DCIT CR 4(2), Mumbai V. MAGNA WAREHOUSING & DISTRIBUTION PVT LTD, Mumbai

ITA 4090/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 3015 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2012-2013
• Appeal Filed On: 07-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BHARAT ANDHALE L D
• Assessee Lawyers: MADHUR AGARWALLD
• Keywords: Depreciation; Business expenditure; Revenue expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI , , BEFORE HONBLE SHRI MAHAVIR SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.4090/MUM/2019 ( / ASSESSMENT YEAR : 2012-13) DCIT - CC - 4(2), R.NO. 1918, 19 TH FLOOR AIR INDIA BUILDING NARIMAN POINT MUMBAI-400 021 / VS. M/S MAGNA WAREHOUSIN G & DISTRIBUTION PVT. LTD. RAHEJA TOWER, PLOT NO.C-30, G-BLOCK, BANDRA KURLA COMPLEX, BANDRA(E), MUMBAI-400 051 *+ ./ ./PAN/GIR NO . AAECM-4101-H ( +- /APPELLANT ) : ( ./+- / RESPONDENT ) REVENUE BY : SHRI BHARAT ANDHALE LD. SR. DR ASSESSEE BY : SHRI MADHUR AGARWAL- LD. AR / DATE OF HEARING : 02/06/2021 / DATE OF PRONOUNCEMENT : 17/06/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFORESAID APPEAL BY REVENUE FOR ASSESSMENT YEAR (AY) 2012-13 CONTEST THE ORDER OF LEARNED COMMISSIONER OF INCOME -TAX (APPEALS)-21, MUMBAI [CIT(A)], DATED 28/02/2019 WHICH HAS HELD TH AT THE BUSINESS EXPENDITURE OF RS.201.56 LACS AS INCURRED BY THE AS SESSEE WAS AN ALLOWABLE EXPENDITURE AS AGAINST THE STAND OF LD. A O THAT THE EXPENDITURE WAS TO BE CAPITALIZED IN VIEW OF THE FA CT THAT THE PROJECT WAS 2 AT UNDER-CONSTRUCTION STAGE AND THE OPERATIONAL ACT IVITIES HAD NOT COMMENCED. THE STATED EXPENDITURE WAS IN THE NATURE OF EMPLOYEE BENEFIT EXPENSES, DEPRECIATION, INTEREST EXPENSES & OTHER EXPENSES ETC. AS ENUMERATED IN THE IMPUGNED ORDER. THE ASSESSEE I NCURRED AGGREGATE EXPENDITURE OF RS.677.84 LACS OUT OF WHICH AN EXPEN DITURE OF RS.201.56 LACS WAS CLAIMED IN THE PROFIT & LOSS ACCOUNT DURIN G THE YEAR. THE ASSESSEE BEING RESIDENT CORPORATE ASSESSEE IS STATE D TO BE ENGAGED IN REAL ESTATE DEVELOPMENT. 2. FROM IMPUGNED ORDER, IT COULD BE SEEN THAT LD. C IT(A), RELYING UPON CERTAIN JUDICIAL PRONOUNCEMENTS, HELD THAT THE BUSINESS WOULD COMMENCE WITH THE ACQUISITION OF LAND, OBTAINING AL L NECESSARY APPROVALS / CERTIFICATES FROM GOVERNMENT AUTHORITIES, APPOINT MENT OF PROJECT MANAGER AND PROCUREMENT OF PLANT & MACHINERY ETC. S INCE ALL THESE FORMALITIES WERE COMPLETED, THE BUSINESS WAS ALREAD Y SET UP AND THEREFORE, THE EXPENDITURE WOULD BE AN ALLOWABLE EX PENDITURE. AGGRIEVED, THE REVENUE IS IN FURTHER APPEAL BEFORE US. 3. AS RIGHTLY POINTED OUT BY LD. AR, THIS ISSUE IS RECURRING IN NATURE AND COVERED BY THE EARLIER DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11, ITA NO.7430/MUM/2013 DATED 21/08/20 19 WHEREIN IT WAS HELD AS UNDER: - 3.1. WE FIND THAT THE ASSESSEE HAD PLEADED THAT THE AFORESAID EXPENDITURE WERE INCURRED FOR THE PURPOSE OF SMOOTH RUNNING OF THE BUSINESS AND A RE PURELY ADMINISTRATIVE IN NATURE AND ARE NOT CONNECTED WITH THE PROJECT UNDERTAKEN BY THE AS SESSEE. IN OTHER WORDS, IT WAS PLEADED THAT THE AFORESAID EXPENDITURE ARE ROUTINE ADMINIST RATIVE EXPENSES AND ARE TO