Rishi Graphics Pvt. Ltd., , Kolkata V. ITO, Ward - 3(1), Kolkata, Kolkata

ITA 1668/KOL/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1827 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2003-2004
• Appeal Filed On: 17-07-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMITAVA BHATTACHARYA CIT REV
• Assessee Lawyers: O P BAID
• Keywords: Depreciation; Revenue expenditure
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH (SMC), KOLKATA [BEFORE SHRI P.M. JAGTAP, AM] I.T.A. NOS. 1666 TO 1668/KOL/2017 ASSESSMENT YEARS : 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. ..............................APPELLANT C/O. BAID & CO., CHARTERED ACCOUNTANTS, 10C, BALLYGUNGE CIRCULAR ROAD, KOLKATA 700 019 [PAN : AABCR 1977 M] INCOME TAX OFFICER.................................RESPONDENT WARD NO. 3(1), KOLKATA, AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069 APPEARANCES BY: SHRI O.P. BAID, FCA APPEARING ON BEHALF OF THE ASSESSEE. SHRI AMITAVA BHATTACHARYA, ADDL. CIT APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JANUARY 11, 2018 DATE OF PRONOUNCING THE ORDER : JANUARY 17, 2018 ORDER THESE THREE APPEALS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE THREE SEPARATE ORDERS OF LD. CIT(APPEALS) 2, KOLKATA FOR A.Y. 2002-03 AND 2003-04 AND SINCE THE ISSUES INVOLVED THEREIN ARE COMMON AND INTER RELATED, THE SAME HAVE BEEN HEARD TOGETHER AND ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST I TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2002-03 BEING ITA NO. 1666/K/2017 WHICH IS DIRECTED AGAINST THE ORDER OF LD. CIT(A) 2, KOLKATA DATED 07.04.2017. 3. THE ISSUE INVOLVED IN GROUND NO 1 OF THIS APPEAL RELATES TO THE DISALLOWANCE OF RS. 39,000/- MADE BY THE A.O. AND CONFIRMED BY THE 2 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. LD. CIT(A) ON ACCOUNT OF DEDUCTION CLAIMED BY THE ASSESSEE FOR RENT PAID IN RESPECT OF COMMERCIAL SPACE HIRED. 4. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE BUSINESS OF TRADING IN PRINTING PAPERS & MATERIAL. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 23.09.2002 DECLARING A TOTAL INCOME OF RS. 3,63,350/-. IN THE SAID RETURN, THE RENTAL INCOME OF RS. 3,90,000/- RECEIVED BY THE ASSESSEE COMPANY WAS DECLARED UNDER THE HEAD INCOME FROM HOUSE PROPERTY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS SUBMITTED ON BEHALF OF THE ASSESSEE IN THIS REGARD THAT THE PROPERTY WAS TAKEN BY IT ON RENT FROM M/S. PRINT SALES COMPANY ON A MONTHLY RENT OF RS. 3,000/- AND THE SAME WAS SUBLET TO M/S. RUMTEEK FINVEST PVT. LTD. AT A MONTHLY LICENSE FEE OF RS. 30,000/-. THE ASSESSEE THUS WAS NOT THE OWNER OF THE PROPERTY AND THE RENTAL INCOME RECEIVED FROM THE SAME WAS ACCORDINGLY BROUGHT TO TAX BY THE A.O. UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY. THE DEDUCTION CLAIMED BY THE ASSESSEE AGAINST THE SAID INCOME ON ACCOUNT OF RENT OF RS. 3,000/- P.M. PAYABLE TO M/S. PRINT SALES COMPANY, HOWEVER, WAS DISALLOWED BY THE A.O. ON THE GROUND THAT IT WAS NOT CLEAR AS TO WHETHER THE SAID EXPENDITURE WAS ACTUALLY INCURRED BY THE ASSESSEE. HE NOTED IN THIS CONTEXT THAT THE RENT @ RS. 3,000/- P.M. WAS NOT PAID TO M/S. PRINT SALES COMPANY. ON APPEAL, THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE A.O. ON THIS ISSUE. 5. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE RENT RECEIVED FROM THE CONCERNED PROPERTY FROM M/S. 3 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. RUMTEEK FINVEST PVT. LTD. WAS TAXED BY THE A.O. IN THE HANDS OF THE ASSESSEE COMPANY UNDER THE HEAD INCOME FROM OTHER SOURCES INSTEAD OF INCOME FROM HOUSE PROPERTY ON THE GROUND THAT THE SAME WAS NOT OWNED BY THE ASSESSEE AND IT WAS TAKEN ON RENT FROM M/S. PRINT SALES COMPANY. HE, HOWEVER, DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE ON ACCOUNT OF RENT PAYABLE TO M/S. PRINT SALES COMPANY MAINLY ON THE GROUND THAT SUCH RENT WAS NOT PAID BY THE ASSESSEE COMPANY TO THE SAID OWNER. AS SUBMITTED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE THE TRIBUNAL, THE ASSESSEE COMPANY HAS PAID THE SAID RENT TO M/S. PRINT SALES COMPANY IN THE F.Y. 2003-04 AND THIS POSITION CAN BE ESTABLISHED BY IT ON EVIDENCE IF THE MATTER IS SENT BACK TO THE A.O. FOR VERIFICATION. SINCE THE LEARNED DR HAS ALSO NOT RAISED ANY OBJECTION IN THIS REGARD, I SET ASIDE THE IMPUGNED ORDER OF THE LD. CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE A.O. FOR DECIDING THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF RENT PAID TO M/S. PRINT SALES COMPANY AFTER NECESSARY VERIFICATION. GROUND NO 1 OF THE ASSESSEES APPEAL FOR A.Y. 2002-03 IS TREATED AS ALLOWED. 6. AS REGARDS THE ISSUE RAISED IN GROUND NO 2 OF THE ASSESSEES APPEAL FOR A.Y. 2002-03 RELATING TO ITS CLAIM FOR HIGHER DEPRECIATION @ 60% ON A COLOUR SCANNER, IT IS OBSERVED THAT THE SAME IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE DIVISION BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS SAMIRAN MAJUMDAR 280 ITR (AT) 74 WHEREIN IT WAS HELD THAT THE PRINTER AND SCANNER BEING INTEGRAL PART OF COMPUTER SYSTEMS ARE ENTITLED FOR HIGHER RATE OF DEPRECIATION AS APPLICABLE TO THE COMPUTERS. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DIRECT THE A.O. TO ALLOW CLAIM OF 4 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. THE ASSESSEE FOR HIGHER DEPRECIATION AT 60% ON COLOUR SCANNER AND ALLOW GROUND NO 2 OF THE ASSESSEES APPEAL FOR A.Y. 2002-03. 7. GROUND NO 3 & 4 RAISED BY THE ASSESSEE IN THE APPEAL FOR A.Y. 2002-03 HAVE NOT BEEN PRESSED BY THE LEARNED COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE TRIBUNAL. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRESSED. 8. NOW, I TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2003-04 BEING ITA NO. 1667/K/2017 WHICH IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) 2, KOLKATA DATED 07.04.2017. THE ISSUE INVOLVED IN GROUND NO 1 RELATES TO THE ADDITION OF RS. 3,00,543/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF REJECTION OF ASSESSEES CLAIM FOR PURCHASE RETURNS BY TREATING THE SAME AS UNPROVED. 9. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY HAD RAISED VARIOUS DEBIT NOTES ON ACCOUNT OF GOODS RETURNED BACK TO THE SUPPLIERS. ACCORDING TO THE A.O., THE ASSESSEE COMPANY HOWEVER FAILED TO ESTABLISH THE GENUINENESS OF THE DEBIT NOTES CLAIMED TO BE ISSUED BY IT. HE ALSO HELD THAT THE ASSESSEE COMPANY HAD FAILED TO PROVE AS TO WHETHER THE CORRESPONDING PURCHASES WERE RECORDED IN ITS BOOKS OF ACCOUNTS OR NOT. HE FURTHER NOTED THAT THE TIME TAKEN BY THE ASSESSEE COMPANY TO RETURN THE GOODS IN SOME CASES WAS MORE THAN ONE YEAR. ACCORDING TO HIM, THE ASSESSEE COMPANY THUS HAD TRIED TO SUPPRESS ITS PURCHASES BY ISSUING DEBIT NOTES WHEN SUCH PURCHASES WERE NOT RECORDED IN ITS BOOKS OF ACCOUNTS. HE, THEREFORE, MADE ADDITION OF RS. 3,00,543/- TO THE TOTAL INCOME OF THE ASSESSEE ON ACCOUNT OF PURCHASES 5 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. OUTSIDE THE BOOKS OF ACCOUNTS. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID ADDITION. 10. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERVED THAT THE INFERENCE OF PURCHASES MADE BY THE ASSESSEE OUTSIDE THE BOOKS OF ACCOUNTS WAS DRAWN BY THE A.O. ON THE BASIS OF DEBIT NOTES ISSUED BY THE ASSESSEE COMPANY FOR PURCHASE RETURNS. IN MY OPINION, IF AT ALL THE CORRESPONDING PURCHASES HAD NOT BEEN RECORDED BY THE ASSESSES COMPANY IN ITS BOOKS OF ACCOUNTS AS ALLEGED BY THE A.O., THERE WAS NO REASON FOR THE ASSESSEE COMPANY TO ISSUE DEBIT NOTES ON ACCOUNT OF PURCHASE RETURNS BECAUSE THE SAME RESULTED IN REDUCTION OF EXPENDITURE CLAIMED BY IT ON ACCOUNT OF PURCHASES. EVEN THE INFERENCE DRAWN BY THE A.O. ABOUT THE UNACCOUNTED PURCHASES ON THE BASIS OF DEBIT NOTES ISSUED BY THE ASSESSEE WAS TOTALLY UNFOUNDED AS SOME OF SUCH PURCHASES, AS NOTED BY THE A.O. HIMSELF, WERE MADE IN THE IMMEDIATELY PRECEDING YEAR. IN ANY CASE, IF THE DEBIT NOTES ISSUED BY THE ASSESSEE ON ACCOUNT OF PURCHASE RETURNS WERE FOUND TO BE UNSUBSTANTIATED, THE EXPENDITURE ON PURCHASES TO THAT EXTENT WOULD HAVE TO BE INCREASED AND THERE CANNOT BE MADE ANY ADDITION TO THE TOTAL INCOME OF THE ASSESSEE ON THIS ISSUE BY ANY STRETCH OF IMAGINATION. I, THEREFORE, FIND THE ADDITION MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE AS UNSUSTAINABLE AND DELETING THE SAME, I ALLOW GROUND NO 1 OF THE ASSESSEES APPEAL FOR A.Y. 2003-04. 11. AS REGARDS THE ISSUE RAISED IN GROUND NO 2 OF THE ASSESSEES APPEAL FOR A.Y. 2003-04 RELATING TO THE ADDITION OF RS. 5,049/- MADE 6 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. BY THE A.O. ON ACCOUNT OF ALLEGED GROSS PROFIT EARNED BY THE ASSESSEE FROM THE PURPORTED SALES MADE FROM THE UNACCOUNTED PURCHASES, IT IS OBSERVED THAT SAME IS CONSEQUENTIAL TO THE ISSUE INVOLVED IN GROUND NO 1 OF THE ASSESSEES APPEAL. KEEPING IN VIEW OUR DECISION RENDERED ON GROUND NO 1 DELETING THE ADDITION MADE BY THE A.O. ON ACCOUNT OF ALLEGED UNACCOUNTED PURCHASES, I DELETE THIS CONSEQUENTIAL ADDITION MADE BY THE A.O. AND ALLOW GROUND NO 2 OF THE ASSESSEES APPEAL. 12. THE ISSUE RAISED IN GROUND NO 3 OF ASSESSEES APPEAL FOR A.Y. 2003-04 RELATES TO THE ADDITION OF RS. 1,29,103/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF DISALLOWANCE OF REPAIRS AND MAINTENANCE EXPENDITURE BY TREATING THE SAME AS CAPITAL IN NATURE. 13. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE EXPENDITURE CLAIMED BY THE ASSESSEE UNDER THE HEAD OFFICE AND GODOWNS MAINTENANCE WAS EXAMINED BY THE A.O. AND ON SUCH EXAMINATION, HE FOUND THE FOLLOWING EXPENSES AGGREGATING TO RS. 1,29,103/- AS CAPITAL IN NATURE: SL. NO. DATE DETAILS OF EXPENDITURES AMOUNT IN RS. I. 12.05.2002 PAID TO KVC ELECTRONICS & ELECTRICALS PVT. LTD. FOR AMC OF 4 CAMERAS & 1 MONITOR 3,750.00 II. 20.11.2002 PAID TO P. PAUL & BROTHERS PVT. LTD. TOWARDS GODOWN RACK MAKING CHARGES 54,703.50 III. 30.11.2002 PAID TO SK. MALIK HOSSAIN TOWARDS PLYWOOD PURCHASE FOR GODOWN RACK 21,150.00 IV. 03.12.2002 AMOUNT PAID TO SAMBHU SINGH TOWARDS SAND, CEMENT, BRICKS PURCHASE FOR GODOWN REPAIR PURPOSE 3,000.00 V. 17.12.2002 BEING THE AMOUNT PAID FOR PURCHASE OF PLYWOOD FOR GODOWN RACK REPAIRING PURPOSE 6,500.00 VI. 22.12.2002 AMOUNT PAID TO WESTON FURNITURE TOWARDS GODOWN RACK MAKING CHARGES 40,000.00 7 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. THE CLAIM OF THE ASSESSEE FOR DEDUCTION ON ACCOUNT OF EXPENDITURE INCURRED ON OFFICE AND GODOWNS MAINTENANCE THUS WAS DISALLOWED BY THE A.O. TO THE EXTENT OF RS. 1,29,103/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE SAID DISALLOWANCE. 14. I HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD THE DETAILS OF OFFICE AND GODOWN EXPENSES IN QUESTION INCURRED BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION AT PAGE NO 28 AND 29 OF THE PAPER BOOK AND A PERUSAL OF THE SAME SHOWS THAT THE SAID EXPENDITURE WAS MAINLY INCURRED BY THE ASSESSEE ON REPAIRS AND RENOVATION OF STORAGE RACKS USED IN THE GODOWN. AS RIGHTLY CONTENDED BY HIM, THE SAID EXPENDITURE THUS DID NOT RESULT IN ANY ENDURING BENEFIT TO THE ASSESSEE COMPANY IN THE CAPITAL FIELD AND THE SAME HAVING BEEN INCURRED ON REPAIRS AND REPLACEMENT IS LIABLE TO BE ALLOWED AS REVENUE EXPENDITURE. THE DESCRIPTION GIVEN IN THE RELEVANT BILLS, COPIES OF WHICH ARE ALSO PLACED ON RECORD BEFORE THE TRIBUNAL, ALSO SUPPORTS AND SUBSTANTIATES THIS VIEW. I, THEREFORE, DELETE THE DISALLOWANCE MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON THIS ISSUE AND ALLOW GROUND NO 3 OF THE ASSESSEES APPEAL FOR A.Y. 2003-04. 15. AS REGARDS ANOTHER APPEAL OF THE ASSESSEE FOR A.Y. 2003-04 BEING ITA NO. 1668/K/2017 WHICH IS ARISING FROM THE ORDER PASSED BY THE A.O. UNDER SECTION 154 DISALLOWING THE CLAIM OF THE ASSESSEE FOR DEPRECIATION AT HIGHER RATE ON COLOUR SCANNER, IT IS OBSERVED THAT THIS SOLITARY ISSUE INVOLVED IN THE APPEAL OF THE ASSESSEE IS SQUARELY 8 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE DIVISION BENCH OF THIS TRIBUNAL IN THE CASE OF ITO VS SAMIRAN MAJUMDAR 280 ITR (AT) 74 WHEREIN IT WAS HELD THAT THE PRINTER AND SCANNER BEING INTEGRAL PART OF COMPUTER SYSTEMS ARE ENTITLED FOR HIGHER RATE OF DEPRECIATION AS APPLICABLE TO THE COMPUTERS. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE TRIBUNAL, WE DIRECT THE A.O. TO ALLOW CLAIM OF THE ASSESSEE FOR HIGHER DEPRECIATION AT 60% ON COLOUR SCANNER AND ALLOW THIS ASSESSEES APPEAL. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR A.Y. 2002-03 IS TREATED AS PARTLY ALLOWED WHILE BOTH THE APPEALS OF THE ASSESSEE FOR A.Y. 2003-04 ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH JANUARY, 2018. SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED: 17/01/2018 BISWAJIT, SR. PS COPY OF ORDER FORWARDED TO: 1. M/S. RISHI GRAPHICS PVT. LTD., C/O. BAID & CO., CHARTERED ACCOUNTANTS, 10C BALLYGUNGE CIRCULAR ROAD, KOLKATA 700 019. 2. I.T.O., WARD NO. 3(1), AAYAKAR BHAWAN, P-7, CHOWRINGHEE SQUARE, KOLKATA 700 069. 3. THE CIT(A) 4. THE CIT 5. DR 9 I.T.A. NOS. 1666 TO 1668/KOL/2017 A.YS. 2002-03 & 2003-04 M/S. RISHI GRAPHICS PVT. LTD. TRUE COPY, BY ORDER, SR. P.S. / H.O.O. ITAT, KOLKATA