DCIT, Circle - 10(1), Kolkata, Kolkata V. M/s. Jayshree Chemicals Ltd., Kolkata

ITA 1588/KOL/2018

• Counselvise Citation: [2019] 112 COUNSELVISE.COM (IT) 1435 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-09-2019
• Assessment Year: 2011-2012
• Appeal Filed On: 24-07-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RANU BISWAS
• Assessee Lawyers: ARVINID AGARWAL
• Keywords: Depreciation; Additional depreciation; Commercial expediency
• Section: 143(3); 37(1); 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH B KOLKATA BEFORE SHRI J.SUDHAKAR REDDY, ACCOUNTANT MEMBER AND SHRI S.S.GODARA, JUDICIAL MEMBER ITA NO.1588/KOL/2018 ASSESSMENT YEAR: 2011-12 DCIT, CIRCLE-10(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, 3 RD FLOOR, KOLKATA-69 / V/S . M/S JAYSHREE CHEMICALS LTD., AT 31, CHOWRINGHEE ROAD, KOLKATA-700 016 [ PAN NO.AAACJ 6736 B ] /APPELLANT .. /RESPONDENT /BY APPELLANT SMT. RANU BISWAS, ADDL. CIT-DR /BY RESPONDENT SHRI ARVINID AGARWAL, ADVOCATE /DATE OF HEARING 18-09-2019 /DATE OF PRONOUNCEMENT 13-12-2019 /O R D E R PER S.S.GODARA, JUDICIAL MEMBER:- THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2011-12 ARISES AGAINST THE COMMISSIONER OF INCOME TAX (APPEALS)-4, KOLKATAS O RDER DATED 09.04.2018 PASSED IN CASE NO.868/CIT(A)-4/14-15, INVOLVING PROCEEDING S U/S 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. HEARD BOTH THE PARTIES. CASE FILE(S) PERUSED. 2. FOR THE REASON STATED IN REVENUES CONODONATION PETITION DATED 20.08.2018 AND ON ACCOUNT OF ASSESSEES NO OBJECTION, WE CONDONE THE IMPUGNED ONE DAYS DELAY AS NEITHER INTENTIONAL NOR DELIBERATE BUT ON ACCOUNT O F VARIOUS PROCEDURAL FORMALITIES. THE MAIN APPEAL IS NOW TAKEN UP FOR ADJUDICATION ON MERITS. ITA NO.15888/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(1), KOL. VS M/S JAYSHREE CHEMIC ALS LTD. P AGE 2 3. THE REVENUES FIRST AND FOREMOST GRIEVANCE CANVA SSED IN THE INSTANT APPEAL CHALLENGES CORRECTNESS OF CIT(A)S ACTION REVERSING ASSESSMENT FINDINGS DISALLOWING ASSESSEES FOREIGN TOUR EXPENSES AMOUNTING TO 1,34,683/- VIDE FOLLOWING DETAILED DISCUSSION:- I HAVE PERUSED THE ORDER OF THE AO AND HAVE CAREFU LLY CONSIDERED THE SUBMISSION MADE BY THE LD. A/R. I FIND THAT OUT OF THE TOTAL E XPENSES OF RS.1,81,161/-, SUM OF RS.87,941/- WAS INCURRED FOR THE FOREIGN TOUR OF TH E MD SHRI V. BANGUR. THE AO HAS NOT GIVEN ANY REASON WHA TSOEVER IN HIS ORDER IN DISALLOWING THE SAME. I FURTHER FIND FROM RECORD TH AT DURING THE YEAR THE APPELLANT HAD INSTALLED AND HAD A TIE-UP WITH UHDE GMBH OF GE RMAN FOR ITS STATE-OF-THE-ART MEMBRANE CELL TECHNOLOGY WHICH WAS COMMISSIONED DUR ING THE YEAR. I FIND REASON IN THE SUBMISSION OF THE LD. A/R THAT THE CHAIRMAN AND THE MANAGING DIRECTORS TOUR TO EUROPE WAS DIRECTLY CONNECTED WI TH THE VISIT TO GERMANY FOR ITS BUSINESS EXIGENCY. ACCORDINGLY, I DIRECT THE LD. A. O TO DELETE THE ADDITION OF RS.46,742/- FOR FOREIGN TOUR OF SHRI S.K. BANGUR, C HAIRMAN AND RS.87,941/- FOR THE FOREIGN TOUR OF MD SHRI V. BANGUR. WITH REGARD TO THE ADDITION MADE BY THE AO OF RS.46 ,778/- ON THE TOUR OF THE WIFE OF THE MANAGING DIRECTOR SMT. BHARTI BANGUR, I DO NOT FIND MUCH REASONING AS MADE BY THE LD. A/R IN HIS SUBMISSION. THE LD. A/R COULD NO T PRODUCE ANY BOARD RESOLUTION AND ANY PLAUSIBLE REASON FOR THE VISIT OF THE WIFE OF T HE CHAIRMAN. ACCORDINGLY, I UPHOLD THE ADDITION OF RS.46,478/- FOR THE EXPENDITURE MAD E ON THE FOREIGN TOUR OF THE WIFE OF THE CHAIRMAN. ACCORDINGLY THIS GROUND IS PARTLY ALLOWED . 4. LEARNED DEPARTMENTAL REPRESENTATIVE VEHEMENTLY C ONTENDS DURING THE COURSE OF HEARING THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN DELETING THE IMPUGNED FOREIGN TRAVEL DISALLOWANCE OF 1,34,683/- DESPITE THE FACT THAT ASSESSEE HAD FAILE D TO PROVE THE SAME INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSINESS. WE FIND NO REASON TO ACCEPT THE REVENUES INSTANT FIRS T SUBSTANTIVE GRIEVANCE. WE NOTICE THAT THIS ASSESSEE HAD A TIE-UP THE ABOVE STATED GE RMANY ENTITY AND ITS CHAIRMAN AS WELL AS MANAGING DIRECTOR VISITED THE SAID COUNTRY IN CONNECTION WITH THE SAID AFFAIRS ONLY. THE CIT(A) HAS ALREADY DECLINED THE TRAVEL EX PENSE PERTAINING TO THE WIFE OF ASSESSEES MANAGING DIRECTOR (SUPRA). THE ABOVE CRU CIAL FINDINGS OF THE ASSESSEE HAVING TIE-UP WITH THE GERMANY ENTITY FOR COMMISSIO NING THE STATE-OF-THE-ART MEMBRANE CELL TECHNOLOGY HAVE GONE UNREBUTTED FROM THE REVENUE SIDE. WE THEREFORE REJECT THE REVENUES FIRST SUBSTANTIVE GRIEVANCE. ITA NO.15888/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(1), KOL. VS M/S JAYSHREE CHEMIC ALS LTD. P AGE 3 5. NEXT COMES SECOND ISSUE OF CORPORATE SOCIAL RESP ONSIBILITY (CSR) EXPENSES OF 10,56,564/- WHICH STOOD DISALLOWED IN THE COURSE OF ASSESSMENT AND ACCEPTED IN THE LOWER APPELLATE DISCUSSION UNDER CHALLENGE AS FOLLO WS:- I HAVE PERUSED THE ASSESSMENT ORDER OF THE AO. I H AVE CAREFULLY CONSIDERED THE GROUNDS OF APPEAL AND STATEMENT OF FACTS AND THE SU BMISSION MADE BY THE LD. A/R AND THE PAPER BOOK SUBMITTED WHICH ARE ON RECORD. I HAVE FOUND FROM THE ANNUAL REPORT AND THE AUDITED ACCOUNTS OF THE APPELLANT THAT THE MANUFACTURING ACTIVITY OF THE APPELLANT IS SITU ATED AT GANJAM, ODISHA. FROM THE DETAIL OF THE EXPENSES UNDER THE HEAD CORPORATE SOC IAL RESPONSIBILITY (CSR) SUBMITTED DURING THE COURSE OF ASSESSMENT PROCEEDIN GS BEFORE THE AO THE EXPENDITURES ARE ON ACCOUNT OF LOCAL CONTRIBUTION FOR CRICKET TOURNAMENTS, DRAMA, VARIOUS PUJAS, PLANTATION EXPENDITURE, SCHOOL RUNNI NG EXPENSES, EXPENDITURE ON ACCOUNT OF MAINTENANCE OF TEMPLES AND GURDWARAS A ND RUNNING OF HOMEO CLINIC AT GANJAM. THE AO HAS NOT DOUBTED THE GENUINENESS OF THE EXPEN DITURE AND HE HAS ACCEPTED THAT THE EXPENDITURE AS INCURRED AT GANJAM AND THE VILLA GE SURROUNDING GANJAM IN ODISHA WERE THE FACTORY OF THE APPELLANT IS SITUATED, AND FORM THE PHOTOGRAPHIC EVIDENCE AND THE DIRECTORS REPORT WHICH IS AT PAPER BOOK PAGE 15 TO 17 AND FROM THE ANNUAL REPORT WHICH IS AT PAPER BOOK PAGE 40 TO 41, I FIND THAT T HE APPELLANT HAS INCURRED THE EXPENDITURE FOR ITS ORGANIZATION AND BENEFIT OF ITS EMPLOYEES FOR HEALTH, EDUCATION, ENVIRONMENT MANAGEMENT, WATER CONSERVATION AND SOCI AL ACTIVITY. I HAVE CONSIDERED THE RATIO OF THE JUDGEMENT CITED BY THE AO AND I FIND THAT THE SAME ARE DISTINGUISHABLE AND ARE NOT APPLICABLE IN THE A PPELLANT CASE. THE LD. A/R IN HIS WRITTEN SUBMISSION HAS RELIED UP ON THE RATIO OF THE JUDGEMENT OF THE HIGH COURTS AND ALSO FILED COPY OF THE JUDGEMENTS W HICH ARE AT PAPER BOOK PAGE 159 TO 204. I HAVE CONSIDERED THE RATIO OF THE JUDGEMENT RELIE D UPON THE APPELLANT, COPIES HAVE BEEN PLACED ON RECORD. THE HON'BLE SUPREME COURT IN THE CASE OF CHANDULAL KESHAVLAL REPORTED IN 38 ITR 601 HAS HELD THAT, A SUM OF MONEY EXPENDED NOT WITH A NECESSITY AND WI TH A VIEW TO DIRECT AND IMMEDIATE BENEFIT TO THE TRADE, BUT V OLUNTARILY AND ON THE GROUNDS OF COMMERCIAL EXPEDIENCY AND IN ORDER TO INDIRECTLY FACILITATE, CARRYING ON OF BUSINESS MAY YET TO BE EXPENDED WHOLLY AND EXCLUSIV ELY FOR THE PURPOSE OF THE TRADE. THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF HINDUS TAN PETROLEUM CORPN. LTD. VS. DCIT (2015) 96 ITD PAGE 186, WHERE IT WAS HELD THAT THE EXPENDITURE INCURRED ON CSR ARE REQUIRED TO BE TREATED AS BUSINESS EXPENDIT URE ELIGIBLE FOR DEDUCTION U/S 37(1) OF THE I.T ACT, 1961. CONSIDERING THE FACTS AND MATERIAL ON RECORD AND TH E RATIO OF THE JUDGEMENT OF THE VARIOUS HIGH COURTS AND THE TRIBUNALS, AND COMING T O A FINDING THAT THE EXPENDITURE INCURRED AT THE GANJAM FACTORY OF THE APPELLANT WAS FOR THEBENEFIT OF ITS WORKERS AND EMPLOYEES, I HOLD THAT THE ENTIRE EXPENDITURE WAS W HOLLY AND EXCLUSIVELY FOR THE ITA NO.15888/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(1), KOL. VS M/S JAYSHREE CHEMIC ALS LTD. P AGE 4 PURPOSE OF BUSINESS AND ACCORDINGLY ALLOWABLE U/S. 37(1) OF THE I.T. ACT 1961, I DIRECT THE AO TO DELETE THE ADDITION OF RS.10,56,564/-. THIS GROUND OF APPEAL OF THE APPELLANT IS ALLOWED . 6. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATIONS TO R IVAL CONTENTIONS. THERE IS HARDLY ANY DISPUTE BETWEEN THE PARTIES THAT THE EXP ENSES AMOUNTING TO 10,56,564/- COMPRISE OF LOCAL CONTRIBUTIONS IN CRICKET TOURNAME NT, DRAMA, VARIOUS PUJAS, PLANTATION EXPENDITURE, SCHOOL RUNNING EXPENSES, EX PENDITURE ON ACCOUNT OF MAINTENANCE OF TEMPLES AND GURDWARDS RUNNING OF HOM EO CLINICS AT GANJAM HAVING CORRESPONDING FIGURE(S) OF 2,56,988/-, 82,170/-, 5,28,159/-, 98,829/- AND 60,408; RESPECTIVELY. THE ASSESSING OFFICER WAS VERY FAIR T HAT THE SAME AMOUNTED TO CSR IN THE NATURE OF DONATIONS. WE HOLD THAT THE RELEVANT EXPLANATION TO THIS EFFECT OF SEC. 37(1)(2) INSERTED VIDE THE FINANCE ACT, 2014 IS APP LICABLE WITH EFFECT FROM 01.04.2015 THAN THE IMPUGNED ASSESSMENT YEAR 2011-12 ONLY. COU PLED WITH, THERE IS NO DISPUTE ON GENUINENESS OF THE IMPUGNED CLAIM SINCE THE ASSESSE E HAD ALREADY PLACED ON RECORD ALL THE CORRESPONDING DETAILS FORMING PART OF CASE RECO RD. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE CIT(A)S ACTION UNDER CHALLENGE DELETING THE IMPUGNED DISALLOWANCE. THE REVENUE FAILS IN ITS INSTANT SECO ND SUBSTANTIVE GRIEVANCE AS WELL. 7. LASTLY COMES THE THIRD ISSUE OF ADDITIONAL DEPRE CIATION DISALLOWANCE AMOUNTING TO 1,99,40,000/- IN THE COURSE OF ASSESSMENT AND REVER SED IN LOWER APPELLATE DISCUSSION AS UNDER:- I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND I HAVE GONE THROUGH THE CONTENTION OF THE AO. I HAVE CONSIDERED THE WRITTEN SUBMISSION AS PLACED BY THE LD. A/R DURING THE COURSE OF HEARING. FROM RECORDS, I FIND THAT THE EXPENDITURE INCURRED FOR THE SERVICES RENDERED BY UDHE INDIA PVT. LTD. FOR SUPPLY AND COMMISSIONING AND IN STALLATION HAS BEEN CAPITALIZED BY THE APPELLANT IN ITS BOOKS OF A/C. THE LD. A/R HAS PLACED ON RECORD THE TAX AUDIT REPORT AND THE DEPRECIATION SCHEDULE BEING BLOCK OF ASSETS FOR THE YEAR ENDED 31 ST MARCH 2011 FROM WHERE IT IS SUBSTANTIATED THAT THE ENTIRE EXPENDITURE TOWARDS THE COST AND EXPENDITURE TOWARDS THE SERVICES FOR INSTA LLATION AND COMMISSIONING HAS BEEN CAPITALIZED. I HAVE CAREFULLY CONSIDERED AND PERUSED THE CERTIFI CATE OF UDHE INDIA PVT. LTD. WHICH WAS FILED BY THE LD. A/R WHICH IS AT PAPER BOOK PAG E 28 & 29. UDHE INDIA HAS ITA NO.15888/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(1), KOL. VS M/S JAYSHREE CHEMIC ALS LTD. P AGE 5 CERTIFIED THAT THEY HAVE SUPPLIED THE ENVIRONMENT F RIENDLY MEMBRANCE CELL TECHNOLOGY FOR THE PRODUCTION OF THE PLANT FOR CAUSTIC SODA, C HLORINE, HYDROCHLORIC ACID AND SODIUM HYPO-CHLORITE WHICH HAS STARTED FROM THE END OF DECEMBER 2010 ONWARD. THEY HAVE ALSO CERTIFIED THAT THE SUPPLY OF THE PLANT AN D MACHINERY AND ITS SERVICES ARE ESSENTIALLY REQUIRED FOR ERECTION AND COMMISSIONING OF THE MEMBRANCE CELL PLANT AND THE SAID MEMBRANCE CELL PLANT HAS BEEN INSTALLED TO ACHIEVE THE TARGETED PRODUCTION SCHEME. THEY HAVE ALSO DONE THE PROCUREMENT/INSPECT ION AND HAVE PROVIDED EXPEDITING SERVICES AD SUPERVISION SERVICES FOR THE UNIT TO COME INTO WORKING CONDITION. ACCORDINGLY TO THE SUB-CLAUSE (IIA) TO SUB-SECTION (1) OF SECTION 32 OF THE INCOME TAX ACT 1961, ADDITIONAL DEPRECIATION OF 20% OF THE ACT UAL COST OF SUCH MACHINERY OR PLANT SHALL BE ALLOWED AS DEDUCTION UNDER CLAUSE (I I) WHERE THE PLANT AND MACHINERY HAS BEEN ACQUIRED AND INSTALLED BY THE ASSESSEE ENG AGED IN THE BUSINESS OF MANUFACTURE OR PRODUCTION OF ARTICLE OR THINGS. I FIND FROM RECORD THAT THE ESSENTIAL SERVICES REND ERED BY UDHE INDIA PVT. LEARNED. FOR THE SUPPLY AND COMMISSIONING AND INSTALLATION H AS BEEN CAPITALIZED AND IS A PART OF THE ACTUAL COST OF MACHINERY OR PLANT. IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE AF TER CONSIDERING THE PROVISION OF LAW AND THE SUBMISSION AS MADE BY THE LD. A/R AND RESPE CTFULLY FOLLOWING THE RATIO OF THE JUDGEMENT OF HON'BLE SUPREME COURT IN THE CASE OF CHALLAPALLI SUGARS LTD. (SUPRA), I DIRECT THE AO TO ALLOW ADDITIONAL DES AS CLAIMED B Y THE APPELLANT AS PER THE BLOCK OF ASSETS BEING PART OF THE TAX AUDIT REPORT ON RECORD . THIS GROUND OF THE APPELLANT IS ALLOWED . 8. MS. BISWAS STRONGLY SUPPORTS THE ASSESSING OFFIC ERS TWIN REASONING THAT THE IMPUGNED ADDITIONAL DEPRECIATION CLAIM IS NOT ALLOW ABLE SINCE SAME PERTAINS TO SERVICE PROVIDED BY UNDER M/S UDHE INDIA PVT. LTD. REGARDIN G PROCUREMENT / INSTALLATION AND NOT FOR DIRECT MANUFACTURE. AND THAT THE RELEVANT S TATUTORY PROVISION I.E. SEC. 332(1)(IIA) DOES NOT PERMIT SUCH RELIEF TO A MANUFA CTURER OR PURCHASER WHICH TURNS OUT TO BE MORE THAN A COST OF ITS PLANT AND MACHINERY. WE FIND NO MERIT IN REVENUES INSTANT LAST GRIEVANCE AS WELL. IT EMERGES DURING T HE COURSE OF HEARING AND AS NOTICED IN CIT(A) DETAILED DISCUSSION IN LIGHT OF ASSESSEES D ETAILED SUPPORTIVE EVIDENCE THAT THE COST OF SERVICES RENDERED BY M/S UDHE INDIA PVT. LT D.; FOR SUPPLY COMMISSIONING AND INSTALLATION HAS BEEN CAPITALIZED AND MADE PART OF THE ACTUAL COST OF MACHINERY OR PLANT (SUPRA). THE ASSESSEE HAS THEREFORE CLAIMED ITS ADD ITIONAL DEPRECIATION IN QUESTION ON AGGREGATE CORRESPONDING AMOUNT ONLY. WE HOLD IN THE SE FACTS THAT THE CIT(A) HAS ITA NO.15888/KOL/2018 ASSESSMENT YEAR 2011-12 DCIT, CIR-10(1), KOL. VS M/S JAYSHREE CHEMIC ALS LTD. P AGE 6 RIGHTLY ALLOWED THE ASSESSEES ADDITIONAL DEPRECIAT ION CLAIM. WE ACCORDINGLY DECLINE REVENUES INSTANT LAST GRIEVANCE. 9. THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 13/12/2019 SD/- SD/- ( ') () ') (J.SUDHAKAR REDDY) (S.S.GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER *DKP-SR.PS * - 13/12/2019 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CIR-10(1), AAYAKAR BHAWAN, P-7, CH OWRINGHEE SQUARE KOLKATA-69 2. /RESPONDENT-M/S JAYSHREE CHEMICALS LTD.,AT 31, CHOW RINGHEE ROAD, KOL-16 3. - . / CONCERNED CIT 4. . - / CIT (A) 5. ))- , - /DR, ITAT, KOLKATA 6. 2 / GUARD FILE. BY ORD ER/ , /TRUE COPY/ -,