETAILS CA LLED FOR BY A.O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. C IT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE A.O. FOR EX AMINING IT AFRESH. 13. THE NEXT ISSUE RELATES TO DISALLOWANCE OF REPAI RS & MAINTENANCE EXPENSES. WE NOTICE THAT THE A.O. HAS MADE THE ABO VE SAID DISALLOWANCE BY ENTERTAINING A PRESUMPTION THAT THE REPAIRS & ITA NOS.1349 TO 1352/BANG/2018 M/S. KINGFISHER AIRLINES LIMITED, BANGALORE PAGE 5 OF 6 MAINTENANCE EXPENSES INCURRED BY THE ASSESSEE HAS G IVEN ENDURING BENEFIT TO THE ASSESSEE. WE NOTICE THAT THE A.O. H AS NOT EXAMINED CRITICALLY THE DETAILS OF REPAIRS & MAINTENANCE EXP ENSES INCURRED BY THE ASSESSEE. WE ALSO NOTICE THAT THE LD. CIT(A) H AS DELETED THE DISALLOWANCE WITHOUT EXAMINING THE DETAILS OF EXPEN SES. IN EFFECT, BOTH THE TAX AUTHORITIES HAVE NOT EXAMINED THE NATU RE OF EXPENSES INCURRED BY THE ASSESSEE UNDER THE HEAD REPAIRS & MAINTENANCE. IN OUR VIEW, WITHOUT EXAMINING THE DETAILS OF REPAIRS & MAINTENANCE EXPENSES, PARTICULARLY WITH REGARD TO THE NATURE OF EXPENSES, ONE CANNOT DECIDE THE NATURE OF EXPENSES, I.E. WHETHER THEY ARE CAPITAL OR REVENUE IN NATURE. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS ISSUE ALSO REQUIRES FRESH EXAMINATION AT THE END OF THE A.O. ACCORDINGLY, WE SET ASIDE THE ORDER PASSED BY LD. CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE A.O. FOR EXAMINING IT AFRES H. 14. IN THE RESULT, THE APPEAL FILED BY THE REVENUE FOR A.Y. 2009-10 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. TH E APPEALS FILED BY THE REVENUE FOR OTHER THREE YEARS ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH JAN, 2021. SD/- (N.V. VASUDEVAN ) VICE PRESIDENT SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 19 TH JAN, 2021. VG/SPS ITA NOS.1349 TO 1352/BANG/2018 M/S. KINGFISHER AIRLINES LIMITED, BANGALORE PAGE 6 OF 6 COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.