DCIT, New Delhi V. M/s Sinosteel India Pvt. Ltd., New Delhi

ITA 2333/DEL/2013

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 2923 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 21-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 22-04-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KAUSHLENDRA TIWARI
• Keywords: Gift; Depreciation; Additional evidence; Corroborative evidences
• Section: 37(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DLEHI BEFORE SHRI G.D. AGRAWAL, PRESIDENT AND SHRI K. NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 2333/DEL/2013 ASSESSMENT YEAR: 2008-09 DY. COMMISSIONER OF INCOME-TAX VS M/S SINOSTEEL IND IA P. LTD. CIRCLE 8(1), NEW DELHI. 12 TH FLOOR, EROS CORPORATE TOWER, NEHRU PLACE, NEW DELHI. (PAN: AAJCS1181N) (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI KAUSHLENDRA TIWARI, SR DR RESPONDENT BY: S/ SHRI RAJAN BHATIA AND DEE PAK SHARMA ORDER DATE OF HEARING: 28.02.2018 DATE OF PRONOUNCEMENT: 12.03.2018 PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 31.1.2013 IN APPEAL NO. 212/11-12 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX XI (LEARNE D CIT(A)), RELEVANT TO THE ASSESSMENT YEAR2008-08, REVENUE PREFERRED THIS APPEA L ON THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.26,80,651/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF DEPRECATION ON BUILDING. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.36,40,681/- ON ACCOUNT OF SECURITY DEPOSIT RECEIV ED BY THE ASSESSEE FOR LETTING OUT PROPERTY FROM HYDRO TASMANIA. 2 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.10,07,616/- ON ACCOUNT OF SELLING AND DISTRIBUTI ON EXPENSES. 4. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.11,17,214/- ON ACCOUNT OF GIFT AND PRESENTATION EXPENSES. 5. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.23,75,489/- ON ACCOUNT OF LEGAL AND PROFESSIO NAL CHARGES. 6. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.35,63,357/- ON ACCOUNT OF BUSINESS PROMOTION EXP ENSES. 2. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A C OMPANY ENGAGED IN THE BUSINESS OF TRADING AND LOGISTIC OF MINERALS LIKE I RON ORE, CHROME ORE, MANGANESE ORE, STEEL AND CARBON PRODUCTS, COKE, REFRACTORY MAT ERIAL ETC. FOR THE ASSESSMENT YEAR 2008-09 THEY HAVE FILED THEIR RETURN OF INCOME ON30.9.2008 DECLARING A TOTAL INCOME OF RS.10,25,29,116/- AND AFTER SCRUTINY, LD. AO MADE THE FOLLOWING ADDITIONS: 1 ON ACCOUNT OF DEPRECIATION ON BUILDING RS.26,80,6 51/- 2 ON ACCOUNT OF PAYMENT TO HYDRO TASMANIA CONSULTING INDIA P. LTD. RS.36,40,680/- 3 SELLING AND DISTRIBUTION EXPENSES RS.10,07,616/- 4 ON ACCOUNT OF GIFTS AND PRESENTATIONS RS.11,17,21 4/- 5 ON ACCOUNT OF LEGAL AND PROFESSIONAL EXPOSES RS.23,75,489/- 6 ON ACCOUNT OF BUSINESS PROMOTION EXPENSES RS.35,63,357/- 3 3. LEARNED CIT(A) DELETED ALL THESE ADDITIONS IN A PPEAL PREFERRED BY THE ASSESSEE BY WAY OF IMPUGNED ORDER. STATING THAT THE LEARNED CIT(A) COMMITTED ERROR IN DELETING THE SAME, REVENUE PREFERRED THIS APPEAL. 4. ADVERTING TO THE ASPECT OF DEPRECIATION, IT IS T HE FINDING OF THE LEARNED AO THAT THE BUILDING WAS NOT REGISTERED IN THE NAME OF THE ASSESSEE AND FOR THE ASSTT. YEAR 2007-08. ON THIS GROUND THE DEPRECIATION WAS DENIED. LEARNED AO, THEREFORE, FOLLOWING THE EARLIER YEAR ORDERS DISALLO WED THE DEPRECIATION ON THE BUILDING ON THE SAME GROUND. 5. ON THIS ASPECT LEARNED CIT(A) WHILE PLACING RELI ANCE ON THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF MYSORE MINERALS VS CIT (1999) 239 ITR 775 (SC) FOR THE INTERPRETATION OF THE TERM OWNER AS USED IN SECTION 32 OF THE ACT, HELD THAT THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRECIA TION SINCE THE ASSESSEE IS THE OWNER AND USED THE BUILDING FOR THE BUSINESS AND PR OFESSION. 6. LEARNED DR ARGUED THAT INASMUCH AS THE BUILDING DOES NOT STAND IN THE NAME OF THE ASSESSEE, NO TITLE TO THE PROPERTY PASSE D TO THE ASSESSEE TO HOLD THEM AS THE OWNERS ENTITLING TO CLAIM THE DEPRECIAT ION. LEARNED AR SUBMITTED THAT IN RESPECT OF THE ASSTT. YEAR 2007-08 RELIEF W AS GRANTED BY THE LEARNED CIT(A) AND NO APPEAL WAS PREFERRED. HE, THEREFORE, SUBMIT TED THAT THE REVENUE NOW CANNOT AGITATE THE SAME GROUND IN THIS APPEAL. 7. AS RECORDED BY THE LEARNED AO ON SIMILAR GROUNDS THE DEPRECIATION CLAIMED BY THE ASSESSEE WAS DISALLOWED BY THE LEARNED AO IN R ESPECT OF THE AY 2007-08, BUT THE LEARNED CIT(A) BY ORDER DATED 8.6.2012 IN AP PEAL NO.220/10-11 VIDE GROUND NO.3 AT PAGE NO.12 PLACED RELIANCE ON THE DE CISION REPORTED IN MYSORE MINERALS LTD. (SUPRA) AND ALLOWED THE CLAIM OF THE ASSESSEE. ADMITTEDLY, REVENUE 4 DID NOT PREFER ANY APPEAL AGAINST THIS ORDER AND ALL OWED IT TO BECOME FINAL. SINCE THE LEARNED CIT(A) GRANTED RELIEF TO THE ASSESSEE I N VIEW OF THE BINDING PRECEDENT IN MYSORE MINERAL CASE (SUPRA) OF THE HONBLE APEX C OURT, IT CANNOT BE SAID THAT THE LEARNED COMMITTED ANY ERROR IN GRANTING RELIEF. WE, THEREFO RE, ARE OF THE CONSIDERED OPINION THAT THE FINDING OF THE LEARNED CIT(A) ON THIS ASPECT DOES NOT SUFFER ANY ILLEGALITY OR IRREGULARITY NECESSITATING ANY INTERFERENCE BY THIS TRIBUNAL. HENCE, GROUND NO.1 IS DISMISSED. 8. COMING TO GROUND NO.2 I.E. IN RESPECT OF RS.36,4 0,680/- SAID TO HAVE BEEN PAID TO HYDRO TASMANIA, IT IS THE OBSERVATION OF THE LEARNED AO THAT THE ASSESSEE HAD SHOWN AN AMOUNT OF RS.94,13,003/- ON ACCOUNT OF SECURITY DEPOSIT SHOWN IN THE BALANCE SHEET AND THE ASSESSEE EXPLAINED THAT T HEY HAVE RECEIVED SECURITY DEPOSIT FROM THE LESSEE, WHICH IS REFUNDABLE AT THE TIME OF TERMINATION OF LEASE. HOWEVER, LEARNED AO RECORDED THAT AN AMOUNT OF RS.3 6,40,680/- WAS PAID TO HYDRO TASMANIA. LEARNED AR SUBMITTED THAT IT IS FAC TUALLY INCORRECT. LEARNED DR RELIED UPON THE ASSESSMENT ORDER. 9. IT IS AN ADMITTED FACT THAT NO DEDUCTION IS CLAI MED IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE CORRESPONDING TO THIS ADDIT ION. THIS AMOUNT WAS SHOWN ONLY AS A LIABILITY, BUT NOT AS AN EXPENDITURE CLAIM ING DEDUCTION. LEARNED CIT(A) RECORDED THAT ON 13.1.2011 THIS AMOUNT WAS RETURNED TO HYDRO TASMANIA. IN THE CIRCUMSTANCES, ADDITION ON THIS ACCOUNT IS UNCONCEI VABLE AND CANNOT BE SUSTAINED. LEARNED CIT(A) IS RIGHT IN DELETING THE SAME AND WE CONCUR WITH HIM. CONSEQUENTLY, GROUND NO.2 IS DISMISSED. 5 10. COMING TO GROUND NOS. 3, 4 & 5, THESE GROUNDS R ELATE TO THE ADDITIONS MADE ON ACCOUNT OF SELLING AND DISTRIBUTION EXPENSE S, GIFT AND PRESENTATION EXPENSES AND LEGAL AND PROFESSIONAL CHARGES. LEARN ED AO RECORDED THAT ON EXAMINATION OF DETAILS PROVIDED BY THE ASSESSEE, IT WAS NOTICED THAT SOME OF THE EXPENSES UNDER THESE HEADS ARE ON SELF MADE VOUCHER S OR ARE NOT PROPERLY EXPLAINED OR NO EVIDENCE IS PRODUCED IN SUPPORT OF THE GENUINENESS AND EXIGENCIES OF THE BUSINESS OF THESE EXPENSES. 11. LEARNED CIT(A) WHILE DEALING WITH THESE ADDITIO NS RECORDED THAT THE DETAILS IN RESPECT OF THESE EXPENSES WERE PRODUCED BEFORE H IM AND BASING ON THAT HE CONCLUDED THAT THE EXPENSES WERE INCURRED FOR THE P URPOSES OF BUSINESS AND, THEREFORE, ALLOWABLE U/S 37(1) OF THE ACT. 12. IT IS THE ARGUMENT OF THE LEARNED DR THAT IN AL L FAIRNESS LEARNED CIT(A) SHOULD HAVE GIVEN SUFFICIENT OPPORTUNITY TO THE LEAR NED AO AFTER SENDING THE DOCUMENTS OR THE DETAILS TO THE LEARNED AO FOR VERI FICATION. HE SUBMITTED THAT NON GRANT OF SUFFICIENT TIME TO THE AO TO VERIFY THE CORRECTNESS OR OTHERWISE OF THE DETAILS FURNISHED BY THE ASSESSEE VITIATES THE FINDI NG OF THE LEARNED CIT(A) AS SUCH, THE ADDITIONS MAY BE RESTORED. 13. PER CONTRA, LEARNED AR SUBMITTED THAT AS IS EVI DENT FROM THE ORDER OF THE LD. CIT(A), THE ADDITIONAL EVIDENCE WAS SENT TO THE LEA RNED AO BUT BECAUSE OF THE NON RESPONSE FROM THE LEARNED AO, LEARNED CIT(A) PROCEE DED TO DECIDE THE CASE ON THE BASIS OF THE DOCUMENTS AVAILABLE ON RECORD AND ON MERITS. HE, THEREFORE, SUBMITTED THAT THE REVENUE CANNOT NOW CONTEND THAT NO ADEQUATE OPPORTUNITY WAS GIVEN TO THEM. LEARNED DR SUBMITTED THAT AFTER ADMITTING THE ADDITIONAL 6 EVIDENCE, IT IS INCUMBENT UPON THE LEARNED CIT(A) T O SEEK THE VERIFICATION OF THE RECORD SUBMITTED BY THE ASSESSEE. 14 ON A CAREFUL PERUSAL OF THE ORDER OF THE LEARNED CIT(A) WE FIND THAT EXCEPT RECORDING THE FACT THAT THE DETAILS WERE PRODUCED B EFORE HIM AND THE EXPENSES WERE INCURRED FOR THE BUSINESS OF THE ASSESSEE, LEA RNED CIT(A) HAS NOT TAKEN PAINS TO DISCUSS THE NATURE AND IMPACT OF THE MATERIAL VI S--VIS THE CLAIM OF THE ASSESSEE. IN OUR OPINION, THE COMMENTS OF THE LEAR NED CIT(A) THAT NO ADEQUATE OPPORTUNITY WAS GRANTED BY THE LEARNED AO) TO THE ASS ESSEE DUE TO WHICH THE ASSESSEE COULD NOT AFFECTIVELY SUBSTANTIATE THEIR CL AIM CANNOT BE IGNORED. BUT AT THE SAME TIME THE ORDER OF THE LEARNED CIT(A) ON TH IS ASPECT SUFFERS WANT OF DETAILED DISCUSSIONS ON THE NATURE AND DESCRIPTION OF THE MATERIAL PRODUCED BY THE ASSESSEE AND ITS IMPACT ON THE CLAIM OF THE ASS ESSEE. THOUGH THE LEARNED AR SUBMITTED THAT INSTEAD OF REMANDING THE MATTER BACK TO THE FILE OF LD. AO, IT MAY BE DISPOSED OF HERE ITSELF BY MAKING DISALLOWANCE T O A REASONABLE EXTENT, WE, ARE NOT INCLINED TO ACCEPT THE SAME BECAUSE DOING SO WI THOUT CAUSING PROPER VERIFICATION OF THE RECORD AT THE END OF THE LEARNE D AO. OUR ORDER WOULD ALSO BE EQUALLY CRYPTIC. WE, THEREFORE, SET ASIDE GROUNDS NO S. 3 TO 5 TO THE FILE OF THE LEARNED AO FOR VERIFICATION OF THE CLAIM IN THE LIG HT OF THE MATERIAL THAT WAS PRODUCED BEFORE THE LEARNED CIT(A) AND WILL BE PROD UCED AGAIN BY THE ASSESSEE. 15. COMING TO THE LAST GROUND I.E IN RESPECT OF THE BUSINESS PROMOTION EXPENSES, LEARNED AO RECORDED THAT NO SUPPORTING DO CUMENT HAD BEEN FURNISHED BY THE ASSESSEE TO SUBSTANTIATE THE SAME AND NO DET AILS AS TO THE TDS PAYMENT ARE AVAILABLE WITH HIM. LEARNED CIT(A) RECORDED TH AT NO OPPORTUNITY WAS GIVEN BY THE ASSESSEE TO THE AO TO GIVE SUPPORTING EVIDENCE IN RESPECT OF RS.23,75,489/-. 7 ACCORDING TO THE LEARNED CIT(A) WHEN THE ASSESSEE C OULD PRODUCE THE DETAILS IN RESPECT OF RS.11,76,356/-, THE ASSESSEE COULD HAVE PRODUCED THE DETAILS OF THE REST OF THE CLAIM, HAD AN OPPORTUNITY BEEN GIVEN TO THEM. 16. ARGUMENT OF THE LEARNED DR IS SIMILAR TO THAT O F ON GROUND NOS.3 TO 5, WHEREAS IT IS THE SUBMISSION OF LEARNED AR THAT WHE N THE LEARNED CIT(A), IN EXERCISE OF HIS POWERS, WHICH ARE CO-TERMINUS WITH THOSE OF THE LEARNED AO, CALLED FOR THE DETAILS, IT IS NOT MANDATORY THAT SUCH DETAI LS MUST BE FORWARDED TO THE AO FOR VERIFICATION OR THE COMMENTS OF THE LD. AO THER EON ARE NECESSARY. 18. BE THAT AS IT MAY, IMPUGNED ORDER ON THIS ASPECT REVEALS THAT THOUGH THE DETAILS ARE SAID TO HAVE BEEN PRODUCED BEFORE THE L EARNED CIT(A), THE ORDER DOES NOT REFLECT ANY DISCUSSION ON THIS ASPECT AS TO THE NATURE AND IMPACT OF SUCH MATERIAL ON THE CLAIM OF THE ASSESSEE. FURTHER, WE SET ASIDE GROUND NOS. 3 TO 5 TO THE FILE OF THE AO FOR VERIFICATION OF THE RECORD A ND MAKE NECESSARY ENQUIRIES. HENCE, ON THIS ASPECT ALSO, WE DEEM IT JUST AND PRO PER TO RESTORE THIS ASPECT ALSO TO THE FILE OF AO FOR VERIFICATION TO REACH A RIGHT CONCLUSION, AFTER GIVING AN OPPORTUNITY TO THE ASSESSEE. 19. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS THE 12 TH DAY OF MARCH, 2018. (G.D. AGRAWAL) (K. NARASIMHA CHARY) PRESIDENT JUDICIAL MEMBER DATED: 12 TH MARCH, 2018 VJ 8 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER ASSTT. REGISTRAR, ITAT