BE INCURRED IRRESPECTIVE OF THE COMPLETION OF THE PROJECT BY TH E ASSESSEE. WE FIND FROM THE PERUSAL OF THE BALANCE SHEET THAT THE ASSESSEE HAD ALREADY CONSIDE RED, THE COST OF LAND, MATERIAL AND CONTRACTUAL PAYMENTS, TECHNICAL PROFESSIONAL FEES, RATES & TAXES FOR THE PROJECT, TRAVELLING EXPENSES FOR THE PROJECT, TECHNICAL PROJECT SUPPORT FEES, INTEREST ETC AGGREGATING TO RS 187 CRORES, TO THE CAPITAL WORK IN PROGRESS AS THEY ARE DIRECTLY RELATED TO THE CONSTRUCTION OF PROJECT. THIS WAS DONE IN ACCORDANCE WITH THE MANDA TE PRESCRIBED IN ACCOUNTING STANDARDS (AS-7) ISSUED BY INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA (ICAI). WE FIND THAT THE ASSESSEE PLEADED BEFORE THE LOWER AUTHORITIES THAT THE VERY SAME SET OF EXPENDITURE WERE INCURRED BY THE ASSESSEE AND CLAIMED AS DEDUCTION B Y THE ASSESSEE IN EARLIER YEARS IN ASST 3 YEARS 2006-07 AND 2007-08 WHEREIN THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE LD AO IN SCRUTINY ASSESSMENTS. IT IS NOT IN DISPUTE THAT THE COMMERCIAL PROJECT HAD BEEN UNDERTAKEN BY THE ASSESSEE FROM THE EARLIER YEARS AND HAD NOT BEE N COMPLETED DURING THE YEAR UNDER CONSIDERATION. THE AFORESAID TREATMENT OF EXPENDITU RE I.E PARTLY TOWARDS CAPITAL WORK IN PROGRESS IN RESPECT OF DIRECT PROJECT RELATED EXPEN SES AND PARTLY TOWARDS REVENUE EXPENDITURE IN RESPECT OF ROUTINE ADMINISTRATIVE EXPENSES HAS B EEN CONSISTENTLY FOLLOWED BY THE ASSESSEE IN THE EARLIER YEARS ALSO AND THE SAME STAND WAS TA KEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. WE FIND THAT THERE IS NO REASON FOR THE LD AO TO TAKE A DIVERGENT STAND WITH REGARD TO THE TREATMENT OF EXPENDITURE GIVEN BY THE ASSESSEE IN THE BOOKS WHICH IS SIMILAR TO TREATMENT FOR INCOME TAX PURPOSES ALSO. IN ANY CASE , WE FIND THAT THESE ADMINISTRATIVE EXPENSES, EVEN IF TRANSFERRED TO CAPITAL WORK IN PR OGRESS, WOULD EVENTUALLY FIND WAY TO THE PROFIT AND LOSS ACCOUNT IN THE YEAR OF COMPLETION O F PROJECT , IN VIEW OF THE FACT THAT THE REVENUE HAD NOT DOUBTED THE GENUINENESS OF INCURREN CE OF THOSE EXPENDITURE AND THE BUSINESS NEXUS OF THE SAME. WE FIND THAT THE LOWER AUTHORITI ES HAD NOT APPRECIATED THE ACTION OF THE ASSESSEE WHEREIN THE ROUTINE ADMINISTRATIVE EXPENSE S THAT ARE NOT DIRECTLY CONNECTED WITH THE PROJECT, NEED TO BE CHARGED OFF AS REVENUE EXPENDIT URE. HENCE WE DIRECT THE LD AO TO GRANT DEDUCTION OF THE REVENUE EXPENDITURE IN THE SUM OF RS 1,09,84,625/- THAT WERE DEBITED TO PROFIT AND LOSS ACCOUNT BY THE ASSESSEE. ACCORDINGL Y, THE GROUND NO. 1 RAISED BY THE ASSESSEE IS ALLOWED. NO FACTUAL DISTINCTION COULD BE POINTED OUT BY REVE NUE IN THIS YEAR. SINCE THE ISSUE IS SQUARELY COVERED IN ASSESSEES FAVOR, NO INTERFERENCE IS CALLED FOR IN THE IMPUGNED ORDER. 4. THE APPEAL STANDS DISMISSED. ORDER PRONOUNCED ON 17TH JUNE 2021 SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI; DATED : 17/06/2021 SR.PS, JAISY VARGHESE !'! / COPY OF THE ORDER FORWARDED TO : 1. +- / THE APPELLANT 2. ./+- / THE RESPONDENT 3. 6 ( ) / THE CIT(A) 4. 6 / CIT CONCERNED 5. 78.19 , 9 , / DR, ITAT, MUMBAI 6. 8:;< / GUARD FILE 4 / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.