ITO, CHENNAI V. Shri Abdul Raheem, CHENNAI

ITA 1882/CHNY/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 0952 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-01-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1882/MDS/2012 (ASSESSMENT YEAR : 2007-08) THE INCOME TAX OFFICER, BUSINESS WARD X(1), CHENNAI - 600 006. (APPELLANT) V. SHRI N. ABDUL RAHEEM, PROP. M/S ZAREENA LEATHER EXPORTS, NO.10A, MUTHU STREET, PERIAMET, CHENNAI - 600 003. PAN : AAFPA 6694 P (RESPONDENT) APPELLANT BY : SHRI T.N. BETGIRI, JCIT RESPONDENT BY : NONE DATE OF HEARING : 22.01.2013 DATE OF PRONOUNCEMENT : 22.01.2013 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, ITS GRIEVANCE IS THAT THE CIT(APPEALS) DELETED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER ON ASSESSEES CONTRIBUTION TO COST OF AN EF FLUENT RO PLANT. 2. FACTS APROPOS ARE THAT ASSESSEE, MANUFACTURER OF TANNED LEATHER, HAD DURING THE RELEVANT PREVIOUS YEAR CLAI MED AN EXPENDITURE I.T.A. NO. 1882/MDS/12 2 OF ` 10,50,000/- AS CONTRIBUTION TO EFFLUENT RO PROJEC T. VARIOUS TANNERRIES IN AND AROUND THE AREA, WHERE ASSESSEES TANNERY WAS SITUATED, HAD JOINED TOGETHER AND DECIDED TO INSTAL L A COMMON EFFLUENT TREATMENT PLANT WITH REVERSE OSMOSIS PROCESS. 50% OF COST OF THE PROJECT WAS BORNE BY CENTRAL GOVERNMENT AND 50% WAS BORNE BY TANNERS ASSOCIATION. ONE M/S DINDIGUL TANNERS ENVI RO CONTROL SYSTEMS PVT. LTD. WAS INSTALLING THE EFFLUENT TREAT MENT PLANT AND THE PAYMENTS WERE EFFECTED BY THE ASSESSEE TO THE SAID PARTY AS A PART OF THE JOINT SCHEME. AS PER THE ASSESSEE, SUCH PAYMEN TS WERE ONLY TO MEET STATUTORY REQUIREMENT FOR TREATMENT OF EFFLUEN TS PRODUCED BY THE TANNERIES AND M/S DINDIGUL TANNERS ENVIRO CONTROL S YSTEMS PVT. LTD. WAS ONLY ACTING AS AN AGENT FOR INSTALLING THE PLAN T. AS PER THE A.O., IF THE TREATMENT PLANT WAS INSTALLED BY THE ASSESSEE I TSELF, EXPENDITURE OUGHT HAVE BEEN CAPITALIZED. HE WAS OF THE OPINION THAT THE EXPENDITURE INCURRED BY WAY OF PAYMENT TO M/S DINDI GUL TANNERS ENVIRO CONTROL SYSTEMS PVT. LTD. WAS NOTHING BUT A CAPITAL OUTGO. THUS, CLAIM OF THE ASSESSEE WAS DISALLOWED. 3. BEFORE CIT(APPEALS), ARGUMENT OF THE ASSESSEE WA S THAT SIMILAR EXPENDITURE INCURRED FOR THE ASSESSMENT YEA R 2006-07 WAS ALLOWED BY THE CIT(APPEALS) ON ASSESSEES APPEAL. ACCORDING TO I.T.A. NO. 1882/MDS/12 3 HIM, SINCE IT WAS ALLOWED BY THE CIT(APPEALS) IN AN EARLIER YEAR, FOR THE IMPUGNED ASSESSMENT YEAR ALSO, THE CLAIM HAD TO BE ALLOWED AS REVENUE EXPENDITURE. FOLLOWING THE ORDER FOR ASSES SMENT YEAR 2006- 07, CIT(APPEALS) ALLOWED THE APPEAL OF THE ASSESSEE . 4. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT THE PAYMENT MADE BY TH E ASSESSEE WAS NOTHING BUT CAPITAL OUTGO. HAD THE ASSESSEE HIMSEL F INSTALLED THE EFFLUENT PLANT TREATMENT, HE COULD NOT HAVE CLAIMED IT AS REVENUE OUTGO. 5. NO ONE APPEARED ON BEHALF OF ASSESSEE, DESPITE I SSUE OF NOTICE OF HEARING. 6. WE HAVE PERUSED THE ORDERS AND HEARD THE SUBMIS SION OF LEARNED D.R. THERE IS NO DISPUTE THAT ASSESSEE HAD EFFECTED PAYMENT FOR INSTALLATION OF EFFLUENT TREATMENT PLAN T TO ABIDE BY POLLUTION CONTROL REQUIREMENTS. THE PROJECT ALSO H AD A CENTRAL GOVERNMENT SUBSIDY. IN OUR OPINION, FACTS ARE SIMI LAR TO THOSE IN THE CASE OF ACIT V. T.M. ABDUL RAHMAN & SONS [(2011) 10 ITR (TRIB.) 272), DECIDED BY A CO-ORDINATE BENCH OF THIS TRIBUN AL. THERE ALSO ASSESSEE HAD EFFECTED PAYMENT FOR SETTING UP AN EFF LUENT PLANT, WHICH I.T.A. NO. 1882/MDS/12 4 WAS HAVING SUBSIDY FROM CENTRAL GOVERNMENT UNDER CL USTER DEVELOPMENT SCHEME. IT WAS HELD BY THIS TRIBUNAL T HAT SUCH CONTRIBUTIONS WOULD AMOUNT TO REVENUE EXPENDITURE B ECAUSE IT WAS NECESSARY FOR SURVIVAL OF THE BUSINESS OF THE ASSES SEE. THIS TRIBUNAL HAD DISTINGUISHED THE DECISION OF HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JASWANT TRADING CO. V. CIT (212 ITR 293) RE LIED ON BY THE ASSESSING OFFICER FOR MAKING THE DISALLOWANCE. REL EVANT PARA 7 OF THE TRIBUNAL ORDER IN T.M. ABDUL RAHMAN & SONSS CA SE (SUPRA) IS REPRODUCED HEREUNDER FOR BREVITY:- 7. AFTER HEARING BOTH SIDES, WE ARE CONVINCED THAT THE RATIO OF THE DECISION OF THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF JASWANT TRADING CO. VS. CIT (SUPRA) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE RATIO OF OTHER DECI SIONS, A COPY OF WHICH HAS ALSO BEEN FILED BEFORE US RENDERED IN THE CASE OF JT. CIT VS. DEVERSONS INDUSTRIES LTD. (2007) 106 TTJ (A HD) 314: (2007) 104 ITD 171 (AHD) AND THAT OF HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. VELUMANICKAM LODGE (2009) 22 7 CTR (MAD) 660: (2009) 32 DTR (MAD) 246: (2009) 317 ITR 338 (MAD) ARE DIRECTLY ON THE ISSUE. SINCE THE TANNERY UNIT SITUA TED AT RANIPET HAS JUST COMPLIED WITH THE DIRECTIONS OF THE TAMIL NADU POLLUTION CONTROL BOARD SO AS TO RUN THE UNIT AND THEREBY CON TRIBUTING ITS SHARE TO RANITEC WOULD AMOUNT TO REVENUE EXPENDITUR E ONLY BECAUSE IT IS NECESSARY FOR THE SURVIVAL OF THE BUS INESS OF THE ASSESSEE-COMPANY. WE ARE IN AGREEMENT WITH THE LEA RNED CIT(A) THAT THIS CAN BE TREATED AS AN EXPENDITURE INCURRED ON ACCOUNT OF BUSINESS EXIGENCY. WE, THEREFORE, CONFIRM THE IMPU GNED DELETION. I.T.A. NO. 1882/MDS/12 5 RESPECTFULLY FOLLOWING THE ABOVE DECISION, WE ARE O F THE OPINION THAT THE CLAIM OF THE ASSESSEE WAS RIGHTLY ALLOWED BY TH E CIT(APPEALS). NO INTERFERENCE IS REQUIRED. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 22 ND OF JANUARY, 2013, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 22 ND JANUARY, 2013. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-IV, CHENNAI-34 (4) CIT-IX, CHENNAI (5) D.R. (6) GUARD FILE