DCIT, Coimbatore V. M/s. Sri Ranganathar Industries Pvt. Ltd., Coimbatore

ITA 1809/CHNY/2013

• Counselvise Citation: 180921714 RSA 2013
• Duration Of Justice: 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-02-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-01-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN JCITD R
• Assessee Lawyers: S SRIDHAR
• Keywords: Capital asset; Bad and doubtful debts; Revenue expenditure; Capital expenditure
• Section: 115JB; 80G; 28

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , . . , ! ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER ./ I.T.A.NO.1809/MDS./2013 ( / ASSESSMENT YEAR :2010-11 ) DY. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), 63-A, RACE COURSE ROAD, COIMBATORE. VS. M/S.SRI RANGANATHAR INDUSTRIES PRIVATE LTD., 12/45,THADAGAM ROAD, EDAYARPALAYAM POST, COIMBATORE 641 025. PAN AADCS 0183 Q ( #$ / APPELLANT ) ( %&#$ / RESPONDENT ) / APPELLANT BY : SHRI N.MADHAVAN, JCIT,D.R / RESPONDENT BY : SHRI S.SRIDHAR, ADVOCATE / DATE OF HEARING : 16.01.2014 ! /DATE OF PRONOUNCEMENT : 17.02.2014 ' / O R D E R PER A.MOHAN ALANKAMONY , ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE REVENUE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A)-I, COIMB ATORE, DATED ITA NO.1809/MDS/13 2 05.07.2013 IN APPEAL NO.135/12-13 PASSED UNDER SECT ION 143(3), READ WITH SECTION SEC. 250 OF THE ACT FOR THE ASSES SMENT YEAR 2010-11. 2. THE REVENUE HAS RAISED EIGHT ELABORATE ARGUMENT ATIVE GROUNDS IN ITS APPEAL, HOWEVER, THE CRUX OF THE ISS UE IS SUMMARIZED HEREUNDER:- (I). LD. CIT(A) HAS ERRED IN ALLOWING DEDUCTION US / 80-IA OF THE ACT FOLLOWING THE DECISION OF THE CASE VELLAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT REPORTED IN 231 CTR (MAD.) 368 WHILE THE SLP FILED BY THE REVENUE BEFORE THE HONBLE AP EX COURT IS PENDING. (II). LD. CIT(A) HAS ERRED TO CONSIDER THAT THE PAYMENTS MADE TO (I) R.K.STEEL & ALLOY, (II) ORIENTAL HYDRAULICS P L TD. (III) MONARCH INDUSTRIAL PRODUCTS (I) PVT LTD & (IV) SRI SABARI E NGINEERS WERE CAPITAL EXPENDITURES, AND THEY CANNOT BE CLAIMED AS REVENUE EXPENDITURES IN THE P&L ACCOUNT. ITA NO.1809/MDS/13 3 3. THE ASSESSEE IS A COMPANY, ENGAGED IN THE BUSI NESS OF ENGINEERING ACTIVITY ALONG WITH FOUNDRY & MACHINE SHOPS, FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2010-11 ON 24.09.2010 ADMITTING INCOME OF APPROXIMATELY ` 14.38 CRORES UNDER NORMAL PROVISIONS OF THE ACT AND ` 11.78 CRORES UNDER SECTION 115JB OF THE ACT. THE CASE WAS TAKEN FOR SCRUTINY AND ASSESSMEN T WAS COMPLETED ON 31.01.2013 BY LD. ASSESSING OFFICER. 4. GROUND NO.1 - CLAIM OF DEDUCTION U/S. 80-IA OF THE ACT WITH RESPECT TO WINDMILL:- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LD. A SSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD CLAIMED DEDU CTION U/S.80-IA OF THE ACT TOWARDS WINDMILL OPERATIONS FOR AN AMOUN T OF ` 3,32,18,267/-. IT WAS FURTHER OBSERVED BY THE LD . ASSESSING OFFICER THAT THE ASSESSEE WAS ELIGIBLE FOR DEDUCTION ONLY F OR AN AMOUNT EXTENDING TO ` 62,49,623/-. HOWEVER, THE ASSESSEE HAD CLAIMED THE ENTIRE DEDUCTION RELAYING UPON THE DECISION OF THE CASE RENDERED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F VELLAYUDHASWAMY SPINNING MILLS (P) LTD VS. ACIT REPORTED IN 231 CTR (MAD) 368. ITA NO.1809/MDS/13 4 SINCE THE REVENUE WENT IN APPEAL AND THE MATTER WAS PENDING WITH THE HON. APEX COURT, THE LD. ASSESSING OFFICER DISA LLOWED AN AMOUNT OF ` 2,69,68,644/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE. BUT AT THE SAME TIME, THE LD. ASSESSING OFFICER HEL D THAT THIS DEMAND SHALL BE ENFORCED ONLY WHEN THE STAND OF THE DEPART MENT IS UPHELD BY THE HONBLE APEX COURT. ON APPEAL BY THE ASSESSEE, LD.CIT (A) DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY OBSE RVING AS UNDER:- 4.2. I HAVE GONE THROUGH THE SUBMISSIONS MADE BY THE APPELLANT AND ALSO THE ORDER OF THE A.O. THE AO IN HIS ORDER AT PARA 3.2. STATED THAT SINCE THE DEPARTMENT HAS PREFERRE D A SPECIAL LEAVE PETITION BEFORE THE HONBLE SUPREME COURT WHICH IS PENDING FOR A DECISION, HE IS COMPELLED TO MAKE THE NECESSARY ADD ITION ON ACCOUNT OF THIS ISSUE. HENCE, AN AMOUNT OF RS.2,69,68,644/ - CLAIMED AS DEDUCTION U/S. 80-IA IS DISALLOWED AND ADDED BACK T O THE TOTAL INCOME. HOWEVER, RESPECTFULLY FOLLOWING THE DECIS ION OF THE HONBLE HIGH COURT IN THE CASE OF VELLAYUDHASWAMY SPINNING MILLS (P) LTD., THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEDUCTION U/S. 80-IA OF THE INCOME TAX ACT. THESE GROUNDS OF APPEAL ARE ALLOWE D. THE AO IS ALSO DIRECTED TO REWORK THE DEDUCTION U/S. 80G OF T HE INCOME TAX ACT WHICH HAS BEEN RESTRICTED ON ACCOUNT OF DEDUCTION C LAIMED U/S. 80-IA OF THE INCOME TAX ACT. THE AO IS ALSO DIRECTED TO A LLOW THE CLAIM OF DEDUCTION U/S. 80G AFTER NECESSARY VERIFICATION. ITA NO.1809/MDS/13 5 5. BEFORE US, THE LD. D.R ARGUED STATING THAT THE D ECISION OF THE LD. ASSESSING OFFICER MAY BE UPHELD BECAUSE HE HAD STAYED THE DEMAND ARISING FROM THE DISALLOWANCE U/S. 80-IA OF THE ACT, UNTIL THE HONBLE APEX COURT DECIDES THE ISSUE. LD. D.R FURT HER SUBMITTED THAT THE LD. ASSESSING OFFICER HAD ARRIVED AT THIS DECI SION OUT OF ABUNDANT CAUTION, BECAUSE THE REVENUE HAS CARRIED THE MATTER BEFORE THE HONBLE APEX COURT AND THE MATTER WAS PENDING. LD . A.R. ON THE OTHER HAND, RELIED ON THE DECISION OF THE HONBLE J URISDICTIONAL HIGH COURT AND PRAYED THAT THE ORDER OF THE LD. CIT(A) MAY BE UPHELD. 6. AFTER HAVING HEARD ON BOTH SIDES ON THIS ISSUE, WE DO NOT FIND IT NECESSARY TO INTERFERE WITH THE ORDER OF THE LD.CIT (A) BECAUSE THE LD. CIT(A) HAD ONLY FOLLOWED THE DECISION OF THE JURISD ICTIONAL HIGH COURT, WHICH WAS DECIDED IN FAVOUR OF THE ASSESSEE. THERE FORE THIS ISSUE RAISED BY THE REVENUE IS DECIDED AGAINST IT. 7. GROUND NO.2 PAYMENTS MADE TO CERTAIN PARTIES DISALLOWED BY THE LD. AO CONSIDERING IT TO BE CAPITAL EXPENDIT URE:- ITA NO.1809/MDS/13 6 (A) PAYMENT MADE TO R.K.STEEL & ALLOY ` .2,45,000/-:- THIS AMOUNT WAS PAID AS ADVANCE BY THE ASSESSEE V IDE CHEQUE DATED 09.05.2008 FOR SUPPLY OF SPECIAL GRADE SCRAP FOR THE ASSESSEES MANUFACTURING ACTIVITIES. HOWEVER, THE PARTY FAILED TO SUPPLY THE MATERIALS AND THEREFORE, THE ASSESSEE DE BITED THE AMOUNT TO ITS P&L ACCOUNT AS BAD DEBTS. THE LD. ASSESSING OFFICER DISALLOWED THE CLAIM OF BAD DEBTS STATING THAT IT P ERTAINED TO PRIOR PERIOD AND ALSO FELL IN THE CAPITAL FIELD. HOWEVER THE LD.CIT (A) CONSIDERING THE SAME AS BUSINESS LOSS SUFFERED BY T HE APPELLANT DURING THE COURSE OF BUSINESS, AND ALLOWED THE EXPE NDITURE U/S. 28 OF THE INCOME TAX ACT. BEFORE US, THE LD.AR SUBMITTE D THAT THIS AMOUNT WAS LOSS SUFFERED BY THE ASSESSEE DURING THE COURSE OF ITS BUSINESS AND THEREFORE, THE SAME MAY BE DEDUCTED FR OM THE INCOME OF THE ASSESSEE. LD. D.R RELIED ON THE ORDER OF THE LD. ASSESSING OFFICER. AFTER HEARING BOTH SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT (A). IT IS APPARENT FROM THE FACTS OF THE CASE THAT THE ASSESSEE HAD ADVANCED THE AMOUNT FOR PURCHASE O F RAW MATERIALS WHICH ARE TO BE USED IN ITS MANUFACTURING ACTIVITY. SUBSEQUENTLY, NEITHER THE MATERIALS WERE SUPPLIED N OR THE AMOUNT ITA NO.1809/MDS/13 7 WAS RETURNED BACK. THOUGH THE AMOUNT WAS PAID, DURI NG THE YEAR 2009-10 THE SAME HAS CRYSTALLIZED DURING THE RELEVA NT ASSESSMENT YEAR 2010-11 BECAUSE ONLY IN THIS RELEVANT YEAR THE ASSESSEE REALIZED THAT THE AMOUNT WAS NOT RECOVERABLE. THERE FORE, WE CONFIRM THE ORDER OF THE LD.CIT (A) ON THIS ISSUE. (B) PAYMENT MADE TO ORIENTAL HYDRAULICS PVT LTD. ` 6,90,000/-:- THIS AMOUNT WAS ADVANCED ON 21.01.2008 FOR SUPPL Y OF HYDRAULIC VALVE TESTING PRESS. SINCE THE AMOUNT WA S NOT RECOVERABLE, THE ASSESSEE CHARGED IT OFF TO ITS P&L ACCOUNT. TH E LD. ASSESSING OFFICER DISALLOWED THE SAME, SINCE IT WAS AN ADVANC E PAID FOR PURCHASING A CAPITAL ASSET. ON APPEAL, LD.CIT (A) A LLOWED THE EXPENDITURE AS A DEDUCTIBLE EXPENDITURE U/S. 28 OF THE ACT, BECAUSE THIS EXPENDITURE WAS INCURRED DURING THE COURSE OF THE BUSINESS OF THE ASSESSEE. WE CONCUR WITH THE VIEW OF THE LD.CIT (A ) ON THIS ISSUE AND THEREFORE CONFIRM THE ORDER OF THE LD.CIT (A). (C) PAYMENT MADE TO MONARCH INDUSTRIAL PRODUCTS (I) PVT LTD ` 26,689/-:- ITA NO.1809/MDS/13 8 THE ASSESSEE HAD ADVANCED THE AMOUNT FOR RELAYING EPOXY FLOORING ON VARIOUS DATES. SINCE THE PARTY HAD NOT COMPLETED THE WORK AND ABANDONED THE SAME, THE ASSESSEE CHARGED T HE AMOUNT TO ITS P&L ACCOUNT. THE LD. ASSESSING OFFICER DISALLO WED THE SAME CONSIDERING IT TO BE IN THE CAPITAL FIELD. HOWEVER , THE LD.CIT (A) ALLOWED THE DEDUCTION BECAUSE THIS EXPENDITURE WAS INCURRED DURING THE COURSE OF THE BUSINESS OF THE ASSESSEE. WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT (A) AND THEREF ORE, WE CONFIRM THE ORDER OF THE LD.CIT (A) ON THIS ISSUE. (D) PAYMENT MADE TO SRI SABARI ENGINEERS ` 1,16,411/- :- THIS AMOUNT WAS ALSO AN ADVANCE PAYMENT MADE BY THE ASSESSEE FOR MODIFICATION, FABRICATION AND DISMANTL ING WORK. SINCE THE PARTY DID NOT COMPLETE THE WORK, THE ASSESSEE CHARG ED IT TO THE PROFIT & LOSS ACCOUNT DURING THE RELEVANT PREVIOUS YEAR AF TER REALIZING THAT THE AMOUNT WAS NOT RECOVERABLE. THE LD. ASSESSING OFFICER DISALLOWED THE DEDUCTION CONSIDERING IT TO BE AN AD VANCE PAID FOR CAPITAL EXPENDITURE. HOWEVER, THE LD.CIT (A) ALLOWE D THE EXPENDITURE ITA NO.1809/MDS/13 9 U/S. 28 OF THE ACT. ON THIS ISSUE ALSO, WE ARE IN C ONFORMITY WITH THE ORDER OF THE LD.CIT (A) AND THEREFORE, THE SAME IS UPHELD. 8. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. ORDER PRONOUNCED ON 17 TH FEBRUARY, 2014 AT CHENNAI. SD/- SD/- (S.S.GODARA) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 17 TH FEBRUARY, 2014. K S SUNDARAM. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE