HAFELE INDIA P.LTD, MUMBAI V. DCIT RG 8(2), MUMBAI

ITA 4159/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71986 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 12-12-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 13-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M RAJAN
• Keywords: Depreciation; Opportunity of being heard; Rule of consistency
• Section: 37

Judgement Text

H IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI DR. S.T.M. PAVALAN, JUDICIAL MEMBER ./I.T.A. NO.4159/M/2012 (AY: 2008 - 2009) M/S. HAFELE INDIA PVT. LTD., OFFICE NO.3, BUILDING A BETA, I - THINK TECHOCAMUS, OFF. J.V.L.R. OPP. KANJUNMARG STATION, KANJUNMARG (E), MUMBAI - 400 042. / VS. DCIT, RANGE 8(2), R.NO.209, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 021. ./ PAN : AABCH 2726 A ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI RAJESH AGR A WAL / REVENUE BY : SHRI M. RAJAN / DATE OF HEARING : 12 .12.2013 / DATE OF PRONOUNCEMENT : 18 .12.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED THE ASSESSEE ON 13.6.2012 IS AGAINST THE ORDER OF THE CIT (A) - 17, MUMBAI DATED 30.4.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE ONLY FOLLOWING EFFECTIVE GROUND WHICH READS AS UNDER: 1. THE AO HAS ERRED IN DISALLOWING AND ADDING BACK AND AMOUNT OF RS. 22,95,973/ - BEING IN HIS OPINION THE EXCESS CLAIM OF DEPRECIATION BY WRONGLY INVOK ING THE PROVISIONS OF EXPLANATION 1 TO SECTION 32(1) AND THE LD CIT (A) HAS FURTHER ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO. 3. AT THE OUTSET, SHRI RAJESH AG R A WAL , LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE ABOV E MENTIONED GROUND AND SUBMITTED THAT THE REVENUE AUTHORITIES HAVE ERRED IN DISALLOWIN G THE AMOUNT OF RS. 22,95,973/ - OPINING THAT IT AMOUNTS TO EXCESS CLAIM OF DEPRECIATION BY WRONGLY INVOKING THE PROVISIONS OF EXPLANATION (1) TO SECTION 32(1) OF THE ACT. IN THIS REGARD, LD COUNSEL MENTIONED 2 THAT AN IDENTICAL ISSUE CAME UP FOR ADJUDICATION BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2006 - 2007 AND FILED A COPY OF THE SAID ORDER OF THE TRIBUN AL VIDE ITA NO.6806/MUM/2010 , DATED 27 TH NOVEMBER, 2013. IN THIS REGAR D, LD COUNSEL READ OUT THE IDENTICAL GROUND EXTRACTED IN PARA 2 OF THE SAID ORDER OF THE TRIBUNAL AND THE RELEVANT PORTIONS FROM PARA 7 OF PAGE 5. FINALLY, LD COUNSEL SUBMITTED THAT THE GROUND MAY BE REMANDED TO THE FILES OF THE AO FOR EXAMINING THIS ISSU E AFRESH IN THE LIGHT OF THE TERMS AND CONDITIONS OF THE LEASE AGREEMENT TO BE PRODUCED BY THE ASSESSEE IN THE SET ASIDE PROCEEDINGS. 4. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIES AND SUBMITTED THAT THE AO HAS NOT DISALLOWED THE CLAIM OF THE ASSESSEE BUT HE HAS RESTRICTED THE CLAIM AS PER THE RATE OF DEPRECIATION PRESCRIBED U N DER THE SCHEDULE. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WE LL AS THE CITED ORDER OF THE TRIBUNAL (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT PARA 7 IS RELEVANT HERE AND THE SAME READS AS UNDER: 7. WE HAVE CONSIDERED THE RI VAL SUBMISSIONS AS WELL AS RELE VANT MATERIAL ON RECORD. THE ASSESS EE HAS INCURRED THE EXPENDITURE OF RS. 96,68,604/ - ON RENOVATION / IMPROVEMENT OF THE THREE PREMISES TAKEN ON LEASE AT BANGALORE, MUMBAI AND DELHI RESPECTIVELY. THE ASSESSEE HAS CLAIMED DEPRECIATION ON THIS EXPENDITURE BY SPREADING OVER THIS EXPENDITURE T O THE PERIOD OF LEASE. THUS, THE ASSESSEE HA S CLAIMED RS. 36,25,726/ - AS DEPRECIATION WHICH THE AO FOUND AS EXCESS IN COMPARISON TO THE RATE OF DEPRECIATION PROVIDED UNDER THE SCHEDULE. THERE IS NO DISPUTE THAT THIS EXPENDITURE IS INCLUDED FOR RENOVATION AND IMPROVEMENT OF THE PREMISES TAKEN ON LEASE AND MAKING THE SAME FIR TO USE OF THE ASSESSEES BUSINESS AND THEREFORE, THE SAID EXPENDITURE DOES NOT FALL UNDER THE CURRENT REPAIRS U/S 31 OF THE INCOME TAX ACT. HOWEVER, THE SAID ALLOW ABILITY OF THE EXPE NDITURE IN QUESTION CAN BE CONSIDERED ONLY U/S 37 OF THE INCOME TAX ACT. SINCE, THE ASSESSEE HAS NOT PRODUCED BEFORE US THE RELEVANT LEASE AGREEMENT TO SHOW THE TERMS AND CONDITIONS OF THE LEASE AND THE CONSEQUENTIAL EFFECT OF EXPIRY OF LEASE ON THE HUGE E XPENDITURE INCURRED BY THE ASSESSEE ON THE LEASE HOLD PREMISES WHICH ARE TAKEN FOR SHORT PERIOD OF 33 TO 36 MONTHS. WE FURTHER NOTE THAT THE LEASE AGREEMENTS WERE ALSO NOT EXAMINED BY THE AUTHORITIES BELOW. THOUGH THE ASSESSEE HAS INCLUDED THE SAID EXPEN DITURE IN THE BLOCK OF ASSETS HOWEVER, IN VIEW OF THE FACT THAT THE PREMISES IN QUESTION WERE TAKEN ON LEASE FOR A SHORT PERIOD OF TIME AND THEREFORE, PRIMA FACIE THE EXPENDITURE CANNOT BE TREATED AS EXPENDITURE INCURRED FOR CREATING ANY ASSET OR TAKING AN Y ENDURING BENEFIT OUT OF IT. SINCE, THE ASSESSEE HAS NOT PRODUCED THE ALL RELEVANT RECORD EITHER BEFORE US OR BEFORE THE AUTHORITIES BELOW, THEREFORE, IN THE INTEREST OF JUSTICE WE SET ASIDE THE ISSUE TO THE RECORD OF THE AO TO RE - EXAMINE THE ISSUE IN TH E LIGHT OF THE TERMS AND CONDITIONS OF THE LEASE AGREEMENT TO BE PRODUCED BY THE ASSESSEE. 3 6. CONSIDERING THE ABOVE, WE ARE OF THE OPINION THAT THE ISSUE INVOLVED IN THE PRESENT APPEAL IS IDENTICAL TO THAT OF THE GROUND ADJUDICATED BY THE TRIBUNAL (SUPRA) IN ASSESSEES OWN CASE FOR THE AY 2006 - 2007, WHEREIN THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILES OF THE AO TO RE - EXAMINE THE ISSUE AFRESH IN THE LIGHT OF THE TERMS AND CONDITIONS OF THE LEASE AGREEMENTS TO BE PRODUCED BY THE ASSESSEE. THEREFORE, CO NSIDERING THE SETTLED NATURE OF THE ISSUE AND FOLLOWING THE PRINCIPLE OF CONSISTENCY WE ARE OF THE OPINION THAT THE GROUND RAISED IN THIS APPEAL SHOULD ALSO BE REMANDED. ACCORDINGLY, WE REMIT THE ISSUE TO THE FILES OF THE AO, WITH IDENTICAL DIRECTIONS, TO RE - EXAMINE AND DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND THE GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRON OUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2013. SD/ - SD/ - (DR. S.T.M. PAVALAN) (D. KARUNAKARA RAO) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 18 .12.2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI