M/s Keti Construction ( I ) LTD, V. The ACIT 5 (1),

ITA 245/IND/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8009 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-03-2010
• Assessment Year: misc
• Appeal Filed On: 02-06-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAJPAL SINGH
• Assessee Lawyers: S S SOLANKI
• Keywords: Depreciation; Capital expenditure

Judgement Text

1 THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI V.K. GUPTA ACCOUNTANT MEMBER ITA NOS. 245 AND 246/IND/08 A.YS. 2004-05 AND 2005-06 M/S KETI CONSTRUCTION (I) LIMITED INDORE PAN AABCK5930D APPELLANT VS ASSTT. COMMR. OF INCOME TAX RANGE-5 INDORE RESPONDENT APPELLANT BY SHRI S.S. SOLANKI RESPONDENT BY SHRI RAJPAL SINGH, DR O R D E R PER BENCH THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, HENCE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF THROUGH THIS CONSOLIDATED ORDER F OR THE SAKE OF CONVENIENCE. 2 2. WE HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PER USED THE MATERIAL ON RECORD. 3. FIRST, WE SHALL TAKE UP THE ASSESSEES APPEAL IN ITA NO. 245/IND/08. 4. GROUND NO. 1 READS AS UNDER :- THAT THE LEARNED CIT(A) ERRED IN MAINTAINING PART DISALLOWANCE OUT OF ADMINISTRATIVE EXPENSES BY RELY ING ON HIS ORDER FOR A.Y. 03-04. THE DISALLOWANCE SO MAIN TAINED BEING ILLEGAL AND WRONG, THE SAME REQUIRE TO BE DEL ETED. 5. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT IN THIS GROUND THE ISSUE INVOLVED WAS ATTRIBUTION OF A DMINISTRATIVE EXPENSES CLAIMED BY THE ASSESSEE IN NON-BOT BUSINES S TOWARDS BOT BUSINESS. HE FURTHER SUBMITTED THAT THI S ISSUE WAS IDENTICAL TO THE ISSUE RAISED IN THE ASSESSEDS APP EAL IN ITA NO. 200/IND2008 FOR THE ASSESSMENT YEAR 2003-04 WHEREIN THE TRIBUNAL EARLIER AND THE TRIBUNAL VIDE ITS ORDER DA TED 18 TH MARCH, 2010 HAD ACCEPTED THE CLAIM OF THE ASSESSEE AND, TH EREFORE, THIS GROUND WAS COVERED IN FAVOUR OF THE ASSESSSEE. HE FURTHER POINTED OUT THAT THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAD FOLLOWED THE APPELLATE ORDER FOR THE ASSESSMENT YEAR 2003-04 WHICH WAS EVIDENT FROM THE GROUNDS OF APPEAL ITSELF. 3 6. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE PREFERRED TO RELY UPON THE ORDER OF THE LEARNED COM MISSIONER OF INCOMETAX (APPEALS). 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUT HORITIES BELOW. IT IS NOTED THAT IN THE ASSESSMENT YEAR 2003 -04 SIMILAR ISSUE AROSE BEFORE THE TRIBUNAL WHEREIN THE TRIBUNA L HELD THAT SINCE ADMINISTRATIVE EXPENSES FOR EACH TYPE OF ACTI VITY WERE IDENTIFIABLE, HENCE, THERE WAS NO JUSTIFICATION FOR ATTRIBUTING ADMINISTRATIVE EXPENSES OF NON-BOT PROJECT TO BOT P ROJECT. ACCORDINGLY WE ACCEPT THIS GROUND OF THE ASSESSEE A ND DELETE THE DISALLOWANCE CONFIRMED BY THE LEARNED COMMISSIO NER OF INCOMETAX (APPEALS). 8. GROUND NO. 2 READS AS UNDER : 2. THAT THE LEARNED CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF RS. 50,000 OUT OF INTEREST OF RS.1, 00,000/- BY HOLDING THAT THE DISALLOWANCE MADE BY THE AO IS CORRECT. THE DISALLOWANCE SO MADE BEING ILLEGAL AN D WRONG, THE SAME REQUIRE TO BE DELETED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT SIMILAR ISSUE ALSO AROSE BEFORE THE TRIBUNAL FOR TH E ASSESSMENT YEAR 2003-04 WHEREIN THE TRIBUNAL DECIDED THE ISSUE AGAINST 4 THE ASSESSEE AS DETAILS OF UTILISATION OF BORROWED FUNDS IN RESPECT OF NON-BOT PROJECT WERE NOT FURNISHED, NOR THE ASSESSEE HAD BEEN ABLE TO PROVE THAT THE ASSESSEE H AD NOT INCURRED ANY GUARANTEE COMMISSION OR OTHER CHARGES IN RESPECT OF BOT PROJECTS. HOWEVER, IN THE YEAR, , UNDER CON SIDERATION, SUCH DETAILS WERE AVAILABLE AND HE REFERRED TO PAGE 18 OF THE PAPER BOOK, WHICH SHOWED THE DETAILS OF BANK GUARAN TEE CHARGES, ETC. INCURRED IN RESPECT OF NON-BOT PROJEC T. HE FURTHER CONTENDED THAT IN THE YEAR, UNDER CONSIDERATION, TH E ASSESSEE HAD NOT UTILISED ANY BORROWED FUNDS IN RESPECT OF B OT PROJECTS AS IN THE YEAR, UNDER CONSIDERATION, THE ASSESSEE D ID NOT INCUR ANY CAPITAL EXPENDITURE AND THERE WERE RECEIPTS FRO M BOT PROJECTS TO THE TUNE OF RS.1.78 CRORES AND AS AGAIN ST THAT THERE WERE EXPENSES (EXCLUDING COST OF BOT PROJECT WRITTE N OFF) AMOUNTING TO RS. 20 LACS ONLY. IT WAS FURTHER SUBM ITTED THAT THE ASSESSEE HAD DEBITED INTEREST ON TERM LOAN IN COMPU TING PROFITS OF BOT PROJECT, HENCE, SUCH DISALLOWANCE WAS NOT WA RRANTED. 10. THE LEARNED DEPARTMENTAL REPRESENTATIVE, HOWEVE R, PREFERRED TO RELY UPON THE ORDER OF THE LEARNED COM MISSIONER OF INCOMETAX (APPEALS) AND THE ORDER OF THE TRIBUNAL I N THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 . 5 11. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUT HORITIES BELOW. IT IS NOTED THAT IN EARLIER YEAR, THE TRIBU NAL CONFIRMED THE DISALLOWANCE MADE BY THE REVENUE AUTHORITIES FOR TH E REASON THAT THE ASSESSEE FAILED TO FURNISH DETAILS AS REGA RD TO THE FACT THAT THE BANK GUARANTEE CHARGES, BANK CHARGES AND COMMISSION, ETC. HAD BEEN INCURRED ONLY IN RESPECT OF NON-BOT PROJECT. HOWEVER, IN THE YEAR, UNDER CONSIDERATION , SUCH DETAILS HAVE BEEN FURNISHED AND, THEREFORE, SUCH DECISION O F THE TRIBUNAL TO WHICH BOTH OF US ARE A PARTY, CANNOT BE MADE APPLICABLE HERE. HAVING STATED SO, WE FURTHER FIND THAT WHATEVER INTEREST HAS BEEN DEBITED BY THE ASSESSEE, IN RESPE CT OF NON- BOT PROJECT, PERTAINS TO SUCH PROJECTS AND, THEREFO RE, NO PRO RATA ALLOCATION THEREOF CAN BE MADE. ACCORDINGLY, WE ACCEPT THIS GROUND OF THE ASSESSEE. 12. GROUND NO. 3 READS AS UNDER :- 3. THAT THE LEARNED CIT(A) ERRED IN MAINTAINING DISALLOWANCE OF RS. 50,000/- OUT OF DEPRECIATION OF RS.1,00,000/- BY HOLDING THAT THE DISALLOWANCE MADE BY AO IS CORRECT. THE DISALLOWANCE SO MADE BEING ILLE GAL AND WRONG, THE SAME REQUIRE TO BE DELETED. 13. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT 6 THIS ISSUE WAS COVERED BY THE DECISION OF THE TRIBU NAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2003-04 AS STATED HEREINABOVE. HENCE, WE DISMISS THIS GROUND OF THE ASSESSEE. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS PARTLY ALLOWED. 15. NOW, WE SHALL TAKE UP THE ASSESSEES APPEAL IN ITA NO. 246/IND/08. 16. GROUND NO. 1 READS AS UNDER :- THAT THE LEARNED CIT(A) ERRED IN PART MAINTAINING DISALLOWANCE OUT OF INTEREST BY ALLEGING THAT SOME MONEY WAS UTILISED FOR NON BUSINESS PURPOSES. THE DISALLO WANCE SO SUSTAINED BEING ILLEGAL & WRONG, THE SAME REQUIR E TO BE DELETED. 17. THE FACTS, IN BRIEF, ARE THAT THE ASSESSING OFF ICER MADE THE DISALLOWANCE OF RS.89,681/- OUT OF INTEREST PAI D BY THE ASSESSEE ON LOANS TAKEN FROM THE BANK FOR THE REASO N THAT THE ASSESSEE HAD MADE INVESTMENT OF RS.21,23,000/- IN K ETI CONSTRUCTION LIMITED AND A SUM OF RS. 16,50,000/- I N KALYAN TOLL INFRASTRUCTURE LIMITED WHEREON NO INTEREST HAD BEEN CHARGED. IN DOING SO, THE ASSESSING OFFICER REJECT ED THE CLAIM OF THE ASSESSEE THAT M/S KALYAN TOOL INFRASTRUCTURE LIMITED WAS A SPECIAL PURPOSE VEHICLE ESPECIALLY INCORPORATED F OR RUNNING 7 BOT PROJECT. THE ASSESSING OFFICER ALSO IGNORED TH E PLEA OF THE ASSESSEE THAT THE ASSESSEE WAS HAVING SUFFICIEN T INTEREST FREE FUNDS WITH IT. 18. ON APPEAL, THE LEARNED COMMISSIONER OF INCOMETA X (APPEALS) ACCEPTED THE CLAIM OF THE ASSESSEE AS REG ARDS THE INVESTMENT IN M/S KALYAN TOLL INFRASTRUCTURE LIMITE D. HOWEVER, IN RESPECT OF OTHER INVESTMENT, THE LEARNED COMMISS IONER OF INCOMETAX (APPEALS), RELYING ON THE ORDER OF THE HO NBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT V. ABHISHEK INDUSTRIES; 286 ITR 1 AND OTHER JUDICIAL DECISIONS, UPHELD THE ACTION OF THE ASSESSING OFFICER. STILL AGGRIEVED, THE ASSESSEE I S IN APPEAL BEFORE US. 19. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT WAS A CASE WHERE THE ASSESSEE WAS HAVING SUFFICIENT LIQUID FUNDS AS WELL AS SUBSTANTIAL INTERNAL ACCRUALS TO C OVER UP SUCH A SMALL INVESTMENT. IN THIS REGARD, HE CONTENDED THA T OPENING CASH AT BANK WAS RS. 2.18 CRORES AND NET PROFIT DUR ING THE YEAR WAS APPROXIMATELY RS. 1 CRORE AND THE INVESTMENT IN ASSETS HAD BEEN MADE OUT OF LOAN TAKEN FOR ACQUIRING SUCH ASSETS AND, THEREFORE, THERE WERE SURPLUS FUNDS TO THE TUNE OF RS. 1.22 CRORE APPROXIMATELY, HENCE, NO SUCH DISALLOWANCE WAS WARR ANTED. 8 20. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE PREFERRED TO RELY ON THE ORDER OF TH E LEARNED COMMISSIONER OF INCOMETAX (APPEALS). 21. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUT HORITIES BELOW. IT IS NOTED THAT ONLY A SUM OF RS.21,23,000/ - HAS BEEN INVESTED BY THE ASSESSEE IN THE SHARE CAPITAL OF M/ S KETI CONSTRUCTION LIMITED. AS AGAINST THIS, WE FIND THA T THERE WERE SUBSTANTIAL OPENING BALANCE WITH BANK AS WELL AS TH ERE HAS BEEN SUBSTANTIAL PROFIT EARNED BY THE ASSESSEE DURI NG THE YEAR UNDER CONSIDERATION. WE FURTHER FIND THAT ALL THE S ALE PROCEEDS/RECEIPTS HAVE BEEN CREDITED TO C.C. ACCOUN T WHEREFROM SUCH AMOUNT HAS BEEN INVESTED. THUS, TAK ING THESE FACTS INTO CONSIDERATION, WE CAN SAFELY CONCLUDE TH AT THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS A VAILABLE WITH IT TO MAKE SUCH INVESTMENT. ACCORDINGLY, WE HOLD THAT NO SUCH DISALLOWANCE IS WARRANTED AND, THEREFORE, WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. THUS, THIS GR OUND OF THE ASSESSEE STANDS ALLOWED. 22. GROUND NO. 2 READS AS UNDER :- 2. THAT THE LEARNED CIT(A) ERRED IN MAINTAINING 9 DISALLOWANCE OUT OF VEHICLE & TELEPHONE EXPENSES. THAT THESE DISALLOWANCE AND THAT TOO IN THE CASE OF COMP ANY IS ILLEGAL AND WRONG. THE SAME REQUIRE TO BE DELETED. 23. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THESE DISALLOWANCES WERE MADE BY THE REVENUE AUTHOR ITIES ON ACCOUNT OF PROBABLE PERSONAL USE BY THE DIRECTORS O F THE ASSESSEE COMPANY. HOWEVER, IN THE CASE OF A COMPAN Y, NO DISALLOWANCE COULD BE MADE ON ACCOUNT OF PERSONAL U SE AS THE ASSESSEE COMPANY WAS A JURISTIC PERSON. FOR THIS P ROPOSITION, HE PLACED RELIANCE ON THE DECISION OF THE HONBLE G UJARAT HIGH COURT IN THE CASE OF DINESH MILLS LIMITED VS. CIT; 268 ITR 502. 24. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESENTATIVE PLACED STRONG RELIANCE ON THE ORDER OF THE LEARNED COMMISSIONER OF INCOMETAX (APPEALS). 25. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUT HORITIES BELOW. IT IS NOTED THAT THE ASSESSEE IS A COMPANY, HENCE, NO SUCH DISALLOWANCE CAN BE MADE AS HELD BY THE HONBL E GUJARAT HIGH COURT IN THE CASE OF DINESH MILLS LIMITED VS. CIT (SUPRA). ACCORDINGLY, WE ACCEPT THIS GROUND OF THE ASSESSEE ALSO. 26. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE STANDS ALLOWED. 10 27. TO SUM UP, THE ASSESSEES APPEAL IN ITA NO. 24 5/IND/08 STANDS PARTLY ALLOWED AND IN ITA NO. 246/IND/08 STA NDS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 26 TH MARCH, 2010 SD SD (JOGINDER SINGH) (V.K. GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER 26 TH _MARCH, 2010 COPY TO APPELLANT, RESPONDENT, CIT, CIT(A), DR, GUA RD FILE D/-