DCIT, Circle - 7, Kolkata, Kolkata V. M/s. Ripley & Company Ltd, Kolkata

ITA 240/KOL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78351 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2012
• Court: TRIBUNAL
• Department Lawyers: USMANIJCIT
• Keywords: Depreciation; Business expenditure; Question of law

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.240/KOL/2012 ASSESSMENT YEAR : 2008-09 ( APPELLANT ) (RESPONDENT) D.C.I.T.,CIRCLE-7, , -VS- M/S.RIPLEY & COMPANY LTD. KOLKATA KOLKATA ( PAN:AABCR 4633 A) FOR THE APPELLANT SHRI S.H.USMANI,JCIT SR.DR FOR THE RESPONDENT SHRI SOMNATH GHOSH, ADVOCATE DATE OF HEARING : 26.06.2014 DATE OF PRONOUNCEMENT : 27. 06.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T ORDER OF LD. C.I.T.(A)- VIII, KOLKATA DATED 24.11.2011 AND PERTAINS TO ASSESSMEN T YEAR 2008-09. 2. THE GROUNDS OF APPEAL RAISED BY REVENUE READ AS UNDER :- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN LAW AND ON FACT IN DELETING THE DISALLOWANCE MADE B Y THE A.O. OF RS.3,24,148 AND RS.74,90,837 TOWARDS DEMURRAGE CHARGES AND PENALTY CHARGES (IMPOSED BY CENTRAL COALFIELDS LIMITED) RESPECTIVELY SINCE THESE ARE PE NAL IN NATURE AND UNDER THE INCOME- TAX ACT, 1961 PENALTY OF ANY SORT IS NOT AN ALLOWAB LE EXPENSE. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(APPEALS) HAS ERRED IN DELETING THE DISALLOWANCE MADE BY THE A.O. TOWARDS EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE COMPANY IN RESPECT OF TIPPERS & DUMPERS WH ICH WERE USED FOR ASSESSEES OWN BUSINESS AND NOT LET OUT ON HIRE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, DELETE, ALTER, MODIFY OR TAKE NEW GROUNDS OF APPEAL. 3. APROPOS GROUND NO.1 : DEMURRAGE CHARGES AND PEN ALTY CHARGES : 3.1. ON THIS ISSUE THE AO NOTED THAT DURING THE YEA R THE ASSESSEE CLAIMED A SUM OF RS.3,24,148 AND RS.74,90,837 AS DEMURRAGE CHARGES A ND PENALTY CHARGES (IMPOSED BY CENTRAL COALFIELDS LIMITED), WHICH HAS BEEN INCLUDE D IN HANDLING & STEVEDORING ITA.NO.240/KOL/2012 M/S.RIPLEY & CO MPANY LTD. A.YR.2008-09 2 EXPENSES. AO OBSERVED THAT SINCE THE DEMURRAGE CHAR GES AND PENALTY IMPOSED IS NOT AN ALLOWABLE EXPENDITURE, BEING PENAL IN NATURE, TH E SAID AMOUNTS OF RS.3,24,148 AND RS.74,90,837 WAS DISALLOWED AND ADDED BACK TO THE T OTAL INCOME OF THE ASSESSEE COMPANY. 4. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT THE ASSESSEE COMPANY DURING THE YEAR DERIVED INCOME FROM EXECUTION OF JOBS OF HANDL ING CONTRACTORS UNDER CENTRAL COAL FIELD (GOVT. UNDERTAKING). THAT IN THE EXECUTI ON OF SUCH JOBS THE ASSESSEE HAD NOT ALWAYS BEEN GIVEN ADEQUATE TIME AND THE DELAY IN CO MPLETING OF JOB RESULTED IN IMPOSITION OF PENALTY. THAT DEMURRAGE CHARGES ARE U SUAL IN THE LINE OF BUSINESS. IT WAS FURTHER SUBMITTED THAT IN IDENTICAL CIRCUMSTANCES I N THE EARLIER YEARS THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE,. CONSIDERING THE ABOVE THE LD. CIT(A) FOUND THAT HE DID NOT FIND ANY REASON TO DIFFER FROM THE DECISION OF HIS PREDECESSOR. ACCORDINGLY THE LD. CIT(A) DELETED THE ADDITION OF RS.78,14,985/- M ADE BY THE AO ON THIS ACCOUNT. 4.1. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPE AL BEFORE US. 5. AT THE OUTSET THE LD. COUNSEL OF THE ASSESSEE SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY SEVERAL DECIS IONS OF THE ITAT IN ASSESSEES OWN CASE EARLIER. HE FURTHER SUBMITTED THAT THE HONBLE CALCUTTA HIGH COURTS DECISION IN THE CASE OF CIT VS JIYAJEERAO COTTON MILLS LTD. 103 CTR 426 ALSO SUPPORTS THE SUBMISSION OF THE ASSESSEE. THE LD. DR, ON THE OTHE R HAND, RELIED ON THE ORDER OF AO. 6. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE TRIBUNAL IN ASSESSEES OWN CASE EARLIER HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE. IN THIS REGARD THE TRIBUNALS DECISION IN ASSESSEE S OWN CASE IN ITA NO.334/KOL/2001 FOR A.YR. 1997-98 AND ITA NO.687/KOL/2002 FOR A.YR. 1998-99 ARE RELEVANT. SINCE IT HAS BEEN DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE ON IDENTICAL ISSUE THERE IS NO REASON TO DIFFER FROM THE SAME. MOREOVER, THE CASE LAW OF THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS JIYAJEERAO COTTON MILLS LTD. (SUPRA) ALSO SUPPORTS THE ITA.NO.240/KOL/2012 M/S.RIPLEY & CO MPANY LTD. A.YR.2008-09 3 ASSESSEES CASE. IN THIS CASE THE HONBLE JURISDICT IONAL HIGH COURT HAS EXPOUNDED AS UNDER :-. THE GOODS WERE NOT DELIVERED IN TIME AND THEREBY A PENALTY UNDER THE DEFAULT CLAUSE HAD TO BE PAID. IT IS NOT A PENALTY FOR BREACH OF A NY LAW. THE PAYMENT WAS MADE ON ACCOUNT OF THE CONTRACTUAL OBLIGATION UNDER THE AGR EEMENT. WHEN THE GOODS WERE NOT DELIVERED WITHIN THE STIPULATED PERIOD, AN EXTRA AM OUNT, DESIGNATED PENALTY HAD TO BE PAID. THIS WAS DONE IN COURSE OF CARRYING ON THE BU SINESS BY THE ASSESSEE. USUALLY, TIME IS NOT OF THE ESSENCE OF THE CONTRACT, BUT THE PART IES ARE ENTITLED TO MAKE IT SO BY INSERTING A SPECIFIC CLAUSE IN THE CONTRACT. THE PA RTIES ARE ENTITLED TO FIX THE TIME WITHIN WHICH THE GOODS MUST BE DELIVERED AND TO STIPULATE THAT IF THERE IS ANY FAILURE TO DELIVER THE GOODS WITHIN THE CONTRACTED PERIOD, EXTRA MONEY WILL HAVE TO BE PAID TO COMPENSATE THE BUYER FOR NON-DELIVERY OF THE GOODS IN TIME. IN THE INSTANT CASE, THERE WAS SPECIFIC REQUIREMENT TO DELIVER THE GOODS IN TIME AND A PENA LTY CLAUSE FOR DEFAULT. THESE RIGHTS AND OBLIGATIONS AROSE IN COURSE OF CARRYING ONE OF THE BUSINESS OF BUYING AND SELLING GOODS. ONE FAILS TO SEE HOW THIS PAYMENT MADE UNDER A CONTRACTUAL OBLIGATIONS CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. AMOUNT PAID FOR NON-DELIVERY OF GOODS IN TIME IS AL LOWABLE AS DEDUCTION EVEN THOUGH SUCH AMOUNT IS DESIGNATED AS PENALTY IN THE SUPPL Y CONTRACT, TIME BEING THE ESSENCE OF THE CONTRACT. 6.1. THUS WE FIND THAT WHEN THE AMOUNTS ARE PAID ON CONTRACTUAL OBLIGATION THE SAME HAVE TO BE ALLOWED AS BUSINESS EXPENDITURE. TH E AMOUNT PAID FOR NON DELIVERY OF GOODS IN TIME IS ALLOWABLE AS DEDUCTION EVEN THOUGH SUCH AMOUNT IS DESIGNATED AS PENALTY IN THE SUPPLY CONTRACT, TIME BEING THE ES SENCE OF THE CONTRACT. IN VIEW OF THE ABOVE DISCUSSIONS AND PRECEDENT WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORDINGLY WE UPHOLD THE SAME. 7. APROPOS GROUND NO.2 :-DEPRECIATION CLAIMED IN RE SPECT OF TIPPERS AND DUMPERS. 7.1. ON THIS ISSUE THE AO NOTED THAT THE ASESSEE HA S CLAIMED DEPRECATION OF 30% ON THE BLOCK OF ASSETS NAMELY TIPPERS AND DUMPERS ETC . @30% INSTEAD OF 15%. THE ASSESSEE CLAIMED THAT IT IS USING THE VEHICLES FOR ITS OWN BUSINESS OF TRANSPORTATION OF GOODS ON HIRE AND ACCORDINGLY HIGHER RATE OF DEPREC IATION SHOULD BE ALLOWED. HOWEVER, THE AO WAS NOT IN AGREEMENT WITH THIS. THE AO OBSERVED THAT ASSESSEES NATURE OF BUSINESS IS PRIMARILY STEVEDORING (WHICH MEANS LOADING AND UNLOADING OF GOODS), CLEARING AND FORWARDING. THE AO OPINED THAT THE ASSESSEES BUSINESS OF ITA.NO.240/KOL/2012 M/S.RIPLEY & CO MPANY LTD. A.YR.2008-09 4 LOADING AND UNLOADING OF GOODS, CLEARING AND FORWAR DING CANNOT BE SAID TO BE A BUSINESS OF TRANSPORTATION OF GOODS ON HIRE. THE A O FURTHER NOTED THAT IN TERMS OF PROVISION OF CIRCULAR NO.652 DATED 14.06.1993 ISSUE D BY CBDT HIGHER RATE OF DEPRECIATION WAS ALLOWABLE FOR MOTOR BUSES AND MOTO R LORRIES. HENCE THE ASSESSEE HAS CLAIMED DEPRECIATION ON TIPPERS AND DUMPERS WHICH A RE LIKE PLANT AND MACHINERY FOR THE ASSESSEE COMPANY AND DEPRECIATION AT THE NORMAL RATE OF 15% IS ONLY ALLOWABLE. BEFORE THE LD. CIT(A) IT WAS SUBMITTED THAT AS PER THE CBDT CIRCULAR NO.652 HIGHER DEPRECIATION WOULD BE AVAILABLE ON VEHICLES USED IN ASSESSEES BUSINESS OF TRANSPORTATION OF GOODS. IT WAS SUBMITTED THAT THE VEHICLES WERE USED BY THE ASSESEE IN BOTH THE CAPACITIES THAT IS BUSINESS OF TRANSPORTAT ION OF GOODS ON HIRE AS WELL AS TRANSPORTATION OF GOODS. HENCE THE ASSESSEE CLAIMED IS ELIGIBLE FOR HIGHER RATE OF DEPRECIATION. FURTHERMORE THE TRIBUNALS DECISIONS IN ASSESSEES OWN CASE WAS CITED. CONSIDERING THE ABOVE THE LD. CIT(A) HELD THAT THE ASSESSEE WAS TO BE ALLOWED 30% OF DEPRECIATION. 7.2. AGAINST THE ABOVE THE REVENUE IS IN APPEAL BEF ORE US. 8. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY COVER ED IN FAVOUR OF THE ASSESSEE ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN ASSESS EES OWN CASE IN ITAT NO.231 OF 2010 VIDE ORDER DATED 10 TH JANUARY, 2011 FOR A.YR.2006-07. THE LD. DR COULD N OT CONTROVERT THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. UPON CAREFUL CONSIDERATION WE FIND THAT THIS ISSUE HAS BEEN DECI DED BY THE APPELLATE AUTHORITIES IN ASSESSEES OWN CASE IN THE EARLIER YEARS IN FAVOUR OF THE ASSESSEE. THE HONBLE JURISDICTIONAL HIGH COURT HAS ALSO CONSIDERED THE I SSUE AND HAS DECIDED IN FAVOUR OF THE ASSESSEE HOLDING AS UNDER :- THE LEARNED TRIBUNAL BELOW, ON CONSIDERATION OF TH E MATERIALS ON RECORD, CAME TO THE CONCLUSION THAT IN VIEW OF CIRCULAR NO.652 DATED 14 TH JUNE, 1993 OF C.B.D.T., THE ASSESSEE WAS ENTITLED TO THE BENEFIT BECAUSE OF THE FACT THAT THE ASSESSEE WAS USING THE VEHICLES IN BOTH THE CAPACITIES, THAT IS TO SAY, BU SINESS FOR TRANSPORTATION OF GOODS ON HIRE AS WELL AS TRANSPORTATION OF GOODS. IT WAS ALS O POINTED OUT THAT IN THE PAST FOR THE ASSESSMENT YEARS 2005-2006 AND 2004-2005, THE LEARN ED C.I.T.(A) HELD THAT THE ASSESSEE HAD THE BUSINESS OF TRANSPORTATION OF GOOD S ON HIRE AS WELL AS TRANSPORTING ITA.NO.240/KOL/2012 M/S.RIPLEY & CO MPANY LTD. A.YR.2008-09 5 OTHER GOODS AND, AS SUCH, WAS ENTITLED TO HIGHER RA TE OF DEPRECIATION AS PER THE SAID CIRCULAR NO.652. IT APPEARS THAT THE REVENUE DID NO T CHALLENGE THOSE DECISIONS. WE, THEREFORE, FIND THAT IN THE FACTS OF THE PRESENT CASE, THE LEARNED APPELLATE TRIBUNAL RIGHTLY HELD THAT THE ASSESSEE WAS ENTITLE D TO THE BENEFIT OF CIRCULAR NO.652. NO SUBSTANTIAL QUESTION OF LAW BEING INVOLVED, WE DISM ISS THIS APPEAL. FROM THE DECISION OF THE HONBLE JURISDICTIONAL HIG H COURT AS ABOVE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND AC CORDINGLY WE UPHOLD THE SAME. 9. IN THE RESULT THE APPEAL OF THE REVENUE STANDS D ISMISSED. ORDER PRONOUNCED IN THE COURT ON 27.06.2014. SD/- SD/- [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 27.06.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.RIPLEY & COMPANY LTD., C/O S.N.GHOSH & ASSOCIAT ES, ADVOCATE SEVEN BROTHERS LODGE, P.O,BOROSHIBTALA, P.S.CHINSURAH, DI ST.HOOGHLY, PIN:712105. 2 D.C.I.T., CIRCLE-7, KOLKATA 3 . CIT(A)-VIII, KOLKATA 4. CIT - KOLKATA. 5. CIT-DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES