M/s MSK Projects (India) Ltd., Baroda V. The ACIT, Central Circle -1(2), Ahmedabad

ITA 1385/AHD/2006

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50748 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-09-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 29-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P K VOHRA SR D R
• Keywords: Depreciation; Business expenditure; Initiation of penalty proceedings
• Section: 143(3)

Judgement Text

, , , , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., !'# $ $ $ $ %% % &, ' ( # BEFORE SHRI G.D.AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MUKUL KR.SHRAWAT, JUDICIAL MEMBER $./ I.T.A. NO.1385/AHD/2006 ( * * * * / / / / ASSESSMENT YEAR : 2000-01) M/S. MSK PROJECTS (INDIA) LTD. 707-708 STERLING CENTRE R.C. DUTT ROAD, BARODA / VS. THE ASST.CIT CENTRAL CIRCLE-1(2) AHMEDABAD '+ (, $./- $./ PAN/GIR NO. : AABCM 4107 C ( +. / // / APPELLANT ) .. ( /0+. / RESPONDENT ) +. 1 ( / APPELLANT BY : MS.URVASHI SHODHAN, A.R. /0+. 2 1 ( / RESPONDENT BY : SHRI P.K. VOHRA, SR. D.R. % 3 2 &, / / / / DATE OF HEARING : 12/09/2011 45* 2 &, / DATE OF PRONOUNCEMENT : 30/ 9/2011 (6 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL OF THE ASSESSEE ARISING FROM THE ORDER OF CIT(A)- III, AHMEDABAD DATED 07/02/2006 PASSED FOR ASST.YEA R 2000-01. 2. AT THE OUTSET, IT IS INFORMED BY THE LD.AR MS. U RVASHI SHODHAN THAT EARLIER A CONSOLIDATED ORDER WAS PASSED BY ITA T A BENCH AHMEDABAD BEARING ITA NOS.1384 & 1385/AHD/2006 DATE D 31/12/2009. IN ADVERTENTLY, THE ASSESSMENT YEARS MENTIONED IN THE NOMENCLATURE WERE A.YS.1999-2000 AND 2001-02, HOWEVER, THOSE APPEALS WERE FOR THE ASSESSMENT YEARS 1999-2000 AND 2000-2001. A SECON D MISTAKE HAS ITA NO. 1385/AHD/2006 M/S.MSK PROJECTS (INDIA)LTD. VS. ACIT ASST.YEAR - 2000-01 - 2 - ALSO BEEN COMMITTED THAT THE ENTIRE JUDGEMENT WAS C ONFINED TO THE ASSESSMENT YEAR 1999-2000 AND THE OTHER ASST.YEAR, I.E. A.Y. 2000-01 WAS NOT AT ALL DISCUSSED OR DECIDED. THEREFORE, A M ISCELLANEOUS APPLICATION WAS MOVED AND VIDE AN ORDER DATED 8/07/ 2011 BEARING MA NO.89/AHD/2011 (IN ITA NO.1385/AHD/2006 A.Y. 2000-0 1) WAS ALLOWED. IT WAS HELD THAT THE APPEAL FOR A.Y. 2000- 01 BEARING ITA NO.1385/AHD/2006 TO BE FIXED FOR HEARING AND TO BE ADJUDICATED ACCORDINGLY. THEREFORE, ON ACCOUNT OF THE SAID DIRECTION THIS APPEAL IS NOW FIXED FOR HEARING BECAUSE IN THE PAST IT REMAIN ED UN-ADJUDICATED. WE HEREIN-BELOW PROCEED TO DECIDE THE SAME AS PER THE GROUNDS RAISED BEFORE US :- 1) THE LD. LEARNED CIT(APPEALS)-III, AHMEDABAD HAS ERR ED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF AO IN INCORRECTLY DETERMINING THE QUANTUM OF DEDUCTION U/S.80IA OF THE ACT . THE LD. CIT(A) HAS FURTHER ERRED IN CONFIRMING THE ACTION OF AO IN REDUCING THE PROFITS OF THE PROJECT ELIGIBLE FOR CLAIMING DEDUCTION U/S.80IA OF THE ACT BY RS.42,77, 609/- BEING THE INTEREST EXPENDITURE WHEN NO BORROWED FUNDS IN RESPECT OF THE SAID INTEREST EXPENDITURE WAS UTILIZ ED FOR THE SAID PROJECT. 2) ALTERNATIVE AND WITHOUT PREJUDICE, THE LD. CIT(A) H AS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THAT THE APPEL LANT WAS HAVING SUFFICIENT INTEREST FREE FUNDS SO AS NOT TO CALL FOR ANY SUCH REDUCTION OF INTEREST EXPENDITURE FROM THE PRO FITS OF THE ELIGIBLE PROJECT. 3) THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN CON FIRMING THE ACTION OF THE LD. AO IN DISALLOWING INTEREST OF RS.42,77,609/- CLAIMED BY THE APPELLANT U/S.36(1)(III) OF THE ACT. ITA NO. 1385/AHD/2006 M/S.MSK PROJECTS (INDIA)LTD. VS. ACIT ASST.YEAR - 2000-01 - 3 - 3. THE ASSESSEE-COMPANY IS A CONTRACTOR AND THE ASS ESSMENT FOR A.Y. 2000-01 WAS MADE U/S.148 R.W.S. 143(3) OF THE ACT V IDE ORDER DATED 28/03/2005. THE DISPUTE WAS IN RESPECT OF COMPUTAT ION OF CLAIM OF DEDUCTION U/S.80IA(4) OF IT ACT. THE ASSESSEE HAS CLAIMED AN EXEMPTION ON THE INFRASTRUCTURE PROJECT BUILT AT KISHNAGARH. THE SAID PROJECT WAS AWARDED BY NATIONAL HIGHWAY AUTHORITY OF INDIA. T HE PROJECT WAS FOR CONSTRUCTION OF A RAILWAY OVER-BRIDGE. THE PRO JECT WAS COMPLETED ON 19/02/2000 AND THE TOLL- COLLECTION WAS STARTED IN THE F.Y.1999-2000. THE AO HAS EXAMINED THE INVOLVEMENT OF THE FUNDS AS ALSO THE BORROWING COSTS OF THE ASSESSEE AND, ACCORDINGLY, D ISALLOWANCE WAS MADE AND HELD THAT THERE WAS NO PROFIT FOR THE YEAR FROM INFRASTRUCTURE PROJECT, HENCE, CLAIM OF DEDUCTION U/S.80IA(4) WOULD NOT BE AVAILABLE TO THE ASSESSEE. AS FAR AS THIS ISSUE IS CONCERNED, THE A DMITTED FACTUAL POSITION IS, AS STATED BY LD.AR, THAT FOR A.Y. 1999-2000 VID E ITA NO.1384/AHD/2006 ORDER DATED 31/12/2009 AND VIDE IT A NO.1633/AHD/2006 FOR A.Y. 2002-03 ORDER DATED 14/05 /2010, THE ISSUE HAS BEEN RESTORED BACK TO BE DECIDED IN ACCORDANCE TO AN EARLIER DECISION OF THE ASSESSEE PRONOUNCED VIDE ITA NO.351 8/AHD/2004 ITAT D BENCH AHMEDABAD ORDER DATED 07/08/2009, WHEREIN THE DIRECTIONS WERE AS FOLLOWS:- 11. WE, THEREFORE, RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO GIVE AN OPPORTUNITY TO THE ASS ESSEE TO SHOW THAT INTEREST BEARING FUNDS WERE NOT UTILIZED FOR I NVESTING INTO INFRASTRUCTURE DIVISION THIS YEAR THEREBY CLEARLY C REATING AN INFERENCE THAT IT WAS INTEREST FREE FUNDS WHICH WER E GIVEN TO INFRASTRUCTURE DIVISION. IN ANY CASE, IT IS ONLY T O THE EXTENT OF INTEREST BEARING FUNDS ARE PROVED TO HAVE GONE TO I NFRASTRUCTURE DIVISION THE INTEREST RELATABLE TO SUCH TRANSFER OF INTEREST BEARING ITA NO. 1385/AHD/2006 M/S.MSK PROJECTS (INDIA)LTD. VS. ACIT ASST.YEAR - 2000-01 - 4 - FUNDS THIS YEAR TO INFRASTRUCTURE DIVISION WILL ALO NE TO BE CONSIDERED FOR DISALLOWANCE IN CONSTRUCTION DIVISIO N. 4. RESPECTFULLY FOLLOWING THE ABOVE ORDERS OF THE C O-ORDINATE BENCHES; FOR THIS YEAR AS WELL, THIS ISSUE GOES BAC K TO THE FILE OF THE AO TO BE DECIDED AFRESH AS PER THE SAID DIRECTIONS. T HESE GROUNDS 1 TO 3 OF THE ASSESSEE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES. 5. GROUND NO.4 READS AS UNDER:- 4) THE LD. CIT(A) WAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING RS.88,750/- BE ING 5% OF STAFF WELFARE EXPENSES . 5.1. LD.AR MS. URVASHI SHODHAN HAS FURNISHED A GROU ND-WISE CHART NARRATING THE PAST HISTORY OF THIS CASE AND ACCORDI NG TO THAT CHART FOR A.Y. 2002-03, THE ITAT C BENCH AHMEDABAD BEARING ITA NO.1633/AHD/2006 ORDER DATED 14/05/2010 HAS FOLLOW ED AN EARLIER ORDER FOR A.Y.1998-99 AND RESTORED THE ISSUE TO BE DECIDE D ACCORDINGLY. RESPECTFULLY FOLLOWING THE AFORESAID DECISIONS OF T HE TRIBUNAL FOR THIS YEAR AS WELL, WE RESTORE THIS GROUND TO THE FILE OF THE AO TO WORK OUT THE DISALLOWANCE ACCORDINGLY. FOR STATISTICAL PURPOSES , THIS GROUND MAY BE TREATED AS ALLOWED. WE MAY ALSO LIKE TO ADD THAT FOR A.Y. 1999-2000, ITAT A BENCH IN ITA NO.1384/AHD/2006 VIDE ORDER DATED 31/12/2009 HAVE DISCUSSED AN EARLIER ORDER OF THE A SSESSEE FOR A.Y. 1998- 99 BEARING ITA NO.1230/AHD/2002 AND THEREAFTER AFFI RMED THE VIEW TAKEN BY THE LD.CIT(A). IN VIEW OF THESE ORDERS, NOW IT IS OPEN FOR THE AO TO EXAMINE THE ENTIRETY OF THE CIRCUMSTANCES UND ER WHICH THE STAFF- WELFARE EXPENSES WERE CLAIMED AND THEREUPON WHAT WA S THE CRITERIA FOR ITA NO. 1385/AHD/2006 M/S.MSK PROJECTS (INDIA)LTD. VS. ACIT ASST.YEAR - 2000-01 - 5 - ADHOC DISALLOWANCE, SUBJECT TO THE UNVERIFIABLE POR TION OF STAFF WELFARE EXPENSES. WE HOLD ACCORDINGLY AND THIS GROUND MAY B E TREATED AS ALLOWED ONLY FOR STATISTICAL PURPOSES. 6. GROUND NO.5.1 & 5.2. READS AS UNDER: 5.1) THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. ASSESSING OFFICER IN DISALLOWING RS.69,725/- BEING 5% OF TOTAL CONVEYANCE EXPENSES. 5.2) THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN DISALLOWING RS.2,12,11 2/- BEING 5% OF TOTAL TELEPHONE EXPENSES. 6.1. IN THIS REGARD, FOR A.Y. 2002-03 ITAT C BENC H (SUPRA) [ ITA NO.1633/AHD/2006] HAS FOLLOWED THE DECISION OF HON BLE GUJARAT HIGH COURT OF SAYAJI IRON & ENGG. CO. VS. CIT (2002)253 ITR 749(GUJ) AND ALSO FOLLOWED ASSESSEES OWN CASE FOR A.Y. 2001-02 (SUPRA) AND RESTORED TO WORK OUT THE DISALLOWANCE ACCORDINGLY. 7. HOWEVER, FOR A.Y. 1999-2000 (ITAT) A BENCH (SU PRA) HAS HELD IN RESPECT OF CONVEYANCE EXPENSES THAT PARTIAL DISA LLOWANCE FOR PERSONAL NATURE WAS NOT PERMISSIBLE. THE AO IS DIRECTED TO EXAMINE THE CORRECT FACTUAL POSITION WHETHER THE EXPENDITURE WAS NOT VE RIFIABLE OR IT WAS IN PERSONAL NATURE AND DECIDE AFRESH AFTER CONSIDERING THE PRECEDENTS CITED HEREINABOVE. WE HOLD ACCORDINGLY. FOR STA TISTICAL PURPOSES, BOTH THE GROUNDS MAY BE TREATED AS ALLOWED. 8. GROUND NO.6 READS AS UNDER: ITA NO. 1385/AHD/2006 M/S.MSK PROJECTS (INDIA)LTD. VS. ACIT ASST.YEAR - 2000-01 - 6 - 6) THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. AO IN RESTRICTING THE CLAIM OF DEPRECIATION @10% AS AGAINST ELIGIBLE RATE OF 25% ON THE OFFICE EQUIP MENTS. 8.1. FOLLOWING THE EARLIER DECISIONS OF THE TRIBUNA L, LD.AR HAS STATED NOT TO PRESS THIS GROUND . THIS GROUND IS DISMISSED BEING NOT PRESSED. 9. GROUND NO.7 READS AS UNDER:- 7) THE LD. CIT(A) HAS ERRED IN LAW AND IN FACTS IN PARTLY CONFIRMING THE ACTION OF LD. AO IN EXPENSES AND ENTERTAINMENT EXPENSES AS CLAIMED BY THE APPELLANT AS BUSINESS EXPENDITURE . 9.1. THE SAID DISALLOWANCE IS BASICALLY MADE BY THE AO ON THE GROUND THAT NO DETAILS WERE PROPERLY MAINTAINED BY THE AS SESSEE. IT WAS ALLEGED THAT THE ASSESSEE WAS NOT IN A POSITION TO FURNISH BIFURCATION IN RESPECT OF POOJA & DIWALI EXPENSES, ENTERTAINMENT EXPENSES, CL UB MEMBERSHIP FEE EXPENSES, ETC. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, CIT(A) HAS FOLLOWED 2001-02 WHEREIN THE DISALLOWANCE IN RESPECT OF MEMBERSHIP AND SUBSCRIPTION EXPENSES WER E CONFIRMED. WHILE DECIDING THE ASSESSEES APPEAL FOR AY 2002-03 ITAT C BENCH AHMEDABAD (SUPRA) ORDER DATED 14/05/2010 HAS REFERR ED THE ORDER OF ITAT FOR THE SAID A.Y. 2001-02 DATED 07/08/2009 AND HELD THAT THE ADDITION TO THAT EXTENT AS RETAINED BY LD.CIT(A) WA S TO BE DELETED. THE EXACT BIFURCATION OF THE ENTERTAINMENT EXPENSES, ET C. ARE NOT PLACED BEFORE US, THEREFORE, WE ARE NOT IN A POSITION TO COMMENT ABOUT THE EXACT NATURE OF THOSE EXPENSES AND WHETHER THEY WERE FOUND TO BE VERIFIABLE BY THE AO, OR ELSE THEY ARE INCURRED WHOLLY & EXCLUSIVELY FOR THE BUSINESS OF THE ASSESSEE. IN THE INTEREST OF JUSTICE, WE THERE FORE DEEM IT PROPER TO ITA NO. 1385/AHD/2006 M/S.MSK PROJECTS (INDIA)LTD. VS. ACIT ASST.YEAR - 2000-01 - 7 - RESTORE THIS GROUND AS WELL BACK TO THE STAGE OF AO , SO THAT ALONGWITH THE OTHER INVESTIGATION AS REFERRED ABOVE, HE CAN VERIF Y THE NATURE OF EXPENSES AND CAN DECIDE IN THE LIGHT OF THE PAST HISTORY OF THE CASE. FOR STATISTICAL PURPOSES, THIS GROUND ALSO MAY BE TREATED AS ALLOWE D. 10. REST OF THE GROUNDS ARE IN RESPECT OF CHARGING OF INTEREST AND INITIATION OF PENALTY PROCEEDINGS WHICH ARE BEING GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDICATION AT THIS STAGE. 11. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED BUT FOR STATISTICAL PURPOSES. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 30/ 09 /2011. SD/- SD/- ( G.D. AGARWAL ) ( MUKUL KR. SHRAWAT ) VICE PRESIDENT (AZ) JUDICIAL ME MBER AHMEDABAD; DATED 30/ 09 /2011 7.. , . ../ T.C. NAIR, SR. 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