M/s. Inayti Footwear Ltd., Kanpur V. Dy. Commissioner of Income Tax-6, Kanpur

ITA 298/LKW/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 100328 (ITAT-LUCKNOW)
• Duration Of Justice: 2 year(s) 3 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 24-07-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 29-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R K RAM
• Keywords: Depreciation; Business expenditure; Revenue expenditure; Capital expenditure
• Section: 80IB; 154

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NOS.298 /LKW/2013 ASSESSMENT YEARS 2008 09 DCIT 6, KANPUR VS M/S INAYATI FOOTWEAR LTD., SULTAN VILLA, JAJMAU, KANPUR. PAN: AAACI6893G (RESPONDENT) (APPELLANT) ITA NOS.299 & 300/LKW/2013 ASSESSMENT YEARS 2008 09 DCIT 6, KANPUR VS M/S INAYATI FOOTWEAR LTD., SULTAN VILLA, JAJMAU, KANPUR. PAN: AAACI6893G (RESPONDENT) (APPELLANT) SHRI RAKESH GARG, ADVOCATE APPELLANT BY SHRI R. K. RAM, SR. DR RESPONDENT BY 24/07/2015 DATE OF HEARING 21 /08/2015 DATE OF PRONOUNCEMENT O R D E R PER A. K. GARODIA, A.M. THERE ARE TWO APPEALS OF THE ASSESSEE FOR A.Y. 2008 09, OUT OF WHICH, ONE APPEAL IS ARISING OUT OF PROCEEDINGS U/S 154 AND THE SECOND APPEAL IS ARISING OUT OF ASSESSMENT PROCEEDINGS U/S 143 (3). THE THIRD APPEAL IS ALSO FILED BY THE ASSESSEE FOR A.Y. 2009 10 AND THIS APPEAL IS ARISING OUT OF ASSESSMENT PROCEEDING S U/S 143 (3). 2. ALL THESE THREE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2 3. FIRST, WE TAKE UP THE APPEAL OF THE ASSESSEE FOR A.Y. 2008 09 ARISING OUT OF PROCEEDINGS U/S 154. 4. THE GROUNDS RAISED ARE AS UNDER: - 1. BECAUSE THE CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN ARBITRARILY UPHOLDING THE DISALLOWANCE OF A SUM OF RS.4,75,063/ - ON ACCOUNT OF DEPRECIATION, ALLEGED TO HAVE BEEN CLAIMED IN EXCESS, WITHDRAWN VIDE ORDER U/S 154 O F THE IT. ACT, 1961 DATED 15.09.2011, WHICH ORDER OF THE ASSESSING OFFICER IS CONTRARY TO FACTS, BAD IN LAW AND BE QUASHED. 2. BECAUSE THE CIT (APPEALS) HAS ERRED ON FACTS AND IN LAW IN UPHOLDING THE DISALLOWANCE OF RS.4,75,063/ - OUT OF DEPRECIATION CLAIM ED BY THE ASSESSEE. 3. BECAUSE THE CIT (APPEALS) HAS FAILED TO APPRECIATE THAT DEPRECIATION ON MOULDS WITH SHOE PLATES WAS WRONGLY CLAIMED @30% IN THE DEPRECIATION CHART ON THE TOTAL EXPENDITURE OF RS.23,47,550/ - AS AGAINST THE ENTIRE EXPENDITURE BEING OF REVENUE NATURE ITSELF SHOULD OUGHT TO HAVE BEEN ALLOWED AS ALLOWABLE BUSINESS EXPENDITURE. 4. BECAUSE THE CIT (APPEALS) HAS FAILED TO APPRECIATE AND HAS ERRED IN LAW IN NOT CONSIDERING THE DECISION OF THE APEX COURT IN THE CASE OF MAHALAXMI TEXTILES MILL S LTD. 66 ITR 710 AND THE DECISION OF PUNJAB HIGH COURT IN THE CASE OF CIT VS. MALERKOTLA STEELS AND ALLOYS PVT. LTD. 336 ITR 42, THE ACTION OF THE CIT (APPEALS) UPHOLDING THE ORDER PASSED BE QUASHED. 4. IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE TH AT ORDER U/S 154 IS DATED 15.09.2011. HE PLACED RELIANCE ON THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - A ) CIT VS. MALERKOTLA STEELS AND ALLOYS P. LTD., 336 ITR 49 (P & H) B ) CIT VS. SUNBEAM AUTO LTD., ITA NO. 351/2012 DATED 30.05.2012 (DELHI) COPY ON PAGES 11 TO 13 OF THE PAPER BOOK. C ) CIT VS. MAHALAKSHMI TEXTILE MILLS, 60 ITR 710 (SC) 3 5. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT IN THE ORDER PASSED BY THE A.O. U/S 154 ON 15.09.2011, IT IS NOTED BY THE A.O. THAT THE ASSESSMENT WAS COMPLETED U/S 143 (3) ON 03.12.2010. HE ALSO OBSERVED THAT I MISTAKE APPARENT FROM RECORD WAS NOTICED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON TOOLS, MOULDS WITH SHOE PLATES, SHOE LASTS @ 30% WHILE DEPRECIATION SHOULD BE ALLOWED @ 15%. WHEN THE A.O. ISSUED SHOW CAUSE NOTICE TO THE ASSESSEE IN THIS REGARD, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ASSESSEE WRONGLY CLAIMED DEPRECIATION ON THIS ITEM BUT IN FACT, IT IS REVENUE EXPENDITURE. THE A.O . DID NOT FIND ANY MERIT IN THIS CONTENTION AND HE MADE DISALLOWANCE OF RS. 475,063/ - BEING DEPRECIATION EXCESS CLAIMED AND ALLOWED. LEARNED CIT (A) UPHELD THE ASSESSMENT ORDER AND THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. BEFORE US, THIS IS NOT THE CLA IM OF THE ASSESSEE THAT DEPRECIATION ON TOOLS, MOULDS WITH SHOE PLATES & SHOE LASTS IS ALLOWABLE @ 30%. THE CLAIM IS THIS THAT THIS EXPENSE IS REVENUE EXPENDITURE. IN OUR CONSIDERED OPINION, WHETHER EXPENDITURE IS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE IS NOT AN ISSUE OF APPARENT MISTAKE, WHICH CAN BE DECIDED U/S 154. THIS IS ADMITTED POSITION THAT THE ASSESSEE HAS ITSELF TREATED THIS EXPENDITURE AS CAPITAL EXPENDITURE AND CLAIMED DEPRECIATION THEREON @ 30%. THE CORRECT RATE OF DEPRECIATION CAN BE AN IS SUE OF APPARENT MISTAKE AND IT CAN BE DECIDED IN THE PROCEEDINGS U/S 154 BUT WHETHER THE EXPENDITURE IS CAPITAL OR REVENUE IS A HIGHLY DEBATABLE ISSUE AND SUCH CLAIM CANNOT BE ENTERTAINED AND DECIDED IN 154 PROCEEDINGS. THEREFORE, WE FIND NO MERIT IN THE C ONTENTIONS OF THE ASSESSEE. 7. MOREOVER, EVEN IF WE EXAMINE THE APPLICABILITY OF THREE JUDGMENTS CITED BY THE LEARNED AR OF THE ASSESSEE, WE FIND THAT THE SAME ARE NOT APPLICABLE IN THE FACTS OF THE PRESENT CASE. THE FIRST JUDGMENT IS OF HONBLE PUNJAB & 4 HARYANA HIGH COURT RENDERED IN THE CASE OF CIT VS. MALERKOTLA STEELS AND ALLOYS P. LTD. (SUPRA). IN THAT CASE, THE EXPENDITURE IN DISPUTE WAS ON ACCOUNT OF REPLACEMENT OF MOULDS. IN THE PRESENT CASE, THE EXPENSES IS NOT FOR REPLACEMENT OF MOULDS BECAUSE IF THE EXISTING MOULDS ARE BEING REPLACED, THERE WILL BE INCOME ON ACCOUNT OF SALE OF SCRAP GENERATED OUT OF DISCARDED/DAMAGED MOULDS OR IF THE SCRAP IS NOT SOLD, VALUE OF CLOSING STOCK OF SCRAP IS TO BE TAKEN INTO ACCOUNT. THE ASSESSEE HAS NOT SHOWN THAT AN Y SUCH INCOME ON ACCOUNT OF SALE OR CLOSING STOCK OF SCRAP WAS ACCOUNTED FOR BY THE ASSESSEE. IT MEANS, THE EXPENDITURE IN THE PRESENT CASE IS NOT FOR REPLACEMENT OF MOULDS. HENCE, THIS JUDGMENT IS NOT APPLICABLE. 8. THE SECOND JUDGMENT IS OF HONBLE DELH I HIGH COURT RENDERED IN THE CASE OF CIT VS. SUNBEAM AUTO LTD. (SUPRA). IN THAT CASE, THE TRIBUNAL NOTED AS PER PARA 5 OF THAT JUDGMENT THAT THE MOULDS AND DIES DID NOT HAVE LONGEVITY AND WERE REPLACED FREQUENTLY. UNDER THESE FACTS, IT WAS HELD THAT THE EX PENDITURE ON MOULDS AND DIES WAS REVENUE EXPENDITURE. IN THE PRESENT CASE, WE HAVE ALREADY NOTED THAT THE ASSESSEE HAS NOT SHOWN THAT ANY SUCH INCOME ON ACCOUNT OF SALE OR CLOSING STOCK OF SCRAP WAS ACCOUNTED FOR BY THE ASSESSEE. IT MEANS, THE EXPENDITURE IN THE PRESENT CASE IS NOT FOR REPLACEMENT OF MOULDS. HENCE, THIS JUDGMENT IS ALSO NOT APPLICABLE. 9. THE THIRD JUDGMENT IS OF HONBLE APEX COURT RENDERED IN THE CASE OF CIT VS. MAHALAKSHMI TEXTILE MILLS (SUPRA). IN THAT CASE, IT WAS HELD BY HONBLE APEX COURT THAT WHEN THE TRIBUNAL IS EXAMINING THE ISSUE REGARDING ALLOWABILITY OF THE DEDUCTION OF RS. 93,215/ - IT IS IMMATERIAL AS TO WHETHER THE ALLOWANCE WAS ADMISSIBLE UNDER ONE HEAD OR THE OTHER AND THE TRIBUNAL HAD THE JURISDICTION TO ADMIT THAT THE EXPE NDITURE IS A PERMISSIBLE ALLOWANCE IN COMPUTATION OF THE TAXABLE INCOME ALTHOUGH UNDER DIFFERENT SECTION. HENCE, AS PER THIS JUDGMENT, THE TRIBUNAL CAN AND SHOULD CONSIDER IF THE ASSESSEE CLAIMS THAT THE EXPENDITURE IS ALLOWABLE UNDER SOME DIFFERENT SECTIO N. BUT THIS 5 JUDGMENT IS NOT IN COURSE OF PROCEEDINGS U/S 154 AND THEREFORE, NOT APPLICABLE IN THE PRESENT CASE. MOREOVER, WE HAVE EXAMINED THE CLAIM OF THE ASSESSEE THAT THE EXPENDITURE IS REVENUE EXPENDITURE IN THE LIGHT OF TWO JUDGMENTS AND FOUND THAT IN THE PRESENT CASE, THE ASSESSEE COULD NOT ESTABLISH THAT THE EXPENDITURE IN DISPUTE IS REVENUE EXPENDITURE BECAUSE THIS IS NOT THE CASE OF THE ASSESSEE THAT THE MOULDS AND DIES ARE FREQUENTLY REPLACED. HENCE, THIS JUDGMENT IS ALSO NOT APPLICABLE. 10. IN T HE RESULT, THIS APPEAL OF THE ASSESSEE IS DISMISSED. 11. NO T, WE TAKE UP THE SECOND APPEAL OF THE ASSESSEE FOR A.Y. 2008 09 ARISING OUT OF PROCEEDINGS U/S 143 (3). 12. AS PER GROUNDS NO. 1 TO 4, THE ONLY ONE GRIEVANCE OF THE ASSESSEE IS ABOUT NOT ALLO WING DEDUCTION U/S 80IB OF THE I. T. ACT IN RESPECT OF DUTY DRAW BACK INCOME OF RS. 153,25,958/ - . 13. BOTH SIDES AGREED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE BY THE JUDGMENT OF HON'BLE APEX COURT RENDERED IN THE CASE OF LIBERTY INDIA, 317 ITR 21 8. RESPECTFULLY FOLLOWING THIS JUDGMENT, WE DECLINE TO INTERFERE IN THE ORDER OF CIT (A) ON THIS ISSUE. THESE GROUNDS ARE REJECTED. 14. AS PER GROUND NO. 5, THE GRIEVANCE OF THE ASSESSEE IS ABOUT DECISION OF CIT (A) TO THE EFFECT THAT SUBSIDY OF RS. 21,53 ,803/ - IS PART OF ACTUAL COST OF PLANT & MACHINERY BUT THE CLAIM OF THE ASSESSEE IS THAT THE SAID SUBSIDY IS CAPITAL SUBSIDY FOR SETTING UP PLANT IN BACKWARD AREA AND NOT PART OF ACTUAL COST. 15. IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT ON PAGE S 9 & 10 OF THE PAPER BOOK IS THE LETTER DATED 12.08.2009 ABOUT APPROVAL OF SUBSIDY AND IN PARTICULAR, OUR ATTENTION WAS DRAWN TO PARA (V) OF THIS LETTER. HE ALSO 6 SUBMITTED THAT AS PER THIS PARA, IF THE UNIT OF THE ASSESSEE BECOMES NON OPERATIONAL WITHIN T WO YEARS, THE ASSESSEE HAS TO REFUND THE SUBSIDY AND THEREFORE, THE SUBSIDY IS CONDITIONAL. HE ALSO SUBMITTED THAT FOR THIS REASON, IT CANNOT BE SAID THAT IT IS PART OF ACTUAL COST. LEARNED DR OF THE REVENUE SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 16. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT LEARNED CIT HAS FOLLOWED TWO JUDGMENTS OF HONBLE APEX COURT RENDERED IN THE CASE OF SAHNEY STEEL, 228 ITR 253 AND IN THE CASE OF RAJA RAM MAIZE PRODUCTS, 251 ITR 427 AND LEARNED AR OF THE ASSESSEE COULD NOT SHOW AS TO WHAT IS THE INFIRMITY IN THE ORDER OF CIT (A) IN FOLLOWING THESE TWO JUDGMENTS OR HOW THESE JUDGMENTS ARE NOT SUPPORTING THE CASE OF THE REVENUE. NOW, WE EXAMINE THE CLAUSE (V) OF THE SUBSIDY SANCTION LETTER STATING THAT IF THE UNIT O F THE ASSESSEE BECOMES NON OPERATIONAL WITHIN TWO YEARS, THE ASSESSEE HAS TO REFUND THE SUBSIDY. NOW WE ARE IN THE YEAR 2015 AND THIS IS NOT THE CASE OF THE ASSESSEE THAT THE ASSESSEE HAS REFUNDED THE SUBSIDY AS PER THIS CLAUSE AND HENCE, IN OUR OPINION, T HIS CLAUSE HAS NO RELEVANCE IN THE FACTS OF THE PRESENT CASE. HENCE, ON THIS ISSUE ALSO, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF CIT (A). 17. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 18. NO T, WE TAKE UP THE APPEAL OF TH E ASSESSEE FOR A.Y. 2009 10 ARISING OUT OF PROCEEDINGS U/S 143 (3). 19. AS PER GROUNDS NO. 1 TO 2, THE ONLY ONE GRIEVANCE OF THE ASSESSEE IS ABOUT NOT ALLOWING DEDUCTION U/S 80IB OF THE I. T. ACT IN RESPECT OF DUTY DRAW BACK INCOME OF RS. 221,21,269/ - . AS PER GROUNDS NO. 3 TO 4, THE ONLY ONE GRIEVANCE OF THE ASSESSEE IS ABOUT DECISION OF CIT (A) TO THE EFFECT THAT SUBSIDY OF RS. 21,53,803/ - IS PART OF ACTUAL COST OF PLANT & MACHINERY AND AS A CONSEQUENCE REDUCTION IN DEPRECIATION AMOUNT BY RS. 274,610/ - BUT THE CLAIM OF THE ASSESSEE IS THAT THE SAID SUBSIDY IS CAPITAL SUBSIDY FOR SETTING UP PLANT 7 IN BACKWARD AREA AND NOT PART OF ACTUAL COST. AS PER GROUNDS NO. 5 TO 6, THE ONLY ONE GRIEVANCE OF THE ASSESSEE IS ABOUT DECISION OF CIT (A) TO THE EFFECT THAT C OST OF MOULDS OF RS. 30,78,133/ - IS CAPITAL EXPENDITURE AS AGAINST THE CLAIM OF THE ASSESSEE THAT IT IS REVENUE EXPENDITURE. 20. BOTH SIDES AGREED THAT ALL THESE THREE ISSUES ARE IDENTICAL TO THREE ISSUES RAISED IN REMAINING TWO APPEALS OF THE ASSESSEE FOR A.Y. 2008 09 WHICH WERE HEARD TOGETHER. THEY AGREED THAT IN THE PRESENT YEAR ALSO, THE ISSUES MAY BE DECIDED ON SAME LINE AS IN A. Y. 2008 09. 21. WE FIND THAT IN A. Y. 2008 09, ALL THESE THREE ISSUES ARE DECIDED AGAINST THE ASSESSEE AND BOTH APPE ALS OF THE ASSESSEE IN A. Y. 2008 09 ARE DISMISSED. HENCE, IN THE PRESENT YEAR ALSO, ALL THESE THREE ISSUES ARE DECIDED AGAINST THE ASSESSEE ON SAME LINE AND ALL GROUNDS OF THE ASSESSEE ARE REJECTED. 22. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS ALSO DISMISSED. 23. IN THE COMBINED RESULT, ALL THREE APPEALS OF THE ASSESSEE ARE DISMISSED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 21 /08/2015 COPY OF THE ORDER FORWARDED TO : 1.THE APPELLANT 2.THE RESPONDENT. 3.CONCERNED CIT 4.THE CIT(A) 5.D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR