M/s Atop Fasteners (P) Ltd., Chandigarh V. DCIT, C-1(1), Chandigarh

ITA 1612/CHANDI/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7217 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 27-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Additional depreciation; Onus to prove
• Section: 143(3); 32(1)(iia)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A , CHANDIGARH , !' #! $ % , &' BEFORE: SHRI SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO.1612/CHD/2017 / ASSESSMENT YEAR : 2013-14 M/S ATOP FASTENERS (P) LTD., # 181, INDUSTRIAL AREA, PHASE-II, CHANDIGARH THE D.C.I.T., CIRCLE-1(1), CHANDIGARH. ./ PAN NO. AACCA4741P /APPELLANT /RESPONDENT /ASSESSEE BY : SHRI PARIKSHIT AGGARWAL, CA ! / REVENUE BY : SMT.CHANDERKANTA, SR.DR '# $ /DATE OF HEARING : 04.12.2018 %&'(# /DATE OF PRONOUNCEMENT: 09.01.2019 &( /ORDER PER ANNAPURNA GUPTA, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-1, CHANDIGARH (IN SHORT CIT(A) DATED 29 .9.2017 PASSED U/S 250(6) OF THE INCOME TAX AT, 1961 (HEREI NAFTER REFERRED TO AS ACT). 2. GROUND NO.1 AND 4 RAISED BY THE ASSESSEE ARE GEN ERAL IN NATURE AND NEED NO ADJUDICATION. 3. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDE R: 2. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE CASE, THE WORTHY CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF LD. AO, WHEREBY HE ERRED IN NOT ALLOWING ADDITIONAL DEPRECIATION ALLOWANCE OF RS.57,597/- U/S 32(L)(IIA) OF THE INCOME TAX ACT ON CUSTOM DUTY PAYMENT OF RS.5,75,965/-FOR IMPORT OF MACHINERY. ITA NO.1612/CHD/2017 A.Y.2013-14 2 4. IN THE ABOVE GROUND THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF CLAIM OF ADDITIONAL DEPRECIATION U/ 32(1)(IIA) OF THE ACT ON THE PLANT AND MACHINERY PURCHASED BY IT. 5. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURIN G THE ASSESSMENT PROCEEDINGS THE A.O. NOTED THAT THE ASSE SSEE HAD CLAIMED CUSTOM DUTY AS EXPENDITURE IN ITS PROFI T & LOSS ACCOUNT. ON BEING CONFRONTED WITH THE SAME, THE ASS ESSEE ADMITTED TO ITS MISTAKE AND STATED THAT IT WAS PAID ACTUALLY ON THE IMPORT OF MACHINERY PURCHASED DURING THE YEA R AND WAS TO BE CAPITALIZED WITH THE COST OF MACHINERY. T HE ASSESSEE CLAIMED DEPRECIATION ON THE SAME. THE A.O. AFTER CONSIDERING THE DOCUMENTS SUBMITTED BY THE ASSESSEE FOUND THAT THE SAME WERE DATED 29.10.2012, ACCORDINGLY HE ALLOWED DEPRECIATION AT HALF THE ALLOWABLE RATE I.E. @ 7.5% . DURING THE APPELLATE PROCEEDINGS THE ASSESSEE CLAIMED ADDI TIONAL DEPRECIATION ALLOWANCE OF RS.57,597/- U/S 32(1)(IIA ) OF THE ACT. THE SAME WERE DENIED BY THE LD.CIT(A) STATING THAT THE ASSESSEE HAD NOT BROUGHT ON RECORD WHETHER THE REQU ISITE CONDITIONS FOR GRANT OF ADDITIONAL DEPRECIATION WER E MET OR NOT. 6. BEFORE US, THE LD. COUNSEL FOR ASSESSEE CONTENDE D THAT IT WAS SUBMITTED TO THE CIT(A) THAT THE ADDITIONAL DEPRECIATION ON ADDITIONS MADE TO PLANT AND MACHINE RY HAD BEEN CLAIMED BY THE ASSESSEE AND WAS ALLOWED BY THE A.O. ALSO AND, THEREFORE, HAVING FOUND THE ASSESSEE ELIG IBLE TO CLAIM ADDITIONAL DEPRECIATION ON THE PLANT AND MACH INERY PURCHASED DURING THE YEAR, THERE WAS NO QUESTION OF ITA NO.1612/CHD/2017 A.Y.2013-14 3 VERIFYING THE COMPLIANCES WITH THE REQUISITE CONDIT IONS FOR CLAIMING ADDITIONAL DEPRECIATION ON THE CUSTOM DUTY COMPONENT OF THE PLANT AND MACHINERY PURCHASED DURI NG THE YEAR. 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND WE FIND MERIT IN THE CONTENTION OF THE LD. COUNSEL FOR ASSESSEE. IT IS NOT DISPUTED THAT THE CUSTOM DUTY ON WHICH THE ASSESSEE IS CLAIMING ADDITIONAL DEPRECIATION WAS RELATED TO ASS ETS WHICH WERE PURCHASED DURING THE YEAR. IT IS ALSO AN UNCON TROVERTED FACT THAT THE PLANT AND MACHINERY PURCHASED DURING THE YEAR HAS BEEN ALLOWED ADDITIONAL DEPRECIATION BY THE A.O . IN THE LIGHT OF THESE FACTS WHEN THE CUSTOM DUTY RELATES T O THE SAME PLANT AND MACHINERY ON WHICH ADDITIONAL DEPRECIATIO N HAS ALSO BEEN ALLOWED, WE AGREE WITH THE LD. COUNSEL FO R ASSESSEE THAT THERE IS NO NEED AND THERE REMAINS NO REASON T O VERIFY WHETHER THE REQUISITE CONDITIONS FOR GRANT OF ADDIT IONAL DEPRECIATION HAVE BEEN MADE BY THE ASSESSEE SINCE T HE SAME ALREADY STANDS VERIFIED WITH RESPECT TO THE PLANT A ND MACHINERY TO WHICH THEY RELATE AND ON WHICH THE CLA IM OF ADDITIONAL DEPRECIATION HAS ALREADY BEEN ALLOWED BY THE A.O. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) IN THIS REGARD AND ALLOW THE CLAIM OF THE ASSESSEE OF ADDITIONAL DEPRECIATION OF RS.57,597/-. GROUND OF APPEAL NO.2, THEREFORE, STANDS ALLOWED. 9. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UNDE R: 3. THAT ON LAW, FACTS AND CIRCUMSTANCES OF THE ITA NO.1612/CHD/2017 A.Y.2013-14 4 CASE, THE WORTHY CIT (A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION OF LD. AO, WHEREBY HE, ON THE CONJECTURES AND SURMISES, ERRED IN ARBITRARILY DISALLOWING RENT OF RS.9,60,000/- PAID FOR HIRING OF RESIDENTIAL ACCOMMODATION. 10. IN THE ABOVE GROUND THE ASSESSEE HAS CHALLENGED THE ACTION OF THE LD.CIT(A) IN DISALLOWING RENT EXPENSE S PAID AMOUNTING TO RS.9,60,000/-. 11. BRIEF FACTS RELEVANT TO THE ISSUE ARE THAT DURI NG THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS ASKED TO G IVE DETAILS OF THE BUSINESS PREMISES WHERE THE BUSINESS WAS BEING RUN. IN ITS REPLY REGARDING THE DETAILS OF TH E BUSINESS PREMISES, THE ASSESSEE DID NOT MENTION THE NAME OF THE PREMISES AT H,NO.-133, SECTOR-8A, CHANDIGARH. THE SUBSEQUENT REPLY FILED BY THE ASSESSEE WAS THAT THE ABOVE MENTIONED ACCOMMODATION WAS TAKEN ON RENT TO PROVIDE ACCOMMODATION TO THE STAFF WHO REMAINED ON TOUR AND FOR THE STAY OF STAF F OF THE CUSTOMERS. FOR THIS PURPOSE, THE DIRECTORS HAD LET OUT A PART OF THE H.NO.133, SECTOR-8A, CHANDIGARH T O THE ASSESSEE COMPANY AT MONTHLY RENT OF RS.89,000/ -. THE ASSESSING OFFICER NOT SATISFIED WITH THE SUBSEQUENT REPLY OF THE ASSESSEE DISALLOWED A SUM O F RS.9,60,000 /- AND MADE ADDITION TO THE INCOME OF T HE ASSESSEE. 12. DURING THE APPELLATE PROCEEDINGS THE ASSESSEE REITERATED THE CONTENTIONS MADE BEFORE THE A.O. AND FURTHER STATED THAT EVEN THE LAND DEED HAD BEEN FURNISHED AND TDS HAS BEEN DEDUCTED ON THE RENT PAI D AND, THEREFORE, THERE WAS NO REASON FOR MAKING ANY ITA NO.1612/CHD/2017 A.Y.2013-14 5 DISALLOWANCE OF THE RENT EXPENSES. THE LD.CIT(A) HE LD THAT THE FACTUM OF HAVING MADE THE PAYMENT OF THE RENT IS NOT DISPUTED AND THE DISPUTE IS ONLY WITH REGARD TO THE USAGE OF THE SAID PROPERTY FOR BUSINE SS PURPOSES WHICH SPECIFIC INFORMATION HAS NOT BEEN FURNISHED BY THE ASSESSEE. HE, THEREFORE, UPHELD TH E ORDER OF THE A.O. HOLDING AT PARAS 8.2 AND 8.3 OF H IS ORDER AS UNDER: 8.2 AS FAR AS PAYMENT OF RENT, TDS DEDUCTED THEREO N OR RENT DEED ARE CONCERNED, THE APPELLANT HAS SUBMITTE D THE NECESSARY EVIDENCES. HOWEVER, AS REGARDS THE USE OF THE SAID PREMISES FOR BUSINESS PURPOSE IS CONCERNED, TH E REPLY FIELD BY THE APPELLANT BEFORE THE ASSESSING OFFICER WAS CONSIDERED VAGUE BY HIM AS THE APPELLANT DID NOT FUR NISH ANY PROOF OF USE OF THE SAID PREMISES FOR BUSINESS PURPOSES. DURING APPEAL ALSO, THE APPELLANT HAS NOT SUBMITTED ANY SPECIFIC INFORMATION REGARDING THE US E OF THE SAID PREMISES FOR BUSINESS PURPOSES VIZ. FIXED ASSET S INSTALLED BY THE COMPANY THEREIN OR ANY EMPLOYEE OF THE COMPANY EMPLOYED THERE OR ANY OTHER DETAILS SUCH AS ELECTRICITY METER ESTABLISHING THAT THE PROPE RTY WAS BEING USED FOR COMMERCIAL PURPOSES. DURING APPEAL PROCEEDINGS, A COPY OF RENT DEED DATED 04.10.2011 W AS FILED BY THE APPELLANT. AS PER PARA 4 OF THE RENT DEED, - 'THAT THE TENANT SHALL USE THE SAID PREMISE S FOR ADMINISTRATIVE OFFICE AND SHALL NOT USE THE SAME FO R ANY UNAUTHORIZED BUSINESS AND SHALL ALSO ABIDE BY THE PROVISIONS OF CAPITAL OF PUNJAB (DEVELOPMENT & REGULATIONS) ACT, 1 952 AND THE RULES FRAMED THEREUN DER DURING THE TENANCY P ERIOD. THE EXPLANATION SUBMITTED BY THE APPELLANT BEFORE THE ASSESSING OFFICER AS DURING APPEAL THAT THE APPELLANT HAS TAKEN THE PREMISES ON RENT FOR USE BY THE EMPLOYEES OR CUSTOMER'S EMPLOYEES IS FOUND BASELESS AND INCORRECT. AS PER THE RENT DEED, THE PREMISES WAS TAKEN ON RENT FOR ADMINISTRATIVE OFFICE AND NOT FOR THE PURPOSE OF STAFF. 8 .3 THE APPELLANT HAS FAILED TO DISCHARGE HIS ONUS TO PROVE THAT THE PROPERTY WAS BEING USED BY IT F OR THE PURPOSES OF THE BUSINESS, THEREFORE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS CONFIRMED. GROUND OF APPEAL NO. 3 IS DISMISSED. 13. BEFORE US THE LD. COUNSEL FOR ASSESSEE REITERAT ED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES ITA NO.1612/CHD/2017 A.Y.2013-14 6 STATING THAT THE USAGE OF THE PROPERTY FOR BUSINESS PURPOSES HAD BEEN CLEARLY ESTABLISHED BY SUBMITTING BEFORE THEM THAT THE SAID ACCOMMODATION HAS BEEN TAKEN ON RENT TO PROVIDE ACCOMMODATION TO THE STAFF WHO REMAINED ON TOUR OF THE ASSESSEE AND ALSO TO PROVIDE ACCOMMODATION FOR THE STAFF OF THE CUSTOMER S WHO CAME TO VISIT THE ASSESSEE FOR BUSINESS PURPOSE S. THE LD. COUNSEL FOR ASSESSEE FURTHER POINTED OUT TH AT THE RENTAL WAS PAID IN THE PRECEDING YEAR ALSO I.E. ASSESSMENT YEAR 2012-13 WHEREIN A QUESTIONNAIRE WAS ISSUED TO THE ASSESSEE IN RESPONSE TO WHICH COPIES OF RENT DEED IN RESPECT OF ALL THE PROPERTIES HIRED WA S FILED BY THE ASSESSEE WHICH INCLUDED THE IMPUGNED PROPERTY BEING HOUSE NO.133, SECTOR 8-A, CHANDIGARH TAKEN ON RENT FOR THE PURPOSE OF RESIDENTIAL ACCOMMODATION FOR STAFF OF VISITORS. OUR ATTENTION WAS DRAWN TO THE ASSESSMENT ORDER PASSED BY THE A.O. FO R ASSESSMENT YEAR 2012-13 MAKING NO DISALLOWANCE IN RESPECT OF THE RENT PAID AND ALSO TO THE COPY OF TH E QUESTIONNAIRE ISSUED BY THE A.O. DURING THE ASSESSMENT PROCEEDINGS FOR THE SAID YEAR AND REPLY FILED BY THE ASSESSEE SUBMITTING THE LEASING OF PREMISES FOR WHICH RENT WAS PAID, COPY OF LEDGER ACCOUNT OF RENT PAID AND ALSO COPY OF THE RELEVANT RENT DEED. THE LD. COUNSEL FOR ASSESSEE ALSO CONTENDED T HAT THE SAID RENTAL INCOME HAD BEEN DULY DISCLOSED IN T HE RETURNS OF THE DIRECTORS OF THE ASSESSEE COMPANY TO WHOM THE SAME HAD BEEN PAID AND TAXES PAID THEREON ITA NO.1612/CHD/2017 A.Y.2013-14 7 AND EVEN ASSESSED U/S 143(3) OF THE ACT. IT WAS ALS O CONTENDED THAT EVEN SERVICE TAX HAD BEEN PAID ON TH E LETTING OUT OF THE SAID PROPERTY. RELEVANT DOCUMENT S IN THIS REGARD WERE FILED BEFORE US IN THE PAPER BOOK. 14. THE LD. DR, ON THE OTHER HAND, HEAVILY RELIED UPON ON THE ORDER OF THE CIT(A) STATING THAT THE ASSESSEE HAD FILED TO PROVE USER OF THE SAID PREMIS ES FOR BUSINESS PURPOSES AND, THEREFORE, THE LD.CIT(A) HAD RIGHTLY DISALLOWED THE CLAIM OF THE ASSESSEE. 15. WE HAVE HEARD THE RIVAL CONTENTIONS. WE FIND MERIT IN THE CONTENTIONS OF THE LD. COUNSEL FOR ASSESSEE. THE FACTUM OF PAYMENT OF RENT IS NOT DISPUTED AS RIGHTLY HELD BY THE LD.CIT(A). IT IS O NLY ITS USAGE FOR BUSINESS PURPOSES WHICH WAS FOUND BY THE LD.CIT(A) TO HAVE NOT BEEN ESTABLISHED BY THE ASSES SEE AND FOR THIS REASON HE DISALLOWED THE CLAIM OF THE ASSESSEE. WE FIND THAT THE FINDING OF THE LD.CIT(A) IN THIS REGARD IS NOT CORRECT. THE ASSESSEE HAD ALL ALONG CONTENDED THAT IT HAD TAKEN PREMISES ON RENT TO PROVIDE ACCOMMODATION TO ITS STAFF WHO REMAINED ON TOUR AND FOR THE STAY OF STAFF OF CUSTOMERS. THIS CONTENTION HAS NOT BEEN CONTROVERTED BY THE REVENUE NOR ANY INFIRMITY POINTED OUT IN THE SAME.MOREOVER THE BALANCE SHEET OF THE ASSESSEE, FILED AT PAGES 27 TO 39 OF THE PAPER BOOK, REVEALS THAT IT IS A BIG BUSI NESS HOUSE WITH AN ISSUED CAPITAL OF RS.5.04 CRORES, HAV ING ITA NO.1612/CHD/2017 A.Y.2013-14 8 RESERVES AND SURPLUS OF RS.8.5 CRORES AND A TOTAL TURNOVER OF RS.39.65 CRORES IN THE IMPUGNED YEAR AN D RS.34.76 CRORES IN THE PRECEDING YEAR. THEREFORE, CLEARLY IT IS A LARGE BUSINESS HOUSE AND IT IS NORM AL FOR SUCH BUSINESS HOUSES TO MAINTAIN GUEST HOUSES FOR I TS TOURING STAFF AND CUSTOMERS. FURTHER THE FACTUM OF PAYMENT OF RENT IS NOT DISPUTED. AND IN THE PRECE DING YEAR, THE A.O. AFTER PERUSING THE RELEVANT DETAILS RELATING TO THE RENT PAID INCLUDING RENT DEED HAD ACCEPTED THE SAME. 16. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES,WE , HOLD THAT THE DISALLOWANCE MADE BY THE CIT(A) OF RE NT EXPENSES AMOUNTING TO RS.9,60,000/- WAS BASED ON INCORRECT APPRECIATION OF FACTS.WE THEREFORE SET A SIDE THE ORDER OF THE LD.CIT(A) AND ALLOW THE CLAIM OF T HE ASSESSEE OF THE RENT EXPENSES INCURRED OF RS.9,60,000/-. GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE, THEREFORE, STANDS ALLOWED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ' #! $ % (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER &' / ACCOUNTANT MEMBER )' /DATED: 9 TH JANUARY, 2019 * ! * ITA NO.1612/CHD/2017 A.Y.2013-14 9 &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR ITA NO.1612/CHD/2017 A.Y.2013-14 10