ITO 9(1) 3, MUMBAI V. DOLLEX INDUSTRIES LTD, MUMBAI

ITA 2772/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4993 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-09-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 30-04-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 08-04-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: C G K NAIR
• Keywords: Unexplained expenditure; Depreciation; Deemed to accrue or arise in india; Corroborative evidences; Reason to believe; Revenue expenditure
• Section: 69C; 194C; 32; 69; 6; 90

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL D DD D BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . , . , ! ! ! ! '# '# '# '# BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO D. KARUNAKARA RAO, AM , AM , AM , AM ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.2325/MUM/2011 2325/MUM/2011 2325/MUM/2011 2325/MUM/2011 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2007-08) M/S DOLLEX INDUSTIRES LTD. 502, DHEERAJ SAPNA, B WING, PALI NAKA, PALI ROAD BANDRA(W) MUMBAI-400050 % % % % / VS. ITO 9(1)(3) MUMBAI ( '( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*'( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.2772 2772 2772 2772/MUM/2011 /MUM/2011 /MUM/2011 /MUM/2011 ( $% $% $% $% & & & & / ASSESSMENT YEAR :2007-08) ITO 9(1)(3) MUMBAI % % % % / VS. M/S DOLLEX INDUSTIRES LTD. 502, DHEERAJ SAPNA, B WING, PALI NAKA, PALI ROAD BANDRA (W) MUMBAI-400050 #' ! ./ + ./ PAN/GIR NO. :AAACD1534D ( '( / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( )*'( / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) '( '( '( '( , , , , / APPELLANT BY : NONE )*'( )*'( )*'( )*'( - -- - , , , , /RESPONDENT BY : SHRI C. G. K. NAIR % % % % - -- - .! .! .! .! / DATE OF HEARING : 13 TH AUGUST 2013 /0& /0& /0& /0& - -- -.! .! .! .! /DATE OF PRONO UNCEMENT: 13 TH SEPTEMBER 2013 ' 1 / O R D E R PER : , . . / VIJAY PAL RAO, JM THESE CROSS APPEALS ARE DIRECTED AGAINST THE ORDER DATED 17.1.2011 OF COMMISSIONER OF INCOME TAX(APPEALS) FOR THE ASSE SSMENT YEAR 2007- 08. 2. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE WHE N THESE APPEALS WERE CALLED FOR HEARING. IT TRANSPIRES FROM THE REC ORD THAT THE ASSESSEE ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 2 HAS BEEN SEEKING ADJOURNMENT REPEATEDLY BY FILING T HE REQUEST LETTERS. ON THE LAST DATE OF HEARING I.E. 13.4.2013 THESE APPEA LS WERE ADJOURNED ON THE REQUEST OF THE ASSESSEE VIDE LETTER DATED 26.4. 2013. WE FURTHER NOTE THAT THE NOTICE ISSUED TO THE ASSESSEE HAVE BEEN RE CEIVED BACK UNDELIVERED ON COUPLE OF OCCASIONS WITH THE POSTAL REMAKES AS LEFT. THE NOTICES WERE ISSUED AT THE ADDRESS GIVEN BY THE ASS ESSEE ON RECORD. SINCE THE ASSESSEE HAS NOT FILED ANY FRESH ADDRESS OR AME NDED THE FORM 36 THEREFORE, THERE IS NO REASON TO BELIEVE THAT THE A SSESSEE IS NOT AVAILABLE AT THE GIVEN ADDRESS. FURTHER WHEN THE ASSESSEE IS REGULARLY SEEKING ADJOURNMENT IN THE CASE THEREFORE, THE ASSESSEE IS VERY MUCH AWARE ABOUT THE DATE OF HEARING OF THE APPEALS. IN THESE CIRCUMSTANCES WE PROPOSE TO HEAR AND DISPOSE OF THESE APPEALS EX-PAR TE. 3. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1) THE LEARNED CIT (A) ERRED IN DISALLOWING THE RE VENUE EXPENDITURE OF RS 2,15,73,054/-. IN THIS RESPECT SHE OUGHT TO HAVE AP PRECIATED THAT THE SAID EXPENDITURE BEING REVENUE IN NATURE AND HA VING INCURRED DURING THE RELEVANT PREVIOUS YEAR IS FULLY ALLOWABLE IN COMPUTING THE PROFITS OF THE BUSINESS CHARGEABLE TO TAX. YOUR APPELLANT HUMBLY PRAYS THAT THE SAID REVENUE EXPEND ITURE OF RS 2,15,73,054/- BE ALLOWED AS DEDUCTION. 2) THE LEARNED CIT (A) ERRED IN TREATING THE FIXED ASSETS PURCHASED AT COST OF RS 5,86,292/- DURING THE YEAR AS UNEXPLAINED EXPENDITURE WITHIN TE MEANING OF SEC 69 C OF THE L.T. ACT 1961 AND THEREBY MAKING THE ADDITION OF THE SAI D AMOUNT TO THE INCOME. IN THIS RESPECT SHE OUGHT TO HAVE APPRECIATED THAT THE EXPENDITURE IS FULLY ACCOUNTED FOR IN THE BOOKS OF ACCOUNTS AND THE SOURCE OF THE PAYMENTS MADE FOR THE SAID PURCHA SES IS ALSO EXPLAINED AS RECORDED IN THE BOOKS OF ACCOUNTS. ON THESE FACTS AND UNDER THE CIRCUMSTANCES THE PROVISIONS OF SEC 6 90 OF THE L.T. ACT 1961 ARE NOT APPLICABLE TO SUCH EXPENDITURE. ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 3 YOUR APPELLANT HUMBLY PRAYS THAT THE SAID ADDITION OF RS 5,86,292/- UNDER SEC 69C OF THE L.T. ACT 1961 BE DE LETED. 3) THE LEARNED CIT (A) ERRED IN DISALLOWING THE CLA IM OF DEPRECIATION TO THE EXTENT OF RS 56,800/- ON THE FI XED ASSTS ACQUIRED DURING THE PREVIOUS YEAR ON THE ALLEGED GR OUND THAT THE SAID PURCHASES OF ASSETS ARE UNEXPLAINED. IN THIS R ESPECT SHE OUGHT TO HAVE APPRECIATED THAT ONCE THE ASSETS ARE PUT TO USE AND FORM PART OF THE BLOCK OF ASSETS THE ASSESSEE I S ENTITLED TO CLAIM DEPRECIATION FOR THE SAME AS PROVIDED UNDER S EC 32 OF THE L.T. ACT 1961. YOUR APPELLANT HUMBLY PRAYS THAT THE SAID CLAIM OF YOUR APPELLANT IN RESPECT OF DEPRECIATION BE ALLOWED IN FULL. 4) THE LEARNED CIT (A) ERRED IN DISALLOWING RS 2,09 ,72,674/- U/S 40(A)(IA) OF THE L.T. ACT 1961. 5) IN THIS RESPECT SHE OUGHT TO HAVE ACCEPTED THE E XPLANATION OFFERED BY YOUR APPELLANT AND THE REPORT OF THEIR A UDITORS THAT THERE WAS NO DEFAULT IN DEDUCTION OF TDS WHICH WOUL D ATTRACT DISALLOWANCE U/S 40(A)(IA) OF THE I.T. ACT 1961 YOUR APPELLANT HUMBLY PRAYS THAT THE DISALLOWANCE O F RS 2,09,72,674/- U/S 40(A)(IA) OF THE L.T. ACT 1961 BE DELETED. 4. IN THESE CROSS APPEALS THE REVENUE HAS RAISED TH E FOLLOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING RELIEF IN RESPECT OF ADDITION MADE ON ACCOUNT OF UNEXPLAINED EXPENDITURE U/S 69C IN RE LATION TO PURCHASE OF T.V. SETS AND TANKER, IGNORING THE FIND ING OF THE ASSESSING OFFICER THAT THE REQUISITE EVIDENCE WAS N OT PRODUCED AT ANY STAGE OF THE ASSESSMENT AND NO DEPRECIATION HAD BEEN CLAIMED ON THE ASSETS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE U/S 40(A)(IA) OF THE L.T. ACT, 1961 IN RELATION TO PAYMENTS MADE ON ACCOUNT OF PACKING MATERIAL AND PRINTING & STATIONERY EXPENSES , ERRONEOUSLY HOLDING THAT NO TDS WAS DEDUCTIBLE IN RELATION TO T HESE PAYMENTS DESPITE THE FINDING IN THE ASSESSMENT ORDER TO THE CONTRARY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD. CIT(A) ERRED IN GRANTING RELIEF OF RS. 1,50 ,19,1 80/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF UNEXPLAINED EXPENDITURE / INVESTMENT, DISREGARDING THE FINDING OF THE ASSESSI NG OFFICER THAT ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 4 THE REQUISITE DETAILS TO SUPPORT THE CLAIM WERE NOT FURNISHED DURING THE ASSESSMENT PROCEEDINGS. 5. GROUND NO. 1 OF THE REVENUES APPEAL AND THE GRO UND NO. 2 AND 3 OF ASSESSEES APPEAL ARE COMMON BEING ADDITION U/S 69C TOWARDS PURCHASE OF FIXED ASSETS. THEREFORE, BOTH THESE GROUNDS ARE TAKEN UP AND DISPOSED OF TOGETHER. DURING THE COURSE OF ASSESSMENT PROCEE DINGS THE AO ASKED THE ASSESSEE TO FURNISH DETAILS OF ADDITION TO THE FIXED ASSETS, SUPPORTING BILLS, DOCUMENTARY EVIDENCES AND DATES ON WHICH SUC H ASSETS ARE PUT TO USE. THE ASSESSEE FILED THE DETAILS OF THE ASSETS P URCHASE DURING THE YEAR UNDER CONSIDERATION AMOUNTING TO ` 12,41,497/-. HOW EVER, THE ASSESSEE COULD NOT PRODUCE THE BILLS WITH REGARD TO THE ADDI TION MADE DURING THE YEAR TO THE FIXED ASSETS. THE ASSESSING OFFICER MAD E AN ADDITION OF ` 12,41,497/- U/S 69C OF THE INCOME TAX ACT BY TREATI NG THE SAID AMOUNT AS UNEXPLAINED EXPENDITURE IN THE ABSENCE OF SUPPORTIN G EVIDENCE. THE AO HAS ALSO DISALLOWED THE DEPRECIATION THEREON AMOUNT ING TO ` 4,17,567/-. ON APPEAL, THE CIT(A) HAS DELETED THE ADDITION MADE BY THE AO IN RESPECT OF CAR, TV AND TANKERS OF ` 1,94,935/-, 1,15,00/- A ND 3,45,270/- RESPECTIVELY. CONSEQUENTLY, THE CIT(A) HAS GIVEN PA RT RELIEF TO THE ASSESSEE. THUS, BOTH THE ASSESSEE AS WELL AS REVENU E HAVE CHALLENGED THE ORDER OF THE CIT(A) ON THIS ISSUE. THE ASSESSEE IS AGGRIEVED BY CONFIRMATION OF THE ADDITION TO THE EXTENT OF ` 5,8 6,292/- AND PROPORTIONATE DEPRECIATION AND THE REVENUE IS AGGRI EVED BY THE DELETION OF PART ADDITION. ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 5 6. WE HAVE HEARD THE LD. DR AS WELL AS CAREFULLY PE RUSAL THE RELEVANT MATERIAL ON RECORD WE NOTE THAT THE ASSESSEE HAS MA DE THE ADDITION TO THE FIXED ASSETS TO THE TUNE OF ` 12,41,497/-. THE DETAILS OF THE FIXED ASSETS PURCHASE DURING THE YEAR AND DEPRECIATION CL AIMED ARE GIVEN BY THE ASSESSING OFFICER IN PARA 4 AS UNDER: SL. NO. NATURE OF ASSETS NAME OF THE PERSON FROM WHOM ASSETS WAS STATED TO HAVE BEEN PURCHASED DATE AMOUNT DEPRECIATI ON CLAIMED 1. PLANT AND MACHINERY KIRTI CORPORATION 31/10/2006 700000 52500 2. PLANT AND MACHINERY B. N. SHARTRI 31/03/2007 39780 2984 3. PLANT AND MACHINERY CONTRACT ADVANCE DG REPAIRING 31/03/2007 8704 653 4. CAR J & K MUMBAI- 368010100000599 07/03/2007 194935 9747 5. FURNITURE & FIXTURE T. V. PURCHASED 03/07/2006 115000 5750 6. FURNITURE & FIXTURE VEHICLE RUNNING AND MAINTENANCE 30/08/2006 6250 313 7. FURNITURE & FIXTURE CUP BOARD 13/09/2006 7000 350 8. TANKERS MANICK BAG AUTOMOBILES, GOA 24/05/2006 345270 345270 12,41,497 4,17,567 7. AS THE ASSESSEE HAS NOT PRODUCED THE RESPECTIVE BILLS TO PROVE THE GENUINENESS OF THE PURCHASE, THE AO MADE AN ADDITIO N U/S 69C BY TREATING THE SAID AMOUNT AS UNEXPLAINED EXPENDITURE . THE CIT(A) HAS DEALT WITH THE ISSUE IN PARA 5.3 AS UNDER: 5.3 IT HAS BEEN EXPLAINED THAT SR. NO 4, 1 E CAR, RELATES TO CAR MARGIN MONEY PAID BY THE BANKER DIRECTLY TO THE PAR TY BY DEBITING THE CURRENT A/C OF THE COMPANY AS ON 6.3.2 007, AS EVIDENCED BY COPY OF BANK STATEMENT PRODUCED. SO AL SO, ITEM 5, IS T.V. SET PURCHASED ON 3.7.2006, AS PER COPY OF B ILL PRODUCED. IT HAS ALSO BEEN SHOWN THAT ITEM NO. 8, IN FACT REPRES ENTS DISCOUNT ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 6 ON PURCHASE OF TANKER WHICH WAS GIVEN BY PARTY AND WAS CREDITED IN ASSETS ACCOUNT AND IT IS ALSO POINTED O UT THAT NO DEPRECIATION WAS PROVIDED IN THIS CREDITED AMOUNT A S IS EVIDENCED BY COPY OF LEDGER PRODUCED. BEARING THE A BOVE STATED ITEMS, NO BILLS OR OTHER DETAILS ARE AVAILABLE FOR THE REMAINING ASSETS. HENCE, TO THE SAID EXTENT THE ACTION OF THE A.O. IN TREATING THE EXPENDITURE AS NOT EXPLAINED AND DISAL LOWING DEPRECIATION THEREON IS UPHELD. IT HAS ALSO BEEN SU BMITTED BY APPELLANT THAT WHENEVER BILLS ARE AVAILABLE THE SAM E HAVE BEEN PRODUCED BEFORE A.O. WHEN THE PURCHASES HAVE NOT BE EN SUBSTANTIATED, THE DEEMING FICTION OF S. 69C COMES INTO OPERATION AND HENCE THE EXPENDITURE AS CLAIMED WITH REFERENCE TO THE SAID ASSET IS TREATED AS DEEMED INCOME UNDER S. 69C. 8. THUS, IT IS CLEAR FROM THE ABOVE FINDING THAT TH E CIT(A) HAS DELETED THE ADDITION IN RESPECT OF CAR, TV AND TANKERS BY C ONSIDERING THE FACTS THAT THE EXPENDITURE RELATES TO CAR IS A MARGIN MON EY PAID BY THE BANKERS DIRECTLY TO THE PARTY WHEREAS IN RESPECT OF PURCHAS E OF TV THE ASSESSEE PRODUCE THE BILL DATED 3.7.2006 AND THE AMOUNT IN R ESPECT OF TANKERS REPRESENTS DISCOUNT ON PURCHASE OF TANKERS WHICH WA S GIVEN BY THE PARTY AND CREATED IN THE ASSETS ACCOUNT. THE REMAINING AD DITION WAS SUSTAINED BY THE CIT(A) BECAUSE THE ASSESSEE FAILED TO PRODUC E ANY EVIDENCE IN SUPPORT OF THE SAME. 9. HAVING CONSIDERED THE FACTS AND MATERIAL WE DO N OT FIND ANY REASON TO INTERFERE WITH THE FINDING OF THE CIT(A) QUA THI S ISSUE. HENCE THE RESPECTIVE GROUNDS OF THE PARTIES IN RESPECT OF ADD ITION U/S 69C AND DISALLOWANCE OF DEPRECIATION ARE DISMISSED. 10. GROUND NO. 2 IN THE REVENUES APPEAL AND GROUND NO. 4, 5 OF THE ASSESSEES APPEAL REGARDING DELETION OF ADDITION MA DE U/S 40(A)(IA). DURING THE ASSESSMENT PROCEEDINGS THE AO ASKED THE ASSESSEE TO FURNISH ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 7 DETAILS OF TDS MADE IN RESPECT OF VARIOUS EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE CONTENDED THAT THE P AYMENT IN RESPECT OF LEASE RENT AND CRUSHING CHARGES, PACKING MATERIAL, PRINTING AND STATIONARY, TRANSPORTATION CHARGES ETC. DO NOT FALL UNDER TDS PROVISIONS. THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSE E AND DISALLOW THE EXPENSES TO THE TUNE OF ` 2,39,42,030/- U/S 40(A)(I A) FOR WANT OF TDS. ON APPEAL, THE CIT(A) HAS HELD THAT THE PACKING MATERI AL AND PRINTING AND STATIONARY ARE NOT SUBJECT TO TDS AND ACCORDINGLY D ELETED THE ADDITION IN RESPECT OF PACKING MATERIAL AND PRINTING & STATIONA RY. HENCE, THE CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE. WE HAVE HEAR D THE LD. DR AND PERUSED THE RELEVANT MATERIAL THE AO FOUND THAT THE ASSESSEE HAS NOT DEDUCTED TAX AND IN SOME CASES AFTER DEDUCTION IT H AS NOT BEEN DEPOSITED THEREFORE, THERE WAS A DEFAULT. ACCORDINGLY, THE AO HAS DISALLOWED THE EXPENDITURE IN RESPECT OF 3 ITEMS AS UNDER: SL. NO . HEAD OF EXPENSES TDS U/S GROSS AMOUNT CLAIMED IN P & L A/C AMOUNT ON WHICH TDS MADE AMOUNT ON WHICH NO TDS MADE 1. CONTRACTS U/S 194C 1,48,52,249/- 39,93,309/- 1,0 8,58,940/- 2. PROFESSIONAL FEES U/S 194J 17,33,322/- 17,33,322 /- NIL 3. RENT U/S 194I 1,32,50,000/- 1,66,910/- 1,30,83,0 90/- DIFFERENCE ` 2,39,42,030/- 11. THE CONTRACT EXPENDITURE COMPRISES VARIOUS SPEC IAL HEADS OF THE EXPENDITURE AS UNDER: DESCRIPTION OF EXPENDITURE AMOUNT ` ALLOWED ` NO T ALLOWED ` PACKING MATERIALS 24,97,887 PRINTING & STATIONERY 4,71,469 TRANSPORTATION CHARGES 4,47,405 CRUSHING CHARGES 88,97,590 ADVERTISEMENT EXPENSES 3,47,357 ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 8 SECURITY CHARGES 21,90,541 TOTAL 1,48,52,249 39,93,309 10858940 FACTORY LEASE RENT 1,32,50,000 1,66,910 1,30,83,090 GRAND TOTAL 2,81,02,249 41,60,219 2,39,42,030 12. THE CIT(A) HAS DECIDED THE ISSUE IN PARA 6.2 AS UNDER: [ 6.2 IT IS THE SUBMISSION OF THE APPELLANT THAT PA CKING MATERIALS, PRINTING, F AND STATIONERY WERE PURCHASED, NO ANY J OB WORK WAS INVOLVED, AND HENCE THERE WAS NO REQUIREMENT TO DED UCT TAX AT SOURCE. THE APPELLANT HAS ALSO FURNISHED COPIES OF THE LEDGER ACCOUNTS RELATING TO PACKING MATERIAL AND PRINTING & STATIONERY. FROM THE DETAILS AS FURNISHED IT IS SEEN THAT PAYME NTS HAVE BEEN MADE AGAINST PURCHASES, IT IS ONLY A CASE OF SALE A ND NOT FOR, CARRYING OUT ANY WORK. THE A.O. HAS ALSO NOT BROUGH T ON RECORD THAT ANY WORK, AS ENVISAGED IN 194C HAS BEEN CARRIE D OUT. WHEN THERE IS NO ELEMENT OF ANY WORK INVOLVED SEC. 194 C WILL NOT APPLY. THEREFORE, IT IS HELD THAT PACKING MATERIAL AND PRINTING AND STATUTORY ARE NOT SUBJECT TO TDS. AS REGARDS, TRANS PORTATION AND ADVERTISEMENT, THE ONLY GROUND TAKEN BY APPELLANT I S THAT THE PAYMENTS DO NOT EXCEED RS. 20,000/-. HOWEVER, FROM THE MATERIAL AS FURNISHED BY THE APPELLANT IT IS INFERR ED THAT THE AGGREGATE EXCEEDS RS. 50,000/- AND HENCE THIS PLEA IS NOT TENABLE. MOREOVER, NO SPECIFIC PARTY-WISE DETAILS H AVE BEEN FURNISHED BY THE APPELLANT SUCH AS NAME OF PARTY, A MOUNTS PAID, DATE(S) OF PAYMENT ETC AND HENCE I AM UPHELD THE AC TION OF THE A.O. IN THIS REGARD. AS REGARDS CRUSHING CHARGES AN D FACTORY RENT, IT IS A FACT THAT NO TAX HAS BEEN DEDUCTED ON THE SUMS AS SPECIFIED BY THE A.O, NEITHER HAS A CERTIFICATE BEE N OBTAINED FROM THE A.O EITHER FOR NIL-DEDUCTION OR FOR DEDUCTION A T A LOWER RATE. HENCE, I DECLINE TO INTERFERE WITH THE ACTION OF TH E A.O. AS REGARD, CRUSHING CHARGES AND FACTORY RENT ARE CONCERNED. SO ALSO, THE APPELLANT HAS DEFAULTED IN TAX DEDUCTION AT SOURCE UNDER S. 194J, WHERE PROFESSIONAL CHARGES OF RS. 17,33,322/- ARE C ONCERNED. HENCE, THE A.O. WAS CORRECT IN LAW TO DISALLOW THE SAID SUMS TO THE EXTENT AS SPECIFIED HEREWITH, UNDER S. 40(A)(IA ). 13. IT IS CLEAR FROM THE FINDING OF THE CIT(A) THAT A RELIEF WITH RESPECT TO PACKING MATERIAL, PRINTING AND STATIONARY CHARGES H AVE BEEN GRANTED TO THE ASSESSEE BECAUSE IT DOES NOT INVOLVED ANY JOB W ORK AND HENCE THE PROVISIONS OF SECTION 194C ARE NOT APPLICABLE. WE D O NOT FIND ANY ERROR OR INFIRMITY AS FAR AS THE FINDINGS OF THE CIT(A) ON T HIS ISSUE IS CONCERNED. ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 9 ACCORDINGLY, WE UPHOLD THE ORDER OF THE CIT(A) QUA THIS ISSUE AND CONSEQUENTLY THE RESPECTIVE GROUNDS OF THE PARTIES ARE DISMISSED. 14. GROUND NO. 3 OF THE REVENUES APPEAL REGARDING ADDITION ON ACCOUNT OF UNEXPLAINED EXPENDITURE/INVESTMENT BEING WORK IN PROGRESS. THE AO ASKED THE ASSESSEE TO FURNISH THE PARTY WISE DETAIL S OF WORK-IN-PROGRESS AMOUNTING TO ` 1,50,19,180/- ALONG WITH THE PROOF O F TDS MADE THEREON. THE ASSESSEE SUBMITTED THE GROUPING OF THE AMOUNTS BUT DID NOT FURNISH ANY BILLS, VOUCHERS OF PROOF OF TDS AS WELL AS ADDR ESSES OF THE PARTY. IN THE ABSENCE OF SUPPORTING EVIDENCE WITH REGARD TO THE E XPENDITURE THE AO TREATED THE SAME AS UNEXPLAINED EXPENDITURE AND ADD ED TO THE TOTAL INCOME OF THE ASSESSEE. THE AO WAS OF THE VIEW THAT THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE IN SUPPORT TO ITS CLAIM OF G ENUINENESS OF THE TRANSACTION. ON APPEAL, THE ASSESSEE SUBMITTED BEFO RE THE CIT(A) THAT THESE AMOUNTS REPRESENTED THE ADVANCES GIVEN TO THE PARTIES FOR PURCHASE OF ASSETS. THE CIT(A) DELETED THE ADDITION BY ACCEPTING THE SUBMISSIONS OF THE ASSESSEE. BEFORE US THE LD. DR H AS SUBMITTED THAT WHEN THE AMOUNTS WERE CLAIMED TO HAVE BEEN PAID FOR PURCHASE OF ASSETS AND OTHER EXPENSES THEN THE ADDITION MADE BY THE AO IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE IS JUSTIFIED U/S 69C BEING UNEXPLAINED EXPENDITURE/ INVESTMENT. THUS, THE LD. DR HAS SUBMI TTED THAT THE CIT(A) COMMITTED AN ERROR IN DELETING THE ADDITION ON THE GROUND THAT THE ASSESSEE HAS NOT CLAIMED EXPENDITURE WITH RESPECT T O THIS AMOUNT. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER. ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 10 15. HAVING CONSIDERED THE SUBMISSIONS OF LD. DR AS WELL AS THE PERUSAL OF THE ORDERS OF THE AUTHORITIES BELOW WE FIND THAT THE REASONING GIVEN BY THE CIT(A) IN DELETING THE ADDITION IS NOT PROPER. THE CIT(A) HAS DECIDED THIS ISSUE IN PARA 8 AS UNDER: 8. I HAVE CONSIDERED THE MATTER. THE A.O. HAS BROU GHT TO TAX AS INCOME ADVANCES MADE, DEFERRED REVENUE TO BE WRITTE N OFF, AND PRE-OPERATIVE EXPENSES AS UNEXPLAINED EXPENDITURE. IN THE FIRST PLACE, THE SAID ITEMS ARE NOT IN THE NATURE OF EXPE NDITURE AND HAVE ALSO NOT BEEN TREATED AS EXPENDITURE. THE SAME HAVE NOT BEEN CLAIMED AS DEDUCTION AGAINST THE TOTAL INCOME. WHEN AN EXPENDITURE HAS NOT BEEN INCURRED, THE SAME CANNOT BE BROUGHT TO TAX AS INCOME UNDER THE DEEMING PROVISIONS OF TH E ACT. PRESUMABLY THE A.O. HAS BROUGHT TO TAX THE SAID SUM UNDER S. 69C. THE CONDITION PRECEDENT FOR INVOKING SECTION 6 9C IS THAT AMOUNT SPENT MUST BE AN EXPENDITURE INCURRED. WHEN THE CONDITION IS NOT SATISFIED, S. 69C CANNOT BE INVOKE D. FURTHER, FROM THE DETAILS AS PRESENT IN THE ASSESSMENT ORDER, IT IS SEEN THAT A.O. HAS HIMSELF INDICATED THAT SUMS ARE IN THE NAT URE OF ADVANCE FOR PURCHASE OF CAPITAL EQUIPMENT. THEREFOR E, THE ADDITION AS MADE BY A.O. IS NOT SUSTAINABLE. THE AD DITION OF RS. 1,50,19,180/- IS HEREBY DELETED. 16. THE ADDITION IS MADE U/S 69C THEN THE CLAIM OF EXPENDITURE IS NOT A PRE-CONDITION OF SUCH ADDITION. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) QUA THIS ISSUE AND REMIT THIS ISSUE TO THE R ECORD OF THE CIT(A) TO RECONSIDER THE ISSUE A PER THE REQUIREMENT OF SECTI ON 69C. 17. THE ONLY GROUND LEFT IS GROUND NO. 1 IN ASSESSE ES APPEAL REGARDING DISALLOWANCE OF EXPENDITURE BY TREATING THE SAME AS CAPITAL IN NATURE. THE AO NOTED THAT THE ASSESSEE CLAIMED DEFERRED REPAIRS AMOUNT TO ` 2,15,73,054/- IN THE COMPUTATION OF INCOME. THE AO FURTHER NOTED THAT UNDER THE HEAD MISCELLANEOUS EXPENDITURE, THE ASSES SEE HAS SHOWN DEFERRED REPAIR AND MAINTENANCE AMOUNT OF ` 2,58,87 ,665/- AS SHOWN IN ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 11 THE SCHEDULED 11 IN THE BALANCE SHEET. AFTER WRITIN G OFF 1/6 TH OF THE SAID AMOUNT TO ` 43,14,611/- THE BALANCE AMOUNT OF ` 2, 15,73,054/- HAS BEEN SHOWN AS MISCELLANEOUS EXPENSES PENDING WRITE ALL. THE AO ASKED THE ASSESSEE TO SHOW-CAUSE AS TO WHY THE CLAIM OF DEFER RED REPAIR AMOUNT SHOULD NOT BE DISALLOWED. THE ASSESSEE CONTENDED TH AT THIS AMOUNT IS REGARDING THE REPAIRS AND MAINTENANCE OF THE PLANT UNDERTAKEN ON LEASE FOR A PERIOD OF 6 YEARS THEREFORE, THE SAME IS ALLO WABLE REVENUE EXPENDITURE. THE AO DID NOT ACCEPT THE CONTENTION O F THE ASSESSEE AND HELD THAT THIS EXPENDITURE IS ENDURING IN NATURE AN D BENEFIT IS SPREAD OVER FUTURE ASSESSMENT YEARS AS ASSESSEE ITSELF HAS ACCE PTED THE SAME IN BOOKS OF ACCOUNT. ACCORDINGLY, THE AO DISALLOWED TH E CLAIM OF THE ASSESSEE. ON APPEAL, THE CIT(A) HAS CONFIRMED THE A CTION OF THE AO. 18. WE HAVE HEARD THE LD. DR AND CAREFULLY PERUSAL THE ORDERS OF THE AUTHORITIES BELOW. DURING THE YEAR THE ASSESSEE TOO K OVER A SUGAR PLANT ON LEASE FOR A PERIOD OF 6 YEARS FROM THE GOVERNMENT O F MAHARASHTRA. THE PLANT NEEDED INITIAL EXPENDITURE ON ACCOUNT OF REPA IRS AND MAINTENANCE WHICH WAS AMORTISED BY THE ASSESSEE IN THE BOOKS OF ACCOUNT FOR A PERIOD OF 6 YEARS. HOWEVER, IN THE COMPUTATION OF INCOME T HE ASSESSEE CLAIMED THE ENTIRE EXPENDITURE OF ` 2,58,87,665/- AS REVENU E EXPENDITURE. THERE IS NO DISPUTE ABOUT THE FACT THAT THIS PLANT WAS EARLI ER CLOSED AND TAKEN OVER BY THE ASSESSEE WHEN IT WAS NOT IN A FUNCTIONAL STA TE. THE EXPENDITURE HAS BEEN INCURRED BY THE ASSESSEE BEFORE THE USE OF PLANT AND TO MAKE IT FIT FOR USE. THUS, THIS EXPENDITURE DOES NOT FALL U NDER THE CURRENT REPAIRS IN TERMS OF SECTION 31 OF THE INCOME TAX ACT. THE AO H AS ALLOWED 1/6 TH OF THE ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 12 EXPENDITURE AS DEFERRED REVENUE EXPENDITURE BECAUSE THE BENEFIT OF THE SAME IS AVAILABLE OVER THE PERIOD OF 6 YEARS. THE C IT(A) HAS CONFIRMED THE ACTION OF THE AO WHILE DECIDING THE ISSUE IN PARA 4 .5 AS UNDER: 4.5 DURING THE COURSE OF HEARING OF THE APPEAL, IN ORDER TO ASCERTAIN THE NATURE OF THE EXPENDITURE THE APPELLA NT WAS DIRECTED TO GIVE SPECIFIC DETAILS OF THE NATURE OF THE WORK CARRIED OUT IN THE CLOSED PLANT. ON A PERUSAL OF THE BREAK OF THE SUM OF RS. 2,58,87,664/- IT IS SEEN THAT EXTENSIVE WORK HA S BEEN CARRIED OUT ON THE STRUCTURE OF THE FACTORY BUILDING AS WEL L AS WITH RESPECT TO THE EQUIPMENT. EXECUTIVE CABINS HAVE BEE N MADE, IT FLOORS RELAED, AC SHEETS WERE INSTALLED ON THE TOP OF THE FACTORY ROOF, THE BROKEN ROOF IN THE MILK SECTION WAS REPLA CED, CABLES REPLACED, COOLING TOWER AND AFFLUENT PLANT REVAMPED , ANGLES AND STILL RODS REPLACED, IRON RODS AND CHANNELS REPLACE D IN MOLASSES TANKS, INSTALLATION WORK DONE IN POWER HOUSE AND MI LK SECTION BRASS CABLES REPLACED STRUCTURAL REPAIRS IN MILL SE CTION AND BOILING SECTION AND SO ON. THUS, EXHAUSTIVE AND EXTENSIVE O VERHAULING OF THE STRUCTURE AND EQUIPMENT WITH REGARD TO FACTORY BUILDING AND EQUIPMENT HAVE BEEN CARRIED OUT WHICH WAS CERTAINLY NECESSITATED ON ACCOUNT OF THE FACT THAT THE APPELL ANT HAD TAKEN OVER A FACTORY THAT HAD REMAINED CLOSED. THEREFORE, THE A.O. WAS CORRECT IN STATING THAT THE SAID EXPENSES CANNOT BE TREATED TO BE IN NATURE OF CURRENT REPAIRS. THAT BEING SO, THE A. O. OUGHT TO HAVE ADDED BACK THE SUM OF RS. 43,14,611/ AS WELL, THAT HAD BEEN CHARGED TO THE PROFIT AND LOSS ACCOUNT BEING 1 /6 TH OF THE AMOUNT DEFERRED. 19. IT IS CLEAR FROM THE FINDING OF THE AUTHORITIES BELOW THAT THE EXPENDITURE HAS BEEN INCURRED FOR REPLACING THE BRO KEN PART OF THE FACTORY/PLANT IN QUESTION AND MAKING THE PLANT FIT FOR USE. THUS, WHEN THE EXPENDITURE HAS BEEN INCURRED PRIOR TO THE USE OF T HE PLANT AND MACHINERY IN QUESTION THEN IT DOES NOT FALL UNDER THE CATEGOR Y OF CURRENT REPAIRS. 20. IN VIEW OF THE ABOVE DISCUSSION WE DO NOT FIND ANY ERROR IN THE ORDER OF THE CIT(A) QUA THIS ISSUE. ITA NO. 2325 & 2772/M/2011 DOLLEX INDUSTRIES LTD. 13 21. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED AND THE APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PU RPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF SEPTEMBER 2013 SD/- SD/- ( . ) ! '# (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) $ '# (VIJAY PAL RAO) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 13 TH SEPTEMBER 2013 SUBODH COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI