DCIT, New Delhi V. M/s. Peartree Enterprises Pvt. Ltd., New Delhi

ITA 4333/DEL/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3829 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 05-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES F : DELHI BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA.NO.4333/DEL./2016 ASSESSMENT YEAR 2010-2011 THE DCIT, CIRCLE - 19(2), ROOM NO.221, 2 ND FLOOR, C.R. BUILDING, I.P. ESTATE, NEW DELHI. VS. M/S. PEARTREE ENTERPRISES PVT. LTD., C-4/142, SAFDARJUNG DEVELOPMENT AREA, NEW DELHI 110 016. PAN AACCP8759Q (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI DEEPAK GARG, SR. D.R. FOR ASSESSEE : - NONE - DATE OF HEARING : 25.09.2017 DATE OF PRONOUNCEMENT : 26 .10.2017 ORDER PER N.K. SAINI, A.M. THIS APPEAL BY THE DEPARTMENT AGAINST THE ORDER D ATED 23.05.2016 OF LD. CIT(A)-7, NEW DELHI. THE ONLY FAC TUAL GROUND RAISED IN THIS APPEAL READS AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ID . CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.35,65,581/- OU T OF TOTAL ADDITION OF RS.49,92,226/- MADE BY ASSESSING OFFICE R ON ACCOUNT OF CAPITAL EXPENDITURE SINCE THE ASSESSEE C OMPANY 2 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. COULD NOT FURNISH ANY DOCUMENT OR RECORD TO ESTABLI SH THE ALLOWABILITY OF THE EXPENDITURE CLAIMED AS REVENUE IN NATURE BEFORE ASSESSMENT PROCEEDINGS AS WELL AS BEFORE REM AND PROCEEDINGS. 2. FACTS OF THE CASE IN BRIEF ARE THA T THE ASSESSEE FILED HIS RETURN OF INCOME ON 29.09.2011 DECLARING NIL INCOME . LATER ON THE CASE WAS SELECTED FOR SCRUTINY. THE A.O. ASKED THE ASSESSEE AS TO WHY THE FOLLOWING EXPENSES NOT BE DISALLOWED AND ADDED BACK TO INCOME OF THE ASSESSEE. DATE PARTY AMOUNT REASON HYVA TRACTOR RUNNING EXPENSE HC1L PEPL JC CMDG 31.08.2010 REGIONAL OFFICE 5,58,099/ - CAPITAL EXPENDITURE 20.01.2011 STATE BANK 60520 1,00,000/ - - DO - 23.02.2011 NEW GOLDEN TYRE 1,18,000/ - - DO - 07.03.2011 STATE BANK 60520 1,61,000/ - - DO - PCD SHEIKHPURA 24.04.2010 CDSS 1,02,500/ - - DO - 09.06.2010 REGIONAL OFFICE 37,000/ - PENALTY 09.06.2010 REGIONAL OFFICE 1,42,600/ - CAPITAL EXPENDITURE 08.02.2011 REGIONAL OFFICE 2,41,200/ - - DO - 03.03.2011 REGIONAL OFFICE 1,31,600./ - - DO - 26.03.2011 REGIONAL OFFICE 1,00,000/ - - DO - 28.03.2011 REGIONAL OFFICE 70,000/ - - DO - MACHINERY REPAIR & MAINTENANCE PCD - SHEIKHPURA PROJECT 07.06.2010 REGIONAL OFFICE 1,00,000/ - CAPITAL EXPENDITURE 06.07.2010 REGIONAL OFFICE 8,67,246/ - - DO - 29.07.2010 WALIRAM TANEJA MINES P LTD 4,57,183/- -DO- 07.02.2011 WALIRAM TANEJA MINES P LTD 84,181/- -DO- 09.02.2011 RD WIRELESS SOLLUTIN 85,000/ - - DO - 12.02.2011 KK ENTERPRISES 1,17,793/ - - DO - 14.02.2011 WALIRAM TANEJA MINES P.LTD 5,04,478/ - - DO - 3 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. 16.03.2011 LERSON & TUBRO LTD 4,52,400/ - - DO - HCIL PEPL JV CMDG 02.04.2010 WALIRAM TANEJA 67,800/ - - DO - 28.07.2010 WALIRAM TANEJA 81,076/ - - DO - 12.01.2011 REGIONAL OFFICE 1,50,000/ - - DO - REGIONAL OFFICE 30.04.2010 AJIT TYRES 1,18,997/ - - DO - PEARTREE HO - SIWAN AMCHINE 11.05.2010 INFRATECH SOLLUTIONS 1,11,910/ - - DO - 12.05.2010 RAMAA MACHINERY 53,025/ - - DO - PEARTREE HO SHEIKHPURA MACHINE 27.04.2010 ENTECH ENGINEERS 1,05,000/ - - DO - 11.06.2010 PUZZLON 1,08,403/ - - DO - 27.07.2010 PUZZLON 2,68,805/ - - DO - 03.03.2011 DRILL TECH 1,75,548/ - - DO - 15.03.2011 DRILL TECH 1,30,771/ - - DO - 26.03.2011 PUZZLON 5,92,389/ - - DO - TOTAL 63,94,004/- 2.1 IN RESPONSE, THE ASSESSEE SUBMITTED A S UNDER : '3. COPIES OF BILLS ARE BEING SUBMITTED HEREWITH A S ASKED FOR AT POINT NO. 15 OF LETTER DATED 01.01.2014 AS ANNEX URE-3. IT IS SUBMITTED THAT IN THE CASE OF CDSS THE AMOUNT IS CO NSOLIDATED SUM OF NUMEROUS SMALL PURCHASES OF MACHINERY AND VE HICLE SPARES PROCURED ON DAY TO DAY BASIS. IT IS EXPLAINE D THAT THESE EXPENDITURES ARE ONLY REVENUE EXPENDITURES, AS ALL THE ITEMS OF EXPENDITURE ARE PURCHASE OF SPARE PARTS FROM THE EQ UIPMENT MANUFACTURER OR FROM THE OPEN MARKET FOR PREVENTIVE MAINTENANCE OF MACHINERY, VEHICLE & EQUIPMENTS. 2.2. THE A.O. HOWEVER, DID NOT FIND MERIT I N THE SUBMISSIONS OF THE ASSESSEE AND MADE THE DISALLOWANCE OF RS.49,92, 226 BY OBSERVING AS UNDER : 4 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. THE REPLY OF THE ASSESSEE ALONG WITH BILLS SUBMITT ED WAS ANALYZED AND EXCEPT FOR FOLLOWING EXPENDITURES WHIC H HAS ASSESSEE HAS ESTABLISHED THROUGH NECESSARY BILLS IN NATURE OF REVENUE EXPENDITURE REMAINING EXPENDITURE FOR RS.49,92,226/- ARE TREATED AS CAPITAL EXPENDITURE O N THE BASIS OF QUANTUM OF EXPENDITURE ALONG WITH DETAILS GIVEN IN THE NARRATION TO THE LEDGER ACCOUNT, ALSO FOR THE E XPENSE OF RS.49,92,226/- THE ASSESSEE HAS NOT FURNISHED ANY DOCUMENT ON RECORD TO ESTABLISH THAT THE SAID EXPEN SE ARE IN NATURE OF REVENUE EXPENDITURE THE EXPENSE ARE DISAL LOWED BEING CAPITAL EXPENDITURE & ADDED BACK TO INCOME OF THE ASSESSEE. OUT OF ABOVE MENTIONED EXPENSE FOR RS.63,94,004/- T HE ASSESSEE HAS ESTABLISHED THAT EXPENSE FOR RS.14,01, 778/- ARE IN NATURE OF REVENUE EXPENDITURE THE EXPENSE FO R RS.49,92,226/- IS TREATED AS CAPITAL EXPENDITURE AN D DISALLOWED & ADDED BACK TO INCOME OF THE ASSESSEE. DETAILS OF REVENUE EXPENDITURE BEING INCURRED ON RO LLERS, SEAL KITS, BUS, BOLTS ETC. 5 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. 24.04.2010 CDSS RS.1,02,500/ - 29.07.2010 WALIRAM TANEJA RS.4,57,183/ - 07.02.2011 WALIRAM TANEJA RS.84,181/ - 09.02.2011 RD WIRELESS RS.85,000/ - 11.05.2010 INFRATECH SOL RS.1,11,910/ - 12.05.2010 RAMAA MACHINERY RS.53,025/ - 11.06.2010 PUZZLON RS. 1,08,403/ - 27.07.2010 PUZZLON RS.2,68,805/ - 15.03.2010 DRILL TECH RS.1,30,771/ - TOTAL REVENUE EXPENDITURE RS.14,01,778/ - REMAINING AMOUNT AS DETAILED ABOVE IN NATURE OF CAP ITAL EXPENDITURE TO BE DISALLOWED & ADDED BACK TO INCOME OF THE ASSESSEE FOR RS.49,92,226/- (63,94,004-14,01,778/-) 3. BEING AGGRIEVED, THE ASSESSEE CARRIE D THE MATTER TO THE LD. CIT(A) WHO SUSTAINED THE DISALLOWANCE TO THE EXTENT OF RS.30,56,645 AND ALLOWED RELIEF OF RS.35,65,581 BY OBSERVING IN PARA 4.3 AND 4.4 OF THE IMPUGNED ORDER AS UNDER : 4.3. IT IS EVIDENT FROM THE FINDING OF THE AO THAT DISALLOWANCE IS MADE ON THE BASIS OF QUANTUM AND NO N PRODUCTION OF DOCUMENTS. IT IS NOT THE CASE OF THE AO THAT EXPENDITURE IS NOT INCURRED OR GENUINENESS OF EXPEN DITURE IS IN DOUBT. IN ANY CASE, DISALLOWING EXPENDITURE BY T REATING IT AS CAPITAL IN NATURE CANNOT BE RESORTED TO WITHOUT EXAMINING 6 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. THE NATURE THEREOF. THIS EXERCISE HAS NOT BEEN DONE BY THE AO. NON PRODUCTION OF DOCUMENTS DOES NOT IMPLY THAT THE EXPENDITURE INCURRED IS CAPITAL IN NATURE. IT IS AL SO NOTED THAT THE APPELLANT WAS ABLE TO PROVIDE BILLS ETC. A ND ON THIS BASIS, THE AO ALLOWED EXPENDITURE OF RS. 14,01,778/ - AS REVENUE EXPENDITURE. IN MY VIEW, IT IS NOT FAIR AND REASONABLE TO DISALLOW THE BALANCE EXPENDITURE ONLY ON THE GROUND OF NON PRODUCTION OF DOCUMENTS. DETAILS OF T HE EXPENDITURE INCURRED WERE MADE AVAILABLE BY THE APP ELLANT COMPANY AND AS ALREADY STATED GENUINENESS OF THE SA ME IS NOT QUESTIONED BY THE A.O. 4.4. IN APPELLATE PROCEEDINGS, THE LD. AR HA S FURNISHED BILLS IN SUPPORT OF THE EXPENDITURE INCURRED. IT IS NOTED THAT MOST OF THE BILLS ARE IN THE NATURE OF REPAIRS & MA INTENANCE, SPARES, BATTERIES, TYRES, REPAIRS AND RELATED MISCE LLANEOUS ITEMS INCURRED ON PLANT & MACHINERY AND VEHICLES OW NED BY THE APPELLANT COMPANY. IT IS ALSO NOTED THAT AS PER THE FIXED ASSETS SCHEDULE, THE OPENING BALANCE IN THE G ROSS BLOCK, PLANT & MACHINERY AND VEHICLES AS ON 01.04.2 010 7 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. ARE RECORDED AT RS.38,65,16,258/- & RS. 1,97,49,729 /- RESPECTIVELY. THIS INDICATES THAT THE APPELLANT WAS REQUIRED TO INCUR ROUTINE EXPENDITURE ON MAINTENANCE OF PLAN T & MACHINERY AND VEHICLES ETC. UTILIZED IN ITS CIVIL C ONSTRUCTION BUSINESS. THE BILLS/VOUCHERS PRODUCED HAVE BEEN EXAMINED. IT IS SEEN THAT THERE ARE CERTAIN ITEMS O F EXPENDITURE WHICH PRIMA FACIE ARE CAPITAL IN NATURE . FROM THE DETAILS OF BILLS ENCLOSED SUMMARIZED AS ANNEXUR E 1, ITEM NO. 12 ARE BILLS OF RS.8,67,245/- OF M/S LARSE N & TOUBRO LTD. ARE PERTAINING TO COMPREHENSIVE REPAIR OF MACHINERY. SIMILARLY, ITEM NO. 14 IS A BILL OF RS.4 ,52,400/- OF LARSEN & TOUBRO FOR SUPPLY OF AN ENGINE. IN ADDI TION AT ITEM NO.4, EXPENDITURE OF RS.37,000/- HAS BEEN CLAI MED ON ACCOUNT OF PENALTY FOR OVERLOADING. THESE ITEMS OF EXPENDITURE CANNOT BE TREATED AS REVENUE ACCOUNT. T HE OTHER BILLS, HOWEVER, ARE FOR PURCHASE OF TYRES, RE PAIR & MAINTENANCE, CONVEYOR BELTS AND SPARE PARTS WHICH I S IN THE NATURE OF REVENUE EXPENDITURE. ON EXAMINATION OF TH E BILLS PRODUCED, IT IS HELD THAT EXCEPT FOR EXPENDITURE OF RS. 8 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. 13,56,645/- AS DETAILED ABOVE WHICH IS IN THE NATUR E OF CAPITAL EXPENDITURE/PENALTY, THE BALANCE IS ALLOWAB LE AS REVENUE EXPENDITURE. THE APPELLANT IS ALLOWED CONSEQUENTIAL RELIEF OF RS.35,65,581/-. THIS GROUND OF APPEAL IS RULED PARTLY IN FAVOUR OF THE APPELLANT. 4. NOW THE DEPARTMENT IS IN APPEAL. THE LEARNED D.R. STRONGLY SUPPORTED THE ASSESSMENT ORDER PASSED BY THE A.O. A ND REITERATED THE SUBMISSIONS MADE THEREIN. IN HIS RIVAL SUBMISSI ONS, THE LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE IMPUGNED ORD ER PASSED BY THE LD. CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE HIM. 5. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE MATERIAL AVAILABLE O N RECORD. IN THE PRESENT CASE, IT IS NOTICED THAT THE LD. CIT(A) CAT EGORICALLY STATED IN PARA 4.4 OF THE IMPUGNED ORDER THAT THE ASSESSEE FU RNISHED BILLS IN SUPPORT OF THE EXPENDITURE INCURRED, HE HAD EXAMINE D THOSE BILLS AND FOUND THAT CERTAIN ITEMS OF EXPENDITURE WERE PRIMA FACIE CAPITAL IN NATURE BUT ALL OTHER EXPENSES RELATING TO TYRES, RE PAIR AND MAINTENANCE ETC., WERE REVENUE IN NATURE. HE, THERE FORE, CONSIDERED THE EXPENDITURE OF RS.13,56,645 IN THE NATURE OF CA PITAL AND 9 ITA.NO.4333/DEL./2016 M/S. PEARTREE ENTERPRISES PVT. LTD., NEW DELHI. SUSTAINED THE DISALLOWANCE TO THAT EXTENT. WE, THER EFORE, DO NOT SEE ANY VALID GROUND TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A) BECAUSE THE FINDINGS GIVEN BY THE LD. CIT(A) WERE N OT CONTROVERTED BY BRINGING ANY COGENT MATERIAL ON RECORD. IN THAT VIE W OF THE MATTER, WE DO NOT SEE ANY MERIT IN THIS APPEAL OF THE DEPARTME NT. 6. IN THE RESULT, APPEAL OF THE DEPARTME NT IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 2 6.10.2017. SD/- SD/- (KULDIP SINGH) (N.K. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DELHI, DATED 26 TH OCTOBER, 2017 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT F BENCH, DELHI 6. GUARD FILE. //BY ORDER// ASST. REGISTRAR : ITAT DELHI BENCHES : DELHI.