Akshaya P Ltd., CHENNAI V. DCIT Corporate Circle 1(1), CHENNAI

ITA 1358/CHNY/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6216 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 24-04-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: V M MAHADIR IRS
• Keywords: Depreciation; Principle of natural justice
• Section: 37(1)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ] ./I.T.A. NO. 1358/CHNY/2018 ! / ASSESSMENT YEAR : 2013-2014. M/S. AKSHAYA P. LTD, GANDHI SQARE, 46, RAJIV GANDHI SALAI (OMR) KANDANCHAVADI, CHENNAI 600 096. VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1) CHENNAI. [PAN AAFCA 1708D] ( / APPELLANT) ( /RESPONDENT) '# $ % / APPELLANT BY : SHRI. S. SRIDHAR, ADVOCATE &' '# $ % /RESPONDENT BY : SHRI. V.M. MAHADIR, IRS, JCIT. ( ) $ * /DATE OF HEARING : 08-08-2019 +,! $ * /DATE OF PRONOUNCEMENT : 11-10-2019 / O R D E R PER INTURI RAMA RAO, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE DIRECTED AG AINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1 , CHENNAI (CIT(A) FOR SHORT) DATED 14.02.2018 FOR THE ASSE SSMENT YEAR (AY) 2013-2014. ITA NO. 1358/2018 :- 2 -: 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 1, CHENNAI DATED 14.02.2018 IN L.T.A.NO.80/CIT(A)-1F2016-17 FOR THE ABOVE MENTIONE D ASSESSMENT YEAR IS CONTRARY TO LAW, FACTS, AND IN T HE CIRCUMSTANCES OF THE CASE. 2. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF CLUB EXPENSES AGGREGATING TO RS.62,7791- FOR WAN T OF FURTHER EVIDENCE IN THE COMPUTATION OF TAXABLE TOTA L INCOME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFI CATION. 3. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVI NG NOT DISPUTED THE FACT OF THE LIVE NEXUS BETWEEN THE INC URRING OF EXPENSES AND THE BUSINESS PURSUED BY THE APPELLA NT, THE SUSTENANCE OF THE DISALLOWANCE OF SUCH EXPENSES ON THE MISCONSTRUCTION OF SECTION 37(1) OF THE ACT WAS WHOLLY UNJUSTIFIED, THEREBY VITIATING THE FINDINGS IN PARA 8 OF THE IMPUGNED ORDER. 4. THE CIT (APPEALS) ERRED IN SUSTAINING THE DISALL OWANCE OF THE DIFFERENTIAL DEPRECIATION AMOUNTING TO RS.1 ,34,782/RS.1 5,97,867 ON CERTAIN OFFICE EQUIPMENTS RECKONED AS PLANT & MACHINERY AS AGAINST THE TREATM ENT GIVEN BY THE ASSESSING OFFICER FOR SUCH ASSETS AS F URNITUTE & FITTINGS IN THE COMPUTATION OF TAXABLE TOTAL INCO ME WITHOUT ASSIGNING PROPER REASONS AND JUSTIFICATION. 5. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVI NG NOT CONSIDERED THE FUNCTIONAL TEST APPROPRIATELY FOR TH E DETERMINATION OF THE CHARACTER OF THE ASSET UNDER CONSIDERATION, THE SUSTENANCE OF THE DIFFERENTIAL DEPRECIATION IN PARA 11 WAS WHOLLY UNJUSTIFIED. 6. THE CIT (APPEALS) ERRED IN ENHANCING THE DISALLO WANCE OF CLAIM FOR FOREIGN TRAVEL EXPENSES IN THE COMPUTA TION OF TAXABLE TOTAL INCOME WITHOUT ASSIGNING PROPER REASO NS AND JUSTIFICATION AND OUGHT TO HAVE APPRECIATED THAT TH E ENHANCEMENT OF THE ASSESSMENT IN THIS REGARD SHOULD BE RECKONED AS BAD IN LAW. ITA NO. 1358/2018 :- 3 -: 7. THE CIT (APPEALS) FAILED TO APPRECIATE THAT HAVI NG NOT QUESTIONED THE INCURRING OF EXPENSES IN CONNECTION WITH THE BUSINESS PROMOTION, THE ENHANCEMENT OF THE ASSESSMENT IN THIS REGARD WITHOUT PROPERLY FOLLOWIN G THE PROCEDURE PRESCRIBED STATUTORILY IN RELATION THERET O WAS WRONG, ERRONEOUS, UNJUSTIFIED, INCORRECT AND NOT SUSTAINABLE IN LAW. 8. THE CIT (APPEALS) FAILED TO APPRECIATE THAT THER E WAS NO PROPER OPPORTUNITY GIVEN BEFORE PASSING OF THE IMPU GNED ORDER AND ANY ORDER PASSED IN VIOLATION OF THE PRIN CIPLES NATURAL JUSTICE WOULD BE NULLITY IN LAW. 9. THE APPELLANT CRAVES LEAVE TO FILE ADDITIONAL GROUNDS/ARGUMENTS AT THE TIME OF HEARING. 3. THE BRIEF FACTS OF THE CASE ARE AS UNDER: THE APPELLANT NAMELY M/S. AKSHAYA PRIVATE LIMITED, IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE CO MPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF REAL ESTA TE AND FLAT PROMOTERS. THE RETURN OF INCOME FOR THE AY 2013-14 WAS FILED O N 04.10.2013 DISCLOSING TOTAL INCOME OF RS. 8,21,33,460/-. AGAIN ST THE SAID RETURN OF INCOME, THE ASSESSMENT WAS COMPLETED BY THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1) CHENNAI (HERE INAFTER CALLED AO) VIDE ORDER DATED 31.03.2016 PASSED U/S. 143(3 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AT TOTAL INCOME OF RS. 8,77,52,992/-. WHILE DOING SO, THE AO MADE SEVERAL DISALLOWANCES I .E RS.12,31,518/- ON ACCOUNT OF BELATED REMITTANCE OF EMPLOYEES CONT RIBUTION TO PF/ESI, DISALLOWANCE OF CLUB EXPENDITURE OF RS.62,779/-, AL LOWED DEPRECIATION ITA NO. 1358/2018 :- 4 -: ON OFFICE EQUIPMENTS AT 10% AGAINST THE CLAIM OF 15 %, DISALLOWED INTEREST EXPENDITURE OF RS.20,02,096/- U/S.36 (I) (III) OF THE ACT BY HOLDING THAT ASSESSEE COMPANY HAD DIVERTED INTEREST BEARING FUNDS TO ITS SISTER CONCERN NAMELY M/S. AKSHAYA SIGNATURE H OMES AND ALSO DISALLOWED RS.7,25,272/- ON ACCOUNT OF PURCHASE OF FOREIGN CURRENCY U/S.37(1) OF THE ACT. 4. . BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE LD.CIT(A) WHO VIDE IMPUGNED ORDER DELETED THE ADDI TION MADE ON ACCOUNT OF BELATED REMITTANCES OF EMPLOYEES CONTRIB UTION TO PF/ESI FOLLOWING THE DECISION OF JURISDICTIONAL HIGH COUR T IN THE CASE OF CIT VS INDUSTRIAL SECURITY AND INTELLIGENCE INDIA (P) LT D, TCS NO.585 & 586 OF 2015, DATED 24.07.2015). AS REGARDS TO THE CLUB EXPENDITURE OF RS.62,779/- , LD .CIT(A) CONFIRMED THE ADDITION AS ASSESSEE COULD NOT SUPPORT THE CLAIM THAT THE AMOUNT WAS INCURRED ON ACCOUNT OF SERVICES AND FACILITIES AND NOT ON ACCOUNT OF ME MBERSHIP. THE LD. CIT(A) CONFIRMED THE ADDITION IN RESPECT OF DEPREC IATION ON FURNITURE AND FITTINGS. HOWEVER THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) HAD DELETED THE ADDITION U/S.36(I)(III) OF THE ACT AND GRANTED RELIEF ON ADDITION OF INTEREST EXPENDITURE OF RS.20,02,096/- ACCEPTING THE SUBMISSION OF THE ASSESSEE THAT NO INTEREST BEING FUNDS WERE DIVERTED TO THE SISTER CONCERN. AS REGARDS TO THE FOREIGN TRAVEL EXPENDITURE, ITA NO. 1358/2018 :- 5 -: THE LD COMMISSIONER OF INCOME TAX (APPEALS) WHILE CONFIRMING THE ACTION OF THE ASSESSING OFFICER DISALLOWING A SUM OF RS.6,34,640/- HAD ENHANCED THE ADDITION BY RS.2,04,707/- AS A SSESSEE FAILED TO PRODUCE EVIDENCE IN SUPPORT OF THE FOREIGN TRAVEL EXPENSES OF RS.9,92,758/-. 5. BEING AGGRIEVED, THE APPELLANT IS IN APPEAL BEFORE US IN THE PRESENT APPEAL. THE GROUNDS OF APPEAL NO.1, 8 & 9 ARE GENERAL IN NATURE THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION . 6. GROUND NOS.2 & 3 CHALLENGES THE DECISION OF THE LD COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMING THE CLUB EXPENDITURE OF RS62,779/-. FROM THE PERUSAL OF PAR AS 7 AND 8 OF THE ORDER OF THE LD COMMISSIONER OF INCOME TAX (APPEALS ), IT IS CLEAR THAT DISALLOWANCE WAS CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON ACCOUNT OF FAILURE OF THE ASSESSEE TO SUBSTANTIATE THAT THE EXPENDITURE WAS INCURRED TOWARDS UTILIZING THE FACILITIES AND SERVICES. EVEN BEFORE US, NOTHING WAS BROUGHT ON R ECORD CONTROVERTING THE FINDINGS OF THE LD COMMISSIONER OF INCOME TAX ( APPEALS). ACCORDINGLY, WE CONFIRM THE DECISION OF THE LD. COM MISSIONER OF INCOME TAX (APPEALS) AND DISMISS THE GROUNDS OF AP PEAL 2 & 3 FILED BY THE ASSESSEE. ITA NO. 1358/2018 :- 6 -: 7. VIDE GROUND NOS.4 & 5, ASSESSEE CHALLENGES THE DECI SION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFI RMING THE ALLOWANCE OF DEPRECIATION ON 10% ON FURNITURE AND FITTINGS ON OFFICE EQUIPMENT, AS AGAINST CLAIM OF THE ASSESSEE THAT IT IS 15%. THE LD COMMISSIONER OF INCOME TAX (APPEALS) HAS CONFIRMED THE ADDITION BY HOLDING THAT THE ITEMS LIKE REFRIGERATOR, DVD PLAY ER, KITCHEN APPLIANCES SUCH AS MIXER, GRINDER, COFFEE/ TEA VENDING MACHINE , CAMERA, MOBILE PHONE, CAMERA ETC FALLS WITHIN THE DEFINITION OF FU RNITURE AND FIXTURE INCLUDING ELECTRICAL FITTINGS. TAKING NOTE 5 OF TH E NEW APPENDIX 1 TO THE DEPRECIATION SCHEDULE, WE ARE OF THE CONSIDERE D OPINION THAT ITEMS LIKE UPS, FIRE ALARM SYSTEM, CCTV ETC DOES NOT FORM PART OF ELECTRICAL FITTINGS BUT THEY FALL UNDER THE CATEGORY OF PLANT AND MACHINERY. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLO W DEPRECIATION @15% AS APPLICABLE TO PLANT AND MACHINERY. ACCORD INGLY, GROUNDS OF APPEAL NO. 4 & 5 OF THE ASSESSEE STAND ALLOWED. 8. VIDE GROUNDS 6 & 7, ASSESSEE CHALLENGES THE DECISIO N OF THE LD . COMMISSIONER OF INCOME TAX (APPEALS) ENHANCING THE FOREIGN TRAVEL EXPENDITURE WITHOUT GIVING AN OPPORTUNITY. FROM THE PERUSAL OF PARA 18 OF THE IMPUGNED ORDER, IT IS CLEAR THAT TH ERE IS NOTHING ON RECORD TO SHOW THAT AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE WHILE ENHANCING THE ADDITION ON ACCOUNT OF FOREIGN TRAVE L EXPENDITURE. IN ORDER TO MEET THE ENDS OF JUSTICE, WE REMAND THIS ISSUE BACK TO THE ITA NO. 1358/2018 :- 7 -: FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) TO GIVE AN OPPORTUNITY TO EXPLAIN THE DISCREPANCIES IN THE EVI DENCE FILED BEFORE HIM. ACCORDINGLY, GROUNDS OF APPEAL NO. 6 & 7 OF T HE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSE. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON 11TH DAY OF OCTOBER, 2019, AT CHENNAI. SD/- SD/- ( . . . ) (N.R.S. GANESAN) /JUDICIAL MEMBER ( ) (INTURI RAMA RAO) /ACCOUNTANT MEMBER - ) / CHENNAI . / DATED: 11TH OCTOBER, 2019 KV $ &*01 21!* / COPY TO: 1 . '# / APPELLANT 3. ( 3* () / CIT(A) 5. 16 &*7 / DR 2. &' '# / RESPONDENT 4. ( 3* / CIT 6. 8 9) / GF