Atam Manohar Ship Breakers Pvt. Ltd., Bhavnagar V. The Asstt. Commissioner of Income Tax, Circle-1, Bhavnagar

ITA 2480/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8003 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 30-09-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI
• Keywords: Capital expenditure

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH C BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.2480/AHD/2016 / ASSTT. YEAR: 2012-2013 ATAM MANOHAR SHIP BREAKERS P.LTD., D-263, SHREE RAM NAGAR KALIABID, BHAVNAGAR PAN : AABCA 8086 A VS. ACIT, CIR.1 BHAVNAGAR. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI T.P.HEMANI, AR REVENUE BY : SHRI PRASOON KABRA, SR.DR ! / DATE OF HEARING : 22/06/2018 '#$ ! / DATE OF PRONOUNCEMENT: 27 /06/2018 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-6, AHMEDABAD DATED 21.7.2016 PASSED FOR T HE ASSESSMENT YEAR 2012-13. 2. THOUGH THE ASSESSEE HAS TAKEN FIVE GROUNDS OF AP PEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE VIZ. (A) D ISALLOWANCE OF EXPENDITURE AMOUNTING TO RS.10,76,507/- BY TREATING IT AS CAPITAL EXPENDITURE, AND (B) DISALLOWANCE PROFESSIONAL EXPE NDITURE AMOUNTING TO RS.20,000/- BY TREATING THE SAME AS CAPITAL EXPE NDITURE. ITA NO.2480/AHD/2016 2 3. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ELEC TRONICALLY ON 21.9.2012 DECLARING TOTAL INCOME AT RS.1,04,50,245/ -. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT THE ASSESSE E HAS DEBITED A SUM OF RS.10,76,507/- FOR PURCHASE OF WIRE ROPES. SIM ILARLY IT HAS DEBITED A SUM OF RS.20,000/- TOWARDS PAYMENT TO INTERIOR DESI GNER. THE LD.AO TREATED THE PAYMENT IN THE CAPITAL FIELD AND DISALL OWED THEM. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSES SEE. 4. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE LD.REVENUE AUTHORITIES HAVE ERRED IN TREATING B OTH THESE EXPENDITURES AS CAPITAL EXPENDITURE. IT IS PERTINE NT TO OBSERVE THAT THE ASSESSEE IS IN THE BUSINESS OF SHIP BREAKING. IT U SED TO PULL SHIPS AND SCRAPES WITH THE HELP OF CRANES WHERE WIRE ROPES AR E BEING USED. ACCORDING TO THE ASSESSEE THESE ROPES REQUIRED FREQ UENT REPLACEMENT, AND THEREFORE IT HAS TO PURCHASE THEM. REVENUE AUT HORITIES WERE OF THE OPINION THAT SUCH ROPES COULD GIVE ENDURING BENEFIT TO THE ASSESSEE, WHEREAS THE ASSESSEE HAS PLEADED THAT IT HAS TO CHA NGE ROPES WITHIN 40-50 DAYS. THE LD.REVENUE AUTHORITIES FAILED TO A PPRECIATE THAT THESE ROPES ARE ONE OF THE COMPONENTS OF THE CRANE. IT I S NOT AN INDEPENDENT MACHINERY IN ITSELF. WITHOUT REPLACEMENT OF ROPES, CRANE COULD NOT BE USED. THE ASSESSEE HAS NOT BOUGHT ANY MACHINERY RA THER IT HAS JUST GOT THE REPAIR DONE BY REPLACEMENT. THUS, SUCH EXPENSE S OUGHT TO BE TREATED AS IN THE FIELD OF REVENUE. SIMILARLY, IT HAS CARRIED OUT CERTAIN REPAIRS AND R ENOVATION WORK AND FOR THAT IT HAS MADE PAYMENT OF RS.20,000/- FOR EXPERT ADVICE. THE ASSESSEE HAS NOT OBTAINED ANY DESIGN WHICH CAN BE T REATED IN THE CAPITAL FIELD. IT HAS OBTAINED ADVICE FOR RENOVATI ON. THUS, SUCH EXPENDITURE SHOULD NOT BE TREATED AS IN THE FIELD O F CAPITAL EXPENDITURE. ITA NO.2480/AHD/2016 3 WE ALLOW THE APPEAL OF THE ASSESSEE AND DIRECT THE AO TO ALLOW DEDUCTION OF THESE EXPENSES AS REVENUE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 27 TH JUNE, 2018 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED 27/06/2018