GOYAL TRADERS, MUMBAI V. ASST CIT 13(3), MUMBAI

ITA 1556/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 70603 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 01-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 05-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DHAVALJEET KAPOOR
• Assessee Lawyers: RAKESH JOSHUI
• Keywords: Revenue expenditure
• Section: 43B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G B ENCH, MUMBAI . , !'# $ $ $ $ , %& '()* , %+ ,- % # BEFORE SHRI D.MANMOHAN,VICE PRESIDENT AND SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER ./ I.T.A. NO.1556/MUM/2012 ( . . . . / ASSESSMENT YEAR : 2008-09 M/S. GOYAL TRADERS, 212-A, STEEL CHAMBERS, CARNAC BUNDER, MUMBAI-400 009 THE ACIT -13(3), AAYAKAR BHAVAN, MUMBAI-400 020 -/ %+ ./ 0 ./PAN/GIR NO. : AAAFG 2924R ( /1 /APPELLANT ) .. ( 23/1 / RESPONDENT ) /1 4 % / APPELLANT BY : ` SHRI RAKESH JOSHUI 23/1 5 4 % /RESPONDENT BY : SHRI DHAVALJEET KAPOOR 5 6+ / DATE OF HEARING :01.08.2013 7. 5 6+ / DATE OF PRONOUNCEMENT : 08.08.2013 ,%8 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-24, MUMBAI DT.8.12.2011 PERTAINING TO A.Y. 2008-09. 2. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUND S OF APPEAL. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT , UNDER INSTRUCTIONS, HE IS NOT PRESSING GROUND NO. 1 AND G ROUND NO. 3 OF THE ITA NO.1556/M/2012 2 GROUNDS OF APPEAL. ACCORDINGLY GROUND NO. 1 & 3 AR E DISMISSED AS NOT PRESSED. 3. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS. 24,65,622/- BEING PLOT DEVELOPMENT CHARGES ON THE GROUND THAT THE EXP ENSES PERTAIN TO PRIOR PERIOD AND SUBSEQUENT PERIOD. 4. THE ASSESSEE IS IN THE BUSINESS OF SHIP BREAKING AND TRADING IN IRON AND STEEL. THE RETURN OF INCOME DECLARING INCOME OF RS. 72,39,200/- WAS ELECTRONICALLY FILED BY THE ASSESSEE ON 30.9.2 008. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY ST ATUTORY NOTICES WERE ISSUED AND SERVED UPON THE ASSESSEE. 5. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER OBSERVED THAT AN AMOUNT OF RS. 33 ,11,022/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE HE AD PLOT DEVELOPMENT CHARGES. THE ASSESSEE WAS ASKED TO PRODUCE DETAILS REGARDING THE SAME. IN RESPONSE TO WHICH THE ASSESSEE FILED A NO DUES CERTIFICATE DT. 17.7.2008 ISSUED BY GUJARAT MARITIME BOARD PERTAINI NG TO RECOVERY MADE AGAINST PLOT DEVELOPMENT FEE AND PLOT RENT. THE AO NOTICED THAT AS PER THE CERTIFICATE, PLOT DEVELOPMENT CHARGES PERTAIN T O THE PERIOD 01.10.2004 TO 30.9.2008. THE AO SOUGHT EXPLANATION FROM THE A SSESSEE TO EXPLAIN WHY PROPORTIONATE DISALLOWANCE SHOULD NOT BE MADE O N THE SAID EXPENSES, AS IT PERTAINS TO FOUR YEARS. THE ASSESSEE FILED A DETAILED REPLY DT. 19.10.2010 EXPLAINING THAT THE PAYMENT IS MADE ON T HE BASIS OF DEMAND RAISED BY THE GUJARAT MARITIME BOARD FOR UTILIZATIO N OF THE PLOT ALLOTTED TO THE ASSESSEE FOR SHIP BREAKING AT ALANG SHIP BREAKI NG YARD. AS THE LIABILITY FOR PAYMENT WAS ACCEPTED DURING THE YEAR AND PAYMENT MADE DURING THE YEAR AND THE SAME BEING REVENUE EXPENDIT URE, THEREFORE SHOULD BE ALLOWED IN THE YEAR UNDER CONSIDERATION. ITA NO.1556/M/2012 3 5.1. THE EXPLANATION OF THE ASSESSEE DID NOT FIND A NY FAVOUR FROM THE AO WHO WAS OF THE FIRM BELIEF THAT THE CHARGES OF R S. 33,81,600/- PERTAINS TO THE PERIOD 1.10.2004 TO 30.9.2008. THE AO FURTHER NOTED THAT AS PER THE CERTIFICATE, RS. 5,70,578/- HAS BEEN REC OVERED ON 23.5.2006 AND RS. 28,11,022/- WAS RECOVERED ON 28.2.2008. THE AO FURTHER OBSERVED THAT AN AMOUNT OF RS. 5,70,578/- PERTAINS TO FINANC IAL YEAR 2006-07 WHICH MEANS THAT THE ASSESSEE HAD ACCEPTED THE LIABILITY TO PAY IN FINANCIAL YEAR 2006-07 ONLY AND NOT DURING THE YEAR UNDER CONSIDER ATION. ACCORDING TO THE AO SINCE THE ASSESSEE HAS ACCEPTED THE DEMAND I N FINANCIAL YEAR 2006-07 AND HAS NOT DISPUTED THE SAME, IT SUGGEST T HAT DEMAND ACCRUED TO THE ASSESSEE IN FINANCIAL YEAR 2006-07 ITSELF. THE REFORE, THE ASSESSEE SHOULD HAVE CLAIMED EXPENSES ATTRIBUTABLE TO THE PE RIOD 1.10.2004 TO 30.3.2007 IN A.Y. 2007-08. THEREFORE, ACCORDING TO THE AO, EXPENSES PERTAINING TO THE PERIOD 1.10.2004 TO 30.3.2007 ARE PRIOR PERIOD EXPENSES AND THEREFORE CANNOT BE ALLOWED IN COMPUTING THE PR OFIT OF THE BUSINESS FOR THE YEAR UNDER CONSIDERATION. 5.2. FOR THE SIMILAR REASONS, THE AO WAS OF THE OPI NION THAT EXPENSES ATTRIBUTABLE TO THE PERIOD 1.4.2008 TO 30.9.2008 PE RTAIN TO A.Y. 2009- 2010, THEREFORE THEY ARE IN THE NATURE OF PRE-PAID EXPENSES AND CANNOT BE ALLOWED DURING THE YEAR UNDER CONSIDERATION. AFTER MAKING THE ABOVE OBSERVATIONS, THE AO DISALLOWED RS. 21,13,500/- AS PRIOR PERIOD EXPENSES AND RS. 4,22,700/- AS PRE PAID EXPENSES. 6. THE ASSESSEE STRONGLY AGITATED THIS MATTER BEFOR E THE LD. CIT(A) AND REITERATED THAT THE LIABILITY WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE THE SAME SHOULD BE ALLO WED DURING THE YEAR UNDER CONSIDERATION ITSELF. ITA NO.1556/M/2012 4 6.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S MADE BY THE ASSESSEE, THE LD. CIT(A) OBSERVED THAT THE AMOUNT O F RS. 33,11,022/- COMPRISED OF TWO ITEMS I.E. PLOT DEVELOPMENT CHARGE S OF RS. 28,11,022/- AND MISCELLANEOUS DEPOSITS FOR RENEWAL OF PLOT AT R S. 5,00,000/-. THE LD. CIT(A) OBSERVED THAT THE ASSESSEE IS REQUIRED TO PA Y THE PLOT CHARGES ON A FINANCIAL YEAR BASIS. THE LD. CIT(A) WAS OF THE FI RM BELIEF THAT AN AMOUNT OF RS. 5,00,000/- BEING A DEPOSIT FOR RENEWA L OF PLOT PERMISSION , THE SAME CANNOT BE ALLOWED AS DEDUCTION. THEREAFTE R, THE LD. CIT(A) CONSIDERED THE DEVELOPMENT CHARGES FOR THE PERIOD 1 .4.2007 TO 31.3.2008 AT RS. 8,45,000/- AND WAS OF THE OPINION THAT ONLY THE EXPENDITURE RELATING TO THE FINANCIAL YEAR RELEVANT TO A.Y. 2008-09 CAN BE ALLOWED AS A DEDUCTION IN COMPUTING THE PROFITS OF THE BUSINESS FOR THE YEAR UNDER CONSIDERATION. THUS, ACCORDING TO THE LD. CIT(A), THE ELIGIBLE DEDUCTION COMES TO RS. 8,45,000/- FOR THE YEAR UNDER CONSIDER ATION. 6.2. BEFORE THE LD. CIT(A), THE ASSESSEE TOOK AN AL TERNATIVE PLEA THAT THE PAYMENT BEING OF A STATUTORY FEE IN THE NATURE, THE SAME SHOULD BE ALLOWED AS PER THE PROVISIONS OF SEC. 43B OF THE AC T WHICH PROVIDES FOR CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT. THE LD. CIT(A) SIMPLY RUBBISHED THIS PLEA OF THE ASSESSEE STATING THAT T HE EXPENSES ARE NOT IN THE NATURE OF FEES AS REFERRED TO SEC. 43B OF THE ACT. THE LD. CIT(A) FINALLY CONCLUDED THAT EXPENDITURE OF RS. 8,45,000/ - IS TO BE ALLOWED AS DEDUCTION AND ACCORDINGLY DIRECTED THE AO TO ALLOW THE SAME. 7. AGGRIEVED BY THIS FINDING OF THE LD. CIT(A), THE ASSESSEE IS BEFORE US. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. ITA NO.1556/M/2012 5 9. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E FINDINGS OF THE LD. CIT(A). 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CA REFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE ENTIRE DI SPUTE REVOLVES AROUND WHETHER THE PAYMENT OF RS. 33,11,022/- COULD BE ALL OWED DURING THE YEAR UNDER CONSIDERATION. AT THE VERY OUTSET, WE AGREE WITH THE LD. CIT(A) THAT RS. 5,00,000/- BEING A SECURITY DEPOSIT CANNOT BE ALLOWED AS REVENUE EXPENDITURE. THIS LEAVES US WITH A CLAIM OF RS. 28 ,11,022/-. THE PLOT ALLOTTED TO THE ASSESSEE WAS FOR A PERIOD OF 4 YEAR S. VIDE LETTER DT. 9.10.2007 EXHIBITED AT PAGE-7 OF THE PAPER BOOK NO. 2 SHOW THAT THE PORTAL OFFICER HAS RAISED DEMANDS FOR THE PAYMENT O F DEVELOPMENT FEES FOR THE PERIOD 1.10.2004 TO 30.9.2008. COPY OF THE BILL RAISED BY GUJARAT MARITIME BOARD IS EXHIBITED AT PAGE-8 OF SECOND PAP ER BOOK WHICH RELATES TO THE AMOUNT OF RS. 28,11,022/- BEING PLOT DEVELOP MENT FEES FOR 1.10.2004 TO 30.9.2008. THE SAME WAS DEBITED TO PL OT DEVELOPMENT FEES ACCOUNT ON 28.2.2002 THROUGH A JOURNAL ENTRY. 10.1. WE FIND THAT A CHEQUE OF RS. 28,10,622/- WAS PAID TO GUJARAT MARITIME BOARD VIDE CHEQUE NO. 725052 OF UNION BANK OF INDIA , THOUGH THE JOURNAL ENTRY WAS PASSED ON 28.2.2008 AS PER TH E LEDGER ACCOUNT OF GMB PLD ACCOUNT EXHIBITED AT PAGE-11 OF THE PAPER B OOK . THE AMOUNT OF RS. 28,10,622/- APPEARS TO HAVE BEEN DEBITED BY THE UNION BANK OF INDIA ON 15.2.2008 VIDE COPY OF BANK STATEMENT EXHI BITED AT PAGE-14 OF THE PAPER BOOK. AS PER THE MONEY RECEIPTS OF GUJAR AT MARITIME BOARD, THE PAYMENT OF RS. 28,11,022/- WAS RECEIVED BY GUJA RAT MARITIME BOARD ON 28.2.2008 VIDE RECEIPT NO. 20070861 AS EXHIBITED AT PAGE-15 OF THE PAPER BOOK. THE ABOVE EVIDENCES ON RECORD SHOW THA T THE BILLS WERE RAISED ON 27.2.2008 PERTAINING TO ASSESSMENT YEAR U NDER CONSIDERATION. THE ASSESSEE HAS MADE PAYMENT AS AND WHEN THE BILLS WAS RAISED. NO ITA NO.1556/M/2012 6 DOUBT, THE BILL CLEARLY SHOW THAT THE PLOT DEVELOPM ENT FEES PERTAIN FOR THE PERIOD 1.10.2004 TO 30.9.2008 BUT AT THE SAME TIME, IT HAS TO BE KEPT IN MIND THAT THE DEMAND WAS RAISED ON 27.2. 2008, WHIC H MEANS THAT THE LIABILITY TO PAY THE DEMAND WAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THAT BEING THE FACT OF THE MATTER, IN OUR HUMBLE OPINION, THE PAYMENT OF RS.28,11,022/- DESERVES TO BE ALLOWE D DURING THE YEAR UNDER CONSIDERATION. WE ACCORDINGLY DIRECT THE AO TO ALLOW THE CLAIM OF EXPENSE TO THE EXTENT OF RS. 28,11,022/- 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 08.08.2013 ,%8 5 . +% 9 :, ; 8.8.2013 5 B SD/- SD/- (D. MANMOHAN ) (N. K. BILLAIYA ) !'# /VICE PRESIDENT %+ ,- / ACCOUNTANT MEMBER MUMBAI; :, DATED / /2013 . . ./ RJ , SR. PS ITA NO.1556/M/2012 7 ,%8 5 26' C%'.6 ,%8 5 26' C%'.6 ,%8 5 26' C%'.6 ,%8 5 26' C%'.6 / COPY OF THE ORDER FORWARDED TO : 1. /1 / THE APPELLANT 2. 23/1 / THE RESPONDENT. 3. D ( ) / THE CIT(A)- 4. D / CIT 5. 'EB 26 , , / DR, ITAT, MUMBAI 6. B F / GUARD FILE. ,%8 ,%8 ,%8 ,%8 / BY ORDER, 3'6 26 //TRUE COPY// ! !! ! / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI