DCIT CEN CIR 2, MUMBAI V. GITANJALI INFRATECH LTD, MUMBAI

ITA 4729/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3591 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 19-07-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 19-06-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Business expenditure

Judgement Text

, INCOME-TAX APPELLATE TRIBUNAL -GBENCH MUMBAI , , , BEFORE S/SHRI RAJENDRA,ACCOUNTANT MEMBER AND RAM LAL NEGI,JUDICIAL MEMBER ./ITA/4729/MUM/2013, /ASSESSMENT YEARS: 2009-10 DCIT, CC-2 ROOM NO.904, PRATISHTHA BHAVAN, MARINE LINES MUMBAI-400 020. VS. M/S. GITANJALI INFRATECH LTD. 801-802, PRASAD CHAMBERS OPERA HOUSE,MUMBAI-400 004. PAN:AACCG 7677 G ( /APPELLANT ) ( / RESPONDENT) REVENUE BY: SHRI K.V. VISPUTE-DR ASSESSEE BY: MS. AARTI VISSANJI / DATE OF HEARING: 22.08.2016 / DATE OF PRONOUNCEMENT:22.08.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 11.03.2013 OF CIT(A)-36 , MUMBAI THE ASSESSING OFFICER (AO) HAS FILED THE PRESENT APPEAL FOR THE YEAR UNDER CON SIDERATION.ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS RELATED TO INFRASTRUCTURE ACTIVITIES,F ILED ITS RETURN OF INCOME ON 30/09/2009 DECLARING INCOME OF RS.7 LAKHS.THE CASE OF THE ASSE SSEE WAS SELECTED FOR SCRUTINY UNDER CASS BY ISSUING NOTICE U/S.143(2) DATED 23/08/2010. THE AO COMPLETED THE ASSESSMNET U/S.143(3) OF THE ACT,ON 20/12/2011,ASSESSING THE I NCOME OF THE ASSESSEE AT RS.95.08 LAKHS. 2. THE SOLITARY GROUND OF APPEAL IS ABOUT ALLOWING TH E EXPENSES CLAIMED BY THE ASSESSEE, UNDER THE HEAD BUSINESS EXPENDITURE.DURING THE ASSE SSMENT PROCEEDINGS,THE AO FOUND THAT IT HAD RECEIVED INTEREST INCOME FROM BANKS AND BONDS O F RS.1.83 CRORES, THAT AGAINST THE SAID INCOME IT HAD CLAIMED EXPENSES OF RS.1.87 CRORES,TH AT VIDE HIS ORDER SHEET NOTING DT.13.9 . 2011,HE ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAID EXPENSES SHOULD NOT BE DISALLOWED U/S.57(III) OF THE ACT.IN ITS RESPONSE, THE ASSESSE E CONTENDED THAT IT HAD RECEIVED MONEY FROM HOLDING COMPANY FROM TIME TO TIME THAT HAD BEEN IN VESTED IN VARIOUS INFRASTRUCTURE PROJECTS, THAT THE BANK CHARGES AND OTHER EXPENSES WERE INCUR RED FOR ITS BUSINESS,THAT THE ACTIVITIES OF INFRASTRUCTURE HAD COMMENCED, THAT THE EXPENSES WER E OF REVENUE NATURE AND HAD TO BE ALLOWED.HOWEVER,THE AO WAS NOT CONVINCED AND HELD T HAT IT HAD MADE INVESTMENTS IN SIX PROJECTS,THAT IT HAD INCURRED PERSONNEL EXPENSES OF RS.58.65 LAKHS AND OFFICE ADMINISTRATIVE EXPENSES OF RS.19.34 LAKHS AGAINST INTEREST INCOME OF RS.1.83 CRORES,THAT IT HAD CLAIMED BUSINESS LOSS OF RS.88.08 LAKHS,THAT MOST OF THE PR OJECT WERE EITHER ON HOLD OR AT VARIOUS STAGES OF COMPLETION,THAT ASSESSEE SHOULD HAVE CAP ITALISED PERSONNEL EXPENSES AND OFFICE 4729/M/13-GITANJALI INFRATECH 2 ADMINISTRATIVE EXPENSES TO BE ADDED TO THE COST OF THE PROJECT.HE REFERRED TO THE CASE OF ASSAM BENGAL CEMENT CO.(27ITR34) AND HELD THAT EXPE NSES INCURRED BY IT WERE TO BE CAPITALISED,THAT DURING THE YEAR ASSESSEE HAD ONLY INTEREST INCOME THAT WAS OFFERED UNDER THE HEAD INCOME FROM OTHER SOURCES,THAT THE EXPENSES AL LOWABLE AGAINST THE SAME HAD TO BE INCURRED WHOLLY AND EXCLUSIVELY FOR EARNING THE INT EREST INCOME, THAT IT HAD PAID INTEREST TO ITS HOLDING COMPANY ON THE LOAN TAKEN.REFERRING TO PROVISION OF SECTION 57(III) HE HELD THAT ONLY INTEREST PAYMENT MADE TO THE HOLDING COMPANY T O THE TUNE OF RS.1,00,53,000/- WAS TO BE ALLOWED,THAT IT WOULD NOT BE ELIGIBLE TO CLAIM PERS ONNEL AND ADMINISTRATIVE EXPENSES AGAINST INCOME FROM FDS AND DEBENTURES.FINALLY, HE DISALLOW ED THE PERSONNEL EXPENSES (RS.58. 65 LAKHS),OFFICE ADMINISTRATIVE EXPENSES(RS.19.34LAKHS ),DEPRECIATION- RS.1.86 LAKHS, INTEREST ON SECURED LOAN (RS.2.56 LAKHS) AND BANK CHARGES (RS.5 .65 LAKHS).THE SAID AMOUNT WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF AO, THE ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,THE ASSESSEE PRODUCED A C HART SHOWING THE NATURE OF VARIOUS EXPENSES INCURRED BY IT AND STATED THAT IT HAD SET UP THE BUSINESS, THAT MOST OF THE EXPENSES RELATED TO DEVELOPMENT PROJECT UNDERTAKEN BY THE CO MPANY AT BORIVALI AND ON LAND BELONGING TO HOLDING COMPANY,THAT THE EXPENSES INCURRED WERE REVENUE IN NATURE.IT RELIED UPON THE CASE OF SAURASHTRA CEMENT (91ITR170). AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE AN D THE ASSESSMENT ORDER THE FAA PASSED ONE LINE ORDER AND SAME READS AS UNDER : 7.3 IN VIEW OF THE ABOVE THIS GROUND OF APPEAL IS HEREBY ALLOWED AND THE AO IS DIRECTED TO GIVE EFFECT ACCORDINGLY. 4. BEFORE US,THE DEPARTMENTAL REPRESENTATIVE (DR) ARGU ED THAT THE FAA HAD ALLOWED THE APPEAL WITHOUT APPRECIATING THE FACTS.THE AUTHORISE D REPRESENTATIVE (AR)SUPPORTED THE ORDER OF THE FAA. WE FIND THAT WHILE DECIDING THE APPEAL,THE FAA HAS NOT GIVEN THE REASONS AS TO WHY THE ORDER OF THE AO WAS NOT JUSTIFIABLE.HE SIMPLY REPRODUCED THE SUBMISSIONS OF THE ASSESEE AND PUT A SEAL OF APPROVAL ON IT WITHOUT ASSIGNING ANY REASON .SUCH AN ORDER CANNOT BE CALLED A REASONED OR SPEAKING ORDER.PROVISIONS OF SECTION 250(6)ARE V ERY CLEAR AND MANDATE THAT THE FAA SHOULD PASS AN ORDER THAT SHOWS APPLICATION OF MIND ON HIS PART.FOR ALLOWING OR DISALLOWING THE APPEAL OF THE ASSESSEE,HE SHOULD GIVE THE REASO NS THAT CAN DEMONSTRATE AS TO WHY AND HOW HE ARRIVED AT A PARTICULAR CONCLUSION.AS AN ADJUDIC ATING AUTHORITY,HE HAS TO SPELL THE REASONS 4729/M/13-GITANJALI INFRATECH 3 FOR HIS DECISION.IN THE CASE OF BUILDWELL ASSAM LTD .(133ITR736)THE HONBLE ASSAM HIGH COURT HAS HELD AS UNDER: SECTION 250(6) OF THE I.T. ACT, 1961, PRESCRIBES T HE MANNER OF DISPOSAL OF AN APPEAL. AN ORDER MUST BE IN WRITING CONTAINING THE POINTS FOR DETERMINATION AND DECISION. THE OBJECT IS OBVIOUS. IT ENABLES A PARTY TO KNOW THE PRECISE POI NTS DECIDED IN HIS FAVOUR OR AGAINST HIM. ABSENCE OF FORMULATION OF POINTS FOR DECISION OR WA NT OF CLARITY IN DECISION PUTS A PARTY IN A QUANDARY. A DECISION AGAINST A PARTY ENABLES HIM TO GO UP IN APPEAL. A DECISION BY ITS VERY NATURE MUST BE FIRM AND SHOULD NOT BE VAGUE AND UNC LEAR. IF THERE IS A DIRECTION BY THE APPELLATE AUTHORITY TO THE ITO, THE LATTER IS BOUND TO CARRY OUT THE DIRECTION. REFUSAL TO CARRY OUT A DIRECTION IS A DENIAL OF JUSTICE AND DESTRUCT IVE OF ONE OF THE BASIC PRINCIPLES IN THE ADMINISTRATION OF JUSTICE BASED ON THE HIERARCHY OF THE AUTHORITIES. THEREFORE, WHEN A SUBORDINATE AUTHORITY IS DIRECTED TO CARRY OUT CERT AIN DIRECTIONS BY A SUPERIOR AUTHORITY, THE TENOR AND COLOUR OF THE ORDER OF THE SUPERIOR AUTHO RITY MUST BE FIRM, CLEAR, CERTAIN, DEFINITE AND WITHOUT ANY AMBIGUITY. HE HAS NOT ADDRESSED THE BASIC ISSUE I.E.SETTING UP OF BUSINESS.HE SHOULD HAVE GIVEN A CATEGORICAL FINDING REGARDING THE ISSUE.CONSIDERING THE ABOVE,WE ARE OF THE OPINION THAT IN THE INTEREST OF JUSTICE,MATTER SHOULD BE RESTORED BACK TO THE FILE OF THE FAA FOR FRESH ADJUDICATION WHO WOULD PASS A SPEAKING AND REASONED ORDER.EFFECT IVE GROUND OF APPEAL IS ALLOWED IN FAVOUR OF THE AO,IN PART. AS A RESULT,APP EAL FILED BY THE AO IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND AUGUST,2016. 22 , 2016 SD/- SD/- ( / R.L.NEGI ) ( / RAJENDRA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 22.08.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.