M/S SHUBHAM FOOD PRODUCTS, Nagpur V. ITO-WARD-4(4), Nagpur

ITA 396/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1662 (ITAT-NAGPUR)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 31-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Keywords: Depreciation; Principle of natural justice
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER ITA NO. 396/NAG./2013 ( ASSESSMENT YEAR : 2008-09 ) M/S. SHUBHAM FOOD PRODUCTS KAILASH BHAVAN, JALAL PURA BEHIND BANK OF BARODA GANDHI BAUG, NAGPUR 440 002 PAN AARFS0484P APPELLANT V/S INCOME TAX OFFICER WAD-4(4), SARAF CHAMBER NAGPUR 440 001 .... RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI NARENDRA KANE DATE OF HEARING 20.07.2015 DATE OF ORDER 20.08.20 15 O R D E R THIS APPEAL FILED BY THE ASSESSEE IS EMANATING FROM THE IMPUGNED ORDER DATED 28 TH AUGUST 2008, PASSED BY THE LEARNED COMMISSIONER (APPEALS)-II, NAGPUR, FOR THE ASSESSMENT YEAR 2008-09, O N THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE ADDITION OF ` 50,000, ON ACCOUNT OF CLEANING EXPENSES, TRAVELLING EXPENSES AND REPAIR AND MAINTENANCE CHARGES. M/S. SHUBHAM FOOD PRODUCTS 2 2. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF ` 40,357, ON ACCOUNT OF DEPRECIATION. 2. FACTS IN BRIEF, AS EMERGED FROM THE CORRESPONDING AS SESSMENT ORDER DATED 19 TH NOVEMBER 2010, PASSED UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) WERE THAT THE ASSESSEE FIRM IS IN THE BUSINESS OF MANUFACTURING AND TRADING OF SWE ETS AND NAMKEEN. IN RESPECT OF GROUND NO.1, IT WAS NOTICED BY THE ASSES SING OFFICER THAT THERE WAS A POSSIBILITY OF NON-VERIFICATION OF CERTAI N EXPENSES AND ALSO AN ELEMENT OF PERSONAL EXPENSES, HENCE, ON AGREED BAS IS, HE HAS DISALLOWED THE FOLLOWING EXPENSES:- FACTORY CLEANING EXPENSES ` 20,000 TRAVELING EXPENSES ` 10,000 REPAIR AND MAINTENANCE ` 20,000 TOTAL ` 50,000 3. WHEN THE MATTER WAS CARRIED BEFORE THE FIRST APPELLAT E AUTHORITY, THE LEARNED CIT(A) HAS AFFIRMED THE SAID ADDITION BECA USE THE APPELLANT HAS NOT PRESSED THIS GROUND. THEREFORE, IN A SITUATION , WHEN THE ASSESSEE HAS AGREED FOR THE SAID ADDITION BEFORE THE ASSESSING OFFICER AND ALSO NOT PRESSED THE GROUND BEFORE THE FIRST APPE LLATE AUTHORITY, M/S. SHUBHAM FOOD PRODUCTS 3 THEREFORE, IT WAS NOT FAIR AND REASONABLE AGAIN TO RAI SE THIS GROUND BEFORE THE TRIBUNAL. RESULTANTLY, GROUND NO.1, IS HEREBY DISMIS SED. 4. APROPOS GROUND NO.2, THE OBSERVATION OF THE ASSESSING OFFI CER WAS THAT THE ASSESSEE HAD RECEIVED SUBSIDY OF ` 4,58,320, FROM DIC, GOVERNMENT OF MAHARASHTRA. THE ASSESSING OFFICER HAS ALS O MENTIONED THAT THE SUBSIDY WAS SHOWN AS A LIABILITY IN THE BAL ANCE SHEET. THE ASSESSING OFFICER HAS ALSO MENTIONED A LETTER PERTAINI NG TO THE GRANT OF SUBSIDY BY THE DIC WHEREIN IT WAS MENTIONED THAT THE SUBSIDY WAS GRANTED FOR A PERIOD OF 15 YEARS. HOWEVER, THE ASSESSING OFFICER HAS INVOKED THE RELEVANT PROVISIONS OF THE ACT AND RE-CAL CULATED THE DEPRECIATION IN THE FOLLOWING MANNER:- 4. THE ASSESSEE HAS RECEIVED SUBSIDY FROM DIC, THE GOVT. OF MAHARASHTRA OF ` 58,320 IN THE F.Y. 2006-07, ON ACCOUNT OF ASSETS. HE HAS SHOWN THIS SUBSIDY IN BALANCE SHEET AS LIA BILITY. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ISSUE OF SUBSID Y WAS DEEPLY DISCUSSED WITH THE COUNSEL FOR THE ASSESSEE ABOUT NATURE OF SUBSIDY. HE HAS FILED XEROX COPY OF LETTER OF GRANT OF SUBSIDY BY DIC. IN THIS LETTER, IT WAS CLEARLY MENTIONED THA T THE SUBSIDY GRANTED FOR THE PERIOD OF 15 YEARS AND THIS SUBSIDY IS AGAINST THE ASSETS OF FACTORY. 4.1 AS ABOVE SUBSIDY GRANTED AGAINST THE ASSETS THE VALUE OF ASSETS SHALL BE REDUCED BY THE AMOUNT OF SUBSIDY FROM THE WDV OF ASSETS WHILE CALCULATED THE DEPRECIATION. HE HAS NOT DEDUC TED THE SUBSIDY FROM WDV AND CALCULATED DEPRECIATION. BY WAY THIS HE HAS CLAIMED EXCESS DEPRECIATION THAN ADMISSIBLE, HENCE, EXCE SS DEPRECIATION CLAIMED BY HIM IS ADDED TO HIS INCOME. THE CALCULATION OF DEPRECIATION ENCLOSED WITH THIS ORDER AS ANNEXURE- A AS PART OF THIS ORDER. AS PER P&L A/C THE ASSESSEE HA S CLAIMED THE DEPRECIATION OF ` 6,43,944 AND AS PER ANNEX. A THE M/S. SHUBHAM FOOD PRODUCTS 4 DEPRECIATION SHOULD BE ` 6,03,587. THE ASSESSEE HAS DEBITED EXCESS DEPRECIATION OF ` 40,357 (643944 603587), HENCE, SAME IS ADDED TO THE INCOME OF THE ASSESSEE. THE ASSESSEE HAS S UBMIT INCORRECT PARTICULARS, THE PENALTY U/S 271(1)(C) OF THE I. T. ACT IS INITIATED SEPARATELY. 5. BEING AGGRIEVED, WHEN THE MATTE WAS CARRIED BEFORE T HE FIRST APPELLATE AUTHORITY, THE LEARNED CIT(A) HAS AFFIRMED THE ACTION OF THE ASSESSING OFFICER, PRIMARILY ON THE GROUND THAT THE IN VIEW OF THE INSERTION OF EXPLANATION-10 TO SECTION 43(1) OF THE AC T, THE SUBSIDY GRANTED FOR ACQUISITION OF FIXED ASSET SHOULD BE REDUC ED FROM THE COST OF THE ASSET. HENCE, THE ACTION OF THE ASSESSING OFFICER WAS AFFIRME D. 6. AT THE OUTSET, IT IS WORTH TO MENTION THAT, IN THE PAS T, ON THE REQUEST OF THE LEARNED COUNSEL FOR THE ASSESSEE, THIS C ASE WAS ADJOURNED. HOWEVER, ON THE DATE OF HEARING, AN APPLICATI ON HAS BEEN MOVED TO ADJOURN THIS CASE. SINCE THE ISSUE, AS RAISED IN THE GROUND OF APPEAL, IS TRIFLE IN NATURE, THEREFORE, IT IS DECIDED TO PROCEED EX-PARTE QUA THE ASSESSEE AFTER HEARING THE LEARNED DEPARTMEN TAL REPRESENTATIVE. 7. FROM THE SIDE OF THE REVENUE, THE LEARNED DEPARTMENTA L REPRESENTATIVE, APPEARED AND PLACED RELIANCE ON THE O RDERS OF THE AUTHORITIES BELOW AS WELL AS EXPLANATION-10 TO SECTION 4 3(1) OF THE ACT. M/S. SHUBHAM FOOD PRODUCTS 5 8. CONSIDERING THE FACTS OF THE CASE, I AM OF THE VIEW TH AT THE REVENUE AUTHORITIES HAVE IGNORED ONE OF THE VITAL FACT IN RESPECT OF THE CONDITIONS UNDER WHICH THE SUBSIDY WAS GRANTED. THE ASSESSING OFFICER HAS MENTIONED IN PARA-4 OF THE ASSESSMENT ORDER, AS R EPRODUCED ABOVE, THAT THE SUBSIDY WAS GRANTED FOR A PERIOD OF 15 YEARS . DUE TO THAT REASON, THE SUBSIDY WAS MENTIONED AS A LIABILITY IN THE BALANCE SHEET. IF IT WAS A LIABILITY, THEN THE ASSESSEE WAS EXPECTED T O RE-PAY THE AMOUNT. IF THAT WAS SO, THEN IT IS NOT JUSTIFIABLE TO HOLD THAT THE COST OF AN ASSET WAS MADE BY THE AMOUNT OF SUBSIDY GRANTED BY THE DIC . EVEN UNDER EXPLANATION-10, IT IS PRESCRIBED THAT WHERE A PORTIO N OF THE COST OF AN ASSET ACQUIRED BY THE ASSESSEE HAS BEEN MADE EITHER DIRECTLY OR INDIRECTLY BY ANY AUTHORITY IN THE FORM OF SUBSIDY, TH EN SO MUCH OF THE COST SHALL NOT BE INCLUDED IN THE ACTUAL COST OF THE ASSET. THEREFORE THE BASIC REQUIREMENT IS THAT THE COST OF AN ASSET SHOUL D BE MADE BY THE GRANT OF SUBSIDY. AS AGAINST THAT, THE ASSESSING OFFICER HAS MENTIONED THAT THE SUBSIDY WAS IN THE FORM OF LIABILITY WHICH W AS TO BE RE-PAID BY THE ASSESSEE MAY BE AFTER A LONG PERIOD OF 15 YEARS. THE ASSESSING OFFICER HAS NOT EXAMINED THE EXACT CLAIM OF SUBSIDY PR ONOUNCED BY THE APPROPRIATE AUTHORITY AS ALSO THE TERMS OF CLAUSES O F RE-PAYMENT OF THE SUBSIDY GRANTED. THE FIRST APPELLATE AUTHORITY HAS AL SO NOT APPRECIATED THIS FACT ALTHOUGH IT WAS VERY MUCH MENTIONED IN THE ASSESSMENT ORDER. M/S. SHUBHAM FOOD PRODUCTS 6 THEREFORE, IN THE INTEREST OF NATURAL JUSTICE, I AM OF TH E CONSIDERED VIEW THAT THIS ISSUE SHOULD GO BACK TO THE FILE OF THE ASSE SSING OFFICER TO RE- EXAMINE THE FACTS OF THE CASE AFTER PERUSING THE SCHEM E UNDER WHICH THE SUBSIDY WAS GRANTED. RESULTANTLY, THE GROUND IS RE STORED BACK FOR DENOVO CONSIDERATION BY THE ASSESSING OFFICER AND, HENC E, THIS GROUND MAY BE TREATED AS ALLOWED FOR STATISTICAL PURPOSES ONLY. 9. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON SD/ - MUKUL K. SHRAWAT JUDICIAL MEMBER NAGPUR, DATED: 20 TH AUGUST 2015 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, NAGPUR CITY CONCERNED; (5) THE DR, ITAT, NAGPUR; (6) GUARD FILE. TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY A SSISTANT REGISTRAR ITAT, NAGPUR