ITO,Wrad-7(2), Kolkata, Kolkata V. M/s. Rampuria Industries & Investments Ltd., Kolkata

ITA 1882/KOL/2009

• Counselvise Citation: 188223514 RSA 2009
• Duration Of Justice: 1 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 10-11-2009
• Court: TRIBUNAL
• Department Lawyers: S K ROY
• Assessee Lawyers: SUBASH AGARWAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

1 , C , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- C, KOL KATA [ , . .. . ! ! ! !. .. . , , , , '# ] BEFORE SRI N.VIJAYAKUMARAN, JUDICIAL MEMBER & SRI C.D. RAO, AC COUNTANT MEMBER $ $ $ $ / ITA NO. 1882 (KOL) OF 2009 %& '( / ASSESSMENT YEAR 2006-07 INCOME-TAX OFFICER, WARD-7(2), KOLKATA. RAMPURIA INDUSTRIES & INVESTMENTS LTD., KOLKATA. (PAN-AAUFS4042C) (+, / APPELLANT ) - - - VERSUS - (/0+,/ RESPONDENT ) +, 1 2 '/ FOR THE APPELLANT: / SRI S.K. ROY /0+, 1 2 ' / FOR THE RESPONDENT: / SRI SUBASH AGARWAL. '3 / ORDER ( ), (N. VIJAYAKUMARAN), JUDICIAL MEMBER : THIS APPEAL BY THE DEPARTMENT IS DIRECTED AGAINST T HE ORDER OF THE LD. C.I.T.(A)- VIII, KOLKATA. THE DATE OF ORDER IS 24/09/2009 AND THE ASSESSMENT YEAR INVOLVED IS 2006-07. 2. THERE ARE TWO ISSUES. THE FIRST ISSUE BEING TH E ALLOWABILITY OF RS.30,00,000/- AS A REVENUE EXPENDITURE, AS URGED BY THE ASSESSEE. T HE A.O. WAS OF THE VIEW THAT SPENDING OF THIS AMOUNT OF RS.30,00,000/- WHICH WAS PAID BY THE COMPANY ON 10/2/2006 BY AN ACCOUNT PAYEE CHEQUE TO M/S. CLARIA NT INDIA LTD. FOR VACATING FIRST FLOOR AND BASEMENT SPACE OF THE PROPERTY OF THE ASS ESSEE SITUATED AT 3A, SHAKESPEARE SARANI, KOLKATA-700 071 WAS CAPITAL IN NATURE AND T HUS DISALLOWED THE DEDUCTION AS CLAIMED BY THE ASSESSEE. IT IS NOT DISPUTED THAT T HE LITIGATION WAS PENDING BEFORE THE HONBLE CALCUTTA HIGH COURT SINCE 1977. EARLIER TH E ASSESSEE HAD CLAIMED IT AS A DEFERRED REVENUE EXPENDITURE BEFORE THE A.O. AND TH E A.O. REJECTED THIS DEFERRED EXPENDITURE OF 1/3 RD , I.E. TO THE TUNE OF RS.10,00,000/-, AS ACCORDING TO THE A.O., THIS IS NOT ALLOWABLE AS PER PROVISIONS OF SEC.24 OF THE I. T.ACT. BESIDES THE AO WAS OF THE VIEW 2 THAT THE NATURE OF EXPENDITURE IS CAPITAL IN NATURE AS THE ASSESSEE HAS GOT THE POSSESSION OF THE PROPERTY FROM THE TENANT BY PAYIN G THE SAID SUM, WHICH IS SUPPORTED BY THE JUDGMENT RELIED UPON BY THE A.O. OF THE JURI SDICTIONAL HIGH COURT IN THE CASE OF CHLORIDE INDIA LTD. VS. CIT [130 ITR 61 (CAL)]. 3. ON APPEAL TO THE C.I.T.(A), THE LD. C.I.T.(A) F OUND THAT THE DECISION RELIED UPON BY THE LEARNED COUNSEL IN THE CASE OF CIT VS. AUTO DISTRIBUTORS LTD. [210 ITR 222 (CAL)] IS DIRECTLY APPLICABLE TO THE CASE. HE FOUND THAT THE DECISION RELIED UPON BY THE A.O. OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CHLORI DE INDIA LTD. VS. CIT (SUPRA) IS DISTINGUISHABLE AS ON THE GIVEN SET OF FACTS AND CI RCUMSTANCES, THE RATIO OF DECISION IN THE CASE OF AUTO DISTRIBUTORS LTD., CITED SUPRA, OF THE JURISDICTIONAL HIGH COURT IS APPLICABLE. THE LD. C.I.T.(A) FOUND THAT THE EXPEN DITURE INCURRED IS LAID OUT AND EXPENDED FOR THE PURPOSE OF BUSINESS AND, THEREFORE , RELIANCE ON THE DECISION IN THE CASE OF CIT VS. AUTO DISTRIBUTORS LTD. (SUPRA), WHE RE THE FACTS ARE VERY SIMILAR, IS QUITE JUSTIFIED AND IT IS IN ACCORDANCE WITH LAW. 4. WE HAVE HEARD THE PARTIES AND PERUSED THE MATER IAL PLACED ON RECORD. IN THE CASE OF AUTO DISTRIBUTORS LTD. (SUPRA), THEIR LORDS HIPS OF HONBLE JURISDICTIONAL HIGH COURT HAD THE OCCASION TO DISCUSS THE DECISION OF C HLORIDE INDIA LTD. VS. CIT (SUPRA) RELIED UPON BY THE DEPARTMENT AND THEY HAVE LAID DO WN THE RATIO TO ARRIVE AT THE NATURE OF THE EXPENDITURE WHETHER CAPITAL OR REVENUE. IN THE PRESENT CASE IT IS NOT IN DISPUTE THAT THE ASSESSEE IS THE OWNER OF THE BUILDING AND THE POSSESSION IS A RIGHT INDEPENDENTLY OF THE TRANSACTION. THAT THE DISTINCT ION HAS TO BE APPRECIATED IN ACCORDANCE WITH LAW. BY PAYING THE TENANT TO VACAT E THE PREMISES, NO NEW ASSET IS BEING CREATED, NEITHER HIS OWNERSHIP TITLE BEING AUGMENTE D IN ANY WAY. TO BRING IT AS A CAPITAL EXPENDITURE, THERE MUST BE ACQUISITION OR PURCHASE OF AN ASSET, THEN ONLY IT CAN BE TAKEN AS A CAPITAL EXPENDITURE. HERE IN THIS CASE, AS RIGHTLY DISTINGUISHED BY THE LD. C.I.T.(A), THE PAYMENT BY THE ASSESSEE IS ONLY FOR REMOVING THE IMPEDIMENT AND THIS IS FOR THE BUSINESS EXPEDIENCY. HENCE, WE AGREE WITH THE LD. C.I.T.(A) THAT THE EXPENDITURE INCURRED BY WAY OF PAYMENT TO THE TENAN T FOR VACATING FIRST FLOOR AND BASEMENT SPACE OF THE PROPERTY OF THE ASSESSEE IS I N THE REVENUE FIELD. 3 5. HAVING AGREED THAT IT IS A REVENUE EXPENDITURE, THE DEDUCTION CLAIMED BY THE ASSESSEE ON PRO RATA AS CLAIMED EARLIER HAS TO BE L OOKED INTO AND THE LD. C.I.T.(A) HAVING ACCEPTED THE PLEA OF THE ASSESSEE THAT IT IS A REVE NUE EXPENDITURE EXPENDED FOR THE PURPOSE OF THE BUSINESS AND INCURRED IN THE YEAR RE LEVANT, HENCE IT HAS TO BE ALLOWED IN ITS ENTIRETY IN THE YEAR IN WHICH IT WAS INCURRED. IT CANNOT BE SPREAD OVER TO A NUMBER OF YEARS EVEN THOUGH THE ASSESSEE HAS MADE THE CLAI M BASED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVE STMENT CORPN. LTD. [225 ITR 802 (SC)]. W E AGREE WITH THE FINDINGS OF THE LD. C.I.T.(A) THAT HAVING COME TO THE CONCLUSION THAT IT IS A REVENUE EXPENDITURE INCURRE D FOR THE PURPOSE OF THE BUSINESS, IT MUST BE ALLOWED IN FULL IN THE YEAR IN WHICH IT WAS INCURRED. HENCE, WE SEE NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF THE LD . C.I.T.(A). 6. IN THE RESULT, THE DEPARTMENTAL APPEAL IS DISMI SSED. 4 '3 #' 5 6 47 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 16 TH SEPT,2011 SD/- SD/- ( . .. . ! ! ! !. .. . ) '# ( ) (C.D. RAO), ACCOUNTANT MEMBER (N.VIJAYAKUMARAN) JUDICIAL MEMBER ( (( (!# !# !# !#) )) ) DATE: 16 -09-2011 '3 1 /%% 8''9- COPY OF THE ORDER FORWARDED TO: 1. +, / THE APPELLANT : I.T.O., WARD-7(2), KOLKATA. 2 /0+, / THE RESPONDENT : RAMPURIA INDUSTRIES & INVESTMENTS LTD., 10/2, HUNGE RFORD STREET, KOLKATA-700 017. 3. %3 () : THE CIT(A)-VIII, KOLKATA. 4. %3/ THE C.I.T., KOL - 5 =%6 /% / DR, ITAT, KOLKATA BENCHES, KOLKATA 6 GUARD FILE . 0 /%/ TRUE COPY, '3/ BY ORDER, (DKP) > / DY/ASSTT. REGISTRAR .