ACIT, Delhi V. M/s. Chadha Power, New Delhi

ITA 4339/DEL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5082 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 05-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Tax effect; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: B: NEW DELHI) BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER & MS. S.KAMBLE, JUDICIAL MEMBER ITA NO:-4339/DEL/2016 (ASSESSMENT YEAR: 2011-12) ACIT, CIRCLE-28(1), NEW DELHI. VS M/S. CHADHA POWER, BLOCK-F, GROUND FLOOR 1 & 2, THE MITRA CORPORATE SUITES, NEW DELHI-110065. PAN-AACFC8094N APPELLANT RESPONDENT C.O-307/DEL/2016 (IN ITA NO:-4339/DEL/2016) (ASSESSMENT YEAR: 2011-12) M/S. CHADHA POWER, BLOCK-F, GROUND FLOOR 1 & 2, THE MITRA CORPORATE SUITES, NEW DELHI-110065. PAN-AACFC8094N VS ACIT, CIRCLE-28(1), NEW DELHI. APPELLANT RESPONDENT REVENUE BY MS. ASHIMA NEB, SR.DR ASSESSEE BY SH. ASHOK KHURANA, CA DATE OF HEARING 19.08.2019 DATE OF PRONOUNCEMENT 19 .08.2019 ORDER PER BENCH THIS APPEAL FILED BY THE REVENUE AND CROSS-OBJECTIO N FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE ORDER DATED 25.02 .2014 PASSED BY LD.CIT(A)-10, NEW DELHI PERTAINING TO ASSESSMENT YE AR 2011-12. FOR ITA NO:-4339/DEL/2016 & C.O-307/DEL/2016 (ASSESSMENT YEAR: 2011-12) PAGE | 2 THE SAKE OF CONVENIENCE, THE APPEAL AS WELL AS THE CROSS OBJECTION WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY T HIS COMMON ORDER. ITA NO:-4339/DEL/2016 (ASSESSMENT YEAR: 2011-12) 2. THE REVENUE HAS RAISED FOLLOWING GROUNDS OF APPE AL:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED IN TREATING ADVANCES OF RS.78,49,052/- AS REVENUE EXPENDITURE AND DELETING THE ADDITION WHICH WAS HEL D TO BE CAPITAL EXPENDITURE BY THE AO ON THE GROUND THAT TH E EXPENSES UNDER THE HEAD THE BANK CHARGES, INCURRED ON BANK G UARANTEES GIVEN FOR OBTAINING ADVANCES FROM CLIENTS FOR THE P ROJECTS WHICH ARE YET TO BE COMMENCED IS TO BE TREATED AS CAPITAL EXPENDITURE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN NOT CONSIDERING ACCOUNTING STANDARD AS -16 WHICH PROVIDES FOR BORROWING COSTS THAT ARE DIRECTLY ATTR IBUTABLE TO THE ACQUISITION, CONSTRUCTION OR PRODUCTION OF A QUALIF YING ASSETS SHOULD BE CAPITALIZED AS PART OF THE COST OF THAT A SSETS. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT IN THE LINE OF BUSINESS OF ASSESSEE, EVERY PROJECT IS A NEW LINE OF BUSINESS B ECAUSE IT IS ENTIRELY A DIFFERENT AND INDEPENDENT PROJECT HAVING NO CONNECTION WITH CURRENT PROJECTS IN HANDS OF THE ASSESSEE. FUR THER IT IS A WELL ESTABLISHED PRINCIPAL THAT PRE-OPERATIVE EXPENSES O N NEW PROJECT OR INITIATING NEW LINE OF BUSINESS ARE CAPITAL EXPE NDITURE. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR A MEND ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE O F HEARING OF THE APPEAL. ITA NO:-4339/DEL/2016 & C.O-307/DEL/2016 (ASSESSMENT YEAR: 2011-12) PAGE | 3 3. LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUB MITTED THAT THE TAX EFFECT INVOLVED IN THE GROUNDS RAISED BY THE RE VENUE IS BELOW RS.50 LACS. REFERRING TO THE DECISION OF AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS DINESH MADHAVLAL PATEL IN ITA NO.1398/AHD/2004 VIDE ORDER DATED 14.08.2019, HE SUBMITTED THAT THE TRIBUNAL AFTER CONSIDERING THE RECENT CBDT CIRC ULAR DATED 08.08.2019, RAISING THE MONETARY LIMIT FOR FILING O F APPEAL BY THE REVENUE BEFORE THE TRIBUNAL TO RS.50,00,000/- HAS HELD THAT THIS CIRCULAR IS ALSO APPLICABLE TO THE PENDING APPEALS IN ADDITION TO THE APPEALS TO BE FILED HENCEFORTH. HE ACCORDINGLY, SU BMITTED THAT SINCE THE TAX EFFECT INVOLVED IN THE GROUNDS RAISED BY TH E REVENUE IS ADMITTEDLY BELOW RS.50,00,000/-, THEREFORE, IN VIEW OF THE RECENT CBDT CIRCULAR DATED 08.08.2019, THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE AND HAS TO BE DISMISSED. 4. LD. DR FAIRLY CONCEDED THAT THE TAX EFFECT INVOL VED IN THE GROUNDS RAISED BY THE REVENUE IS BELOW RS.50,00,000 /- 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IT IS AN ADMITTED FA CT THAT THE TAX EFFECT INVOLVED IN THE GROUNDS RAISED BY THE REVENUE IS BE LOW RS.50,00,000/-. WE FIND THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF DINESH MADHAVLAL PATEL (SUPRA) AFTER CONSI DERING THE CBDT CIRCULAR DATED 08.08.2019, HAS HELD THAT THE SAID CIRCULAR IS ITA NO:-4339/DEL/2016 & C.O-307/DEL/2016 (ASSESSMENT YEAR: 2011-12) PAGE | 4 APPLICABLE TO THE PENDING APPEALS IN ADDITION TO TH E APPEALS TO BE FILED HENCEFORTH. THE RELEVANT PORTION OF THE ORDER FROM PARA 5 TO 9 READS AS UNDER:- 5. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND HAV ING PERUSED THE MATERIAL ON RECORD, WE DO NOT HAVE SLIGHTEST OF HESITATION IN HOLDING THAT THE CONCESSION EXTENDED BY THE CBDT NO T ONLY APPLIES TO THE APPEALS TO BE FILED IN FUTURE BUT IT IS ALSO EQUALLY APPLICABLE TO THE APPEALS PENDING FOR DISPOSAL AS O N NOW. OUR LINE OF REASONING IS THIS. THE CIRCULAR DATED 8TH A UGUST 2019 IS NOT A STANDALONE CIRCULAR. IT IS TO BE READ IN CONJ UNCTION WITH THE CBDT CIRCULAR NO 3 OF 2018 (AND SUBSEQUENT AMENDMEN T THERETO), AND ALL IT DOES IS TO REPLACE PARAGRAPH NOS. 3 AND 5 OF THE SAID CIRCULAR. THIS IS EVIDENT FROM THE FOLLOWING EXTRAC TS FROM THE CIRCULAR DATED 8 TH AUGUST 2019: 2. AS A STEP TOWARDS FURTHER MANAGEMENT OF LITIGATI ON. IT HAS BEEN DECIDED BY THE BOARD THAT MONETARY LIMITS FOR FILING OF APPEALS IN INCOME-TAX CASES BE ENHANCED F URTHER THROUGH AMENDMENT IN PARA 3 OF THE CIRCULAR MENTION ED ABOVE AND ACCORDINGLY. THE TABLE FOR MONETARY LIMIT S SPECIFIED IN PARA 3 OF THE CIRCULAR SHALL READ AS F OLLOWS: S.NO. APPEALS/SLPS IN INCOME-TAX MATTERS MONETARY LIMIT (RS.) 1 BEFORE APPELLATE TRIBUNAL 50,00,000 2 BEFORE HIGH COURT 1,00,00,000 3 BEFORE SUPREME COURT 2,00,00,000 3. FURTHER, WITH A VIEW TO PROVIDE PARITY IN FILING OF APPEALS IN SCENARIOS WHERE SEPARATE ORDER IS PASSED BY HIGH ER APPELLATE AUTHORITIES FOR EACH ASSESSMENT YEAR VIS- A-VIS WHERE COMPOSITE ORDER FOR MORE THAN ONE ASSESSMENT ITA NO:-4339/DEL/2016 & C.O-307/DEL/2016 (ASSESSMENT YEAR: 2011-12) PAGE | 5 YEARS IS PASSED. PARA 5 OF THE CIRCULAR IS SUBSTITU TED BY THE FOLLOWING PARA: 5. THE ASSESSING OFFICER SHALL CALCULATE THE TAX E FFECT SEPARATELY FOR EVERY ASSESSMENT YEAR IN RESPECT OF THE DISPUTED ISSUES IN THE CASE OF EVERY ASSESSEE. IF I N THE CASE OF AN ASSESSEE, THE DISPUTED ISSUES ARISE IN M ORE THAN ONE ASSESSMENT YEAR, APPEAL CAN BE FILED IN RE SPECT OF SUCH ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFE CT IN RESPECT OF THE DISPUTED ISSUES EXCEEDS THE MONETARY LIMIT SPECIFIED IN PARA 3. NO APPEAL SHALL BE FILED IN RE SPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. FURTHE R, EVEN IN THE CASE OF COMPOSITE ORDER OF ANY HIGH COURT OR APPELLATE AUTHORITY WHICH INVOLVES MORE THAN ONE ASSESSMENT YEAR AND COMMON ISSUES IN MORE THAN ONE ASSESSMENT YEAR NO APPEAL SHALL BE FILED IN RESPECT OF AN ASSESSMENT YEAR OR YEARS IN WHICH THE TAX EFFECT IS LESS THAN THE MONETARY LIMIT SPECIFIED IN PARA 3. IN CAS E WHERE A COMPOSITE ORDER/ JUDGEMENT INVOLVES MORE THAN ONE ASSESSEE, EACH ASSESSEE SHALL BE DEALT WITH SEPARAT ELY. 4. THE SAID MODIFICATIONS SHALL COME INTO EFFECT FR OM THE DATE OF ISSUE OF THIS CIRCULAR. 6. CLEARLY, ALL OTHER PORTIONS OF THE CIRCULAR NO. 3 OF 2018 (SUPRA) HAVE REMAINED INTACT. THE PORTION WHICH HAS REMAINE D INTACT INCLUDES PARAGRAPH 13 OF THE AFORESAID CIRCULAR WHI CH IS AS FOLLOWS: 13. THIS CIRCULAR WILL APPLY TO SLPS/ APPEALS/ CROS S OBJECTIONS/REFERENCES TO BE FILED HENCEFORTH IN SC/HCS/TRIBUNAL AND IT SHALL ALSO APPLY RETROSPECTI VELY TO PENDING SLPS/ APPEALS/ CROSS OBJECTIONS/REFERENCES. ITA NO:-4339/DEL/2016 & C.O-307/DEL/2016 (ASSESSMENT YEAR: 2011-12) PAGE | 6 PENDING APPEALS BELOW THE SPECIFIED TAX LIMITS IN P ARE 3 ABOVE MAY BE WITHDRAWN/ NOT PRESSED. 7. IN VIEW OF THE ABOVE DISCUSSIONS, WE HEREBY HOLD THAT THE RELAXATION IN MONETARY LIMITS FOR DEPARTMENTAL APPE ALS, VIDE CBDT CIRCULAR DATED 8TH AUGUST 2019 (SUPRA) SHALL B E APPLICABLE TO THE PENDING APPEALS IN ADDITION TO THE APPEALS T O BE FILED HENCEFORTH. 8. LEARNED COMMISSIONER (DR) THEN SUBMITS LIBERTY M AY KINDLY BE GIVEN TO POINT OUT, UPON NECESSARY FURTHER VERIF ICATIONS, AND TO SEEK RECALL THE DISMISSAL OF APPEALS AND RESTORATIO N OF THE APPEALS IN THE CASES (I) IN WHICH IT CAN BE DEMONST RATED THAT THE APPEALS ARE COVERED BY THE EXCEPTIONS, AND (II) WHI CH ARE INADVERTENTLY INCLUDED IN THIS BUNCH OF APPEALS, WH EREIN THE TAX EFFECT, IN TERMS OF THE CBDT CIRCULAR (SUPRA), EXCE EDS RS 50,00,000. NONE OPPOSES THIS PRAYER; WE ACCEPT THE SAME. WE MAKE IT CLEAR THAT THE APPELLANTS SHALL BE AT LIBER TY TO POINT OUT THE CASES WHICH ARE WRONGLY INCLUDED IN THE APPEALS SO SUMMARILY DISMISSED, EITHER OWING TO WRONG COMPUTAT ION OF TAX EFFECT OR OWNING TO SUCH CASES BEING COVERED BY THE PERMISSIBLE EXCEPTIONS- OR FOR ANY OTHER REASON, AND WE WILL TA KE APPROPRIATE REMEDIAL STEPS IN THIS REGARD. 9. IN THE LIGHT OF THE ABOVE DISCUSSIONS, ALL THE A PPEALS STAND DISMISSED AS WITHDRAWN. AS THE APPEALS FILED BY THE REVENUE ARE FOUND TO BE NON-MAINTAINABLE AND AS ALL THE REL ATED CROSS- OBJECTIONS OF THE ASSESSEE ARISE ONLY AS A RESULT O F THOSE APPEALS AND MERELY SUPPORT THE ORDER OF THE CIT(A), THE CRO SS OBJECTIONS FILED BY THE ASSESSEE ARE ALSO DISMISSED AS INFRUCT UOUS. ORDERED, ACCORDINGLY. ITA NO:-4339/DEL/2016 & C.O-307/DEL/2016 (ASSESSMENT YEAR: 2011-12) PAGE | 7 6. FOLLOWING THE DECISION OF THE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ITO VS DINESH MADHAVLAL PATEL (CITED SUPRA), WE HOLD THAT THE APPEAL FILED BY THE REVENUE IS NOT MAINTAI NABLE IN VIEW OF THE TAX EFFECT BEING BELOW RS.50,00,000/-. ACCORDINGLY , THE APPEAL FILED BY THE REVENUE IS DISMISSED. C.O-307/DEL/2016 (IN ITA NO:-4339/DEL/2016) (ASSESSMENT YEAR: 2011-12) 7. LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEAR ING DID NOT PRESS THE GROUNDS RAISED IN THIS CROSS-OBJECTION FOR WHIC H LD.DR HAS NO OBJECTION. ACCORDINGLY, THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS NOT PRESSED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE A ND CROSS- OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 19 TH DAY OF AUGUST, 2019. SD/- SD/- (S.KAMBLE) (R.K.PANDA) JUDICIAL MEMBER ACCOUNTANT MEM BER DATED: 19.08.2019 * AMIT KUMAR * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI