M/s. Shree Nityanand Cotspin Limited, Ahmedabad V. The Income tax Officer,Ward-8(3), Ahmedabad

ITA 1552/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0066 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 18-08-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R K DHANESTA
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH A AA A BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI N NN N. .. .S. SAINI S. SAINI S. SAINI S. SAINI, , , , ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER AND AND AND AND SHRI SHRI SHRI SHRI MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER MAHAVIR SINGH, JUDICIAL MEMBER DATE OF HEARING :19 8 10 DRAFTED ON: 19-8-10 ITA NO. 1552 - 1553/ AHD/ 2008 ASSESSMENT YEARS:2004-05 AND 2005-06 SHREE NITYANAND COTSPIN LIMITED, 210,SAKAR-III, NEAR OLD HIGH COURT, NAVRANGPURA, AHMEDABAD. VS. THE INCOME TAX OFFICER, WARD 8(3), 4 TH FLOOR, AJANTA COMMERCIAL CENTER, ASHRAM ROAD, AHMEDABAD. PAN/GIR NO. : AACCS 1430 M (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI SAKAR SHARMA. RESPONDENT BY: SHRI R. K.DHANESTA, D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI , ACCOUNTANT MEMBER :- THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAINS T THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (AP PEALS)-XIV, AHMEDABAD DATED 14-2-2008. 2. IN THIS APPEAL THE GROUNDS OF APPEAL TAKEN BY TH E ASSESSEE ARE COMMON FOR BOTH THE ASSESSMENT YEARS UNDER CONS IDERATION ARE FOLLOWS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE LEARNED ASSESSING OFFICER BY TREATING THE EXPEN SES OF `.5,20,781/- FOR ASSESSMENT YEAR 2004-05 AND `.3,22,398/- AS PRE-OPERATIVE EXPENSES AND SO DISALLOWED IT WITHOUT APPRECIATING THE FACTS. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED ON FACTS AND IN LAW IN NOT GRANTING THE DEDUC TION OF THE EXPENSES AMOUNTING TO `.5,20,781/- FOR ASSESSMENT YEAR 2004-05 AND `.3,22,398/-FOR ASSESSMENT YEAR 2005-06 FROM THE INCOME EARNED, - 2 - WHICH IS ALLOWABLE IN ACCORDANCE WITH THE PROVISION S OF THE ACT. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IN THE INSTANT CASE THE UNDISPUTED FACTS OF THE CASE ARE THAT THE ASSESSEE COULD NOT C OMMENCE ITS BUSINESS OF MANUFACTURE OF COTTON YARN THROUGH OPEN END TECHNOLOGY AND WAS IN THE PROCESS OF SETTING UP OF THE UNIT FOR THE SAME. THE ASSESSEE EARNED INTEREST INCOME BY UTILI ZING THE IDLE FUNDS DURING THE YEARS UNDER CONSIDERATION AND ALSO EARNED MISCELLANEOUS INCOME OF `.10,760/- IN THE ASSESSMEN T YEAR 2004- 05. THE ASSESSEE CLAIMED DEDUCTION OF `.5,20,781/- IN ASSESSMENT YEAR 2004-05 AND `.3,22,398/- IN ASSESSMENT YEAR 20 05-06 OUT OF THE ABOVE INCOME. 4. THE LEARNED ASSESSING OFFICER DISALLOWED THE ENT IRE EXPENDITURE ON THE GROUND THAT NO BUSINESS ACTIVITY WAS CARRIED OUT BY THE ASSESSEE DURING THE YEARS UNDER CONSIDERATIO N AND TREATED THE SAME AS PRE-OPERATIVE EXPENSES. THUS, THE LEARN ED ASSESSING OFFICER TREATED THE ENTIRE INTEREST RECEIPT AND MIS CELLANEOUS INCOME AS THE TAXABLE INCOME OF THE ASSESSEE. 5. ON APPEAL, THE LEARNED COMMISSIONER OF INCOME TA X (APPEALS) CONFIRMED THE ACTION OF THE LEARNED ASSES SING OFFICER. 6. BEFORE US THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT STATUTORY EXPENSES ARE ALLO WABLE AGAINST INTEREST INCOME AND THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE STATUTORY EXPENSES. WHEN THE LEARN ED AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS QUESTIONED BY TH E BENCH TO SHOW WHICH WERE THE STATUTORY EXPENSES THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE REPLIED THAT THE ENT IRE EXPENSES CLAIMED BY THE ASSESSEE WERE STATUTORY EXPENSES. - 3 - 7. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDERS OF THE LOWER AU THORITIES. 8. WE FIND THAT IT IS NOT IN DISPUTE THAT DURING TH E YEARS UNDER CONSIDERATION THE ASSESSEE DID NOT COMMENCE ANY BUS INESS ACTIVITY. THE INCOME EARNED BY THE ASSESSEE WERE BY DEPLOYING UNEMPLOYED FUND AVAILABLE WITH THE ASSESSEE. THE DI RECTORS REPORT OF THE ASSESSEE COMPANY RELEVANT TO THE ASSE SSMENT YEAR 2004-05 READS AS UNDER:- DURING THE PERIOD UNDER REVIEW, YOUR COMPANY HAS N OT CARRIED OUT ANY BUSINESS ACTIVITIES DUE TO ABANDONM ENT OF THE PROJECT. THE LEGAL SUITS AGAINST IDBI IS PENDIN G IN THE COURT OF LAW. THE DIRECTORS ARE IN PROCESS OF REVIV ING THE PROJECT. DURING THE YEAR UNDER CONSIDERATION COMPA NY HAS EARNED AN INTEREST AMOUNT OF `.5.61 LAKHS OUT OF TH E UNEMPLOYED FUNDS. THE COMPANY HAS MADE THE NET PROF IT OF `.0.40 LAC DURING THE YEAR. 9. SIMILARLY, WE FIND THAT THE REVIEW REPORT CONTAI NED IN DIRECTORS REPORT RELEVANT TO THE ASSESSMENT YEAR 2 005-06 READS AS UNDER:- DURING THE PERIOD UNDER REVIEW, YOUR COMPANY HAS NOT CARRIED OUT ANY BUSINESS ACTIVITIES DUE TO ABANDONM ENT OF THE PROJECT. THE LEGAL SUITS AGAINST IDBI IS PENDIN G IN THE COURT OF LAW. THE DIRECTORS ARE IN PROCESS OF REVIV ING THE PROJECT. 10. THE CLAIM OF EXPENDITURE MADE BY THE ASSESSEE I NCLUDES DEPRECIATION ON PLANT AND MACHINERY, ELECTRICITY CH ARGES, TRANSPORT EXPENSES, BANK COMMISSION ETC. THE LEARNED AUTHORIS ED REPRESENTATIVE OF THE ASSESSEE COULD NOT EXPLAIN HO W THESE EXPENSES ARE STATUTORY EXPENSES AND HOW THESE EXPEN SES ARE CONNECTED WITH THE INTEREST EARNED BY THE ASSESSEE. FURTHER, THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESSEE C OULD NOT POINT OUT ANY SPECIFIC EXPENDITURE WHICH WAS INCURRED DUR ING THE YEARS UNDER CONSIDERATION FOR THE PURPOSE OF EARNING OF I NTEREST INCOME OR MISCELLANEOUS INCOME. HOWEVER, WE FIND THAT THE EXPENSES INCURRED INCLUDES AUDIT FEE WHICH WAS STATUTORILY R EQUIRED TO BE - 4 - INCURRED BY THE ASSESSEE TO EXIST AND WITHOUT ITS E XISTENCE IT COULD NOT HAVE EARNED INTEREST INCOME. THUS, IN OUR CONSI DERED OPINION ONLY AUDIT FEE EXPENSES CAN BE ALLOWED AS A DEDUCTI ON FOR COMPUTING INCOME FROM OTHER SOURCES OF THE ASSESSEE -COMPANY FOR BOTH THE YEARS UNDER CONSIDERATION. IN THE ABOVE C IRCUMSTANCES, WE MODIFY THE ORDERS OF THE LOWER AUTHORITIES AND D IRECT THE LEARNED ASSESSING OFFICER TO ALLOW DEDUCTION FOR AU DIT FEE INCURRED BY THE ASSESSEE FOR BOTH THE YEARS UNDER CONSIDERAT ION. 11. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED AS ABOVE FOR BOTH THE YEARS. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 20 TH AUGUST,2010 SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNT ANT MEMBER AHMEDABAD: ON THIS 20 TH DAY OF AUGUST, 2010 COMPILED AND COMPARED BY: PATKI. COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-XIV,AHMEDABAD. 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD - 5 - DATE INITIALS 1. DRAFT DICTATED ON 19-8-2010 ------------------- 2. DRAFT PLACED BEFORE AUTHORITY 19-8-2010 ------------------- 3. DRAFT PROPOSED & PLACED 19-8-2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 19--8-2010 ------------------- JM 5. APPROVED DRAFT COMES TO P.S 20-8-2010 --------- ----------- 6. KEPT FOR PRONOUNCEMENT ON 20-8-2010 --- ----------------- 7. FILE SENT TO THE BENCH CLERK 20-8-2010 ------- ------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------