Haryana State Warehousing Corporation, Panchkula V. ACIT Cir Panchkula, Panchkula

ITA 351/CHANDI/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5661 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 27-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: B.K. NOHRIA
• Keywords: Capital expenditure

Judgement Text

1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH .., !' '# $, % &' BEFORE: SHRI. N.K.SAINI, VP & SHRI , SANJAY GARG, J M ITA NO. 351/CHD/2019 ASSESSMENT YEAR : 2015-16 HARYANA STATE WAREHOUSING CORPORATION BAY NO. 15-18 SECTOR-2 PANCHKULA-134112 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-PANCHKULA SECTOR-2, PANCHKULA-134112 PAN NO: AAACH3948K APPELLANT RESPONDENT !' ASSESSEE BY : SHRI B.K. NOHRIA, CA #!' REVENUE BY : SHRI CHANDRAJIT SINGH, CIT(DR) $ %! & DATE OF HEARING : 30/09/2019 '()*! & DATE OF PRONOUNCEMENT : 03/10/2019 &(/ ORDER PER N.K. SAINI, VICE PRESIDENT THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A), PANCHKULA DT. 17/01/2019. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE LD. CIT(A) PANCHKULA HAS ERRED IN LAW AND FACTS IN UPHOLDING T HE CONTENTION OF THE LEARNED A.O. IN ADDING RS. 44,57,98,668/- UNDER SECTION 35AD OF THE INCOME TAX ACT, 1961 INSPITE OF COMPLETE DOCUMENTS ALONGWITH REASON AND NOT REBUTTING THE DEDUCTION EXCEPT STATING THAT NO PLAUSIBLE EXPLANAT ION SUBMITTED. 2. THAT THE APPELLANT RESERVES THE RIGHT TO ADD, AMEND OR DELETE ONE OR MORE OF THE GROUNDS OF APPEAL BEFORE THE APPEAL IS DISPOSED OFF. 2 3. THE ONLY GRIEVANCE OF THE ASSESSEE IN THIS APPEA L RELATES TO THE SUSTENANCE OF ADDITION OF RS. 44,57,98,668/- MADE B Y THE A.O. UNDER SECTION 35AD OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFER RED TO AS ACT). DURING THE COURSE OF HEARING THE LD. COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET STATED THAT THE ISSUE UNDER CONSIDERATION IS SQUARELY COVERED I N FAVOUR OF THE ASSESSEE VIDE ORDER DT. 19/03/2019 IN ASSESSEES OWN CASE IN ITA NO. 239/CHD/2016 AND OTHERS FOR THE A.Y. 2012-13 AND OTHERS, COPY OF THE SAID O RDER WAS FURNISHED WHICH IS PLACED ON RECORD. 4. THE LD. SR. DR ALTHOUGH SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW BUT COULD NOT CONTROVERT THE AFORESAID CONTENTION OF TH E LD. COUNSEL OF THE ASSESSEE. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. IN THE PRESENT CA SE IT IS NOTICED THAT A SIMILAR ISSUE HAVING IDENTICAL FACT WAS A SUBJECT MATTER OF THE ASSESSEES APPEAL FOR THE A.Y. 2011-12 TO 2014-15 IN ITA NO. 239/CHD/2016 & O THERS, WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE AND THE RELE VANT FINDINGS HAVE BEEN GIVEN IN PARA 10 TO 14 WHICH READ AS UNDER: 10. NOW COMING TO THE ISSUE ON MERITS TAKEN BY THE ASSESSEE VIDE GROUND NOS. 4 AND 5 OF THE APPEAL. THE BRIEF FACTS RELATING TO TH E ISSUE ARE THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S 35AD OF THE ACT FROM ITS PROF ITS ON ACCOUNT OF CONSTRUCTION OF WAREHOUSES IN DIFFERENT DISTRICTS OF HARYANA, HO WEVER, THE AO HAS DISALLOWED THE DEDUCTION OBSERVING THAT AS PER THE PROVISO TO SECTION 35AD OF THE ACT, THE EXPENDITURE INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ANY SPECIFIED BUSINESS SHALL BE ALLOWED AS DEDUCTION DURING THE P REVIOUS YEAR IN WHICH THE ASSESSEE COMMENCES OPERATIONS OF HIS SPECIFIED BUSI NESS. THE AO OBSERVED THAT THOUGH THE ASSESSEE HAD TAKEN UP THE CONSTRUCTION O F WAREHOUSING FACILITY DURING THE YEAR WHICH IS COVERED UNDER THE SPECIFIED BUSIN ESS, HOWEVER, IN VIEW OF THE PROVISO TO SECTION 35AD, THE DEDUCTION WAS AVAILABL E TO THE ASSESSEE WHOSE DATE OF COMMENCEMENT OF BUSINESS IS ON OR AFTER 01. 04.2009 AND SINCE IN THIS CASE THE ASSESSEE HAS EXISTING BUSINESS OF WAREHOUS ING AND HENCE, IT CANNOT BE SAID THAT THE ASSESSEE HAD COMMENCED THE BUSINESS O F WAREHOUSING DURING THE YEAR UNDER CONSIDERATION. HE, THEREFORE, DISALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE U/S 35AD OF THE ACT. THE LD. CIT(A) UP HELD THE ABOVE FINDING OF THE AO. 3 11. WE HAVE HEARD THE RIVAL CONTENTIONS. TO BETTER UNDERSTAND THE CASE, WE DEEM IT FIT TO FIRST REPRODUCE THE PROVISIONS OF SE CTION 35AD OF THE ACT : 'DEDUCTION IN RESPECT OF EXPENDITURE ON SPECIFIED B USINESS. [35AD. (1) AN ASSESSEE SHALL BE ALLOWED A DEDUCTION IN RESPECT OF THE WHOLE OF ANY EXPENDITURE OF CAPITAL NATURE INCURRED, WHOLLY AND EXCLUSIVELY, FOR THE PURPOSES OF ANY SPECIFIED BUSINESS CARRIED ON BY HI M DURING THE PREVIOUS YEAR IN WHICH SUCH EXPENDITURE IS INCURRED BY HIM: PROVIDED THAT THE EXPENDITURE INCURRED, WHOLLY AND EXCLUSIVELY, FOR THE PURPOSES OF ANY SPECIFIED BUSINESS, SHALL BE ALLO WED AS DEDUCTION DURING THE PREVIOUS YEAR IN WHICH HE COMMENCES OPERATIONS OF H IS SPECIFIED BUSINESS, IF- (A) THE EXPENDITURE IS INCURRED PRIOR TO THE COMMENCEME NT OF ITS OPERATIONS; AND (B) THE AMOUNT IS CAPITALIZED IN THE BOOKS OF ACCOUNT O F THE ASSESSEE ON THE DATE OF COMMENCEMENT OF ITS OPERATIONS. 12. A PERUSAL OF THE ABOVE PROVISIONS OF SECTION 35 AD OF THE ACT REVEALS THAT ASSESSEE IS ELIGIBLE TO CLAIM DEDUCTION IN RESPECT OF CAPITAL EXPENDITURE IF THE SAME IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE PUR POSE OF ANY SPECIFIED BUSINESS CARRIED OUT BY HIM DURING THE PREVIOUS YEAR IN WHIC H SUCH EXPENDITURE IS INCURRED. HOWEVER, IN CASES WHERE SUCH EXPENDITURE IS INCURRE D PRIOR TO THE COMMENCEMENT OF ITS OPERATIONS BY THE ASSESSEE AND AMOUNT IS CAPITALIZED IN THE BOOKS OF ACCOUNT OF THE ASSESSEE ON THE DATE OF COMMENCEMENT OF OPERATIONS, THEN SUCH EXPENDITURE IS ALLOWABLE AS D EDUCTION IN THE PREVIOUS YEAR IN WHICH THE ASSESSEE COMMENCES OPERATIONS OF HIS S PECIFIED BUSINESS. 13. IN OUR VIEW, THE LOWER AUTHORITIES HAVE WRONGLY INTERPRETED THE RELEVANT PROVISIONS OF THE ACT. THERE ARE TWO PARTS OF THE A BOVESAID PROVISIONS. IN THE FIRST PART, IT HAS BEEN MENTIONED THAT AN ASSESSEE IS ELI GIBLE TO CLAIM DEDUCTION OF THE CAPITAL EXPENDITURE IF SUCH AN EXPENDITURE HAS BEEN INCURRED WHOLLY AND EXCLUSIVELY IN A SPECIFIED BUSINESS. THERE IS NO CO NDITION OF ANY DATE OR YEAR OF COMMENCEMENT OF SPECIFIED BUSINESS. HOWEVER, IN THE SECOND PART, IT HAS BEEN PROVIDED THAT IF SUCH AN EXPENDITURE HAS BEEN INCUR RED PRIOR TO THE COMMENCEMENT OF BUSINESS AND HAS BEEN DULY CAPITALI ZED IN THE BOOKS OF ACCOUNT, THE CLAIM WILL BE ALLOWED IN THE YEAR IN W HICH THE ASSESSEE COMMENCES OPERATIONS OF HIS SPECIFIED BUSINESS. THERE IS NEIT HER ANY OVERLAPPING NOR ANY CONTRADICTION IN THE AFORESAID PROVISION. THE ASSES SEE IS COVERED IN THE FIRST PART I.E. THE ASSESSEE HAS INCURRED THE EXPENDITURE ON T HE SPECIFIED BUSINESS DURING THE YEAR IN WHICH OPERATIONS OF HIS BUSINESS OF WAREHOU SING WERE ALREADY GOING ON. IN VIEW OF THIS, WE DO NOT FIND ANY JUSTIFICATION ON T HE PART OF THE LOWER AUTHORITIES IN DENYING THE DEDUCTION TO THE ASSESSEE U/S 35AD OF T HE ACT. THIS GROUND IS, ACCORDINGLY, ALLOWED IN FAVOUR OF THE ASSESSEE. 14. IN VIEW OF THIS, THE LEGAL GROUNDS RELATING TO THE REASSESSMENT ARE DECIDED AGAINST THE ASSESSEE WHEREAS THE GROUNDS TAKEN ON M ERITS REGARDING THE ALLOWABILITY OF THE CLAIM OF DEDUCTION U/S 35AD ARE ALLOWED IN FAVOUR OF THE ASSESSEE. 4 SO RESPECTFULLY FOLLOWING THE AFORESAID REFERRED TO ORDER DT. 19/03/2019 IN ASSESSEES OWN CASE FOR THE A.Y. 2012-13 IN ITA NO. 239/CHD/2016, THE PRESENT CASE IS REMANDED BACK TO THE FILE OF THE A.O. TO BE DECIDED AS PER THE DIRECTIONS GIVEN IN THE AFORESAID REFERRED TO ORDER DT. 19/03/2019. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. (ORDER PRONOUNCED IN THE OPEN COURT ON 03/10/2019 ) SD/- SD/- '# $ .., (SANJAY GARG ) ( N.K. SAI NI) % &'/ JUDICIAL MEMBER / VICE PRESIDENT AG DATE: 03/10/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) 5. -2 45&456789 DR, ITAT, CHANDIGARH 6. 8:% GUARD FILE (+ $ BY ORDER, ; # ASSISTANT REGISTRAR