R.L. Steel & Energy Ltd., Faridabad V. Addl. CIT, New Delhi

ITA 2418/DEL/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 7518 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 9 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 24-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAYASUDDHIN ANSARI
• Keywords: Capital asset; Depreciation; Principle of natural justice; Difference of opinion; TDS; Set aside
• Section: 14A; 40(a)(ia); 194C; 201; 194J; 13

Judgement Text

IN TH E INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : F : NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER AND SHRI N.K. CH O UDH RY, JUDICIAL MEMBER ITA NO S . 2418 & 2419 /DEL/201 7 ASSESSMENT YEAR : 20 11 - 12 & 2012 - 13 R.L. STEEL & ENERGY LTD., C/O ANKIT GUPTA , B - 64, 2 ND FLOOR, NEHRU GROUND, NIT, FARIDABAD. PAN: A AACR5809B VS A DDL. CIT, RANGE - 15, NEW DELHI. (APP ELL A NT ) (RESPONDENT) A SSESSEE BY : SHRI GURJEET SINGH, ADVOCATE RE VENUE BY : SHRI GAYASUDDHIN ANSARI, SR. DR DATE OF HEARING : 2 8 .01. 20 20 DATE OF PRONOUNCEMENT : 30 . 01 . 20 20 ORDER PER BENCH : ITA NO.2418/DEL/2017 FILED BY THE ASSESSEE IS DIRE CTED AGAINST THE ORDER DATED 15 TH FEBRUARY, 2017 OF THE CIT(A) - 7 , NEW DELHI, RELATING TO ASSESSMENT YEAR 20 11 - 12 . ITA NO.2419/DEL/2017 FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 10 TH MARCH, 2017 OF THE CIT(A) - 16, NEW DELHI, RELATING TO ASSESSMENT YEAR 20 12 - 13. ITA NO S . 2418 & 2419 /DEL /201 7 2 2. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THEREFORE, THESE WERE HEAR D TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.2418/DEL/2017 (A.Y. 2011 - 12) 3. GROUND OF APPEAL NOS.1 AND 4 BEING GENERAL IN NATURE ARE DISMISSED. GROUND OF APPEAL NO.2 WAS NOT PRESSED BY THE ASSESSEE FOR WHI CH THE LD. DR HAS NO OBJECTION. ACCORDINGLY, GROUND OF APPEAL NO.2 FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 4. IN GROUND OF APPEAL NO.3, THE ASSESSEE HAS CHALLENGED THE ORDER OF THE CIT(A) IN CONFIRMING THE ADDITION OF RS.59,56,605/ - ON ACCOU NT OF DISALLOWANCE OF DEPRECIATION ON RE - HEATING FURNACE AND POLLUTION CONTROL EQUIPMENT. 5. AFTER HEARING BOTH THE SIDES, WE FIND THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURING STEEL AND ALLIED PRODUCTS INCLUDING POWER GENERATION FOR CAPTIVE USE. IT F ILED ITS RETURN OF INCOME 30 TH SEPTEMBER, 2011 DECLARING THE TOTAL INCOME AT RS. 3,83,32,711/ - . THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTED THAT THE ASSESSEE HAS CLAIMED 80% DEPRECIATION ON REHEATING FURNACE. RELYING ON THE DECISION OF HIS PR EDECESSOR FOR A.YS 2006 - 07 TO 2010 - 11, THE AO RESTRICTED THE SAME TO 15% AND, ACCORDINGLY, MADE DISALLOWANCE OF RS.23,52,725/ - . SIMILARLY, THE AO NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION @ 100% ON POLLUTION CONTROL EQUIPMENTS. FOLLOWING HIS ORDER FOR A.Y. 2009 - 10 , THE AO RESTRICTED THE ITA NO S . 2418 & 2419 /DEL /201 7 3 DEPRECIATION ON SUCH EQUIPMENTS @ 15% AND MADE DISALLOWANCE OF RS.36,03,880/ - BEING THE EXCESS DEPRECIATION CLAIMED. 6. IN APPEAL, THE LD.CIT(A) SUSTAINED BOTH THE ADDITIONS. WE FIND THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. S 2007 - 08, 2008 - 09 AND 2009 - 10, VIDE ITA NO.5784/ & 5785/DEL/2012 AND ITA NO.1838/DEL/2013, RESPECTIVELY, ORDER DATED 5 TH FEBRUARY, 2018, HAS DECIDED AN IDENTICAL ISSUE AND RESTORED THE ISSUE TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS. TH E RELEVANT OBSERVATIONS OF THE TRIBUNAL AT PARA 9, 10 AND 14 ARE AS UNDER: - 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. THE SIMPLE ISSUE BEFORE US IS THAT WHETHER THE RE - HEATING FURNACE PURCH ASED BY THE ASSESSEE ARE ENTITLED FOR DEPRECIATION @80% OR NOT. COORDINATE BENCH IN RATHI SUPER STEEL LTD (SUPRA) HAS CONSIDERED THE IDENTICAL ISSUE AND THE CASE OF THE ASSESSEE BEFORE US IS SIMILAR, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH IN PARA NO. 6 WHICH IS UNDER: - '6. THERE IS NOTHING DECISIVE IN THE ASSESSMENT OR THE IMPUGNED ORDER TO DEMONSTRATE THAT THE ASSET IN QUESTION IS, IN FACT, AN ENERGY SAVING DEVICE, WHICH IS PRE - REQUISITE CONDITION FOR CLAIMING DEPRECIATION A T A HIGHER RATE. ON A SPECIFIC QUERY, THE LD AR COULD NOT FURNISH THE DETAIL OF TOTAL AMOUNT OF RS. 14.51 CRORES AND ODD CLAIMED TO HAVE BEEN INCURRED ON REHEATING FURNACE. IN OUR CONSIDERED OPINION, THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNE D ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF AO. WE ORDER ACCORDINGLY AND DIRECT THE AO TO VERIFY THE DETAILS OF THE TOTAL SUM CAPITALIZED AT RS. 14.51 CRORE WITH A VIEW TO ASCERTAIN IF THE ENTIRE AMOUNT CAPITALIZED IS TOWARDS REHEATING F URNACE AS CLAIMED BY THE ASSESSEE. ONCE THIS DETAIL IS CHECKED UP, THEN THE ONUS WOULD BE ON THE ASSESSEE TO ADDUCE SOME TECHNICAL EXPERT'S OPINION ETC. DIVULGING THE TRUE NATURE OF THE ASSET PRODUCED, BEING A REHEATING FURNACE OR OTHERWISE. THE AO, IF NOT SATISFIED WITH THE EXPERT'S REPORT FURNISHED BY THE ASSESSEE, MAY ALSO SEEK AN EXPERT OPINION AT HIS OWN END. IF THE ASSESSEE'S CONTENTION IS FOUND TO BE CORRECT THAT THE CAPITAL ASSET IS NOTHING BUT AN ENERGY SAVING DEVICE, THEN DEPRECATION SHOULD BE ALL OWED AT THE HIGHER RATE. THE MERE FACT THAT THE CONSUMPTION OF FUEL AND POWER HAS NOT WITNESSED A DECLINING TREND IN THAT YEAR, CANNOT BE A CRITERIA TO JUDGE THE ALLOWABILITY OR OTHERWISE OF DEPRECATION AT HIGHER RATE.' ITA NO S . 2418 & 2419 /DEL /201 7 4 10. WE SET ASIDE THE WHOLE ISSUE BAC K TO THE FILE OF THE LD AO TO VERIFY THE REPORT OF THE EXPERT FURNISHED BY THE ASSESSEE AND IF FOUND IN ACCORDANCE WITH LAW TO GRANT DEPRECIATION ACCORDINGLY. 14. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO P ERUSED THE ORDERS OF THE LOWER AUTHORITIES. ADMITTEDLY NOW THE PURCHASE OF THE EQUIPMENTS HAS BEEN VERIFIED BY THE LOWER AUTHORITIES THEREFORE, THE PURCHASE ARE NOW VERIFIED AND GENUINENESS WAS ESTABLISHED BY THE ASSESSEE. NOW THE ONLY ISSUE REMAIN IS WITH RESPECT TO FACT THAT WHETHER THE EQUIPMENTS PURCHASED BY THE ASSESSEE ARE POLLUTION CONTROL EQUIPMENT ELIGIBLE FOR 100% DEPRECIATION OR NOT. ASSESSEE HAS SUBMITTED THE REPORT OF CHARTERED ENGINEER WHICH SAYS THAT EQUIPMENT PURCHASED BY THE ASSESSEE ARE PO LLUTION CONTROL EQUIPMENT. THE LD AO HAS NOT BELIEVED THE FACT THAT THE ASSESSEE HAS PURCHASED POLLUTION CONTROL DESPITE THERE BEING A CERTIFICATE OF AN EXPERT. IN OUR VIEW THE FACT ARE SIMILAR TO THE CLAIM OF THE ASSESSEE OF DEPRECATION ON RE - HEATING FURN ACE. HENCE, WE ALSO DIRECT THE LD AO TO EXAMINE THE CERTIFICATE OF EXPERT AND ALLOW THE CLAIM OF THE ASSESSEE ON DEPRECATION @100%, IF FOUND IN ACCORDANCE WITH LAW. FURTHER, THE LD AO SHOULD NOT DISREGARD THE ABOVE CERTIFICATE OF AN EXPERT WITHOUT ANY COGE NT REASON OR SIMILAR OPINION OF EXPERT. ACCORDINGLY, GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS ALLOWED WITH ABOVE DIRECTION. 7. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y.S 2007 - 08, 2008 - 09 AND 2009 - 10, CITED (S UPRA), WE RESTORE THE ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL. THE GROUND RAISED BY THE ASSESSEE ON THIS ISSUE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.2419/DEL/2017 (A.Y.201 2 - 13) 8. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: - 1. THAT THE ORDER OF LEARNED CIT (A) PARTLY SUSTAINING THE ORDER OF THE LEARNED ASSESSING OFFICER IS BAD IN LAW AND ON FACTS AND IS LIABLE TO BE SET - ASIDE. 2. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. ASSESSING ITA NO S . 2418 & 2419 /DEL /201 7 5 OFFICER IN MAKING ADDITION OF RS 300 U/S 14A READ WITH 8D OF THE INCOME - TAX ACT, 1961 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT (A) AND LD. ASSESSING OFFICER HAVE ERRED IN LAW AND ON FACTS IN MAKING ADDITION OF RS. 1,23,97,437/ - ON ACCOUNT OF DISALLOWANCE OF EXPENSES UNDER SECTION 40(A) (IA) OF THE INCOME - TAX ACT,1961. 4. THAT HAVING REGARD TO THE FACTS AND CIRC UMSTANCES OF THE CASE, LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. ASSESSING OFFICER IN MAKING ADDITION OF RS.2,80,260/ - ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON REHEATING FURNACE AN D POLLU TION CONTROL EQUIPMENT. 5. T HAT ORDERS PASSED BY LEARNED CIT (A) AND LEARNED ASSESSING OFFICER ARE AGAINST THE PRINCIPLES OF NATURAL JUSTICE. [ 9. GROUNDS OF APPEAL NOS.1 AND 5 BEING GENERAL IN NATURE ARE DISMISSED. GROUND OF APPEAL NO.2 WAS NOT PRESSED BY THE LD. COUNSEL FOR THE ASS ESSEE FOR WHICH LD. DR HAS NO OBJECTION. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. SO FAR AS GROUND OF APPEAL NO.4 IS CONCERNED, THE SAME IS IDENTICAL TO GROUND OF APPEAL NO.3 IN ITA NO.2418/DEL/2017. WE HAVE ALREADY DECIDED THE ISSUE AND RESTO RED THE ISSUE TO THE FILE OF THE AO WITH CERTAIN DIRECTIONS. FOLLOWING THE ABOVE REASONINGS, THIS GROUND BY THE ASSESSEE IS RESTORED TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. ACCORDINGLY GROUND OF APPEAL NO.4 IS ALLOWED FOR STATISTICAL PURPOSES. 10. SO FAR AS GROUND OF APPEAL NO.3 IS CONCERNED, THE FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 27 TH SEPTEMBER, 2012 DECLARING A LOSS OF RS.21,12,15,505/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE HAS PAID RS.1,374.63 LAKHS AS CONTRACTOR PAYMENTS WHICH, INTER ALIA , INCLUDES CHARGES PAID FOR PROFESSIONAL AND TECHNICAL SERVICES. ON ALL ITA NO S . 2418 & 2419 /DEL /201 7 6 THESE PAYMENTS THE ASSESSEE HAS DEDUCTED TAX @ 2% FOR MANY OF THE ACTIVITIES CLUBBED UNDER THIS COMMON HEAD AS AGAINST 10% AS PER THE PROVISIONS OF SECTION 194J. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, THE AO NOTED THAT THE PAYMENTS AGAINST WHICH THE DEDUCTION OF TAX @ 2% OR 1% HAS BEEN DONE AND INCLUDE PAYMENTS MADE FOR REPAIR AND MAINTENANCE, ANNUAL MAINTENANCE CONTRACTS, CONVERSION CHARGE, FOR PROVISION OF CAR HIRING, FUMIGATION AND PEST CONTROL WORK, TESTING FEE, ETC. THE AO ASKED THE ASSESSEE AS TO WHY THE TAX SHOULD NOT HAVE BEEN DEDUCTED AS PER THE PROVISIONS OF SECTION 194J ON ACCOUNT O F PAYMENTS FOR TECHNICAL/PROFESSIONAL FEES. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE, HE NOTED THAT THE ASSESSEE HAS DEDUCTED TAX U/S 194C ON PAYMENT OF RS.1,23,97,437/ - INSTEAD OF U/S 194J. REJECTING THE VARIOUS EXPLANATIONS GIVEN BY THE ASSES SEE, THE AO MADE ADDITION OF RS.1,23,97,437/ - PAID AS FEES FOR TECHNICAL OR PROFESSIONAL CHARGES SINCE NO PROPER TDS HAS BEEN MADE. 11 . IN APPEAL, THE LD.CIT(A), UPHELD THE ACTION OF THE AO. 12 . AGGRIEVED WITH SUCH ORDER OF THE CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 13 . AFTER HEARING THE ARGUMENTS MADE BY BOTH THE SIDES , WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y.S 2007 - 08, 2008 - 09 AND 2009 - 10, VIDE ITA NO.5784/ & 5785/DEL/2012 AND ITA NO.183 8/DEL/2013, ITA NO S . 2418 & 2419 /DEL /201 7 7 RESPECTIVELY, ORDER DATED 5 TH FEBRUARY, 2018. THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: - 18. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. IN THE PRESENT CASE THE ASSESSEE HAS MADE PAYMENT FOR CRANE HIRE CHARGES U/S 40(A)(IA) THE DISALLOWANCE IS MADE, THOUGH THE ASSESSEE HAS MADE DEDUCTION APPLYING THE PROVISIONS OF SECTION 194C OF THE ACT. ACCORDING TO THE LD AO PROVISION OF SECTION 194I SHOULD HAVE BEEN APPLIED. HOWEVER DESPITE THE ABOVE DIFFERENCE OF OPINION ACCORDING TO US DISALLOWANCE CANNOT BE MADE. HON'BLE KOLKATA HIGH COURT IN CIT VS. SK TEKRIWA L 361 ITR 432 HAS HELD THAT IF THERE IS ANY SHORTFALL DUE TO ANY DIFFERENCE IN THE OPINION AS TO TAXABILITY OF ANY ITEM OR ANOTHER BY PAYMENT FALLING UNDER VARIOUS TDS PROVISION THE ASSESSEE CAN BE DECLARED TO BE AN ASSESSEE IN DEFAULT U/S 201 OF THE INCOME TAX ACT BUT NO DISALLOWANCE CAN BE MADE U/S 40(A)(IA). IN VIEW THIS WE REVERSE THE FINDING OF THE LOWER AUTHORITIES AND DIRECT THE LD AO TO DELETE THE DISALLOWANCE OF RS. 4772527/ - . IN THE RESULT GROUND NO. 3 OF THE APPEAL IS ALLOWED. 14. SINCE THE TRIBUNAL, FOLLOWING THE DECISION OF THE KOLKATA HIGH COURT IN THE CASE OF S.K. TEKRIWAL (SUPRA) HAS DIRECTED THE AO TO DELETE THE DISALLOWANCE, THEREFORE, FOLLOWING SIMILAR REASONINGS, WE DIRECT THE AO TO DELETE THE DISALLOWANCE. THE GROUND OF APPEAL NO.3 RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 15 . IN THE RESULT, BOTH THE APPEAL S FILED BY THE ASSESSEE ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30 .0 1 .20 20 . SD/ - SD/ - ( N.K. CH O UDH RY ) ( R. K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 30 TH J ANUARY, 2020. ITA NO S . 2418 & 2419 /DEL /201 7 8 DK COPY FORWARDED TO : 1. APPELLANT 2. RESPON DENT 3. CIT 4. CIT(A) 5. DR ASSTT. REGISTRAR, ITAT, NEW DELHI