GP OFFSET P. LTD, MUMBAI V. ACIT CIR 6(3), MUMBAI

ITA 319/MUM/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7304 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 03-03-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 14-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOHAMMAD USM AN
• Keywords: Depreciation; Additional evidence; Assessment record; Revenue expenditure; Capital expenditure; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G: MUMBAI BEFORE SHRI J. SUDHAKAR REDDY (AM) AND SHRI R.S. PADVEKAR (JM) ITA NO. 319/MUM/2009 (ASSTT. YEAR : 2005-06) GP OFFSET PRIVATE LIMITED., APPELLANT C/O. R.C. RESHAMWALA & CO., CHARTERED ACCOUNTANTS, 323, VARMA CHAMBERS, 11, HOMJI STREET, FORT, MUMBAI 400 001 PAN : AABCG4392B V/S. THE ASSISTANT COMMISSIONER OF INCOME-TAX, RESPO NDENT CIRCLE 6(3), AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 ITA NO. 7163/MUM/2008 (ASSTT.YEAR : 2005-06) THE ASSISTANT COMMISSIONER OF INCOME-TAX, APPEL LANT CIRCLE 6(3), AAYKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 V/S. GP OFFSET PRIVATE LIMITED., RESPONDENT C/O. R.C. RESHAMWALA & CO., CHARTERED ACCOUNTANTS, 323, VARMA CHAMBERS, 11, HOMJI STREET, FORT, MUMBAI 400 001 PAN : AABCG4392B ASSESSEE BY : MR. DILIP J. THAKKAR /M R.RAJESH P.SHAH DEPARTMENT BY : MR. MOHAMMAD USM AN : O R D E R : PER R.S. PADVEKAR, J.M THESE TWO CROSS APPEALS, ONE BY THE ASSESSEE AND AN OTHER BY THE REVENUE HAVE BEEN FILED CHALLENGING THE IMPUGNED OR DER OF THE LD CIT(A)- VI, ITA NO. 319/MUM/2009 & 7163/M UM/2008 2 MUMBAI DATED 30.9.2008 FOR THE A.Y. 2005-06. 2. WE FIRST TAKE UP THE ASSESSEES FILE. THE ASS ESSEE HAS TAKEN THE FOLLOWING GROUND : ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE, TH E LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)-VI, MUMBAI, 1 ERRED IN CONFIRMING ACTION OF THE ASSESSING OFFIC ER IN CONSIDERING THE RETRENCHMENT EXPENSES AMOUNTING TO RS.64,29,046/- PAID TO THE WORKERS AS CAPITAL EXPEN DITURE AND THEREBY ERRED IN DISALLOWING THE SAME AS REVENUE EX PENDITURE. 3. THE FACTS WHICH REVEAL FROM THE RECORD IN RESPEC T OF THE ISSUE ARISING FROM GROUND NO. 1 ARE AS UNDER. THE ASSESSEE COMPA NY DEALS IN OFFSET PRINTING. IN AUGUST 2004, THE ASSESSEE SHIFTED ITS BUSINESS PREMISES FROM PAREL TO ANDHERI. DUE TO SHIFTING OF THE PLACE OF WORK, THERE WAS A LABOUR UN- REST AND THE ASSESSEE HAD NEGOTIATION WITH THE UNI ON REPRESENTING THE WORKERS, AND FINALLY THE MANAGEMENT OF THE ASSESSEE COMPANY AND REPRESENTATIVE UNION OF THE WORKERS CAME TO THE AMI CABLE SETTLEMENT. IT IS PERTINENT TO NOTE THAT THE UNION REPRESENTING THE WORKERS HAD FILED A CASE UNDER THE MAHARASHTRA RECOGNITION OF THE TRADE UNIO N AND PREVENTION OF UNFAIR LABOUR PRACTICE ACT 1995, (M.R.T.U. & P.U.L. P.ACT) IN THE INDUSTRIAL COURT, MAHARASHTRA AT MUMBAI. FINALLY, THE CASE FI LED BY THE UNION WAS ALSO DISPOSED OF BY THE HONBLE INDUSTRIAL COURT AS PER THE M.O.U BETWEEN THE ASSESSEE COMPANY AND HINDUSTAN KAMGAR UNION, REPR ESENTATIVE UNION OF THE WORKERS. AS PER THE TERMS OF THE SETTLEMENT WITH T HE UNION, THE ASSESSEE COMPANY AGREED TO PAY THE FOLLOWING AMOUNTS TO THE WORKERS : I) NOTICE PAID FOR 30 DAYS II) VRS COMPENSATION AT 25 DAYS PER YEAR OF COMPLE TED SERVICE III) GRATUITY AS PER GRATUITY ACT. IV) BALANCE LEAVE SALARY ENCASHMENT ITA NO. 319/MUM/2009 & 7163/M UM/2008 3 V) BONUS AT 20% FOR THE YEAR 2003-04 VI) ADDITIONAL VRS COMPENSATION AT 20% BASIC + DA FOR THE PERIOD FROM 1 ST APRIL 2004 TO 31 ST OCTOBER 2004. VII) WAGES FOR THE MONTH OF OCTOBER 2004 AS PER THE REVISED RATES, 4. IN THE MEMORANDUM OF UNDERSTANDING/SETTLEMENT EN TERED IN TO BETWEEN THE ASSESSEE COMPANY AND REPRESENTATIVE UNI ON I.E. HINDUSTAN KAMGAR UNION, TERMINATION OF SERVICES WAS GIVEN THE NOMENCLATURE AS UNDER THE VRS SCHEME. THE ASSESSEE DEBITED THE AMOUNT TO PROFIT & LOSS ACCOUNT TO THE EXTENT OF RS.64,29,046/- AS A COMPENSATION O N RETRENCHMENT OF THE WORKERS. THE A.O WAS OF THE OPINION THAT THE COMPEN SATION PAID TO THE WORKERS WHICH WAS DEBITED TO THE PROFIT & LOSS ACCO UNT WAS IN THE NATURE OF VRS COMPENSATION. IT IS PERTINENT TO NOTE HERE THA T OUT OF THE TOTAL AMOUNT PAID TO THE WORKERS, THE ASSESSEE TREATED THE AMOUN T OF COMPENSATION AND NOTICE PAY TOTALING TO RS.64,29,046/- AS COMPENSATI ON ON ACCOUNT OF RETRENCHMENT OF WORKERS. EVEN THE CONTROVERSY IS A LSO LIMITED TO THE SAID AMOUNT. AS PER THE DOCUMENTS ON RECORD, IT CANNOT BE SAID THAT THE COMPENSATION AS WELL AS THE AMOUNT OF THE NOTICE P AID BY THE ASSESSEE TO THE WORKERS WERE TOWARDS ANY VRS SCHEME BUT, IN FACT, I T IS IN COMPLIANCE WITH THE SECTION 25F OF THE INDUSTRIAL DISPUTE ACT, WHIC H HAS PUT STATUTORY LIABILITY ON THE EMPLOYER TO COMPLY TO RETRENCH ANY WORKER A S WELL AS RIGHT OF THE RETRENCHED WORKER TO GET THE COMPENSATION AS WELL AS ONE MONTHS NOTICE OR ONE MONTHS PAY IN LIEU OF NOTICE PERIOD. IT IS TR UE THAT THE ASSESSEE HAS PAID MORE COMPENSATION THAN MINIMUM PRESCRIBED U/S. 25F OF THE INDUSTRIAL DISPUTE ACT, BUT THERE IS NO BAR TO PAY MORE COMPEN SATION THOUGH THE SETTLEMENT BETWEEN THE ASSESSEE COMPANY AND THE RE PRESENTATIVE UNION OF THE WORKER, THE NOMENCLATURE IS GIVEN TO THE COMPE NSATION PAID AS A VRS COMPENSATION. IN OUR OPINION, IT IS ONLY THE RETREN CHMENT AS PROVIDED U/S. 25F OF THE INDUSTRIAL DISPUTE ACT, 1947 , BECAUSE O NE MONTHS NOTICE PAY IS ALSO GIVEN BY THE COMPANY WHICH IS ONE OF THE STATU TORY REQUIREMENT IF IN CASE AN EMPLOYER DECIDES TO RETRENCH ANY WORKER EITHER T O ONE MONTH NOTICE BEFORE THE DATE OF TERMINATION OF HIS SERVICE OR ONE MONTH NOTICE PAY IN LIEU OF NOTICE PERIOD. WE ARE, THEREFORE, OF THE OPINION THAT THE SUM OF RS.64,29,046/- IS NOTHING, BUT NOTICE PAY AS WELL AS COMPENSATION ON THE RETRENCHMENT OF THE ITA NO. 319/MUM/2009 & 7163/M UM/2008 4 WORKERS AND SAME IS ALLOWABLE AS EXPENDITURE. ACCO RDINGLY, THE A.O IS DIRECTED TO ALLOW THE EXPENDITURE OF RS.64,29,046/- AND THE GROUND TAKEN BY THE ASSESSEE IS ALLOWED. 5. NOW WE TAKE UP THE REVENUES APPEAL BEING ITA NO . 7163/MUM/2008. 6. THE FIRST ISSUE IS IN RESPECT OF THE BAD DEBT OF RS. 5,98,570/-. 7. WE HAVE HEARD THE PARTIES. THE ASSESSEE HAS WRI TTEN OF THE AMOUNT OF RS.5,98,570/- AS A BAD DEBT AND DEBITED THE SAME TO THE PROFIT AND LOSS ACCOUNT. THE A.O WAS OF THE OPINION THAT EVEN AFTE R THE AMENDMENT TO SECTION 36(1)(VII), IT IS STILL NECESSARY ON THE PA RT OF THE ASSESSEE TO PROVE THAT THE DEBT HAS BECOME BAD. THE A.O MADE THE DISALLOW ANCE AND MADE THE ADDITION TO THE INCOME OF THE ASSESSEE. THE LD CIT (A) DELETED THE SAME FOLOWING THE DECISION OF THE HONBLE SPECIAL BENCH OF THE ITAT, IN THE CASE OF DCIT V/S. OMAN INTERNATIONAL BANK SAOG, 100 ITD 285 (MUM)(S.B) AS WELL AS THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V/S. STAR CHEMICALS, 313 ITR 126 (BOM). THE LD. D.R. FA IRLY CONCEDED THAT NOW THIS ISSUE STANDS COVERED BY THE DECISION OF THE HO NBLE HIGH COURT OF BOMBAY IN THE CASE OF STAR CHEMICALS (SUPRA) AS WELL AS IN THE CASE OF DIT (INTERNATIONAL TAXATION) V/S. OMAN INTERNATIONAL BA NK SAOG, 313 ITR 128. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF THE LD CIT(A). WE ACCORDINGLY CONFIRM THE SAME AND GROUND NO. 1 IS DI SMISSED. 8. THE NEXT GROUND IS AS UNDER : 2(A) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, LD CIT(A) ERRED IN ALLOWING ASSESSEES APPEAL BY TREATING THE AMOUNT OF RS.44,78,245/- EXPENDED TOWARDS REPAIRS AND MAINTEN ANCE AS REVENUE EXPENDITURE WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO SUBMIT THE DETAILS OF REPAIRS AND MAINTENANCE DURIN G THE ASSESSMENT PROCEEDINGS AND SINCE THE EXPENSES WERE INCURRED BE FORE THE PREMISES WAS PUT TO USE, THEY WERE NOT IN THE NATURE OF REPA IRS AND MAINTENANCE AND THE A.O RIGHTLY CONSIDERED THE EXPENSES AS CAPI TAL EXPENDITURE. ITA NO. 319/MUM/2009 & 7163/M UM/2008 5 2(B) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, LD. CIT(A) ERRED IN ADMITTING ADDITIONAL EVIDENCE IN THE FORM OF DETAILS OF EXPENSES OF RS. 44,78,245/- IN VIOLATION OF RULE 46A OF THE I.T. RULES 9. WE HAVE HEARD THE PARTIES. THE ISSUES ARE IN RE SPECT OF THE AMOUNT OF RS. 44,78,245/- CLAIMED TOWARDS REPAIRS AND MAINTEN ANCE TREATING THE SAME AS REVENUE EXPENDITURE. THE LD CIT(A) ADMITTED THE NEW EVIDENCE UNDER RULE 46A OF THE I. T. RULES AND DECIDED THE ISSUE WITHOU T CALLING FOR THE OBJECTIONS OF THE A.O. THE A.O WAS OF THE OPINION THAT THE EX PENDITURE CLAIMED ON THE REPAIRS AND MAINTENANCE OF RS. 44,78,245/- ON THE F ACTORY PREMISES WAS CAPITAL IN NATURE. THE A.O HAS ALSO NOTED THAT AMP LE OPPORTUNITY GIVEN TO THE ASSESSEE, BUT NO DETAILS WERE FILED. THE A.O ALSO ALLOWED DEPRECIATION ON THE SAID EXPENSES. IT APPEARS THAT BEFORE THE CIT(A), THE ASSESSEE FILED THE DETAILS OF THE REPAIRS AND MAINTENANCE. ON THE PER USAL OF THE ORDER OF THE CIT(A), THOUGH THE CIT(A) HAS MENTIONED THAT THE A SSESSEE HAS FILED DETAILED BEFORE THE A.O, BUT NOTHING IS CLEAR THAT HE HAS EX AMINED THE ASSESSMENT RECORD WHETHER THE DETAILS WERE FILED BEFORE THE A. O OR NOT. WE, THEREFORE, CONSIDER IT FIT TO RESTORE THE ISSUE OF ALLOWANCE O F RS. 44,78,245/- TOWARDS REPAIRS AND MAINTENANCE TO THE FILE OF THE A.O FOR FRESH ADJUDICATION AS PER LAW AND WE ACCORDINGLY, SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE. 10. THE NEXT ISSUE IS THE DISALLOWANCE OF RS. 6,03, 185/- WHICH WAS EXPENDED TOWARDS SHIFTING OF THE FACTORY BUILDING. THE A.O TREATED THE SAID AMOUNT AS A CAPITAL EXPENDITURE AND MADE THE DISALL OWANCE. IT APPEARS THAT THE A.O ASKED FOR THE DETAILS OF THE SAID EXPENDITU RE AND THE ASSESSEE ALSO FILED THE REPLY. THERE IS NO DISPUTE ABOUT THE FAC T THAT THE EXPENDITURE WAS IN RESPECT OF SHIFTING OF THE FACTORY FROM PAREL TO AN DHERI AND IT IS NOT THE CASE OF THE A.O THAT IT WAS IN RESPECT OF SETTING ANY NEW F ACTORY OF THE ASSESSEE AND SHIFTING WAS DONE DURING CONTINUATION OF THE BUSINE SS. IN OUR OPINION, THE SAID EXPENDITURE IS ALLOWABLE. WE, THEREFORE, CONF IRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND DISMISS THE GROUND NO. 3(A) AND 3 (B) TAKEN BY THE REVENUE. ITA NO. 319/MUM/2009 & 7163/M UM/2008 6 11. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED AND REVENUES APPEAL IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25TH DAY OF MARCH, 2010. SD/- SD/- (J. SUDHAKAR REDDY) (R.S. PADVEKAR) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25TH DAY OF MARCH, 2010. :US COPY TO: 1. APPELLANT 2. RESPONDENT , 3.THE CIT(A)- VI, MUMBAI 4.THE CIT -6, MUMBAI 5.THE DR, G BENCH, MUMBAI 6.GUARD FILE BY ORDER TRUE COPY ASSTT..REGISTRAR, ITAT, MUMBAI. ITA NO. 319/MUM/2009 & 7163/M UM/2008 7 US DATE INITIALS 1. DRAFT DICTATED ON 18/3/10 --------------- SR.P.S . 2. DRAFT PLACED BEFORE AUTHORITY 22/3/10 --------- ----- SR.P.S. 3. DRAFT PROPOSED & PLACED ----------- ---------- --- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED ----------- ----------- -- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO ----------- ------------ - SR.P.S. THE SR. P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON --------- ----------- -- SR.P.S. 7. FILE SENT TO THE BENCH CLERK --------- --------- ---- SR.P.S. 8. DATE ON WHICH FILE GOES TO THE ------- --------- ---- 9. DATE OF DISPATCH OF ORDER --------- --------- ----