DCIT, New Delhi V. M/s. Central Warehousing Corp., New Delhi

ITA 2787/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5231 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 17-05-2017
• Assessment Year: 1995-1996
• Appeal Filed On: 05-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PROF S SAMPATH
• Keywords: Depreciation; Business expenditure; Earning of tax free income
• Section: 143(3); 10B; 148; 263

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 2787 & 2788/DEL/2014 (ASSESSMENT YEAR: 1995 - 96 & 1996 - 97 ) DCIT, CIRCLE - 3(1), NEW DELHI VS. CENTRAL WAREHOUSING CORP, 4/1, SIRI INSTITUTION AREA AUGUST KRANTI, HAUZ KHAS, NEW DELHI PAN:AAACC1206D (APPELLANT) (RESPONDENT) REVENUE BY : MS. RACHNA SINGH, CIT DR ASSESSEE BY: PROF. S. SAMPATH, FCA DATE OF HEARING 23/05 / 2017 DATE OF PRONOUNCEMENT 07 / 08 / 2017 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THESE ARE THE APPEALS FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - V, NEW DELHI DATED 27.02.2014 FOR THE AY 1995 - 96 AND 1996 - 97. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL IN ITA NO. 2788/DEL/2014: .1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HOLDING THAT THE DEDUCTIBLE INCOME U/S 10(29) IS TO BE COMPUTED AFTER EXCUSING DEPRECIATION AS PART OF EXPENDITURE AND TAKI NG GROSS RECEIPTS FROM WAREHOUSING AND CFS/ICD IGNORING THE FACT THAT DEPRECIATION IS CLAIMED LIKE ANY OTHER BUSINESS EXPENSES IN THE P&L A/C WHICH GOES ON TO REDUCE THE TAX LIABILITY OF THE ASSESSEE. 3. THE ASSESSEE IS ESTABLISHED U/S 3 OF THE WAREHOUSING CORPORATION ACT 1962 WITH THE OBJECT OF MARKETING OF COMMODITIES AND IS DERIVING ITS INCOME FROM LETTING OF GOWDOWNS . FOR THIS YEAR THE COORDINATE BENCH SET ASIDE THE ISSUE BECK TO THE FILE OF LD ASSESSING OFFICER FOR T HE PURPOSE OF VERIFYING EXEMPTION U/S 10(29) OF THE ACT WITH RESPECT TO CERTAIN INCOME. THE LD ASSESSING OFFICER VIDE ORDER DATED 31.12.2009 PASSED ORDER U/S 254 READ WITH SECTION 263 READ WITH SECTION 148 READ WITH SECTION 143(3) OF THE ACT. THE LD ASSESS ING OFFICER HELD THAT ASSESSEE IS CARRYING ON TWO DIFFERENT ACTIVITIES: ONE, WHICH IS PRESCRIBED UNDER THE CENTRAL WAREHOUSING ACT AND SECOND WITH REGARD TO CUSTODIAN OF ICD AND CFS. THEREFORE, HE COMPUTED THE 2 | P A G E EXEMPTION U/S 10(29) BY PROPORTIONATELY ALLOCA TE THE TOTAL EXPENDITURE INCURRED BY THE ASSESSEE FOR TOTAL BUSINESS CARRIED OUT BY THE ASSESSEE. THEREBY, HE REDUCED RS. 922456950/ - FROM TOTAL WAREHOUSING RECEIPT OF RS. 1137862760/ - AND GRANTED EXEMPTION OF RS. 215405810/ - . THE ASSESSEE AGGRIEVED WITH T HE ORDER PREFERRED APPEAL BEFORE THE LD CIT(A), WHO PASSED AN ORDER ON 27.02.2014 AND VIDE GROUND NO. 8, 9 AND 10 RECOMPUTED THE EXEMPTION U/S 10(29) AT RS. 3636 LAKHS. AGAINST THIS REVENUE IS IN APPEAL CONTESTING THAT LD CIT(A) HAS COMPUTED THE DEDUCTION BY EXCLUDING THE DEPRECIATION FROM THE TOTAL EXPENDITURE. 4. THE LD CIT DR SUBMITTED WRITTEN SUBMISSION HOLDING THA T DEPRECIATION SHOULD HAVE BEEN REDUCED PROPORTIONATELY WHILE WORKING OUT THE EXACT AMOUNT OF EXEMPTION U/S 10(29) OF THE ACT. SHE SUBMITTED IF DEPRECIATION WERE NOT REDUCED FROM THE GROSS EXEMPT INCOME ALONG WITH EXPENDITURE THEN IT WOULD HAPPEN THAT DEPR ECIATION ALLOWANCE OF ASSETS, WHICH ARE USED FOR EXEMPT BUSINESS, IS BEING ALLOWED AS A DEDUCTION FROM TAXABLE INCOME OF THE ASSESSEE. SHE ELABORATED THAT BECAUSE OF THE ORDER OF THE LD CIT(A) THE DEPRECIATION OF EXEMPT BUSINESS IS ALLOWED AGAINST INCOME O F TAXABLE BUSINESS. FOR THIS PROPOSITION SHE RELIED UPON THE LEGAL PROVISION ALLOWING DEPRECIATION VIS - A - VIS ALLOWABILITY OF DEPRECIATION U/S 11, 10A AND 10B ETC. 5. THE LD AR VEHEMENTLY SUBMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSE E BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE IN ITA NO. 1455 AND 1459/DEL/2014 DATED 29.07.2016. 6. THE LD DR VEHEMENTLY CONTESTED THAT IN THAT ORDER THE COORDINATE BENCH HAS RELIED UPON THE DECISION OF NECTAR BEVERAGES PVT. LTD VS. DCIT 314 ITR 314 WHICH IS DISTINGUISHABLE ON THE FACTS. SHE FURTHER SUBMITTED THAT DECISION OF SPECIAL BENCH RELIED UPON BY THE ITAT IN CASE OF VISHNU ANANTA MAHAJAN 3002/AHD/2009 ALSO DO NOT APPLY. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF COORDINATE BENCH. THE COORDINATE BENCH HAS DECIDED THIS ISSUE VIDE PARA NO. 5 RELYING UPON THE DECISION OF HON'BLE DELHI HIGH COURT AS WELL AS SPECIAL BENCH. IN VIEW OF THIS JUDICIAL DISCIPLINE DEMANDS THAT SAME SHOULD BE FOLLOWED. FU RTHER NOW IT HAS COME TO OUR NOTICE THAT ABOVE DECISION OF THE COORDINATE BENCH HAVE BEEN FURTHER AFFIRMED BY THE HON'BLE DELHI HIGH COURT IN ITA NO. 584 TO 589/2017 DATED 01/08/2017 WHEREIN, HON'BLE HIGH COURT HAS HELD THAT THERE IS NO ERROR IN THE ORDER OF CIT(A) AND ITAT IN CONCLUDING THAT FOR THE PURPOSE OF SECTION 10(29) OF THE ACT DEPRECIATION IS NOT AN EXPENSE BUT AN ALLOWANCE. IN VIEW OF THIS RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT THE APPEAL OF THE REVENUE IS DISMISSED. 3 | P A G E 8. NOW WE COME TO THE APPEAL OF THE REVENUE FOR THE AY 1995 - 96 WHERE THE FACTS ARE IDENTICAL. HENCE, RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT THE APPEAL OF THE REVENUE IS DISMISSED. 9. IN THE RESULT BOTH THE APPEALS OF THE REVENUE ARE DISMIS SED. ORDER PRO NOUNCED IN THE OPEN COURT ON 0 7 / 08 / 2017 . - S D / - - S D / - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 0 7 / 08 / 2017 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI