MAHINDRA & MAHINDRA FINANCIAL SERVICES LTD, MUMBAI V. ACIT CIR 6(3), MUMBAI

ITA 3498/MUM/2010

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79096 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 09-06-2014
• Assessment Year: 2004-2005
• Appeal Filed On: 04-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI , ! BEFORE SHRI SANJAY ARORA, AM AND DR. S. T. M. PAVA LAN, JM ' # I.T.A. NO. 3498/MUM/2010 ( / ASSESSMENT YEAR: 2004-05) MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED SADHANA HOUSE, 2 ND FLOOR, BEHIND MAHINDRA TOWERS, 570, P. B. MARG, WORLI, MUMBAI-400 018 # VS. ASST. CIT 6(3), AAYKAR BHAVAN, M. K. ROAD, MUMBAI-400 020 $ #'%' ./PAN/GIR NO. ( $& /APPELLANT ) : ( '($& / RESPONDENT ) $&)* / APPELLANT BY : SHRI BHAVIN SHAH '($&)* / RESPONDENT BY : SHRI SURENDRA KUMAR + ,)- / DATE OF HEARING : 09.06.2014 ./0 )- / DATE OF PRONOUNCEMENT : 09.06.2014 '1# O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE PEN ALTY U/S.271(1)(C) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) BY THE COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI (CIT(A) FOR SHORT) FOR THE A SSESSMENT YEAR (A.Y.) 2004-05 VIDE HIS ORDER DATED 19.03.2010. 2.1 OPENING THE ARGUMENTS FOR AND ON BEHALF OF THE ASSESSEE, IT WAS SUBMITTED BY THE LD. AUTHORIZED REPRESENTATIVE (AR), THE ASSESSEES COUNSEL, THAT PENALTY STANDS CONFIRMED 2 ITA NO. 3498/MUM/2010 (A.Y. 2004-05) MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED VS. ASST. CIT BY THE FIRST APPELLATE AUTHORITY ON FIVE GROUNDS. H OWEVER, QUA TWO OF THEM, I.E., DEPRECIATION ON LEASED ASSETS AND DISALLOWANCE U/S. 14A, THE TRIBUNAL HAS SINCE DELETED THE DISALLOWANCE IN THE QUANTUM PROCEEDINGS, WHILE RESTORING THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER (A.O.) ON THE OTHER TWO GR OUNDS, I.E., THE DISALLOWANCE OF HIGHER DEPRECIATION ON UPS AND THAT ON INCREMENTAL COMMISS ION, CONFIRMING THE DISALLOWANCE ON ONLY ONE GROUND, I.E., THE TREATMENT OF THE RENO VATION EXPENDITURE AND ARCHITECTS FEES, AGGREGATING TO RS.92.38 LACS, AS CAPITAL EXPENDITUR E AND, THUS, ELIGIBLE TO DEPRECIATION, AS AGAINST REVENUE EXPENDITURE, AS CLAIMED BY THE ASSE SSEE. AS SUCH, PENALTY SHALL SURVIVE ONLY IN RESPECT OF THE LAST GROUND. HE WOULD THEN T AKE US THROUGH THE RELEVANT PARTS OF THE ORDERS BY THE TRIBUNAL IN THE ASSESSEES CASE FOR T HE RELEVANT YEAR, PLACING A COPY OF THE SAME ON RECORD. 2.2 THE LD. DEPARTMENTAL REPRESENTATIVE (DR), ON TH E OTHER HAND, WOULD RELY ON THE ORDERS BY THE REVENUE AUTHORITIES. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. 3.1 WE SHALL PROCEED GROUND-WISE. NO CONTENTION HAV ING BEEN RAISED OR ARGUMENTS MADE IN RESPECT OF THE ASSESSEES GROUND NOS. 1[(A) , (B) AND (C)], THE SAME ARE DISMISSED AS NOT PRESSED. 3.2 THE PLEADING BEFORE US WAS MADE WITH REFERENCE TO THE ASSESSEES GROUND NO. 1(D), MADE WITHOUT PREJUDICE TO ITS OTHER GROUNDS, AND WH ICH LISTS ALL THE FIVE (NUMBERING 1(I) TO 1(V)) DISALLOWANCES ON WHICH PENALTY STANDS CONF IRMED BY THE LD. CIT(A). A). GROUND 1(D) ( I) IS IN RESPECT OF DEPRECIATION ON LEASED ASSETS, CLAIMED AT RS.7.48 CR. THE TRIBUNAL VIDE PARA 3 OF ITS ORDER FOR A.Y. 2004 -05 (IN ITA NO.405/MUM/2008 DATED 02.04.2014/COPY ON RECORD) HAS DELETED THE DISALLOW ANCE ON DEPRECIATION ON LEASED ASSETS, SETTING ASIDE THE ORDER OF THE FIRST APPELL ATE AUTHORITY AND DIRECTING THE A.O. TO ALLOW DEPRECIATION ON LEASED ASSETS, I.E., AS CLAIM ED BY THE ASSESSEE. IN THIS VIEW OF THE MATTER, NO GROUND FOR PENALTY SURVIVES. WE, ACCORDI NGLY, DELETE THE PENALTY, SETTING ASIDE THE IMPUGNED ORDER. 3 ITA NO. 3498/MUM/2010 (A.Y. 2004-05) MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED VS. ASST. CIT B). GROUND NO. 1(D)(II) AGITATES THE DISALLOWANCE O F HIGHER DEPRECIATION ON UPS. THE ASSESSEE CLAIMED DEPRECIATION ON UPS AT 60%, TREATI NG IT AS A PART OF THE COMPUTER SYSTEM, WHILE THE SAME WAS TREATED AS AN ELECTRICAL EQUIPMENT, SUBJECT TO DEPRECIATION AT 15%, BY THE REVENUE. THE TRIBUNAL VIDE PARA 57 OF I TS ORDER FOR A.Y. 2004-05 (IN ITA NO.405/MUM/2008 DATED 31.07.2012/COPY ON RECORD), F OLLOWING ITS DECISION FOR A.Y. 2003-04 (IN ITA NO.2846/MUM/2007 DATED 31.07.2012), HAS RESTORED THE MATTER BACK TO THE FILE OF THE A.O. IN THIS VIEW OF THE MATTER; TH E QUANTUM ORDER HAVING BEEN SET ASIDE, PENALTY ON THIS ISSUE WOULD STAND TO BE NECESSARILY SET ASIDE. THE REVENUE SHALL, HOWEVER, BE AT LIBERTY TO LEVY PENALTY ON THIS GROUND, WHERE DEEMED FIT AND PROPER, IN THE SET ASIDE PROCEEDINGS. WE DECIDE ACCORDINGLY. C). GROUND 1(D)(III) IS WITH REGARD TO THE DISALLOW ANCE OF INCREMENTAL COMMISSION AT RS.546.38 LACS. IT WAS EXPLAINED BY THE LD. AR DURI NG HEARING THAT THE LD. CIT(A) HAD ALLOWED PART RELIEF, SO THAT THE DISALLOWANCE AS FI NALLY SUSTAINED BY HIM AMOUNTED TO RS.493.57 LACS, AND WHICH HAS SINCE BEEN RESTORED B ACK TO THE FILE OF THE A.O. BY THE TRIBUNAL VIDE ITS ORDER IN THE QUANTUM PROCEEDINGS (REFER PARA 62 IN ITA NO.405/MUM/2008 DATED 31/7/2012). UNDER THE CIRCUMS TANCES, THEREFORE, WE HAVE NO HESITATION IN SETTING ASIDE THE IMPUGNED ORDER AND, ACCORDINGLY, DELETE THE PENALTY. THE REVENUE SHALL HOWEVER BE AT LIBERTY TO LEVY PENALTY ON THIS GROUND, WHERE DEEMED FIT AND PROPER, I.E., IN THE SET ASIDE PROCEEDINGS. WE DECI DE ACCORDINGLY. D). GROUND NO. 1(D)(IV) IS IN RESPECT OF DISALLOWAN CE OF EXPENDITURE ON RENOVATION AND ARCHITECTS FEES AS CAPITAL EXPENDITURE, AT RS.92,3 7,716/-. THE BONE OF CONTENTION BETWEEN THE PARTIES QUA THIS GROUND WAS FOR TREATING THE SAME AS CAPITAL EX PENDITURE (AT RS.97,62,679/-), THOUGH EXIGIBLE FOR CLAIM OF DEPRE CIATION THEREON, LEADING TO DISALLOWANCE AT A NET AMOUNT OF RS.92.38 LACS; THE ASSESSEE HAVING TREATED THE ENTIRE AMOUNT AS REVENUE EXPENDITURE. AS EXPLAINED BY THE LD. AR DURING HEARING, THE LD. CIT(A) HAS NOT ADJUDICATED THIS GROUND, MISTAKENLY TREATING THE SAME AS COVERED BY HIS PREDECESSORS ORDER FOR A.Y. 2003-04, VIDE PARA 5 O F THE IMPUGNED ORDER, WHICH IN FACT 4 ITA NO. 3498/MUM/2010 (A.Y. 2004-05) MAHINDRA & MAHINDRA FINANCIAL SERVICES LIMITED VS. ASST. CIT DOES NOT LIST THE IMPUGNED DISALLOWANCE. CLEARLY, T HEREFORE, THERE HAS BEEN AN OMISSION ON THE PART OF THE LD. CIT(A) IN ADJUDICATING THIS GROUND. THE MATTER WOULD THEREFORE NECESSARILY HAVE TO TRAVEL BACK TO HIS FILE FOR THE SAME. WE DECIDE ACCORDINGLY. E). GROUND 1(D)(V) IS QUA THE DISALLOWANCE OF EXPENDITURE U/S.14A FOR RS.2,1 92/-. THE SAID DISALLOWANCE STANDS SINCE DELETED BY THE TRIBU NAL IN THE QUANTUM PROCEEDINGS VIDE PARA 49 OF ITS ORDER (IN ITA NO.405/MUM/2008 DATED 31.07.2012). THE SAID GROUND DOES NOT THEREFORE SURVIVE FOR ADJUDICATION, AND STANDS RESULTANTLY DISMISSED. WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY A LLOWED. 20 -34 52-) '61 7 -) -89! ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 09, 2014 SD/- SD/- (DR. S. T. M. PAVALAN) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER + :, MUMBAI; ; DATED : 09.06.2014 # ROSHANI , SR. PS ! ' #$%& ' &$ # COPY OF THE ORDER FORWARDED TO : 1. $& / THE APPELLANT 2. '($& / THE RESPONDENT 3. '' + <- = > / THE CIT(A) 4. '' + <- / CIT CONCERNED 5. ?@ A'-B4 ' B40 + :, / DR, ITAT, MUMBAI 6. A 5C , # GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , + :, / ITAT, MUMBAI