SHRI LAXMAN SINGH, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 219/JPR/2018

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 5378 (ITAT-JAIPUR)
• Duration Of Justice: 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 13-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J C KULHARI
• Assessee Lawyers: SHIWANGI SAMDHANI
• Keywords: Rule of consistency; Capital expenditure
• Section: 43B; 80C; 37

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 219/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR :2014-15 SHRI LAXMAN SINGH JAIPUR CUKE VS. ITO, WARD-6(3), JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: BHBPS1636R VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SMT SHIWANGI SAMDHANI (CA) JKTLO DH VKSJ LS @ REVENUE BY : SHRI J. C. KULHARI (JCIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 04/10/2018 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT:05/10/2018 VKNS'K@ ORDER PER: VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-2, JAIPUR DATED 08.12.2017 FOR A.Y. 2014-15 WHEREIN THE ASSESSEE HAS TAKEN FOLLOWING GROUNDS OF APPEAL. 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF EXPENSE OF INSURANCE POLICY OF RS. 73,367/- MADE BY LD. AO. TH E ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAIN ST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 73,367/- 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY LD. ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 2 AO OF THE TUITION FEES OF RS. 30,300/- CLAIMED U/S 80C OF INCOME TAX ACT, 1961. THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE SAID DISALLOWANCE OF RS. 30 ,300/-. 3. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ACTION OF LD . AO OF MAKING AD-HOC DISALLOWANCE OF RS. 25,000/- OUT OF THE TOTA L MAINTENANCE EXPENSES OF RS. 1,82,480/- CLAIMED BY THE ASSESSEE. THE ACTION OF LD. CIT(A) IS ILLEGAL, UNJUSTIFIED, ARBITRARY AN D AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHI NG THE SAID DISALLOWANCE OF RS. 25,000/-. 2. REGARDING GROUND NO. 1, BRIEFLY STATED THE FACTS OF THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO OBSERVED THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS. 91,950/ - TOWARDS INSURANCE PREMIUM ON 04.07.2013 AND 04.03.2014 AND A SIGNIFICANT PART OF THESE PAYMENTS PERTAIN TO THE NEXT FINANCIA L YEAR. ACCORDINGLY, HE DISALLOWED AN AMOUNT OF RS. 73,367/- NOT PERTAIN ING TO YEAR UNDER CONSIDERATION. 3. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS HELD THAT THE EXPENSES SHOUL D BE CLAIMED IN THE YEAR TO WHICH THEIR RELATE AND ACCORDINGLY, SHE CON FIRMED THE DISALLOWANCE SO MADE BY THE ASSESSING OFFICER. 4. DURING THE COURSE OF HEARING, THE LD. AR SUBMIT TED THAT THE ASSESSEE IS CLAIMING COMPLETE INSURANCE PREMIUM AS DEDUCTION IN THE YEAR OF PAYMENT IRRESPECTIVE OF THE PERIOD OF INSUR ANCE IN THE EARLIER YEARS AND FOLLOWING THE PRINCIPLE OF CONSISTENCY, E XPENSES SO CLAIMED SHOULD BE ALLOWED. IT WAS SUBMITTED THAT WHERE THE APPROACH SO ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 3 ADOPTED BY THE ASSESSING OFFICER IS ACCEPTED, IT WI LL DISTORT THE TREATMENT OF THE EXPENDITURE IN THE PAST AND IN THE SUBSEQUENT YEARS. IT WAS SUBMITTED THE SIMILAR CONTENTIONS WERE RAISED B EFORE THE LD. CIT(A), HOWEVER, THE SAME WAS NOT ACCEPTED. 5. IN SUPPORT, RELIANCE WAS PLACED ON THE DECISION OF CO-ORDINATE BENCH IN CASE OF ACIT VS. SHRI SATISH SEHRAWAT IN I TA NO. 223/D/2012 DATED 15.03.2012 WHEREIN IT WAS HELD AS UNDER:- 5. WE HAVE HEARD THE LD. DR AND GONE THROUGH THE FACTS OF THE CASE. ADMITTEDLY, INSURANCE PREMIUM IS PAID YEAR AFTER YE AR FOR A PERIOD OF 12 MONTHS ONLY. THE BENEFIT OF PREMIUM PAID IN T HE PRECEDING YEAR WOULD HAVE BEEN AVAILABLE FOR A PORTION OF PER IOD IN THE YEAR UNDER CONSIDERATION. AS FOUND OUT BY THE LD. CIT(A) , THE ASSESSEE IS FOLLOWING CONSISTENTLY THE SAME METHOD. IT IS NOBODYS CLAIM THAT PREMIUM FOR A PERIOD EXCEEDING 12 MONTHS HAD BEEN CLAIMED IN THE YEAR CONSIDERATION AND HAS BEEN PAID ON THE BASIS OF DEMAND NOTICE RAISED BY THE INSURANCE COMPANY. I N THIS SITUATION, WE DO NOT FIND ANY FLAW IN THE APPROACH OF THE LD. CIT(A). UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE IS ENTITLED TO CLAIM DEDUCTION ON THE BASIS OF INCU RRING THE LIABILITY IRRESPECTIVE OF THE DATE OF PAYMENT. EVEN SUCH LIA BILITY CAN BE CLAIMED ON THE BASIS OF PROVISIONS WHERE SUCH LIABI LITY IS NOT QUALIFIED. ON THE OTHER HAND, UNDER THE CASH SYSTE M OF ACCOUNTING, THE ASSESSEE IS ENTITLED TO CLAIM DEDUC TION ON THE BASIS OF PAYMENT IRRESPECTIVE OF THE DATE OF INCURR ING OF LIABILITY. UNDER THE MERCANTILE SYSTEM OF ACCOUNTING, IN TERMS OF PROVISIONS OF SEC. 145(1) OF THE ACT, DEDUCTION CAN BE CLAIMED ONLY IF IT IS ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 4 ESTABLISHED THAT LIABILITY HAS BEEN INCURRED IN THE YEAR UNDER CONSIDERATION. THE LIABILITY FOR PAYMENT OF PREMIUM IS INCURRED AT 4 ITA NO. 223/DEL./2012 THE TIME OF COMMENCEMENT OF POLICY, WHICH UNDISPUTEDLY FALLS IN THE YEAR UNDER CONSIDER ATION. THE ASSESSEE HAS ACTUALLY PAID THE INSURANCE PREMIUM FO R A PERIOD OF 12 MONTHS IN THE YEAR UNDER CONSIDERATION, EVEN THO UGH BENEFIT OF SUCH PAYMENT MAY BE AVAILABLE BEYOND THE ACCOUNT ING YEAR. PREMIUM FOR INSURANCE IN RESPECT OF BUILDINGS IS AD MISSIBLE U/S 30(C) OF THE ACT WHILE FOR PLANT AND MACHINERY U/S 31(II) OF THE ACT. THE OTHER KINDS OF INSURANCE PREMIUM ARE ADMIS SIBLE U/S 36 & 37 OF THE ACT. A SIMILAR CLAIM OF THE ASSESSEE IS STATED TO HAVE BEEN ACCEPTED BY THE AO HIMSELF IN THE ASSESSMENT Y EARS 2003- 04 TO 2005-06 AND 2007-08. IN THESE CIRCUMSTANCES, WE AREOF THE OPINION THAT SINCE THE AMOUNT HAS ACTUALLY BEEN PAI D AND WAS LIABILITY FOR THE YEAR UNDER CONSIDERATION AT THE C OMMENCEMENT OF POLICY, WHICHEVER ALTERNATIVE DEFINITION OF THE WOR D 'PAID' BE APPLICABLE TO THE CASE OF THE ASSESSEE, IT HAS TO B E HELD THAT THIS AMOUNT WAS 'PAID' BY THE ASSESSEE IN THE YEAR OF ACCOUNT IN QUESTION ON A CORRECT INTERPRETATION OF THE WORD 'P AID' AS USED IN SECTION 43(2) OF THE ACT. THE ASSESSEE WAS ENTITLED TO CLAIM THIS AMOUNT AS A LEGITIMATE DEDUCTION IN THE YEAR OF ACC OUNT IN QUESTION AND CONSEQUENTLY IN THE ASSESSMENT FOR THE RELEVANT ASSESSMENT YEAR. HERE, WE MAY REFER TO A DECISION O F THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. SOUTHERN R OADWAYS LTD.,282 ITR 379(MAD) IN RESPECT OF SIMILAR CLAIM I N RESPECT OF TELEX RENT, TELEPHONE RENT, POSTAL FRANKING MACHINE RENT, RATES AND TAXES. HONBLE HIGH COURT, RELYING UPON THEIR E ARLIER DECISION HELD THAT THE ABOVE ISSUES ARE SQUARELY COVERED BY A DIVISION ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 5 BENCH DECISION OF THIS COURT IN THE CASE OF CIT V. SOUTHERN ROADWAYS LTD. REPORTED IN [2004] 265 ITR 404, WHERE IN IT HAS BEEN HELD AS FOLLOWS (PAGE 407) : THE ASSESSEE PAID A SUM OF RS. 26,729/- OUT OF WHI CH A SUM OF RS. 22,034/- HAS BEEN PAID TOWARDS POSTAGE, TELEGRA M, TELEPHONE, ETC., AND A SUM OF RS. 4,695/- HAS BEEN PAID AS RATES AND TAXES. THE ASSESSE E-COMPANY IN ITS ACCOUNTS TR EATED THEM AS PREPAID AND SHOWED IT AS AN ASSET IN ITS BALANCE -SHEET. HOWEVER, THE PAYMENTS WERE MADE IN PURSUANCE OF DEM ANDS RAISED BY THE POSTAL, TELEPHONE AND TELEGRAPH DEPAR TMENTS, ETC., THE SAME WAS CLAIMED AS A DEDUCTION IN COMPUTING TH E INCOME FROM BUSINESS. THE ASSESSING OFFICER NEGATIVED THE CLAIM FOR DEDUCTION OF SUCH EXPENSES. IN THE APPEAL, THE COMM ISSIONER OF INCOME-TAX ACCEPTED THE CONTENTION OF THE APPELLANT . ON SECOND APPEAL, THE TRIBUNAL HELD THAT IN PRINCIPLE, THE AS SESSEE IS ENTITLED TO THE REVENUE DEDUCTION EITHER ON THE BASIS OF THE MATCHING PRINCIPLE OR WITH REFERENCE 5 ITA NO. 223/DEL./2012 TO SECTION 43B OF THE ACT, THAT THE SAID SUM OF RS. 26,729/- I S NOT GOVERNED BY EITHER, THEREBY IT SET ASIDE THE DECISION OF THE COMMISSIONER OF INCOME-TAX, AND TO THAT EXTENT, RESTORED THE ORDER OF THE ASSESSING OFFICER. THE CASE OF THE ASSESSEE IS THAT THEY ARE FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE AMOUNT HAS BEEN ACTUALLY INCURRED FOR WHICH LIABILITY TO PAY HAS ARISEN IN THAT ACCOUNTIN G YEAR. THERE IS NO DISPUTE IN THIS CASE THAT THE AMOUNT HAS BEEN AC TUALLY PAID. IN THE STATEMENT OF CASE ALSO, IT IS STATED THAT THE A SSESSEE-COMPANY IN ITS ACCOUNTS TREATED THE ABOVE SAID AMOUNT AS PR EPAID AND SHOWED IT AS AN ASSET IN ITS BALANCE-SHEET. HOWEVER , THE ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 6 PAYMENTS WERE MADE IN PURSUANCE OF DEMANDS RAISED B Y THE POSTAL, TELEPHONE AND TELEGRAPH DEPARTMENTS, ETC., AND CLAIMED AS DEDUCTION IN COMPUTING THE INCOME FROM BUSINESS. THE EXPENDITURE ACTUALLY INCURRED AND REVENUE IN NATURE RELATING TO THE BUSINESS IS ALLOWABLE. ANY EXPENDITURE NOT BEIN G IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSES OF THE ASSESSEE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURP OSE OF THE BUSINESS OR PROFESSION SHOULD BE ALLOWED. HENCE, WE ARE OF THE VIEW THAT THE ACTUAL EXPENDITURE INCURRED HAS TO BE ALLOWED NOTWITHSTANDING THE METHOD OF ACCOUNTING THE ASSESS EE FOLLOWED. 