The ITO, Ward-1(2), Ahmedabad V. Besto Tradelink Pvt. Ltd., Ahmedabad

ITA 2652/AHD/2011

• Counselvise Citation: 265220514 RSA 2011
• Duration Of Justice: 3 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-05-2015
• Assessment Year: 2001-2002
• Appeal Filed On: 21-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MK SINGH
• Assessee Lawyers: G C PIPARA
• Keywords: Capital asset; Depreciation; Wrong claim
• Section: 40A(3); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE S/SHRI G. D. AGARWAL, VP & S. S. GODARA. J M ITA NO. 2652/AHD/2011 ASST. YEAR 2001-02 INCOME-TAX OFFICER, WARD-1(2), AHMEDABAD. VS M/S BESTO TRADELINK (P) LTD., 9 TH FLOOR, B.D. PATEL HOUSE, NARANPURA ROAD, AHMEDABAD. (APPELLANT) (RESPONDENT) PA NO.AAACB6241P APPELLANT BY SHRI M. K. SINGH, SR. DR RESPONDENT BY SHRI G. C. PIPARA, AR DATE OF HEARING: 20/5/2015 DATE OF PRONOUNCEMENT: 9/6/15 O R D E R PER S. S. GODARA, JUDICIAL MEMBER. THIS REVENUES APPEAL FOR ASSESSMENT YEAR 2001-02 A RISES FROM ORDER OF THE CIT(A) -6 AHMEDABAD DATED 10.8.2011 IN APPEAL NO.CIT(A)- VI/DCIT(OSD)R.1/16/10-11, IN PROCEEDINGS UNDER SECT ION 271(1)(C) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE REVENUES PLEADING IN THE PRESENT APPEAL SEE K TO RESTORE SECTION 271(1)(C) ARISING FROM DISALLOWANCES ON ASSESSEES WIND MILLS AMOUNTING TO ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 2 RS.2.40 CRORES, INTEREST AMOUNT OF RS.60,892/- ON ACCOUNT OF INTEREST BEARING FUNDS UTILISED IN INTEREST FREE ADVANCES AND THE ON E MADE UNDER SECTION 40A(3) OF RS.1,72,780/- @ 20% OF THE CASH PAYMENT AMOUNTIN G TO RS.8,63,903/-; RESPECTIVELY. THE REVENUE STRONGLY ARGUES IN SUPPORT OF THE IMPU GNED PENALTY ARISING FROM THE AFORESAID DISALLOWANCES AND PRAYS FOR ACCE PTANCE OF ITS APPEAL. THE ASSESSEE SUPPORTS THE CIT(A)S ORDER. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA D CLAIMED DEPRECIATION RELIEF ON WIND MILLS OF RS.2.40 CRORES. IT WOULD AL SO CLAIM DEDUCTION OF INTEREST PAYMENT AMOUNTING TO RS.60,892/- TOWARDS UNSECURED LOANS AND FREIGHT PAYMENT IN CASH OF RS.8,63,903/-. THE ASSESSING OFFICER FOU ND THAT THE ASSESSEE HAD NOT BECOME OWNER OF THE WINDMILLS IN QUESTION SO AS TO CLAIM DEPRECIATION RELIEF. AND THAT IT HAD ADVANCED INTEREST BEARING LOANS WITHOUT CHARGING ANY INTEREST. HE ALSO FOUND THAT ITS FREIGHT PAYMENTS MADE IN CASH VIOLAT ED SECTION 40A(3) OF THE ACT. THIS MADE HIM TO DISALLOW ALL THE THREE CLAIMS IN A SSESSMENT ORDER DATED 18.3.2004. HE ALSO INITIATED PENALTY PROCEEDINGS AG AINST THE ASSESSEE UNDER SECTION 271(1)(C) OF THE ACT. THERE IS NO DISPUTE T HAT THE ASSESSEES APPEAL AGAINST ALL THESE THREE DISALLOWANCES STANDS REJECT ED UPTO THE TRIBUNAL. 4. THE ASSESSING OFFICER TOOK UP PENALTY PROCEEDING S. HE INTER ALIA HELD IN PENALTY ORDER DATED 29.3.2010 THAT THE ASSESSEE HAD NOT DISCLOSED ABOUT THE ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 3 VITAL FACT QUA ITS WINDMILLS IN CLAIMING DEPRECIATI ON, IT WAS FULLY AWARE THAT THE IMPUGNED INTEREST ON UNSECURED LOANS WAS NOT ALLOWA BLE AND THAT ITS FREIGHT PAYMENTS (SUPRA) INVITED SECTION 40A(3) OF THE ACT. HE TREATED THE ASSESSEES CASE AS THAT OF FURNISHING OF INACCURATE PARTICULAR S OF INCOME AND IMPOSED MINIMUM PENALTY OF RS.95,86,108/-. THE CASE FILE RE VEALS THAT THIS PENALTY ALSO INCLUDED ANOTHER DISALLOWANCE OF CAPITAL EXPENDITUR E OF RS.4,275/-. 5. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) HAS ACCEPTED THE ASSESSEES CONTENTIONS QUA THE THREE ISSUES AS UNDE R : 2.3 I HAVE CONSIDERED THE FACTS OF THE CASE, PENA LTY ORDER AND APPELLANT'S SUBMISSION. ASSESSING OFFICER LEVIED PENALTY ON THE ADDITIONS CONFIRMED IN APPEAL AS MENTIONED IN THE PENALTY ORDER REFERRED E ARLIER. THE MAJOR ADDITION ON WHICH PENALTY WAS LEVIED IS CLAIM OF DEPRECIATIO N ON WINDMILL. THE SAID WINDMILL WAS NOT TRANSFERRED IN THE NAME OF THE APP ELLANT AND THEREFORE OWNERSHIP WAS NOT PROVED AND ACCORDINGLY IT IS HELD THAT SINCE APPELLANT IS NOT THE OWNER OF WINDMILL, DEPRECIATION CANNOT B E CLAIMED. HOWEVER IT IS NOT IN DISPUTE THAT APPELLANT PURCHASED WINDMILL BY ENTERING INTO A MOD AND ALSO MADE THE PAYMENT OF PURCHASE CONSIDERA TION. THE PROCEEDS OF ELECTRICITY GENERATED THROUGH THIS WIND MILL WERE ALSO OFFERED AS INCOME BY THE APPELLANT. ALL THESE DOCUMENTS ALONG WITH THE DOCUMENTS SUBMITTED BY THE APPELLANT FOR TRANSFERRI NG THE WINDMILL IN ITS NAME WERE SUBMITTED. IT IS CLEAR THAT EXCEPT THE TRANSFE R OF WINDMILL IN THE NAME OF APPELLANT, ALL OTHER PROCEDURES AND PAPERWORK WERE COMPLETED. APPELLANT CLAIMED DEPRECIATION ON THE WINDMILL BY TREATING IT SELF BENEFICIAL OWNER OF THE WINDMILL. SEVERAL DECISIONS ALLOWED CLAIM OF DEPREC IATION IN CASE OF BENEFICIAL OWNERSHIP INCLUDING APEX COURT DECISION IN THE CASE OF MYSORE MINERALS LTD. HOWEVER REQUIREMENT OF TRANSFER WAS THERE AS PER MO U IN THIS CASE, THE TRANSFER COULD NOT GET COMPLETED AND NEXT YEA R IT WAS REVERSED. HOWEVER FOLLOWING DOCUMENTS CLEARLY PROVE THE BONA FIDES OF THE APPEL LANT IN CLAIMING DEPRECIATION ON WINDMILL- 1- PURCHASE BILLS IN RESPECT OF WINDMILL 2- BANK STATEMENT REFLECTING PAYMENT IN RESPECT OF WINDMILL PURCHASED 3- AUDITED ACCOUNTS OF THE SELLER REFLECTING SALE O F WINDMILL TO THE APPELLANT. ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 4 4- ACCOUNT IN RESPECT OF WINDMILL REFLECTING INC OME GENERATED FROM WINDMILL. CONSIDERING THE ABOVE, BOTH APPELLANT AND THE SELLE R OF WINDMILL HAD GIVEN THE SIMILAR TREATMENT TO THE TRANSACTION. CLAIM OF DEPR ECIATION IS CONSEQUENTIAL TO THIS TRANSACTION. SINCE SEVERAL JUDICIAL DECISIONS SUPPORTED THE VIEW OF CLAIM OF DEPRECIATION IN CASE OF BENEFICIAL OWNERSHIP, AP PELLANT'S CLAIM IS HELD TO BE BONAFIDE. THE DISALLOWANCE OF DEPRECIATION IS CONFI RMED ONLY BECAUSE THE WINDMILL COULD NOT BE TRANSFERRED IN THE NAME OF AP PELLANT. THIS CANNOT MAKE THE CLAIM FALSE OR INACCURATE. WHEN THERE ARE DECIS IONS TO SUPPORT APPELLANT'S CLAIM, SUCH CLAIM WILL NOT BE LIABLE FOR PENALTY OF CONCEALMENT OF INCOME. THE DECISIONS RELIED UPON BY THE APPELLANT AND REFERRED EARLIER ARE RELEVANT. THE SAME ARE NOT REPEATED HERE HOWEVER THESE SUPPORT TH E APPELLANT'S ARGUMENT THAT CONFIRMATION OF ADDITION OR REJECTION OF ANY C LAIM WILL NOT AUTOMATICALLY RESULT IN LEVY OF PENALTY. AO HAS TO FIND OUT WHAT INACCURATE PARTICULARS WERE FURNISHED BY THE APPELLANT. ASSESSING OFFICER ONLY MENTIONED THAT THE TERMS OF MOD WERE NOT FULFILLED STILL THE DEPRECIATION WAS C LAIMED BY THE APPELLANT. WHEN THE MATTER REGARDING TRANSFER OF NAME IS PENDI NG, APPELLANT CANNOT REVERSE THE TRANSACTION IN ITS BOOKS EVEN AFTER CO MPLETION OF THREE MONTHS AS MENTIONED IN MOU. WHEN INCOME AS A RESULT OF THIS T RANSACTION HAS BEEN OFFERED FOR TAXATION, PAYMENT HAS BEEN MADE, THE DE PRECIATION CLAIMED ON SUCH TRANSACTION CANNOT BE CONSIDERED FALSE OR INAC CURATE. CONSIDERING THE FACT THAT SEVERAL JUDICIAL DECISIONS ALLOWED DEPREC IATION EVEN IN CASE OF BENEFICIAL OWNERSHIP, APPELLANT CANNOT BE FOUND FAU LT WITH CLAIM OF DEPRECIATION ON WINDMILL FOR WHICH IT HAS MADE PAYM ENT AND RECEIVED INCOME. THE RECENT DECISIONS OF SUPREME COURT RELIED UPON B Y THE APPELLANT SUPPORTS THE VIEW OF THE APPELLANT THAT MERE REJECTION OF CL AIM CANNOT ATTRACT PENALTY. IN VIEW OF THIS THE PENALTY LEVIED ON THE REJECTION OF CLAIM OF DEPRECIATION IS NOT UPHELD. AS REGARDS LEVY OF PENALTY ON DISALLOWANCE UNDER SE CTION 40A (3), APPELLANT SUBMITTED THAT THIS GROUND WAS NOT PRESSED BEFORE I TAT IN QUANTUM APPEAL HOWEVER THE PAYMENT WAS GENUINELY MADE TOWARDS FREI GHT CHARGES. THE DISALLOWANCE IS ESTIMATED AT THE RATE OF 20% AS PER THE PROVISIONS OF SECTION 40 A (3). APPELLANT CLAIMED THAT THE PAYMENT WAS CO VERED UNDER RULE 6DD HOWEVER THE SAME WAS NOT PURSUED IN APPEAL. SINCE T HIS IS ESTIMATED DISALLOWANCE NOT IN RESPECT OF BOGUS CLAIM OR DISAL LOWABLE CLAIM, PENALTY FOR INACCURATE PARTICULARS CANNOT BE LEVIED ON SUCH DIS ALLOWANCE. , AS REGARDS DISALLOWANCE OF INTEREST, APPELLANT SUBM ITTED THAT TRIBUNAL FOUND THAT ASSESSEE HAS PROVED THE NEXUS STILL DISALLOWAN CE WAS CONFIRMED AND THEREFORE THE ITAT'S ORDER TO THIS EXTENT IS CONTRA DICTORY. THE SIMILAR INTEREST DISALLOWANCE IN THE ASSESSMENT YEAR 2002-03 WAS DEL ETED BY CIT (A) WHICH WAS UPHELD BY ITAT. CONSIDERING THE FACTS AND DECIS IONS, PENALTY CANNOT BE LEVIED FOR INTEREST DISALLOWANCE. ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 5 AS REGARDS LEVY OF PENALTY ON CLAIMING CAPITAL EXPE NSE AS REVENUE, APPELLANT DID NOT SUBMIT ANYTHING. THE MOBILE WAS COSTING MOR E THAT RS 5000 AND ACCORDINGLY THE SAME SHOULD HAVE BEEN CAPITALISED. BY NOT DOING SO APPELLANT CLAIMED EXCESS EXPENDITURE TO THE EXTENT OF RS 4275 FOR WHICH IT OFFERED NO EXPLANATION. IN THE PENALTY PROCEEDING ALSO APPELLANT COULD NOT SUBMIT ANY REASON FOR CLAIMING CAPITAL EXPENSE AS REVENUE THER EFORE ON THIS ISSUE APPELLANT IS LIABLE FOR PENALTY. PENALTY LEVIED BY THE ASSESSING OFFICER ON THIS ADDITION IS CONFIRMED. 6. WE HAVE HEARD THE PARTIES AND GONE THROUGH THE C ASE FILE. THE REVENUE INVITES OUR ATTENTION TO ASSESSEES DEPRECIATION CL AIM. IT TRANSPIRES THAT THE ASSESSEE HAS ALREADY PLACED ON RECORD SUFFICIENT EV IDENCE OF PAYMENTS OF RS.2.40 CRORES BEING MADE TO THE VENDER ENTITY ALON G WITH COPY OF THE PURCHASE DEED. IT ALSO APPLIED FOR STATE GOVERNMENTS APPROV AL. EVEN THE REVENUE IS FAIR ENOUGH NOT TO DISPUTE THESE FACTS. THE ASSESSEE ACQ UIRED THESE WINDMILLS IN MARCH, 2000. IT ALSO DECLARED POWER GENERATION INCO ME OF RS.9,44,146/-. THE ASSESSEE FURTHER OBTAINED INSURANCE COVER FOR THE S AID WINDMILLS. IT RAISED DEPRECIATION CLAIM @ 100% IN THE IMPUGNED ASSESSMEN T YEAR ONLY. THE SAME STOOD DECLINED FOR WANT OF OWNERSHIP TRANSFER. IT I S EVIDENT THAT THE ASSESSEE CHOSE TO HAND OVER THE WINDMILLS BACK TO THE VENDER SINCE THE STATE GOVERNMENT HAD NOT ACCORDED APPROVAL OF THE OWNERSHIP TRANSFER . THE REVENUE SOUGHT TO TAX THE VERY SUM OF RS.2.40 CRORES RECEIVED IN THE FOLL OWING ASSESSMENT YEAR AS CAPITAL GAINS. THE TRIBUNAL IN THE SUBSEQUENT YEAR HELD THAT ONCE IT HAS NOT BECOME OWNER IN THE IMPUGNED ASSESSMENT YEAR, NO CA PITAL GAIN HAD ARISEN TO BE TAXED ON ACCOUNT OF HANDING OVER THE WINDMILLS B ACK TO THE OWNER. ALL THESE FACTS INDICATE THAT THE ASSESSEE HAS NOT FURNISHED ANY INACCURATE PARTICULARS OF INCOME. THERE IS NOTHING ATTRIBUTABLE ON ASSESSEES CONDUCT IN NOT POSSESSING ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 6 FULLFLEDGED OWNERSHIP. WE FIND THAT THE HONBLE APE X COURT IN CASE OF MYSORE MINERALS LTD. VS. CIT (1999) 239 ITR 775 INTERPRETS THE OWNERSHIP CONCEPT FOR THE PURPOSE OF DEPRECIATION AS UNDER :- AN OVERALL VIEW OF THE ABOVE SAID AUTHORITIES SHO W THAT THE VERY CONCEPT OF DEPRECIATION SUGGESTS THAT THE TAX BENEFIT ON ACCOU NT OF DEPRECIATION LEGITIMATELY BELONGS TO ONE WHO HAS INVESTED IN THE CAPITAL ASSE T, IS UTILIZING THE CAPITAL ASSET AND THEREBY LOOSING GRADUALLY INVESTMENT CAUSED BY WEAR AND TEAR; AND WOULD NEED TO REPLACE THE SAME BY HAVING LOST ITS VALUE F ULLY OVER A PERIOD OF TIME. IT IS WELL SETTLED THAT THERE CANNOT BE TWO OWNERS OF THE PROPERTY SIMULTANEOUSLY AND IN THE SAME SENSE OF THE TERM. T HE INTENTION OF THE LEGISLATURE IN ENACTING SECTION 32 WOULD BE BEST FU LFILLED BY ALLOWING DEDUCTION IN RESPECT OF DEPRECIATION TO THE PERSON IN WHOM FOR T HE TIME BEING VESTS THE DOMINION OVER THE BUILDING AND WHO IS ENTITLED TO U SE IT IN HIS OWN RIGHT AND IS USING THE SAME FOR THE PURPOSES OF HIS BUSINESS OR PROFESSION. ASSIGNING ANY DIFFERENT MEANING WOULD NOT SUBSERVE THE LEGISLATIV E INTENT. TO TAKE THE CASE AT HAND IT IS THE APPELLANT-ASSESSEE WHO HAVING PAID P ART OF THE PRICE, HAS BEEN PLACED IN POSSESSION OF THE HOUSES AS AN OWNER AND IS USING THE BUILDING FOR THE PURPOSE OF ITS BUSINESS IN ITS OWN RIGHT. STILL THE ASSESSEE HAS BEEN DENIED THE BENEFIT OF SECTION 32.. WE ALSO FIND THAT THE ASSESSEE HAD INITIALLY DISCLO SED LOSS OF RS.2,29,55,932/- IN THE RETURN. THE SAME STANDS RECOMPUTED TO POSITIVE INCOME OF RS.12,82,014/- THEREFORE, THE PRESENT DOES NOT SEEM TO BE AN INSTA NCE OF EVASION OF TAXABLE INCOME. WE REITERATE THAT QUANTUM AND PENALTY PROCE EDINGS UNDER THE ACT STAND ON A DIFFERENT FOOTING AND EACH AND EVERY DISALLOWA NCE/ADDITION DOES NOT LEAD TO AUTOMATIC IMPOSITION OF PENALTY AS HELD BY HONBLE APEX COURT IN RELIANCE ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 7 PETROPRODUCTS LTD. 322 ITR 158 (SC). THEREFORE, WE HOLD THAT THE ASSESSING OFFICER HAD WRONGLY HELD ASSESSEES CASE AS THAT OF FURNISHING OF INACCURATE PARTICULARS OF INCOME UNDER SECTION 271(1)(C) OF TH E ACT. WE ALSO FIND IN THE SAME TUNE THAT THE ASSESSING OFFICER HAS COMPUTED THE OT HER DISALLOWANCES OF INTEREST AMOUNT AND THE ONE UNDER SECTION 40A(3) ONLY ON THE BASIS OF ASSESSEES ACCURATE PARTICULARS ALREADY SUBMITTED ON RECORD IN THE COURSE OF SCRUTINY. THEREFORE, THE IMPUGNED PENALTY QUA THESE ISSUES HA S ALSO BEEN RIGHTLY DELETED. THE CIT(A) FINDING UNDER CHALLENGE ARE UPHELD. THE REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9/6/2015 SD/- SD/- (G. D. AGARWAL) VICE PRESIDENT (S. S. GODARA) JUDICIAL MEMBER MAHATA/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD ITA NO.2652/AHD/2011 ASST. YEAR 2001-02 8 1. DATE OF DICTATION: 22/5/2015 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ________OTHER MEMBER: 3. DATE ON WHICH APPROVED DRAFT COMES TO THE SR. P. S./P.S.: 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: __________ 5. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE S R. P.S./P.S.: 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK: 9/6/2015 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK: 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 9. DATE OF DESPATCH OF THE ORDER: