The ITO, Ward-4(1), Ahmedabad V. Gujarat State Warehousing Corporation, Ahmedabad

ITA 2183/AHD/2011

• Counselvise Citation: 218320514 RSA 2011
• Duration Of Justice: 3 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2015
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 04-06-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 01-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: PARIMALSINH B PARMARAR
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .. , ( .) , ! BEFORE SHRI G.D. AGARWAL,VICE PRESIDENT (AZ) AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.2183/AHD/2011 ( / ASSESSMENT YEAR : 2005-06) THE ITO WARD-4(1) AHMEDABAD / VS. GUJARAT STATE WAREHOUSING CORPORATION SHANTI SADAN ESTATE OPP.DINBAI TOWER MIRZAPUR AHMEDABAD-380 001 % & ./ ./ PAN/GIR NO. : AABCG 6778 P ( %( / APPELLANT ) .. ( )*%( / RESPONDENT ) %(+ / APPELLANT BY : SHRI DINESH SINGH, SR.DR )*%(,+ / RESPONDENT BY : SHRI PARIMALSINH B.PARMAR,AR - ., /& / DATE OF HEARING 04/06/2015 0123 , /& / DATE OF PRONOUNCEMENT 19 /06/2015 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDA BAD (CIT(A) IN SHORT) DATED 06/07/2011 PERTAINING TO ASSESSMEN T YEAR (AY) 2005-06. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL:- ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 2 - 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.3,16,584/- ON ACCOUNT OF NON-ACCOUNTING OF RE CEIVABLE WAREHOUSING CHARGES ON ACCRUED BASIS, WITHOUT APPRE CIATING THE FACT THAT THE ASSESSEE WAS FOLLOWING MERCANTILE SYS TEM OF ACCOUNTING. 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS.21,19,856/- ON ACCOUNT OF PRIOR PERIOD EXPENS ES, WITHOUT APPRECIATING THE FACT THAT THE PRIOR PERIOD EXPENSE S CLAIMED IN THE BALANCE SHEET DURING THE YEAR IS NOT PERMISSIBLE. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. 4. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE LD.C IT(A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER MAY BE REST ORED TO THE ABOVE EXTENT. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT,1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 20/11/2007, THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE IN RESPECT OF NON-ACCOUNTING OF BILL F OR WAREHOUSE CHARGES AMOUNTING TO 3,16,584/-, DISALLOWANCE OF PRIOR PER IOD EXPENSES AT RS.21,19,856/-, DISALLOWANCE OF PROFESSIONAL FEES O F RS.77,535/- AND DISALLOWANCE OF DEPRECIATION ON BUILDING AND WAREHO USE OF RS.11,12,656/-. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERI NG THE SUBMISSIONS PARTLY ALLOWED THE APPEAL. THE LD.CIT(A) DELETED T HE ADDITION MADE ON ACCOUNT OF DISALLOWANCE OF NON-ACCOUNTING OF WAREHO USE CHARGES, DELETED THE DISALLOWANCE OF PRIOR PERIOD EXPENSES AND ALSO DELETED THE ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 3 - DISALLOWANCE OF DEPRECIATION. NOW, FEELING AGGRIEV ED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 3. FIRST GROUND RELATES TO DELETION OF ADDITION OF RS.3,16,584/- MADE ON ACCOUNT OF NON-ACCOUNTING OF RECEIVABLE WAREHOUS ING CHARGES. THE LD.SR.DR SUPPORTED THE ORDER OF THE LD.CIT(A) AND S UBMITTED THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN DELETING THE ADDITIO N. 3.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UBMITTED THAT AN IDENTICAL DISALLOWANCE WAS MADE IN THE EARLIER YEAR BY THE LD.CIT(A) AND THE ISSUE TRAVELLED UPTO THE STAGE OF THE ITAT A BENCH AHMEDABAD AND THE TRIBUNAL WAS PLEASED TO DELETE THE ADDITION . 4. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) HAS DECIDED THE ISSUE IN PARA-3.2 BY OBSERVING AS UNDER:- 3.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY. ON GOING THROUGH THE APPELLATE ORDER FROM HONOURABLE I TAT AHMEDABAD IN A.Y. 2003-04 AND THE ORDER PASSED BY M Y PREDECESSOR IN OFFICE IN RESPECT OF A.Y. 2004-05 IT IS SEEN THAT THE APPELLANT DID NOT RECEIVE THE INCREASE IN STORAGE R ENT ULTIMATELY AND THE GODOWNS WERE VACATED BY THE POST MASTER GEN ERAL SUBSEQUENTLY ON 31-10-2005. IT WAS AN INCREASE MAD E UNILATERALLY BY THE APPELLANT WHICH WAS NOT ACCEPTED BY THE TENA NT. THE INCREASE IN RENT BECAME DISPUTED, SO IT CANNOT BE H ELD THAT THE RENT ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 4 - HAS ACCRUED TO THE APPELLANT. IN VIEW OF THE FACTS OF THE CASE AS THE DISPUTED INCOME HAS NOT BEEN RECEIVED BY THE APPELL ANT AND THE SAME HAS BEEN WRITTEN OFF IN THE F.Y. 2005-06, THER E IS NO QUESTION OF ACCRUAL OF ADDITIONAL RENTAL INCOME OF RS.3,16,5 84/-, THEREFORE THE ADDITION OF THE SAID AMOUNT IS DELETED. 4.1. FROM THE ABOVE, IT IS EVIDENT THAT THE LD.CIT( A) HAS FOLLOWED THE EARLIER ORDERS. THE REVENUE HAS NOT PLACED ANY MAT ERIAL ON RECORD SUGGESTING THAT THE FACTS IN THE PRESENT CASE ARE D IFFERENT THAN THE EARLIER YEARS. IN ASST.YEAR 2004-05, AN IDENTICAL GROUND WA S RAISED BY THE REVENUE BY WAY OF ITA NO.2901/AHD/2008 (WITH CO NO. 224/AHD/2008 BY ASSESSEE) IN ASSESSEES OWN CASE, WHEREIN THE COORDINATE BENCH (ITAT A BENCH AHMEDABAD) IN PARAS-3 & 4 OF ITS OR DER DATED 30/04/2012 WERE DECIDED THE GROUND AS UNDER:- 3. AT THE BEGINNING OF THE HEARING LD. AR SUBMITTE D THAT THE ISSUE IS COVERED BY THE ORDER OF THE TRIBUNAL FOR THE ASSESS MENT YEAR 2003-04 DATED 17/07/09 IN ITA NO.837/AHD/2006 WHEREIN IT WA S HELD AS UNDER: 'IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE CONSIDERED OPINION THAT UNDER THE 'MERCANTILE SYSTE M' OF ACCOUNTING, THE ASSESSEE IS REQUIRED TO ACCOUNT FOR THOSE INCOME WHICH HAS ACCRUED TO THE ASSESSEE. AN INCOME ACCRUE D TO THE ASSESSEE ONLY WHEN IT ACQUIRES A RIGHT TO RECEIVE T HAT INCOME. IN THE INSTANT CASE, THE ASSESSEE REVISED WAREHOUSING CHARGES WHICH WAS NOT ACCEPTED BY THE CIRCLE STAMP DEPOT. THEREFO RE, THE ASSESSEE FILED A CIVIL SUIT FOR RECOVERY OF THE REV ISED WAREHOUSING CHARGES. THUS, THE REVISED WAREHOUSE CH ARGES WILL BE RECEIVABLE BY THE ASSESSEE ONLY WHEN THIS DISPUT E IS SETTLED BETWEEN THE ASSESSEE AND CIRCLE STAMP DEPOT AS BECA USE THE CLAIM MADE BY THE ASSESSEE WAS NOT ACCEPTED BY THE CIRCLE STAMP DEPOT. THE LD. DEPARTMENTAL REPRESENTATIVE BROUGHT NO ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 5 - MATERIAL BEFORE US TO SHOW THAT THE CLAIM MADE BY T HE ASSESSEE FOR THE REVISED WAREHOUSING CHARGES WAS ACCEPTED AT ANY POINT OF TIME DURING THE YEAR UNDER CONSIDERATION BY CIRC LE STAMP DEPOT. IN ABSENCE OF SUCH A MATERIAL, THE LOWER AUT HORITIES WERE NOT JUSTIFIED IN ASSUMING THAT ASSESSEE GOT RIGHT T O RECEIVE THE REMAINING AMOUNT OF RS.3,86,412/- DURING THE YEAR U NDER CONSIDERATION. WE, THEREFORE, SET ASIDE THE ORDER O F THE ID. CIT(APPEALS) AND DIRECT THE ASSESSING OFFICER TO EX CLUDE THE WAREHOUSING CHARGES RECEIVABLE OF RS.3,86,412/- FRO M THE TOTAL INCOME OF THE ASSESSEE. HENCE, THE GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED.' 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL AVAILABLE ON RECORD. THIS ISSUE FOR THE RE LEVANT ASSESSMENT YEAR IS IDENTICAL TO THE ISSUE DECIDED BY THE TRIBU NAL FOR THE ASSESSMENT YEAR 2003-04 AS POINTED OUT BY THE LD. AR. BEFORE U S FOR THE RELEVANT ASSESSMENT YEAR ALSO THE REVENUE HAS NOT BROUGHT OU T ANY MATERIALS TO SHOW THAT THE CLAIM MADE BY THE ASSESSEE FOR THE RE VISED WAREHOUSING CHARGES WAS ACCEPTED AT ANY POINT OF TIME DURING TH E YEAR UNDER CONSIDERATION BY CIRCLE STAMP DEPOT. THEREFORE WE A RE INCLINED TO FOLLOW THE DECISION RENDERED BY THE EARLIER BENCH A ND HOLD THE MATTER IN FAVOUR OF THE ASSESSEE. 4.2. SINCE NO CHANGE INTO THE FACTS AND CIRCUMSTANC ES OF THE CASE ARE POINTED OUT BY THE REVENUE, THEREFORE WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) AND ALSO NOT TO TAKE A CONTRARY VIEW THAN TAKEN BY THE COORDINATE BENCH IN ITA NO.2 901/AHD/2008, DATED 30/04/2012(SUPRA). THUS, GROUND NO.1 OF REVE NUES APPEAL IS REJECTED. 5. SECOND GROUND RELATES TO DELETION OF ADDITION OF RS.21,19,856/- ON ACCOUNT OF PRIOR PERIOD EXPENSES. THE LD.SR.DR SUP PORTED THE ORDER OF ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 6 - THE AO AND SUBMITTED THAT THE LD.CIT(A) WAS NOT JUS TIFIED IN DELETING THE ADDITION. HE SUBMITTED THAT THE LD.CIT(A) DELETED THE ADDITION WITHOUT APPRECIATING THE FACT THAT THE PRIOR PERIOD EXPENSE S CLAIMED IN THE BALANCE-SHEET DURING THE YEAR IS NOT PERMISSIBLE. 5.1. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE S UPPORTED THE ORDER OF THE LD.CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE ISSUE IS DECIDED BY THE LD.CIT(A) IN PARA-4.2 OF HIS ORDER BY OBSERVING AS UNDER:- 4.2. I HAVE CONSIDERED THE SUBMISSIONS OF THE A.R. CAREFULLY. I FIND THE EXPLANATION OF THE A.R. CONVINCING. ON GOING THROU GH THE EXPLANATION REPRODUCED IN THE ASSESSMENT ORDER AND THE SUPPORTI NG DOCUMENTS SUBMITTED DURING THE COURSE OF HEARING I FOUND THAT THE EXPENDITURE THOUGH RELATES TO PRIOR PERIOD ARE CRYSTALLIZED OR FINALIZED DURING THE YEAR UNDER APPEAL. THEREFORE IT IS ALLOWABLE AS BU SINESS EXPENDITURE. IN A.Y. 2004-05 MY PREDECESSOR HAS ALLOWED THE SIMI LAR CLAIM. IN VIEW OF THE FACTS OF THE CASE AND FOLLOWING THE APPELLAT E ORDER FOR A.Y. 2004- 05 IT IS HELD THAT THE LIABILITY FOR THE ABOVE EXPE NSES HAS CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION AND THEREFORE T HE SAME IS DIRECTED TO BE ALLOWED IN THIS YEAR. 6.1. FROM THE ABOVE FINDING OF THE LD.CIT(A), IT IS EVIDENT THAT THE LD.CIT(A) HAS FOLLOWED THE ORDER OF HIS PREDECESSOR PASSED IN AY 2004- 05. IN AY 2004-05, THE ISSUE WAS CARRIED TO THE TR IBUNAL IN ITA NO.2901/AHD/2008(SUPRA) BY THE REVENUE, WHEREIN THE REVENUE HAS RAISED GROUND NO.2 WHICH READS AS UNDER:- ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 7 - 2. THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE DISALLOWANCE OF RS.2,17,489/-, BEING P RIOR PERIOD EXPENSES. 6.2. THE AFORESAID GROUND NO.2 OF REVENUES APPEAL WAS DECIDED BY THE TRIBUNAL IN ITA NO.2901/AHD/2008 FOR AY 2004-05 VIDE ITS ORDER DATED 30/04/2012 IN PARAS-9.1 & 9.2 BY OBSERVING AS UNDER:- 9.1 WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIAL AVAILABLE ON RECORD. THE REASONS OBSERVED BY THE LD .AO FOR THE ADDITION ARE HEREIN BELLOW DISCUSSED AND ADJUDICATE :- REASONING OF AO 1. THE CLAIM OF THE ASSESSEE U/S 43(B) OF THE ACT I S NOT APPEARING IN PAYMENT IN PREVIOUS YEARS. HOWEVER, EVEN, IF IT WOU LD HAVE BEEN PAID, THE INCOME OF THE ASSESSEE BEING EXEMPT IN THE EARL IER YEARS, THE CLAIM WOULD NOT HAVE BEEN ALLOWABLE OUR DECISION:- THE ITEMS OF PAYMENT FALLING U/S 43( B) OF THE ACT SHALL BE ALLOWED TO BE CLAIMED STRICTLY AS PER THE PROVISIONS STIPULATED IN THAT SECTION AND NOT OTHERWISE. REASONING OF AO 2. THE CLAIM OF THE ASSESSEE THAT THE ORIGINAL BILL S NOT RECEIVED IS NOT TENABLE BECAUSE THE EXPENSES ARE TO BE ACCOUNTED FO R ON DUE BASIS UNDER THE MERCANTILE SYSTEM OF ACCOUNTING. OUR DECISION:- THE LD.AO IS ABSOLUTELY CORRECT IN S TATING SO, SINCE IN MERCANTILE SYSTEM OF ACCOUNTING, THE EXPENSE WIL L CRYSTALLIZE ON THE DATE OF RAISING OF THE BILL AS PER THE AGREED TERMS AND NOT ON THE DATE OF THE RECEIPT OF BILLS. ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 8 - REASONING OF AO 3. THE ASSESSEE WAS REQUESTED TO SUBMIT THE DETAILS OF ALLOWABILITY OF THE EXPENSES RELATING TO CURRENT YEAR. OUR DECISION:- NOT RELEVANT. REASONING OF AO 4. IT IS NOT RELEVANT AS TO WHETHER THE EXPENSES AR E REMAINED TO BE PROVIDED OR NOT OUR DECISION:- EXPENSES CAN BE CLAIMED AS DEDUCTION ONLY WHEN IT IS CRYSTALIZED AND NOT OTHERWISE SUBJECT TO THE OTH ER PROVISIONS OF THE ACT. REASONING OF AO 5. THE MANAGING DIRECTOR'S APPROVAL IS AN INTERNAL MATTER AND HENCE NO RELEVANCE TO THE ACCOUNTING OF THE INCOME/EXPENS ES UNDER MERCANTILE SYSTEM OF ACCOUNTING. OUR DECISION:- THE REASONING OF THE LD.AO IS PERFEC TLY CORRECT BECAUSE EXPENDITURE INCURRED BY THE ASSESSEE CAN BE CLAIMED ONLY WHEN IT CRYSTALLIZES. THE INTERNAL MATTER WITH REGARD TO PROCEDURES WILL HAVE NO BEARING. SINCE THE APPROVAL OF THE MANAGING DIRE CTOR IS AN INTERNAL PROCEDURE THE SAME WILL HAVE NO BEARING IN THE CLAI M OF DEDUCTION UNDER INCOME TAX ACT WHICH RECOGNIZES MERCANTILE SY STEM OF ACCOUNTING. THEREFORE WE DO NOT ACCEDE TO THE VIEW OF THE LD.CIT ON THIS ISSUE. 9.2. THUS WITH RESPECT TO THIS GROUND OF THE REVENU E ON DELETING THE DISALLOWANCE OF RS.2,17,489/- BEING PRIOR PERIOD EX PENSES, WE HEREBY SET ASIDE THE ORDER OF LD.CIT(A) AND REMIT IT BACK TO THE FILE OF LD.CIT(A) IN ORDER TO PASS APPROPRIATE ORDER IN THE LIGHT OF OUR OBSERVATIONS ABOVE. 6.3. SINCE THERE IS NO CHANGE INTO THE FACTS AND CI RCUMSTANCES OF THE CASE AS THE TRIBUNAL RESTORED THIS ISSUE TO THE FIL E OF LD.CIT(A), THEREFORE ITA NO.2183/AHD /2011 ITO VS. GUJARAT STATE WAREHOUSING CORPN. ASST.YEAR 2005-06 - 9 - THIS YEAR ALSO, WE DEEM IT PROPER TO RESTORE THIS I SSUE BACK TO THE FILE OF LD.CIT(A) TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE COORDINATE BENCH PASSED IN ITA NO.2901/AHD/2008(SUP RA). ACCORDINGLY, THIS GROUND OF REVENUES APPEAL IS ALL OWED FOR STATISTICAL PURPOSES. 7. GROUND NOS.3 & 4 ARE GENERAL IN NATURE WHICH REQ UIRE NO INDEPENDENT ADJUDICATION. 8. IN THE RESULT, REVENUES APPEAL IS PARTLY ALLOWE D FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON FRIDAY, THE 19 TH DAY OF JUNE, 2015 AT AHMEDABAD. SD/- SD/- ( .. ) ( ) ( .) ( G.D. AGARWAL ) ( KUL BHARAT ) VICE PRESIDENT (AZ) JUDICIAL MEMBER AHMEDABAD; DATED 19/ 06 /2015 6/..- , .-../ T.C. NAIR, SR. PS !'#$%&%# / COPY OF THE ORDER FORWARDED TO : 1. %( / THE APPELLANT 2. )*%( / THE RESPONDENT. 3. 789 : / CONCERNED CIT 4. : ( ) / THE CIT(A)-VIII, AHMEDABAD 5. ; < )-89 , /893 , 7 / DR, ITAT, AHMEDABAD 6. < => . / GUARD FILE. / BY ORDER, * ;) //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD