Easun Products of India Pvt Ltd., CHENNAI V. DCIT, CHENNAI

ITA 143/CHNY/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7996 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-11-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-10-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 25-01-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SUPRIYO PAL
• Assessee Lawyers: M VISWANATHAN
• Keywords: Depreciation; Revenue expenditure
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.143 & 144/MDS/2016 ( )( / ASSESSMENT YEARS : 2009-10 & 2012-13 M/S EASUN PRODUCTS OF INDIA PVT. LTD., 6 TH FLOOR, TEMPLE TOWER, NO.672, ANNA SALAI, NANDANAM, CHENNAI - 600 034. PAN : AAACE 7384 C V. THE DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 2(1), CHENNAI. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI M. VISWANATHAN, CA -.+, / 0 / RESPONDENT BY : SHRI SUPRIYO PAL, JCIT 1 / 2% / DATE OF HEARING : 03.10.2016 3') / 2% / DATE OF PRONOUNCEMENT : 25.11.2016 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: BOTH THE APPEALS OF THE ASSESSEE ARE DIRECTED AG AINST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS)-6, CHENNAI, DATED 16.12.2015 AND PERTAIN TO ASSESSMENT YEARS 2009- 10 AND 2012-13. WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.143 & 144/MDS/16 2. FIRST LETS TAKE APPEAL OF THE ASSESSEE FOR ASSE SSMENT YEAR 2009-10. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOWANCE OF ` 76,02,493/-. 3. SHRI M. VISWANATHAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE HAS INCURRED EXPENDITURE TO THE EXTENT OF ` 76,02,493/- TOWARDS CONSTRUCTION OF COMPOUND WALL, STORE ROOM, UNDERGROUND SEWAGE, DESIGN CHARGES AND TEMPORARY REPAIRS TO THE BUILDING. THE ASSESSING OFFICER, HO WEVER, TREATED THE EXPENDITURE AS CAPITAL IN NATURE AND ALLOWED DEPREC IATION AT THE RATE OF 10%. ACCORDING TO THE LD. REPRESENTATIVE, THESE ARE OF TEMPORARY EXPENDITURE, THEREFORE, THE ASSESSING OFFICER HAS T O ALLOW THE SAME AS REVENUE EXPENDITURE. ON A QUERY FROM THE BENCH, HOW THE CONSTRUCTION OF COMPOUND WALL IS TREATED AS A TEMPO RARY EXPENDITURE BY THE ASSESSEE? THE LD. REPRESENTATIV E SUBMITTED THAT IT IS NOT ONLY A CONSTRUCTION OF COMPOUND WALL , UNDERGROUND SEWAGE DRAIN WAS ALSO CONSTRUCTED TEMPORARILY AND T EMPORARY GODOWN FOR KEEPING THE CABLES WAS ALSO CONSTRUCTED. THEREFORE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE I S ENTITLED FOR ALLOWANCE OF ENTIRE AMOUNT AS REVENUE EXPENDITURE. 4. ON THE CONTRARY, SHRI SUPRIYO PAL, THE LD. DEPAR TMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE INCURRE D EXPENDITURE 3 I.T.A. NOS.143 & 144/MDS/16 ON CONSTRUCTION OF COMPOUND WALL, WATCH TOWER, GODO WN, UNDERGROUND RCC DRAINAGE. THESE ARE ALL PERMANENT STRUCTURES FOR PERMANENT USE. THE INTENTION OF THE ASSESSEE IS TO USE THESE INFRASTRUCTURES CREATED ON PERMANENT BASIS. EVEN T HOUGH THE ASSESSEE CLAIMS THAT A TEMPORARY GODOWN WAS CONSTRU CTED FOR KEEPING THE CABLES, THESE ARE ALL PERMANENT STRUCTU RES FOR KEEPING THE CABLES PERMANENTLY. THEREFORE, ACCORDING TO TH E LD. D.R., THE CIT(APPEALS) HAS RIGHTLY CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE INCURRED EXPENDITURE FOR CONSTRUCTION OF C OMPOUND WALL, WATCH TOWER, GODOWN, UNDERGROUND DRAINAGE, ETC. TH IS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS CON STRUCTED COMPOUND WALL, SEWAGE DRAIN, GODOWN, ETC. FOR PERMA NENT USE IN THE BUSINESS. IT CANNOT BE SAID THAT THE INFRASTRU CTURES CREATED BY THE ASSESSEE ARE FOR TEMPORARY USE OF THE ASSESSEE. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY TREATED THE EXPENDITU RE AS CAPITAL IN NATURE AND ALLOWED DEPRECIATION AT THE RATE OF 10%. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRMED. 4 I.T.A. NOS.143 & 144/MDS/16 6. NOW COMING TO THE APPEAL FOR THE ASSESSMENT YEAR 2012-13, THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 14A OF THE INCOME-T AX ACT, 1961 (IN SHORT 'THE ACT') READ WITH RULE 8D OF THE INCOME-TA X RULES, 1962. 7. SHRI M. VISWANATHAN, THE LD. REPRESENTATIVE FOR THE ASSESSEE, SUBMITTED THAT THE ASSESSING OFFICER DISA LLOWED THE EXPENDITURE UNDER SECOND AND THIRD LIMBS OF RULE 8D (2). ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSING OFFICER HA S TO RESTRICT HIMSELF ONLY TO THE INCOME EARNED BY THE ASSESSEE. THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER BEYOND T HE INCOME EARNED BY THE ASSESSEE IS NOT JUSTIFIED. 8. WE HAVE HEARD SHRI SUPRIYO PAL, THE LD. DEPARTME NTAL REPRESENTATIVE ALSO. THE ASSESSING OFFICER AFTER C ONSIDERING SECTION 14A OF THE ACT AND RULE 8D(2) OF INCOME-TAX RULES, 1962, FOUND THAT THERE WAS NO DIRECT EXPENDITURE UNDER FI RST LIMB OF RULE 8D(2). REFERRING TO LIMB (II) OF RULE 8D(2), THE A SSESSING OFFICER FOUND THAT UNDER RULE 8D(2), DISALLOWANCE WAS MADE TO THE EXTENT OF ` 95,09,111/-. REFERRING TO LIMB (III) OF RULE 8D(2) , THE ASSESSING OFFICER HAS TAKEN 0.5% OF AVERAGE VALUE OF INVESTME NT, INCOME FROM WHICH DOES NOT FORM PART OF TOTAL INCOME. ULTIMATE LY, THE ASSESSING 5 I.T.A. NOS.143 & 144/MDS/16 OFFICER HAS TAKEN AVERAGE OF BOTH. FOR THE PURPOSE OF LIMB (II), THE ASSESSING OFFICER HAS TO COMPUTE THE DISALLOWANCE B Y FOLLOWING THE METHOD PRESCRIBED UNDER RULE 8D(2)(II). SIMILARLY, FOR THE PURPOSE OF LIMB (III), THE ASSESSING OFFICER HAS TO TAKE 0. 5% OF THE AVERAGE OF VALUE OF INVESTMENT WHICH RESULTED IN INCOME WHICH WOULD NOT FORM PART OF TOTAL INCOME. THEREFORE, FOR THE PURPOSE O F LIMB (III) ALONE, THE DISALLOWANCE CANNOT BE EXTENDED BEYOND THE INCO ME WHICH DOES NOT FORM PART OF TOTAL INCOME. RULE 8D(2) PRO VIDES DISALLOWANCE OF AVERAGE OF ALL THE THREE LIMBS THER EIN. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE W ITH THE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 9. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON 25 TH NOVEMBER, 2016 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 25 TH NOVEMBER, 2016. KRI. 6 I.T.A. NOS.143 & 144/MDS/16 / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-6, CHENNAI 4. PRINCIPAL CIT-2, CHENNAI 5. 7: -2 /DR 6. ;( < /GF.