ACIT CIR 1, THANE V. EVEREST INDUSTRIES LTD, NEW DELHI

ITA 3208/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2869 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 4 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2016
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 01-06-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 09-05-2012
• Court: TRIBUNAL
• Department Lawyers: J SARAVANAN
• Assessee Lawyers: BASANT KASAT
• Keywords: Reopening of assessment; Depreciation; Assessment record; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN (AM) & RAMLAL NEGI (JM) I.T.A. NO. 3208 /MUM/20 12 (ASSESSMENT YEAR 20 02 - 03 ) ACIT CIRCLE - 1 MIDC, VARDAAN BUILDING WAGLE ESTATE LOWER GROUND FLOOR THANE ( WEST ) MAHARASHTRA. V S. M/S. EVEREST INDUSTRIES LTD. A - 32, GENESIS MOHAN CO - OP. ESTATE MATHURA ROAD NEW DELHI - 110 044. ( APPELLANT ) ( RESPONDENT ) C.O. NO. 95/MUM/2013 (ASSESSMENT YEAR 2002 - 03) M/S. EVEREST INDUSTRIES LTD. (FORMERLY ETERNIT EVEREST LTD) A - 32, GENESIS MOHAN CO - OP. ESTATE MATHURA ROAD NEW DELHI - 110 044. VS. ACIT CIRCLE - 1 ASHAR I.T. PAARK B - WING 6 TH FLOOR ROAD NO. 16 - Z WAGLE INDUSTRIAL ESTATE THANE WEST - 400 604 . ( APPELLANT ) ( RESPONDENT ) PAN NO . AAACE7550N ASSESSEE BY SHRI BASANT KASAT DEPARTMENT BY S HRI J. SARAVANAN DATE OF HEARING 0 4.10 . 201 6 DATE OF PRONOUNCEMENT 04 . 10 . 201 6 O R D E R PER BENCH : - THE APPEAL FILED BY THE REVENUE AND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 29.11.2011 PASSED BY LE ARNED CIT(A) - II, THANE AND IT RELATE TO A.Y. 2002 - 03. 2. THE ONLY ISSUE URGED BY THE REVENUE IS RELATES TO THE ISSUE ON DISALLOWANCE OF LEASE RENT OF ` 56.31 LAKHS. EVEREST INDUSTRIES LTD. 2 3. WE HAVE HEARD THE PARTIES AND PERUS ED THE RECORD. THE ASSESSEE HAD T AKEN A LAND BELON GING TO CALCUTTA PORT TRUST (CPT) ON LEASE , ON WHICH IT HAS CONSTRUCTED ITS FACTORY . ON THE EXPIRY OF INITIAL LEASE PERIOD, THE L ESSOR , VIZ., CALCUTTA PORT TRUST OFFERED TO RENEW THE LEASE AGREEMENT FOR A FURTHER PERIOD OF FIFTEEN YEARS ON PAYMENT OF ` 91 .50 LAKHS AS NON - REFUNDABLE AND NON - ADJUSTABLE PREMIUM OVER AND ABOVE MONTHLY RENT. THE ASSESSEE DISPUTED THE DEMAND RAISED BY THE CALCUTTA PORT TRUST BY FILING A WRIT PETITION BEFORE HON'BLE CALCUTTA HIGH COURT CHALLENGING THE ENHANCEMENT OF RENT. IN THE BOOKS OF ACCOUNT, PROPORTIONATE PREMIUM RELATING TO THE PERIOD PRIOR TO THE RELEVANT ASSESSMENT YEAR AMOUNTING TO ` 17,79,273/ - WAS ADJUSTED AGAINST THE LIABILITY FOR RENT ACCOUNT. BALANCE AMOUNT OF ` 73,71,303/ - WAS SHOWN AS ADDITION TO FIXED ASSET. EVEN THOUGH, THE ASSESSEE CLAIMED THE PROPORTIONATE AMOUNT OF THE AMOUNT CAPITALIZED AS DEPRECIATION IN THE BOOKS OF ACCOUNT, YET IT VOLUNTARILY DISALLOWED THE SAID CLAIM WHILE COMPUTING TOTAL INCOME UNDER THE INCOME TAX ACT. ACCORDINGLY, THE ASSESSEE SUBMITT ED BEFORE THE ASSESSING OFFICER THAT IT HAS NOT CLAIMED THE AMOUNT OF ` 91.50 LAKHS AS EXPENDITURE AT ALL . THE ASSESSING OFFICER W AS NOT CONVINCED WITH THE EXPLANATION OF THE ASSESSEE. HE TREATED THE CLAIM OF ` 91.50 LAKHS AS CONTINGENT LIABILITY , SINCE TH E ASSESSEE WAS DISPUTING THE SAME . ACCORDINGLY HE HELD THAT THE ABOVE SAID CLAIM HAS NOT CRYSTALLIZED DURING THE YEAR UNDER CONSIDERATION. THE ASSESSING OFFICER NOTICED THAT A SUM OF ` 35,18,870/ - WAS ASSESSED TO TAX IN A.Y. 2003 - 04 AND HENCE HE ASSESSED THE BALANCE AMOUNT OF ` 56,31,706/ - AS INCOME OF THE ASSESSEE . 4. LEARNED CIT(A) DELETED THE ADDITION AND HENCE THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5. WE NOTICED THAT LEARNED CIT(A) HAS DELETED THE ADDITION WITH THE FOLLOWING OBSERVATIONS : EVEREST INDUSTRIES LTD. 3 6.1. I HAVE GONE THROUGH THE ASSESSMENT ORDER PASSED BY THE AO AND ALSO THE WRITTEN SUBMISSIONS MADE BY THE AR OF THE APPELLANT DURING THE COURSE OF APPELLATE PROCEEDINGS. THE CONTENTION OF THE APPELLANT IS THAT THE AMOUNT OF RS. 91,50,576/ - PAYABLE TO CPT BOOKED AS PREMIUM ON LEASEHOLD LAND, HAS BEEN AMORTIZED OVER THE PERIOD OF LEASE AGREEMENT I.E. 15 YEARS W.E.F. 1998 AND OUT OF THIS TOTAL AMOUNT, AN AMOUNT OF RS. 17,79,273/ - ADJUSTED AGAINST LIABILITY FOR THE RENT FOR EARLIER YEARS AS WELL AS FOR THE PE RIOD UNDER CONSIDERATION. THE BALANCE AMOUNT OF RS. 73,71,303/ (91,50,576 - 17,79,273) HAS BEEN SHOWN AS ADDITION TO FIXED ASSETS AND REFLECTED IN THE SCHEDULE OF FIXED ASSETS AS ON 31/03/2003. THE PROPORTIONATE PREMIUM FOR THE YEAR UNDER CONSIDERATION WAS DEBITED TO THE P&L A/C. AS DEPRECIATION, BUT THE DEPRECIATION SO CLAIMED IN THE RETURN OF INCOME DOES NOT INCLUDE THE DEPRECIATION ON ACCOUNT OF AMORTIZATION OF LEASE HOLD LAND. 6.2. IT HAS BEEN FURTHER CONTENDED BY THE APPELLANT THAT IT HAS NEITHER DEBI TED THE ABOVE AMOUNT OF RS. 91,50,576/ - TO THE P & L A/C. NOR CLAIMED ANY DEDUCTION ON THE SAME DURING THE CURRENT ASSESSMENT YEAR IN THE COMPUTATION OF TOTAL INCOME AND THEREFORE QUESTION OF DISALLOWANCE OF SUCH AMOUNT DOES NOT ARISE. 6.3. THE ABOVE CONT ENTIONS OF THE AR OF THE APPELLANT HAVE BEEN CONSIDERED AND THERE IS SUBSTANCE IN THE ABOVE ARGUMENTS. AS STATED ABOVE, THE APPELLANT HAS BOOKED THIS AMOUNT OF RS. 91,50,576/ - AS PREMIUM ON LEASEHOLD LAND AND HAS AMORTIZED IT OVER THE PERIOD OF LEASE AGREE MENT I.E. 15 YEARS W.E.F. 1998, TREATING THE SAME AS A CAPITAL EXPENDITURE. AFTER ADJUSTING THE AMOUNT OF RS. 17,79,273/ - AGAINST LIABILITY FOR THE RENT FOR EARLIER YEARS AS WELL AS FOR THE PERIOD UNDER CONSIDERATION, THE BALANCE AMOUNT OF RS. 73,71,303/ - (91,50,576 - 17,79,273 ) HAS BEEN SHOWN AS ADDITION TO FIXED ASSETS AND REFLECTED IN THE SCHEDULE OF FIXED ASSETS AS ON 31/03/2003 AND NO DEPRECIATION HAS BEEN CLAIMED ON IT. THIS FACT CAN BE VERIFIED FROM THE CHART OF DEPRECIATION FOR THE YEAR UNDER CONSI DERATION SUBMITTED DURING THE APPELLATE PROCEEDINGS AND THIS DEPRECIATION CHART WAS AVAILABLE WITH THE A.O. THE ABOVE AMOUNT OF RS. 73,71,303/ - REPRESENTS A LIABILITY OF AN EXPENDITURE WHICH WILL GIVE ENDURING BENEFIT TO THE APPELLANT OVER A LONG PERIOD OF 15 YEARS AND THEREFORE IS CAPITAL IN NATURE AND ACCORDINGLY GIVEN THE TREATMENT BY THE APPELLANT IN ITS BOOKS OF ACCOUNTS FOR THE YEAR UNDER CONSIDERATION. I INTEND TO AGREE WITH THE CONTENTION OF THE APPELLANT THAT NO PART OF THIS EXPENDITURE HAS BEEN DE BITED TO THE P & L A/C. AND CLAIMED AS DEDUCTION AND THEREFORE THERE IS NO QUESTION ONLY DISALLOWANCE. 6.4. IN VIEW OF THE FACTS AND CIRCUMSTANCES EXPLAINED, IN MY OPINION, EVEREST INDUSTRIES LTD. 4 THE ACTION OF THE AO MAKING DISALLOWANCE OF RS. 56,31,706/ - AND MAKING AN ADDITION OF THE SAME AMOUNT TO THE INCOME OF THE APPELLANT FOR THE YEAR UNDER CONSIDERATION APPEARS TO BE INCORRECT. THE APPELLANT HAS BOOKED THIS AMOUNT AS PREMIUM ON LEASEHOLD AND AMORTIZED IT FOR A PERIOD OF 15 YEARS W.E.F. 1998, THE AMOUNT IS CAPITAL IN NATURE. THERE IS NO QUESTION OF DISALLOWING THE SAME DURING THE YEAR UNDER CONSIDERATION. AS STATED ABOVE, AFTER ADJUSTING AN AMOUNT OF RS. 17,79,273/ - , THE BALANCE AMOUNT OF RS. 73,71,703/ - IS REFLECTED AS ADDITION TO FIXED ASSETS. ALL THESE FACTS STATED ABOVE N EED TO BE VERIFIED FROM THE ASSESSMENT RECORDS. THE A.O. IS DIRECTED TO VERIFY THE ABOVE CONTENTION OF THE APPELLANT FROM THE ASSESSMENT RECORDS, BALANCE SHEETS AND OTHER ANNEXURE AND THE APPELLANT IS ALSO DIRECTED TO ASSIST THE ASSESSING OFFICER IN CARRYI NG OUT THIS EXERCISE. IF, THE CONTENTIONS OF THE APPELLANT ARE FOUND TO BE CORRECT, THE ADDITION MADE AMOUNTING TO ` 56,31,706/ - STANDS DELETED. 6. ON PERUSAL OF THE ORDER PASSED BY LEARNED CIT(A), WE NOTICED THAT THE FIRST APPELLATE AUTHORITY HAS APPRECI ATED THE FACTS RELATING TO THE ISSUE IN PROPER PERSPECTIVE AND ACCORDINGLY HAS TAKEN A JUDICIOUS DECISION OF THE MATTER. THE QUESTION OF DISALLOWANCE OF ANY EXPENDITURE WILL ARISE, ONLY IF, IT HAS BEEN CLAIMED AS DEDUCTION WHILE COMPUTING TOTAL INCOME. SI NCE LEARNED CIT(A) HAS GIVEN FINDING THAT THE ASSESSEE HAS NOT CLAIMED THE IMPUGNED AMOUNT OF ` 56.31 LAKHS AS DEDUCTION, THE QUESTION OF DISALLOWING THE SAME WAS NOT ARISE. THE LD A.R SUBMITTED THAT THE ASSESSEE HAS MADE AN IDENTICAL CLAIM IN AY 2003 - 04 AND THE LD CIT(A) HAD DIRECTED THE AO TO DELETE THE ADDITION, IF THE CLAIM OF THE ASSESSEE IS FOUND TO BE CORRECT. HE FURTHER SUBMITTED THAT THE AO HAS DELETED THE ADDITION IN AY 2003 - 04 BY CARRYING OUT NECESSARY EXAMINATION AND ACCEPTING THE CLAIM OF THE ASSESSEE. 7. IN VIEW OF THE ABOVE, WE AFFIRM THE ORDER PASSED BY LEARNED CIT(A). 8 . THE ASSESSEE HAS FILED THE CROSS OBJECTION CHALLENGING THE VALIDITY OF REOPENING OF ASSESSMENT. SINCE WE HAVE DISMISSED THE APPEAL OF THE REVENUE, WE DO NOT FIND IT NECESSARY TO ADJUDICATE THE LEGAL ISSUE URGED BY THE ASSESSEE AS THE SAME HAS BECOME ACADEMIC IN NATURE. EVEREST INDUSTRIES LTD. 5 9 . IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER HAS BE EN PRONO UNCED IN THE COURT ON 04 . 10 .2016 SD/ - SD/ - (RAMLAL NEGI ) (B.R.BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 04 / 10 / 20 1 6 COPY OF THE O RDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( DY./ASSTT. REGISTRAR) PS ITAT, MUMBAI