ACIT, New Delhi V. M/s. Gulshan Sugar & Chemicals Ltd., New Delhi

ITA 4591/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3534 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-07-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 04-07-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-10-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MOHD SHAHIB
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI I.P. BANSAL, JUDICIAL MEMBER AND SHRI K.G. BANSAL, ACCOUNTANT MEMBER I.T.A. NO.4591/D/2010 ASSESSMENT YEAR: 2007-08 ACIT. VS. M/S GULSHAN SUGAR & CIRCLE 12(1), CHEMICALS LTD., G-81, NEW DELHI PREET VIHAR, NEW DELHI PAN NO.AAACG 0485C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT GARG, SR. DR RESPONDENT BY : SHRI MOHD. SHAHIB, CA ORDER PER K.G. BANSAL: AM: IN THIS APPEAL, THE REVENUE HAS TAKEN TWO SUBSTANTIVE G ROUNDS REGARDING ALLOWANCE OF THE DEDUCTION/RELIEF OF `6,3 6,834/- BEING THE PRIOR PERIOD EXPENSES, AND `7,71,440/- BEING 50% OF T HE AMOUNT OF `15,42,881/- CAPITALIZED BY THE ASSESSING OFFICER. 2. THE FACTS REGARDING PRIOR PERIOD EXPENSES ARE THAT THE ASSESSEE WAS REQUIRED TO EXPLAIN WHY THE SUM OF `6,36,834/- DEBITED UNDER THIS HEAD SHOULD NOT BE DISALLOWED AS IT HAS BEEN FOLLOW ING MERCANTILE SYSTEM OF ACCOUNTING. IT WAS SUBMITTED THAT THE EXPEND ITURE HAS BEEN INCURRED IN THE ORDINARY COURSE OF BUSINESS AND REPRESEN TS DEMANDS RAISED BY VARIOUS GOVERNMENT BODIES. HOWEVER, THE ASSESSI NG OFFICER DID NOT ACCEPT THIS CONTENTION AND DISALLOWED THE EXP ENDITURE AS NOT PERTAINING TO THIS YEAR. BEFORE THE LEARNED CIT(A), IT WAS SUBMITTED THAT THE AMOUNT WAS PAID IN THIS YEAR TO UP POLLUTION CONTROL BOARD AND IT REPRESENTS THE CESS PAYABLE FOR THE PERIOD 01.04.200 5 TO 31.03.2006. NO DEMAND WAS RAISED IN THAT YEAR AND IT WAS RAISED ONLY 4591-2010-GSC 2 ON 22.12.2006, A DATE FALLING IN THE CURRENT YEAR. ON THESE FACTS, THE LEARNED CIT(A) ALLOWED THE DEDUCTION. 3. BEFORE US, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED TO PAGE NO.3 OF THE PAPER BOOK WHICH SHOWS T HAT THE DEMAND FOR FINANCIAL YEAR 2005-06 WAS RAISED ON 22.12.2006 A ND THE DUE DATE OF PAYMENT WAS 22.01.2007. PAGE NO.7 OF THE PAPER B OOK SHOWS THAT OUT OF THE TOTAL DEMAND OF `8,86,475/-, A SUM OF `6, 45,180/- WAS CLASSIFIED AS PRIOR PERIOD EXPENSES AND THE BALANCE AMOU NT OF ABOUT `1,61,293/- AS RATES AND TAXES. THE WHOLE OF THE DEMA ND WAS PAID IN THIS YEAR. THE CASE OF THE LEARNED COUNSEL IS THAT IN TERMS OF SECTION 43B, THE AMOUNT IS DEDUCTIBLE IN COMPUTING THE INCOM E OF THIS YEAR. HAVING CONSIDERED THE RIVAL SUBMISSIONS, WE FIND THAT TH E DEMAND WAS RAISED BY THE CESS OFFICER ON 22.12.2006 AND IT WAS PAI D IN THIS FINANCIAL YEAR. THUS, THE DEMAND BECAME PAYABLE IN THIS YEAR AND WAS ALSO PAID IN THIS VERY YEAR. THEREFORE, AS PER PROVISI ONS OF SECTION 43B, THE ASSESSEE IS ENTITLED TO GET THE DEDUCTION ON PAYMENT BASIS. ACCORDINGLY, IT IS HELD THAT THE LEARNED CIT(A) WAS R IGHT IN ALLOWING THE AMOUNT IN COMPUTATION OF INCOME. 4. IN REGARD TO CAPITALIZATION OF THE EXPENDITURE O F `15,42,881/-, IT IS MENTIONED IN THE ASSESSMENT ORDER THAT EXPENDITURE ON R EPAIR AND MAINTENANCE OF PLANT AND MACHINERY WAS SHOWN AT `69,2 9,111/-. IN THE COURSE OF ASSESSMENT, THE LEDGER ACCOUNT WAS FILED. ON PERUSAL OF THE SAME, THE ASSESSING OFFICER LISTED 22 ITEMS OF AGGREGA TE VALUE OF `18,15,154/-, WHICH WERE HELD TO BE EXPENSES OF CAPIT AL NATURE. AFTER ALLOWING DEDUCTION OF DEPRECIATION AT THE RATE OF 1 5%, NET ADDITION OF `15,42,881/- WAS MADE. THIS MATTER WAS ALSO AGITATED I N APPEAL AND IT WAS SUBMITTED THAT THE EXPENSES WERE PETTY IN NATURE, E ACH ITEM BEING BELOW `1,00,000/-. THE OVERALL EXPENDITURE W AS REASONABLE 4591-2010-GSC 3 LOOKING TO THE FACT THAT THE BLOCK OF MACHINERY WAS OF THE VALUE OF ABOUT `50 CRORES. THE LEARNED CIT(A) EXAMINED THE B ILLS OF EXPENSES AND CAME TO THE CONCLUSION THAT THERE ARE SOME BILLS O F PURCHASE, WHICH CAN BE SAID TO BE IN THE NATURE OF CAPITAL EXP ENDITURE. IN VIEW THEREOF, THE ADDITION WAS REDUCED TO OF THE AMOUNT ADDED BY THE ASSESSING OFFICER. 5. BEFORE US, THE LEARNED COUNSEL REFERRED TO THE BIL LS PLACED IN THE PAPER BOOK AND SUBMITTED THAT ALL OF THEM WERE RELAT ING TO REPAIRS ETC. AND NONE OF THE EXPENDITURE WAS CAPITAL IN NATURE. ON THE OTHER HAND, THE LEARNED DR RELIED ON THE ORDER OF THE ASSESSING OFF ICER. 5.1 WE HAVE PERUSED THE BILLS PLACED ON RECORD AND FI ND THAT SOME OF THE BILLS REGARDING PURCHASE SUCH AS FULLY AUTOMATIC BU RNER, IGNITION TRANSFORM ETC. MAY BE OF CAPITAL NATURE. HOWEVER, T HE AGGREGATE OF SUCH BILLS DOES NOT EXCEED THE AMOUNT OF ADDITION UPHE LD BY THE LEARNED CIT(A). THEREFORE, WE DO NOT FIND ANY REASO N TO INTERFERE WITH HIS DECISION IN THE MATTER. IT MAY BE MENTIONED HERE THAT THE LEARNED COUNSEL SPECIFICALLY SUBMITTED THAT THE ASSESSEE HAS ACCEPT ED THE DECISION OF LEARNED CIT(A) IN THIS MATTER. ACCORDING LY, THE DECISION OF LEARNED CIT(A) IS UPHELD ON THIS GROUND ALSO. 6. IN RESULT, THE APPEAL IS DISMISSED. THIS ORDER WAS PRONOUNCED IN OPEN COURT ON 08.07.2011 . SD/- SD/- ( I.P. BANSAL ) ( K.G. BANSAL ) JUDICIAL MEMBER ACCOUNTANT ME MBER DT.08.07.2011. NS 4591-2010-GSC 4 COPY FORWARDED TO:- 1. ACIT, CIRCLE 12(1), NEW DELHI. 2. M/S GULSHAN SUGAR & CHEMICALS LTD., G-81, PREET VIH AR, NEW DELHI. 3. THE CIT 4. THE CIT (A), NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY BY ORDER (ITAT, NEW DELHI).