K.L.J Organic Ltd., New Delhi V. DCIT, New Delhi

ITA 1810/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65275 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 18-07-2012
• Assessment Year: 2001-2002
• Appeal Filed On: 13-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SRUJANI MOHANTY
• Assessee Lawyers: VK SABHARWAL
• Keywords: Rule of consistency; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) SHRI U.B.S. BEDI, JUDICIAL MEMBER AND BEFORE SHRI K.D. RANJAN, ACCOUNTANT MEMBER ITA NO.1810/DEL./2011 (ASSESSMENT YEAR : 2001-02) M/S. K.L.J. ORGANIC LIMITED, VS. DCIT, CENTRAL CI RCLE 23, KLJ HOUSE, 63, RAMA MARG, NEW DELHI. NAJAFGARH ROAD, NEW DELHI. (PAN : AAACK3722A) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.K. SABHARWAL, ADVOCATE REVENUE BY : MS. SRUJANI MOHANTY, DR ORDER PER K.D. RANJAN, ACCOUNTANT MEMBER : THIS APPEAL BY THE ASSESSEE FOR ASSESSMENT YEAR 200 1-02 ARISES OUT OF ORDER OF THE CIT (APPEALS)-III, DELHI. THE GROUNDS OF AP PEAL RAISED BY THE ASSESSEE ARE REPRODUCED AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE, THE LD. CIT (APPEAL) WAS NOT JUSTIFIED & HAD ERRED THE LAW TO U PHELD THE ADDITION OFRS.2,36,780/- OF DEFERRED REVENUE EXPENDITURE. 2. THAT, NO REASONABLE AND PROPER OPPORTUNITY WAS O FFERED BY THE LD CIT AND BY THE A.O. TO MAKE AND UPHOLD THE ADDITION OF DISALLOWING / REJECTING AMOUNT OF RS.2,36,780/- CLAIMED BY THE AS SESSEE AS DEFERRED EXPENDITURE BEING 1/10 TH OF THE EXPENDITURE INCURRED / DEFICIT DURING TRIAL RUN OF THE PRODUCTION, AND NOT GRANTED ANY ALTERNAT IVE REMEDY. 3. APPELLANT COMPANY HAS RIGHT TO MODIFY THE GROUND S OF APPEAL BEFORE YOU. ITA NO.1810/DEL./2011 2 2. THE ONLY ISSUE FOR CONSIDERATION RELATES TO CONF IRMING THE ADDITION OF RS.2,36,780/-. THE FACTS OF THE CASE, STATED IN BR IEF, ARE THAT ORIGINAL ASSESSMENT IN THIS CASE WAS MADE ON A TOTAL INCOME OF RS.1,77,14, 870/- ON 31.10.2003. ON APPEAL, LD. CIT (A) CONFIRMED THE ADDITION BY HIS O RDER DATED 25.11.2004 IN APPEAL NO.46/004. THE ASSESSEE CARRIED THE MATTER IN FURT HER APPEAL BEFORE ITAT AND ITAT VIDE ITS ORDER IN ITA NO.818/D/2005 RESTORED T HE ISSUE RELATING TO DISALLOWANCE OF RS.2,76,276/- BEING THE INTEREST PA ID ON BORROWINGS FOR ACQUIRING LAND FOR THE FACTORY AND DISALLOWANCE OF RS.2,36,78 0/- ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE. 3. THE ASSESSING OFFICER WHILE COMPLETING ASSESSMEN T U/S 143(3) / 254 DISALLOWED THE AMOUNT OF RS.2,36,780/- ON ACCOUNT O F DEFERRED REVENUE EXPENDITURE. AGGRIEVED BY THE ORDER OF ASSESSING OFFICER, THE AS SESSEE FILED APPEAL BEFORE CIT (A). IT WAS SUBMITTED BY THE ASSESSEE THAT ASSESSE E COMPANY INCURRED AN EXPENDITURE OF RS.13,98,653/- TILL 31.03.1997 AND F URTHER INCURRED ANOTHER AMOUNT OF RS.9,69,162/- FROM 01.04.1997 TO 12.05.1997. TH US, TOTAL EXPENDITURE OF RS.23,68,798/- WAS INCURRED TILL THE TRIAL OF PLANT INCLUDING OTHER ADMINISTRATIVE EXPENSES. SINCE THE EXPENDITURE WAS INCURRED AND T HE BENEFIT OF SAME WAS EXPECTED TO BE SPREAD IN FUTURE ALSO, THE ASSESSEE TREATED T HE EXPENDITURE OF RS.23,68,798/- AS DEFERRED REVENUE EXPENDITURE AND WRITTEN OFF 1/10 TH OF THE SAME DURING THE YEAR UNDER CONSIDERATION AS USUAL PRACTICE OF THE ACCOUN TS. IT WAS ALSO SUBMITTED THAT UNDER THE INCOME-TAX ACT, THERE WAS NO PROVISION FO R DEFERMENT OF ANY REVENUE EXPENDITURE. SINCE ASSESSEE TREATED THE EXPENDITUR E INCURRED ON ACCOUNT OF PREOPERATIVE AND PREPRODUCTION EXPENSES FOR REACHIN G TO THE STANDARD QUALITY OF ITA NO.1810/DEL./2011 3 PRODUCTION, THEREFORE, 1/10 TH OF THE SAME WAS CLAIMED AS DEDUCTION DURING THE YE AR AND REMAINING AMOUNT WAS DEFERRED TO BE WRITTEN OFF IN COMING YEARS. ALTERNATIVELY, IT WAS SUBMITTED THAT IN CASE, DEDUC TION IS NOT ALLOWED ON THE GROUND THAT IT WAS CAPITAL EXPENDITURE, THEN DEPRECATION S HOULD BE ALLOWED TO THE ASSESSEE. 4. LD. CIT (A), AFTER CONSIDERING THE FACTS OF THE CASE AND ARGUMENTS MADE BEFORE HIM, HELD THAT ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE EXPENDITURE AND EVEN THE ASSESSEE HAS NOT BEEN ABLE TO GIVE ANY REA SON AS TO WHY THE EXPENDITURE SHOULD BE ALLOWED DURING THE YEAR UNDER CONSIDERATI ON. AS REGARDS THE ALTERNATIVE PLEA, THE LD. CIT (A) WAS OF THE OPINION THAT SINCE EXPENSES RELATING TO ASSESSMENT YEARS 1997-98 AND 1998-99 THEY HAVE TO BE CAPITALIZ ED IN THE YEAR 1998-99 ONLY. THEREFORE, THE ALTERNATIVE PLEA OF THE ASSESSEE COU LD NOT BE CONSIDERED IN ASSESSMENT YEAR 2001-02. THE LD. CIT (A) REJECTED THE ALTERNA TIVE PLEA OF THE ASSESSEE. 5. BEFORE US, THE LD. AR OF THE ASSESSEE SUBMITTED THAT ASSESSEE HAD CLAIMED 1/3 RD OF THE EXPENDITURE IN ASSESSMENT YEAR 1998-99 ONWA RDS AND THE DEPARTMENT HAS NOT DISALLOWED THE CLAIM OF THE ASSESSEE IN EAR LIER YEARS. THEREFORE, THE SAME SHOULD BE ALLOWED ON THE PRINCIPLE OF CONSISTENCY I N ASSESSMENT YEAR 2001-02. ON THE OTHER HAND, THE LD. DR SUPPORTED THE ORDER OF T HE CIT (A). 6. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT ASSESSEE HAD INCU RRED EXPENDITURE OF RS.23,68,798/- ON TRIAL RUN OF PLANT SINCE 03.02.1997. SINCE THE EXPENDITURE WAS A LITTLE BIT BULKY AND THE BENEFIT OF SAME WAS TO BE SPREAD IN FUTURE ALSO, THE ASSESSEE TREATED THE EXPENDITURE AS DEFERRED REVENUE EXPENSES AND HAD WR ITTEN OFF 10% OF THE SAME DURING ASSESSMENT YEAR 1998-99 ONWARDS. IN THE YEA R UNDER CONSIDERATION ALSO, THE ITA NO.1810/DEL./2011 4 ASSESSEE CLAIMED RS.2,36,780/- AS DEFERRED REVENUE EXPENDITURE. THE ASSESSEE HAD BEEN CLAIMING 1/10 TH OF EXPENDITURE SINCE ASSESSMENT YEAR 1998-99 AND T HE CLAIM OF ASSESSEE HAS BEEN ALLOWED BY THE REVENUE. THEREFOR E, ON PRINCIPLE OF CONSISTENCY, THE ASSESSEE IS ELIGIBLE TO CLAIM 1/10 TH OF THE EXPENDITURE OF RS.23,68,798/- IN THE YEAR UNDER CONSIDERATION. THE LD. CIT (A), THEREFO RE, WAS NOT JUSTIFIED IN REJECTING THE CLAIM OF THE ASSESSEE IGNORING THE PRINCIPLE OF CONSISTENCY. WE, THEREFORE, ALLOW THE APPEAL OF ASSESSEE. THE ASSESSING OFFICER IS D IRECTED TO ALLOW THE REQUISITE RELIEF. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 16 TH DAY OF AUGUST, 2012. SD/- SD/- (U.B.S. BEDI) (K.D. RANJAN) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 16 TH DAY OF AUGUST, 2012 TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-III, DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.