ACIT, New Delhi V. M/s Sandhu Contractors Pvt. Ltd., New Delhi

ITA 1771/DEL/2015

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 2740 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 30-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A N KHURANA
• Keywords: Depreciation; Audit objection; Additional depreciation; Revenue expenditure

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL, (DELHI BENCH G, NEW DELHI) BEFORE : SHRI H.S. SIDHU, JUDICIAL MEMBER DR. B.R.R. KUMAR, ACCOUNTANT MEMBER ITA NO. 1771/DEL/2015 ASSESSMENT YEAR: 2007-08 ACIT, CIRCLE 22(1), NEW DELHI. (APPELLANT) VS. SANDHU CONTRACTORS PVT. LTD., C-153A, MOTI NAGAR, NEW DELHI PAN- AAACS2782A (RESPONDENT) APPELLANT BY SH. N.K. BANSAL, SR. DR RESPONDENT BY SH. A.N. KHURANA, CA ORDER PER B.R.R. KUMAR, A.M.: THE CASE WAS REOPENED U/S147 OF THE INCOME TAX ACT 1961, BASED ON THE AUDIT OBJECTION THAT THE ASSESSEE HAS CLAIMED E XCESS DEPRECIATION. THE OPERATIVE PART OF THE ASSESSMENT ORDER IS REPRODUCE D BELOW : DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION OF INDUSTRIAL & RESIDENTIAL BUILDING S, HYDEL POWER PROJECT, INSTITUTIONAL & COMMERCIAL PROJECTS ON CONTRACTUAL BASIS FOR VARIO US PRIVATE & GOV. CLIENT AS IN THE PAST. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE LD. AR WAS ASKED TO EXPLAIN AS WHY THE AMOUNT OF RS. 2000040/- BEING EXCESS CLAIM IN TH E P&L ACCOUNT ON ACCOUNT OF DEPRECIATION BE NOT WITHDRAWN AND ADDED BACK TO THE TOTAL TAXABLE INCOME OF THE ASSESSEE. IN ABSENCE OF ANY DOCUMENTARY SUPPORT THE SAME IS BEING DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. DATE OF HEARING 12 .06.2019 DATE OF PRONOUNCEMENT 12 .06.2019 ITA NO. 1771/DEL/2015 2 2. FROM THE PERUSAL OF ASSESSMENT ORDER, IT CAN BE SEEN THAT THE ASSESSING OFFICER HAS FAILED TO GIVE ANY REASON AS TO HOW THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS WRONG OR GIVEN ANY RE COMPUTATION OF T HE DEPRECIATION. THE LD. CIT(A) DELETED THE ADDITION ON THE GROUNDS THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND AND THE DEPRECIATION WORKED OUT BY THE ASSESSEE WAS CORRECT. THE RELEVANT PART OF THE ORDER OF THE CIT( A) IS AS UNDER : (II). REGARDING THE ADDITION ON ACCOUNT OF DEPRECIA TION, I FIND THAT THE A.O. HAS NOT DISCUSSED WHAT WAS THE REASON FOR TREATING THE AMOU NT OF RS.20,00,040/- AS EXCESS DEPRECIATION. IT APPEARS THAT A.O. HAS NOT CALCULAT ED THE RATE OF DEPRECIATION AND ALSO NOT CONSIDERED THE SUB-SECTION (IIA) OF SECTION 32( 1) BY WHICH ADDITIONAL DEPRECIATION @20% WAS ALLOWED WITH CERTAIN RESTRICTIONS. WITHOUT APPRECIATING FULL FACTS OF THE ISSUE, LD. ASSESSING OFFICER MECHANICALLY ACCEPTED THE VIEW OF THE AUDIT PARTY AND ADDED RS.20,00,040/- WITHOUT APPLYING HIS MIND. THE ADDITIONAL DEPRECIATION CLAIMED BY THE APPELLANT WAS AS UNDER: (I) PLANT 8T MACHINERY RS.9,84,671/- (II) SHUTTERING MATERIAL RS.3,13,504/- (III) OFFICE EQUIPMENT RS. 2,360/- (IV) TIPPERS/TROLLY RS.6,99,506/- AFTER CONSIDERING THESE DETAILS, I FIND THAT THE NA TURE OF THE BUSINESS OF THE APPELLANT IS CONSTRUCTION AND IT IS A REGULAR CONTRACTOR, HENCE THE PLANT & MACHINERY, SHUTTERING MATERIAL AND TRIPPERS / TROLLY ARE COMING UNDER THE HEAD 'PLANT & MACHINERY' AND ADDITIONAL DEPRECIATION IS ALLOWABLE. HOWEVER, APPEL LANT HAS WRONGLY CLAIMED ADDITIONAL DEPRECIATION ON OFFICE EQUIPMENT AMOUNTI NG TO RS.2,360/-. IN VIEW OF THIS, I FIND THAT ONLY DISALLOWANCE REQUIRED BY THE ASSESSI NG OFFICER WAS RS.2,360/ 3. WE HAVE PERUSED THE RECORD AND HEARD THE ARGUME NTS OF BOTH THE PARTIES. THE DEPRECIATION CLAIMED BY THE ASSESSEE O N THE BLOCK OF ASSETS IS AS UNDER: BLOCK 15% -BLOCK 60% - BLOCK 5% -FURNITURE & FI TTINGS 10% - TOTAL DEPRECIATION 57,29,913 1,22,369 416 20,204 58,72,902 IT WAS ARGUED THAT THE AMOUNT OF DEPRECIATION CLAIM ED AS PER COMPUTATION OF INCOME UNDER SCHEDULE BP AT PAGE 12 POINT NO.L2(I) OF THE RETURN OF INCOME IS RS.58,72,902. THE LD.CIT(A) AFTER GOING THROUGH THE DETAILS HELD THAT DEPRECIATION HAS BEEN CORRECTLY CALCULATED AND DISC LOSED AT PAGE NO. 14 & 16 ITA NO. 1771/DEL/2015 3 OF THE RETURN OF INCOME FILED AS PER THE INCOME TAX ACT AND ADDITIONS DUE TO EXCESS DEPRECIATION CLAIMED IS NOT VALID AND DESERV ED TO BE DELETED. 4. HAVING GONE THROUGH THE BUSINESS AFFAIRS OF THE ASSESSEE AND THE DEPRECIATION SCHEDULE AS PER THE INCOME-TAX RULES A ND THE CLAIM OF THE ASSESSEE PERTAINING TO DEPRECIATION, WE HEREBY DECL INE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). 5. GROUND NO. 2 PERTAINS TO ENCASHMENT OF BANK GUAR ANTEES WHICH HAS BEEN CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE . THE BANK GUARANTEES IS ENCASHED IN THE NORMAL COURSE OF BUSINESS, WHICH AM OUNTS TO TRADING RECEIPTS ASSESSABLE TO INCOME TAX IN THE HANDS OF THE RECIPI ENT AND BE TREATED AS REVENUE EXPENDITURE. THIS CAN, IN NO WAY, BE TREATE D AS DISALLOWABLE EXPENDITURE. THE LD. CIT(A) HAS RELIED ON THE JUDGM ENT OF HONBLE DELHI HIGH COURT IN THE CASE OF STC INDIA LTD., 94 ITR 496. HA VING GONE THROUGH THE FACTS, SINCE THE ENCASHMENT OF BANK GUARANTEES CONSTITUTES REVENUE EXPENDITURE, WE HEREBY DECLINE TO INTERFERE IN THE ORDER OF THE LD. CIT(A). SINCE THE MATTER HAS BEEN DEALT ON MERITS OF THE CASE, ADJUDICATION ON T HE ISSUE OF REOPENING WOULD BECOME ACADEMIC IN NATURE AND HENCE, NOT DEALT WITH . 6. AS A RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (H.S. SIDHU) (B.R.R. KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 12.06.2019 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI