Gateway Distriparks(Kerala) Ltd, Cochin V. ACIT, Cochin

ITA 21/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77470 (ITAT-COCHIN)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 30-06-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2014
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: A S NARAYANAMOORTHY
• Keywords: Capital asset; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND CHANDRA POOJ ARI, AM I.T.A. NO. 21/COCH/2014 ASSESSMENT YEAR : 2008-09 GATEWAY DISTRIPARKS (KERALA) LIMITED, DOOR NO. 525, CHAKIAT HOUSE, SUBRAMANIAM ROAD, COCHIN-3 [PAN:AACCG 6616P] VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1(2), ERNAKULAM. (ASSESSEE -APPELLANT) (REVENUE-RESPONDEN T) ASSESSEE BY SHRI A.S. NARAYANAMOORTHY, CA REVENUE BY SMT. LATHA V. KUMAR, JR. DR DATE OF HEARING 30/06/2014 DATE OF PRONOUNCEMENT 04/07/2014 O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 26- 11-2013 PASSED BY THE CIT(A)-II, KOCHI FOR THE ASSE SSMENT YEAR 2008-09. 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS: 1. THE COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN HER CONCLUSION THAT THE EXPENDITURE INCURRED FOR REPAIRS OF THE YA RD AS CAPITAL EXPENDITURE. THE CIT(A) FAILED TO NOTE THAT THE AS SESSEE HAD INCURRED THE REPAIRS TO MAKE THE FACILITY OPERATIONAL. THE COMP ANY HAD NOT ACQUIRED ANY CAPITAL ASSETS BUT INCURRED THE EXPENDITURE TO UTILIZE THE FACILITY TO CARRY ON ITS BUSINESS MORE EFFECTIVELY AND HENCE WA S ALLOWABLE AS REVENUE EXPENDITURE. I.T.A. NO.21/COCH/2014 2 2. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN H ER CONCLUSION THAT THE EXPENDITURE WAS INCURRED PRIOR TO COMMENCEMENT OF BUSINESS AND HENCE CAPITAL IN NATURE. THE EXPENDITURE WAS INCURR ED IN A PREMISES OWNED BY ANOTHER PARTY AND APPELLANT HAD CARRIED ON THE BUSINESS FROM THE SAID PREMISES. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E CLAIMED EXPENDITURE OF RS. 22,78,011/- AS REPAIRS IN ITS RETURN OF INCOME. THE ASSESSING OFFICER OBSERVED WHILE COMPUTING THE EXPENDITURE THAT IT IS A CAPITA L EXPENDITURE AND NOT REVENUE EXPENDITURE TO BE ALLOWED. ON APPEAL, THE CIT(A) C ONFIRMED THE DECISION OF THE ASSESSING OFFICER. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 4. THE LD. AR SUBMITTED THAT THE EXPENDITURE IS REV ENUE IN NATURE AND THE ASSESSEE HAS NOT DERIVED ENDURING BENEFIT. THE ASS ESSEE HAS ONLY UPGRADED THE EXISTING FACILITY AND IT IS WHOLLY AND EXCLUSIVELY LAID OUT FOR THE PURPOSE OF BUSINESS. WITHOUT PREJUDICE TO THE ABOVE FACTS, TH E LD. AR SUBMITTED THAT THE EXPENDITURE INCURRED WAS ON ACCOUNT OF JOINT VENTU RE WITH PACE CFS PVT. LTD. AND THE PERIOD OF JOINT VENTURE IS FOR THREE YEARS AND AT LEAST ONE THIRD OF THE EXPENDITURE MAY BE ALLOWED DURING THE PERIOD OF EXI STENCE OF THE JOINT VENTURE. 5. THE LD. AR RELIED ON THE FOLLOWING CASE LAWS: 1. CIT VS. CO-OPERATIVE SUGARS LIMITED (235 ITR 34 3) (KER.) 2. ACIT VS. TUPPERWARE INDIA PRIVATE LTD. (32 ITR 186) (TRI) DELHI. I.T.A. NO.21/COCH/2014 3 5.1 THE LD. AR ALSO RELIED ON THE JUDGMENT OF THE J URISDICTIONAL HIGH COURT IN THE CASE OF JOY ALUKKAS INDIA PVT. LTD. VS. ACIT IN I.T.A. NO. 230/2013 DATED 20- 01-2014. 6. ON THE OTHER HAND, THE LD. DR SUBMITTED THAT BY NO STRETCH OF IMAGINATION IT CAN BE CLAIMED AS REVENUE EXPENDITURE. THE ASSE SSEE HAS DERIVED ENDURING BENEFIT. MORE SO, SHE SUBMITTED THAT THE EXPENDITU RE WAS INCURRED BEFORE THE COMMENCEMENT OF THE BUSINESS OF THE JOINT VENTURE A ND IT SHOULD BE TREATED AS CAPITAL EXPENDITURE ONLY. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL IN RECORD. THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE EXPENDI TURE INCURRED ON REPAIRS IS REVENUE EXPENDITURE. HOWEVER, THE LD. DR SUBMITTED THAT THE EXPENDITURE WAS INCURRED PRIOR TO THE COMMENCEMENT OF THE BUSINESS OF THE ASSESSEE. IF THE EXPENDITURE IS INCURRED BEFORE THE PERIOD OF COMMEN CEMENT, THE EXPENDITURE CANNOT BE CLAIMED AS REVENUE EXPENDITURE AND IT IS TO BE TREATED AS CAPITAL EXPENDITURE. ON THE OTHER HAND, IF THE EXPENDITURE IS INCURRED AFTER THE COMMENCEMENT OF THE JOINT VENTURE, THE EXPENDITURE IS TO BE CONSIDERED AS REVENUE EXPENDITURE. HOWEVER, THE BENEFIT OF THIS EXPENDITURE IS DERIVED BY THE ASSESSEE FOR MORE THAN ONE YEAR, I.E., FOR THREE YE ARS DURING THE PERIOD OF THE JOINT VENTURE. BY PLACING RELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF BROOKE BOND LTD. VS. CIT (225 ITR 798), WE ARE INCLINED TO DIRECT THE I.T.A. NO.21/COCH/2014 4 ASSESSING OFFICER TO VERIFY WHETHER THE EXPENDITURE IS INCURRED DURING THE PERIOD OF PRE-COMMENCEMENT OR NOT. IF IT IS INCURRED AFTE R THE COMMENCEMENT OF JOINT VENTURE BUSINESS, IT WOULD BE APPORTIONED OVER THE PERIOD OF THE JOINT VENTURE WITH PACE CFS PVT. LTD. ACCORDINGLY, THE ENTIRE ISS UE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WITH BILLS, VOUC HERS AND RECEIPTS SO AS TO VERIFY THE DATE OF EXPENDITURE WHETHER THEY WERE INCURRED BEFORE THE COMMENCEMENT OF THE JOINT VENTURE OR AFTER THE COMMENCEMENT OF T HE JOINT VENTURE AND DECIDE ACCORDINGLY. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED ACCORDINGLY ON 04-07- 2014. SD/- SD/- (N.R.S.GANESAN) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: KOCHI DATED: 4TH JULY, 2014 GJ COPY TO: 1. GATEWAY DISTRIPARKS (KERALA) LIMITED, DOOR NO. 5 25, CHAKIAT HOUSE, SUBRAMANIAM ROAD, COCHIN-3 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCL E-1(2), KOCHI. 3. THE COMMISSIONER OF INCOME-TAX(APPEALS)-II, KOCH I. I.T.A. NO.21/COCH/2014 5 4. THE COMMISSIONER OF INCOME-TAX, KOCHI. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE. BY ORDER (ASSISTANT REGISTRAR) I.T.A.T, COCHIN