ACIT, New Delhi V. M/s Kalinga International, New Delhi

ITA 4500/DEL/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81652 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 04-09-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR B R R KUMAR
• Keywords: Depreciation; Notional interest; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : D : NEW DELHI BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM ITA NO.4500/DEL/2012 ASSESSMENT YEAR : 2008-09 ACIT, CIRCLE 33(1), NEW DELHI. VS. KALINGA INTERNATIONAL, 5/1, WEST PATEL NAGAR, NEW DELHI. PAN : AAAFK1235H ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY : NONE DEPARTMENT BY : DR. B.R.R. KUMAR, SR. DR ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT (A) ON 07.05.2012 IN RELATION TO THE ASSESSMENT YEAR 2008-09. 2. REVISED GROUNDS HAVE BEEN FILED BY THE REVENUE. FIRST REVISED GROUND IS AS UNDER:- THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,88,061/- ON ACCOUNT OF DISALLOWANCE MADE ON ITA NO.4500/DEL/2012 2 INSURANCE, DEPRECIATION, INTEREST ON FINANCE AND RESTRICTING ADDITION @ 10% ON DISALLOWANCE MADE ON CAR EXPENSES TO RS.34,944/- BY FOLLOWING ITATS ORD ER FOR AY 2000-01 AND CITING THAT THERE WAS NO SUCH ADDITION MADE IN SUBSEQUENT YEAR 2009-10, DESPITE T HE FACT THAT THE ITAT ORDER FOR AY 2000-01 IS TOO FAR FROM THE AY 2008-09 IS QUESTION AND CANNOT BIND THE REVENUE. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE AO DISALLOWED CERTAIN EXPENSES. THE LD. CIT(A) DELETE D THE DISALLOWANCE BY RELYING ON THE ORDER PASSED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2000-01. 4. WE HAVE HEARD THE LD. DR AND PERUSED THE RELEVAN T MATERIAL ON RECORD. THERE IS NO APPEARANCE FROM THE SIDE OF THE ASSESSEE DESPITE NOTICE. AS SUCH, WE ARE PROCEEDING TO DISP OSE OF THIS APPEAL EX PARTE QUA THE ASSESSEE. IN SO FAR AS THE DELETION OF THE ADDITION IS CONCERNED, IT IS OBSERVED THAT THE LD. CIT(A) DELETED SUCH ADDITION BY RELYING ON THE TRIBUNAL ORDER PASS ED IN ASSESSEES OWN CASE FOR AY 2000-01. THE LD. DR COU LD NOT BRING ON RECORD ANY MATERIAL TO INDICATE THAT THERE WAS A NY FALLACY IN SUCH ORDER OR IN THE SUBSEQUENT YEARS SUCH ORDER HA S NOT BEEN FOLLOWED. RESPECTFULLY FOLLOWING THE PRECEDENT, WE APPROVE THE ITA NO.4500/DEL/2012 3 VIEW TAKEN BY THE LD. CIT(A) ON THIS ISSUE. THIS G ROUND IS NOT ALLOWED. 5. THE SECOND GROUND IS AGAINST THE DELETION OF ADD ITION OF ` 15,56,334/- MADE BY THE AO ON ACCOUNT OF INTEREST @ 12% ON ` 1.29 CRORE. THE FACTS OF THIS GROUND ARE THAT THE ASSESSEE GAVE INTEREST FREE LOANS AND ADVANCES AMOUNTING TO ` 1.2 9 CRORE TO THE RELATED PARTIES. THE AO OBSERVED THAT THE ASSESSEE HAD ALSO TAKEN INTEREST BEARING LOANS. HE, THEREFORE, DISALL OWED INTEREST @ 12% ON SUCH INTEREST FREE LOANS AND ADVANCES TO THE RELATED PARTIES AND OTHERS. THIS RESULTED INTO AN ADDITION OF ` 15,56,334/-. THE LD. CIT(A) DELETED THE ADDITION. 6. AFTER CONSIDERING THE SUBMISSIONS ADVANCED ON BE HALF OF THE REVENUE, WE FIND FROM THE IMPUGNED ORDER THAT INTER EST FREE LOANS WERE GIVEN TO THE PERSONS WHOSE PROPERTIES WE RE USED BY THE ASSESSEE FOR SHOWROOMS AND GODOWNS, ON WHICH NO RENT WAS PAID. IT CAN BE SEEN FROM THE IMPUGNED ORDER THAT T HE AO HIMSELF, WHILE PASSING ORDER U/S 143(3) FOR THE AY 2009-10, ACCEPTED THE ASSESSEES SUBMISSIONS ON THIS SCORE AND DID NOT MA KE ANY SUCH ADDITION. WHEN INTEREST FREE LOANS WERE GIVEN TO T HE PARTIES FROM ITA NO.4500/DEL/2012 4 WHOM THE ASSESSEE HAD TAKEN PREMISES FOR ITS BUSINE SS PURPOSE WITHOUT PAYING ANY RENT, THE NOTIONAL INTEREST ON S UCH LOANS CAN BE CONSIDERED AS QUID PRO QUO OF RENT. SINCE THE AO HAS HIMSELF ACCEPTED THE ASSESSEES CASE, IN HIS ORDER FOR AY 2 009-10, WE HOLD THAT NO INTERFERENCE CAN BE MADE IN THE IMPUGN ED ORDER ON THIS ISSUE. THIS GROUND IS NOT ALLOWED. 7. THE LAST EFFECTIVE GROUND IS AGAINST THE DELETIO N OF ADDITION OF ` 6,13,200/- MADE ON ACCOUNT OF CONVERSION EXPEN SES. THE AO NOTICED FROM THE PROFIT & LOSS ACCOUNT THAT A SUM O F ` 6,13,200/- PAID AS CONVERSION CHARGES WAS CLAIMED AS DEDUCTION . IN HIS OPINION, THIS WAS A CAPITAL EXPENDITURE AND, HENCE, COULD NOT BE ALLOWED. THE LD. CIT(A) DELETED THIS ADDITION AFTER NOTICING THAT THE PROPERTY IN RESPECT OF WHICH THE ASSESSEE PAID CONV ERSION CHARGES TO MCD, WAS BELONGING TO SMT. SARLA, AND T HE SAME WAS USED BY THE ASSESSEE FOR HIS BUSINESS PURPOSE. 8. IN VIEW OF THE FACT THAT THE ASSESSEE WAS TO USE THIS PROPERTY OF SOME THIRD PERSON FOR BUSINESS PURPOSE AND THE S AME WAS NOT POSSIBLE UNLESS IT WAS SO CONVERTED, THE CONVERSION CHARGES IN SUCH CIRCUMSTANCES COULD NOT HAVE BEEN CONSIDERED A S A CAPITAL ITA NO.4500/DEL/2012 5 EXPENDITURE. THE CASE IS NOT EVEN HIT BY EXPL. 1 TO SEC. 32(1) INASMUCH AS PAYMENT OF SUCH CONVERSION CHARGES CANN OT BE CONSIDERED AS ANY CAPITAL EXPENDITURE ON THE CONST RUCTION OF ANY STRUCTURE OR DOING OF ANY WORK IN OR IN RELATION TO , AND BY WAY OF RENOVATION OR EXTENSION OF, OR IMPROVEMENT TO, THE BUILDING. WE, THEREFORE, HOLD THAT SUCH A PAYMENT CANNOT BE CONSI DERED AS CAPITAL EXPENDITURE. THE IMPUGNED ORDER ON THIS SCO RE IS UPHELD. 9. IN THE RESULT, THE APPEAL IS DISMISSED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 08.09 .2014. SD/- SD/- [ A.T. VARKEY ] [ R.S. SYAL ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 08 TH SEPTEMBER, 2014. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.