Orissa Forest Development Corporation Ltd, Bhubaneswar V. ACIT, Bhubaneswar

ITA 251/CTK/2010

• Counselvise Citation: 25122114 RSA 2010
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2011
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Next Hearing Date: 25-07-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 30-06-2010
• Court: TRIBUNAL
• Department Lawyers: AND AGAINST
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE : HONBLE SHRI K.K.GUPTA, ACCOUNTANT MEMBER, AND HONBLE SHRI K.S.S.PRASAD RAO, JUDICIAL MEMBER. ITA NO.251/CTK/2010 (ASSESSMENT YEAR 2006 - 07) ITA NO.267/CTK/2010 AND C.O.NO.24/CTK/ 2010 (FILED BY ASSESSEE) ORISSA FOREST DEVELOPMENT CORPORATION LTD., A/84,KHARAVEL NAGAR,BHUBANESWAR PAN: AACO 2573 M .. APPELLANT - VERSUS - ACIT,CIRCLE 1(1), BHUBANESWAR. .. RESPONDENT ACIT , CIRCLE 1(1), BHUBANESWAR. .. APPELLANT - VERSUS - ORISSA FOREST DEVELOPMENT CORPORATION LTD., A/84,KHARAVEL NAGAR,BHUBANESWAR PAN: AACO 2573 M .. RESPONDENT FOR THE ASSESSEE : SHRI B.K .MOHAPATRA, AR FOR THE DEPARTMENT : SMT.PARAMITA TRIPATHY, DR ORDER SHRI K.K.GUPTA, ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND BY THE REVENUE AGAINST THE ORDER DT.26.4.2010 OF THE COMMISSIONER OF INCOME - TAX (APPEALS) FOR THE ASSESSMENT YEAR 2006 - 07. THE ASSESSEE HAS ALSO FILED CROSS OBJECTION O N THE APPEAL FILED BY THE REVENUE. 2. FIRST WE TAKE UP THE APPEAL OF THE REVENUE AND THE CROSS OBJECTION FILED THEREIN BY THE ASSESSEE. 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF 1,47,38,971 MADE BY THE AO ON ACCOUNT OF CONSTRUCTION OF KENDU LEAF GODOWNS TREATING IT AS REVENUE EXPENDITURE INSTEAD OF CAPITAL EXPENDITURE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS NOT JUSTIFIED IN DELETING THE ADDITION OF 1,71,25,216 MADE BY THE AO ON ACCOUNT OF PLANTATION EXPENSES TREATING IT AS REVENUE NATURE . ITA NO.251/CTK/2010 ITA NO.267/CTK/2010 AND C.O.NO.24/CTK /2010 2 4. AFTER HEARING BOTH THE PARTIES AND PERUSING THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THE ASSESSING OFFICER HAD MADE THE ADDITION OF 1, 47,38,971 ON ACCOUNT OF CONSTRUCTION OF KENDU LEAF GODOWNS TREATING IT AS REVENUE EXPENDITURE . THE LEARNED CIT(A) HAS DELETED THE SAID ADDITION RELYING ON THE DECISION OF THE ITAT, CUTTACK BENCH VIDE CONSOLIDATED ORDER DT.30.4.2001 IN ASSESSEES OWN CASE I N ITA NOS.7 TO 19/CTK/2001 FOR THE AYS 1980 - 81 TO 1991 - 92. WE FIND THAT THE UNDISPUTED FATS ARE THAT SUCH EXPENDITURE IS A CONTINUING ONE FROM YEAR TO YEAR AND THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL RELIED ON BY THE LEARNED CIT(A) AND ALSO BY THE DECISION OF THE ITAT, CUTTACK BENCH VIDE CONSOLIDATED ORDER DT.27.5.2011 IN THE CASE OF THE ASSESSEE FOR THE ASSESSMENT YEARS 1993 - 94, 2000 - 01, 2003 - 04, 2004 - 05 AND 2007 - 08 IN ITA NOS. 16 /CTK/2010 AND OTHERS. THEREFORE, T HE ORDER OF THE LEARNED CIT(A) IN DELETING THE IMPUGNED ADDITION MADE ON ACCOUNT OF CONSTRUCTION OF KENDU LEAF GODOWNS FINDS FAVOUR WITH THE DECISION OF THE TRIBUNAL. IN VIEW OF THIS, HAVING FOUND NO INFIRMITY IN THE SAID ORDER, WE UPHOLD THE SAME AND DISM ISS THE GROUND OF THE REVENUE RAISED AND ALLOW THE C.O. FILED BY THE ASSESSEE ON THIS ISSUE. 5. THE NEXT ISSUE RAISED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(A) IN DELETING THE ADDITION OF 1,71,25,216 MADE BY THE ASSESSING OFFICER ON ACCOUN T OF PLANTATION EXPENSES. AFTER HEARING BOTH THE PARTIES AND PERUSING THE IMPUGNED ORDERS OF THE AUTHORITIES BELOW, WE FIND THAT THIS IS ALSO A CONTINUING ISSUE AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT, CUTTACK BENCH IN THEIR CONSOLIDATED ORDER DT.30.4.2001 IN ASSESSEES OWN CASE IN ITA NOS.7 TO 19/CTK/2001 FOR THE AYS 1980 - 81 TO 1991 - 92, WHICH HAS ALSO BEEN FOLLOWED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS 2003 - 04, 2004 - 05 AND 2007 - 08 VIDE CONSOLIDATED ORDER DT.27.5 .2011 IN ITA NOS.16/CTK/2010 & OTHERS, WHEREIN THE TRIBUNAL HAS HELD THESE EXPENSES ARE NOT ONLY THE EXPENSES LAID OUT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, BUT ALSO ARE NON - AGRICULTURAL AS WELL AS REVENUE IN NATURE. IN VI EW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE LEARNED CIT(A) DELETING THE IMPUGNED ADDITION OF 1,71,25,216. WE, THEREFORE CONFIRM THE SAME AND DISMISS THE GROUND RAISED BY THE REVENUE ON THIS ISSUE AND ALLOW THE CROSS OBJECTION FILED BY THE ASSESSEE SUPPORTING THE IMPUGNED ORDER OF THE LEARNED CIT(A). ITA NO.251/CTK/2010 ITA NO.267/CTK/2010 AND C.O.NO.24/CTK /2010 3 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED AND THE CROSS OBJECTION FILED BY THE ASSESSEE SUPPORTING THE IMPUGNED ORDER OF THE LEARNED CIT(A) IS ALLOWED. 7. NOW ADVERTING TO THE APPEAL OF THE ASSESSEE, WE FIND THAT THE ASSESSEE IS IN APPEAL ON THE SOLITARY ISSUE AS REGARDS TO THE CLAIM O F EXPENSES UNDER THE HEAD PRIOR PERIOD ADJUSTMENT AMOUNTING TO 5.20 CRORES HAS BEEN ADJUDICATED UPON BY THE TRIBUNAL IN THE EARLIER YEARS ON THE FACTS FINDING OF THE LEARNED CIT(A) THAT 4.63,98,000 ARE NOT TO BE ALLOWED AS DEARNESS ALLOWANCE NOTED BY HIM MADE IN THE IMPUGNED ASSESSMENT YEAR AS A PORTION COULD NOT SA ID TO BE PRIOR PERIOD ADJUSTMENT INSOFAR AS THE EMPLOYEES HAD NOT RECEIVED THE SAME IN THE YEARS WHEN THE DEARNESS ALLOWANCE WAS TO BE GRANTED. THE LEARNED CIT(A) HAS CATEGORICALLY NOTED THAT THE STATE GOVERNMENT SANCTIONED THE DEARNESS ALLOWANCE WAS THERE FORE TO BE ALLOWED IN THE YEAR WHICH IT PERTAIN S HAS TO BE VERIFIED BY THE ASSESSING OFFICER IN THE LIGHT OF THE FACT THAT THE EXPENDITURE IN THE HANDS OF THE ASSESSEE COULD NOT HAVE BEEN CLAIMED AS INCOME IN THE HANDS OF THE INDIVIDUAL EMPLOYEE AS A MATT ER OF RIGHT. SIMILARLY THE ASSESSEE HAS NOT APPEALED AGAINST DISALLOWANCE OF DEDUCTION FOR THE PROVISION OF GRATUITY AMOUNTING TO 1,96,01,902 HAS TO BE DISALLOWED AS SUSTAINED BY THE LEARNED CIT(A). BUT THE OTHER EXPENSES BEING DIVISION - WISE EXPENDITURE AMOUNTING TO 56,71,401 REQUIRES CONSIDERATION IN VIEW OF THE LEARNED COUNSEL FILING A PAPER BOOK WHICH PRIOR PERIOD EXPENSES HAVE NOT BEEN VERIFIED WHETHER THEY CRYSTALLIZED IN THE EARLIER YEARS AND WERE NOT TO BE CLAIMED OR HAVE NOT BEEN CLAIMED IS TO BE VERIFIED BY THE ASSESSING OFFICER. THIS EXERCISE THEREFORE IS RESTORED TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT OF THE ISSUE COVERED BY THE EARLIER DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE WHEN THE PRIOR PERIOD EXPENSES WERE CONSIDERED T O BE ALLOWABLE BY THE ASSESSING OFFICER AFTER DUE VERIFICATION. THE LEARNED DR INSISTING ON THE ADMINISTRATIVE INEFFICIENCY NOT BROUGHT ON RECORD HAS NO BEARING TO THE FACT THAT THE BELATED CLAIM OF THE EXPENSES HAS TO BE GIVEN A NAME IN COMPLIANCE TO THE PROVISIONS OF COMPANIES ACT,1956.THE AUDITORS CERTIFIED THE PROFIT AS TRUE AND FAIR AND NOT TRUE AND CORRECT IN THE MERCANTILE SY STEM OF ACCOUNTING PURELY ON THE BASIS THAT THE EXPENSES MAY BE PERTAINING TO THE EARLIER YEARS BUT NOW WERE PROVIDED FOR EITH ER AS CONTINGENT LIABILITY IN VIEW OF THE FACT THAT A CLAIM HAD NOT BEEN MADE FOR HAVING INCURRED ITA NO.251/CTK/2010 ITA NO.267/CTK/2010 AND C.O.NO.24/CTK /2010 4 SUCH EXPENSES. THIS ISSUE, THEREFORE, IS ALSO RESTORED TO THE FILE OF THE ASSESSING OFFICER TO BE ADJUDICATED UPON BY THE ASSESSING OFFICER IN THE LIGHT OF TH E FACTS DEALT WITH BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS (SUPRA). 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 9. TO SUM UP ITA NO.267/CTK/2010 FILED BY THE REVENUE IS DISMISSED AND C.O. NO.24 /CTK/2010 FILED BY THE ASSESSEE IS ALLOWED, AND ITA NO.251/CTK/2010 FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN OPEN COURT ON DT. 5 TH AUGUST, 2011 S D/ - S D/ - (K.S.S.PRASAD RAO) JUDICIAL MEMBER (K.K.GUPTA) ACCOU NTANT MEMBER DATE: 5 TH AUGUST, 2011 H.K.PADHEE, SENIOR PRIVATE SECRETARY. COPY OF THE ORDER FORWARDED TO : 1. THE A SSESSEE : ORISSA FOREST DEVELOPMENT CORPORATION LTD., A/84,KHARAVEL NAGAR,BHUBANESWAR 2. THE DEPARTMENT : ACIT, CIRCLE 1(1), BHUBANESW AR. 3. THE CIT, 4. THE CIT(A), 5. THE DR, CUTTACK 6. GUARD FILE (IN DUPLICATE) TRUE COPY, BY ORDER, SENIOR PRIVATE SECRETARY.