Appeal Details
Counselvise Citation
22923314 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 20 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-05-2014
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
DB
Next Hearing Date
08-04-2014
Assessment Year
2009-2010
Appeal Filed On
15-04-2013
Judgement Text
IN THE INCOME TAX APPELALTE TRIBUNAL : JODHPUR BENC H : JODHPUR BEFORE SHRI HARI OM MARATHA, JUDICIAL MEMBER AND SHRI N.K. SAINI, ACCOUNTANT MEMBER. ITA NO.229/JODH/2013 (A.Y. 2009-10) DCIT, CIRCLE, VS. M/S . PREM CABLES PVT. LTD. PALI. PIPALIA KALAN, PALI. PAN NO. AAACP 6660 N (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI G.S. MEHTA. DEPARTMENT BY : SHRI N.A. JOSHI - D.R. DATE OF HEARING : 08/04/2014. DATE OF PRONOUNCEMENT : 05/05/2014. O R D E R PER N.K. SAINI, A.M THIS IS AN APPEAL BY THE DEPARTMENT AGAINST THE OR DER DATED 11/02/2013 OF LD. CIT(A), JODHPUR. THE FOLLOWING G ROUNDS HAVE BEEN RAISED IN THIS APPEAL:- 1. (I) THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN HOLDING THAT DEDUCTION U/S 80IA AMOUNTING TO RS. 86,333/- IS AL LOWABLE TO ASSESSEE EVEN WHEN THE SAME PERTAINS TO A.Y. 2008- 09. (II) THE LD. CIT(A) HAS IGNORED THAT FACT THAT THE ASSESSEE HAD INTIMATED VIDE LETTER 17/11/2011 THAT A.Y. 2009-10 IS THE INITIAL ASSESSMENT YEAR AND IT HAS CLAIMED 1 ST TIME DEDUCTION U/S 80IA FOR A.Y. 2009-10. THEREFORE, INCOME PERTAINS TO E ARLIER 2 ASSESSMENT YEAR CANNOT BE SAID TO BE DERIVED IN TH E ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR 2009-10. 2. (I) THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS IN HOLDING THAT THERE WAS NO COMMON ADMINISTRATIVE EXPENDITURE INC URRED IN RUNNING THE WIND MILL, WHICH WAS WORKED OUT AT RS. 66,941/- BY AO ON PROPORTIONATE BASIS. (II) THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FA CTS IN HOLDING THAT WIND MILL CAN FUNCTION WITHOUT ANY SUPPORT FROM HE AD AND BRAIN OF MANAGEMENT FOR WHICH COMMON ADMINISTRATIV E EXPENDITURE HAVE TO BE INCURRED. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN HOLDING THAT INTEREST ON AMOUNT INVESTED IN WIND MILL COMES TO R S. 4,18,478/-. 4. (I) THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS IN HOLDING THAT THE RESIDUAL DEDUCTION U/S 80IA AMOUNTING TO RS. 6 1,353/- IS ALLOWABLE TO ASSESSEE EVEN WHEN THERE ARE NO PROFI TS AFTER CONSIDERING THE CONCEPT OF STAND ALONE BASIS. (II) THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FA CTS IN HOLDING THAT THE RESIDUAL DEDUCTION U/S 80IA AMOUNTING TO RS. 6 1,353/- IS ALLOWABLE TO ASSESSEE WITHOUT SETTING OF NOTIONAL BROUGHT FORWARD UNABSORBED DEPRECIATION WHICH HAD BEEN ADJ USTED AGAINST OTHER TAXABLE BUSINESS INCOME IN EARLIER A SSESSMENT YEAR. 5. (I) THE LD. CIT(A) HAS ERRED IN LAW AND ON THE F ACTS IN HOLDING THAT EXPENDITURE OF RS.26,20,124/- WAS NOT A CAPITAL EX PENDITURE. (I) THE LD. CIT(A) HAS NOT APPRECIATED THE FACTS THAT A SSESSEE CLAIMED TO HAVE INCURRED EXPENDITURE OF RS. 52,44, 176/- FOR COMPLETE REPAIR/RENOVATION OF WALLS, ROADS AND STA ND ETC. DAMAGED DUE TO CONSTANT HEAVY WEIGHT VIBRATIONS. HOWEVER, THE LEDGER ACCOUNT OF BUILDING REPAIR SHOWS THAT I T HAD PURCHASED HSD STEEL BAR WORTH RS. 18,63,985/- FOR RENOVATION OF BUILDING OR NEW PLANT, EXPENSES OF RS. 6,72,540 /- FOR NEW PLANT AND RS. 57,805/- FOR NEW BANGLOW. THE DA Y TO DAY 3 CURRENT REPAIR EXPENDITURE ALLOWABLE AND ONLY THOS E EXPENDITURE WHICH ARE FOR NEW PLANT, NEW BANGLOW A ND STEEL BAR ETC. OUGHT TO HAVE CONSIDERED FOR CAPITALIZATI ON. THAT THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR AL TER ANY OR ALL THE GROUNDS OF APPEAL ON OR BEFORE THE DATE THE APPEAL IS FINALLY HEARD FOR DISPOSAL. 2 VIDE GROUND NOS. 1 & 2, THE GRIEVANCE OF THE DEPAR TMENT RELATES TO THE DEDUCTION UNDER SECTION 80IA I.T. ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT IN SHORT) FOR A SUM OF RS. 86,333/- AN D RS. 66,941/- . 3. FACTS RELATING TO THESE ISSUES, IN BRIEF, ARE THA T THE ASSESSEE FILED THE RETURN OF INCOME ON 28/09/2009 DECLARING AN INC OME OF RS. 16,33,660/-. LATER ON, CASE WAS SELECTED FOR S CRUTINY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFF ICER NOTICED THAT THE ASSESSEE CLAIMED DEDUCTION OF RS. 33,94,943/- UNDER SECTION 80IA OF THE ACT AND THAT THE DETAILS SUBMITTED REVEALED THAT TH E PROFIT AMOUNTING TO RS. 86,333/- PERTAINED TO MARCH, 2008, SO IT WAS NO T ALLOWABLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. THE ASSES SING OFFICER ALSO NOTICED THAT THE ASSESSEE INCURRED VARIOUS ADMINIST RATIVE EXPENSES TOTALING TO RS. 3,05,08,797/- WHICH WAS REQUIRED TO BE ALLOCATED TO WIND MILL FOR WHICH DEDUCTION UNDER SECTION 80IA OF THE ACT WAS CLAIMED. THE ASSESSING OFFICER POINTED OUT THAT THE TOTAL RECEIP TS OF THE ASSESSEE WERE 4 AT RS. 1,16,54,31,415/- AND THE RECEIPT FROM WIND M ILL WAS RS. 37,20,054/-. THE ASSESSING OFFICER WORKED OUT PROPORTIONATE ALLOCATION AMOUNT WHICH ATTRIBUTABLE TO WIND MILL U NIT AT RS. 66,941/- WHICH WAS REDUCED FROM THE PROFIT OF THE WIND MILL AND ACCORDINGLY THE CLAIM OF DEDUCTION UNDER SECTION 80IA OF THE ACT WA S DISALLOWED TO THE EXTENT OF RS. 1,53,274/- (RS. 86,333/- + RS. 66, 941/-). 4. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER WAS NOT JU STIFIED IN DISALLOWING THE ADMINISTRATIVE EXPENSES AND REDUCING THE ELIGIB LE PROFIT UNDER SECTION 80IA OF THE ACT WHEN THE ASSESSEE HAD NOT PAID ANY EXPENSES RELATING TO COMMON ADMINISTRATIVE EXPENSES. IT WAS FURTHER STA TED THAT THE ASSESSEE HAD PAID FIXED AMOUNT FOR MAINTENANCE OF THE WIND M ILL TO M/S. ERCON INDIA LTD. WHICH WAS REFLECTED IN THE BOOKS OF ACCO UNTS. AS REGARDS TO THE DISALLOWANCE OF RS. 86,333/-, IT WAS SUBMITTED THAT THE INCOME WAS NOT INCLUDED IN THE INCOME OF PRECEDING YEAR BEING THE BILL WAS RECEIVED IN THE YEAR RELEVANT TO THE A.Y. 2009-10 AND THE AS SESSEE FOLLOWED THE SAME SYSTEM WHERE THE RECEIPT OF MARCH WERE SHOWN I N THE NEXT FINANCIAL YEAR ON THE PAYMENT BASIS. THEREFORE, THE ASSESSIN G OFFICER WAS NOT JUSTIFIED IN DISALLOWING RS. 86,333/-. 5 5. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE AMOUNT OF RS. 86,333/- WAS NOT RECEIVED IN THE EARLIER YEAR AND NOT SHOWN IN THE BOOKS OF ACCO UNTS OF THE SAID YEAR. ACCORDING TO THE LD. CIT(A), THE ASSESSEE ACTUALLY DID NOT CLAIM THE SAID AMOUNT IN THE BOOKS OF ACCOUNTS IN THE PRECEDING YE AR, THEN IT SHOULD HAVE BEEN ALLOWED IN THIS YEAR AS IT WAS CLAIMED IN THIS YEAR. AS REGARDS TO THE DISALLOWANCE OF RS. 66,941/- FROM THE PROFIT OF THE WIND MILL, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE WAS PAYING FI XED AMOUNT FOR ADMINISTRATIVE WORK, SO THERE WAS NO BASIS FOR MAKI NG THE DISALLOWANCE ON ACCOUNT OF COMMON ADMINISTRATIVE EXPENSES ON PRO PORTIONATE BASIS. ACCORDINGLY, THE IMPUGNED DISALLOWANCES MADE BY THE ASSESSING OFFICER WERE DELETED. NOW THE DEPARTMENT IS IN APPEAL. 6 . LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND REITERATED THE OBSERVATIONS MADE IN THE ASSESSM ENT ORDER. 7 . IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW. 8 . WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PA RTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSEE QUANTIFIED AN D RECEIVED A SUM OF 6 RS. 86,333/- IN THE PERIOD RELEVANT TO THE ASSESSME NT YEAR UNDER CONSIDERATION, THE ASSESSING OFFICER DID NOT DOUBT THE RECEIPT OF THE SAID AMOUNT. THEREFORE, THERE WAS NO REASON TO DISALLOW THE CLAIM OF THE ASSESSEE UNDER SECTION 80IA OF THE ACT ON THE SAID RECEIPT WHICH WAS RECEIVED AND QUANTIFIED IN THE YEAR UNDER CONSIDERA TION. SIMILARLY, THE DISALLOWANCE IN RESPECT OF RS. 66,941/- ON THE BASI S OF PROPORTIONATE ADMINISTRATIVE EXPENSES WAS NOT JUSTIFIED PARTICULA RLY WHEN THE ASSESSEE WAS PAYING FIXED AMOUNT OF MAINTENANCE OF THE WIND MILL AND NO SEPARATE ADMINISTRATIVE EXPENSES WERE CLAIMED TO BE RELATED TO THE MAINTENANCE OF WIND MILL. IN THAT VIEW OF THE MATTER, WE DO NO T SEE ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. 9 . VIDE GROUND NO. 3, THE GRIEVANCE OF THE DEPARTMEN T RELATES TO THE DISALLOWANCE OF INTEREST ON THE AMOUNT INVESTED IN WIND MILL. 10 . FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT TH E ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICE D THAT THE ASSESSEE PURCHASED WIND MILL FOR A SUM OF RS. 3 CRORE AND TH E AMOUNT HAD BEEN PAID FROM IDBI O/D A/C, HENCE THE ASSESSEE HAD UTIL IZED THE BORROWED FUNDS FOR INVESTMENT IN WIND MILL. HOWEVER, NO ALL OCATION OF INTEREST EXPENSES HAD BEEN MADE, WHICH WAS REQUIRED TO BE MA DE CONSIDERING THE 7 PROVISIONS OF SECTION 80IA OF THE ACT WHICH LAYS DO WN THAT PROFIT WAS TO BE WORKED OUT ON STANDALONE BASIS. THE ASSESSING OFF ICER WORKED OUT THE FIGURE OF PROPORTIONATE INTEREST ATTRIBUTABLE TO IN VESTMENT IN WIND MILL TO RS. 31,80,316/- AND DISALLOWED THE REMAINING DEDUCT ION. 11 . BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER TO THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSEE WITHDREW ONLY RS. 1 .96 CRORE FROM IDBI BANK AND NOT RS. 3 CRORE WHICH WAS REFLECTED IN BAN K ACCOUNT OF THE RELEVANT YEAR. IT WAS FURTHER STATED THAT THE ASSE SSEE HAD NOT UTILIZED ANY BORROWED FUND FROM IDBI OR OTHERWISE FOR THE PU RPOSE OF EARNING ANY INCOME FROM THE WIND MILL. IT WAS CLAIMED THAT THE ASSESSEE HAD DEPOSITED CHEQUES (INCOME RECEIVED FROM WIND MILL T HROUGH RRVPNL) IN IDBI ACCOUNT WHICH REDUCED THE BURDEN OF INCOME CLA IMED AGAINST THE PROFIT OF THE OTHER UNIT INSTEAD OF INCREASING THE BURDEN OF INTEREST. IT WAS FURTHER STATED THAT THERE WAS NO INTEREST COST INCURRED DURING THE YEAR FOR THE PURPOSE OF EARNING OF INCOME FROM THE WIND MILL, HENCE, THE COMPUTATION OF NOTIONAL INTEREST WITH REFERENCE TO THE PAYMENT MADE DURING THE A.Y. 2004-05 (RS. 1.96 CRORES INSTEAD OF RS. 3 CRORES) WAS NOT JUSTIFIABLE AND REASONABLE TO DEDUCT IT FROM THE PR OFIT EARNED FROM THE WIND MILL AND TO DISALLOW THE DEDUCTION U/S 80IA OF THE ACT. IT WAS STATED THAT THE NOTIONAL COMPUTATION OF INCOME CANNOT BE J USTIFIABLE FOR 8 REDUCTION FROM THE PROFIT OF WIND MILL AND WHEN THE RE WAS NO PAYMENT OF INTEREST DURING THE YEAR FOR THE PURPOSE OF WIND MI LL OPERATION THEN HOW THE INTEREST COST WOULD BE COMPUTED AND DEDUCTED FR OM THE PROFIT. IT WAS FURTHER STATED THAT THE ASSESSEE REPAID THE LOA N AND FURNISHED THE YEAR WISE DETAILS OF INCOME FROM WIND MILL, WHICH W AS DEPOSITED AGAINST THE REPAYMENT OF LOAN AND THE TOTAL INCOME UPTO 31/ 03/2009 HAD BEEN SHOWN AT RS. 1,56,52,486/-. 12. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSIO NS OF THE ASSESSEE, ASKED THE ASSESSING OFFICER TO MAKE THE S UBMISSIONS ON THE ARGUMENTS OF THE ASSESSEE, HOWEVER, HE STATED THAT IT WAS A FRESH ARGUMENT. ON THE CONTRARY, THE ASSESSEE STATED THA T THIS FACT WAS ALREADY AVAILABLE ON RECORD AND THE DETAILS WERE SU BMITTED VIDE LETTER DATED 21/12/2011, COPY OF WHICH WAS SUBMITTED TO TH E ASSESSING OFFICER. THE LD. CIT(A) HELD THAT IT WAS NOT JUSTIFIED TO S TATE THAT THE ASSESSEE HAD TAKEN A FRESH ARGUMENT. IT WAS OBSERVED THAT TH E REPAYMENT OF LOAN UPTO 31/03/2009 WAS RS. 1,56,54,486/- AND THE OUTST ANDING LOAN REMAINED ONLY OF RS. 39,45,514/-. THE LD. CIT(A) W AS OF THE VIEW THAT THE INTEREST ON THE OUTSTANDING LOAN OF RS. 39,45,5 14/- WAS REQUIRED TO BE DISALLOWED ON PROPORTIONATE BASIS FROM THE RECEIPT OF THE WIND MILL. HE WORKED OUT THE TOTAL INTEREST AT RS. 4,18,478/- AS UNDER:- 9 RS. 2,47,65,486/- X RS. 39,47,514/- = RS. 4,18,478 /- RS. 23,36,13,451/- ACCORDINGLY, DISALLOWANCE OF RS. 4,18,478/- WAS SU STAINED. NOW THE DEPARTMENT IS IN APPEAL. 13. L EARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER, BUT COULD NOT CONTROVERT THE FINDINGS GIVEN BY THE LD. CIT(A). 14. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). IT WAS SUBMITTED THAT THE ASSESSEE EARNED INCOME FROM WIND MILL SINC E A.Y. 2004-05 AND DEPOSITED THE SAME IN THE IDBI ACCOUNT, SO THERE WA S NO INTEREST INCURRED DURING THE YEAR FOR THE PURPOSE OF EARNING INCOME F ROM THE WIND MILL. HENCE, COMPUTATION OF NOTIONAL INTEREST WITH REFERE NCE TO THE PAYMENT MADE DURING THE A.Y. 2004-05 WAS NOT JUSTIFIABLE. IT WAS FURTHER STATED THAT THE ASSESSING OFFICER HAD WRONGLY COMPUTED THE ASSUMED INTEREST WITH REFERENCE TO THE BORROWING OF RS. 3 CRORE WHER EAS THE ACTUAL BORROWINGS WAS OF RS. 1.96 CRORE AND THE ASSESSING OFFICER HAD NOT TAKEN INTO ACCOUNT THIS FACT THAT THERE WAS NO BORROWING FROM THE IDBI DURING THE YEAR UNDER CONSIDERATION FOR THE PURPOSE OF WIN D MILL 10 OPERATIONS. IT WAS FURTHER STATED THAT NOTIONAL E XPENSES COULD NOT BE SET OFF FROM THE CURRENT YEAR INCOME. RELIANCE WAS PLA CED ON THE JUDGMENT OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS. EMERALD JEWEL INDUSTRY REPORTED IN 53 DTR 262 (MAD.). 15. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE ASSESSING OFFICER WRON GLY CONSIDERED THE LOAN AMOUNT AT RS. 3 CRORE INSTEAD OF RS. 1.96 CRORE TAK EN FROM IDBI AND ALSO IGNORED THIS FACT THAT REPAYMENT OF LOAN UPTO 31/03 /2009 WAS AT RS. 1,56,52,486/- AS SUCH THE ONLY OUTSTANDING LOAN REMAINED AT RS. 39,45,514/-. IN THE PRESENT CASE, THE ASSESSIN G OFFICER WRONGLY DISALLOWED THE NOTIONAL INTEREST CONSIDERING THAT T HAT ASSESSEE HAD TAKEN THE LOAN FOR PURCHASING THE WIND MILL DURING THE YE AR UNDER CONSIDERATION. HE IGNORED THIS FACT THAT THE ASSESSEE HAD PURCHASE D THE WIND MILL IN THE PERIOD RELEVANT TO THE A.Y. 2004-05 AND OUTSTANDING LOAN WAS AT RS. 39,45,514/- FOR THE YEAR UNDER CONSIDERATION. THE LD. CIT(A) CATEGORICALLY STATED THAT THERE WAS NO BORROWING DU RING THE YEAR UNDER CONSIDERATION. WE THEREFORE, DO NOT SEE ANY INFIRM ITY IN THE ORDER OF THE LD. CIT(A), WHO SUSTAINED THE DISALLOWANCE OF RS. 4 ,18,478/- ON THE REMAINING OUTSTANDING LOAN OF RS. 39,45,514/-. IN THAT VIEW OF THE 11 MATTER, WE DO NOT SEE ANY MERIT IN THIS GROUND OF T HE DEPARTMENTAL APPEAL. 16. THE NEXT ISSUE VIDE GROUND NO. 4 RELATES TO THE RE SIDUAL DEDUCTION UNDER SECTION 80IA OF THE ACT. 17. FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER COMPUTED THE PROFIT OF RS. 61,353/- AFTER MAKING TH E ADJUSTMENT OF INTEREST ON LOAN ETC. AND SET OFF AGAINST THE UNABS ORBED DEPRECIATION FOR EARLIER YEARS. 18. BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED THAT THERE WAS NO UNABSORBED DEPRECIA TION WHICH REQUIRED TO BE SET OFF AGAINST THE CURRENT YEARS INCOME OF THE WIND MILL. RELIANCE WAS PLACED ON THE DECISION OF THE ITAT JODHPUR BENC H IN THE CASE OF M/S. SAURABH AGROTECH (P) LTD. VS. DCIT, ALWAR, WHEREIN IT WAS HELD THAT THE BROUGHT OUT LOSSES AND DEPRECIATION ONCE ADJUST ED OUT OF OTHER BUSINESS INCOME IN EARLIER YEARS COULD NOT BE RECON SIDERED TO COMPUTE DEDUCTION UNDER SECTION 80IA OF THE ACT. IT WAS AC CORDINGLY SUBMITTED THAT THERE WAS NO UNABSORBED DEPRECIATION AND BUSIN ESS LOSS, HENCE, NOTHING COULD BE DEDUCTED FROM THE COMPUTED PROFIT UNDER SECTION 80IA OF THE ACT ON ACCOUNT OF UNABSORBED DEPRECIATION AN D BUSINESS LOSSES. 12 19. THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO VERIFY THE FACT WHETHER THERE WAS ANY UNABSORBED DEPRECIATION, BUSINESS LOSS OR N OT AFTER ADJUSTMENT OF UNABSORBED DEPRECIATION OR BUSINESS LOSS IN THE PRECEDING YEAR AND IF THERE WAS NO BUSINESS LOSS OR UNABSORBED DEPRECIATI ON THEN THE ASSESSING OFFICER SHALL ALLOW THE CLAIM OF THE ASSESSEE. NOW THE DEPARTMENT IS IN APPEAL. 20. THE LEARNED D.R. WHILE SUPPORTING THE ORDER OF THE ASSESSING OFFICER, RELIED ON THE DECISION OF THE ITAT AHMEDAB AD SPECIAL BENCH IN THE CASE OF ACIT, CIRCLE-4, AHMEDABAD VS. GOLDMINE SHARES AND F INANCE (P.) LTD. (2008) 113 ITD 209 . 21 IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). 22. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN OUR OPINION, IN THE PRESENT CASE, THE LD. CIT(A) HAS TAKEN A JUST V IEW WHILE DIRECTING THE ASSESSING OFFICER TO VERIFY FROM THE RECORD ONLY TH EREAFTER ALLOW THE CLAIM 13 OF THE ASSESSEE. WE, THEREFORE, DO NOT SEE ANY VAL ID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) ON THIS ISSUE. 23 THE LAST ISSUE AGITATED BY THE DEPARTMENT RELATES TO THE EXPENDITURE OF RS. 26,20,124/- DIRECTED TO BE CONSI DERED AS A CAPITAL EXPENDITURE. 24 THE FACTS RELATING TO THIS ISSUE IN BRIEF ARE THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS, NOTICE D THAT THE ASSESSEE HAD DEBITED BUILDING REPAIR EXPENSES OF RS. 52,44,1 76/- OUT OF WHICH CERTAIN EXPENSES AMOUNTING TO RS. 26,20,124/- WERE CONSIDERED BY THE ASSESSING OFFICER TO BE EITHER OF CAPITAL IN NATURE OR NOT RELATED TO BUSINESS ASSETS. DETAIL OF THE SAME HAD BEEN GIVEN AT PAGE NO. 3 OF THE ASSESSMENT ORDER, FOR THE COST OF REPETITION, THE S AME IS NOT REPEATED HEREIN. EXPLANATION OF THE ASSESSEE BEFORE THE ASS ESSING OFFICER WAS AS UNDER:- BUILDING REPAIR : MAIN REASONS FOR REPAIRING OF PLA NT BUILDING ARE AS UNDER:- A. THE PLANT BUILDING IS SPREAD IN 5500 SQ. METER (APP ROX) AND THERE IS A CONSTANT HEAVY VIBRATION IN THE PLANT IS DUE TO C ONTINUOUS PRODUCTION WHICH CAUSES DAMAGES TO PLANT BUILDING. B. THERE IS HEAVY LOAD ON BUILDING DUE TO MOVEMENT OF LABOURS, TROLLEYS, PACKING DRUMS, LOADING. C. HANDLING OF HEAVY SPOOLS IN THE PLANT CAUSES HEAVY DAMAGES TO THE PLANT BUILDING. 14 D. FOR REPAIRING AND REPLACEMENT OF UNDERGROUND CABLES WE HAVE TO DIG THE PLANT FLOOR TO FIND OUT THE EXACT PLACE OF FAUL T WHICH CAUSES HEAVY DAMAGES TO THE PLANT FLOOR. E. SHIFTING OF MACHINES IN THE PLANT AREA CAUSES HEAVY DAMAGES TO THE PLANT BUILDING. F. WHOLE PLANT & MACHINERY AND BUILDING ARE VERY OLD T HEREFORE TO GIVE PROTECTION TO ALL PRODUCTION AND OTHER PERSONS WORK ING HEREIN PLANT AREA NEEDS REGULAR MAINTENANCE. DURING THE YEAR THE PLANT BUILDING WAS SUBJECT TO COMPLETE REPAIRING BECAUSE THE WALL, ROADS, STANDS ETC. WERE HEAVILY D AMAGED DUE TO CONSTANT HEAVY WEIGHT VIBRATIONS AND HEAVY LOAD ON THE PLANT BUILDING. DUE TO ABOVE REASONS DURING THE YEAR BUILDING FOUN DATION, WALLS, DIVIDERS, SHEDS, ROOF, YARD, WEIGHING SCALE SHEET E TC. WERE HEAVILY DAMAGED AND GOT REPAIRED, THEREFORE, STEEL, CEMENT, BRICKS, BAJARI AND OTHER BUILDING MATERIALS WERE PURCHASED. ALSO CASUAL LABOURS WERE EMPLOYED FOR REPAIRING OF PLANT BUILDING. HOWEVER, THE ASSESSING OFFICER DID NOT FIND MERIT IN THE EXPLANATION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE HAD NOT EXPLAINED HOW EXPENSES OF ABOUT RS. 20 LAC WERE INCURRED ON STEEL BARS/STEEL AND FOR WHICH PURPOSE THE SAME WAS USED. HE ALSO STATED TH AT THERE WERE SEVERAL OTHER EXPENSES WITH THE NARRATION AS FOR N EW PLANT. THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 26,20,124 /- TREATING THE SAME AS CAPITAL IN NATURE OR NOT INCURRED FOR THE PURPOS E OF BUSINESS. 25 BEING AGGRIEVED, THE ASSESSEE CARRIED THE MATTER T O THE LD. CIT(A) AND SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED A SUM OF RS. 26,20,124/- OUT OF THE CLAIM OF RS. 54,45,176/- EVE N WHEN COMPLETE 15 DETAILS WERE FURNISHED ALONG WITH VOUCHERS AND THAT THE AUDITORS HAD NOT POINTED OUT ANY DEFECT, BUT THE ASSESSING OFFICER W ITHOUT ANY BASIS MADE THE DISALLOWANCE. IT WAS FURTHER STATED THAT THE A SSESSING OFFICER HAD NOT POINTED OUT ANYTHING ABOUT THE ENDURING NATURE OF T HE EXPENSES INCURRED AND NOT BROUGHT OUT ANY SUBSTANCE OF FACT THAT A NE W ASSET HAD BEEN CREATED OUT OF THOSE EXPENSES AND HAD ALSO NOT POIN TED OUT ANY DEFECT IN THE MAINTENANCE OF THOSE EXPENSES NOR GIVEN ANY FIN DING THAT THOSE EXPENSES WERE NOT GENUINE AND NOT FOR BUSINESS PURP OSES. IT WAS CONTENDED THAT THE ASSESSING OFFICER HAD PARTLY ALL OWED THE EXPENSES FOR WHICH NO BASIS HAD BEEN GIVEN THAT HOW THOSE EXPENS ES WERE CAPITAL IN NATURE OR NOT RELATED TO BUSINESS. IT WAS FURTHER CONTENDED THAT THE EXPENSES WERE ACTUALLY REVENUE IN NATURE AND WERE R ELATED TO CURRENT REPAIRING OF THE BUILDING. IT WAS FURTHER STATED T HAT THERE WAS HEAVY REPAIRING IN THE BUILDING, BUT THE OBJECTION OF THE ASSESSING OFFICER WAS REGARDING THE WORD NEW PLANT USED IN THE VOUCHERS , WHICH WAS NOT SUBSTANTIAL BECAUSE IT WAS THE REGULAR LANGUAGE OF ACCOUNTING TO PREPARE VOUCHERS AND HAD BEEN CONSISTENTLY FOLLOWED IN THE BUSINESS, THE WORD NEW PLANT DID NOT MEAN THAT ANY NEW ASSET WAS CRE ATED OR CONSTRUCTED BY THE ASSESSEE DURING THE YEAR. THEREFORE, THE AS SESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING THE AMOUNT OF RS. 26,20,12 4/-. 16 26 THE LEARNED CIT(A), AFTER CONSIDERING THE SUBMISSI ONS OF THE ASSESSEE, OBSERVED THAT THE ASSESSING OFFICER HAD NOT GIVEN ANY FINDING THAT THE EXPENSES WERE ENDURING IN NATURE AND HAD N OT CONSIDERED THE DEPRECIATION WHILE DISALLOWING THE CAPITAL EXPENDI TURE BY STATING IN THE ASSESSMENT ORDER THAT CLAIM OF DEPRECIATION WAS NOT ALLOWED AS EXPENDITURE COULD NOT BE ALLOWED TO ANY BLOCK OF AS SET WHICH WAS PUT TO USE. THE LD. CIT(A) WAS OF THE VIEW THAT THE ASSES SING OFFICER HIMSELF WAS NOT SURE WHETHER THIS EXPENDITURE WAS CAPITAL I N NATURE OR NOT. ACCORDING TO HIM, THE WORD NEW PLANT DID NOT SHOW THAT ANY ASSET WAS CREATED OF ENDURING BENEFIT WHICH FALLS UNDER ANY B LOCK OF ASSETS. ACCORDINGLY, IT WAS HELD THAT THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING RS. 26,20,154/-. NOW THE DEPARTMENT IS IN APPEAL. 27. LEARNED D.R. STRONGLY SUPPORTED THE ORDER OF THE AS SESSING OFFICER AND REITERATED THE OBSERVATIONS MADE BY THE ASSESSI NG OFFICER IN THE ASSESSMENT ORDER. 28. IN HIS RIVAL SUBMISSIONS, LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE AUTHORITIES BELOW A ND STRONGLY SUPPORTED THE IMPUGNED ORDER PASSED BY THE LD. CIT( A). IT WAS FURTHER STATED THAT THE EXPENSES CLAIMED BY THE ASSESSEE WE RE REVENUE IN NATURE 17 RELATING TO REPAIR OF THE BUILDING AND THE ASSESSIN G OFFICER HAD NOT BROUGHT OUT ANY MATERIAL TO SUBSTANTIATE THAT THOSE EXPENSES WERE CAPITAL IN NATURE AND NOT RELATED TO THE BUSINESS. 29. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PAR TIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE ON RE CORD. IN THE PRESENT CASE, IT APPEARS THAT THE ASSESSING OFFICER WAS MIS GUIDED BY THE WORD USED NEW PLANT ON THE VOUCHERS OF THE EXPENSES WH ICH WERE CLAIMED TO BE RELATED TO REPAIRS/RENOVATION OF THE BUILDING. IN THE PRESENT CASE, THE ASSESSING OFFICER HAD NOT BROUGHT OUT ANY MATERIAL ON RECORD TO SUBSTANTIATE THAT A NEW ASSET WAS CREATED HAVING EN DURING BENEFIT. THE ASSESSING OFFICER HIMSELF HAD NOT ALLOWED THE DEPRE CIATION ON THOSE EXPENSES WHICH WERE CONSIDERED TO BE CAPITAL IN NAT URE AND EVEN DID NOT ADD THE SAME TO ANY OF THE BLOCK OF THE ASSETS WHIC H CLEARLY SHOWS THAT THE ASSESSING OFFICER WAS NOT SURE ABOUT THE NATURE OF THE EXPENSES. ON THE CONTRARY, THE CLAIM OF THE ASSESSEE WAS THAT HE AVY REPAIRING WAS REQUIRED DURING THE YEAR CONSIDERATION FOR MAINTENA NCE OF THE OLD BUILDING AND ALL THE EXPENSES WERE OF REVENUE IN NA TURE. SINCE THE ASSESSING OFFICER HAD FAILED TO BRING ANY MATERIAL ON RECORD IN SUPPORT OF HIS VIEW THAT PART OF THE EXPENSES INCURRED BY THE ASSESSEE WERE CAPITAL IN NATURE OR DID NOT RELATE TO THE BUSINESS, THEREF ORE, THE DISALLOWANCE 18 WAS MADE ON THE BASIS OF SURMISES AND CONJECTURE. I T IS WELL SETTLED THAT NO DISALLOWANCE CAN BE MADE ON THE BASIS OF SURMISE S AND CONJECTURE, WE THEREFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS GIVEN BY THE LD. CIT(A). IN THAT VIEW OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS GROUND OF THE DEPARTMENTAL APPEAL. 30. IN THE RESULT, APPEAL OF THE DEPARTMENT IS DISMISSE D. (ORDER PRONOUNCED IN THE COURT ON 05 TH MAY, 2014). SD/- SD/- (HARI OM MARATHA) (N.K.SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 05 TH MAY, 2014. VR/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE LD.CIT 4. THE CIT(A) 5. THE D.R ASSISTANT REGISTRAR, ITAT, JODHPUR.
