The ITO, Ward-5(2), Ahmedabad V. Priyank Infrastructure (P) Ltd., Ahmedabad

ITA 1953/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6458 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 15-04-2011
• Assessment Year: 2000-2001
• Appeal Filed On: 15-06-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH OJHA SRDR
• Assessee Lawyers: M G PATEL
• Keywords: Depreciation; Permanent establishment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD C BENCH BEFORE SHRI G.D. AGARWAL, HONBLE VICE-PRESIDENT (AZ) AND SHRI D.K. TYAGI, HONBLE JUDICIAL MEMBER ITA NO.1953/AHD/2009 ASSESSMENT YEAR:2000-01 DATE OF HEARING:15.4.11 DRAFTED: 24.5.11 INCOME TAX OFFICER, WARD-5(2), C.U.SHAH COLLEGE BUILDING, 2 ND FLOOR, AHMEDABAD V/S . PRIYANK INFRASTRUCTURE PVT. LTD., 2 ND FLOOR, NAVNEET MARKET, C.G. ROAD, AHMEDABAD PAN NO.AABCP1548E (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI RAJESH OJHA, SR-DR RESPONDENT BY:- SHRI M.G. PATEL, AR O R D E R PER D.K. TYAGI, JUDICIAL MEMBER:- THIS IS REVENUES APPEAL AGAINST THE ORDER OF COMM ISSIONER OF INCOME- TAX (APPEALS)-XI, AHMEDABAD IN APPEAL NO. CIT(A)-XI /ITAT/08-09 FOR ASSESSMENT YEAR 2000-01. 2. THE REVENUE HAS TAKEN FOLLOWING EFFECTIVE GROUND S:- 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE O N ACCOUNT OF INTEREST EXPENDITURE OF RS.14,08,022/- 2. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN DELETING OF RS.12,63,342/- ON A CCOUNT OF DISALLOWANCE OF DEPRECIATION. ITA NO.1953/AHD/2009 A.Y.2000-0 1 ITO WD-5(2) V. PRIYANK INFRASTRUCTURE PVT . LTD. PAGE 2 3. GROUND NO.1 RELATES TO DISALLOWANCE OF RS.14,08, 022/-. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE-COMPANY IS ENGAGED IN THE BUSINESS OF CONSTRUCTION WORK ON SUBLETTING BASIS OF CANAL WORK S AT VARIOUS PLACES. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER O N VERIFICATION OF LOAN AND INTEREST ACCOUNT FOUND THAT ASSESSEE-COMPANY HAS OB TAINED VARIOUS BANK LOANS FOR PURCHASE OF MACHINERY AND PAID INTEREST. THE ASSESSEE HAS TAKEN A LOAN OF RS.1 CRORE FROM THE MADHAVPURA MERCANTILE C O.OP. BANK LTD. AGAINST HYPOTHETIC OF MACHINERY. THIS LOAN AMOUNT WAS WITHD RAWN FROM THE MADHAVPURA MERCANTILE CO.OP. BANK LTD AND DEPOSITED IN PUNJAB NATIONAL BANK. ON THE BORROWED LOAN BANK HAS CHARGED INTERES T AMOUNTING TO RS.14,08,022/-. THE AO WAS OF THE VIEW THAT THIS BO RROWED LOAN WAS NOT USED FOR BUSINESS PURPOSES. ACCORDINGLY, THIS AMOUNT WAS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4. AGGRIEVED BY THIS ORDER ASSESSEE WENT IN APPEAL BEFORE LD. CIT(APPEALS) AND SUBMITTED AS UNDER:- THE A.O. HAS DISALLOWED INTEREST OF RS.14,08,022/- PAID TO THE MADHAVPURA MERCANTILE CO.OP. BANK LTD. ON THE GROUN D THAT THE SAME WAS UTILIZED FOR PURCHASE OF MACHINERIES OF RS.1,01 ,06,750/- WHICH WAS FOUND TO BE NOT GENUINE. IT IS SUBMITTED THAT THE A PPELLANT BORROWED LOAN OF RS.1,00,00,000/- FROM THE MADHAVPURA MERCANTILE CO.OP BANK LTD. ON 31-05-1999. THE SAID AMOUNT WAS TRANSFERRED TO B ANK ACCOUNT WITH THE PUNJAB NATIONAL BANK ON THE SAME DAY. THEREAFTE R, FROM THE ACCOUNT WITH PUNJAB NATIONAL BANK, TWO CHEQUES OF R S.28,40,000/- AND RS.71,32,000/- WERE ISSUED TO NITIN CONSTRUCTION CO . BY WAY OF LOAN. THUS, THIS AMOUNT BORROWED WAS DIRECTLY UTILIZED FO R GIVING LOAN TO NITIN CONSTRUCTION CO. BY WAY OF SARAFI LOAN. THE APPELLA NT HAS CHARGED INTEREST AT THE RATE OF 18% THEREON WHICH IS THE SA ME AS INTEREST PAYABLE TO THE BANK. IN VIEW OF THE BANK LOAN OF RS .1,00,00,000/- BEING DIRECTLY UTILIZED FOR GIVING ADVANCE TO SISTER CONC ERN, NITIN CONSTRUCTION CO. ON WHICH INTEREST OF RS.21,98,208/- WAS DULY CH ARGED, NO DISALLOWANCE IS WARRANTED IN RESPECT OF THE SAID IN TEREST AND, THEREFORE THE SAME REQUIRES TO BE DELETED. (PLEASE SEE PAPER BOOK PAGE NOS 44 TO 47) TAKING INTO CONSIDERATION THIS SUBMISSION OF THE AS SESSEE LD. CIT(APPEALS) DELETED THIS ADDITION. ITA NO.1953/AHD/2009 A.Y.2000-0 1 ITO WD-5(2) V. PRIYANK INFRASTRUCTURE PVT . LTD. PAGE 3 AGGRIEVED BY THIS ORDER, NOW REVENUE IS IN APPEAL B EFORE US. 5. AT THE TIME OF HEARING LD. DR RELIED ON THE ORDE R OF ASSESSING OFFICER WHILE LD. AR ON THE ORDER OF LD. CIT(APPEALS). 6. HEARD BOTH THE PARTIES AND PERUSED THE RECORDS A ND PAPER BOOK FILED BY ASSESSEE IN SUPPORT OF ITS SUBMISSION BEFORE LD. CI T(APPEALS) BY THE ASSESSEE. WE FIND THAT ASSESSEE HAS OBTAINED THE LO AN FROM MADHAVPURA MERCANTILE CO.OP. BANK LTD. AND PAID INTEREST @ 18% . WE FURTHER FIND THAT OUT OF THIS LOAN ASSESSEE HAS GIVEN LOAN TO ITS SISTER CONCERN NAMELY NITI CONSTRUCTION CO. AND HAS ALSO CHARGED INTEREST @ 18 % WHICH IS THE SAME AS INTEREST PAYABLE TO BANK. THE RATE OF TAXATION FOR BOTH THE COMPANIES I.E. ASSESSEE-COMPANY AND THE SISTER CONCERN NITI CONSTR UCTION CO. BEING SAME, IT CANNOT BE SAID THAT ASSESSEE HAS DIVERTED ITS PROFI T BY WAY OF GIVING LOAN TO ITS SISTER CONCERN. IN VIEW OF THIS, AO WAS NOT JUSTIFI ED IN MAKING ADDITION ON ACCOUNT OF INTEREST AND LD. CIT(APPEALS) HAS RIGHTL Y DELETED THIS ADDITION AND THEREFORE ORDER PASSED BY HIM IS HEREBY CONFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 7. THE SECOND GROUND RELATES TO DISALLOWANCE OF DEP RECIATION OF RS.12,63,342/- ON NEW MACHINERY COST OF RS.1,01,06, 750/- BY THE ASSESSING OFFICER ON THE GROUND THAT ASSESSEE HAS NOT PRODUCE D PURCHASE BILLS IN RESPECT OF THESE NEW MACHINERIES AND COULD NOT PROD UCE THE PERSONS FROM WHOM THESE MACHINERIES WERE PURCHASED. BEFORE LD. C IT(APPEALS) FOLLOWING WRITTEN SUBMISSION WAS FILED:- (A) IT IS SUBMITTED THAT SUCH MACHINERIES WERE PUR CHASED FROM THE CONTRACTORS WHO WERE EXECUTING CONTRACT WORK AT THE VARIOUS SITES AND BILLS OF SUCH MACHINERIES HAVE BEEN ISSUED BY THE S ELLERS ON THEIR LETTER HEADS. THE A.O ISSUED NOTICE U/S.133(6) TO THE SELL ERS. HOWEVER, SINCE SUCH SELLERS HAD COMPLETED THEIR JOBS AND SOLD MACH INERY, THEY HAD MOVED TO OTHER SITES. SUCH SELLERS DO NOT HAVE ANY PERMANENT ESTABLISHMENT AT THE WORK-SITE AND IT IS DIFFICULT FOR THE APPELLANT TO TRACE OUT SUB-CONTRACTORS AND PRODUCE THEM BEFORE THE A.O (PLEASE SEE PAPER BOOK PAGE NOS. 113 TO 122) ITA NO.1953/AHD/2009 A.Y.2000-0 1 ITO WD-5(2) V. PRIYANK INFRASTRUCTURE PVT . LTD. PAGE 4 (B) IT IS FURTHER SUBMITTED THAT DURING THE YEAR UN DER ASSESSMENT, DETAILS OF WORKS EXECUTED AND RECEIPTS THERE FROM AGAINST E ACH CONTRACT ARE SHOWN AS UNDER:- S.NOR CONTRACT WORK FOR RECEIPTS (RS) 1. CONTRACT FOR WIDENING OF FOUR LANE OF COSTRAL HIGHWAY NO.6 SEC. OF AMOD-ROJA KENTARIYA ROAD MULER DAAHEJ ROAD, KN.O/O TO 458 1,87,68,350 2. CONTRACT OF JAMBUSAR BR. CANAL 0.00 TO 43.02 KM. 1,01,19,673 3. CONTRACT DISTRIBUTORY OF BLOCK NO.11 A1 80,51, 557 4. CONTRACT FOR DISTRIIBUTORY OF BLOCK NO.11B 1,03, 64,304 5. MISCELLANEOUS PATCH WORK 1,20,059 TOTAL 4,73,23,908 THE ABOVE WORKS WERE CARRIED OUT AT DIFFERENT SITE S HAVING DISTANCE FROM EACH OTHER OF APPROXIMATELY MORE THAN 100 KMS. IT WAS NOT POSSIBLE TO USE MACHINERY OF ONE SITE TO THE OTHER SITE (PI, SEE PAPER BOOK PAGE NO.143). FOR THE PURPOSE OF CARRYING OUT THE ROAD WORK MEN TIONED AT SR.1, THE MACHINERIES REQUIRED AS UNDER:- 1. JCB EXCAVATOR 2. ROAD ROLLER. 3. VIBRATOR ROLLER 4. PAVER MACHINERY FOR CARRYING OUT CANAL CONSTRUCTION WORK, MACHINERI ES REQUIRED ARE AS UNDER:- 1. JCB EXCAVATOR 2. ROAD ROLLER 3. VIBRATOR ROLLER (D) THE APPELLANT WAS WORKING AT THREE CANAL SITE A ND ONE ROAD SITE. IN THE BEGINNING OF THE YEAR, THE APPELLANT OWNED ONLY TWO EXCAVATORS NAMELY POCLAIM CK-890 AND TATA HITACHI. IT WAS NOT POSSIBLE TO CARRY OUT THE ABOVE WORKS WITHOUT THE HELP OF FURTHER MAC HINERIES WHICH WERE PURCHASED DURING THE YEAR. THE SAME ARE AS UNDER. S.NO.` DESCRIPTION OF ASSETS PRICE OF ASSETS RS. NO. TOTAL COST 1 THREE VIBRATER ROLLER MACHINE 14,00,000 3 42,00,000 2 (TWO) JCB LODAR 12,00,000 2 24,00,000 3. (ONE) PAVER MACHINE (OLD) 5,00,000 1 5,00,000 4. (FOUR) ROAD ROLLER MACHINE 5,00,000 4 20,00,000 5. (FOUR) DIESEL ENGINE 2,50,000 4 10,00,000 ITA NO.1953/AHD/2009 A.Y.2000-0 1 ITO WD-5(2) V. PRIYANK INFRASTRUCTURE PVT . LTD. PAGE 5 6 ELECTRIC MOTOR 6,750 1,01,06,850/- (E) THE APPELLANT HAS INCURRED EXPENDITURE OF RS.35 ,40,565/- FOR PURCHASE OF DIESEL WHICH WAS USED IN THE MACHINERIE S. THEREFORE ON THE BASIS OF QUANTUM AND NATURE OF WORK AT DIFFERENT SI TES, PURCHASE OF MACHINERIES WAS GENUINELY REQUIRED AND WERE PURCHAS ED (PENALTY. SEE PAPER BOOK PAGE NO.148) (F) FOR THE YEAR UNDER ASSESSMENT, THE APPELLANT HA S SHOWN GROSS PROFIT OF RS.1,08,62,962/- ON CONTRACT RECEIPTS OF RS.4,73 ,23,908/- WHICH WORKS OUT TO 21.7% AS AGAINST G.O. OF 18.13% IN THE PREVIOUS YEAR I.E. A.Y. 1999-2000. SUCH A HIGH G.P. CANNOT BE DERIVED IN THIS LINE OF BUSINESS WITHOUT DEPLOYMENT OF OWN MACHINERIES (PEN ALTY. SEE PAPER BOOK PAGE NO.142) (G) DETAILS OF CONTRACT RECEIPTS TOGETHER WITH QUAN TITY EXECUTED FOR EACH WORK AND THE MACHINERIES REQUIRED FOR EACH OF THE C ONTRACT HAVE BEEN SUBMITTED IN THE PAPER BOOK AT PAGE NO.144 TO 147. TAKING INTO CONSIDERATION THIS SUBMISSION OF THE AS SESSEE LD. CIT(APPEALS) DELETED THIS ADDITION. 8. AGGRIEVED BY THIS ORDER OF LD. CIT(APPEALS) REVE NUE IS IN APPEAL BEFORE US. 9. AT THE TIME OF HEARING LD. DR RELIED ON THE ORDE R OF ASSESSING OFFICER WHILE LD. AR RELIED ON THE ORDER OF LD. CIT(APPEALS ) AND THE DETAILS FILED IN SUPPORT OF ITS SUBMISSION. 10. HEARD BOTH THE PARTIES AND PERUSED THE DETAILS FILED ON BEHALF OF ASSESSEE IN SUPPORT OF HIS SUBMISSION. WE FIND THAT LD. CIT(A) WHILE GIVING RELIEF TO THE ASSESSEE HAS OBSERVED AS UNDER:- AS IT COULD BE SEEN FROM THE DETAILS PRODUCED BEF ORE ME BY THE A.R THAT APPELLANT HAS PURCHASED MACHINERIES AND PUT TO USE THE SAME FOR BUSINESS PURPOSE DURING THE ASSESSMENT YEAR UNDER C ONSIDERATION. THE APPELLANT HAS ALSO INCURRED THE EXPENDITURE OF RS.3 5,40,565/- TOWARDS DIESEL FOR THE USE OF THE SAID MACHINERIES. THESE E XPENSES HAVE NOT BEEN DENIED BY THE ASSESSING OFFICER. HOWEVER, WHIL E MAKING THE ABOVE ITA NO.1953/AHD/2009 A.Y.2000-0 1 ITO WD-5(2) V. PRIYANK INFRASTRUCTURE PVT . LTD. PAGE 6 ADDITION THE ASSESSING OFFICER HAS NOT BROUGHT ON R ECORD ANY MATERIAL TO SHOW THAT THE CLAIM OF THE APPELLANT IS BOGUS. THER EFORE, HAVING CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT THE A.O IS NOT JUSTIFIED IN MAKING THE ADDITIO N ON ACCOUNT OF DEPRECIATION. THEREFORE, THE ADDITION MADE BY THE A .O AT 12,63,342/- IS DELETED. THUS THIS GROUND OF APPEAL IS ALLOWED. SINCE THE ABOVE FINDING OF LD. CIT(APPEALS) REMAIN UNCONTROVERTED BY THE REVENUE AND IS IN CONFORMITY WITH THE DETAILS AVAIL ABLE IN THE PAPER BOOK, WE FEEL NO NEED TO INTERFERE WITH THE ORDER PASSED BY LD. CIT(APPEALS) AND THE SAME IS HEREBY CONFIRMED. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 11. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS DAY OF 10 TH JUNE, 2011 SD/- SD/- ( G.D.AGARWAL ) ( D.K. TYAGI ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 10/06/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD