The DCIT, Circle-6, Ahmedabad V. M/s. R.K.Industries , Ahmedabad

ITA 239/AHD/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 8682 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 23-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B T THAKKAR
• Keywords: Additional evidence; Corroborative evidences; Capital expenditure
• Section: 143(3); 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH AHMEDABAD BEFORE, SHRI N. K. BILLAIYA , ACCOUNTANT MEMBER AND SHRI S. S. GODARA, JUDICIAL MEMBER ITA NO. 239/AHD/2014 (ASSESSMENT YEAR: 2010-11) DY.CIT, CIRCLE-6, AHMEDABAD APPELLANT VS. M/S. R. K. INDUSTRIES, PLOT NO. 3411/1, GIDC, PHASE-IV, VATVA, AHMEDABAD 382445 RESPONDENT PAN: AADFR4268A /BY REVENUE : SHRI K. MADHUSUDAN, SR. DR. /BY ASSESSEE : SHRI B. T. THAKKAR, A.R. /DATE OF HEARING : 24.07.2017 /DATE OF PRONOUNCEMENT : 28.08.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2010-11 A RISES AGAINST THE CIT(A)-XI, AHMEDABADS ORDER DATED 01.11.2013, IN C ASE NO. CIT(A)- XI/214/ACIT.CIR-6/12-13, IN PROCEEDINGS U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT. 2. THE REVENUES FIRST SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING DISALLOWANCE OF RS.51,10,131/- MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 19. 12.2012 IN RESPECT OF ESTIMATED GROSS PROFITS AMOUNTING TO RS.51,10,131/- AFTER REJECTING BOOKS OF ITA NO. 239/AHD/14 (DCIT VS. M/S. R. K. INDUSTRIES) A.Y. 2010-11 - 2 - ACCOUNTS U/S.145 OF THE ACT. WE STRAIGHTWAY COME T O CIT(A)S ORDER PAGE 7 PARA 2 ND & 3 RD AS CONCLUDED IN PAGE 8. THE SAME INDICATES THAT T HE ASSESSING OFFICER HIMSELF HAS ADMITTED IN HIS REMAND REPORT T HAT ASSESSEES ADDITIONAL EVIDENCE FILED UNDER RULE 46A OF THE INCOME TAX RUL ES, 1962 INDICATING THAT ITS COMMISSION AGENT M/S. ORGANICA PRODUCTS HAD INA DVERTENTLY MENTIONED THE NAME OF THE PRODUCTS SOLD THROUGH THEM AS 2-PY RIDONE INSTEAD OF ITS ACTUAL NAME ETY CYANO PYRIDONE FORMING THE BASIS OF BOOK REJECTION IN ASSESSMENT PROCEEDINGS. THE LEARNED DEPARTMENTAL R EPRESENTATIVE FAILS TO DISPUTE THE FACT THAT THE ASSESSING OFFICERS REMAN D REPORT HAS ITSELF AGREED WITH ASSESSEES CASE AS SUBMITTED IN LOWER APPELLAT E PROCEEDINGS. THE CIT(A) HAS THEREFORE TAKEN THE SAME ON RECORD TO DE LETE THE IMPUGNED ADDITION MADE BY THE ASSESSING AUTHORITY AFTER REJE CTING ASSESSEES BOOKS ACCOUNT. WE THUS QUOTE THIS TRIBUNALS CO-ORDINATE BENCH DECISION IN ACIT VS. R.P.G. CREDIT & CAPITAL LTD. ITA NOS. 4688-4690 /DEL/2012 HOLDING THAT THE ASSESSING OFFICER CANNOT BE HELD TO BE AN AGGRI EVED PARTY IF HE HIMSELF ACCEPTS THE CONCERNED ASSESSEES EXPLANATION SUBMIT TED IN REMAND PROCEEDINGS. WE THEREFORE AFFIRM CIT(A)S ORDER PE RTAINING TO THIS FIRST SUBSTANTIVE GROUND. THE REVENUES SUBSTANTIVE GROU ND IS THEREFORE REJECTED. 3. THE REVENUES SECOND SUBSTANTIVE GROUND SEEKS TO REVIVE COMMISSION DISALLOWANCE OF RS.10,51,382/- AS MADE IN THE COURS E OF ABOVE ASSESSMENT. WE COME TO PAGE 20 OF THE CIT(A)S ORDER DEALING WI TH THE INSTANT ISSUE IN PARA 3.2. THE ASSESSEE HAD ADMITTEDLY PAID THE IMPU GNED COMMISSION TO M/S. ORGANICA PRODUCTS (SUPRA). THE CIT(A) CONCLUDES TH AT THE ASSESSING OFFICERS REMAND REPORT QUA FIRST ISSUE (SUPRA) ALR EADY TREATS THE ABOVE ENTITY AS A GENUINE COMMISSION AGENT IN VIEW OF SUPPORTING EVIDENCE TENDERED THEREIN. WE THUS ADOPT VERY REASONING HEREIN AS WE LL AS IN PRECEDING SUBSTANTIVE GROUND TO DECLINE REVENUES INSTANT GRI EVANCE AS WELL. ITA NO. 239/AHD/14 (DCIT VS. M/S. R. K. INDUSTRIES) A.Y. 2010-11 - 3 - 4. THE REVENUES THIRD SUBSTANTIVE GROUND PLEADS TH AT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN REVERSING ASSES SING OFFICERS FINDINGS DISALLOWING ASSESSEES CLAIM OF RS.3,56,100/- BEING AGGREGATE OF VARIOUS AMOUNTS PAID AS PROFESSIONAL FEES AND OTHER ITEMS H ELD TO BE CAPITAL EXPENDITURE IN NATURE. WE DEEM IT APPROPRIATE TO R EPRODUCE LOWER APPELLATE FINDINGS UNDER CHALLENGE DISCUSSING ASSESSING OFFIC ERS CONCLUSION AS WELL AS THEIR RELEVANT NATURE OF ALL EXPENSES AS UNDER: 8. EIGHTH GROUND OF APPEAL IS AGAINST THE DISALLOW ANCE OF LEGAL AND PROFESSIONAL FEES OF RS. 3,56,100/-. THE DISCUSSION MADE BY THE ASSESSING OFFICER IS REPRODUCED AS UNDER: '9. ON PERUSAL OF DETAILS OF LEGAL AND PROFESSIONAL FEES DEBITED IN THE P/L A/C, IT IS NOTICED THAT THE ASSESSEE HAS DEBITED CE RTAIN AMOUNTS AS PER FOLLOWING DETAILS: S. NO DETAILS AND NATURE OF EXPENDITURE AMOUNT IN RS 1 PROFESSIONAL FEES FOR SERVICES RENDERED IN CONNECTI ON WITH WORKING CAPITAL LIMITS WITH BANK (LIAISON WITH BANK, PREPARATION OF VARIOUS REPORTS OF THE BANK ET C) 2,00,000/-. 2 NA CHARGES FOR TRANSFER OF TITLE OF THE LEASE OF AS SETS TO ASSESSEE' S NAME 5100/- 1200/- 3 STAMPING CHARGES FOR LOANS TAKEN FROM BOB FOR NEW BUILDING AND MACHINE 39100 4 PREPARATION OF ONSITE EMERGENCY PLANS'. 6000/- 5 FOR STRUCTURAL DESIGN CHARGES FOR FACTORY. 21000 6 FOR ISO DOCUMENTATION 14000 13000 33200 13000 73200 IT IS SEEN THAT THE ASSESSEE HAS SHOWN BUILDING CON STRUCTION IN PROGRESS AND PLANT AND MACHINERY IN PROGRESS AND HAS CAPITALIZED CERTAIN EXPENSES. THEREFORE, CERTAIN EXPENSES OUT OF THE ABOVE SHOULD HAVE BEEN CAPITALIZED. FURTHER, THE EXPENSES IN RELATION TO ISO CERTIFICAT ION WILL GIVE THE ASSESSEE AN ENDURING BENEFIT. IT WILL ALSO CREATE A NEW INTANG IBLE ASSET TO THE ASSESSEE. ALL THE ABOVE MENTIONED EXPENSES ARE THEREFORE CAPITAL IN NATURE AND THEREFORE SHOULD ALSO HAVE BEEN CAPITALIZED. THE SAME IS THER EFORE DISALLOWED. FURTHER IT IS SEEN THAT THE ASSESSEE HAS ALSO DEBITED AN AMOUN T OF RS.10500/- AS FEES FOR ITAT APPEAL. THE SAME IS ALSO DISALLOWED. THUS THE TOTAL DISALLOWANCE OUT OF LEGAL AND PROFESSIONAL FEES PAID COMES TO RS. 356100/-. IN THE COURSE OF APPELLATE PROCEEDINGS IT WAS SUBMI TTED THAT EXPENSES HAVE BEEN INCURRED FOR AVAILING PROFESSIONAL CONSULTANCY SERV ICES. IT WAS ALSO SUBMITTED THAT THE ITA NO. 239/AHD/14 (DCIT VS. M/S. R. K. INDUSTRIES) A.Y. 2010-11 - 4 - PROFESSIONAL FEES HAS BEEN PAID FOR PREPARATION OF VARIOUS REPORTS AND LIAISON WITH BANK IN RESPECT OF INCREASE IN CREDIT LIMITS FOR WO RKING CAPITAL. I HAVE GONE THROUGH THE LIST OF EXPENSES DISALLOWED BY THE ASSESSING OF FICER. I DO NOT FIND ANY EXPENDITURE WHICH WILL BE BRINGING BENEFITS OF ENDURING NATURE OR ARE NOT OF REVENUE NATURE. I DO NOT AGREE WITH THE STAND TAKEN BY THE ASSESSING OFF ICER THAT THE LEGAL AND PROFESSIONAL FEE EXPENDITURE NEEDS TO BE CAPITALIZED. THE ASSES SING OFFICER IS DIRECTED TO DELETE THE ADDITION. THE EIGHT GROUND OF APPEAL IS ACCORDINGL Y ALLOWED AN APPEAL AND GETS A RELIEF OF RS.3,56,100/-. 5. WE AFFORDED AMPLE OPPORTUNITY TO THE REVENUE FOR REBUTTING THE CIT(A)S CONCLUSION THAT ALL THESE ITEMS OF EXPENSE S ARE REVENUE IN NATURE THAN CAPITAL EXPENDITURE TREATED BY THE ASSESSING A UTHORITY. LEARNED DEPARTMENTAL REPRESENTATIVE FAILS TO INDICATE AS TO IN WHAT MANNER ALL THESE HEADS OF EXPENSES GIVE ENDURING ADVANTAGE TO THE AS SESSEE SO AS TO BE TREATED AS CAPITAL EXPENDITURE IN NATURE. WE THEREFORE AFF IRM CIT(A)S CONCLUSION UNDER CHALLENGE. THE REVENUES INSTANT SUBSTANTIVE GROUND AS WELL AS ITS MAIN CASE FAILS ACCORDINGLY. 6. THIS REVENUES APPEAL IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF AUGUST, 2017.] SD/- SD/- ( N. K. BILLAIYA ) (S. S . GODARA) ACCOUNTANT MEMBER JUDIC IAL MEMBER AHMEDABAD: DATED 28/08/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0