M/s. Medha Fashions Pvt. Ltd., New Delhi V. DCIT, New Delhi

ITA 3879/DEL/2013

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 9994 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-03-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 18-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAMESH CHANDER
• Keywords: Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E, NEW DELHI) BEFORE SHRI G. C. GUPTA, HONBLE VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.3879 /DEL/2013 ASSESSMENT YEAR : 2003-04 M/S. MEDHA FASHIONS PVT. LTD., VS. DCIT, CC-12, 407-408, ROOTS TOWER-07, NEW DELHI LAXMI NAGAR DISTT. CENTRE, NEW DELHI-110 092 GIR / PAN:AACCM9673J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAJIV SAXENA, ADV. RESPONDENT BY : SHRI RAMESH CHANDER, CIT DR DATE OF HEARING : 19.03.2015 DATE OF PRONOUNCEMENT : 08.04.2015 ORDER PER T.S. KAPOOR, AM: THIS IS AN APPEAL FILED BY ASSESSEE AGAINST THE OR DER OF LD. CIT(A) DATED 07.03.2013. THE ASSESSEE IS AGGRIEVED WITH T HE ACTION OF LD. CIT(A) BY WHICH HE HAD DISALLOWED CAPITALIZATION OF EXPENS ES AMOUNTING TO RS.8,56,881/-. AT THE OUTSET, LD. A.R. INVITED OUR ATTENTION TO HIS APPLICATION FOR RAISING ADDITIONAL GROUND AND SUBMITTED THAT AD DITIONAL GROUND RAISED BY ASSESSEE IS ON LEGAL ISSUES WHEREBY THE ASSESSEE HA S CHALLENGED THAT SINCE NO INCRIMINATING MATERIAL WAS FOUND FROM THE PREMISES OF THE SEARCHED PERSON THEREFORE, INITIATION OF PROCEEDINGS U/S 153C WERE NOT LEGAL AND, THEREFORE THE ORDER OF ASSESSMENT ITSELF NEEDS TO BE QUASHED. 2. LD. A.R. ALSO INVITED OUR ATTENTION TO AN APPLIC ATION FILED ON 18.06.2013 WHEREIN THE ASSESSEE HAD REQUESTED FOR C ONDONATION OF DELAY IN ITA NO.3879/DEL/2013 2 FILING THE APPEAL. IT WAS SUBMITTED THAT DUE TO HA NDLING OF OTHER MATTERS BY THE COUNSEL, THE FILING OF APPEAL SKIPPED THE ATTEN TION OF THE COUNSEL AND THERE WAS NO FAULT OF THE ASSESSEE. IN THIS RESPEC T, LD. D.R. HAD NO OBJECTION IN CONDONING THE DELAY IN FILING OF APPEAL, THEREFO RE, IN VIEW OF THE SUBSTANTIAL JUSTICE, THE DELAY IN FILING OF APPEAL IS CONDONED. INVITING OUR ATTENTION TO THE ISSUE, LD. A.R. SUBMITTED THAT THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF MANUFACTURING AND DEALE R IN ALL KINDS OF CLOTHS. HOWEVER, DURING THE YEAR UNDER CONSIDERATION NO BUS INESS ACTIVITIES WAS CARRIED OUT BY THE COMPANY AS THE BUILDING WAS UNDE R CONSTRUCTION THEREFORE, THE ASSESSEE HAD CAPITALIZED THE DAY TO DAY EXPENSE UNDER THE HEAD BUILDING UNDER CONSTRUCTION. IT WAS ALSO SUBMITTED THAT THE A.O. HAS ALLOWED ONLY 50% OF SUCH EXPENSE TO BE CAPITALIZED AND REMAINING 50% HAVE NOT BEEN ALLOWED TO BE CAPITALIZED, NOR HAS BEEN ALLOWED AS REVENUE EXPENDITURE. IT WAS SUBMITTED THAT IF THE REMAINING EXPENSE WERE NO T ALLOWED TO BE CAPITALIZED THEN A.O. SHOULD HAVE ALLOWED THE SAME AS REVENUE EXPENDITURE. IT WAS SUBMITTED THAT THE INSTITUTE OF CHARTERED AC COUNTANTS OF INDIA IN ITS GUIDANCE NOTES FOR PRE OPERATIVE EXPENSES HAS GUIDE D THAT EXPENSES DURING CONSTRUCTION PERIOD NEEDS TO BE CAPITALIZED AND, TH EREFORE, LD. A.R. SUBMITTED THAT LOWER AUTHORITIES HAVE NOT CONSIDERE D THE ABOVE SUBMISSIONS. 3. LD. D.R. ON THE OTHER HAND HEAVILY RELIED UPON T HE ORDERS OF AUTHORITIES. 4. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. DURING PROCEEDINGS BEFORE US, THE LD. A .R. WAS DIRECTED TO FILE A COPY OF THE BALANCE SHEET AS ON 31.03.2003 WHICH HE HAD FILED AFTER HEARING. FROM THE COPY OF THE BALANCE SHEET WE FIND THAT ASS ESSEE HAD NOT STARTED ITS BUSINESS AND SHOWN THE BUILDING UNDER CONSTRUCTION. THEREFORE, THE ITA NO.3879/DEL/2013 3 EXPENSES INCURRED BY ASSESSEE HAD TO BE CAPITALIZED IN ACCORDANCE WITH GUIDANCE NOTE ISSUED BY ICAI. THERE IS NO BASIS OF A.O. FOR ALLOWING 50% OF THE EXPENSES FOR CAPITALIZATION WHEREAS HE HAS N OT MENTIONED ABOUT THE TREATMENT TO BE MADE TO THE REMAINING 50% OF EXPENS ES. THE A.O. HAS NOT DOUBTED THE GENUINENESS OF EXPENDITURE INCURRED, TH EREFORE, THE REMAINING OF 50% EXPENDITURE HAS TO BE ALLOWED EITHER AS CAPITAL IZED EXPENDITURE OR AS REVENUE EXPENDITURE. SINCE THE ASSESSEE HAS PREFER RED THESE EXPENSES TO BE CAPITALIZED IN ACCORDANCE WITH ICAI GUIDELINES, WE SEE NO JUSTIFICATION IN THE ACTION OF A.O. BY WHICH HE HAD ALLOWED ONLY 50% OF THE EXPENSE TO BE CAPITALIZED. LD. CIT(A) HAS ALSO NOT APPRECIATED T HE FACTS IN ACCORDANCE WITH LAW. IN VIEW OF ABOVE, WE ARE IN AGREEMENT WI TH THE CONTENTION OF LD. A.R. AND DIRECT THE A.O. TO ALLOW THE REMAINING EXP ENSES TO BE CAPITALIZED UNDER THE HEAD FIXED ASSETS. SINCE WE HAVE DECID ED THE ISSUE ON MERITS, THE ADDITIONAL GROUND TAKEN BY ASSESSEE ON LEGAL ISSUE, NEED NOT BE ADJUDICATED. 5. IN VIEW OF ABOVE, APPEAL FILED BY ASSESSEE IS AL LOWED. 6. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH APRIL, 2015. SD./- SD./- ( G. C. GUPTA) (T.S. KAPOO R) VICE PRESIDENT ACCOUNTANT MEMBER DATE: 08 TH APRIL, 2015 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). ITA NO.3879/DEL/2013 4 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR , SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS 8/4 SR. PS/PS 6 KEPT FOR PRONOUNCEMENT 8/4 SR. PS/PS 7 FILE SENT TO BENCH CLERK 8/4 SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER