M/S KETI CONSTRUCTIONS, V. THE ACIT 5(1),

ITA 200/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8007 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 16-03-2010
• Assessment Year: misc
• Appeal Filed On: 21-04-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: S S SOLANKI
• Keywords: Business income; Depreciation

Judgement Text

PAGE 1 OF 6 - I.T.A.NO. 200/IND/2008 M/S.KETI KCONSTRUCTION (I) LIMITED, INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AABCK5930D I.T.A.NO.200/IND/2008 A.Y. : 2003-04 M/S.KETI CONSTRUCTION (I)LIMITED, ACIT 5(1), 31/6,VATSALAY CHAMBER, VS INDORE. SNEH NAGAR MAIN ROAD, INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.S.SOLANKI, C.A. RESPONDENT BY : SMT.APARNA KARAN, SR. DR DATE OF HEARING : 16.03.2010 O R D E R PER V.K. GUPTA, A.M. THIS APPEAL FILED BY THE ASSESSEE ARISES OUT OF ORD ER OF THE LD. CIT(A)-II, INDORE, DATED 15.01.2008 FOR THE ASSESS MENT YEAR 2003-04. 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSE D THE MATERIAL AVAILABLE ON RECORD. 3. GROUND NO. 1 READS AS UNDER :- THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWAN CE OUT OF ADMINISTRATIVE EXPENSES TO THE EXTENT OF RS. 2,5 8,989/- BY PAGE 2 OF 6 - I.T.A.NO. 200/IND/2008 M/S.KETI KCONSTRUCTION (I) LIMITED, INDORE. TAKING HIS ASSUMPTIONS. THAT THE DISALLOWANCE SO MA INTAINED BEING ILLEGAL AND WRONG. THE SAME REQUIRE TO BE DEL ETED. 4. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS HAVIN G NON BOT AS WELL AS BOT PROJECTS. IN RESPECT OF BOT PROJECTS, T HE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-IA OF THE ACT. THE A.O. FOUND THAT THE ASSESSEE COMPANY WAS MAINLY ENGAGED IN NON-BOT PROJECTS. IT WAS SUBMITTED BY THE ASSESSEE THAT IT WAS MAINTAINING SEPARATE ACCOU NTS FOR BOTH TYPES OF ACTIVITIES AND HAD SEPARATELY DEBITED ADMINISTRATIV E EXPENSES TO BOT PROJECT TO THE TUNE OF RS. 13,79,632/-, HENCE, THER E WAS NO JUSTIFICATION FOR FURTHER ALLOCATION OF ADMINISTRATIVE EXPENSES OF RS . 39,42,557/- TOWARDS BOT PROJECTS. THE A.O., HOWEVER, HELD THAT PROPORTI ONATE AMOUNT OF SUCH NON ALLOCATED ADMINISTRATIVE EXPENSES WAS TO BE ATT RIBUTED TOWARDS BOT PROJECT. ACCORDINGLY, IN THE RATIO OF TOTAL TURN OV ER OF BOT BUSINESS TO THE TOTAL TURNOVER OF THE ASSESSEE, HE ATTRIBUTED EXPEN DITURE WORTH RS. 2,81,127/- OUT OF ADMINISTRATIVE EXPENSES TOWARDS B OT PROJECTS RECOMPUTED THE PROFIT OF SUCH ACTIVITY. AGGRIEVED B Y THIS, THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. CIT(A ), WHO HELD THAT COST OF TENDER FORM OF RS. 3,10,460/- DID NOT PERTAIN TO BO T PROJECT,. HENCE, THE SAME COULD NOT BE PROPORTIONATELY ATTRIBUTED TO BOT PROJECT. ACCORDINGLY, THE LD. CIT(A) WORKED OUT THE QUANTUM OF ATTRIBUTION OF PAGE 3 OF 6 - I.T.A.NO. 200/IND/2008 M/S.KETI KCONSTRUCTION (I) LIMITED, INDORE. SUCH ADMINISTRATIVE EXPENSES TOWARDS BOT PROJECT AT RS. 2,58,989/-. STILL AGGRIEVED THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT SEPARATE ACCOUNTS HAD BEEN MAINTAINED FOR BOTH THE TYPES OF ACTIVITIES. HENCE, THERE WAS NO QUESTION OF SUCH ATTRIBUTION. HE FURTH ER CONTENDED THAT EXPENSES OF RS. 13,17,240/- INCLUDING COST OF TENDE R OF RS. 3,10,460/- WERE RELATED ONLY TO NON BOT PROJECTS. HENCE, THESE SHOULD NOT HAVE BEEN ALLOCATED TOWARDS BOT PROJECTS. SIMILARLY, TU RNOVER OF BOT PROJECT HAD BEEN TAKEN AT RS. 2,13,72,671/-, WHICH SHOULD H AVE BEEN TAKEN AT RS. 1,88,04,026/- AS CERTAIN RECEIPTS PERTAINED TO GOVE RNMENT. 6. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHER H AND, PLACED STRONG RELIANCE ON THE ORDER OF THE LD. CIT(A). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE ASSESSEE HAD CLAIMED TOTAL ADM INISTRATIVE EXPENSES AT RS. 39,42,557/- IN ADDITION TO ADMINIST RATIVE EXPENSES SEPARATELY CHARGED TO BOT PROJECTS. THE A.O. HAS PR OPORTIONATELY APPORTIONED TOTAL ADMINISTRATIVE EXPENSES OF NON-BO T PROJECTS AND THE LD. CIT(A) HAS APPROXIMATELY APPORTIONED RS. 36 LAK HS TOWARDS BOT PROJECTS. AS AGAINST THIS, THE ASSESSEES CLAIM IS THAT EXPENSES WORTH RS. 10,09,000/- APPROXIMATELY SHOULD ALSO NOT BE ATTRIB UTED. WE HAVE PERUSED PAGE 4 OF 6 - I.T.A.NO. 200/IND/2008 M/S.KETI KCONSTRUCTION (I) LIMITED, INDORE. THE DETAILS OF THESE EXPENSES AND, IN OUR OPINION, SUCH CLAIM OF THE ASSESSEE IS CORRECT. HENCE, WE ACCEPT THE CLAIMS OF THE ASSESSEE IN THIS REGARD. SIMILARLY, TOTAL TURNOVER AS WELL AS TOTAL TURNOVER OF BUSINESS SHOULD BE TAKEN AT NET OF RECEIPT PERTAINING TO THE GOVERNMENT. ACCORDINGLY, WE DIRECT THE A.O. TO RECOMPUTE THE DI SALLOWANCE TO BE MADE IN THIS REGARD IN ACCORDANCE WITH THE ABOVE DE CISION. THUS, THIS GROUND OF THE ASSESSEE STANDS PARTLY ALLOWED. 9. GROUND NO.2 READS AS UNDER :- THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWA NCE OF RS. 1,00,000/- OUT OF INTEREST EXPENSES BY HOLDING THAT NO DETAILS WERE FURNISHED TO SUBSTANTIATE THE POINT THAT BORROWED F UND WERE NOT UTILIZED FOR BOT PROJECT AND PROVISION FOR INTEREST HAVE BEEN MADE IN THE ACCOUNT. THE DISALLOWANCE SO MADE ON THE BAS IS OF WRONG FACTS AND CONCLUSION IS WRONG. THE SAME, THEREFORE, REQUIRED TO BE DELETED IN FULL. 10. THE FACTS, IN BRIEF, ARE THAT THE A.O. DISALLOWED A SUM OF RS. 1 LAKH OUT OF INTEREST EXPENSES FOR THE REASON THAT B ORROWED FUNDS WERE USED NOT ONLY FOR NON BOT PROJECT, BUT ALSO FOR BOT PROJECT. THE ASSESSEE, IN APPEAL, BEFORE THE LD. CIT(A) CONTENDE D THAT INTEREST ON TERM LOAN IN RESPECT OF BOT PROJECT HAD BEEN SEPARATELY CLAIMED. HENCE, THERE PAGE 5 OF 6 - I.T.A.NO. 200/IND/2008 M/S.KETI KCONSTRUCTION (I) LIMITED, INDORE. WAS NO QUESTION OF ANY FURTHER DISALLOWANCE. THE LD . CIT(A), HOWEVER, CONFIRMED THE ACTION WITH THE A.O. FOR THE REASON T HAT THE ASSESSEE FAILED TO SUBMIT THE DETAILS OF UTILIZATION OF BORROWED FU NDS ONLY IN RESPECT OF NON BOT PROJECTS. STILL AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 11. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE THE LD. CIT(A) AND SUBMITTED THAT INTEREST T ERM LOAN AMOUNTING TO RS. 5,02,205/- HAD BEEN SEPARATELY DEBITED IN RESPE CT OF BOT PROJECTS CONSIDERING NO FURTHER DISALLOWANCE WAS REQUIRED. H OWEVER, THE LEARNED COUNSELS CONTENTION WAS DRAWN TO THE FACT THAT THE AMOUNT OF RS. 17,71,418/- WAS TOWARDS BANK INTEREST, GUARANTEE CO MMISSION AND OTHER CHARGES AND NO GUARANTEE COMMISSION/OTHER CHARGES H AD BEEN DEBITED UNDER THE BOT PROJECTS. HENCE, HOW THE DISALLOWANCE COULD BE CONSIDERED AS UNJUSTIFIED. THE LEARNED COUNSEL COUL D NOT SUBMIT ANY DETAILS TO SUBSTANTIATE THE SAME. IN THESE CIRCUMST ANCES, WE FIND NO MERIT IN THE CONTENTIONS OF THE ASSESSEE AND, THEREFORE, THIS GROUND OF THE ASSESSEE IS DISMISSED. 12. GROUND NO. 3 READS AS UNDER :- THAT THE LD. CIT(A) ERRED IN MAINTAINING DISALLOWA NCE OF RS. 1,00,000/- OUT OF DEPRECIATION BY UPHOLDING THE VIEW OF THE A.O. THAT SOME ASSETS WERE USED IN ENTIRE BUSIN ESS. THE PAGE 6 OF 6 - I.T.A.NO. 200/IND/2008 M/S.KETI KCONSTRUCTION (I) LIMITED, INDORE. OBSERVATION OF THE LD. CIT(A) IS WRONG. THE DISALLO WANCE OF RS. 1,00,000/- THEREFORE REQUIRED TO BE DELETED IN FULL. 13. THE ISSUE RAISED IN THIS GROUND IS SIMILAR TO THE O THER ISSUES IN SUM AND SUBSTANCE, WHERE DEPRECIATION ON THE ASSETS USED FOR BOTH THE BUSINESSES HAVE ONLY BEEN CLAIMED BY THE ASSESSEE I N RESPECT OF NON BOT PROJECT, WHICH, IN OUR OPINION, IS APPARENTLY NOT C ORRECT AS THESE BUSINESS ASSETS MUST HAVE BEEN USED FOR BOTH THE BUSINESSES, BECAUSE THERE ARE NO SEPARATE ASSETS FOR EACH TYPE OF ACTIVITY. ACCORDIN GLY, WE CONFIRM THE FINDING OF THE LD. CIT(A) IN THIS REGARD. THUS, THI S GROUND OF THE ASSESSEE IS ALSO DISMISSED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 18 TH MARCH, 2010. SD/- SD/- (JOGINDER SINGH) (V. K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 18 TH MARCH, 2010. CPU* 16173