Kivi Labs Limited, Baroda V. The Income tax Officer,Ward-1(3), Baroda

ITA 2820/AHD/2010

• Counselvise Citation: 282020514 RSA 2010
• Duration Of Justice: 3 year(s) 1 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 20-11-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 06-10-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C MATHEWS
• Assessee Lawyers: SUNIL TALATI
• Keywords: Capital asset; Depreciation; Additional depreciation; Valuation report; Capital expenditure
• Section: 32

Judgement Text

, , , , D, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . . . . , , , , ! ! ! ! ' #$ ' #$ ' #$ ' #$ , , , , % % % % BEFORE S/SHRI N.S. SAINI, ACCOUNTANT MEMBER AND KUL BHARAT, JUDICIAL MEMBER) ITA NO.2820/AHD/2010 [ASSTT.YEAR : 2006-2007] KIVI LABS LTD. D-7, DHANLAXMI COMPLEX NR. SARASWATI COMPLEX MANJALPUR, BARODA. PAN : AABCK 9388 D /VS. ITO, WARD-1(3) BARODA. ( (( ( '( '('( '( / APPELLANT) ( (( ()*'( )*'( )*'( )*'( / RESPONDENT) +$ , - / ASSESSEE BY : SHRI SUNIL TALATI / , - / REVENUE BY : SHRI K.C. MATHEWS, SR.DR '0 , $1/ DATE OF HEARING : 20 TH NOVEMBER, 2013 234 , $1/ DATE OF PRONOUNCEMENT : 27-11-2013 5 / O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT( A)-IV, BARODA DATED 5.8.2010. 2. THE GROUND NO.1 OF THE APPEAL IS GENERAL IN NATU RE, AND HENCE REQUIRES NO ADJUDICATION BY US. ITA NO.2820/AHD/2010 -2- 3. IN GROUND NO.2 OF THE APPEAL, THE GRIEVANCE OF T HE ASSESSEE IS THAT THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 3,66,650/- BEING BANK LOAN EXPENSES WITHOUT CONSIDE RING THE FULL FACTS OF THE CASE. 4. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLOW ED THE EXPENSES OF ` 3,66,650/- INCURRED FOR PREPARING PNB LOAN PAPERS, TITLE CLEARANCE CHARGES, VALUATION REPORT CHARGES, CONSULTING CHARGES ETC. IN CONNECTION WITH THE TERM LOAN TAKEN FOR ACQUIRING CAPITAL ASSETS BY HOLDING THE SAME TO BE CAPITAL EX PENDITURE. 5. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ORDE R OF THE AO BY OBSERVING THAT THE PROVISO TO SECTION 36(1)(I II) STATES THAT THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FO R ACQUISITION OF ASSETS FOR EXTENSION OF EXISTING BUSINESS FROM THE DATE OF BORROWAL TO THE DATE ASSETS ARE PUT TO USE, IS NOT ALLOWABLE AS DEDUCTION. HE FURTHER OBSERVED THAT THE DECISION I N THE CASE OF SUPER SPINNING MILLS LTD., 290 ITR 107 (MAD) AND SI VAKAMI MILLS LTD. 95 TAXMAN 73 (SC) ETC. PERTAINED TO THE PERIOD PRIOR TO THE INSERTION OF PROVISO BELOW SECTION 36(1)(III) W .E.F. 1.4.2004 AND ARE NOT APPLICABLE TO THE ASSESSEES CASE. 6. BEFORE US, THE LEARNED AR OF THE ASSESSEE FAIRLY CONCEDED THAT THE ISSUE IS COVERED AGAINST THE ASSESSEE. TH EREFORE, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS DISMISSED. ITA NO.2820/AHD/2010 -3- 7. IN GROUND NO.3, THE GRIEVANCE OF THE ASSESSEE IS THAT THE LEARNED CIT(A) ERRED IN MAKING ADDITION OF ` 42,740/- BEING TERM LOAN INTEREST. 8. BRIEF FACTS OF THE CASE ARE THAT THE AO DISALLOW ED INTEREST OF ` 42,740/- BEING TERM LOAN INTEREST. ACCORDING TO HI M, IT PERTAINED TO TERM LOAN AND WAS RELATED TO ACQUISITI ON OF CAPITAL ASSETS. 9. BEFORE THE LEARNED CIT(A), THE ASSESSEE CONTENDE D THAT DEPRECIATION/ADDITIONAL DEPRECIATION BE ALLOWED AS PER PROVISIONS OF SECTION 32 OF THE ACT ON THE SAID EXPENDITURE. 10. THE LEARNED CIT(A) OBSERVED THAT IN VIEW OF PRO VISO BELOW SECTION 36(1)(II), DISALLOWANCE OF ` 42,740/- IS UPHELD SUBJECT TO ALLOWANCE OF DEPRECIATION AS PER LAW. 11. BEFORE US, THE LEARNED AR OF THE ASSESSEE SUBMI TTED THAT THE INTEREST OF ` 42,740/- PERTAINED TO WORKING CAPITAL LOAN TAKEN BY THE ASSESSEE. HE REFERRED TO THE ASSESSMENT ORDER PAGE NO.3 ITEM(III) AND POINTED OUT THERE FROM THAT THE ASSES SEE HAD AVAILED TERM LOAN AND WORKING CAPITAL FACILITY FOR PUNJAB N ATIONAL BANK TO THE TUNE OF ` 115 LAKHS AND ` 20 LAKHS RESPECTIVELY. THUS, IT WAS THE SUBMISSION OF THE ASSESSEE THAT THE MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE AO FOR VERIFICATIO N, AND IF IT WAS FOUND THAT THE INTEREST OF ` 42,740/- PERTAINED TO WORKING CAPITAL LOAN, THEN DEDUCTION FOR THE SAME SHOULD BE ALLOWED TO THE ITA NO.2820/AHD/2010 -4- ASSESSEE, AS IN THAT CASE, INTEREST WOULD BE REVENU E EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE BUSINESS PU RPOSE OF THE ASSESSEE UNDER SECTION 36(1)(III) OF THE ACT. THE LEARNED DR DID NOT HAVE ANY OBJECTION TO THESE SUBMISSIONS OF THE ASSESSEE. 12. WE, THEREFORE, SET ASIDE THE ORDERS OF THE LOWE R AUTHORITIES AND REMAND THE MATTER BACK TO THE FILE OF THE AO FO R VERIFYING THE FACT, WHETHER THE INTEREST OF ` 42,740/- PAID BY THE ASSESSEE PERTAINED TO WORKING CAPITAL LOANS OR NOT. IF IT I S FOUND SO, THEN DEDUCTION SHOULD BE ALLOWED TO THE ASSESSEE IN THE COMPUTATION OF INCOME, BECAUSE IN THAT CASE, THE INTEREST PAID WOU LD BE FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE, AND THUS A N ALLOWABLE EXPENSES UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE IS ALSO DIRECTED TO FILE ALL DETAILS AND EVIDENCES, AS AND WHEN CALLED UPON BY THE AO. THE AO SHALL ALLOW REASONABLE OPPORTUN ITY OF HEARING TO THE ASSESSEE BEFORE ADJUDICATION OF THE ISSUE AFRESH. THUS, THIS GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 13. THE GROUND NO.4 OF THE APPEAL IS DIRECTED AGAIN ST THE ORDER OF THE LEARNED CIT(A) IN CONFIRMING THE ADDITION OF ` 97,000/- BEING ROC CHARGES. 14. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I NCURRED EXPENSES OF ` 97,000/- BY WAY OF FEE PAID TO ROC FOR INCREASE IN AUTHORIZED CAPITAL OF THE ASSESSEE-COMPANY FROM ` 5.00 LAKHS TO ` 50.0 LAKHS. THE AO TREATED THE SAME AS CAPITAL EXP ENDITURE AND ITA NO.2820/AHD/2010 -5- DISALLOWED THE DEDUCTION FOR THE SAME IN COMPUTING THE INCOME OF THE ASSESSEE. 15. ON APPEAL, THE LEARNED CIT(A) CONFIRMED THE ACT ION OF THE AO BY FOLLOWING THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIAL DEVELOPMENT COR PORATION LTD., (1997) 225 ITR 792 (SC) WHERE IT WAS HELD THA T FILING FEE PAID TO ROC FOR ENHANCEMENT OF SHARE CAPITAL IS CAP ITAL EXPENDITURE. HE ALSO PLACED RELIANCE ON THE HONBL E SUPREME COURT DECISION IN THE CASE OF BROOKE BOND INDIA LTD ., (1997) 225 ITR 798 (SC) WHEREIN IT WAS HELD THAT EXPENSES IN C ONNECTION WITH THE ISSUE OF FRESH LOT OF SHARE WERE HELD TO B E CAPITAL EXPENDITURE. 16. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE. THEREF ORE, WE DISMISS THIS GROUND OF THE ASSESSEE. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED FOR STATISTICAL PURPOSE. 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.