ACIT Cir, V. Bharti Health Care Ltd.,

ITA 2124/DEL/2008

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 0741 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-01-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 30-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS ANUSHA KHURANA
• Keywords: Depreciation; Set aside
• Section: 260A; 37(1)

Judgement Text

ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A NEW DELHI BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2124/DEL/2008 A.Y. : 2003-04 ASSTT. COMMISSIONER OF INCOME TAX, REWARI CIRCLE, AAYAKAR BHAVAN, MODEL TOWN, REWARI VS. M/S BHARTI HEALTH CARE LTD., 21, JONIAWAS, DHARUHERA, DISTT.- REWARI (PAN: AAACB6447R) AND C.O. NO. 313/DEL/2009 (IN ITA NO. 2124/DEL/2008) A.Y. 2003-04 M/S CAPSUGEL HEALTHCARE LTD., (FORMERLY BHARTI HEALTHCARE LTD) 21, JONIWAS DHARUHERA, DISTT. REWARI (APPELLANT) VS. ASSTT. COMMISSIONER OF INCOME TAX, REWARI CIRCLE, AAYAKAR BHAVAN, MODEL TOWN,REWARI (RESPONDENT) ASSESSEE BY : SH. ANIL BHALLA, CA DEPARTMENT BY : MRS. ANUSHA KHURANA, SR. D.R. ORDER ORDER ORDER ORDER P PP PER SHAMIM YAHYA: AM ER SHAMIM YAHYA: AM ER SHAMIM YAHYA: AM ER SHAMIM YAHYA: AM THIS APPEAL BY THE REVENUE AND CROSS OBJECTION BY THE ASSESSEE EMANATE OUT OF ORDERS OF LD. COMMISSIONER OF INCOME T AX (APPEALS) DATED 18.3.2008 PERTAINING TO ASSESSMENT YEAR 2003-0 4. REVENUES APPEAL 2. THE FIRST ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF 28, 45,951/- MADE ON ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 2 ACCOUNT OF PROVISION MADE TOWARDS AGEING OF INVENTO RY OF WORK IN PROGRESS AND FINISHED GOODS AND WITHOUT HAVING REAL IZED THE ACTUAL SALE OF GOODS. 3. THE ASSESSING OFFICER IN THIS REGARD NOTED THAT ASSESSEE COMPANY HAS DEBITED AN AMOUNT OF ` 28,45,951/- ON ACCOUNT OF PROVISION MADE TOWARDS AGEING OF INVENTORY OF WORK IN PROGRESS AND FINISHED GOODS. THE ASSESSING OFFICER WAS NOT AGRE EABLE TO THIS. HE INTER-ALIA HELD THAT SIMILAR ADDITION HAS BEEN MADE IN THE CASE OF THE ASSESSEE HIMSELF IN THE PRECEDING YEAR 2001-02 WHICH HAS BEEN CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS). 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION HOLDING THAT THE GEN UINENESS OF THE CLAIM CANNOT BE DOUBTED. 5. AGAINST THIS ORDER THE REVENUE IS IN APPEAL BEFO RE US. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE, AS IDENTICAL ISSUE WAS DECIDED IN ASSESSMENT YEAR 2000-01 AND 2001-02 IN FAVOUR OF THE ASSESSEE BY TH IS TRIBUNAL IN ITA NO. 3952 AND 2558 VIDE ORDER DATED 7.11.2008. AFTE R ELABORATE CONSIDERATION, THE TRIBUNAL HAD CONCLUDED THAT AS SUCH, CONSIDERING ALL THE FACTS OF THE CASE, WE ARE OF THE VIEW THAT THE LOSS ON ACCOUNT OF DEVALUATION IN CLOSING STOCK WAS RIGHTLY CLAIMED BY THE ASSESSEE COMPANY IN THE YEAR UNDER CONSIDERATION AND THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN CONFIRMIN G THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON THIS ISSUE. SINC E IN ASESSEES OWN CASE ON THE IDENTICAL FACTS, THE TRIBUNAL HAD GRANT ED THE RELIEF TO THE ASSESSEE. RESPECTFULLY FOLLOWING THE PRECEDENT, WE UPHOLD THE ORDER OF ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 3 THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND DECI DE THE ISSUE AGAINST THE REVENUE. 7. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND FACTS IN DELETING THE DI SALLOWANCES OF ` 1,47,876/- CLAIMED ON AMOUNT CAPITALIZED ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION FOR INCREASE IN COST OF LIABIL ITY DUE TO CAPITALIZATION OF FOREIGN EXCHANGE RATE FLUCTUATIO N, WHEN 43A OF THE ACT WAS NOT APPLICABLE TO THE FACTS OF THE CASE. 8. IN THIS REGARD, ASSESSING OFFICER NOTED THAT AS SESSEE WAS ASKED TO FURNISH THE DETAILS OF AMOUNT CAPITALIZED ON ACCO UNT OF FOREIGN EXCHANGE FLUCTUATION AND WAS ALSO ASKED TO FURNISH THE DETAILS OF DEPRECIATION CLAIMED DURING THE YEAR UNDER CONSIDERA TION. PERUSAL OF THE DETAIL REVEALS THAT DURING THE YEAR UNDER CONSI DERATION THE ASSESSEE COMPANY HAS ADDED ` 591505/- TO CAPITAL COS T ON ACCOUNT OF EXCHANGE FLUCTUATION LOSS AND A DEPRECIATION OF ` 1 47876/- HAS BEEN CLAIMED ON THIS ACCOUNT. THE ASSESSING OFFICER THOU GH NOTED THAT ITAT HAD DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN EARLIER YEARS. HOWEVER, SINCE THE APPEALS U/S 260A BEFORE THE HON BLE HIGH COURT HAD ALREADY FILED BY THE DEPARTMENT. THE ISSUE WA S SUB-JUDICE AND HE PROCEED TO HOLD THAT THIS LIABILITY IS ONLY ON NOTI ONAL BASIS AND DEPRECIATION CANNOT BE ALLOWED. 9. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) NOTED THAT TRIBUNAL IN ASSESSEES OWN CAS E HAD ALLOWED THIS ISSUE IN FAVOUR OF THE ASSESSEE. HENCE, HE DELETED THE ADDITION. 10. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. WE FIND THAT IN ASSESSEES OWN CASE IN ITA NO. 3972/DE L/2004 AND ITA NO. 2588/DEL/05 FOR A.Y. 2000-01 AND 2001-02, THE IDENTI CAL ISSUE HAS BEEN ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 4 DECIDED IN FAVOUR OF THE ASSESSEE. BOTH THE COUNS EL FAIRLY AGREED TO THIS PROPOSITION. ACCORDINGLY, WE HOLD THAT THE I SSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE EARLIER DECISION OF T HE TRIBUNAL IN THIS REGARD AND ACCORDINGLY, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THIS ISSUE. 11. THE NEXT ISSUE RAISED IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE OF ` 2,61,469/- MADE ON ACCOUNT OF LOSS DUE TO RESTATEMENT / REVALUATION OF ITS DEBTORS AND CREDITORS WITHOUT HAVING THEIR ACTUAL REALIZATION. 12. ASSESSING OFFICER ON THIS ISSUE NOTED THAT ON PERUSAL OF PROFIT AND LOSS ACCOUNT REVEALS THAT THE ASSESSEE COMPANY HAS D EBITED LOSS AT ` 261469/- DUE TO EXCHANGE FLUCTUATION. ON ENQUIRY IN THIS REGARD ASSESSEE SUBMITTED THAT LOSS ON ACCOUNT OF FOREIGN E XCHANGE IS DEBITED ON ACCOUNT OF ACTUAL REALIZATION OF FOREIGN EXCHANG E DURING THE YEAR AND RESTATEMENT OF DEBTORS AND CREDITORS AS ON 31.3 .2003. IT WAS FURTHER SUBMITTED THAT THE ACCOUNTS ARE MAINTAINED ON MERCANTILE SYSTEM AND IT SHOULD NOT BE DISALLOWED. ASSESSING O FFICER DID NOT ACCEPT THE SUBMISSIONS. HE CLAIMED THAT ASSESSEE HA S NOT MADE ACTUAL PAYMENT OF THE LIABILITY DURING THE YEAR. H ENCE, THE LOSS IS ON NOTIONAL BASIS. HENCE, HE MADE THE ADDITION OF ` 26 1469/-. 13. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE SEVERAL CASES ON THIS ISSU E. HE DIRECTED THE ASSESSING OFFICER TO EXAMINE WHETHER THE LOSS IS ON CAPITAL ACCOUNT OR REVENUE ACCOUNT, AND IF IT WAS ON REVENUE ACCOUNT T O ALLOW THE SAME. 14. AGAINST THIS ORDER REVENUE IS IN APPEAL BEFORE US. ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 5 15. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE HONBLE APEX COURT IN THE CASE OF WOODWARD GOVERNOR 312 ITR 254. IN THIS CASE IT WA S HELD THAT LOSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF FLUCTUATION IN THE RATE OF FOREIGN EXCHANGE AS ON THE DATE OF BALANCE SHEET IS AN ITEM OF EXPENDITURE UNDER SECTION 37(1) OF THE IT ACT. RES PECTFULLY FOLLOWING THE PRECEDENT AS ABOVE, WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND DECIDE THE ISSUE IN FAV OUR OF THE ASSESSEE. ASSESSEES CROSS OBJECTION ASSESSEES CROSS OBJECTION ASSESSEES CROSS OBJECTION ASSESSEES CROSS OBJECTION 16. THE ISSUE RAISED IS THAT LD. COMMISSIONER OF INC OME TAX (APPEALS) HAS ERRED BOTH ON FACTS AND IN LAW IN CON FIRMING THE ACTION OF THE ASSESSING OFFICER IN DISALLOWING RUNNING AND MAI NTENANCE EXPENSES AND DEPRECIATION AMOUNTING TO ` 22,376/- T O THE EXTENT OF 1/8 TH OF THE EXPENSES IN RESPECT OF RUNNING AND MAINTENA NCE EXPENSES INCURRED ON THE CAR OF THE MD AMOUNTING TO ` 169,508/ - AND DEPRECIATION THEREON AMOUNTING TO ` 9,502/- ALLEGED LY ON THE GROUND THAT THE SAME HAS BEEN INCURRED TOWARDS PERSONAL US AGE. 17. ON THIS ISSUE ASSESSING OFFICER HAS MADE ESTIMA TED DISALLOWANCE HOLDING THAT PERSONAL USAGE OF MOBILE AND TELEPHON E ETC. CANNOT BE ALLOWED. SIMILARLY, IT WAS HELD THAT 1/10 TH OF VEHICLE RUNNING AND MAINTENANCE EXPENSES WAS DISALLOWED ON THE GROUND TH AT SOME PERSONAL USE CANNOT BE RULED OUT. 18. UPON ASSEESSEES APPEAL LD. COMMISSIONER OF INCOM E TAX (APPEALS) HELD THAT THESE GROUND OF APPEALS ARE DIS POSED OF ON THE SAME LINES AS IN THE ASSESSEES CASE IN A.Y. 2002- 03. ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 6 19. AGAINST THIS ORDER BY WAY OF CROSS OBJECTION THE ASSESSEE HAS OBJECTED THAT ASSESSEE HAS CLAIMED THAT IN ASSESSMEN T YEAR 2002-03 THIS MATTER WAS DECIDED BY THE TRIBUNAL IN FAVOUR O F THE ASSESSEE AND ASSESSEES IN OWN CASE IN CROSS OBJECTION NO. 171/DE L/2008 (IN ITA NO. 2125/DEL/2008) FOR A.Y. 2002-03 VIDE PARAGRAPH NOS. 3 & 4 AS UNDER:- 3. IN THE CROSS OBJECTION, THE FIRST GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOWANCE OF ` 99,770/-. T HIS DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT PERSONAL ELEMENT OF USER OF VEHICLES ARE INVOLVED. THE ASSESSEE CONTENDED THAT IN EARLIER YEARS, THIS DISALLOWANCE HAS BEEN DELETED BY THE ITAT IN THE ASSESSES OWN CASE. HE PLACED ON RECORD COPY OF T HE ITATS ORDER PASSED IN ASSESSMENT YEAR 1998-99 IN C O NO. 55/DEL/06 IN THE CASE OF THE ASSESSEE AND SUBMITTED THAT THE ASSESSEE IS A COMPANY AND IN THE CASE OF A COMPANY, THERE CANNOT BE ANY PERSONAL USER OF SUCH FACILITIES. IN SUPPORT OF HIS CONTENTIONS, HE RELIED UPON THE DECISION OF THE HONBLE GUJARAT HIG H COURT RENDERED IN THE CASE OF SAYAJI IRON 253 ITR 749. ON THE OTHER HAND, LEARNED D.R. RELIED UPON THE ORD ER OF THE ASSESSING OFFICER . 4. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH THE RECORDS CAREFULLY. WE FIND THAT THE ITAT IN ASSESSMENT YEAR 1998-99 HAS DELETED SIMILAR DISALLOWANCE BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON (SUPRA) . ASSESSEE BEING A COMPANY IS A JURIDICAL ENTITY, ITA NO. 2124/DEL/2008 & CO NO. 313/DEL/2009 7 THEREFORE, THERE CANNOT BE ANY INVOLVEMENT OF PERSONAL ELEMENT FOR USER OF CAR FACILITIES ETC. W E ALLOW THIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE. 20. AS THE FACTS ARE IDENTICAL AND LD. COMMISSIONE R OF INCOME TAX (APPEALS) HAS HELD THAT HE WAS MAKING THE DISALLOWAN CE IN TERMS OF HIS ORDER FOR A.Y. 2002-03 AND THE SAME ORDER HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY ITAT. RESPECTFULLY FOLLOWING TH E SAME, WE SET ASIDE THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPE ALS) AND DECIDE THE ISSUE IN FAVOUR OF THE ASSESSEE. 21. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISM ISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 10/01/2011. SD/ SD/ SD/ SD/- -- - SD/ SD/ SD/ SD/- -- - [ [[ [R.P. R.P. R.P. R.P. TOLANI TOLANI TOLANI TOLANI] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 10/01/2011 SRB COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES