ACIT, Trivandrum V. M/S AISANET SATELLITE COMMUNICATIONS LTD, Trivandrum

ITA 429/COCH/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 1010 (ITAT-COCHIN)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 22-01-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 03-06-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C PANKAJAKSHAN
• Keywords: Principle of natural justice; Revenue expenditure
• Section: 263

Judgement Text

1 ITA NO.342 & 429/COCH/2011 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 342/COCH/2011 (ASSESSMENT YEAR 2006-07) ASIANET SATELLITE COMMUNICATIONS LTD VS A.C.I.T., CIR.1(1) M/S VARMA & VARMA, CAS THIRUVANANTHAPURAM A-12, KOWDIAR GARDENS GOLF LINKS ROAD, KOWDIAR THIRUVANANTHAPURAM 695 003 PAN : AAECA5548E (APPELLANT) (RESPONDENT) I.T.A NO. 429/COCH/2011 (ASSESSMENT YEAR 2003-04) THE A.C.I.T, CIR.1(1) VS ASIANET SATELLITE COMMU NI- THIRUVANANTHAPURAM CATIONS LTD, TRIVANDRUM (APPELLANT) (RESPONDENT) TAXPAYER BY : SHRI C PANKAJAKSHAN RESPONDENT BY : SMT. SUSAN GEORGE VARGHESE SMT. S VIJAYAPRABHA DATE OF HEARING : 22-01-2013 DATE OF PRONOUNCEMENT : 28-01-2013 2 ITA NO.342 & 429/COCH/2011 O R D E R PER N.R.S. GANESAN (JM) ITA NO.342/COCH/2011 FILED BY THE TAXPAYER IS AGA INST THE ORDER OF THE ADMINISTRATIVE COMMISSIONER PASSED U/S 263 OF THE ACT AND PERTAINS TO ASSESSMENT YEAR 2006-07. ITA NO.429/CO CH/2011 IS FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-I, TRIVANDR UM DATED 14-03-2011 AND PERTAINS TO ASSESSMENT YEAR 2003-04. THEREFORE, WE HEARD THE SAME TOGETHER AND DISPOSE OF THEM BY THIS COMMON ORDER. 2. LET US TAKE ITA NO.342/COCH/2011 FIRST FILED BY THE TAXPAYER AGAINST THE ORDER U/S 263 OF THE ACT. 3. SHRI C PANKAJAKSHAN, THE LD.REPRESENTATIVE FOR T HE TAXPAYER SUBMITTED THAT THE ADMINISTRATIVE COMMISSIONER IN EXERCISE OF HIS REVISIONAL JURISDICTION U/S 263 OF THE ACT FOUND THAT THE ORDE R OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDING TO THE LD.REPRESENTATIVE, THE ADMINISTRATIVE COMMISSIO NER FURTHER FOUND THAT THE ASSESSING OFFICER HAS NOT APPLIED HIS MIND IN R ESPECT OF AMOUNT DEBITED TO THE EXTENT OF RS. 710.10 LAKHS TOWARDS POLE RENT AL CHARGES PAYABLE TO 3 ITA NO.342 & 429/COCH/2011 KERALA STATE ELECTRICITY BOARD. THE ADMINISTRATIVE COMMISSIONER FURTHER FOUND THAT NO TAX WAS DEDUCTED IN RESPECT OF BAND W ITH CHARGES PAID TO THE EXTENT OF RS.40.09 LAKHS. ACCORDINGLY, THE ADMINIS TRATIVE COMMISSIONER SET ASIDE THE ASSESSMENT ORDER FOR A DETAILED EXAMINATI ON. THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT R EVISION U/S 263 IS PERMISSIBLE ONLY IN CASE THE ASSESSMENT ORDER IS ER RONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. ACCORDING TO THE L D.REPRESENTATIVE, THERE IS NO ERROR IN THE ASSESSMENT ORDER INASMUCH AS THE PA YMENT OF BAND WITH CHARGES WAS NOT TAXABLE IN INDIA. THEREFORE, ACCOR DING TO THE LD.REPRESENTATIVE, THERE IS NO QUESTION OF ANY DEDU CTION OF TAX. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT IN RESPECT OF POLE RENTAL CHARGES, THE LIABILITY HAS ARISEN DURING THE YEAR UNDER CONS IDERATION ON THE BASIS OF THE ORDERS OF THE HIGH COURT DATED 16-06-2005 AND T HE ORDER OF THE STATE ELECTRICITY BOARD DATED 05-12-2005. ACCORDING TO T HE LD.REPRESENTATIVE, THE STATUTORY AUDITORS HAVE NOT DISCLOSED THIS ITEM UND ER PRIOR PERIOD EXPENSES, BUT IT WAS SHOWN ONLY AS AN EXTRAORDINARY ITEM AS R EQUIRED UNDER THE ACCOUNTING STANDARD 5. THE LD.REPRESENTATIVE SUB MITTED THAT THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT P ROCEEDINGS HAS CALLED FOR ALL THE DETAILS AND ALLOWED THE CLAIM AS MADE IN TH E RETURN OF INCOME. 4 ITA NO.342 & 429/COCH/2011 THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, THE ADMINISTRATIVE COMMISSIONER IS NOT JUSTIFIED IN EXERCISING HIS REV ISIONAL JURISDICTION U/S 263 OF THE ACT. 4. ON THE CONTRARY, SMT. SUSAN GEORGE VARGHESE, THE LD.DR SUBMITTED THAT THE ASSESSING OFFICER HAS NOT DISCUSSED ANYTHI NG IN THE ASSESSMENT ORDER. THE ASSESSING OFFICER WITHOUT ANY APPLICATI ON OF MIND HAS SIMPLY ACCEPTED THE LOSS CLAIMED BY THE TAXPAYER. SINCE T HERE WAS NO DISCUSSION AND NO ENQUIRY WAS CONDUCTED, ACCORDING TO THE LD.D R, THE ASSESSMENT ORDER IS NOT ONLY ERRONEOUS BUT ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. WE HAVE ALSO CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE IMPUGNE D ORDER OF THE ADMINISTRATIVE COMMISSIONER. THE ASSESSMENT ORDER IS VERY VAGUE AND IT DOES NOT DISCLOSE THE APPLICATION OF MIND AND THE S O-CALLED ENQUIRIES SAID TO BE CONDUCTED BY THE ASSESSING OFFICER. ASSESSMENT PROCEEDINGS ARE JUDICIAL PROCEEDINGS. THEREFORE, APPLICATION OF MIND BY THE ASSESSING OFFICER SHALL 5 ITA NO.342 & 429/COCH/2011 BE REFLECTED IN THE ASSESSMENT ORDER ITSELF. IF TH E REASON FOR ALLOWING OR DISALLOWING A CLAIM IS NOT DISCLOSED IN THE ASSESSM ENT ORDER, THEN THE APPELLATE / REVISIONAL AUTHORITIES MAY NOT BE ABLE TO PERFORM THEIR STATUTORY DUTY AS PROVIDED UNDER THE INCOME-TAX ACT. IN OTHE R WORDS, THE APPELLATE / REVISIONAL AUTHORITIES MAY NOT BE ABLE TO APPRECIAT E THE REASON FOR ALLOWING OR DISALLOWING THE CLAIM OF THE TAXPAYER. THEREFOR E, IT IS OBLIGATORY ON THE PART OF THE ASSESSING OFFICER TO DISCLOSE THE REASO NS FOR ALLOWING OR DISALLOWING THE CLAIM OF THE TAXPAYER IN THE ASSESS MENT ORDER ITSELF. IT IS WELL SETTLED PRINCIPLES OF LAW THAT THE REASON FOR ALLOWING OR DISALLOWING A CLAIM SHALL CONTAIN IN THE IMPUGNED ASSESSMENT ORDE R ITSELF. THE REASON FOR TAKING A DECISION CANNOT BE SUBSTITUTED BY FILING A FFIDAVITS BEFORE THE REVISIONAL AUTHORITIES. 6. WE FIND THAT THE PUNJAB & HARYANA HIGH COURT HAD AN OCCASION TO EXAMINE THIS ISSUE IN COMMISSIONER OF INCOME-TAX VS SUNIL KUMAR GOEL (2005) 274 ITR 53 (P&H) AND AFTER CONSIDERING THE J UDGMENT OF THE APEX COURT IN MUKHERJEE (S.N.) VS UOI (1990) AIR 1990 SC 1984 HAS OBSERVED AS FOLLOWS: 6 ITA NO.342 & 429/COCH/2011 IN S.N. MUKHERJEE V. UNION OF INDIA, AIR 1990 SC 1984, A CONSTITUTION BENCH OF THE SUPREME COURT DISCUSSED T HE DEVELOPMENT OF LAW ON THIS SUBJECT IN INDIA, AUSTRA LIA, CANADA, ENGLAND AND THE UNITED STATES OF AMERICA AND AFTER MAKING REFERENCE TO A LARGE NUMBER OF JUDICIAL PRECEDENTS, THEIR LORDSHIPS CULLED OUT THE FOLLOWING PROPOSITIONS (PA GE 1995): THE DECISIONS OF THIS COURT REFERRED TO ABOVE IND ICATE THAT WITH REGARD TO THE REQUIREMENT TO RECORD REASO NS THE APPROACH OF THIS COURT IS MORE IN LINE WITH THAT OF THE AMERICAN COURTS. AN IMPORTANT CONSIDERATION WHICH HAS WEIGH ED WITH THE COURT FOR HOLDING THAT AN ADMINISTRATIVE AUTHOR ITY EXERCISING QUASI-JUDICIAL FUNCTIONS MUST RECORD THE REASONS FOR ITS DECISION, IS THAT SUCH A DECISION IS SUBJECT TO THE APPELLATE JURISDICTION OF THIS COURT UNDER ARTICLE 136 OF THE CONSTITUTION AS WELL AS THE SUPERVISORY JURISDICTION OF THE HIGH COURTS UNDER ARTICLE 227 OF THE CONSTITUTION AND THAT THE REASON S, IF RECORDED, WOULD ENABLE THIS COURT OR THE HIGH COURT S TO EFFECTIVELY EXERCISE THE APPELLATE OR SUPERVISORY P OWER. BUT THIS IS NOT THE SOLE CONSIDERATION. THE OTHER CONS IDERATIONS WHICH HAVE ALSO WEIGHED WITH THE COURT IN TAKING TH IS VIEW ARE THAT THE REQUIREMENT OF RECORDING REASONS WOULD (I) GUARANTEE CONSIDERATION BY THE AUTHORITY; (II) INTRODUCE CLAR ITY IN THE DECISIONS; AND (III) MINIMIZE CHANCES OF ARBITRARIN ESS IN DECISION MAKING. IN THIS REGARD A DISTINCTION HAS BEEN DRAW N BETWEEN ORDINARY COURTS OF LAW AND TRIBUNALS AND AUTHORITIE S EXERCISING JUDICIAL FUNCTIONS ON THE GROUND THAT A JUDGE IS TR AINED TO LOOK AT THINGS OBJECTIVELY UNINFLUENCED BY CONSIDERATION S OF POLICY OR EXPEDIENCY WHEREAS AN EXECUTIVE OFFICER GENERALL Y LOOKS AT THINGS FROM THE STAND POINT OF POLICY AND EXPEDIENC Y. REASONS, WHEN RECORDED BY AN ADMINISTRATIVE AUTHOR ITY IN AN ORDER PASSED BY IT WHILE EXERCISING QUASI-JUD ICIAL FUNCTIONS, WOULD NO DOUBT FACILITATE THE EXERCISE O F ITS JURISDICTION BY THE APPELLATE OR SUPERVISORY AUTHOR ITY. BUT THE OTHER CONSIDERATIONS, REFERRED TO ABOVE, WHICH HAVE ALSO WEIGHED WITH THIS COURT IN HOLDING THAT AN ADMINIST RATIVE 7 ITA NO.342 & 429/COCH/2011 AUTHORITY MUST RECORD REASONS FOR ITS DECISION, ARE OF NO LESS SIGNIFICANCE. THESE CONSIDERATIONS SHOW THAT THE R ECORDED OF REASONS BY AN ADMINISTRATIVE AUTHORITY SERVICES A S ALUTARY PURPOSE, NAMELY, IT EXCLUDES CHANCES OF ARBITRARINE SS AND ENSURES A DEGREE OF FAIRNESS IN THE PROCESS OF DECI SION-MAKING. THE SAID PURPOSE WOULD APPLY EQUALLY TO ALL DECISIO NS AND ITS APPLICATION CANNOT BE CONFINED TO DECISIONS WHICH A RE SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IN OUR OPI NION, THEREFORE, THE REQUIREMENT THAT REASONS BE RECORDED SHOULD GOV ERN THE DECISIONS OF AN ADMINISTRATIVE AUTHORITY EXERCISING QUASI- JUDICIAL FUNCTIONS IRRESPECTIVE OF THE FACT WHETHER THE DECISION IS SUBJECT TO APPEAL, REVISION OR JUDICIAL REVIEW. IT MAY, HOWEVER, BE ADDED THAT IT IS NOT REQUIRED THAT THE REASONS SHOULD BE AS ELABORATE AS IN THE DECISION OF A COUR T OF LAW. THE EXTENT AND NATURE OF THE REASONS WOULD DEPEND ON PA RTICULAR FACTS AND CIRCUMSTANCES. WHAT IS NECESSARY IS THAT THE REASONS ARE CLEAR AND EXPLICIT SO AS TO INDICATE THAT THE A UTHORITY HAS GIVEN DUE CONSIDERATION TO THE POINTS IN CONTROVERS Y. THE NEED FOR RECORDING OF REASONS IS GREATER IN A CASE WHERE THE ORDER IS PASSED AT THE ORIGINAL STAGE. THE APPELLATE OR REV ISIONAL AUTHORITY, IF IT AFFIRMS SUCH AN ORDER, NEED NOT GI VE SEPARATE REASONS IF THE APPELLATE OR REVISIONAL AUTHORITY AG REES WITH THE REASONS CONTAINED IN THE ORDER UNDER CHALLENGE. IN TESTEELS LTD V. N.M. DESAI (1970) 37 FJR 7; AIR 1970 GUJ 1, A FULL BENCH OF THE GUJARAT HIGH COURT HAS M ADE AN EXTREMELY LUCID ENUNCIATION OF LAW ON THE SUBJECT A ND WE CAN DO NO BETTER THAN TO EXTRACT SOME OF THE OBSERVATIO NS MADE IN THE DECISION. THE SAME ARE (HEADNOTE OF AIR 1970 ( GUJ)): THE NECESSITY OF GIVING REASONS FLOWS AS A NECESS ARY COROLLARY FROM THE RULE OF LAW WHICH CONSTITUTES ON E OF THE BASIC PRINCIPLES OF THE INDIAN CONSTITUTIONAL SET-U P. THE ADMINISTRATIVE AUTHORITIES HAVING A DUTY TO ACT JUD ICIALLY CANNOT THEREFORE DECIDE ON CONSIDERATIONS OF POLICY OR EXP EDIENCY. THEY MUST DECIDE THE MATTER SOLELY ON THE FACTS OF THE PARTICULAR CASE, SOLELY ON THE MATERIAL BEFORE THEM AND APART 8 ITA NO.342 & 429/COCH/2011 FROM ANY EXTRANEOUS CONSIDERATIONS BY APPLYING PRE- EXISTING LEGAL NORMS TO FACTUAL SITUATIONS. NOW THE NECESSI TY OF GIVING REASONS IS AN IMPORTANT SAFEGUARD TO ENSURE OBSERVA NCE OF THE DUTY TO ACT JUDICIALLY. IT INTRODUCES CLARITY, CHE CKS THE INTRODUCTION OF EXTRANEOUS OR IRRELEVANT CONSIDERAT IONS AND EXCLUDES OR, AT ANY RATE, MINIMIZES ARBITRARINESS I N THE DECISION-MAKING PROCESS. ANOTHER REASON WHICH COMPELS MAKING OF SUCH AN ORD ER IS BASED ON THE POWER OF JUDICIAL REVIEW WHICH IS P OSSESSED BY THE HIGH COURT UNDER ARTICLE 226 AND THE SUPREME CO URT UNDER ARTICLE 32 OF THE CONSTITUTION. THESE COURTS HAVE THE POWER UNDER THE SAID PROVISIONS TO QUASH BY CERTIORARI A QUASI-JUDICIAL ORDER MADE BY AN ADMINISTRATIVE OFFICER AND THIS PO WER OF REVIEW CAN BE EFFECTIVELY EXERCISED ONLY IF THE ORD ER IS A SPEAKING ORDER. IN THE ABSENCE OF ANY REASONS IN S UPPORT OF THE ORDER, THE SAID COURTS CANNOT EXAMINE THE CORRE CTNESS OF THE ORDER UNDER REVIEW. THE HIGH COURT AND THE SUP REME COURT WOULD BE POWERLESS TO INTERFERE SO AS TO KEEP THE ADMINISTRATIVE OFFICER WITHIN THE LIMITS OF THE LAW . THE RESULT WOULD BE THAT THE POWER OF JUDICIAL REVIEW WOULD BE STULTIFIED AND NO REDRESS BEING AVAILABLE TO THE CITIZEN, THER E WOULD BE INSIDIOUS ENCOURAGEMENT TO ARBITRARINESS AND CAPRIC E. IF THIS REQUIREMENT IS INSISTED UPON, THEN, THEY WILL BE SU BJECT TO JUDICIAL SCRUTINY AND CORRECTION. IF THE ORDER PASSED BY THE TRIBUNAL IS SCRUTINIZED IN THE LIGHT OF THE AFOREMENTIONED PROPOSITION OF LAW, WE DO NOT FIND ANY DIFFICULTY IN SETTING ASIDE THE SAME ON THE GRO UND OF VIOLATION OF THE RULES OF NATURAL JUSTICE. THE FLO WERY LANGUAGE USED BY THE TRIBUNAL TO JUSTIFY ITS ACCEPTANCE OF T HE RESPONDENTS PLEA THAT HE DID NOT KNOW THE LAW DOES NOT WARRANT OUR AFFIRMATION. IN OUR OPINION, THE TRIBU NAL WAS DUTY BOUND TO RECORD TANGIBLE AND COGENT REASONS FOR UPS ETTING WELL REASONED ORDERS PASSED BY THE ASSESSING OFFICER AND THE COMMISSIONER OF INCOME-TAX (APPEALS). IT SHOULD HA VE DIRECTED ITS ATTENTION TO THE LANGUAGE OF SECTION 2 71D AND 9 ITA NO.342 & 429/COCH/2011 271E OF THE ACT IN CONJUNCTION WITH OTHER PROVISION S OF THE SAME FAMILY AND THEN DECIDED BY A REASONED ORDER WH ETHER THE RESPONDENT HAD BEEN ABLE TO MAKE OUT A CASE FOR DELETING THE PENALTY. THE ORDER PASSED BY THE TRIBUNAL SHOU LD HAVE CLEARLY REFLECTED THE APPLICATION OF MIND BY THE LE ARNED MEMBERS. 7. THE APEX COURT ALSO HAD AN OCCASION TO CONSIDER THIS ISSUE IN TOYOTA MOTOR CORPORATION VS COMMISSIONER OF INCOME-TAX (20 08) 306 ITR 52 (SC). THE APEX COURT HAS OBSERVED AS FOLLOWS AT PAGE 53 O F THE ITR: WE ARE NOT INCLINED TO INTERFERE WITH THE IMPUGNE D ORDER OF THE HIGH COURT. THE HIGH COURT HAS HELD T HAT THE ASSESSING OFFICER HAD DISPOSED OF THE PROCEEDINGS S TATING THE PENALTY PROCEEDINGS INITIATED IN THIS CASE UNDER SE CTION 271C READ WITH SECTION 274 OF THE INCOME-TAX ACT, 1961 A RE HEREBY DROPPED. ACCORDINGLY TO THE HIGH COURT, THERE WAS NO BASIS INDICATED FOR DROPPING THE PROCEEDINGS. THE TRIBUN AL REFERRED TO CERTAIN ASPECTS AND HELD THAT THE INITIATION OF PROCEEDINGS UNDER SECTION 263 OF THE INCOME-TAX ACT, 1961 (IN S HORT, THE I.T. ACT) WAS IMPERMISSIBLE WHEN CONSIDERED IN THE BACKGROUND OF THE MATERIALS PURPORTEDLY PLACED BY T HE ASSESSEE BEFORE THE ASSESSING OFFICER. WHAT THE HI GH COURT HAS DONE IS TO REQUIRE THE ASSESSING OFFICER TO PAS S A REASONED ORDER. THE HIGH COURT WAS OF THE VIEW THAT THE TRI BUNAL COULD NOT HAVE SUBSTITUTED ITS OWN REASONINGS WHICH WERE REQUIRED TO BE RECORDED BY THE ASSESSING OFFICER. ACCORDING TO THE ASSESSEE, ALL RELEVANT ASPECTS WERE PLACED FOR CONS IDERATION AND IF THE OFFICER DID NOT RECORD REASONS, THE ASSE SSEE CANNOT BE FAULTED. WE DO NOT THINK IT NECESSARY TO INTERFERE AT THIS STAGE. IT GOES WITHOUT SAYING THAT WHEN THE MATTER BE TAKEN U P BY THE ASSESSING OFFICER ON REMAND, IT SHALL BE HIS DUTY T O TAKE INTO 10 ITA NO.342 & 429/COCH/2011 ACCOUNT ALL THE RELEVANT ASPECTS INCLUDING THE MATE RIALS, IF ANY, ALREADY PLACED BY THE ASSESSEE, AND PASS A REASONED ORDER. 8. IN VIEW OF THE ABOVE, IT IS INCUMBENT ON THE PAR T OF THE ASSESSING OFFICER TO DISCLOSE THE REASONS IN THE ASSESSMENT O RDER AND THE APPLICATION OF MIND REFLECTED IN THE ASSESSMENT ORDER ITSELF. IN THE ABSENCE OF ANY REASON IN THE ASSESSMENT ORDER, THE APPLICATION OF MIND IS NOT REFLECTED IN THE ASSESSMENT ORDER. THEREFORE, THE ORDER OF THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ADMI NISTRATIVE COMMISSIONER HAS RIGHTLY INVOKED HIS JURISDICTION U/S 263 OF THE ACT. ACCORDINGLY THE ORDER OF THE ADMINISTRATIVE COMMISSIONER IS CONFIRMED. 9. NOW COMING TO THE REVENUES APPEAL IN ITA NO.429 /COCH/2011, THE FIRST GROUND OF APPEAL IS WITH REGARD TO DISALLOWAN CE MADE IN RESPECT OF EXPENDITURE ON CONVERTED CONNECTIONS BEING DEFERRED REVENUE EXPENDITURE. 11 ITA NO.342 & 429/COCH/2011 10. SMT. SUSAN GEORGE VARGHESE, THE LD.DR SUBMITTED THAT THE TAXPAYER HAS CLAIMED THE AMOUNT RELATING TO CONVERTED CONNEC TIONS AS REVENUE EXPENDITURE. HOWEVER, THE ASSESSING OFFICER FOUND THAT THE ESTIMATED UTILITY OF THE EXPENDITURE WAS FIVE YEARS. THEREFO RE, THE CLAIM OF THE TAXPAYER WITH REGARD TO THE ENTIRE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION IS NOT CORRECT. ACCORDINGLY, THE EXP ENDITURE WHICH WAS SAID TO BE INCURRED ON THE MAINTENANCE OF THE NEW CONNEC TION WAS DISALLOWED. HOWEVER, THE CIT(A) FOUND THAT THOUGH THERE WAS A D ISCUSSION IN THE ASSESSMENT ORDER FOR DISALLOWING THE CLAIM OF THE T AXPAYER IN THE COMPUTATION, NO ADDITION WAS MADE. THE CIT(A) FURT HER FOUND THAT SINCE THE EXPENDITURE ON THE CONVERTED CONNECTIONS WAS SP READ OVER A PERIOD OF FIVE YEARS ONLY THE AMOUNT RELATABLE TO THE ASSESSM ENT YEAR UNDER CONSIDERATION HAS TO BE DISALLOWED AND THE REMAININ G AMOUNT HAS TO BE SPREAD OVER TO THE SUBSEQUENT ASSESSMENT YEARS FOR THE PURPOSE OF DISALLOWANCE. ACCORDING TO THE LD.REPRESENTATIVE, THE CIT(A) OUGHT TO HAVE CONFIRMED THE DISALLOWANCE MADE BY THE ASSESSING OF FICER FOR THE YEAR UNDER CONSIDERATION INSTEAD OF SPREADING OVER THE S AME OVER FIVE YEARS. 12 ITA NO.342 & 429/COCH/2011 11. ON THE CONTRARY, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT THERE WAS A DISCUSSION IN THE ASSESSMENT ORDER TO DISALLOW THE CLAIM OF THE TAXPAYER. THERE WAS NO ADDITION MADE IN THE CO MPUTATION OF THE TOTAL INCOME. ACCORDING TO THE LD.REPRESENTATIVE, ADMITT EDLY, THE EXPENDITURE WAS SPREAD OVER FOR A PERIOD OF FIVE YEARS. THEREF ORE, IT IS REVENUE EXPENDITURE. EVEN THOUGH IT WAS RECORDED AS DEFERR ED REVENUE EXPENDITURE IN THE BOOKS OF ACCOUNT, SINCE THE EXPE NDITURE WAS INCURRED IN OR THE YEAR UNDER CONSIDERATION THE SAME WAS CLAIME D AS REVENUE EXPENDITURE. THE CIT(A), ACCORDING TO THE LD.REPRE SENTATIVE, FOUND THAT THE EXPENDITURE RELATABLE TO THIS ASSESSMENT YEAR HAS T O BE ALLOWED AND THE BALANCE HAS TO BE SPREAD OVER FOR THE REMAINING PER IOD OF FOUR YEARS. THEREFORE, ACCORDING TO THE LD.REPRESENTATIVE, SINC E NO ADDITION WAS MADE IN THE ASSESSMENT ORDER ITSELF, THERE CANNOT BE ANY GRIEVANCE TO THE REVENUE AT ALL. 12. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON E ITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHT LY SUBMITTED BY THE LD.REPRESENTATIVE FOR THE REVENUE AND THE LD.REPRES ENTATIVE FOR THE TAXPAYER, THOUGH THERE WAS A DISCUSSION IN THE ASSE SSMENT ORDER TO 13 ITA NO.342 & 429/COCH/2011 DISALLOW AN EXPENDITURE INCURRED IN RESPECT OF THE CONVERTED CONNECTIONS, NO ADDITION WAS MADE IN THE ASSESSMENT ORDER WHILE COMPUTING THE TAXABLE INCOME. APPARENTLY THIS IS AN ERROR IN THE ASSESSM ENT ORDER WHICH NEEDS TO BE RECTIFIED. THE CIT(A), HOWEVER, FOUND THAT THE EXPENDITURE WAS DEFERRED REVENUE EXPENDITURE AND IT HAS TO BE SPREAD OVER A PERIOD OF FIVE YEARS. SINCE NO ADDITION WAS MADE BY THE ASSESSING OFFICER WHILE COMPUTING THE TOTAL INCOME, THIS TRIBUNAL IS OF THE CONSIDERED OP INION THAT THE ASSESSING OFFICER HAS TO CONSIDER WHETHER ANY ADDITION IS REQ UIRED IN VIEW OF THE EXPLANATION OFFERED BY THE TAXPAYER. THE CONTENTIO N OF THE TAXPAYER HAS TO BE CONSIDERED AND THE ADDITION, IF ANY, HAS TO BE M ADE IN THE COMPUTATION. SINCE ADMITTEDLY, NO ADDITION WAS MADE IN THE COMPU TATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECONSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE LOWER AUTHORITIES ARE SET ASIDE AND THE ISSUE OF EXPENDITURE ON THE CONVERTED CONNECTIONS IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE IN THE LIGHT OF THE OBSERVATIO NS MADE ABOVE AND DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASON ABLE OPPORTUNITY OF HEARING TO THE TAXPAYER. IT IS MADE CLEAR THAT IF THE ASSESSING OFFICER 14 ITA NO.342 & 429/COCH/2011 DISALLOWS THE CLAIM OF THE TAXPAYER, THE SAME MAY B E ADDED IN THE COMPUTATION OF TOTAL INCOME. 13. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE U/S 40A(2)(B) OF THE ACT IN RESPECT OF THE INADMISSIBLE PORTION OF THE SALARY AND PERQUISITE PAID TO THE MANAGING DIRECTOR. 14. WE HEARD THE LD.DR AND THE LD.TAXPAYER. IT IS BROUGHT TO THE NOTICE OF THE BENCH THAT AN IDENTICAL ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN TAXPAYERS OWN CASE FOR THE ASSESSMENT YEAR 2004-05 . THIS TRIBUNAL IN ITA NO.37/COCH/2009 ORDER DATED 21-12-2010 FOUND THAT T HE DISALLOWANCE MADE WAS NOT JUSTIFIED. ACCORDINGLY, THE APPEAL OF THE TAXPAYER WAS ALLOWED. FOR THE ASSESSMENT YEAR UNDER CONSIDER, T HE CIT(A) HAS SIMPLY FOLLOWED THE ORDER OF THIS TRIBUNAL IN TAXPAYERS O WN CASE FOR THE ASSESSMENT YEAR 2004-05. SINCE THE CIT(A) HAS FOLL OWED THE ORDER OF THIS TRIBUNAL IN TAXPAYERS OWN CASE FOR THE ASSESSMENT YEAR 2004-05, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 15 ITA NO.342 & 429/COCH/2011 15. THE NEXT GROUND OF APPEAL IS WITH REGARD TO DIS ALLOWANCE ON ACCOUNT OF ADDITIONAL INTEREST PAYABLE TO FINANCIAL INSTITU TION. THE LD.RPERESENTATIVE FOR THE REVENUE SUBMITTED THAT THE TAXPAYER HAS PAI D LATE FEE ON THE LEASE RENT OF PLANT AND MACHINERY. ACCORDING TO THE LD.D R IT IS IN THE NATURE OF FINE / PENALTY AND NOT PAYMENT OF RENT. THEREFORE, THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE TAXPAYER. 16. ON THE CONTRARY, THE LD.REPRESENTATIVE FOR THE TAXPAYER SUBMITTED THAT IT IS NOT A FINE OR PENALTY. IT IS A COMPENSA TORY PAYMENT FOR NON PAYMENT OF THE LEASE RENT IN TIME. ACCORDING TO TH E LD.REPRESENTATIVE, AT THE BEST, IT MAY BE CONSTRUED AS INTEREST AND IT CA NNOT BE CONSTRUED AS PENALTY. 17. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EIT HER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS NO T IN DISPUTE THAT THE ADDITIONAL INTEREST WAS PAID ON ACCOUNT OF DELAY IN PAYMENT OF LEASE RENT OF PLANT AND MACHINERY TO THE EXTENT OF RS.7,93,698. THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT PAYMENT OF ADDITIONAL INTER EST FOR LATE PAYMENT OF LEASE RENTAL IS ONLY COMPENSATORY IN NATURE. AT TH E BEST, WE MAY SAY IT IS 16 ITA NO.342 & 429/COCH/2011 DAMAGES FOR USE OF THE MONEY. IT CANNOT BE CONSTRU ED AS A PENALTY / FINE. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINI ON THAT THE CIT(A) HAS RIGHTLY ALLOWED THE CLAIM OF THE TAXPAYER. HENCE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A). ACCORDINGLY THE SAME IS CONFIRMED. 18. THE NEXT GROUND OF APPEAL IS WITH REGARD TO EXC ESS PROVISION FOR INCOME-TAX. WE HEARD THE LD.DR AND THE LD.REPRESEN TATIVE FOR THE TAXPAYER. THE CIT(A) ALLOWED THE CLAIM OF THE TAXPAYER ON THE GROUND THAT THE EXCESS PROVISION FOR INCOME-TAX MADE IN THE EARLIER YEAR W AS NOT ASSESSABLE AS PER THE PROVISIONS OF THE INCOME-TAX ACT. IT IS NOT CL EAR FROM THE ORDER OF THE ASSESSING OFFICER OR THE CIT(A) AS TO WHETHER THE P ROVISIONS MADE FOR INCOME-TAX FOR EARLIER ASSESSMENT YEAR WAS TAKEN AS INCOME OF THAT YEAR OR NOT? IF THE PROVISION MADE FOR INCOME-TAX WAS TAKE N AS INCOME AND TAX ARE PAID THEREON, THEN MERELY BECAUSE IT WAS WRITTEN BA CK, THE SAME CANNOT BE CONSIDERED AS INCOME FOR THE YEAR UNDER CONSIDERATI ON. IN THE ABSENCE OF ANY DETAILS, THE ORDERS OF THE LOWER AUTHORITIES AR E SET ASIDE AND THE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AND FIND OUT WHETHER THE PROVI SION MADE FOR PAYMENT OF INCOME-TAX WAS TAKEN AS INCOME IN ANY ONE OF THE EARLIER ASSESSMENT 17 ITA NO.342 & 429/COCH/2011 YEAR OR NOT AND THEREAFTER DECIDE THE SAME IN ACCOR DANCE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY TO THE TAXPAYER. 19. IN THE RESULT APPEAL IN ITA NO.342/COCH/2011 IS DISMISSED AND APPEAL IN ITA NO.429/COCH/2011 IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH FEBRUARY, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 28 TH FEBRUARY, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH