Aaiswarya Prints Dyeing and Printing Mills Pvt.Ltd., Surat V. The ACIT.,Range-1, Surat

ITA 2332/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1602 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 8 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-05-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 11-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-09-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Corroborative evidences; Assessment record; Revenue expenditure; Capital expenditure
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI SHAILENDRA YADAV, JM, & SHRI MANISH BORAD, AM. ITA NO.2332/AHD/2011 ASST. YEAR: 2008-09 AAISWARYA PRINTS DYEING & PRINTING MILLS PVT. LTD., PLOT NO.72, BHURIGAM, VARELI, PALSANA, SURAT. VS. ADDL. CIT, RANGE-1, SURAT. APPELLANT RESPONDENT PAN AACCA 4770A APPELLANT BY SHRI MEHUL SHAH, AR RESPONDENT BY SHRI DILEEP KUMAR, SR. DR DATE OF HEARING: 11/5/2016 DATE OF PRONOUNCEMENT: 18/5/2016 O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER . ASSESSEE IS IN APPEAL AGAINST THE ORDER OF LD. CIT (A)-1, SURAT DATED 22.06.2011 IN APPEAL NO. CAS-1/296/2010-11. A SSESSMENT WAS FRAMED U/S 143(3) OF IT ACT, 1961 (IN SHORT THE ACT), FOR ASST. YEAR 2008-09 BY ADDL. CIT, RANGE-1, SURAT, ON 16.11 .2010. 2. BRIEFLY STATED THE FACTS OF THE CASE AS CULLED O UT FROM THE ASSESSMENT RECORD ARE THAT THE ASSESSEE IS A PRIVAT E LIMITED COMPANY ENGAGED IN THE BUSINESS OF DYEING AND PRINT ING OF ART SILK GREY CLOTH. RETURN OF INCOME WAS FILED ON 27.09.200 8 DECLARING TOTAL ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 2 INCOME AT RS.1,12,26,788/-. CASE WAS SELECTED FOR S CRUTINY ASSESSMENT AND NOTICE U/S 143(2) OF THE ACT WAS ISS UED ON 27.08.2009 AND DULY SERVED ON THE ASSESSEE FOLLOWED BY NOTICE U/S 142(1) OF THE ACT ALONG WITH DETAILED QUESTIONNAIRE AND SERVED ON THE ASSESSEE. IN RESPONSE TO NOTICE U/S 143(2) AND 142( 1) OF THE ACT, NECESSARY INFORMATION WAS FILED ALONG WITH DETAILS. ASSESSMENT WAS COMPLETED BY LD. ASSESSING OFFICER ON 16.11.2010 AF TER MAKING CERTAIN ADDITIONS, AT AN INCOME OF RS.1,37,57,460/ -. 3. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE LD. CI T(A) AND THE SAME WAS DISMISSED. 4. ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 5. GROUND NO.1 OF THE APPEAL READS AS UNDER :- 1. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE DISALLOWANCE OF RS. 15,08,000/- OUT OF SOFTWARE EXPENSES AS MADE BY THE AO ON THE GROUND T HAT IT IS PERTAINING TO THE EARLIER-YEAR, WHICH IS ABSOLUTELY ERRONEOUS AND NEEDS TO BE DELETED. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASS ESSING OFFICER OBSERVED THAT A SUM OF RS.16,93,000/- WAS DEBITED I N THE PROFIT AND LOSS ACCOUNT UNDER THE HEAD SOFTWARE EXPENSES. AFTE R GOING THROUGH THE DETAILS OF EXPENDITURE INCURRED AT RS.16,93,000 /- LD. ASSESSING OFFICER OBSERVED THAT TOWARDS THE SOFTWARE PURCHASE OF RS.15,08,000/- BILL & CHALLAN ISSUED BY DYNAMIC SOF TLINK PVT. LTD., SURAT WERE DATED 31.3.2007 WHICH FALL IN FINANCIAL YEAR 2006-07 2007-08 RELEVANT TO ASST. YEAR BUT WAS BOOKED BY AS SESSEE IN ASST. ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 3 YEAR 2008-09. LD. ASSESSING OFFICER FURTHER OBSERVE D THAT ASSESSEE FOLLOW MERCANTILE SYSTEM OF ACCOUNT CONSISTENTLY AN D EXPENDITURE INCURRED DURING A YEAR IRRESPECTIVE OF THE DATE ON WHICH IT HAS BEEN PAID FOR, NEEDS TO BE ENTERED IN THE BOOKS ON THE B ASIS OF THE DATE OF INCURRING SUCH EXPENDITURE WHICH IN THIS CASE WAS A SST. YEAR 2007- 08. TO THIS OBSERVATION THE ASSESSEE REPLIED THAT T HE WORK OF PROGRAMMING AND INSTALLATION OF CUSTOMIZED SOFTWARE WAS GOING ON UPTO MAY, 2007 AND THE BILL WAS ACTUALLY RECEIVED I N THE FIRST WEEK OF MAY, 2007 AND AS SUCH THE LIABILITY CRYSTALLIZED DU RING MAY, 2007 SO IT WAS DEBITED IN THE BOOKS RELEVANT TO ASST. YEAR 200 8-09. HOWEVER, LD. ASSESSING OFFICER WAS NOT SATISFIED WITH THE REPLY OF ASSESSEE AND DISALLOWED THE EXPENDITURE OF RS.15,08,000/- ON THE BASIS OF THE OBSERVATION THAT IT SHOULD NOT BE ALLOWED FOR ASST. YEAR 2008-09 AS IT PERTAINED TO ASST. YEAR 2007-08. IN APPEAL BEFORE L D. CIT(A), OUT OF THE TOTAL EXPENDITURE INCURRED BY ASSESSEE FOR PURC HASE OF SOFTWARE DURING THE YEAR AT RS.16,83,000/-, LD. CIT(A) HELD THAT RS.15,08,000/- PERTAINED TO ASST. YEAR 2007-08 AND THEREFORE, LD. ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE SAME AND THE REMAINING A MOUNT OF RS.1,82,300/- WAS HELD TO BE CAPITAL EXPENDITURE. 6. NOW THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNA L. LD. AR SUBMITTED THAT ASSESSEE IS ENGAGED IN A BUSINESS OF PROCESSING OF ART SILK GREY CLOTH AND FOR PROCESSING ACTIVITIES A ND ACCOUNT DEPARTMENT NEW SOFTWARE WAS TO BE INSTALLED HENCE C ONTRACT WAS GIVEN TO SOFTWARE SUPPLYING COMPANY. THE INSTALLATI ON WORK WAS STARTED IN PREVIOUS YEAR HENCE ADVANCE MONEY WERE G IVEN. THE INSTALLATION PROCEDURE WAS COMPLETED IN APRIL OF TH E FINANCIAL YEAR ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 4 UNDER CONSIDERATION I.E. F.Y.2007-08. HENCE THE COM PANY ISSUED BILL FOR THE SAME WHICH YOUR APPELLANT RECEIVED IN MAY 2 007 BUT THE VENDOR PREPARED THE BILL ON 31/03/2007. NOW ON RECE IPT OF THE BILL AND SETTLEMENT OF ACCOUNT WAS DONE IN MAY 2007, HENCE Y OUR APPELLANT DEBITED THE SAME IN MAY 2007. LD. AR FURTHER SUBMITTED THAT INSTALLATION OF ANY E QUIPMENT OR MACHINERY OR SOFTWARE IS A LONG PROCEDURE AND IT TA KES TIME TO BE COMPLETED AND IN SOME SITUATION WORK IS STARTED IN ONE YEAR AND GETS COMPLETED IN NEXT YEAR AND SAME THING HAS HAPPENED IN OUR CASE AS INSTALLATION OF SOFTWARE WAS STARTED IN F.Y.2006-07 AND WAS COMPLETED IN F.Y.2007-08. PART PAYMENT WAS MADE IN PREVIOUS YEAR AND ON COMPLETION OF WORK IN APRIL 2007 PAYMENT WAS COMPLETED. NOW THE SUPPLIER OF SOFTWARE RAISED THE BILL ON 31/ 03/2007 BUT ISSUED IN MAY 2007 AND YOUR APPELLANT ALSO RECEIVED THE BI LL IN APRIL 2007 HENCE YOUR ASSESSEE GAVE EFFECT IN MAY 2007 AND CLA IMED IN F.Y.2007-08 I.E. ASSTT YEAR 2008-09 AS THE LIABILIT Y CRYSTALIZED, WHICH THE ASSESSING OFFICER DISALLOWED STATING THAT THIS EXPENDITURE IS PERTAINING TO EARLIER YEAR. AS STATED ABOVE THE BILL ISSUED BY THE COMPANY WAS RECEIVED AS LATE AS ON 01/05/2007 AND BEFORE THAT YOUR ASSES SEE HAD FINALIZED AND CLOSED AND ADJUSTED THEIR BOOKS OF ACCOUNT FOR F.Y.2006-07 HENCE THERE WAS NO OPTION OR ALTERNATIVE TO DEBIT T HE SAME IN FINANCIAL YEAR 2007-08 AND WORK WAS ALSO COMPLETED, IN THAT Y EAR ONLY BUT THE COMPANY ISSUED THE BILL DATED 31/03/2007. HENCE THE FACTS AND ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 5 CIRCUMSTANCES OF THE CASE THE LEARNED ASSESSING OFF ICER WAS NOT JUSTIFIED IN DISALLOWING THE AMOUNT OF RS.15,08,000 /-. 7. ON THE OTHER HAND LD. DR SUPPORTED THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND ASSESSEE HAS CHALLEN GED THE ORDER OF LD. CIT(A) FOR SUSTAINING THE DISALLOWANCE OF RS.15 ,08,000/- OUT OF SOFTWARE EXPENSES MADE BY ASSESSING OFFICER ON THE GROUND THAT IT IS PERTAINING TO EARLIER YEAR. FROM GOING THROUGH THE PAPER BOOK WE OBSERVE THAT BILL NUMBER 00010 DATED 31.3.2007 AND CHALLAN NUMBER 00010 DATED 31.3.2007 ISSUED BY DYNAMIC SOFTLINK PV T. LTD. HAVE BEEN RECEIVED BY ASSESSEE ON 1.5.2007 TOWARDS PURCH ASE OF CUSTOMIZED BUSINESS SOFTWARE AT RS.15,08,000/- WHIC H FORMED PART OF THE SOFTWARE EXPENSES, LEDGER FOR FINANCIAL YEAR 20 07-08 WHEREIN TOTAL EXPENDITURE FOR THE YEAR HAS BEEN SHOWN AT RS .16,93,000/- WHICH IS INCLUSIVE OF BILL FOR RS.15,08,000/- ISSUE D BY DYNAMIC SOFTLINK PVT. LTD. LD. ASSESSING OFFICER WHILE DEALING WITH THE EXPENDITURE OF RS.15,08,000/- HAS DISALLOWED THE EXPENDITURE ON BA RE FOOTING THAT THE BILL IS DATED 31.3.2007 AND AS ASSESSEE MAINTAI NS BOOKS OF ACCOUNT ON MERCANTILE SYSTEM THIS EXPENDITURE PERTA INS TO ASST. YEAR 2007-08 AND NOT FOR ASST. YEAR 2008-09. APART FROM THIS OBSERVATION, THERE IS NO OTHER DEFECT POINTED OUT BY ASSESSING O FFICER IN HIS ASSESSMENT ORDER. HOWEVER, IT IS WORTHWHILE TO MENT ION THAT LD. ASSESSING OFFICER HAS NOT DISPUTED THE TYPE OF EXPE NDITURE OF ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 6 RS.15,08,000/- AS TO WHETHER IT IS CAPITAL OR REVEN UE AND SO WE ARE NOT DEALING WITH THIS ASPECT, BECAUSE THIS IS NOT T HE GROUND BEFORE US. 9. WE FURTHER OBSERVE THAT CERTAINLY THE IMPUGNED B ILL OF RS.15,08,000/- ISSUED BY DYNAMIC SOFTLINK PVT. LTD. IS DATED 31.3.2007 BUT LD. AR HAS BEEN SUBMITTING SINCE THE ASSESSMENT PROCEEDINGS THAT BUSINESS SOFTWARE WHICH WAS SPECIF ICALLY CUSTOMIZED FOR THE YEAR WAS HANDED OVER TO THE ASSE SSEE ON 1 ST MAY, 2007 DUE TO SOME REQUIRED CHANGES AND CORRECTIONS. DUE TO THIS REASON THAT THE LIABILITY OF THE EXPENDITURE OF RS. 15,08,000/- ACTUALLY CRYSTALLIZED DURING FINANCIAL YEAR 2007-08. WE FURT HER OBSERVE THAT THE COMPANY IS RUNNING BUSINESS ON LARGE SCALE AND GROS S TURNOVER FOR THE YEAR UNDER APPEAL WAS RS.62.96 CRORES AND AFTER CLAIMING OF DEPRECIATION OF RS.1.83 CRORES, NET PROFIT AT RS.1. 87 CRORES WAS DECLARED. THERE IS NO FINDING BY LD. ASSESSING OFFI CER WHICH CAN DOUBT THE GENUINENESS OF THE EXPENDITURE INCURRED AND ALS O NO DEFECT HAS BEEN POINTED OUT IN THE BOOKS OF ACCOUNT REGULARLY MAINTAINED AND THERE IS NO PLAUSIBLE REASON WHICH INDICATES THAT T HE ASSESSEE HAS INTENTIONALLY ENTERED THE EXPENDITURE FOR FINANCIAL YEAR 2007-08 RATHER THAN IN FINANCIAL YEAR 2006-07. HOWEVER, WE OBSERVE THAT THERE HAS BEEN NO CROSS VERIFICATION OF THE EXPENDITURE BOOKE D BY THE ASSESSEE WITH THE CONFIRMATION OF THE PARTY ISSUING THE BILL AS TO WHETHER THEY BOTH HAVE BEEN ENTERED IN THE SAME ASSESSMENT YEAR AND ALSO NO SUBSTANTIAL EVIDENCE HAS BEEN PLACED ON RECORD BY A SSESSEE TO PROVE THAT LIABILITY CRYSTALLIZED IN ASST. YEAR 200 8-09. ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 7 10. IN THESE CIRCUMSTANCES, WE HAVE A REASON TO BEL IEVE THAT THERE IS NO DOUBT OF THE GENUINENESS OF THE EXPENDITURE INCURRED BY THE ASSESSEE AT RS.15,08,000/- AND THE ONLY POINT WHICH REVOLVES ROUND THE ISSUE IS WHETHER THIS EXPENDITURE WAS CRYSTALLI ZED DURING ASST. YEAR 2008-09 OR IN ASST. YEAR 2007-08 WHICH IN OUR VIEW CAN BE CROSS CHECKED ONLY WITH A CONFIRMATION TO THIS EFFECT BY THE PARTY WHICH HAS ISSUED THIS BILL. IF ON CROSS-VERIFICATION IT IS RE VEALED THAT M/S DYNAMIC SOFTLINK PVT. LTD. HAVE EITHER BOOKED THE REVENUE O F RS.15.08,000/- DURING ASST. YEAR 2008-09 OR THE IMPUGNED SOFTWARE WAS HANDED OVER TO ASSESSEE IN APRIL, 2007 FOR USE THEN CERTAI NLY THE CONTENTION OF THE ASSESSEE CAN BE ACCEPTED THAT THE LIABILITY CRYSTALLIZED DURING ASST. YEAR 2008-09 ONLY AND FOR VERIFICATION OF THE SE LIMITED ASPECTS, THE MATTER IS SET ASIDE TO THE FILE OF LD. ASSESSIN G OFFICER WHO WILL CALL THE REQUISITE INFORMATION FROM DYNAMIC SOFTLINK PVT . LTD. AND ALSO GIVE AN OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. ACCO RDINGLY, THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 11. GROUND NO.2 OF THE APPEAL READS AS UNDER :- 2. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, TH E LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE ACTION OF THE AO IN TREATING THE SOFTWARE EXPENSES OF RS. 1,82,300/- AS CAPITAL EXPENDITURE I NSTEAD OF REVENUE EXPENDITURE, WHICH IS ABSOLUTELY ERRONEOUS AND NEED S TO BE DELETED. 12. THROUGH THIS GROUND ASSESSEE HAS CHALLENGED THE ORDER OF LD. CIT(A) FOR SUSTAINING THE ACTION OF ASSESSING OFFIC ER IN TREATING THE SOFTWARE EXPENSES OF RS.1,82,300/- AS CAPITAL EXPEN DITURE INSTEAD OF REVENUE EXPENDITURE. ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 8 13. LD. AR SUBMITTED THAT SOFTWARE EXPENSES FOR THE YEAR BOOKED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNT IN ASST. YE AR 2008-09 STOOD AT RS.16,90,000/- OUT OF WHICH RS.15,08,000/- WAS D ISALLOWED ONLY ON THE BASIS OF THE DATE OF THE BILL AND CHALLAN WHIC H PERTAINED TO ASST. YEAR 2007-08 AND NO OTHER REASON WAS ACCORDED FOR D ISALLOWANCE BY LD. ASSESSING OFFICER AND FOR THE YEAR 1,82,300/-, WHICH INCLUDED EXPENDITURE OF RS.1,56,000/-, RS.1,460/-, RS.11,000 /-, RS.5,000/- AND RS.8,840/-. LD. ASSESSING OFFICER HAS DISALLOWED TH IS TOTAL SUM OF RS.1,82,300/- BY ASSESSING IT AS CAPITAL EXPENDITUR E WHEREAS IN FACT THESE ARE GENERAL SOFTWARE EXPENDITURE WHICH ARE IN CURRED REGULARLY AND EARLY BASIS AND ARE OF REVENUE IN NATURE. 14. ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF LOWER AUTHORITIES. 15. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND THE ASSESSEE IS AGGR IEVED WITH THE ORDER OF LD. CIT(A) FOR SUSTAINING THE ACTION OF AS SESSING OFFICER IN TREATING THE SOFTWARE EXPENSES OF RS.1,82,300/- AS CAPITAL EXPENDITURE. FROM GOING THROUGH THE PAPER BOOK WE O BSERVE THAT ASSESSEE HAS INCURRED CERTAIN EXPENDITURE UNDER THE HEAD SOFTWARE EXPENSES AT RS.16,90,000/- OUT OF WHICH RS.1,82,300 /- HAS ASSESSED AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITU RE AND THE REMAINING AMOUNT OF RS.15,08,000/- WAS DISALLOWED B EING THE TRANSACTION OUT OF ASST. YEAR 2008-09. WE WILL DEAL WITH THE DISALLOWANCE OF RS.182,300/- IN THIS GROUND. THE SU M OF RS.1,82,300/- WAS INCURRED IN THE FOLLOWING MANNER :- ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 9 DYNAMIC SOFTLINK P. LTD. RS.1,56,000/- TRIVIA INFO RS. 1,460/- TRIVIA INFO RS. 11,000/- REDINGTON INDIA LTD. RS. 5,000/- REDINGTON INDIA LTD. RS. 8,840/- ---------------------- -------- RS. 1,82,300/- WHILE GOING THROUGH THE ABOVE BILLS, WE FIND THAT A PART FROM EXPENDITURE OF RS.1,56,000/- PAID TO DYNAMIC SOFTLI NK P. LTD., THE REMAINING AMOUNT OF RS.26,300/- ARE MINOR EXPENDITU RE FOR SOFTWARE UPGRADATION AND OTHER RELATED EXPENDITURE WHICH AS PER LD. AR WERE HAVING ENDURING BENEFIT LESS THAN A YEAR AND, THERE FORE, THEY ARE TREATED AS REVENUE EXPENDITURE. AS FAR AS EXPENDITU RE OF RS.1,56,000/- IS CONCERNED FROM GOING THROUGH THE C OPY OF BILL PLACED ON RECORD AT PAGE 5 OF PAPER BOOK WE OBSERVE THAT T HIS BILL WHICH IS IS ISSUED BY DYNAMIC SOFTLINK P. LTD. AND IT IS MENTI ONED IN THE BILL ITSELF THAT THE BUSINESS SOFTWARE CUSTOMIZED EXPENDITURE OF RS.1,50,000/- IS CHARGED FOR PROVIDING SERVICES FOR 1,4,2007 TO 3 1.3.2008 AND AFTER ADDING VAT 4% WHICH COMES TO RS.6,000/- THE TOTAL E XPENDITURE AMOUNT OF BILLS IS RS.1,56,000/-. THIS BILL ITSELF CLARIFIES THAT THIS EXPENDITURE IS INCURRED FOR ONLY F.Y. 2007-08 AND N O DEFECT HAS BEEN POINTED OUT IN THIS BILL BY THE REVENUE AND, WE ARE , THEREFORE, INCLINED TO BELIEVE THAT THE EXPENDITURE OF RS.1,82,300/- IN CURRED ON SOFTWARE EXPENDITURE IS HAVING ENDURING BENEFIT OF NOT MORE THAN A YEAR AND THE EXPENDITURE HAS BEEN RIGHTLY BOOKED AS REVENUE EXPENDITURE. WE, ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 10 THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND AL LOW THIS GROUND OF THE ASSESSEE. 16. GROUND NO.3 READS AS UNDER :- 3. THAT ON FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN SUSTAINING THE ACTION OF THE AO IN TREATING THE REPAIR EXPENSES OF ROTARY MACHINE AMOUNTING TO RS.25,000/- AND DEBITED UNDER THE HEAD 'FACTORY EXPENSES' AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE, WHICH IS ABSOLUTELY ERRONEOUS AND NEED S TO BE DELETED. 17. DURING THE COURSE OF ASSESSMENT PROCEEDINGS LD. ASSESSING OFFICER OBSERVED THAT A SUM OF RS.25,000/- WAS PAID IN CASH TOWARDS ROTARY MACHINE ACCOUNT WHICH WAS BALANCE PAYMENT OU T OF THE TOTAL VALUE OF THE MACHINE AT RS.12,75,000/- OUT OF WHICH RS.12,50,000/- WAS BOOKED UNDER THE HEAD FIXED ASSET AND THE REMAI NING AMOUNT OF RS.25,000/- WAS SHOWN AS REVENUE EXPENDITURE. DUE T O THIS REASON LD. ASSESSING OFFICER WAS INCLINED TO BELIEVE THAT RS.25,000/- ALSO PERTAINED TOWARDS THE COST OF ROTARY MACHINE WHICH NEEDED TO BE CAPITALIZED AND HE DID SO WHILE FRAMING THE ASSESSM ENT BY DISALLOWING RS.25,000/- AND ALLOWING DEPRECIATION A S PER RATES APPLICABLE UNDER THE LAW. IN APPEAL BEFORE LD. CIT( A) THE VIEW TAKEN BY LD. ASSESSING OFFICER WAS ACCEPTED BY LD. CIT(A) AND THE GROUND OF ASSESSEE WAS DISMISSED. 18. NOW IN APPEAL BEFORE US, LD. AR SUBMITTED THAT EXPENDITURE OF RS.25,000/- WAS INCURRED FOR FACTORY AND FORMS PART OF TOTAL FACTORY EXPENSES OF RS.4,51,408/- AND IS OF REVENUE IN NATU RE. ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 11 19. LD. DR OPPOSED THE SUBMISSIONS OF LD. AR AND SU PPORTED THE ORDERS OF LOWER AUTHORITIES. 20. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THROUGH THIS GROUND THE ASSESSEE IS AGGR IEVED BY THE ORDER OF LD. CIT(A) FOR SUSTAINING THE DISALLOWANCE OF RS.25,000/- TOWARDS FACTORY EXPENSES TREATING IT AS CAPITAL EXP ENDITURE. FROM GOING THROUGH THE RECORDS, WE OBSERVE THAT AT PAGES 7 TO 11 OF THE PAPER BOOK THEIR APPEARS FACTORY EXPENDITURE A/C WH ICH TOTALS TO RS. 4,51,408/-, A CASH PAYMENT OF RS.25,000/- HAS BEEN SHOWN TO BE PAID VIDE VOUCHER NO.537 AND IN THE DETAILS OF ENTR Y ITSELF THERE IS MENTION THAT THIS AMOUNT OF RS.25,000/- IS BALANCE AMOUNT OF ROTARY MACHINE WHICH VALUED AT RS.12,75,000/- AND AFTER PA YING OF RS.12,50,000/- THE BALANCE AMOUNT HAS BEEN PAID IN CASH AND THIS MACHINE WAS PURCHASED FROM SUHAG PRINTS PVT. LTD. I N OUR VIEW THIS ENTRY MAKES THE FACT VERY CLEAR THAT RS.25,000/- WA S PART OF THE TOTAL VALUE OF THE ROTARY MACHINE AT RS.12,75,000/- AND F URTHER NO SUPPORTING EVIDENCE WAS PLACED ON RECORD BY ASSESSE E TO PROVE THAT THERE WERE TWO SEPARATE BILLS ONE FOR THE COST OF T HE MACHINE OF RS.12,50,000/- AND THE OTHER FOR EXPENDITURE INCURR ED FOR ROTARY MACHINE FOR RS.25,000/- RELATING TO REPAIR ETC. AND , THEREFORE, IN THESE CIRCUMSTANCES, WE ARE UNABLE TO ACCEPT THE CONTENTI ON OF LD. AR AND INCLINED TO BELIEVE THAT RS.25,000/- WAS PART OF CA PITAL EXPENDITURE OF RS.12,75,000/- INCURRED FOR PURCHASE OF ROTARY MACH INE AND LD. ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE SAME A ND ALLOWED DEPRECIATION OF RS.25,000/-. ACCORDINGLY, WE FIND N O REASON TO ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 12 INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSU E. WE UPHOLD THE SAME. THIS GROUND OF ASSESSEE IS DISMISSED. 21. OTHER GROUND IS OF GENERAL NATURE, WHICH NEEDS NO ADJUDICATION. 22. IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH MAY, 2016 SD/- SD/- (SHAILENDRA YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER DATED 18/5/2016 MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, AHMEDABAD ITA NO. 2332/AHD/2011 ASST. YEAR 2008-09 13 1. DATE OF DICTATION: 16/05/2016 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: 17/05/2016 OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 18/5/16 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: