The DCITCicle-8, Ahmedabad V. M/s. Sarjan Realities Limited, Ahmedabad

ITA 2579/AHD/2012

• Counselvise Citation: 257920514 RSA 2012
• Duration Of Justice: 1 year(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 30-10-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 09-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID
• Keywords: Depreciation

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.2579/AHD/2012 [ASSTT.YEAR : 2009-2010] DCIT, CIR.8 AHMEDABAD. /VS. M/S.SARJAN REALITIES LTD. SUZLON HOUSE, 5, SHRIMALI SOCIETY NAVRANGPURA, AHMEDABAD 380009. PAN : AAACE 3472 H ( (( ('( '( '( '( / APPELLANT) ( (( ()*'( )*'( )*'( )*'( / RESPONDENT) + , - / REVENUE BY : SHRI J.P. JHANGID, SR.DR /$ , - / ASSESSEE BY : SHRI TUSHAR HEMANI '0 , $1/ DATE OF HEARING : 30 TH OCTOBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 15.11.2013 5 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A )-XIV, AHMEDABAD DATED 8.8.2012. 2. IN GROUND NO.1 OF THE APPEAL, THE GRIEVANCE OF T HE REVENUE IS THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF ` 1,22,13,280/- MADE U/S.40A(2)(B) OF THE ACT. ITA NO.2579/AHD/2012 -2- 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE AO OBSERVED THAT THE ASSESSEE HAS PAID INTEREST AT THE RATE OF 10% ON LOAN TAKEN FROM SUBH REALITY (S) P. LTD. OF ` 4,54,520/-, INTEREST OF ` 15,59,589/- @ 10% ON LOAN TAKEN FROM SANGITA V. TANTI, INTEREST OF ` 15,59,589/- @ 10% ON LOAN TAKEN FROM GITA T. TANTI, INTEREST OF ` 15,59,589/- @ 10% ON LOAN TAKEN FROM LINA J. TANTI AND INTEREST OF ` 15,59,589/- @ 10% LOAN TAKEN FROM RADHA G. TANTI, WHEREAS THE ASSESSE E HAS PAID INTEREST OF ` 14,82,181/- AT THE RATE OF 12% ON THE LOAN TAKEN F ROM SE ENERGY PARK LTD., INTEREST OF ` 4,51,72,603/- @ 12% ON LOAN TAKEN FROM SUZLON INF. SERVICE LTD. AND INTEREST OF ` 2,66,24,899/- @ 12% ON LOAN TAKEN FROM SUZLON ENERG Y LTD. SINCE THE ASSESSEE COULD NOT FURNISH JUSTIFICATION WITH REGARD TO REASONABLENESS OF THE INTEREST PAYMENT AT THE RATE OF 12% TO THE RELATED PARTIES, THE AO DISALLOWED THE DIFFERENCE A MOUNT OF INTEREST AT THE RATE OF 2% HIGHER PAID BY THE ASSES SEE TO THE RELATED PARTIES, AND THEREBY MADE DISALLOWANCE OF ` 1,22,13,280/-. 4. ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESSE E CONTENDED THAT VIDE LETTER DATED 26.7.2011, THAT TH E ASSESSEE HAD SUBMITTED BEFORE THE AO THAT THE ASSESSEE HAS ALSO PAID INTEREST AT THE RATE OF 15% TO SMT.RAJULBEN K. GOSWAMI, WHEREAS THE INTEREST PAID TO THE IMPUGNED PARTIES WAS AT THE RA TE OF 12%, AND THEREFORE, THERE IS NO EXCESSIVE OR UNREASONABLE RA TE OF INTEREST ITA NO.2579/AHD/2012 -3- PAID TO THE IMPUGNED PARTIES, WHICH COULD ATTRACT T HE DISALLOWANCE UNDER SECTION 40A(2)(B) OF THE ACT. I T WAS ALSO SUBMITTED THAT IN THE INCOME TAX ACT, UNDER THE PRO VISIONS OF SECTION 40A(B)(IV) OF THE ACT, INTEREST PAID AT THE RATE OF 12% TO PARTNERS IS ALLOWABLE AND INTEREST PAID IN EXCESS O F 12% TO THE PARTNERS IS NOT ALLOWABLE. THE ASSESSEE ALSO RELIE D ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ACIT VS.RAJ STEEL IN DUSTRIES, IN ITA NO.2245/AHD/2010 AND IN THE CASE OF VIPUL Y. ME HTA VS. ACIT, ITA NO.869/AHD/2010 WHEREIN THE TRIBUNAL HAD ACCEPTED PAYMENT OF INTEREST AT THE RATE OF 18% TO 24% AS RE ASONABLE AND NOT EXCESSIVE. THEREFORE, IT WAS PLEADED THAT THE ADDITION MADE WAS REQUIRED TO BE DELETED. 5. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISS IONS MADE BY THE ASSESSEE FOUND FORCE IN THE SUBMISSION OF THE ASSESSEE THAT THE INTEREST AT THE RATE OF 12% WAS A LSO TAKEN AS REASONABLE IN THE INCOME TAX ACT UNDER THE PROVISIO NS OF SECTION 40A(B)(IV) FOR THE PURPOSE OF CALCULATING INTEREST TO THE PARTNERS. THE CIT(A) ALSO FOLLOWED THE DECISION OF THE TRIBUN AL IN THE CASE OF ACIT VS. M/S.RAJ STEEL INDUSTRIES AND VIPUL Y. M EHTA VS. ACIT (SUPRA) WHERE THE RATE OF INTEREST AT 18% TO 2 4% WAS CONSIDERED TO BE REASONABLE AND DELETED THE DISALLO WANCE OF ` 1,22,13,280/-. ITA NO.2579/AHD/2012 -4- 6. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF THE AO, WHEREAS THE LEARNED AR OF THE ASSESSEE FULLY JUSTIF IED THE ORDER OF THE CIT(A). 7. WE FIND THAT THE LEARNED DR COULD NOT POINT OUT ANY SPECIFIC ERROR IN THE ORDER OF THE LEARNED CIT(A). WE FIND NO ERROR IN THE ORDER OF THE LEARNED CIT(A) AND IN OUR CONSIDERED OPINION, SECTION 40A(2)(B) EMPOWERS THE AO TO DISAL LOW EXPENDITURE PAID TO RELATED PARTIES ONLY, WHEN SUCH PAYMENT IS FOUND IN EXCESS OF THE MARKET RATE. IN OUR CONSIDE RED VIEW, THE LEARNED CIT(A) WAS JUSTIFIED IN HOLDING THAT THE RA TE OF INTEREST OF 12% CANNOT BE SAID TO BE UNREASONABLE OR EXCESSIVE KEEPING IN VIEW THE MARKET RATE AND THE RATE OF INTEREST PRESC RIBED UNDER THE INCOME TAX ACT ITSELF. WE, THEREFORE, CONFIRM THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE GROUND OF THE APPEAL OF THE REVENUE. 8. IN GROUND NO.2, THE GRIEVANCE OF THE REVENUE IS THAT THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF DEPRECIATION OF ` 19,02,138/- MADE ON MET MASTS. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND MATERIAL AVAILABLE ON REC ORD. IN THE INSTANT CASE, THE AO OBSERVED THAT THE ASSESSEE HAS INSTALLED 16 MET MASTS UPTO THE PERIOD OF FEBRUARY, 2009. THE A O ACCEPTED MET MASTS COMMISSIONED UPTO THE PERIOD FEBRUARY, 20 09 AND ALLOWED THE CLAIM OF DEPRECIATION TO THE ASSESSEE, BUT, HE DID NOT ITA NO.2579/AHD/2012 -5- ACCEPT THE COMMISSIONING OF 18 MET MASTS AMOUNTING TO ` 2,53,61,713/- IN THE MONTH OF MARCH, 2009 AND DISAL LOWED THE CLAIM OF DEPRECIATION AT ` 19,02,128/- THEREON FOR THE REASONS THAT THE ASSESSEE COULD PRODUCE EVIDENCE FOR INSTALLATIO N, COMMENCEMENT AND PUT TO USE IN THE MONTH OF MARCH, 2009. 10. ON APPEAL BEFORE THE LEARNED CIT(A), THE ASSESS EE SUBMITTED THAT IT WAS EXPLAINED TO THE AO THAT PLAN T & MACHINERY MAINLY INCLUDED MET MASTS WHICH IS ASSEMBLED IN-HOU SE WITH COMPONENT PURCHASED. THE ASSESSEE ALSO FURNISHED COPY OF THE CERTIFICATE OF MET MASTS COMMISSIONED DURING THE YE AR UNDER CONSIDERATION OF DGM WIND RESOURCES PLACED AT PAGE 89 OF THE PAPER BOOK. THE AO ACCEPTED THE COMMISSIONING OF T HE MET MASTS TILL THE PERIOD FEBRUARY, 2009, BUT, WAS OF T HE VIEW THAT THE MET MASTS AMOUNTING TO ` 2,53,61,713/- HAVE NOT BEEN PUT TO USE IN THE MONTH OF MARCH, 2009, ON WHICH THE ASSESSEE HAS CLAIMED DEPRECIATION OF ` 19,02,128/-, AND THEREFORE, DISALLOWED THE SAME. IT WAS ARGUED THAT THE AO HAD NO OBJECTION AND HAS ACCEPTED THE COMMISSIONING OF MET MASTS UPTO THE PERIOD FEBRUARY , 2009 AND HAS ALSO ACCEPTED THE EVIDENCE PLACED ON RECORD TO PROVE/ESTABLISH THAT MET MASTS HAVE BEEN INSTALLED AND COMMISSIONED AND PUT TO USE. THE AO HAVING ACCEPTE D THE SIMILAR KIND OF EVIDENCES FOR THE INSTALLATION OF 1 6 MET MASTS UPTO THE PERIOD FEBRUARY, 2009 CANNOT DISREGARD THE SAME KIND OF EVIDENCES IN THE MONTH OF MARCH, 2009 FOR COMMISSIO NING OF 18 MET MASTS AND DISALLOWING THE CLAIM OF DEPRECIATION THEREON. ITA NO.2579/AHD/2012 -6- THE AO CANNOT TAKE CONTRARY VIEW MERELY FOR THE REA SON THAT MET MASTS WAS INSTALLED/COMMISSIONED AND PUT TO USE IN THE MONTH OF MARCH, 2009 AND CAUSE INJUSTICE TO THE ASSESSEE. 11. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMIS SIONS OF THE ASSESSEE OBSERVED THAT THE AO HAS NOT DOUBTED T HAT MET MASTS HAVE IN FACT BEEN INSTALLED, BUT HAS ONLY DOU BTED THE FACT THAT THE SAME HAS BEEN PUT TO USE IN THE MONTH OF M ARCH, 2009. HE FURTHER OBSERVED THAT THE ASSESSEE HAS FURNISHED INSTALLATION CERTIFICATE FROM THE DGM, WIND MILL RESOURCES OF TH E COMPANY, COPY PLACED AT PAGE NO.89 WHO HAD SUPERVISED THE IN STALLATION OF MASTS. THE MET MASTS ARE CONSTRUCTED BY THE ASSESS EE BY DOING CIVIL WORK AND SOME ERECTION AND THE SAME HAS BEEN DONE BY UTILIZING IN-HOUSE RESOURCES. THE COST HAS BEEN W ORKED OUT BY THE ASSESSEE BY CAPITALIZING THE COST OF THE COMPON ENT UTILIZED. THE AO HAS NOT POINTED OUT ANY CONTRARY FACT TO SHO W THAT THE MET MASTS WERE NOT PUT TO USE IN THE MONTH OF MARCH , 2009 AS CLAIMED BY THE ASSESSEE, WHEREAS, HE HAS ACCEPTED S IMILAR EVIDENCE FOR THE MET MASTS ERECTED UPTO THE PERIOD OF FEBRUARY, 2009. HE, THEREFORE, HELD THAT THE ACTION OF THE AO IN DISALLOWING THE DEPRECIATION, ON THE BASIS OF THE P RESUMPTION WAS NOT JUSTIFIED, AND DIRECTED HIM TO DISALLOWING DEPR ECATION CLAIMED BY THE ASSESSEE ON MET MASTS, CONSIDERING THE SAME HAVE BEEN PUT TO USE IN THE MONTH OF MARCH, 2009. ITA NO.2579/AHD/2012 -7- 12. THE LEARNED DR RELIED ON THE ORDER OF THE AO, W HEREAS, THE LEARNED AR OF THE ASSESSEE SUPPORTED THE ORDER OF T HE CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE HAS ALSO RELIE D ON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. SHAHABAD CO-OP. SUGAR MILLS LTD., (2011) 10 TAXMANN.COM 84 (P&H) WHERE THE HONBLE HIGH COURT H ELD THAT THE ASSESSEE WAS ENTITLED TO FREE PLAY IN JOINTS IN TAKING A DECISION TO INSTALL THE MACHINERY, IF IN ITS VIEW THE SAME W AS NECESSARY FOR ITS BUSINESS. IF THE ASSESSEE WAS TO INSTALL SUCH MACHINERY ON ITS BONA FIDE BUSINESS CONSIDERATION, MERE ABSENCE OF P ROOF OF ACTUAL USE THEREOF WAS NOT ENOUGH TO DENY THE CLAIM FOR DE PRECIATION. ACCORDINGLY, WE DO NOT FIND ANY GROUND TO INTERFERE WITH THE FINDING OF THE TRIBUNAL, HOLDING THAT THE ASSESSEE WAS ENTITLED TO DEPRECIATION ON THE MACHINERY, AS CLAIMED. 13. WE FIND THAT THE NO SPECIFIC ERROR IN THE ORDER OF THE LEARNED CIT(A) COULD BE POINTED OUT BY THE LEARNED DR DURIN G THE COURSE OF HEARING. WE FIND THAT THE LEARNED DR HAS NOT DI SPUTED THE FINDING OF THE LEARNED CIT(A) THAT PUT TO USE OF 18 MET MASTS IN QUESTION WERE SUPPORTED BY THE CERTIFICATE OF DGM W IND MILL RESOURCES OF THE COMPANY, WHO SUPERVISED INSTALLATI ON AND COMMISSIONING OF THE MET MASTS AND THE EVIDENCES WE RE ALSO FILED BEFORE THE AO. FURTHER, IT IS OBSERVED THAT THE REVENUE COULD NOT DISPUTE THE FINDING OF THE LEARNED CIT(A) THAT SIMILAR EVIDENCE PRODUCED BY THE ASSESSEE FOR MET MASTS PUT TO USE UPTO FEBRUARY, 2009 WAS ACCEPTED BY THE AO AS EVIDENCE F OR DATE OF ITA NO.2579/AHD/2012 -8- PUT TO USE OF MET MASTS. WE FIND THAT NO ERROR OR DISCREPANCY IN THE SAID CERTIFICATE EVIDENCING THAT 18 MET MASTS W ERE PUT TO USE BY THE ASSESSEE IN THE MONTH OF MARCH, 2009 COULD B E BROUGHT ON RECORD BY THE AO. IN THE ABSENCE OF THE SAME, WE A GREE WITH THE FINDING OF THE LEARNED CIT(A) THAT DISALLOWANCE OF DEPRECIATION IN RESPECT OF 18 MET MASTS BY THE AO WAS MERELY ON THE BASIS OF THE SUSPICION, AND THEREFORE, NOT SUSTAINABLE. WE, THEREFORE, CONFIRM THE ORDER OF THE LEARNED CIT(A) ON THIS ISS UE AND DISMISS THE GROUND OF THE APPEAL OF THE REVENUE. 14. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( ' #$ ' #$ ' #$ ' #$ /KUL BHARAT /JUDICIAL MEMBER . .. . . . . . /N.S. SAINI /ACCOUNTANT MEMBER C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD