Appeal details
Counselvise Citation
27820114 RSA 2009
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 10 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
21-12-2012
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
I
Next Hearing Date
18-12-2012
Assessment Year
2004-2005
Appeal Filed On
27-01-2009
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 DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH I II I : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NOS SS S. .. .278/DEL/2009 & 3871/DEL/2009 278/DEL/2009 & 3871/DEL/2009 278/DEL/2009 & 3871/DEL/2009 278/DEL/2009 & 3871/DEL/2009 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2004 2004 2004 2004- -- -05 & 2005 05 & 2005 05 & 2005 05 & 2005- -- -06 0606 06 M/S G4S SECURITY SERVICES M/S G4S SECURITY SERVICES M/S G4S SECURITY SERVICES M/S G4S SECURITY SERVICES INDIA PVT INDIA PVT INDIA PVT INDIA PVT.LTD., .LTD., .LTD., .LTD., PANCHWATI, 82A, PANCHWATI, 82A, PANCHWATI, 82A, PANCHWATI, 82A, SECTOR SECTOR SECTOR SECTOR- -- -18, 18, 18, 18, GURGAON GURGAON GURGAON GURGAON 122 016. 122 016. 122 016. 122 016. HARYANA. HARYANA. HARYANA. HARYANA. PAN : AAACG1625Q. PAN : AAACG1625Q. PAN : AAACG1625Q. PAN : AAACG1625Q. VS. VS. VS. VS. DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), 12(1), 12(1), 12(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI MUKESH BHUTANI, ADVOCATE, SHRI SUMIT SINGHANIA, SHRI KABIR HANDA AND SHRI ANUJ AGARWAL, CAS. RESPONDENT BY : SHRI PEEYUSH JAIN, CIT-DR(TP). ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : ITA NO.278/DEL/2009 ITA NO.278/DEL/2009 ITA NO.278/DEL/2009 ITA NO.278/DEL/2009 THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A)-XX, NEW DELHI DATED 28 TH NOVEMBER, 2008 FOR THE AY 2004-05. 2. GROUND NO.1(A) OF THE ASSESSEES APPEAL READS AS UNDER:- THE COMMISSIONER OF INCOME-TAX (APPEALS)-XX, NEW D ELHI [HEREINAFTER REFERRED TO AS CIT(A)] ERRED BOTH ON LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING THE ORDER OF DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE 12(1), NE W DELHI (HEREINAFTER REFERRED TO AS AO') THAT CONSTR UCTION OF TEMPORARY STRUCTURE ON LEASEHOLD PROPERTY IS TO BE ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 2 CAPITALIZED UNDER THE HEAD BUILDING AND CONSEQUENTL Y UPHOLDING THE DISALLOWANCE OF RS.2,09,57,485 IN RES PECT OF THE AMOUNT INCURRED BY THE APPELLANT ON WHICH THE APPELLANT HAD CLAIMED DEPRECIATION AT THE RATE OF H UNDRED PERCENT. 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED COUNSEL FOR THE ASSESSEE THAT THIS ISSUE IS SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF ITAT FOR AY 2002-03 VID E ITA NO.4315/DEL/2005. THAT IN THIS YEAR, THE ITAT SET ASIDE THIS MATTER TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN SPEC IFIC DIRECTIONS. THAT AGAINST THE ABOVE ORDER OF ITAT, THE REVENUE HAD FI LED THE APPEAL BEFORE THE HONBLE JURISDICTIONAL HIGH COURT WHICH, VIDE ORDER DATED 18.02.2009 IN ITA NO.70/2009, DID NOT ADMIT THE APP EAL HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES. THAT THE REVEN UES SLP IS ALSO DISMISSED BY THE HONBLE APEX COURT VIDE ORDER DATE D 16.04.2010. THUS, THE ORDER OF ITAT FOR AY 2002-03 HAS BECOME F INAL. THAT THE ITAT IN AY 2003-04 VIDE ITA NO.1094/DEL/2008 SET ASIDE T HE MATTER TO THE FILE OF THE ASSESSING OFFICER TO BE READJUDICATED A S PER THE DIRECTIONS OF THE ITAT FOR AY 2002-03. HE, THEREFORE, SUBMITTED THAT SINCE THE FACTS OF THE YEAR UNDER CONSIDERATION ARE IDENTICAL, THE MATTER MAY BE SET ASIDE TO THE FILE OF THE ASSESSING OFFICER TO BE RE ADJUDICATED AS PER THE DIRECTIONS OF THE ITAT FOR AY 2002-03. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND HAVE PERUSED THE MATERIAL PLACED BEFORE US. WE FIND THAT THE ISSUE UNDER CONSIDERATION IS IDENTICAL TO THE ISSUE BEFORE THE ITAT FOR AY 2002-03. THAT THE ITAT IN AY 2002-03 VIDE ORDER DATED 31 ST MARCH, 2008 IN ITA NO.4315/DEL/2005 SET ASIDE THE MATTER T O THE FILE OF THE ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3 ASSESSING OFFICER FOR READJUDICATION AS PER THE SPE CIFIC DIRECTIONS GIVEN THEREIN. THAT THE ABOVE DECISION OF ITAT HAS BECOM E FINAL BECAUSE THE HONBLE JURISDICTIONAL HIGH COURT DISMISSED THE REV ENUES APPEAL HOLDING THAT NO SUBSTANTIAL QUESTION OF LAW ARISES AND THE HONBLE APEX COURT DID NOT ADMIT THE SLP OF THE DEPARTMENT AGAIN ST THE ORDER OF THE HONBLE JURISDICTIONAL HIGH COURT. THAT IN AY 2003 -04 VIDE ITA NO.1094/DEL/2008, THE ITAT AGAIN SET ASIDE THE MATT ER TO THE FILE OF THE ASSESSING OFFICER TO BE READJUDICATED AS PER THE DI RECTION OF THE ITAT FOR AY 2002-03. IN VIEW OF THE ABOVE, WE ALSO SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER. WE DIRECT HIM TO READJUDICA TE THE ISSUE AFRESH AS PER THE DIRECTION OF THE ITAT FOR AY 2002-03. N EEDLESS TO MENTION THAT THE ASSESSING OFFICER WILL ALLOW ADEQUATE OPPO RTUNITY OF BEING HEARD TO THE ASSESSEE. 6. GROUND NO.1(B) OF THE ASSESSEES APPEAL READS AS UNDER:- THE CIT(A) ERRED BOTH ON THE LAW AS WELL AS ON THE FACTS IN CONFIRMING THE DISALLOWANCE OF RS.2,09,57,485/- MAD E BY THE AO IN RESPECT OF THE AMOUNT INCURRED BY THE APP ELLANT ON REPAIR AND RENOVATION OF LEASEHOLD PROPERTY WHIC H HAS ALSO BEEN CLAIMED AS REVENUE EXPENDITURE UNDER SECT ION 37(1) OF THE INCOME TAX ACT, 1961 (THE ACT) BY IG NORING THE FACT THAT THE APPELLANT COMPANY HAD MADE THE EXPENDITURE WITH A INTENTION TO SAVE ON REVENUE EXPENDITURE BY SECURING RENT OF THE BUILDING AT THE RATE LOWER THAN THE MARKET RATE. 7. AT THE TIME OF HEARING BEFORE US, THE LEARNED CO UNSEL FOR THE ASSESSEE DID NOT PRESS THE ABOVE GROUND AND STATED THAT THE ABOVE GROUND 1(B) IS ONLY AN ALTERNATIVE CLAIM OF THE ASS ESSEE, BUT, ONCE ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 4 GROUND 1(A) OF THE ASSESSEES APPEAL IS ACCEPTED, G ROUND 1(B) WILL NOT SURVIVE. 8. IN VIEW OF THE ABOVE, GROUND NO.1(B) OF THE ASSE SSEES APPEAL IS REJECTED. ITA NO.3871/DEL/2009 ITA NO.3871/DEL/2009 ITA NO.3871/DEL/2009 ITA NO.3871/DEL/2009 9. THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XX, NEW DELHI DATED 29 TH JULY, 2009 FOR THE AY 2005-06. 10. GROUND NO.1 OF THE ASSESSEES APPEAL IS AGAINST THE DISALLOWANCE OF DEPRECIATION OF ` 1,34,85,585/-. THIS GROUND IS IDENTICAL TO GROUND NO.1 OF THE ASSESSEES APPEAL FOR AY 2004-05. FOR THE DETAILED DISCUSSION AS ABOVE, WE SET ASIDE THE ORDERS OF AUT HORITIES BELOW ON THIS POINT AND RESTORE THE MATTER TO THE FILE OF TH E ASSESSING OFFICER TO BE READJUDICATED AFRESH AS PER THE DIRECTION OF THE ITAT FOR AY 2002-03, OF COURSE, AFTER ALLOWING ADEQUATE OPPORTUNITY OF B EING HEARD. 11. GROUND NO.2 OF THE ASSESSEES APPEAL READS AS U NDER:- THE CIT(A) ERRED BOTH ON THE LAW AS WELL AS ON THE FACTS IN CONFIRMING THE DISALLOWANCE OF RS.5,44,645/- MADE B Y THE AO IN RESPECT OF THE EXPENSES INCURRED BY THE APPEL LANT FOR OBTAINING ECB LOAN WHICH HAS BEEN CLAIMED AS REVENU E EXPENDITURE UNDER SECTION 37(1) OF THE ACT BY IGNOR ING THE FACT THAT SURPLUS AMOUNT OF LOAN WAS PUT IN FIXED D EPOSIT WITH THE BANK AND INTEREST INCOME ON THE SAME IS OF FERED FOR TAX AS INCOME FROM OTHER SOURCES AFTER ADJUST ING THE COMMITMENT CHARGES RELATING TO THE AFORESAID LOAN. ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 5 12. AT THE TIME OF HEARING BEFORE US, IT IS SUBMITT ED BY THE LEARNED COUNSEL THAT DURING THE YEAR UNDER CONSIDERATION, T HE ASSESSEE HAS TAKEN THE FOREIGN CURRENCY LOAN. THE EXPENDITURE W AS INCURRED BY THE ASSESSEE BEING UPFRONT CHARGES WHILE BORROWING THE ABOVE MONEY. THE ASSESSING OFFICER HAS SPREAD OVER THE EXPENDITU RE OVER THE PERIOD OF SIX YEARS FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION VS. CIT 225 ITR 802 . HE SUBMITTED THAT ON THESE FACTS, THE DECISION OF HONBLE APEX COURT IN THE CASE OF DCIT VS. GUJARAT ALKALIES AND CHEMICALS LTD. 299 ITR 8 5 WOULD BE APPLICABLE AND NOT THE DECISION IN THE CASE OF MADR AS INDUSTRIAL CORPORATION (SUPRA). HE ALSO STATED THAT THOUGH IN AY 2005-06 THE ASSESSING OFFICER HELD THAT THE EXPENDITURE IS SPRE AD OVER SIX YEARS AND ACCORDINGLY ALLOWED ONLY 1/6 TH OF THE EXPENDITURE CLAIMED BY THE ASSESSEE, BUT, IN THE SUBSEQUENT YEAR, 1/6 TH EXPENDITURE HAD NOT BEEN ALLOWED IN EACH YEAR. HE ALSO STATED THAT THE ASSE SSEE HAS DISCLOSED SUBSTANTIAL INCOME EVERY YEAR AND IT IS IMMATERIAL FOR HIM THAT THIS SMALL AMOUNT OF ` 6,53,563/- PAID AS COMMITMENT FEE IS ALLOWED IN THI S YEAR OR SPREAD OVER SIX YEARS BUT THE ASSESSING OFF ICER IS NOT CONSISTENT IN HIS APPROACH. HE, THEREFORE, SUBMITT ED THAT THE DECISION OF HONBLE APEX COURT IN THE CASE OF GUJARAT ALKALI ES AND CHEMICALS LTD. (SUPRA) IS DIRECTLY APPLICABLE AND THEREFORE, FOLLOWING THE SAME, THE DEDUCTION SHOULD BE DIRECTED TO BE ALLOWED IN T HE YEAR UNDER CONSIDERATION. HOWEVER, IF AT ALL THE BENCH CONCUR S WITH THE VIEW OF THE REVENUE, THEN A DIRECTION SHOULD BE GIVEN TO AL LOW 1/6 TH EXPENDITURE EVERY YEAR. 13. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 14. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF B OTH THE SIDES AND HAVE ALSO PERUSED THE MATERIAL PLACED BEFORE US . WE FIND THAT THE ISSUE OF COMMITMENT CHARGES HAS BEEN CONSIDERED BY THE HONBLE ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 6 APEX COURT IN THE CASE OF GUJARAT ALKALIES AND CHEM ICALS LTD. (SUPRA). THE FACTS OF THE CASE WERE THAT THE ASSESSEE HAD ES TABLISHED A PHOSPHORIC ACID PROJECT AS AN EXTENSION TO ITS EXIS TING BUSINESS ACTIVITIES. FOR THAT PURPOSE, IT OBTAINED FOREIGN CURRENCY LOAN FROM THE IDBI WHICH IN TURN WAS REFINANCED BY COFACE. THE D EPARTMENT DISALLOWED DEDUCTION OF COMMITMENT CHARGES ON THE GROUND THAT THE PAYMENT WAS NOT IN THE NATURE OF INTEREST. THE TRI BUNAL, HOWEVER, ALLOWED THE DEDUCTION UNDER SECTION 37 OF THE INCOM E-TAX ACT, 1961, AND THE HIGH COURT ON APPEAL AFFIRMED THE ORDER OF THE TRIBUNAL. ON APPEAL, HONBLE APEX COURT HELD AS UNDER:- HELD, AFFIRMING THE DECISION OF THE HIGH COURT, TH AT THE COMMITMENT CHARGES WERE AN ADMISSIBLE DEDUCTION UNDER SECTION 37 AND THERE WAS NOT INFIRMITY ON THE PART OF THE APPELLATE TRIBUNAL IN ALLOWING THE DEDUCTION. 15. THUS, THE FACTS OF THE ASSESSEES CASE ARE IDEN TICAL TO THE FACTS BEFORE THE HONBLE APEX COURT. THE QUESTION IS WHE THER THE EXPENDITURE ON COMMITMENT CHARGES INCURRED FOR OBTA INING THE LOAN IS ADMISSIBLE AS DEDUCTION UNDER SECTION 37 OR NOT. T HE HONBLE APEX COURT HELD THE SAME TO BE AN ADMISSIBLE DEDUCTION U NDER SECTION 37. THE FACTS IN THE CASE OF MADRAS INDUSTRIAL CORPORAT ION (SUPRA) RELIED UPON BY THE ASSESSING OFFICER ARE DIFFERENT. THERE FORE, RESPECTFULLY FOLLOWING THE DECISION OF HONBLE APEX COURT IN THE CASE OF GUJARAT ALKALIES AND CHEMICALS LTD. (SUPRA), WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEDUCTION ON COMMITMENT CHARGES UNDER SEC TION 37 OF THE INCOME-TAX ACT. ACCORDINGLY, GROUND NO.2 OF THE AS SESSEES APPEAL IS ALLOWED. 16. GROUND NO.3 OF THE ASSESSEES APPEAL READS AS U NDER:- ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & ITA NOS.278/DEL/2009 & 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 3871/DEL/2009 7 THE CIT(A) ERRED BOTH ON THE LAW AS WELL AS ON THE FACTS IN CONFIRMING THE DISALLOWANCE OF RS.80,000/- MADE BY THE AO IN RESPECT OF THE AMOUNT INCURRED BY THE APPELLANT ON REPAIR AND MAINTENANCE OF THE COMPOUND INCLUDING WA TER FOUNTAIN OF THE BUILDING WHICH HAS BEEN CLAIMED AS REVENUE EXPENDITURE UNDER SECTION 37(1) OF THE ACT BY IGNOR ING THE FACT THAT THE APPELLANT COMPANY INCURRED SUCH EXPEN DITURE FOR GENUINE NEED FOR THE BUSINESS AND EXPANSION. 17. IN OUR OPINION, THIS GROUND IS RELATED TO GROUN D NO.1 AND, THEREFORE, IS ALSO SET ASIDE TO BE READJUDICATED AL ONGWITH GROUND NO.1. 18. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE DEEMED TO BE ALLOWED FOR STATISTICAL PURPOSES. DECISION PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2012. SD/- SD/- ( (( (A.D.JAIN A.D.JAIN A.D.JAIN A.D.JAIN) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 21.12.2012 VK. COPY FORWARDED TO: - 1. APPELLANT : M/S G4S SECURITY SERVICES INDIA PVT. LTD., M/S G4S SECURITY SERVICES INDIA PVT.LTD., M/S G4S SECURITY SERVICES INDIA PVT.LTD., M/S G4S SECURITY SERVICES INDIA PVT.LTD., PANCHWATI, 82A, PANCHWATI, 82A, PANCHWATI, 82A, PANCHWATI, 82A, SECTOR SECTOR SECTOR SECTOR- -- -18, GURGAON 18, GURGAON 18, GURGAON 18, GURGAON 122 016, HARYANA. 122 016, HARYANA. 122 016, HARYANA. 122 016, HARYANA. 2. RESPONDENT : DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 12(1), NEW DELHI. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR
