M/S INFRA DREDGE SERVICE PVT LTD., MUMBAI V. DCIT, CIRLCE (2)(2)(1), MUMBAI

ITA 1746/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4835 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 25-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Revenue expenditure; Capital expenditure; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER & SHRI RAVISH SOOD, JUDICIAL MEMBER ITA NO.1746/MUM/2019 ASSESSMENT YEAR: 2010-11 M/S INFRA DREDGE SERVICES PVT. LTD. FLAT NO.1101, MOUNT EVEREST BLDG., B-WING, BHAKTI PARK, WADALA (EAST), MUMBAI 400 037. PAN AABCI9189A VS. THE DCIT CIRCLE (2)(2)(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY : NONE RESPONDENT BY : SHRI UODAL RAJ SINGH DATE OF HEARING : 08 . 1 0 .20 20 DATE OF PRONOUNCEMENT : 1 4 . 1 0. 20 20 O R D E R PER SHAMIM YAHYA, ACCOUNTANT MEMBER THIS IS AN APPEAL BY THE ASSESSEE DIRECTED AGAINST ORDER OF LEARNED CIT(A)-5, MUMBAI, DATED 11.02.2019, PERTAINING TO ASSESSMENT YEAR 2010-11. 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF LD. AO IN TREATING REVENUE EXPENDITURE OF RS. 29,61,040/- AS CAPITAL I N NATURE; 2. THE LD. C1T(A) ERRED IN UPHOLDING THE DISALLOWA NCE MADE BY LD. AO OF EXPENDITURE ON ACCOUNT OF STAMP DUTY AND MORTGAG E CHARGES OF RS. 21,31,120/- AND RS. 8,30,920/- RESPECTIVELY ON THE GROUND THAT THESE ARE NONRECURRING EXPENDITURE MADE TOWARDS ACQUISITION O F ASSETS AND HENCE CAPITAL IN NATURE; 3. THE LD. CIT(A) ERRED IN NOT APPRECIATING THE F ACT THAT DURING THE YEAR THERE WERE NO ADDITIONS MADE IN THE CAPACITY OF FIX ED ASSETS/ LEASE ASSETS. ITA NO.1746/MUM/2019 INFRA DREDGE SERVICES PVT. LTD. 2 3. THE SOLITARY ISSUE IN THIS APPEAL RELATES DISALL OWANCE OF REVENUE EXPENDITURE INCURRED ON STAMP DUTY AMOUNTING TO RS 21,31,120/- AND MORTGAGE CHARGE AMOUNTING TO RS 8,30,920/- FOR OBTAINING LOAN. THE ASSESSING OFFICER HELD IT AS CAPITAL EXPENDITURE AS THE LOAN WAS FOR ACQUIRING C APITAL ASSET. 4. UPON ASSESSEES APPEAL, LEARNED CIT(A) CONFIRMED THE DISALLOWANCE OBSERVING AS UNDER: 7.4.1 I HAVE CONSIDERED THE SUBMISSIONS OF THE A PPELLANT AND PERUSED THE MATERIALS AVAILABLE ON RECORDS. THE APP ELLANT HAS REQUESTED TO DELETE THE IMPUGNED DISALLOWANCE OF RS. 21,31,12 0/- (ACTUALLY RS. 21,30,120/-) BEING STAMP DUTY AND RS. 8,30,9207- BE ING MORTGAGE CHARGES, WHICH HAVE BEEN HELD AS CAPITAL EXPENDITUR E BY THE LD AO, THE APPELLANT'S MAIN CONTENTIONS ARE THAT THE SAID EXPA NSES HAVE BEEN INCURRED FOR THE PURPOSES OF ACQUIRING BUSINESS FUN DS AND HENCE THE SAME IS INCURRED WHOLLY AND EXCLUSIVELY 'FOR THE PU RPOSES OF BUSINESS. THE APPELLANT HAS ALSO SUBMITTED THAT SUCH CHARGES ARE REVENUE IN NATURE AND NO ENDURING BENEFIT HAS ARISEN FROM THE SAME. IN SU PPORT OF ITS CLAIM THE APPELLANT HAS PLACED RELIANCE ON VARIOUS JUDICIAL P RONOUNCEMENTS AS DETAILED ABOVE. THE CONTENTIONS- OF THE APPELLANT H AVE BEEN CONSIDERED CAREFULLY. FROM THE SUBMISSIONS OF THE APPELLANT IT IS OBSERVED THAT IT IS AN ADMITTED FACT THAT DURING THE YEAR THE APPELLANT HAS AVAILED CERTAIN CREDIT FACILITIES FROM THE BANK FOR THE PURPOSE OF ACQUISITION OF 'TWO DRY DOCKING OF TRAILER SUCTION HOOPER DREDGERS' AMOUNTI NG TO RS. 56.50 CRORES FOR WHICH DEED OF HYPOTHECATION AND REGISTER ED MORTGAGE DEED WERE EXECUTED BETWEEN THE APPELLANT AND SBI ON 22.0 3.2010 AND FOR THE SAME STAMP DUTY WAS PAID AT RS. 21,30,120/- AND THE MORTGAGE CHARGES WAS PAID AT RS, 8,30,920/-. FROM THE SAME IT IS EVI DENT THAT SAID EXPENDITURES HAVE BEEN INCURRED FOR 'ACQUISITION OF NEW ASSETS NAMELY 'TWO DRY DOCKING OF TRAILER SUCTION HOOPER DREDGERS '. FURTHER, FROM PERUSAL OF ABOVE REFERRED MORTGAGE DEED IF IS OBSER VED THAT THEREIN IT HAS BEEN MENTIONED THAT 'WHEREAS THE BORROWERS HAVE APP LIED TO THE MORTGAGEES FOR THE GRANT OF TERM LOAN/CREDIT FACILI TIES TO THE EXTENT OF RS. 56.50 CRORES (RUPEES FIFTY SIX CRORES FIFTY LAC S ONLY) FOR THE PURPOSES OF ACQUISITION AND MAINTENANCE OF DREDGERS.' FROM T HE ABOVE, IT IS EVIDENT THAT THE EXPENSES UNDER CONSIDERATION WERE INCURRED FOR ACQUISITION OF ASSETS AND IT IS NOT THE CASE OF THE APPELLANT THAT THE SAID DREDGERS WERE STOCK IN TRADE IN ITS HAND AND HENCE THE SAME IS OUGHT TO BE TREATED AS CAPITAL IN NATURE. THE RELIANCE PLACE D BY THE APPELLANT ON VARIOUS JUDICIAL PRONOUNCEMENTS, AS DETAILED ABOVE, IS MISPLACED AS THE FACTS ADJUDICATED THEREIN WERE DIFFERENT AND FURTHE R THEREIN THE ISSUE OF EXPENSES RELATED TO ACQUISITION OF CAPITAL ASSETS W AS NOT CONSIDERED. IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE CONSIDERED ITA NO.1746/MUM/2019 INFRA DREDGE SERVICES PVT. LTD. 3 OPINION THAT NO FAULT CAN BE 1 FOUND WITH THE ACTION OF THE LD. AO IN TREATING THE EXPENSES UNDER CONSIDERATION AS CAPITA L IN NATURE. HENCE, THE IMPUGNED DISALLOWANCES OF RS. 21, 30,120/- BEIN G STAMP-DUTY CHARGES AND RS. 8,30,920/-BEING MORTGAGE CHARGES AR E CONFIRMED. 5. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LEARNED DR AND PERUSED THE MAT ERIAL ON RECORD. WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD. VS. CIT 60 ITR 52. IN THIS CASE THE ASSESSEE OBTAINED CERTAIN LOAN WHICH WAS S ECURED BY A CHARGE ON THE FIXED ASSETS OF THE COMPANY. IT INCURRED EXPENDITURE LIK E LEGAL FEES, REGISTRATION FEES, STAMPS ETC. AND CLAIMED THAT IT WAS A BUSINESS EXPE NDITURE. REVENUE DISALLOWED THE SAME ON THE GROUND THAT THE IMPUGNED EXPENDITUR E WAS INCURRED IN OBTAINING CAPITAL. ON APPEAL, REVENUE CONTENDED THAT EVEN IF IT WAS REVENUE EXPENDITURE, IT WAS NOT LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF BUSINESS. THE HONBLE APEX COURT HELD THAT THE LOAN OBTAINED WAS NOT AN A SSET OR ADVANTAGE OF AN ENDURING NATURE; THAT THE EXPENDITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD AND THAT IT WAS IRRELEVANT TO CONS IDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED. CONSEQUENTLY, IN THE CIRCUMSTANCES O F THE CASE, THE EXPENDITURE WAS NOT IN THE NATURE OF CAPITAL EXPENDITURE AND WAS LA ID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES BUSIN ESS. 7. SINCE THE FACTS OF THE PRESENT CASE ARE IDENTICA L TO THAT OF INDIA CEMENTS LTD. (SUPRA), WE ARE OF THE VIEW THAT THE ACTION OF THE AUTHORITIES BELOW IN HOLDING THE EXPENDITURE AS CAPITAL IN NATURE IS NOT SUSTAINABLE . HENCE, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND DECIDE THE ISSUE IN FAVOU R OF THE ASSESSEE. ITA NO.1746/MUM/2019 INFRA DREDGE SERVICES PVT. LTD. 4 8. IN THE RESULT, THE APPEAL IS ALLOWED. ORDER PRONOUNCED UNDER RULE 34(4) OF THE I TAT RULES ON OCT, 2020. SD/- SD/- (RAVISH SOOD) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED : 14 TH OCTOBER, 2020. SA COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE C I T(A), 4. THE C I T 5. THE DR, C BENCH BY ORDER //TRUE COPY// (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, MUMBAI