DCIT, New Delhi V. M/s Interocean Shipping India Pvt. Ltd., New Delhi

ITA 4715/DEL/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77607 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-04-2014
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 07-08-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G: NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER ITA NO. 4715/DEL/2013 ASSESSMENT YEAR: 2010-11 DCIT, CIRCLE 11(1), NEW DELHI. VS. INTEROCEAN SHIPPING INDIA P. LTD., 75, LINK ROAD, LAJPAT NAGAR-III, NEW DELHI. AAACI0143F (APPELLANT) (RESPONDENT) APPELLANT BY: SH. SATPAL SINGH, SR. DR RESPONDENT BY: SH. SANJIV RAI MEHRA, CA O R D E R PER S.V. MEHROTRA, A.M. THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF LD. CIT(A)S-XV, DATED 17/05/2013 FOR A.Y. 2010-11. 2. THE ASSESSEE COMPANY HAD FILED ITS E-RETURN DECL ARING TOTAL INCOME AT RS. 20,48,04,595/-. THE ASSESSMENT WAS COMPLETED A FTER MAKING FOLLOWING ADDITIONS/DISALLOWANCES: 1) DISALLOWANCE OF RS. 10,13,625/- OUT OF REPAIRS, RENEWALS AND REPLACEMENT OF RS. 74,13,138.73; 2) DISALLOWANCE OF DEPRECIATION RS. 60,090,35/-. 3. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL ON BOTH COUNTS. 3.1 BEING AGGRIEVED WITH THE ORDER OF LD. CIT(A), T HE DEPARTMENT IS IN APPEAL BEFORE US AND HAS TAKEN FOLLOWING GROUNDS OF APPEAL: ITA NO. 4715/D/2013 INTEROCEAN SHIPPING I NDIA PVT. LTD. 2 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 10,13,625/- M ADE OUT OF REPAIR & MAINTENANCE EXPENSES BEING CAPITAL IN NATURE; 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 60,09,035/- M ADE BY RESTRICTING THE RATE OF DEPRECIATION @ 15% INSTEAD OF 80% CLAIMED B Y THE ASSESSEE ON INTEREST CHARGES AND CONNECTING CHARGES AS WIND MIL L. 4. BRIEF FACTS APROPOS GROUND NO. 1 ARE THAT AO NOT ICED THAT ASSESSEE HAD CLAIMED EXPENSES UNDER THE HEAD REPAIRS, RENEW ALS AND REPLACEMENT OF RS. 74,13,138.73 CLAIMING IT AS REVENUE EXPENDITURE . THE AO AFTER EXAMINING THE DETAILS OF EXPENSES, INTER-ALIA, OBSE RVED AS UNDER: IN VIEW OF THE ABOVE DISCUSSION, AN AMOUNT OF RS. 11,26,250/- IS CAPITALIZED UNDER THE HEAD FURNITURE AND FIXTURE ON WHICH ASSESSEE IS ENTITLED FOR DEPRECIATION AS P ER RULE. ACCORDINGLY, THE ASSESSEE IS ENTITLED FOR DEPRECIAT ION @ 10% TO THE TUNE OF RS. 1,12,625/- AND BALANCE AMOUNT OF RS. 10,13,625/- IS DISALLOWED AND ADDED TO THE TOTAL IN COME OF THE ASSESSEE. 4.1 HOWEVER, IT IS EVIDENT FROM THE AFOREMENTIONED OBSERVATIONS THAT AO DID NOT TREAT THE SUM OF RS. 10,13,625/- AS CAPITAL EXPENDITURE AND HAD TREATED ONLY 11,26,250/- AS CAPITAL EXPENDITURE. H E HAD DISALLOWED THE SUM OF RS. 10,13,625/-. 5. LD. CIT(A) WHILE EXAMINING THIS DISALLOWANCE, IN TER-ALIA, OBSERVED AS UNDER: ON EXAMINATION OF THE VARIOUS BILLS IN RESPECT OF THE SAME, THE LD. AO WAS OF THE VIEW THAT THE EXPENSES INCURR ED TOWARDS THE COST OF FURNISHING THE CLOTH FOR SOFA ETC. AMOU NTING TO RS. ITA NO. 4715/D/2013 INTEROCEAN SHIPPING I NDIA PVT. LTD. 3 10,13,625/- WERE CAPITAL IN NATURE AS IN HER VIEW, THE SAME GIVES A NEW SHAPE AND LONGEVITY TO THE FURNITURE. ACCORDINGLY, THE SAME WAS HELD AS CAPITAL IN NATURE ON WHICH DEPRECIATION @ 10% WAS ALLOWED. 6. THUS, LD. CIT(A) HAS NOT CORRECTLY APPRECIATED T HE FACTS AND, THEREFORE, WE RESTORE THIS MATTER TO THE FILE OF LD. CIT(A) FO R PROPER APPRECIATION OF FACTS AND THEN TO DECIDE THIS GROUND. 7. APROPOS GROUND NO. 2 BRIEF FACTS ARE THAT ASSESS EE HAD CLAIMED DEPRECIATION @ 80% OF RS. 11,01,88,652/-. THE AO N OTICED THAT ASSESSEE HAD INCURRED MANY PERIPHERAL EXPENSES FOR THE INSTA LLATION OF THE WIND MILL ON THE HEADS LIKE ERECTION AND COMMISSIONING CHARGES A ND INFRASTRUCTURE DEVELOPMENT CHARGES. HE WAS OF THE OPINION THAT 80 % DEPRECIATION COULD NOT BE ALLOWED ON THE EXPENDITURE RELATING TO INSTA LLATION OF THE WIND MILL. AFTER CONSIDERING THE DETAILS, HE CONCLUDED THAT DE PRECIATION ON AN AMOUNT OF RS. 92,44,670/- IS TO BE ALLOWED UNDER THE HEAD OF NORMAL PLANT AND MACHINERY @ 15% RATHER THAN 80%. HE, ACCORDINGLY, MADE AN ADDITION OF RS. 60,090,35/-. LD. CIT(A) ALLOWED THE ASSESSEES APPEAL, INTER-ALIA, OBSERVING THAT SINCE THE ASSET IN THE NATURE OF WIN D MILL WOULD NOT HAVE COME INTO THE OPERATION WITHOUT INCURRING THESE EXPENSES , THE SAME ARE PART AND PARTIAL OF THE ACTUAL COST OF THE PAYMENT. 7.1 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 8. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A) ON THIS ISSUE BECAUSE, AS RIGHTLY OBSERVED BY HIM, ALL THE EXPENSES INCURRED ITA NO. 4715/D/2013 INTEROCEAN SHIPPING I NDIA PVT. LTD. 4 UPTO THE STAGE OF FINAL INSTALLATION OF WIND MILL T O MAKE IT OPERATIONAL HAVE TO BE TREATED AS PART AND PARTIAL OF ACTUAL COST. 9. IN THE RESULT, THIS GROUND IS DISMISSED. 10. IN THE RESULT, THE DEPARTMENTS APPEAL IS PARTL Y ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17/04/2014 SD/- SD/- (C.M. GARG) JUDICIAL MEMBER (S.V. MEHROTRA) ACCOUNTANT MEMBER DATED: 17/04/2014 *KAVITA COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, NEW DELHI. TRUE COPY BY ORDER ASSISTANT REGISTRAR