Haryana Agro Industries Corporation, Panchkula V. DCIT, Panchkula

ITA 216/CHANDI/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2016 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 14-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ASHISH GUPTA
• Keywords: Capital asset; Depreciation; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 43B

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, A, CHANDIGARH , !' # $ % &' , '( BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 216/CHD/2016 / ASSESSMENT YEAR : 2012-13 HARYANA AGRO INDUSTRIES CORPORATION, BAY NO.15-20, SECTOR 4, PANCHKULA THE DCIT, PANCHKULA CIRCLE, PANCHKULA ./PAN NO: AAACH4686C / APPELLANT /RESPONDENT ! /ASSESSEE BY : SH. ATUL GOYAL ' ! / REVENUE BY : SH. ASHISH GUPTA, CIT DR # $ % /DATE OF HEARING : 5.11.2018 &'() % / DATE OF PRONOUNCEMENT : 16.11. 2018 ')/ ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 06.01.2016 OF THE COMMISSIONER OF INCO ME TAX (APPEALS), PANCHKULA [HEREINAFTER REFERRED TO AS CIT(A)]. 2. THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APP EAL :- 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AS WELL AS ON FACTS BY SUSTAINING THE ADDITION OF RS. 11,17,000/- ON ACCOUNT OF FINANCIAL ASSISTANCE TO THE FAMILY OF TH E DECEASED EMPLOYEE. (II) THAT THE ASSESSING OFFICER AS WELL AS CIT(A) H AS ERRED IN CONSIDERING THE FINANCIAL ASSISTANCE AS PROVISION WHILE THE LIABILITY FOR THE SAME HAS ARIS EN ITA NO. CHD/2017- M/S 2 DURING THE YEAR, THOUGH PAYABLE IN FUTURE PERIOD. (III) THAT THE CIT(A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE PROVISIONS OF SECTION 43B ARE APPLICABLE TO FINANCIAL ASSISTANCE AND ALLOWABLE ON PAYMENT BASIS. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND FACTS BY RESTRICTING THE CLAIM OF ASSESSEE ON ACCOUNT OF PERFORMANCE AWARD TO ITS EMPLOYEES TO RS.50,00,000/ -. (II) THAT THE ASSESSING OFFICER AS WELL AS CIT (A) HAS ERRED IN CONSIDERING THE PERFORMANCE AWARD AS PROVISION WHILE THE LIABILITY FOR THE SAME HAS ARIS EN DURING THE YEAR (III) THAT THE HONBLE CIT (A) HAS ERRED IN LAW AND ON FACTS BY HOLDING THAT THE PROVISIONS OF SECTION 36 (1) (II) AND SECTION 43-B OF THE ACT ARE APPLICABLE TO PERFORMANCE AWARD AND HENCE ALLOWABLE ON PAYMENT BASIS. 3. THAT THE LEARNED CIT(APPEALS) HAS ERRED IN LAW AND FACTS IN UPHOLDING THE ADDITION OF RS. 72,03,620/- ON ACCOUNT OF 1% DEPARTMENTAL CHARGES ON PURCHASE OF GUNNY BAGS (BARDANA), CONSIDERING THE SAME AS PROVISION. 4. THAT THE LEARNED CIT (APPEALS) HAS ERRED IN TREATIN G THE WOODEN CRATES AND POLY-COVERS AS CAPITAL ASSETS AND ALLOWING THE DEPRECIATION @ 10%. 5. THAT HONBLE CIT(APPEALS) HAS ERRED IN LAW AND FACTS TO UPHOLD THE ADDITION OF RS. 56,60,760/- UNDER PROVISO TO SECTION 36 (1) (III) OF THE ACT , WHEN T HE CORPORATION HAS SUFFICIENT AMOUNT OF INTEREST FREE FUNDS AVAILABLE FOR MAKING SUCH EXPENDITURE. THAT T HE ASSESSEE RESERVES THE RIGHT TO ADD, AMEND OR DELETE ANY GROUND OF APPEAL BEFORE THE DISPOSAL OF THE APPEAL. 3. GROUND NO.1 : THE ASSESSEE VIDE GROUND NO.1 HAS AGITATED THE ACTION OF THE CIT(A) IN SUSTAINING THE ADDITION ON ACCOUNT OF FINANCIAL ASSISTANCE TO THE FAMILY OF THE DECEASED EMPLOYEE . ADMITTEDLY, NO SUCH ITA NO. CHD/2017- M/S 3 TYPE OF FINANCIAL LIABILITY WAS ASCERTAINED FOR THE YEAR UNDER CONSIDERATION. THE ASSESSEE HAS BOOKED THE LIABILITY WHICH WAS PAY ABLE IN FUTURE. HOWEVER, THE LD. COUNSEL FOR THE ASSESSEE HAS STATE D THAT OUT OF THE ABOVE LIABILITY CERTAIN PAYMENTS HAVE BEEN MADE DURING TH E YEAR. 4. AFTER HEARING THE LD. REPRESENTATIVES OF THE PAR TIES, WE ARE OF THE VIEW, THAT ANY LIABILITY WHICH IS NEITHER PAID NOR PAYABLE FOR THE YEAR UNDER CONSIDERATION CANNOT BE ALLOWED AS AN EXPENDITURE. HOWEVER, IF ANY AMOUNT HAS BEEN PAID DURING THE YEAR IN RESPECT OF THE ABO VE SAID LIABILITY, THAT IS TO BE ALLOWED AS EXPENDITURE. HENCE, THIS ISSUE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR LIMITED PURPOSE TO VERIFY AS TO WHETHER ANY AMOUNT OUT OF THE AFORESAID LIABILITY BOOKED BY THE ASSESSEE HAS BEEN PAID DURING THE YEAR, THAT IS TO BE ALLOWED AND OUT OF T HE REMAINING LIABILITY, THE AMOUNT OF EXPENDITURE WILL BE ALLOWABLE AS AND WH EN THE SAME BECOME PAID OR PAYABLE IN THE RELEVANT ASSESSMENT YEAR. 5. GROUND NO.2 : VIDE GROUND NO.2, THE ASSESSEE HAS AGITATED THE ACTION OF THE CIT(A) IN RESTRICTING THE CLAIM OF TH E ASSESSEE ON ACCOUNT OF CLAIM OF EXPENDITURE IN RELATION TO PAYMENT TO EMPL OYEES ON ACCOUNT OF PERFORMANCE AWARD. THE LD. COUNSEL HAS STATED THAT THE AFORESAID PERFORMANCE AWARD IS NOT A BONUS AND, HENCE, IS NOT SUBJECTED TO THE PROVISIONS OF SECTION 43B OF THE ACT. HE HAS FURTH ER POINTED OUT THAT EVEN LD. CIT(A) HAS HELD SO, HOWEVER, THE LD. CIT(A) DIR ECTED THE ASSESSING OFFICER TO VERIFY IF THE AFORESAID PAYMENT WAS MADE BY THE ASSESSEE TO ITS EMPLOYEES BEFORE THE DUE DATE AS PROVIDED U/S 43B O F THE ACT. THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE HAS BEEN THAT THE LD. CIT(A) HAVING HELD THAT PROVISIONS OF SECTION 434B ARE NOT APPLICABLE THEN THERE ITA NO. CHD/2017- M/S 4 WAS NO QUESTION OF ADHERING TO THE TIME LIMIT OF P AYMENT / DUE DATE AS PER THE PROVISIONS OF SECTION 43B OF THE ACT. 6. AFTER HEARING THE LD. REPRESENTATIVES OF THE PAR TIES, WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. SINCE THE LIABILITY WAS BOOKED DURING THE YEAR, HENCE, IT IS DIRECTED THA T THE ASSESSING OFFICER WILL VERIFY IF THE EXPENDITURE BOOKED DURING THE Y EAR HAD ACTUALLY BEEN PAID BY THE ASSESSEE EITHER DURING THE YEAR OR IN THE SUBSEQUENT YEAR AND IF FOUND SO, THEN TO ALLOW THE AFORESAID CLAIM OF THE ASSESSEE AS AN EXPENDITURE. 7. GROUND NO.3 : VIDE THIS GROUND, THE ASSESSEE HAS AGITATED THE ADDITION OF RS. 72,03,620/- ON ACCOUNT OF DISALLOWA NCE OF EXPENDITURE @ 1% DEPARTMENTAL CHARGES ON PURCHASE OF GUNNY BAGS. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE AFORESAID EXPENDITURE HAS BEEN DISALLOWED BY THE LOWER AUTHOR ITIES CONSIDERING THE SAME AS A PROVISION, WHEREAS, THE ASSESSEE HAD ACT UALLY INCURRED THE AFORESAID EXPENDITURE DURING THE YEAR. HE, IN THI S RESPECT HAS MOVED AN APPLICATION FOR ADMISSION OF ADDITIONAL EVIDENCE TO PROVE THE ABOVE FACT OF INCURRING OF EXPENDITURE DURING THE YEAR. IN VIEW O F THE ABOVE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE, THE ISSUE IS RE STORED TO THE FILE OF THE ASSESSING OFFICER TO VERIFY IF THE AFORESAID EXPEND ITURE HAD ACTUALLY BEEN INCURRED DURING THE YEAR, AND IF FOUND SO, THEN TO ALLOW THE CLAIM OF THE SAME TO THE ASSESSEE. ITA NO. CHD/2017- M/S 5 8. GROUND NO.4 : VIDE GROUND NO.4, THE ASSESSEE HAS AGITATED THE TREATMENT OF EXPENDITURE INCURRED ON WOODEN CRATES AND POLY-COVERS AS CAPITAL EXPENDITURE AS AGAINST THE CLAIM OF THE AS SESSEE AS REVENUE EXPENDITURE. 9. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNS EL FOR THE ASSESSEE THAT THE WOODEN CRATES AND POLY-COVERS ARE PERISHAB LE THINGS WHICH HAVE SHORT LIFE AND ARE NOT OF ENDURING BENEFIT TO THE A SSESSEE. EVEN THE ASSESSEE HAS CLAIMED ONLY 25% OF THE SAID EXPENDITU RE DURING THE YEAR AND HAS BEEN SPREAD OVER THE REMAINING OF 75% INTO FOU R YEARS CLAIMING 25% DURING EACH OF THE YEAR. CONSIDERING THE ABOVE FACTS, WE DONT FIND ANY JUST IFICATION ON THE PART OF THE LOWER AUTHORITIES TO TREAT IT AS A LONG TERM CAPITAL EXPENDITURE OF ENDURING BENEFIT. THIS GROUND OF THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED . 10. GROUND NO.5 : VIDE GROUND NO. 5, THE ASSESSEE HAS AGITATED THE DISALLOWANCE OF INTEREST EXPENDITURE U/S 36(I)(III ) OF THE ACT. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THOUGH THE LOAN IN QUESTION WAS TAKEN FOR SPECIFIC PURPOSE TO CONSTRUCT THE GODOWNS , HOWEVER, THE LOAN AMOUNT WAS USED DURING THE YEAR AND THE ASSETS WERE PUT TO USE I.E. GODOWNS WERE MADE FUNCTIONAL. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT THOUGH THE ASSESSEE HAD CONS TRUCTED CERTAIN OTHER GODOWNS, SOME OF WHICH WERE UNDER CONSTRUCTION DURI NG THE YEAR ALSO, HOWEVER, THE EXPENDITURE IN RELATION TO THOSE OTHER GODOWNS WAS BORNE BY THE ASSESSEE OUT OF HIS OWN SURPLUS FUNDS. SO FAR A S THE LOAN TAKEN BY THE ASSESSEE FOR CONSTRUCTION OF THE GODOWNS WAS CONCER NED, THAT WAS FOR ITA NO. CHD/2017- M/S 6 SPECIFIC GODOWNS AND THOSE GODOWNS (ASSETS) WERE PU T TO USE DURING THE YEAR. THAT SINCE FROM THE DATE FROM WHICH THE ASSE TS WERE PUT TO USE, THE ASSESSEE WAS ENTITLED TO CLAIM OF INTEREST EXPENDI TURE. IN VIEW OF THE ABOVE CONTENTIONS, THE ISSUE IS RESTORED TO THE FIL E OF THE ASSESSING OFFICER TO VERIFY THE SAME AFTER EXAMINING THE FACTS AND BY GIVING OPPORTUNITY TO THE COUNSEL OF THE ASSESSEE TO PRESENT HIS CASE AND THEN DECIDE THIS ISSUE AFRESH. IN VIEW OF ABOVE DISCUSSION, THE APPEAL OF THE ASSE SSEE IS TREATED AS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ( # $ % &' / ANNAPURNA GUPTA) '( / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 16.11. 2018 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR