AP State Coop Rural Irrigation Corp. Limited, Hyderabad V. Dy.CIT, Circle-5(1),Hyd., Hyderabad

ITA 1721/HYD/2013

• Counselvise Citation: 172122514 RSA 2013
• Duration Of Justice: 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 16-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: C H AMANULLA KHAN
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO. 1721/HYD/2013 ASSESSMENT YEAR : 2009-10 AP STATE COOP RURAL IRRIGATION CORP. LTD., HYDERABAD PAN AAAA6348Q DY. COMMISSIONER OF INCOME- TAX, CIRCLE 5(1), HYDERABAD. (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI C.H. AMANULLA KHAN REVENUE BY SHRI SOLGY JOSE T. KOTTARAM DATE OF HEARING 22-07-2014 DATE OF PRONOUNCEMENT 28-08-2014 O R D E R PER SAKTIJIT DEY, J.M.: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 30/08/2013 OF THE CIT(A)-V, HYDERABAD PERTAINING T O THE AY 2009-10. 2. THE SOLE ISSUE IN THE PRESENT APPEAL IS CONFINED TO ADDITION OF RS. 2,28,96,000 MADE BY THE AO AND SUSTAINED BY THE CIT(A). 3. BRIEFLY THE FACTS ARE, ASSESSEE IS A STATE LEVEL APEX COOP SOCIETY ESTABLISHED IN THE YEAR 1981 BY THE GOVERNM ENT OF ANDHRA PRADESH FOR HELPING THE SMALL AND MEDIUM FARMERS IN EXPLORING THE GROUND WATER FOR IRRIGATION PURPOSE. ITS SHAREHOLDE RS CONSIST OF THE GOVERNMENT OF AP AND MANY COOPERATIVE SOCIETIES. 2 ITA NO. 1721/HYD/2013 AP STATE COOP RURAL IRRIGATION CORP LTD. 4. DURING THE ASSESSMENT PROCEEDING, ON EXAMINING T HE BALANCE SHEET AO NOTICED THAT GRANTS AND SUBSIDIES RECEIVED FROM STATE GOVERNMENT AND GOVT. OF INDIA TO THE TUNE OF RS. 4, 00,000 AND RS. 1,61,96,000 RESPECTIVELY AND MARGIN MONEY AMOUNTING TO RS. 63,00,000 WERE SHOWN AS LIABILITY IN THE BALANCE SH EET UNDER THE HEAD GRANTS AND SUBSIDIES. THEREFORE, AO ASKED THE ASS ESSEE TO EXPLAIN IT BY PRODUCING ALL DETAILS. HOWEVER, AS MENTIONED BY AO IN ASSESSMENT ORDER, ASSESSEE COULD NOT PRODUCE SUFFIC IENT DOCUMENTARY EVIDENCE TO PROVE THAT THE RECEIPT IS F OR THE PURPOSE OF SUBSIDY/GRANT, EXCEPT STATING THAT GRANTS AND SUBSI DIES FROM THE STATE AND CENTRAL GOVERNMENTS WERE RECEIVED 20 YEARS BACK TO MEET THE CAPITAL EXPENDITURE AND SAME WAS APPEARING IN THE B ALANCE SHEET FOR THE PAST 20 YEARS. ASSESSEE SUBMITTED THAT THE AMOU NT OF RS. 159,00,000 WAS GRANTED UNDER CENTRALLY SPONSORED SC HEME BY THE GOVT. OF INDIA IS NOTHING BUT A GRANT/SUBSIDY. THE AO OBSERVED THAT IF THE GRANT-IN-AID OF RS. 1.59 CRORES (WRONGLY MENTIO NED AS RS. 159 CRORES) WAS UTILIZED FOR CAPITAL WORKS, IT MUST HAV E BEEN IN THE FORM OF FIXED ASSETS. HENCE, DEPRECIATION SHOULD NOT BE CL AIMED ON THE FIXED ASSETS ACQUIRED WITH THE SUBSIDY/GRANT-IN-AID, BUT THE ASSESSEE HAD NOT SEPARATED FIXED ASSETS AND WAS CLAIMING DEPRECI ATION ON WHOLE ASSETS. THE ASSESSEE COULD NOT PRODUCE SEPARATE LIS T OF ASSETS. THE AO OBSERVED, FOR THIS REASON DEPRECIATION CLAIMED B Y THE ASSESSEE IS TO BE DISALLOWED FROM THE YEAR OF RECEIPT. FURTHER, AO OBSERVED, ASSESSEE ALSO COULD NOT ESTABLISH THAT THE AMOUNT R ECEIVED WAS INCURRED ONLY FOR THE PURPOSE OF CAPITAL WORKS BY A NY DOCUMENTARY EVIDENCE. AO FELT THAT GRANT UTILIZED FOR THE PURPO SE OF STRENGTHENING GROUND WATER SCHEME SUCH AS MINOR IRRIGATION SCHEME S, INVESTMENTS IN PUBLIC SECTOR AND OTHER UNDERTAKINGS AND INVESTM ENT IN APSCRIC 180 INVESTMENTS, WHICH ARE IN NATURE OF DAY TO DAY REVENUE EXPENDITURE. THE AO NOTED THAT THE LIABILITY SHOWN BY THE ASSESSEE IN THE BALANCE SHEET FOR FY 2008-09 RELEVANT TO AY 200 9-10 WAS OF RS. 1,61,96,000 WAS DISALLOWED TREATING IT AS REVENUE E XPENDITURE. THE AO OPINED THAT AMOUNT OF RS. 1,61,96,000 GRANTED BY THE CENTRAL 3 ITA NO. 1721/HYD/2013 AP STATE COOP RURAL IRRIGATION CORP LTD. GOVT. WAS NOT REQUIRED TO BE RETURNED BACK TO THE C ENTRAL GOVT. HE WAS OF THE VIEW, AS THE AMOUNT WAS NOT TO BE RETURNED B ACK, THE SAME SHOULD HAVE BEEN WRITTEN OFF BY THE ASSESSEE BUT HA S NOT BEEN DONE. ACCORDINGLY, AO TREATED THE AMOUNT OF RS. 1.61 CROR ES AS WRITTEN OFF DURING THE FY 2008-09 AND ADDED THE SAME TO THE TOT AL INCOME AS REVENUE RECEIPT. 5. REGARDING RS. 4 LAKHS SHOWN AS SUBSIDY FROM STAT E AND CENTRAL GOVT. AND MARGIN MONEY OF RS. 63 LAKHS, THE AO OBSE RVED THAT THE ASSESSEE COULD NOT EXPLAIN WHY THE SUMS WERE TREATE D AS LIABILITY NOR PRODUCED ANY DOCUMENTARY EVIDENCE TO ESTABLISH ITS CLAIM APART FROM STATING THAT LIABILITY AROSE LONG BACK. THEREFORE, THE AO TREATED THE SAME AS RECEIPTS AND ADDED TO THE TOTAL INCOME AS G RANTS AND SUBSIDIES. 6. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE C ARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). BEFORE THE CIT( A) THE ASSESSEE FILED ADDITIONAL SUBMISSIONS DATED 21/06/2012 AND 2 3/08/2013, WHICH WERE EXTRACTED BY THE CIT(A) ON PAGES 4 TO 6 OF HIS ORDER. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CI T(A) CONFIRMED THE ADDITION MADE BY THE AO BY HOLDING AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE APPELLANT AND THE REASONINGS OF THE AO. I FULLY AGR EE WITH THE REASONINGS GIVEN BY THE AO. REGARDING THE GRANT/SUB SIDY OF RS. 1,61,96,000, THE APPELLANT DID NOT PRODUCE SUFFICIE NT DOCUMENTARY EVIDENCE TO PROVE THAT THE RECEIPT WAS FOR THE PURPOSE OF SUBSIDY/GRANT AND HAD BEEN UTILIZED FOR CAPITAL WORKS. REGARDING RS. 4 LAKHS SHOWN AS SUBSIDY FROM THE STATE AND CENTRAL GOVT. AND MARGIN MONEY OF RS. 63 LAKHS, THE APPELLANT COULD NOT EXPLAIN TREATING THEM AS LIABIL ITY NOR PRODUCED ANY DOCUMENTARY EVIDENCE TO ESTABLISH ITS CLAIM, BUT SIMPLY STATED THAT THE SAME LIABILITY AROSE LONG BA CK. HENCE, I CONFIRM THE ACTION OF THE AO IN TREATING THEM AS RE VENUE RECEIPTS AND ADDING TOTAL AMOUNT OF RS. 2,28,96,000 TO THE TOTAL INCOME. 7. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFOR E US. 4 ITA NO. 1721/HYD/2013 AP STATE COOP RURAL IRRIGATION CORP LTD. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE MATERIALS ON RECORD AS WELL THE ORDERS OF THE R EVENUE AUTHORITIES ON THIS ISSUE. ON PERUSAL OF THE BALANCE SHEETS OF THE ASSESSEE, IT IS QUITE EVIDENT THAT THE AMOUNT OF RS. 1,61,96,000 W AS RECEIVED IN FY 1991-92 & 1992-93 AND ASSESSEE HAS CONSISTENTLY SH OWN IT AS A LIABILITY IN THE BALANCE SHEET AS ON 31/03/1993 AND THEREAFTER. THEREFORE, IF AT ALL IT IS TO BE CONSIDERED AS A RE VENUE RECEIPT, CERTAINLY IT CANNOT BE ASSESSED IN THE IMPUGNED ASS ESSMENT ORDER AS IT WAS RECEIVED IN FY 1991-92 AND 1992-93. IT IS NO T UNDERSTOOD HOW AN AMOUNT RECEIVED MUCH EARLIER CAN BE TREATED AS A REVENUE RECEIPT IN THE IMPUGNED ASSESSMENT YEAR. FURTHER, AOS OBSE RVATION THAT IF AT ALL AMOUNT RECEIVED WAS UTILIZED FOR ACQUIRING CAP ITAL ASSETS, THEN, DEPRECIATION COULD NOT HAVE BEEN CLAIMED BY THE ASS ESSEE, IS EQUALLY IRRELEVANT. ADMITTEDLY, THE DEPRECIATION CLAIMED BY THE ASSESSEE FOR LAST SO MANY YEARS AFTER RECEIPT OF THE AMOUNT HAS BEEN ALLOWED BY THE DEPARTMENT. THEREFORE, SUDDENLY, IN THE IMPUGNE D ASSESSMENT YEAR, THE AO CANNOT TAKE A DIFFERENT VIEW AND DISTU RB THE CLAIM OF DEPRECIATION FOR THE IMPUGNED ASSESSMENT YEAR. IN T HE AFORESAID CIRCUMSTANCES, EVEN ASSUMING THAT GRANT-IN-AID/SUBS IDY RECEIVED BY THE ASSESSEE IS A REVENUE RECEIPT, CERTAINLY, IT CA NNOT BE ASSESSED IN THE IMPUGNED ASSESSMENT YEAR AS IT WAS RECEIVED IN THE AY 1992-93 AND 1993-94. SIMILARLY, IN CASE OF OTHER ADDITIONS OF RS. 4,00,000 AND RS. 63,00,000 RECEIVED AS SUBSIDY FROM STATE AN D CENTRAL GOVERNMENT AND MARGIN MONEY RESPECTIVELY, BOTH THE AMOUNTS HAVING BEEN RECEIVED LONG BACK CANNOT BE TREATED AS INCOME OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. AT THE COST OF REP ETITION IT NEEDS TO BE MENTIONED, THE AMOUNT IN QUESTION HAS NOT ONLY B EEN SHOWN AS LIABILITIES IN THE BALANCE SHEET OVER THE YEARS BUT ASSESSEE HAS ALSO FURNISHED CERTAIN DOCUMENTARY EVIDENCES BEFORE THE AO DURING ASSESSMENT PROCEEDING WHICH INDICATE THAT GOVT. HAS NOT GIVEN UP ITS CLAIM OVER THE MONEY GIVEN TO ASSESSEE, HENCE, IT C ONTINUES TO BE A LIABILITY WITH ASSESSEE. HOWEVER, IN SPITE OF SUCH DOCUMENTARY 5 ITA NO. 1721/HYD/2013 AP STATE COOP RURAL IRRIGATION CORP LTD. EVIDENCE, THE AO HAS OBSERVED THAT THE ASSESSEE HAS FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO SHOW THAT IT IS A LIABI LITY OF THE ASSESSEE. MOREOVER, IF AT ALL, AO HAD ANY DOUBT WI TH REGARD TO THE NATURE AND CHARACTER OF THE RECEIPTS, HE SHOULD HAV E ENQUIRED WITH THE CONCERNED GOVT. AUTHORITIES NOT ONLY TO ASCERTA IN THE TRUE NATURE OF THE MONEY ADVANCED TO THE ASSESSEE BUT ALSO THE TRE ATMENT GIVEN TO IT IN THEIR ACCOUNTS. WITHOUT DOING SO, THE AO ARBI TRARILY CANNOT COME TO THE CONCLUSION THAT AMOUNT IS A REVENUE RECEIPT IN THE HANDS OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR. THE CIT(A ) HAS ALSO CONFIRMED THE ADDITION WITHOUT PROPERLY APPRECIATIN G THE FACTS OF THE CASE AND ALSO THE MATERIAL AVAILABLE ON RECORD. IN THE AFORESAID VIEW OF THE MATTER, WE HOLD THAT THE ADDITION MADE IN TH E PRESENT CASE CANNOT BE SUSTAINED, ACCORDINGLY THE AO IS DIRECTED TO DELETE THE SAME. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 28/08/2014. SD/- SD/- (B. RAMAKOTAIAH) (SAKTIJIT DEY) ACCOUNTANT MEMBER JU DICIAL MEMBER HYDERABAD, DATED: 28 TH AUGUST, 2014 KV COPY TO:- 1) AP STATE COOP RURAL IRRIGATION CORP LTD., 5-10 -193, HACA BHAVAN, OPP. PUBLIC GARDENS, SAIFABAD, HY DERABAD. 2) DCIT, CIRCLE 5(1), 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAG, HYDERABAD. 3) CIT(A)-V, HYDERABAD. 4) CIT, HYDERABAD. 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD.