IDFC ASSET MANAGEMENT COMPANY LTD, MUMBAI V. ACIT RG 2(3), MUMBAI

ITA 37/MUM/2011

• Counselvise Citation: 3719914 RSA 2011
• Duration Of Justice: 2 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 13-08-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 04-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SINGH
• Assessee Lawyers: MILIND THAK O R E
• Keywords: Depreciation; Bonafide belief; Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI . , , , BEFORE SHRI B. RAMAKOTAIAH , ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA , JUDICIAL MEMBER . / ITA NO. 36 /MUM./20 11 ( / ASSESSMENT YEAR : 200 4 05 ) . / ITA NO. 37 /MUM./20 11 ( / ASSESSMENT YEAR : 2003 04 ) IDFC ASSET MANAGEMENT CO. LTD. ONE INDIA BULLS CENTRE JUPITER MILLS COMPOUND 841, SE NAPATI BAPAT MARG MUMBAI 400 013 .. / APPELLANT V/S DY. COMMISSIONER OF INCOME TAX RANGE 2(3), MUMBAI 400 020 .... / RESPONDENT . / PERMANENT ACCOUNT NUMBER A ACCA3262H / REVENUE BY : MR. O.P. SINGH / ASSESSEE BY : MR. MILIND THAK O R E / DATE OF HEARING 13 .08.2013 / DATE OF ORDER 23.10.2013 / ORDER , / PER AMIT SHUKLA , J.M. THE PRESENT APPEAL S HA VE BEEN PREFERRED BY THE ASSESSEE, CHALLENGING THE IMPUGNED ORDER OF EVEN DATE 1 8 TH OCTOBER 201 0 , PASSED BY THE LEARNED IDFC ASSET MANAGEMENT CO. LTD. 2 COMMISSIONER (APPEALS) VI , MUMBAI, FOR THE ASSESSMENT YEAR S 2003 04 AND 2004 05, IN THE MATTER OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 (FOR SHORT THE ACT) LEVIED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) ON ACCOUNT OF REFURBISHMENT OF EXPENSES , WHICH WAS CLAIMED AS REVENUE EXPENDITURE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER (APPEALS) AS CAPITAL EXPENSES. 2 . THE SOLE GROUND RAISED BY THE ASSESSEE IN THESE APPEALS IS COMMON, EXCEPT VARIATION IN FIGURES AND, HENCE, WE PROCEED TO DISPOSE OFF THESE APPEALS BY WAY OF THIS CONSOLIDATED ORDER. SINCE THE GROUND RAISED AND THE FACTS & CIRCUMSTANCES INVOLVED IN THESE APPEALS ARE IDENTICAL, HOWEVER , IN ORDER TO UNDERSTAND THE IMPLICATION, IT WOULD BE NECESSARY TO TAKE NOTE OF THE FACTS OF ONE APPEAL. ACCORDINGLY, W E ARE NARRATING THE FACTS , AS THEY APPEAR IN ITA NO. 36/MUM . /2011, FOR THE ASSESSMENT YEAR 2004 05. 3 . FACTS IN BRIEF : THE ASSESSEE COMPANY HAS FILED ITS RETURN OF INCOME ON 16 TH OCTOBER 2004, DISCLOSING INCOME OF ` 23,82,32,0 80, WHICH WAS SUBSEQUENTLY REVISED ON 16 TH JANUARY 2006, AT AN INCOME OF ` 23,79,50,280. THE ASSESSING OFFICER, IN THE ASSESSMENT ORDER, NOTED THAT THE ASSESSEE HAS CLAIMED REFURBISHMENT OF EXPENSES OF ` 5,60,341, WHICH WERE STATED TO BE ON ACCOUNT OF RENO VATION / REPAIRS RELATED TO PREMISE S TAKEN ON LEASE FROM ITS PARENT COMPANY STANDARD CHARTERED BANK , AS THE PERIOD OF LEASE HAS BEEN RENEWED ON REGULAR BASIS WITH THE BANK, THE A MORTIZATION FOR THE PERIOD OF THREE YEARS WAS NOT ACCEPTABLE. ACCORDINGLY, THE ASSESSING OFFICER TREATED THE SAID EXPENDITURE AS CAPITAL IN NATURE AND ALLOW DEPRECIATION @ 5%. ACCORDINGLY, THE DISALLOWANCE OF ` 5,32,324, WAS MADE. THE SAID DISALLOWANCE HAS BEEN CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS) IN THE IMPUGNED ORDER. T HE PENALTY UNDER SECTION 271(1)(C) HAS BEEN INITIATED AND LEVIED BY THE ASSESSING OFFICER ON THIS SCORE AFTER REJECTING THE ASSESSEES EXPENSES FOR SUCH A CLAIM WAS EXPLAINED TO BE BASED ON BONAFIDE BELIEF. IDFC ASSET MANAGEMENT CO. LTD. 3 4 . BEFORE THE LEARNED COMMISSIONER (APPEALS), FOLLO WING SUBMISSIONS WERE MADE WHICH HAVE BEEN INCORPORATED AT PAGE 2 OF THE APPELLATE ORDER. THE EXPENSES USED IN SECTION 271(1)(C) I.E., FURNISHED INACCURATE PARTICULARS OF SUCH INCOME HAS BEEN EXPLAINED IN JUDICIAL PRECEDENTS AS FAILURE OF DUTY TO DISCL OSE FULLY AND TRULY PARTICULARS OF INCOME, IMPOSED UNDER THE ACT. THE APPELLANT HAD DISCLOSED ITS POSITION WITH RESPECT TO T REATING THE EXPENSES ON REFURBISHMENT AS REVENUE EXPENSE BY INSERTING A NOTE AL ONG WITH THE TAX COMPUTATION FILED WITH ITS LAX RETU RN, HENCE THE AO'S OBSERVATION THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME IS INCORRECT. I T HAS BEEN HELD IN SEVERAL CASES THAT WHEN ALL THE RELEVANT PARTICULARS RELATING TO THE ASSESSEE'S CLAIM HAVE NOT BEEN WITHHELD B Y THE ASSESSE E AND RATHER HAVE BEEN FULLY PLACED BEFORE THE AUTHORITIES IN THE COU RSE OF PROCEEDINGS BEFORE THEM, BUT THE ASSESSEES CLAIM IS CONSIDERED TO BE NOT MAINTAINABLE IN LIGHT OF DIFFERENCE IN INTERPRETATION OF THE STATUTE. IT CANNOT BE REGARDED AS A CASE OF F ALSE CLAIM MADE BY THE ASSESSEE. THE HO NBLE SUPREME COURT IN THE CASE OF RELIANCE PE T R OPRODUCTS PVT. LTD. (SLP IC] NO,27161 OF 2008) HELD THAT A MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF WILL NO T AMOUNT TO FURNISHING OF INACCURA TE PARTICULARS REGARDING THE INCOME OF THE TAXPAYER. SIMILARLY, MERELY BECAUSE THE CLAIM OF EXPENDITURE WHICH WAS NOT ACCEPTED OR NOT ACCEPTABLE TO THE ASSESSING OFFICER, BY ITSELF WOULD NOT ATTRACT THE PROVI SI ON S OF 271(1)(C) OF THE ACT. THE DISPUTE BETW EEN THE APPELLANT AND THE LEARNED AO WAS WITH RESPECT TO CLASSIFICATION OF EXPENSE AS CAPITAL OR REVENUE, WHICH IS A VEXED ISSUE AND IN ITSELF HAS BEEN CONSIDERED DEBATABLE BY CO URTS. W HERE AN ASSESSEE HAD CLAIMED EXPENSES ON RE MODELING OF FURNITURE AS R EVENUE EXPENDITURE, WHILE THE ASSESSING OFFICER AND THE APPELLATE AUTHORITIES HAD HELD THE SAME TO BE CAPITAL EXPENDITURE, THE DELHI HIGH COURT HELD THAT PENALTY SHOULD NOT BE CHARGED FOR INCORRECT CLASSIFICATION (ACIT V/S DELHI CLOTH AND GENERAL MILLS LTD . [1986] [157 ITR 822], THE FACTS OF THE CASE ARE SIMILAR TO THE APPELLANTS CASE. QUANTUM AND PENALTY PROCEEDINGS ARE INDEPENDENT TO EACH OTHER. CONFIRMATION OF THE ADDITION BY THE ITAT IN QUANTUM PROCEEDINGS CANNOT AUTOMATICALLY MEAN THAT PENALTY BE AU TOMATICALLY CONFIRMED. IDFC ASSET MANAGEMENT CO. LTD. 4 5 . THE LEARNED COMMISSIONER (APPEALS) HAS ALSO CONFIRMED THE PENALTY ON THE GROUND THAT THIS ISSUE HAS BEEN AFFIRMED BY THE TRIBUNAL ALSO, THEREFORE, THE LEVY OF PENALTY IS JUSTIFIED. 6 . BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN THE COMPUTATION OF INCOME, THE ASSESSEE HAS SHOWN TOTAL REFURBISHMENT OF EXPENDITURE WHICH HAS BEEN AMORTIZED IN THE PROFIT & LOSS ACCOUNT AT ` 22,76,547, OUT OF THIS, THE EXPENDITURE TO THE TUNE OF ` 5,60,341 WAS ONLY CLAIMED IN THIS YEA R AND THE BALANCE WAS DEFERRED FOR CLAIMING IN THE SUBSEQUENT YEARS. THE ASSESSEE ALSO GAVE THESE DETAILS AND REASONS BEFORE THE ASSESSING OFFICER AT THE TIME OF THE ASSESSMENT PROCEEDINGS. THUS, THERE IS NO QUESTION OF FURNISHING OF INACCURATE PARTICULARS AS HELD BY THE ASSESSING OFFICER , BECAUSE ALL THE PARTICULARS WERE DULY SHOWN IN THE RETURN OF INCOME ALONG WITH THE NOTES AS TO WHY THESE EXPENSES ARE TO BE AMORTIZED AND HAS BEEN CLAIMED ON DEFERRED REVENUE BASIS. HE HAS ALSO GIVEN COMPILATION OF CASE L AWS WHERE SUCH KIND OF EXPENSES WHICH HAVE BEEN INCURRED ON LEASED PREMISES HAVE BEEN HELD TO BE ALLOWABLE AS A REVENUE EXPENDITURE . A LIST OF SUCH CASES ARE AS UNDER: SR.NO RULING EXPENSES HELD TO BE REVENUE 1 DEPUTY COMMISSIONER OF INCOME TAX VIS LAZARD INDIA (P.) LTD [2010]41 SOT 72 (MUMBAI TRIBUNAL) MARBLE SLABS, CARPENTRY, TIMBER, HARDWARE ITEM, TABLES AND PARTITION, DOOR FRAMES, PARTITIONS, STORAGE CABINETS, FLOORING 2 COMMISSIONER OF INCOME - TAX VIS CITI FINANCIAL CONSUMER FIN. LTD. 335 ITR 29 PARTITIONS, PIN BOARDS, BRICK WORK, FLOORING, FALSE CEILING, TOILET FINISHING 3 B AND A PLANTATIONS & INDUSTRIES LTD. VIS COMMISSIONER OF INCOME - TAX 242 ITR 22 INTERIOR DECORATION, WALLPAPER, PARTITION WALLS, MARBLE FLOORING, ELECTRICAL GOODS 4 COMM ISSIONER OF INCOME - TAX VIS AYESHA HOSPITALS (P.) LTD 292 ITR 266 PARTITIONS 5 P & A NEDLLOYD (INDIA) PRIVATE LIMITED VIS JOINT COMMISSIONER OF INCOME TAX SPECIAL RANGE (ITA NO 706/M/2000) ELECTRICAL FITTINGS, FURNITURE, PANELING, FALSE CEILING, BLINDS A ND SCREENS 6 DEPUTY COMMISSIONER OF INCOME - TAX VIS BIJESH THAKKAR 49 SOT POP, WINDOW FRAMES, HARDWARE, ELECTRIFICATION WORK. 7. CIT V/S HIDINE PENS PVT. LTD., 306 ITR 182 (DEL.) TENANT BY HIS VERY NATURE AS STATUS OF TENANT WOULD NOT UNDERTAKE EXPENDIT URE AS WOULD ENDURE DURING HIS TENANCY OR CREATE A NEW ASSET. IDFC ASSET MANAGEMENT CO. LTD. 5 HE ALSO RELIED UPON THE DECISION OF HON'BLE SUPREME COURT IN CIT V/S. RELIANCE PETROPRODUCTS PVT. LTD. (2010) 322 ITR 158 (SC) THAT SUCH A CLAIM OF EXPENSES CANNOT BE TREATED AS FURNISHING O F INACCURATE PARTICULARS. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, RELIED UPON THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS). 8 . WE HAVE HEARD THE RIVAL CONTENTION, PERUSED THE RELEVANT FINDINGS OF THE AUTHORITIES BELOW AND THE M ATERIAL AVAILABLE ON RECORD. THE ASSESSEE, IN ITS COMPUTATION OF INCOME, HAS SHOWN THE REIMBURSEMENT OF EXPENSES WHICH HAS BEEN AMORTISED OVER THE PERIOD OF LEASE IN THE BOOKS OF ACCOUNT. IN THIS YEAR, THE ASSESSEE HAS CLAIMED ` 5,60,341. IN THE QUANTUM PR OCEEDINGS, THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE HOLDING IT TO BE CAPITAL IN NATURE AND DEPRECIATION HAS BEEN ALLOWED. THE PENALTY PROCEEDINGS BEING SEPARATE AND DISTINCT FROM THE QUANTUM PROCEEDINGS, THE ASSESSEES EXPLANATION AND THE CL AIM HAS NOT BEEN FOUND TO BE NOT BONAFIDE BECAUSE , THERE ARE VARIOUS JUDICIAL AUTHORITIES WHEREIN IT HAS BEEN HELD THAT THE EXPENDITURE INCURRED ON REPAIR S AND RENOVATION ON LEASE PREMISES IS TO BE TREATED AS REVENUE EXPENDITURE. ONCE THE ASSESSEES CLAIM IS BONA FIDE WHICH IS ALSO BASED ON CERTAIN JUDICIAL PRECEDENTS AND HAS GIVEN ALL THE DETAILS OF PARTICULARS OF SUCH CLAIM AND EXPENSES, IT CANNOT BE HELD THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICULARS OF INCOME . THE AFORESAID JUDICIAL AUTHORITIES FURNISHE D BY THE LEARNED COUNSEL BEFORE US ALSO GOES TO SHOW THAT THIS ISSUES, BY AND LARGE, HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE I.E., REPAIRS AND RENOVATION EXPENSES INCURRED ON LEASED PREMISES HAVE BEEN HELD TO BE REVENUE IN NATURE. THUS, THE RATIO LAID D OWN BY THE HON'BLE SUPREME COURT IN RELIANCE PETROPRODUCTS PVT. LTD. (SUPRA) GETS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE AND, ACCORDINGLY, WE HOLD THAT IT IS NOT A FIT CASE FOR LEVY OF PENALTY US/ 271(1)(C) AND, CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND DELETE THE PENALTY LEVIED IDFC ASSET MANAGEMENT CO. LTD. 6 BY THE ASSESSING OFFICER WHICH HAS BEEN CONFIRMED BY THE LEARNED COMMISSIONER (APPEALS). THUS, THE GROUND RAISED BY THE ASSESSEE IS TREATED AS ALLOWED. 9 . 9. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED. IN ASSESSEES APPEAL IN ITA NO. 37/MUM./2011, FOR THE ASSESSMENT YEAR 2003 04, IDENTICAL ISSUE, AS RAISED BY THE ASSESSEE IN ITA NO.36/MUM./2011 FOR THE ASSES SMENT YEAR 2002 03 , HAS BEEN RAISED IN THIS APPEAL ALSO. 10 . SINCE THE FACTS AND CIRCUMSTANCES INVOLVED IN THE PRESENT APPEAL ARE MUTATIS MUTANDIS APPLICABLE TO THE FACTS A ND CIRCUMSTANCES INVOLVED IN THIS APPEAL FOR THE ASSESSMENT YEAR 2002 03 ALSO , THEREFOR E, THE CONCLUSION DRAWN, VIDE PARA 8 ABOVE, IS APPLICABLE TO THE GROUND RAISED IN THIS APPEAL ALSO . CONSEQUENTLY, WE SET ASIDE THE IMPUGNED ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) AND TREAT THE GROUND RAISED BY THE ASSESSEE AS ALLOWED. 11 . 11. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE TREATED AS ALLOWED. 12 . , 12. TO SUM UP, ASSESSEES APPEALS ARE TREATED AS ALLOWED. 23 RD OCTOBER 2013 ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD OCTOBER 2013 SD/ - . B. RAMAKOTAIAH ACCOUNTANT MEMBER SD/ - AMIT SHUKLA JUDICIAL MEMBE R MUMBAI, DATED : 23 RD OCTOBER 2013 IDFC ASSET MANAGEMENT CO. LTD. 7 / COPY OF THE ORDER FORWARDED TO : ( 1 ) / THE ASSESSEE ; ( 2 ) / THE REVENUE; ( 3 ) ( ) / THE CIT(A ) ; ( 4 ) / THE CIT, MUMBAI CITY CONCERNED ; ( 5 ) , , / THE DR, ITAT, MUMBAI ; ( 6 ) / GUARD FILE . / TRUE COPY / BY ORDER . / PRADEEP J. CHOWDHURY / SR. PRIVATE SECRETARY / / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI