DOLPHIN OFFSHRORE ENTERPARISES, MUMBAI V. DCIT CIR 3(1), MUMBAI

ITA 2922/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62279 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-04-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 13-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S K MOHANTY
• Assessee Lawyers: M SUBRAMANIAN
• Keywords: Revenue expenditure
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI DINESH KUMAR AGARWAL (J.M.) AND SHRI RA JENDRA (A.M.) ITA NO. 2992/MUM/2010 ASSESSMENT YEAR : 2005-06 M/S DOLPHIN OFFSHORE ENTERPRISES (I) LTD., 1001, RAHEJA CENTRE, 214, NARIMAN POINT, MUMBAI 400001. PAN : AAACD 0522D VS. DY. COMMISSIONER OF INCOME TAX 3(1), MUMBAI.. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI M. SUBRAMANIAN RESPONDENT BY : SHRI S.K. MOHANTY DATE OF HEARING 18.4.2012 DATE OF PRONOUNCEMENT 25.4.2012 O R D E R PER DINESH KUMAR AGARWAL, J.M. THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 05.01.2010 PASSED BY THE LD. CIT (A) FOR THE A.Y. 2005-06. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING SERVICES MAINL Y TO THE OFFSHORE OIL AND GAS, SHIPPING AND MARITIME INDUSTRIES. DURING T HE COURSE OF ASSESSMENT PROCEEDINGS IT WAS, INTER ALIA, OBSERVED BY THE A.O. THAT THE ITA NO. 2922/MUM/2010 M/S DOLPHIN OFFSHORE ENTERPRISES (I) LTD. 2 ASSESSEE HAS MADE THE PROVISION OF RS. 15 LACS TOWA RDS DYE DOCKING EXPENSES. ON BEING ASKED, IT WAS SUBMITTED BY THE ASSESSEE THAT THE PROVISION WAS MADE AND NO ACTUAL EXPENSES ON ACCOUN T OF DYE DOCKING WAS INCURRED. HOWEVER, THE A.O. WHILE OBSERVING TH AT IN VIEW OF THE METHOD OF ACCOUNTING FOLLOWED BY THE ASSESSEE FOR T HE EARLIER PERIOD WHERE PROVISION MADE WERE ALLOWED TO THE EXTENT OF ACTUAL EXPENSES, IN THE CURRENT YEAR SINCE NO ACTUAL EXPENSES WERE INCU RRED, HE DISALLOWED THE ENTIRE PROVISION OF EXPENSES OF RS. 15 LACS AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) WHILE OBSERVING THAT SINCE THE APPELLANT IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THEREFORE, ASCERTAINED LIABILITIES ONLY CAN BE ALLO WED TO THE APPELLANT AGAINST THE INCOME OF THE CURRENT YEAR, UPHELD THE DISALLOWANCE MADE BY THE A.O. 3. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) T HE ASSESSEE IS IN APPEAL BEFORE US TAKING THE FOLLOWING GROUNDS OF AP PEAL:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF PROVISION F OR DRY- DOCKING EXPENSES OF RS. 15,00,000/-. 2. YOUR PETITIONER HUMBLY SUBMITS THAT DRY-DOCKING EXPENSES ARE REVENUE IN NATURE AND ARE MANDATORILY EXPENDED TWICE IN A PERIOD OF 5 YEARS AND HENCE, RECURRING A NNUAL REVENUE EXPENDITURE CAN BE ALLOWED TO BE SPREAD OVE R THE SPAN OF 5 YEARS. 3. DR-DOCKING EXPENSES ARE NOT COVERED UNDER THE AM BIT OF THE PROVISIONS OF SECTION 43B (DEDUCTIONS TO BE ALL OWED ONLY ON ACTUAL PAYMENT). AS PER THE MERCANTILE SYSTEM O F ACCOUNTING FOLLOWED BY YOUR PETITIONER, THE PROVISI ON FOR AN ABSOLUTELY CERTAIN REVENUE EXPENDITURE MADE IS ALLO WABLE AS IN THE PAST. ITA NO. 2922/MUM/2010 M/S DOLPHIN OFFSHORE ENTERPRISES (I) LTD. 3 4. YOUR PETITIONER PRAYS THAT THE DISALLOWANCE OF R S. 15,00,000/- BE DELETED AND/OR SET ASIDE. 4. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE A SSESSEE WHILE REITERATING THE SAME SUBMISSIONS AS SUBMITTED BEFOR E THE A.O. AND LD. CIT(A) FAIRLY SUBMITS THAT IN THE YEAR UNDER CONSID ERATION THE ASSESSEE HAS NOT INCURRED ANY EXPENSES ON THIS ACCOUNT AND O NLY PROVISION FOR SUCH EXPENSES WAS MADE, THEREFORE, IN VIEW OF THE O RDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 4699 TO 4705/MUM/07 ORDER DTD. 25.3.2010 FOR A.YS 1998-99 TO 2004-05 THE ISSU E MAY BE SET ASIDE TO THE FILE OF THE A.O. HE ALSO PLACED ON RECORD THE C OPY OF THE SAID ORDER OF THE TRIBUNAL. 5. ON THE OTHER HAND, THE LD. D.R. SUPPORTS THE ORD ER OF THE A.O. AND LD. CIT(A). 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS O F THE RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FI ND THAT THE FACTS ARE NOT IN DISPUTE IN ASMUCH AS IT IS ALSO NOT IN DISPU TE THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND HAS C LAIMED RS. 15 LACS AS PROVISION FOR DYE-DOCKING EXPENSES WITHOUT INCURRIN G ANY SUCH ACTUAL EXPENDITURE. THE TRIBUNAL IN ASSESSEES OWN CASE (S UPRA) VIDE PARA 15 OF THE ORDER (SUPRA) OBSERVED AND HELD THAT . THE FACTS IN THE PRESENT HAS TO BE SEEN WHETHER THE EXPENDITURE CLAIMED HAS INCURRED DURING THE YEAR OR NOT AS THE LD. CIT(A) FOR A.Y. 2001-02 HAS ALLOWED THE ISSUE IN ITA NO. 2922/MUM/2010 M/S DOLPHIN OFFSHORE ENTERPRISES (I) LTD. 4 FAVOUR OF THE ASSESSEE ON THE BASIS OF ACTUAL INCUR RING OF EXPENDITURE. THIS ASPECT HAS NOT BEEN EXAMINED. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE AUTHORITIES BELOW AND RESTORE THIS ISSUE TO THE FILE OF THE A.O. HOWEVER IN THE PRESENT CASE THERE IS NO DISPUTE THA T THE ASSESSEE HAS NOT INCURRED ANY EXPENDITURE DURING THE YEAR UNDER CONS IDERATION, THEREFORE, WE DO NOT FIND ANY MERIT IN THE PLEA OF THE LD. COU NSEL FOR THE ASSESSEE THAT FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSE ES OWN CASE (SUPRA) THE ISSUE MAY BE SET ASIDE TO THE FILE OF THE A.O. THI S BEING SO AND KEEPING IN VIEW THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING AND IN THE ABSENCE OF ANY MATERIAL TO SH OW THE BASIS OF CLAIM OF PROVISION OF RS. 15 LACS OF DYE-DOCKING EXPENSES , WE ARE OF THE VIEW THAT THE LD. CIT(A) WAS FULLY JUSTIFIED IN CONFIRMI NG THE DISALLOWANCE OF DYE-DOCKING EXPENSES OF RS. 15 LACS MADE BY THE A.O . THE GROUNDS TAKEN BY THE ASSESSEE ARE, THEREFORE, REJECTED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON THIS 25 TH DAY OF APRIL, 2012. SD/ - (RAJENDRA) ACCOUNTANT MEMBER SD/ - (DINESH KUMAR AGARWAL) JUDICIAL MEMBER MUMBAI, DATED 25 TH APRIL , 2012. RK ITA NO. 2922/MUM/2010 M/S DOLPHIN OFFSHORE ENTERPRISES (I) LTD. 5 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. COMMISSIONER OF INCOME TAX (APPEALS)- 7, MUMBAI 4. COMMISSIONER OF INCOME TAX 3, MUMBAI 5. DEPARTMENTAL REPRESENTATIVE, BENCH D, MUMBAI //TRUE COPY// BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI