The ACIT,(OSD)Circle-8, Ahmedabad V. Shree Rama Multi-Tech Ltd., Ahmedabad

ITA 2471/AHD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62907 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-07-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 30-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K GUPTA
• Assessee Lawyers: S N SAPORKAR
• Keywords: Capital asset; Revenue expenditure
• Section: 37; 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD C BENCH BEFORE: SHRI D.K. TYAGI, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER I.T.A. NO.2362/AHD/2011 A. Y. 2004-05 SHREE RAMA MULTI-TECH. LTD. 603, SHIKHAR BUILDING, NAVRANGPURA, AHMEDABAD-380 009 PAN-AAJCS1563N APPELLANT VS. THE DY. CIT(OSD), CIRCLE-8 AHMEDABAD RESPONDENT WITH I.T.A. NO.2471/AHD/2011 A. Y. 2004-05 THE A.C.I.T.(OSD), CIRCLE-8 AHMEDABAD APPELLANT VS. SHREE RAMA MULTI TECH. LTD., 305, RAM NIVAS NO.1, KHANPUR AHMEDABAD PAN-AAJCS1563N RESPONDENT DEPARTMENT BY : SHRI S.K. GUPTA, CIT D.R. ASSESSEE BY : SHRI S.N. SAPORKAR, A.R. DATE OF HEARING : 05.07.2012 DATE OF PRONOUNCEMENT 09.08.2012 / ORDER PER : D.K. TYAGI, JUDICIAL MEMBER I.T.A. NO.2362/AHD/2011, A. Y. 2004-05 WITH I.T.A. NO.2471/AHD/2011, A. Y. 2004-05 2 THESE ARE CROSS APPEALS FILED AGAINST THE ORDER OF LD. CIT(A)-XIV, AHMEDABAD DATED 26.07.2011. 2. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSE SSEE DID NOT PRESS THE APPEAL FILED BY THE ASSESSEE VIDE ITA NO.2362/A HD/2011. ACCORDINGLY, THE SAME IS DISMISSED AS NOT PRESSED. I.T.A. NO.2471/AHD/2011 3. REVENUE HAS TAKEN FOLLOWING GROUND OF APPEAL THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.33,67,396/ - MADE BY THE A.O. ON ACCOUNT OF LOSS ON ASSETS IN TRANSIT ACCOUNT. 4. THE A.O., WHILE MAKING THE DISALLOWANCE OF RS.3 3,67,396/- HAS OBSERVED AS UNDER:- REGARDING THE WITHDRAWAL OF LOSS ALLOWED TOWARDS L OSS ON ASSETS IN TRANSIT ACCOUNT, THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE ON FOLLOWING GROUNDS: (I) ON GOING THROUGH THE SUBMISSION MADE BY THE ASSESSEE COMPANY, IT WAS FOUND FROM ANNEXURE A ATTACHED WITH THE SUBMISSION THAT THE IMPORTED ASSETS LOSS COMPRISES OF (1) U.V. LAMPS NO.25 VALUED AT RS.9,01,062 (2) PUNCHING TOOLS VALUED AT RS.16,63,369(3) CUP STOCK PAPER VALUED AT RS.9,02,965 (AGGREGATING TO RS.33,67,396). (II) VOUCHER NO.2002100/08 DATED 01/10/2003 ISSUED BY SHREE RAMA MULTITECH LTD. UNIT-2, IT CAN BE SEEN THAT PUNCHING TOOLS WERE FIXED ASSETS AND LOSS WAS INCURRED TO THE TUNE OF RS.1563369 ON SALE OF FIXED ASSETS. (III) AS PER COMMERCIAL INVOICE NO.011221 DATED 21/12/2001, U.V. LAMPS FOR TLC 250-6C PRESS IMPORTED FROM TAIYO KIKAL LTD. JAPAN VALUED I.T.A. NO.2362/AHD/2011, A. Y. 2004-05 WITH I.T.A. NO.2471/AHD/2011, A. Y. 2004-05 3 RS.22,60,000. THIS IS ALSO A CAPITAL ASSET AND ASSESSEE AS PER SECTION 37 OF THE I.T. ACT, LOSSES ON ACCOUN T OF EMBEZZLEMENT OF CASH/THEFT ARE ALLOWABLE EXPENDITUR E, HENCE LOSS ON ASSETS IN TRANSIT ACCOUNT IS NOT ALLO WABLE AS AN EXPENDITURE U/S 37 OF THE ACT. FURTHER, THE LOS S ON SALE UNDER AUCTION IS A CAPITAL ASSET LOSS AND THEREFORE , NOT ALLOWABLE U/S 37 OF THE ACT. 5. AGGRIEVED BY THIS ORDER OF THE A.O. THE ASSESSE E WENT IN APPEAL BEFORE LD. CIT(A) AND PLACED RELIANCE ON THE FOLLOW ING WRITTEN SUBMISSIONS:- WITHOUT PREJUDICE TO ABOVE IT IS FURTHER SUBMITTED THAT, LOSS SUFFERED BY APPELLANT IS ALLOWABLE U/S 2 8 OF THE ACT AS IT IS A LOSS INCIDENTAL TO THE CARRYING ON THE BUSINES S OF THE ASSESSEE AND IT IS LOSS TO THE ASSESSEE AND NOT EXPENSES INC URRED BY THE ASSESSEE. THE ASSETS LOST IN THE TRANSIT ARE ON AC COUNT OF AUCTION OF RAW MATERIALS AND SPARES AND PARTS BY CUSTOM AUT HORITIES, BECAUSE THE APPELLANT COMPANY COULD NOT MAKE PAYMEN T OF CUSTOM DUTY DUE TO SEVERE FINANCIAL CRUNCH WHICH IS ALLOWABLE AS A REVENUE LOSS TO THE APPELLANT. THEREFORE THE ADDIT ION MADE BY AO IS TO BE DELETED, EVEN ON MERITS AND FACTS OF THE C ASE. AFTER TAKING INTO CONSIDERATION THESE SUBMISSIONS OF THE ASSESSEE LD. CIT(A) DELETED THE DISALLOWANCE OF RS.33,67,396/- M ADE BY THE A.O. AGGRIEVED BY THIS ORDER OF LD. CIT(A), NOW THE REVE NUE IS IN APPEAL BEFORE US. 6. AT THE TIME OF HEARING, LD. D.R. PLACED RELIANC E ON THE ORDER OF THE A.O. AND SUBMITTED THAT LD. CIT(A) HAS DELETED THE DISALLOWANCE SAYING THAT ALL THESE ITEMS WERE CONSUMABLE ITEMS AND HENC E, IS ALLOWABLE U/S 37 OF THE ACT WITHOUT EXAMINING WHETHER THE LOSS WAS GENU INE OR NOT. THEREFORE, DISALLOWANCE MADE BY THE A.O. MAY KINDLY BE CONFIRM ED AND THE ORDER PASSED BY LD. CIT(A) MAY KINDLY BE SET ASIDE. LD. COUNSEL OF THE ASSESSEE, I.T.A. NO.2362/AHD/2011, A. Y. 2004-05 WITH I.T.A. NO.2471/AHD/2011, A. Y. 2004-05 4 ON THE OTHER HAND, RELIED ON THE ORDER OF LD. CIT(A ) AND THE SUBMISSIONS MADE BEFORE HIM. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE RECORD WE FIND THAT DURING THE ASSESSMENT PROCEEDINGS, AFTER PERUS AL OF THE VARIOUS DOCUMENTS SUBMITTED BY THE ASSESSEE BEFORE HIM, THE A.O. FOUND THAT CERTAIN ITEMS WERE AUCTIONED BY THE CUSTOM AUTORITI ES AT MUMBAI AS THE ASSESSEE COULD NOT PAY THE CUSTOM DUTY FOR CLEARING THE CARGO FROM THE PORT. THESE ITEMS WERE U.V. LAMPS, PUNCHING TOOLS AND CUP STOCK PAPER. THE AGGREGATE VALUE OF THESE ITEMS WAS RS.33,67,396/-. THE ASSESSEE CLAIMED IT AS LOSS SUFFERED ALLOWABLE U/S 28 OF THE ACT AS IT WAS A LOSS INCIDENTAL TO THE CARRYING ON THE BUSINESS OF THE ASSESSEE. THE A.O. , DISALLOWED THE LOSS BY HOLDING THAT LOSS ON ACCOUNT OF EMBEZZLEMENT OF CAS H/THEFT CAN ONLY BE ALLOWED AS EXPENDITURE U/S 37 AND THE LOSS OF ASSET S IN TRANSIT CANNOT BE ALLOWED. LD. CIT(A), HOWEVER, DID NOT AGREE WITH T HE A.O. HE WAS OF THE VIEW THAT ALL THE ITEMS WERE CONSUMABLE ITEMS AND W ERE NOT THE ASSETS OF CAPITAL NATURE. U.V. LAMBS ARE ULTRA VIOLET LAMPS AND ARE CLEARLY CONSUMABLE ITEM. THE PUNCHING TOOLS ARE ALSO CONSU MABLE ITEMS AND ARE NOT OF CAPITAL NATURE. SIMILARLY THE THIRD ITEM I. E. CUP STOCK PAPER IS ALSO A RAW MATERIAL FOR PRODUCTION. HE FURTHER FOUND THAT THE A.O. HAD HIMSELF STATED IT TO BE A RAW MATERIAL AND THE BILLS OF LOA DING/IMPORT ALSO CLEARLY SHOW THE NATURE OF THESE ITEMS. LD. CIT(A), THEREF ORE, WAS OF THE VIEW THAT THESE ITEMS WERE CONSUMABLE ITEMS AND THE EXPENDITU RE INCURRED SHOULD BE BOOKED AS REVENUE EXPENDITURE. ACCORDINGLY, THE LO SS ON TRANSIT OR THE LOSS INCURRED BY THE ASSESSEE ON ACCOUNT OF THE AUCTION BY THE CUSTOM AUTHORITIES I.T.A. NO.2362/AHD/2011, A. Y. 2004-05 WITH I.T.A. NO.2471/AHD/2011, A. Y. 2004-05 5 HAS RIGHTLY BEEN BOOKED BY THE ASSESSEE AS A BUSINE SS LOSS U/S 28 OF THE ACT OR ALLOWABLE EXPENDITURE U/S 37 OF THE ACT. WE FIN D NO INFIRMITY IN THIS FINDING OF LD. CIT(A) AND THEREFORE, FEEL NO NEED T O INTERFERE WITH THE ORDER PASSED BY HIM AND THE SAME IS HEREBY UPHELD. THIS GROUND OF THE REVENUE IS DISMISSED. 8. IN THE RESULT, BOTH THE CROSS APPEALS ARE DISMI SSED. ORDER PRONOUNCED IN OPEN COURT ON 09.08.2012 SD/- SD/- (T.R. MEENA) (D.K. TYAGI) ACCOUNTANT MEMBER JUDICIAL MEMBER TRUE COPY N.K. CHAUDHARY, SR. P.S. COPY OF THE ORDER FORWARDED TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS) 5. THE DR, AHMEDABAD 6. THE GUARD FILE BY ORDER AR,ITAT,AHMEDABAD