5.1 IN VIEW OF THE FOREGOING AND IN THE LIGHT OF AFORESAID DECISION, THE ASSESSEE IS ENTITLED TO CLAIM THIS AM OUNT AS A LEGITIMATE DEDUCTION IN THE YEAR OF ACCOUNT IN QUES TION AND CONSEQUENTLY, IN THE ASSESSMENT FOR THE RELEVANT AS SESSMENT YEAR. THEREFORE, WE HAVE NO HESITATION IN UPHOLDING THE FINDINGS OF LD. CIT(A). THUS, GROUND NO. 1 IN THE APPEAL IS DISMISSED. 6. THE LD. DR IS HEARD WHO HAS RELIED ON THE FINDIN GS OF THE LOWER AUTHORITIES. 7. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT HAS BEEN CONTENDED THAT IT IS THE CONSISTENT POLICY OF THE ASSESSEE TO CLAIM THE INSURANCE PREMI UM IN THE YEAR OF INCURRENCE AND THIS IS NOT THE FIRST YEAR OF OPERAT ION OF THE ASSESSEE AND EVERY YEAR, THE ASSESSEE HAS BEEN PAYING THE INSURA NCE PREMIUM AND CLAIMING THE SAME IN THE YEAR OF PAYMENT IRRESPECTI VE OF THE PERIOD OF ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 7 THE INSURANCE. IN OUR VIEW, WHERE THE FACTUM OF INS URANCE PREMIUM BEING ACTUALLY PAID AND THE INCURRENCE OF EXPENDITU RE FOR THE PURPOSES OF BUSINESS HAS NOT BEEN DISPUTED BY THE REVENUE AN D THE ASSESSEE HAS BEEN CONSISTENTLY CLAIMING THE SAME IN THE YEAR OF INCURRENCE AND/OR HAS BEEN ALLOWED BY THE REVENUE IN THE PAST, AND GIVEN BY THE NATURE OF EXPENDITURE OF INSURANCE PREMIUM IN THE O VERALL CONTEXT OF THE BUSINESS OF THE ASSESSEE BEING IN THE BUSINESS OF DAIRY MARKETING, WHICH UNDISPUTEDLY IS NOT GOING TO DISTORT THE DETE RMINATION OF TRUE PROFIT/LOSS, SUCH CONSISTENT CLAIM OF EXPENDITURE S HOULD NOT BE DISTURBED. HOWEVER, WHERE THIS IS THE FIRST YEAR OF CLAIM OF SUCH AN EXPENDITURE AND IN WHICH CASE, THE PRINCIPLE OF CON SISTENCY WILL NOT APPLY AND INFACT, THE STAND TAKEN FOR THE YEAR WILL SET THE PRECEDENT FOR THE SUBSEQUENT YEARS. WE THEREFORE, SET ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER FOR THE LIMITED PURPOSE OF VE RIFYING AS TO WHETHER THE ASSESSEE HAVE BEEN CLAIMING SIMILAR EXPENDITURE TOWARDS INSURANCE PREMIUM IN THE PAST IN THE YEAR OF INCURRENCE AND W HERE THE SAME IS FOUND TO BE CORRECT, THE AO IS DIRECTED TO ALLOW TH E SAME FOLLOWING THE PRINCIPLE OF CONSISTENCY AND IN LIGHT OF THE DECISI ON OF THE CO-ORDINATE BENCH REFERRED (SUPRA) WHICH SUPPORTS THE CASE OF T HE ASSESSEE. 8. REGARDING GROUND NO. 2, LD. AR HAS NOT PRESSED D URING THE COURSE OF HEARING. THEREFORE, THE SAME IS DISMISSED AS NOT PRESSED. 9. REGARDING GROUND NO. 3, WE FIND THAT THE ADDITIO N OF MAINTENANCE EXPENSES IS PURELY AN ADHOC DISALLOWANC E WHICH CANNOT BE SUSTAINED IN THE EYES OF LAW AND THE SAME IS HEREBY DELETED AND THE GROUND SO RAISED BY THE ASSESSEE IS ALLOWED. ITA NO. 219/JP/2018 SHRI LAXMAN SINGH, JAIPUR VS. ITO, JAIPUR 8 IN THE RESULT OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 05/10/2018. SD/- SD/- FOT; IKY JKO FOE FLAG ;KNO (VIJAY PAL RAO) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 05/10/2018. * GANESH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- SHRI LAXMAN SINGH, JAIPUR 2. IZR;FKHZ@ THE RESPONDENT- ITO, JAIPUR 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 219/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR