DCIT, New Delhi V. M/s Control & Switchgear Contractors ltd., New Delhi

ITA 1981/DEL/2013

• Counselvise Citation: 198120114 RSA 2013
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 04-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Keywords: Depreciation; Additional depreciation; Difference of opinion; Capital expenditure
• Section: 10B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO: 1981/DEL/2013 AY : - 2006-07 DCIT VS. C ONTROL & SWITCHGEAR CONTRACTORS LTD., CIRCLE 3 (1), 222, OKHLA INDL. ESTATE NEW DELHI. NEW DELHI. (PAN AAACT0682J) (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. PARWINDER KAUR, SR. DR RESPONDENT BY :SHRI ANIL BHALLA, CA DATE OF HEARING :16.2.2015 DATE OF PRONOUNCEMENT : 4. 3.2015 O R D E R PER G.C. GUPTA, VICE PRESIDENT THIS APPEAL BY THE REVENUE FOR THE ASSES SMENT YEAR 2006-07 IS DIRECTED AGAINST THE ORDER OF CITA. THE ONLY GROUND OF THE A PPEAL OF THE REVENUE IS AS UNDER :- WHETHER THE LD. CIT(A) HAS ERRED IN LAW AND ON FAC TS IN DELETING THE PENALTY U/S 271(1)(C) AMOUNTING TO RS. 1,07,50,171/-. 2. THE LD. DR REFERRED TO THE RELEVANT POR TION OF THE PENALTY ORDER PASSED U/S 271(1)(C) OF THE ACT WHEREIN PENALTY WAS LEVIED ON CERTAIN DISALLOWANCES ON RENOVATION/ADDITIONAL CONSTRUCTION EXPENSES, FOREIG N TRAVELLING EXPENSES, ADDITIONAL DEPRECIATION, GUARANTEE COMMISSION AND THE CLAIM OF EXEMPTION U/S 10B OF THE ACT. SHE SUBMITTED THAT THE PENALTY WITH RES PECT TO THE AMOUNTS WHOSE ITA NO.1981/DEL/2013 DCIT VS.CONTROL & SWITCHGEAR CONTRACTORS LTD. 2 DISALLOWANCE HAS BEEN CONFIRMED IN APPEAL, SHOULD B E CONFIRMED BY THE TRIBUNAL. SHE RELIED ON THE ORDER OF THE AO AND ALSO THE DECI SION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ZOOM COMMUNICATION (P) LTD. (2010) 327 ITR 510. 3. THE LD. COUNSEL FOR THE ASSESSEE HAS OPPOSED THE SUBMISSIONS OF LD. DR. HE SUBMITTED THAT OUT OF FIVE DISALLOWANCES, THE DISAL LOWANCE WITH RESPECT TO ADDITIONAL DEPRECIATION U/S 32(1)(IIA) OF THE ACT AND EXEMPTIO N U/S 10B OF THE ACT HAS BEEN RESTORED TO THE FILE OF THE AO BY THE TRIBUNAL AND ACCORDINGLY THE PENALTY WITH RESPECT TO THESE TWO ITEMS OF DISALLOWANCE MAY BE D ELETED. WITH REGARD TO THE ADDITION MADE ON ACCOUNT OF THE DISALLOWANCE OF REP AIR AND MAINTENANCE IN RESPECT OF LEASED BUILDING, HE SUBMITTED THAT THE SAME HAS BEEN HELD AS CAPITAL EXPENDITURE AND THE ADDITION WAS MADE BASED ON INFORMATION AND FACTS MADE AVAILABLE BY THE ASSESSEE ITSELF. HE SUBMITTED THAT OUT OF DISALLOWA NCE OF RS. 20.78 LACS ON ACCOUNT OF FOREIGN TRAVELLING EXPENSES, THE CIT(A) HAS REST RICTED THE DISALLOWANCE TO RS. 3.59 LACS WHICH WAS CONFIRMED BY THE TRIBUNAL AND T HE CLAIM OF EXPENDITURE WAS DISALLOWED ONLY ON THE BASIS OF INFORMATION AND FAC TS MADE AVAILABLE BY THE ASSESSEE. HE SUBMITTED THAT THE GUARANTEE COMMISSIO N PAID TO DIRECTORS WAS DISALLOWED BY THE AO AND DISALLOWANCE WAS CONFIRMED BY THE CIT(A) AND THE TRIBUNAL. HOWEVER, THE TRIBUNAL IN MISCELLANEOUS AP PLICATION ORDER PASSED PURSUANT TO THE DECISION OF HONBLE DELHI HIGH COURT HAS ALL OWED THE CLAIM OF THE ASSESSEE WITH REGARD TO THE GUARANTEE COMMISSION PAID TO THE DIRECTORS BY THE ASSESSEE COMPANY AND THEIR REMAIN NO BASIS FOR LEVY OF PENA LTY ON THIS ISSUE. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND HAVE PERUSED THE ORDER OF THE AO. WITH REGARD TO THE DISALLOWANCE OF ADDITIONAL D EPRECIATION AND OF EXEMPTION U/S ITA NO.1981/DEL/2013 DCIT VS.CONTROL & SWITCHGEAR CONTRACTORS LTD. 3 10B OF THE ACT, THE MATTER HAS BEEN RESTORED TO THE FILE OF THE AO TO DETERMINE THE SAME AFRESH IN ACCORDANCE WITH LAW AS PER THE DIREC TIONS OF THE TRIBUNAL AND THE MATTER IS STILL PENDING BEFORE THE AO. IN THESE FAC TS, WE CANCEL THE PENALTY LEVIED U/S 271(1)(C) OF THE ACT ON THESE TWO ITEMS OF DISALLOW ANCE. HOWEVER, THE AO WHILE FRAMING THE ASSESSMENT AS PER THE DIRECTIONS OF THE TRIBUNAL, MAY IF SO WARRANTED INITIATE THE PENALTY U/S 271(1)(C) OF THE ACT AFRES H IN ACCORDANCE WITH LAW. WITH REGARD TO THE DISALLOWANCE OF GUARANTEE COMMISSION OF DIRECTORS, THE TRIBUNAL HAS ALREADY ALLOWED THE MISCELLANEOUS APPLICATION PREFE RRED BY THE ASSESSEE AND FOLLOWING THE DECISION OF THE HONBLE DELHI HIGH CO URT HAS ALLOWED DEDUCTION OF GUARANTEE COMMISSION PAID TO THE DIRECTORS AND THEI R REMAIN NO BASIS FOR LEVY OF PENALTY U/S 271(1)(C) OF THE ACT ON THIS ISSUE AND THE SAME IS ACCORDINGLY CANCELLED. WITH REGARD TO THE OTHER TWO ITEMS OF DISALLOWANCE OF REPAIR AND MAINTENANCE EXPENSES AND DISALLOWANCE OUT OF FOREIGN TRAVELLING EXPENSES, WE FIND THAT PART OF DISALLOWANCE HAS BEEN CONFIRMED IN APPEAL BY THE AP PELLATE AUTHORITY. HOWEVER, THE DISALLOWANCE WAS MADE ON THE BASIS OF INFORMATION A ND FACTS MADE AVAILABLE TO THE AO BY THE ASSESSEE ITSELF. THE FACT THAT ASSESSEE H AS IN FACT SPENT THE AMOUNTS IN QUESTION, IS NOT IN DOUBT. MOREOVER, IT IS A CLEAR CASE OF DIFFERENCE OF OPINION WITH REGARD TO THE ALLOWABILITY OF CERTAIN CLAIM OF EXPE NDITURE MADE BY THE ASSESSEE. THE ISSUE THAT WHETHER REPAIRS AND MAINTENANCE IN RESPE CT OF LEASED BUILDINGS WAS REVENUE OR CAPITAL IN NATURE OR WHETHER THE PART OF THE FOREIGN TRAVELLING EXPENSES WERE FOR THE BUSINESS PURPOSES OF THE ASSESSEE IS CLEARLY DEBATABLE IN NATURE. THIS IS A CASE WHERE THE ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR ASSESSMENT AT THE TIME OF FILING OF THE RETURN ITSE LF. THE CONDUCT OF THE ASSESSEE IN THIS CASE WAS BONAFIDE. IN THESE FACTS OF THE CASE, WE ARE OF THE VIEW THAT IT IS NOT A ITA NO.1981/DEL/2013 DCIT VS.CONTROL & SWITCHGEAR CONTRACTORS LTD. 4 FIT CASE FOR LEVY OF PENALTY U/S 271(1)(C) OF THE A CT ON THESE TWO ITEMS OF DISALLOWANCES MADE BY THE AO AND ACCORDINGLY THE PE NALTY LEVIED U/S 271(1)(C) OF THE ACT ON DISALLOWANCE OF REPAIR AND MAINTENANCE E XPENSES AND OUT OF FOREIGN TRAVELLING EXPENSES IS CANCELLED. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2015. SD/- SD/- (T.S. KAPOOR) (G.C. GUPTA) ACCOUNTANT MEMBER VICE PRESIDE NT DATED: THE 2015 VEENA COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 17.2.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 18.2.2 015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER ITA NO.1981/DEL/2013 DCIT VS.CONTROL & SWITCHGEAR CONTRACTORS LTD. 5