DCIT 2(3), MUMBAI V. THE SEKSARIA BISWAN SUGAR FACTORY, MUMBAI

ITA 4428/MUM/2012

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3878 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 28-07-2015
• Assessment Year: 2006-2007
• Appeal Filed On: 29-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHUDR
• Assessee Lawyers: Y P TRIVEDI
• Keywords: Depreciation; Additional depreciation; Wrong claim; Revenue expenditure; Capital expenditure
• Section: 32

Judgement Text

4428/M/12-SEKSARIA BISWANSF 1 INCOME-TAX APPELLATE TRIBUNAL -EBENCH MUMBAI , . . , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND C. N. PRASAD,JUDICIAL MEMBER ./ITA/4428/MUM/2012, /ASSESSMENT YEARS: 2006-07 ACIT-2(3) ROOM NO.552, 5TH FLOOR, AAYAKAR BHAVANMK ROAD, MUMBAI-400 020. VS. M/S. THE SEKSARIA BISWAN SUGAR FACTORY LTD.,5TH FLOOR, 139, NAGINDAS MASTER RD.FORT, MUMBAI-1. PAN:AAACT 1343 C ( /APPELLANT ) ( / RESPONDENT) CO/144/MUM/2013, /ASSESSMENT YEARS: 2006-07 M/S. THE SEKSARIA BISWAN SUGAR FACTORY LTD.MUMBAI. VS. ACIT-2(3) MUMBAI. REVENUE BY: SHRI R.K. SAHU-DR ASSESSEE BY: SHRI Y.P.TRIVEDI & USHA DALAL /DATE OF HEARING: 26.07.2016 / DATE OF PRONOUNCEMENT: 05.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM-. CHALLENGING THE ORDER,DATED 20/04/2012,OF THE CIT ( A)-6,MUMBAI,THE ASSESSEE- COMPANY AND THE ASSESSING OFFICER(AO)HAVE FILED THE APPEAL/CROSS OBJECTION.THE ASSESSEE,ENGAGED IN THE BUSINESS OF MANUFACTURING O F WHITE CRYSTAL SUGAR,FILED ITS RETURN OF INCOME ON 21/11/ 2006,DECLARING TOTAL INC OME OF RS.30.45 CRORES.THE AO COMPLETED THE ASSESSMENT U/S.143(3)OF THE ACT,ON 18 /12/2008,DETERMINING ITS INCOME AT RS.30.98 CRORES. ITA/4428/MUM/2012: 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE P ENALTY LEVIED BY THE AO U/S. 271(1)(C),AMOUNTING TO RS. 21.86 LAKHS. DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATION OF RS.43.72 LAKHS U/S.32 (I I) R.W.S.32(IIA) OF THE ACT ON THE ADDITION TO THE PLANT AND MACHINERY TO THE TUNE OF RS. 2.18 CRORES, THAT THE NEW PLANT AND MACHINERY WAS PUT TO USE AFTER 30/09/2005 ,THAT THE DEPRECIATION WAS 4428/M/12-SEKSARIA BISWANSF 2 RESTRICTED TO 10% AS PER THE SECOND PROVISO TO SECT ION 32 (I) OF THE ACT. HE DISALLOWED DEPRECIATION OF RS.21.86 LAKHS. HE FURTH ER FOUND THAT THE ASSESSEE HAD CLAIMED EXPENDITURE OF RS.16.96 LAKHS AS FILING FEE S, THAT THE EXPENDITURE WAS INCURRED FOR INCREASING THE AUTHORISED SHARE CAPITA L.ACCORDINGLY,THE SAID SUM WAS DISALLOWED WHILE COMPLETING THE ASSESSMENT. HE ALSO INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) FOR FILING INACCURATE PARTICULARS OF INCOME. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,IT DID NO T PRESS THE GROUND WITH REGARD TO DISALLOWANCE OF DEPRECIATION.HE CONFIRMED THE AO S ACTION OF DISALLOWING THE EXPENDITURE OF RS.16.85 LAKHS FOR INCREASING THE AU THORISED SHARE CAPITAL.AFTER RECEIVING THE ORDER OF THE FAA,THE AO REVIVED THE P ENALTY PROCEEDINGS AND DIRECTED THE ASSESSEE TO FILE ITS EXPLANATION.AS PE R THE AO,DURING THE PASSING OF THE PENALTY ORDER THE ASSESSEE DID NOT FILE ANY EXPLANA TION BEFORE HIM. ON THE BASIS OF THE AVAILABLE MATERIAL, THE AO HELD THAT THE ASSESS EE HAD ADMITTED THE FACT THAT CLAIM WITH REGARD TO THE DEPRECIATION WAS WRONG, TH AT IT HAD CONCEALED THE PARTICULARS OF INCOME WITH REGARD TO DEPRECIATION O N ADDITION TO PLANT AND MACHINERY AND HAD FILED INACCURATE PARTICULARS WITH A VIEW TO EVADE TAXES, THAT THE ASSESSEE HAD NOT FILED ANY SUBMISSION WITH REGARD T O EXPENDITURE TO INCREASE AUTHORISED SHARE CAPITAL.INVOKING THE PROVISIONS SE CTION 271(1)(C) OF THE ACT,HE LEVIED A PENALTY OF RS.13.03 LAKHS. 4 .AGGRIEVED BY THE PENALTY ORDER OF THE AO, THE ASSE SSEE FILED AN APPEAL BEFORE THE FAA.BEFORE HIM,IT WAS ARGUED THAT THERE WAS AN INAD VERTENT MISTAKE IN CLAIMING ADDITIONAL DEPRECIATION THAT INSTEAD OF CLAIMING AD DITIONAL DEPRECIATION AT THE RATE OF 10% IT HAD CLAIMED DEPRECIATION AT THE RATE OF 2 0%, THAT THE MATERIAL FACTS WERE DISCLOSED IN THE AUDIT REPORT WHEREIN THE DATE OF A DDITION OF ASSETS HAD BEEN 4428/M/12-SEKSARIA BISWANSF 3 MENTIONED, THAT THE AUDITOR ITSELF HAD MADE MISTAKE IN THE AUDIT REPORT, THAT DURING THE ASSESSMENT PROCEEDINGS THE ASSESSEE HAD AGREED TO RESTRICT THE DEPRECIATION TO 10%, THAT DURING THE QUANTUM PROCEEDINGS THE FAA HA D CONFIRMED THE ADDITION ON ACCOUNT OF EXPENDITURE RELATING TO INCREASE IN AUTH ORISED CAPITAL FOR RIGHT ISSUE, THAT THE ADDITION WAS ON ACCOUNT OF DIFFERENCE OF OPINIO N, THAT PENALTY WAS NOT LEVIABLE FOR THE SAID ADDITION. AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE PENALTY ORDER, THE FAA HELD THAT THE CLAIM OF ADDITIONAL DEPRECIATION AT T HE RATE OF 20%, INSTEAD OF 10%, WAS AN INADVERTENT MISTAKE AND THE FACT WAS DISCLOS ED IN THE AUDIT REPORT, THAT THE ASSESSEE HAD ALSO AGREED THAT THERE WAS A MISTAKE I N THE COURSE OF ASSESSMENT PROCEEDINGS BY FILING LETTER DATED 10/11/2008 BEFOR E THE AO, THAT IT WAS A CASE OF MISTAKE AND NOT A CASE OF CONCEALMENT OF INCOME. TH EREFORE HE HELD THAT PENALTY LEVIED BY THE AO ON ACCOUNT OF DISALLOWANCE OF 10% OF ADDITIONAL DEPRECIATION WAS NOT JUSTIFIED. WITH REGARD TO EXPENDITURE PERTAINING TO INCREASE I N AUTHORISED SHARE CAPITAL FOR ISSUE OF RIGHT ISSUE,THE FAA HELD THAT IT WAS CLEAR LY A CAPITAL EXPENDITURE. HE REFERRED TO THE CASES OF PUNJAB STATE INDUSTRIAL DE VELOPMENT CORPORATION LTD. (225 ITR 792) AND BROOKE BOND INDIA LTD. (225 ITR 798) A ND HELD THAT THE AO WAS JUSTIFIED IN LEVYING THE PENALTY. 5. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE(DR) RELIE D UPON THE CASES OF ZOOM COMMUNICATION(327ITR510)AND MAK DATA(358 ITR593) AN D STATED THAT ASSESSEE HAD CONSIDERED PARTICULARS OF INCOME, THAT AO HAD R IGHTLY LEVIED THE PENALTY. THE AUTHORISED REPRESENTATIVE(AR) STATED THAT IT WAS AN INADVERTENT MISTAKE, ALL THE DETAILS WERE MADE AVAILABLE IN THE AUDIT REPORT, TH AT THE TAX CONSULTANT HAD ADVISED TO CLAIM ADDITIONAL DEPRECIATION AT THE RATE OF 20% , THAT THE ASSESSEE HAD REDUCED 4428/M/12-SEKSARIA BISWANSF 4 THE CLAIM DURING THE ASSESSMENT PROCEEDINGS. HE REF ERRED TO THE PAGES 24-27 OF THE PAPER BOOK. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. WE FIND THAT THE ASSESSEE HAD CLAIMED ADDITIONAL DEPRECIATI ON AT THE RATE OF 20% THOUGH THE PLANT AND MACHINERY WAS USED ONLY FOR PERIOD OF SIX MONTHS, THAT DURING THE ASSESSMENT PROCEEDINGS IT SUBMITTED LETTER TO THE A O TO REDUCE THE ADDITIONAL DEPRECIATION, THAT THE CHARTERED ACCOUNTANT HAD, IN THE AUDIT REPORT, RECOMMENDED THE CLAIM OF DEPRECIATION AT THE RATE OF 20%. IN OU R OPINION, CONSIDERING THE CLEAR FACTS AND CIRCUMSTANCES OF THE CASE, IT IS NOT A CA SE OF FILING INACCURATE PARTICULARS OF INCOME FOR CONSIDERING THE PARTICULARS OF INCOME .IT WAS AN INADVERTENT MIS - TAKE.THE ASSESSEE HAD ACTED ON THE ADVICE OF A PROF ESSIONAL AND HIS ADVICE WAS FOUND NOT AS PER THE PROVISIONS OF THE ACT.IN OUR O PINION,BOTH THE CASES,RELIED UPON BY THE DR,ARE NOT APPLICABLE TO THE FACTS OF THE CA SE.THEREFORE,WE HOLD THAT THE ORDER OF THE FAA DOES NOT SUFFER FROM ANY LEGAL INF IRMITY.IN CONFIRMING HIS ORDER, WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST TH E AO. CO/144/MUM/2013: 6. THE EFFECTIVE GROUND OF APPEAL IN THE CO IS ABOUT C ONFIRMING THE PENALTY WITH REGARD TO DISALLOWANCE OF EXPENDITURE INCURRED ON A CCOUNT OF INCREASE IN SHARE CAPITAL.WE HAVE ALREADY DISCUSSED THE FACTS ABOUT T HE ISSUE IN THE EARLIER PART OF OUR ORDER. 7. BEFORE US, THE AR STATED THAT IT WAS A DEBATABLE IS SUE AND HENCE PENALTY WAS NOT LEVIABLE. THE DR SUPPORTED THE ORDER OF THE FAA. WE ARE OF THE OPINION THAT THERE IS NO AMBIGUITY ABOUT THE NATURE OF THE EXPENDITURE INCURRED FOR INCREASE IN AUTHO - RISED SHARE CAPITAL.THE HONBLE SUPREME COURT, IN T HE YEAR 1997, HAD, WHILE 4428/M/12-SEKSARIA BISWANSF 5 DECIDING THE CASE OF PUNJAB STATE INDUSTRIAL DEVEL OPMENT CORPORATION LTD. (SUPRA) HELD AS UNDER: THE FEES PAID TO THE REGISTRAR OF COMPANIES FOR EXP ANSION OF THE CAPITAL BASE OF A COMPANY IS DIRECTLY RELATED TO THE CAPITAL EXPENDIT URE INCURRED BY THE COMPANY AND ALTHOUGH INCIDENTALLY THAT WOULD CERTAINLY HELP IN THE BUSINESS OF THE COMPANY AND MAY ALSO HELP IN PROFIT-MAKING, IT STILL RETAINS THE CH ARACTER OF CAPITAL EXPENDITURE SINCE THE EXPENDITURE IS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY. THUS,THERE IS NO AMBIGUITY ABOUT THE NATURE OF THE EXPENDITUE.THE EXPENSES INCURRED BY THE ASSESSEE FOR ISSUING SHARES ON RIGH T BASIS CANNOT BE TREATED AS REVENUE EXPENDITURE.IT IS NEITHER A DEBATABLE ISSUE NOR THERE ARE TWO OPINIONS ABOUT THE SAID EXPENDITURE.THE ASSESSEE HAD MADE A PATENT LY WRONG CLAIM.THERE IS A DIFFERENCE BETWEEN A DEBATABLE CLAIM AND A WRONG CL AIM.IN THE FIRST INSTANCE BECAUSE OF THE DIVIDED JUDICIAL OPINIONS THE ASSESS EE CAN ARGUE THAT IT HAD OPTED FOR ONE OF THE OPINIONS.BUT,AS FAR AS THE SECOND CATEGO RY IS CONCERNED NOBODY CAN ARGUE THAT THE CLAIM IS SUPPORTED BY JUDICIAL PRONO UNCEMENT.THE CLAIM MADE BY THE ASSESSEE, IN THE CASE UNDER CONSIDERATION,FALLS UND ER THE SECOND CATEGORY.WE FIND THAT THE ASSESSEE HAD NOT CHALLENGED THE FINDING OF FACT GIVEN BY THE AO THAT IT DID NOT FILE ANY REPLY IN RESPONSE TO THE PENALTY NOTIC E.BY NOT FILING ANY REPLY TO NOTICE ISSUED BY THE AO THE ASSESSEE HAD INDIRECTLY ADMITT ED THE CHARGE LEVELED BY HIM.HOWEVER,CONSIDERING THE FACT THAT IT HAD AGITAT ED THE ISSUE BEFORE THE FAA AND HE HAD DECIDED THE ISSUE ON MERITS,WE WANT TO HOLD THAT HIS ORDER DOES NOT SUFFER FROM ANY LEGAL INFIRMITY.SO,CONFIRMING THE SAME,EFF ECTIVE GROUND OF CO IS DECIDED AGAINST THE ASSESSEE. AS A RESULT, APPEAL OF THE AO AND THE CO OF THE ASS ESSEE STAND DISMISSED. / . ORDER PRONOUNCED IN THE OPEN COURT ON 5 TH AUGUST,2016. 5 , 2016 SD/- SD/- ( . . / C.N. PRASAD ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER 4428/M/12-SEKSARIA BISWANSF 6 MUMBAI; DATED : 05.08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR E BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.