Indian Railway Finance Corpn. Ltd., V. Addl. CIT, Range-11,

ITA 1735/DEL/2006

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 9891 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 02-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 16-05-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M W HAQUE
• Assessee Lawyers: S KRISHNAN
• Keywords: Depreciation
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `E : NEW DELHI BEFORE SHRI DEEPAK R. SHAH, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO.1735/DEL/2006 ASSESSMENT YEAR : 2002-03 M/S. INDIAN RAILWAY FINANCE ADDL. COMMISSIONER OF INCOME-TAX, CORPN. LTD., UG FLOOR, VS. RANGE-11, NEW DELHI. EAST TOWER, NBCC PLACE, BHISHAM PITAMAH MARG, LODHI ROAD, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. KRISHNAN ADVOCATE. RESPONDENT BY : SHRI M.W. HAQUE, CIT-DR. O R D E R PER DEEPAK R. SHAH, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, NEW DELHI , DATED 28 TH FEBRUARY, 2006 FOR THE ASSESSMENT YEAR 2002-03 IN A N APPEAL AGAINST ORDER UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (T HE ACT). 2. THE ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND HENCE IT WAS REQUIRED TO OBTAIN PERMISSION FROM THE COMMITTEE ON DISPUTES SET UP BY THE GOVERNMENT O INDIA. THE COMMITTEE ON DISPUTES HAS PERMITTED THE ASSESSEE TO AGITATE ONLY 3 GROUNDS OF APPEAL WHICH WE PROCEE D TO DEAL WITH. OTHER 2 GROUNDS ARE NOT PERMITTED AND HENCE CANNOT BE AGITA TED BEFORE THE TRIBUNAL. THEREFORE, THOSE GROUNDS RAISED BEFORE US ARE TO BE TREATED AS DISMISSED FOR WANT OF PERMISSION FROM COD. 3. THE FIRST GROUND PERMITTED TO BE RAISED IS AGAIN ST THE ADDITION OF RS.88,132/- ON ACCOUNT OF PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENTS FOR THE PURPOSE OF COMPUTING BOOK PROFI T UNDER SECTION 115JB OF THE ACT. 4. AT THE TIME OF HEARING BOTH THE COUNSELS AGREED THAT THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL I N ASSESSEES OWN CASE FOR ASSESSMENT YEARS 1997-98, 1998-99, 1999-2000 & 2000 -01 IN ITA NOS.699, 359, 3357 & 2109/DEL/2004 VIDE ORDER DATED 8 TH AUGUST 2008. FOLLOWING THE DECISION OF THE TRIBUNAL WE HOLD THAT PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMENT CANNOT BE CONSIDERED AS PROVISION FOR ANY UN- ASCERTAINED LIABILITY. THE SAME IS FOR VALUE OF AN INVESTMENT WHICH APPEARS AS AN ASSET IN THE BALANCE-SHEET. SIMILAR VIEW HAS ALSO BEEN HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. HCL CO MNAT SYSTEMS & SERVICES LTD., 305 ITR 409. FOLLOWING THE DECISION OF TRIBUNAL IN ASSESSEES CASE AS ALSO HELD BY THE HONBLE SUPREME COURT PROVISION FOR DIMINUTION IN VALUE OF INVESTMENT CANNOT BE ADDED I N COMPUTATION OF BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 3 5. GROUND NO.5 PERMITTED TO BE RAISED IS AGAINST DI SALLOWANCE OF SUM OF RS.48,10,665/- BEING CONSIDERED AS PRIOR PERIOD EXP ENDITURE. 6. THE ASSESSING OFFICER NOTED THAT AS PER SCHEDULE 9 TO THE PROFIT & LOSS ACCOUNT, EXPENDITURE OF RS.48,10,665/- IS PRIO R PERIOD EXPENDITURE. THEREFORE, THE SAME CANNOT BE ALLOWED AS DEDUCTION. THE LEARNED CIT(A) NOTED THAT THE ASSESSEE WAS REQUIRED TO SUBMIT EVID ENCE THAT THE LIABILITY IN RESPECT OF SUCH EXPENDITURE WAS CRYSTALLIZED DURING THE YEAR. THE LEARNED CIT(A) NOTED THAT THE ASSESSEE DID NOT FILE ANY EVI DENCE BUT ATTACHED THE PROOF REGARDING THE PAYMENT TO BE MADE DURING THE Y EAR IN RESPECT OF PRIOR PERIOD EXPENDITURE. HE ACCORDINGLY CONFIRMED THE D ISALLOWANCE. 7. THE LEARNED COUNSEL FOR THE ASSESSEE SHRI S. KRI SHNAN SUBMITTED THAT THERE IS NO DISPUTE ABOUT THE ALLOWABILITY OF EXPEN SES BUT DISPUTE IS ONLY FOR THE YEAR IN WHICH IT CAN BE ALLOWED. THE HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. M/S. VISHNU INDUSTRIAL GASES P. LTD . BY ORDER DATED 6 TH MAY 2008 IN ITR NO.229/1988, FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. NAGRI MILLS CO. LTD., 33 ITR 681, HELD THAT THE REVENUE SHALL NOT AGITATE REGARDING ALLOWABILITY OF EXPENSES IN PARTICULAR YEAR OR IN SOME OTHER YEAR WHEN THE TAX RATES ARE S AME AND THE TAXES PAID IN EITHER OF THE YEAR. HE ACCORDINGLY PLEADED THAT EI THER THE EXPENSES MAY BE ALLOWED IN THIS YEAR OR THE MATER MAY BE RESTORED T O THE FILE OF THE ASSESSING 4 OFFICER TO CONSIDER THE EXPENSES FOR PREVIOUS YEAR AND COMPUTE THE INCOME ACCORDINGLY. AT ANY RATE THE EXPENSES CANNOT BE DI SALLOWED FOR BOTH THE YEARS. 8. THE LEARNED DR SHRI M.W. HAQUE SUBMITTED THAT SI NCE THE ASSESSEE FAILED TO FILE EVIDENCE TO PROVE THAT THE LIABILITY FOR SUCH EXPENDITURE WAS CRYSTALLIZED DURING THIS YEAR, THE EXPENSES CANNOT BE ALLOWED IN THIS YEAR. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE ABOUT THE ALLOWABILITY OF EXPENSES. ONLY DISPUTE IS REGA RDING THE YEAR OF ALLOWABILITY. IF THE ASSESSING OFFICER IS OF THE V IEW THAT THE EXPENSES ARE PERTAINING TO THE PRIOR PERIOD, THE SAME ARE REQUIR ED TO BE CONSIDERED FOR THE PRIOR PERIOD AND ALLOWED IN THAT YEAR. IF IT IS FO UND THAT THE EXPENSES ARE ALLOWABLE IN THIS YEAR ON THE BASIS OF CRYSTALLIZAT ION OF LIABILITY, THE SAME MAY BE CONSIDERED N THE YEAR UNDER APPEAL. THE ASS ESSEE IS, THEREFORE, DIRECTED TO PLACE NECESSARY EVIDENCE IN SUPPORT OF CLAIM OF EXPENSES. THE ASSESSING OFFICER ON APPRECIATION OF EVIDENCE MAY D ETERMINE THE YEAR OF ALLOWABILITY AND ALLOW THE SAME IN EITHER OF THE YE ARS. 10. GROUND NO.6 IS AGAINST DISALLOWANCE OF DEPRECIA TION ON OFFICE PREMISES. 5 11. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE H AS CLAIMED DEPRECIATION ON OFFICE BUILDING AT 10% AT RS.1,30,6 4,415/-. THE NOTES ON ACCOUNTS ATTACHED REVEAL AS UNDER:- OFFICE BUILDING INCLUDING PARKING AREA HAS BEEN CA PITALIZED FROM THE DATE OF TAKING POSSESSION. HOWEVER, THE S ALE/TRANSFER DEED IS PENDING FOR EXECUTION IN FAVOUR OF THE COMP ANY. FURTHER THE AUDITORS HAVE COMMENTED THAT,- DOCUMENTATION/REGISTRATION FORMALITIES ARE PENDING IN RESPECT OF OFFICE BUILDING INCLUDING PARKING AREA, VALUING RS.15.17 CRORES. THE ASSESSEE WAS ASKED TO SUBSTANTIATE THE CLAIM OF DEPRECIATION AS IN THE OPINION OF THE ASSESSING OFFICER THE ASSESSEE WAS N OT LEGAL OWNER OF THE BUILDING. THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS LEGAL OWNER BUT ONLY REGISTRATION FORMALITIES ARE PENDING. PROOF OF OCC UPATION WAS FILED AND THE AGREEMENT FOR SALE WAS ALSO FILED. IT WAS CONTENDE D THAT THE PAYMENT HAS BEEN MADE AND THE POSSESSION HAS BEEN OBTAINED. TH E ASSESSING OFFICER HELD THAT ON THE BASIS OF AGREEMENT FILED DATED 11. 4.2002 IT CAN BE HELD THAT THE ASSESSEE WAS PROVISIONALLY ALLOTTED CERTAIN SPA CE AT UPPER GROUND FLOOR BUT THE BUILDING WAS UNDER CONSTRUCTION AT THAT TIM E. AS PER AGREEMENT DATED 21.11.2002 POSSESSION WAS HANDED OVER TO THE ASSESS EE. THUS UPTO 21.11.2002 NEITHER THE PROPERTY WAS IN EXISTENCE NO R THE POSSESSION WAS WITH THE ASSESSEE. MERE PAYMENT OF CONSIDERATION ON 14. 6.1999 IS NOT SUFFICIENT 6 TO CLAIM DEPRECIATION. THIS RESULTED INTO DISALLOW ANCE OF RS.1,30,64,415/-. THE LEARNED CIT(A) HELD THAT THE AMOUNT IS DISALLOW ED BY THE ASSESSING OFFICER FOLLOWING THE REASONING GIVEN FOR ASSESSMEN T YEAR 2001-02. THE LEARNED CIT(A) FOLLOWING HIS ORDER FOR ASSESSMENT Y EAR 2001-02 HELD THAT IN RESPECT OF SPACE PROVIDED BY MMTC THE ASSESSEE I S ENTITLED TO DEPRECIATION. IN RESPECT OF OTHER SPACE THE ASSESS EE IS NOT ENTITLED TO DEPRECIATION. 12. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ON 28.4.1998 TWO PREMISES WERE ALLOTTED TO THE ASSESSEE IN THE SAME BUILDING. ONE BLOCK WAS ALLOTTED DIRECTLY BY NBCC AND THE OTHER WAS INITIAL LY ALLOTTED TO MMTC WHICH LATER ON CAME IN THE POSSESSION OF THE ASSESS EE. ON 14 TH JUNE 1999 CONSIDERATION PASSED IN RESPECT OF BOTH THE PREMISE S. ON 29.3.2000 THE POSSESSION WAS TAKEN OVER OF THE COMBINED PREMISES BY THE ASSESSEE. WHAT THE AUDITORS ARE REFERRING TO IS THE AGREEMENT IN R ESPECT OF WHICH REGISTRATION IS PENDING BUT THERE IS NO DISPUTE ABOUT THE POSSES SION. THE PREMISES ARE USED BY THE ASSESSEE AS ITS REGISTERED OFFICE. EVE N IN ASSESSMENT ORDER FOR ASSESSMENT YEAR 1998-99 DATED 26.3.2001 THE ADDRESS OF THE ASSESSEE IS SHOWN AS EAST TOWER, U.G. FLOOR, NBCC PLACE, BISHAM PITAMAH MARG, LODHI ROAD, NEW DELHI. THUS THE COMMENT OF AUDITOR S WERE ONLY TO THE EXTENT THAT SINCE THE ASSESSEE IS NOT REGISTERED OW NER AND THE PREMISES ARE 7 NOT REGISTERED IN THE NAME OF THE ASSESSEE BUT THER E IS NO DISPUTE ABOUT THE POSSESSION OBTAINED AND PAYMENTS HAVING BEEN MADE. EVEN IN POSSESSION LETTER DATED 29.3.2000 TWO PREMISES ARE SPECIFICALL Y SHOWN IN RESPECT OF WHICH POSSESSION WAS HANDED OVER TO THE ASSESSEE. THEREFORE, IF THE DEPRECIATION IS HELD ALLOWABLE EVEN IN RESPECT OF P ROPERTY WHICH WAS INITIALLY ALLOTTED TO MMTC AND LATER ON SOLD TO THE ASSESSEE, THE ASSESSEE IS HELD TO BE OWNER, THEN THERE IS NO REASON TO HOLD THAT THE PRO PERTY WHICH WAS ORIGINALLY ALLOTTED VIDE LETTER DATED 28.4.1998, THE ASSESSEE IS NOT OWNER THEREOF FOR THE PURPOSE OF CLAIMING DEPRECIATION. 13. THE LEARNED DR ON THE OTHER HAND SUBMITTED THAT THE SALE AGREEMENT WAS ENTERED INTO ON 11.4.2002 WHICH WAS PENDING REG ISTRATION. THEREFORE, THE ASSESSEE CANNOT BE SAID TO HAVE OBTAINED POSSES SION PRIOR TO 11.4.2002. 14. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WHEN THE POSSESSION WAS HANDED OVER BY NBCC TO THE ASSESSEE, THE POSSESSION LETTER NOTED AS UNDER:- POSSESSION OF THE FOLLOWING COMMERCIAL SPACE IS HA NDED OVER TO INDIAN RAILWAY FINANCE CORPORATION LTD., NEW DEL HI. (I) COMMERCIAL SPACE MEASURING 625.0104 SQ. M. (AP PROX.), UPPER GROUND FLOOR, EAST TOWER OF NBCC PLACE, PRAGA TI VIHAR, NEW DELHI. (REF. NBCCS ALLOTMENT LETTER NO.REM&D:98:854 DT. 28.4.98 AND LETTER NO.REM&D:99: 836 DATED 5.11.1999) (II) COMMERCIAL SPACE MEASURING 284.9241 SQ. M. 8 (PURCHASED BY MMTC AND SOLD TO IRFC: BY MMTC. REF; IRFCS LETTER NO.IRFC/O. ACCOM/NBCC DT. 14.1.2000 T O CE/REM&D, NBCC) TOILET: COMPLETE FIRE FIGHTING POINTS=49 POSSESSION WITH REGARD TO 30 CAR PARKING AND 20 SCO OTER PARKING SLOTS WILL BE HANDED OVER SHORTLY. DRAWINGS FOR TH E SAME ARE BEING OBTAINED FROM THE NBCC HQ OFFICE. FIREFIGHTI NG LAYOUT DRAWING WILL ALSO BE SUPPLIED SHORTLY AS DESIRED BY IRFC. IN RESPECT OF PROPERTY REFERRED IN PARA NO.2 OF THE ABOVE REFERRED POSSESSION LETTER THE ASSESSEE IS HELD TO BE THE OWNER AND WAS ALSO HELD TO BE ENTITLED FOR DEPRECIATION EVEN FOR ASSESSMENT YEAR 2001-02. THE REFORE, THERE CANNOT BE ANY DISPUTE ABOUT THE SPACE ALLOTTED TO THE ASSESSE E DIRECTLY BY NBCC WHICH IS ALSO CONFIRMED BY ALLOTMENT LETTER DATED 28.4.19 98 REFERRED IN THE POSSESSION LETTER AND IN RESPECT OF WHICH POSSESSIO N WAS HANDED OVER ON 29.3.2000. THE FORMALITIES WHICH ARE PENDING ARE I N RESPECT OF TRANSFER DEED PENDING FOR EXECUTION BUT NEITHER THE NOTES ON ACCO UNT NOR THE AUDITORS REPORT REVEAL THAT THE POSSESSION WAS NEVER TAKEN. ON THE CONTRARY PROVISION WAS MADE IN THE ACCOUNTS IN RESPECT OF DEPRECIATION ON THE BASIS OF PAYMENT MADE AND POSSESSION TAKEN OVER. WE, THEREFORE, HOL D THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION. MERELY BECAUSE REGISTRAT ION FORMALITIES WERE PENDING, CLAIM OF DEPRECIATION CANNOT BE DISALLOWED IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MYSORE MINE RALS, 239 ITR 775 9 WHICH HAS BEEN FOLLOWED BY THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT VS. BHARAT ALUMINIUM CO. LTD., 292 ITR 600. 15. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 28 TH AUGUST, 2009. SD/- SD/- (GEORGE MATHAN) (DEEPAK R. SHAH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 28 TH AUGUST, 2009. COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR BY ORDER *MG DEPUTY REGISTRAR, ITAT.