M/s. Bharat Gears Ltd., New Delhi V. ACIT, New Delhi

ITA 4784/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2738 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 15-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 03-09-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R C DANDAY
• Assessee Lawyers: M K MADAN
• Keywords: Depreciation; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 43B

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: A , NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIAL MEMBER ITA NO. 4784 /DEL/2014 AY: 20 11 - 12 BHARAT GEARS LTD. 512, SURYA KIRAN BUILDING 19 K.G.MARG NEW DELHI PAN: AAACB 4860 G VS . ACIT CENTRAL CIRCLE II NEW DELHI ITA NO. 5008 /DEL/2014 AY: 20 11 - 12 DCIT, CENTRAL CIRCLE II NEW DELHI VS . BHARAT GEARS LTD. NEW DELHI (APPELLANT) ( RESPONDENT) A SSESSEE BY SH. M.K.MADAN, C.A. DEPARTMENT BY SH. R.C. DANDAY, SR.D.R. DATE OF HEARING 15 TH JUNE, 2017 DATE OF PRONOUNCEMENT 05 TH JULY, 2017 ORDER PER R.K. PANDA, ACCOUNTANT MEMBER TH ESE ARE CROSS APPEALS . ITA 4784/DEL/14 IS FILED BY THE ASSESSEE AND ITA 5008/DEL/14 IS FILED BY THE REVENUE AND ARE DIRECTED AGAINST THE ORDER DT. 26 TH JUNE, 2014 OF THE LD. CIT(A) - 2 31, NEW DELHI RELATING TO ASSESSMENT YEAR (A.Y.) 20 11 - 12 . FOR THE SAKE OF CONVENIENCE THESE WE RE HEARD TOGETHER AND ARE DISPOSED OF BY THIS COMMON ORDER. 2. ITA 4784/DEL/14 (BY THE ASSESSEE ) : - THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE RELATES TO THE ORDER OF LD. CIT(A) CONFIRMING THE DISALLOWANCE OF RS.44,09,000/ - MADE BY THE A.O. ON ACCOUNT OF LEAVE ENCASHMENT U/S 43B OF THE INCOME TAX ACT, 1961 ( THE ACT ) . 3 . THE FACTS OF THE CASE , IN BRIEF , ARE THAT THE ASSESSEE IS A COMPANY AND FIELD ITS RETURN OF INCOME ON 26 TH SEPTEMBER, 2011 DECLARING TOTAL INCOME OF RS.15,63,23,925/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. ASKED THE ASSESSEE TO FURNISH DETAILS IN RESPECT OF PAYMENTS MADE ON ACCOUNT OF LEAVE ENCASHMENT AND PROVISIONS MADE ON THIS ACCOUNT. FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE HE OBSERVE D THAT AS AGAINST RS. 101.34 LAKHS DEBITED IN THE BOOKS OF ACCOUNTS THE ASSESSEE HAS MADE PAYMENT OF RS. 57.25 LAKHS . HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE BALANCE AMOUNT SHOULD NOT BE DISALLOWED U/S 43B OF THE ACT. REJECTING THE EXPLANATION GIVEN BY THE ASSESSEE AND FOLLOWING THE ORDER OF HIS PREDECESSOR FOR THE A.Y. 2007 - 08 TO 2009 - 10 , THE A.O. DISALLOWED 3 AN AMOUNT OF RS.44.09 LAKHS. ON APPEAL THE LD. CIT(A) FOLLOWING HIS OR DER FOR THE PRECEDING A.YS CONFIRMED THE ADDITION MADE BY THE A.O. AGGRIEVED BY THE ORDER OF THE LD. CIT(A) , THE ASSESSEE IS IN APPEAL BEFORE US. 4 . THE LD.COUNSEL FOR THE ASSESSEE AT THE OUTSET REFERRED TO THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CA SE FOR THE A.Y. 2009 - 10 AND SUBMITTED THAT THE TRIBUNAL IN ITA NO.9061/DEL/13 AND ITA 1327/DEL/2013 ORDER DT. 18 TH JULY, 2014 AT PARA 10 OF THE ORDER HAS DISCUSSED THE ISSUE AND HAS RESTORED THE ISSUE TO THE FILE OF THE A.O. WITH CERTAIN DIRECTIONS. THER EFORE, HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE A.O. FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF DIRECTIONS OF THE TRIBUNAL. 5 . THE LD.D.R. FAIRLY CONCEDED THAT HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE A.O. 6 . IN VIEW OF THE ABOVE SUBMISSIONS MADE BY BOTH THE SIDES AND IN THE LIGHT OF THE DECISION OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE A.Y. 2009 - 10 ON THIS VERY ISSUE, WE RESTORE THE MATTER BACK TO THE FILE OF THE A.O. WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DIRECTIONS OF THE TRIBUNAL. THE A.O. SHALL GIVE DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE AS PER LAW. 4 WE HOLD AND DIRECT ACCORDINGLY. THE GROUND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 7 . IN THE RESULT ASSESSEE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. 8 . ITA NO.50 0 8/DEL/13 ( BY THE REVENUE): - THE ONLY EFFECTIVE GROUND RAISED BY THE REVENUE READS AS UNDER. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.15,29,121/ - MADE BY THE A.O. ON ACCOUNT OF TREATING REPAIRS AND MAINTENANCE TO PLANT & MACHINERY AS CAPITAL EXPENDITURE. 9 . F ACTS OF THE CASE IN BRIEF ARE THAT THE A.O. DURING THE COURSE OF ASSESSMENT PROC EEDINGS ASKED THE ASSESSEE TO FURNISH THE DETAILS IN RESPECT OF RECONDITIONING OF PLANT AND MACHINERY. FROM THE DETAILS FURNISHED BY THE ASSESSEE HE NOTED THAT AN AMOUNT OF RS.17,98,666/ - HAS BEEN CLAIMED ON ACCOUNT OF RECONDITIONING OF PLANT AND MACHINER Y. ON BEING QUESTIONED BY THE A.O. IT WAS REPLIED THAT THE EXPENDITURE INCURRED WAS ON ACCOUNT OF CURRENT EXPENSES AND NO DISALLOWANCE SHOULD BE MADE. HOWEVER, THE A.O. NOTED THAT IDENTICAL ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE DURING THE A.Y. 199 4 - 95 AND THE ADDITION MADE BY THE A.O. WAS DELETED BY THE LD. CIT(A) WHICH WAS REVERSED BY THE 5 TRIBUNAL. THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL HAS BEEN DISMISSED BY THE HON BLE HIGH COURT. THE A.O. THEREFORE FOLLOWING THE ORD ER FOR A.Y. 1994 - 95 HELD THAT THE ENTIRE AMOUNT OF EXPENDITURE OF RS.17,98,966/ - IS CAPITAL IN NATURE. HE, THEREFORE, ALLOWED DEPRECIATION ON THE ABOVE @ 15% AND MADE ADDITION OF RS.15,29,121/ - . ON APPEAL, THE LD. CIT(A) DIRECTED THE A.O. TO ALLOW THE SA ME AS REVENUE EXPENDITURE BY OBSERVING AS UNDER. 3.2.3. I DO NOT FIND ANY MERIT IN A.O. S ACTION. THE ISSUE INVOLVED IS A QUESTION OF ASCERTAINING THE FACTS. UNLESS THE FACTS SHOW THAT THE EXPENDITURE WAS IN THE NATURE OF CAPITAL EXPENDITURE, THE SAME C ANNOT BE HELD SO MERELY BECAUSE REPAIRS ON MACHINERY UNDER CERTAIN SET OF FACTS WAS HELD TO BE CAPITAL EXPENDITURE FOR A.Y. 1994 - 95. HE HAD TO SHOW THAT THE FACTS OF THE PRESENT A.Y. ARE COMPARABLE TO THOSE OF A.Y. 1994 - 95. CONSIDERING ALL THESE FACTORS AND FOLLOWING MY ORDER IN THE APPELLANT S OWN CASE FOR A.Y. 1994 - 95, THE ADDITION MADE BY THE A.O. IS HEREBY DELETED. DISALLOWANCE OF RS.15,29,121/ - (NET OF DEPRECIATION ALLOWED ON THE CAPITAL EXPENDITURE @ 15%) IS HEREBY DELETED. THE GROUND IS THEREFOR E ALLOWED. 6 1 0 . AGGRIEVED WITH SUCH ORDER OF LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 11 . THE LD.COUNSEL FOR THE ASSESSEE REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE A.Y. 2009 - 10 SUBMITTED THAT AN IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL WHEREIN THE TRIBUNAL VIDE ORDER DT. 18 TH JULY,2014 AT PARA 9 HAS DISCUSSED THE ISSUE AND DISMISSED THE GROUND RAISED BY THE REVENUE. REFERRING TO THE ORDER OF THE TRIBUNAL IN ASSESEE S OWN CASE FOR THE A.Y. 2010 - 11 HE SUBMITTED THA T THE TRIBUNAL FOLLOWING ITS EARLIER ORDER FOR THE A.Y. 2009 - 10 HAS DISMISSED THE APPEAL BY THE REVENUE ON THIS VERY ISSUE. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MATTER IN FAVOUR OF THE ASSESSEE THE GROUND RAISED BY THE REVENUE BE DISMISSED . 12. THE LD.D.R. ON THE OTHER HAND FAIRLY CONCEDED THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 13. AFTER HEARING BOTH THE SIDES WE FIND IDENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEE S OWN CASE IN THE IMMEDIATELY PRECEDING A.Y WHEREIN THE TRIBUNAL HAS DISMISSED 7 THE GROUND RAISED BY THE REVENUE ON THIS VERY ISSUE BY OBSERVING AS UNDER: 5. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT S IMILAR ISSUE WAS DECIDED IN FA VO UR OF THE ASSESSEE IN THE CASE OF ASSESSEE ITSELF VIDE TRIBUNAL ORDER DATED 18.07.2014. THE RELEVANT FINDING OF THE TRIBUNAL ARE RECORDED IN PARA 17 - 20, WHICH FOR THE SA K E OF CONVENIENCE, ARE REPRODUCED BELOW: ' 1 7. LD. AR ON THE OTHER HAND HEAVILY RELYING UPON THE IMPUGNED ORDER AND THE FAC TUAL POSITION THAT APART FROM 1994 - 95 WHEREIN T HE M ACHINE WAS LYING UNFIT FOR PRODUCTION AND B Y THE RECONDITIONING CARRIED OUT THE OLD MACHINERY WAS MADE FIT FOR PRODUCTION AS SUCH SINCE THE MACHINE LYING UNFIT WAS NOT IN USE. THE TRIBUNAL AND THE COURT HELD THE EXPENDITURE TO MAKE IT FIT WAS TO BE TAKEN AS CAPITAL EXPENDITURE . REFERRING TO THE FACTS OF THE PRESENT CASE IT WAS ARGUED THAT THE EXPENDITURE IS CATEGORICALLY AND P ATENTLY REVENUE EXPENDITURE AND THE MACHINES WERE NOT LYING IDLE AND UNFIT (OR PRODUCTION AND IN FACT THE EXPENDITURE PERTAINING ONLY TO THEIR REPAIRS. ACCORDINGLY THE E XPENDITURE I T 'WAS ARGUED HAS RIGHTLY BEEN HELD BY THE CIT(A) AS ALLOWABLE EXPEN DITURE FOR REPAIR . 18. THE APPEAL WAS FIXED FOR CLARIFICATION AS QU A THE EVIDENCE OF EXPENDITURE THE RESPECTIVE STAND WAS FOUND TO HAVE NOT BEEN ADDRESSED. HOWEVER ON THE DALE OF HEARING THE LD. AR TOOK T HE STAND THAT THE EVIDENCE HAS NOT BEEN DOUBLED BY THE A0, CONSEQUENTLY T HE DEPARTMENT HAS NOT QUESTIONED THIS AS T HE AO HAS TREATED T HE EXPENDITURE AS CAPITAL EXPENDITURE RELYING ON THE 8 VIEW TAKEN IN 1 994 - 95 AND SINCE THE ISSUE UNDER CHALLENGE WAS WHETHER THE EXPENDITURE WAS CAPITAL OR REVENUE THE FAC TUM OFF EXPENDITURE HAVING BEEN INCURRED HAS NEVER BEEN IN ANY DOUBT. THE SAID POSITION WAS CONCURRED - WITH BY THE LD. C IT DR. 19. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL ON RECORD. ON A CAREFUL CONSIDERATION THERE T O , WE FIND THAT THERE IS NO SIMILARITY ESTABLISHED BY THE REVENUE WITH THE FACTS TAKEN INTO CONSIDERATION BY THE TRIBUNAL AND THE HON'BLE HIGH COURT IN 1994 - 95 A. YEAR. N OTHING HAS BEEN PLACED BEFORE US TO SHOW THAT THE MACHINES WERE LYING IDLE OR HAD BE COME UNFIT FOR PRODUCTION AND IN FACT NO ARGUMENT IN THAT LINE HAS BEEN ADVANCED BY THE RE V ENUE. ACCORDINGLY IN THE AFORE - MENTIONED PECULIAR FACTS AND CIRCUMSTANCES OF T HE CASE WHICH WE HAVE BROUGHT OUT IN DERAIL IN THE EARLIER PART OF THIS ORDER, WE ARE OF THE VIEW THAT THE ARGUMENTS OF [HE REVENUE HAVE NO MERIT. BEING SATISFIED BY THE REASONING AND FINDING ARRIVED AT IN THE IMPUGNED ORDER, THE DEPARTMENTAL GROUND IS DISMISSED. 20. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED AND THE APPEAL OF THE ASSESSEE IS ALLOWED/OR STATISTICAL PURPOSES. ' 6. WE FIND THAT EXPENDITURE INCURRED BY ASSESSE IN RECONDITIONING OF OLD PLANT AND MACHINERY IS SIMILAR AND, THEREFORE, RESPECTFULLY FOLLOWING THE EARLIER ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE, WE HO LD THAT EXPENSES INCURRED ON SUCH RECONDITIONING ARE REVENUE IN NATURE AND, THEREFORE, WE UPHOLD THE ACTION OF LD. CIT(A). 14 . SINCE THE FACTS OF THE INSTANT CASE ARE IDENTICAL TO THE FACTS OF THE PRECEDING A.Y. THEREFORE , FOLLOWING THE CONSISTENT VIEW OF 9 THE TRIBUNAL ON THIS VERY ISSUE IN ASSESSEE S OWN CASE FOR THE A.Y. 2009 - 10 AND 2010 - 11 AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT TO OUR NOTICE BY THE LD.D.R. THE GROUND RAISED BY THE REVENUE IS DISMISSED. 15. IN THE RESULT THE APPEAL FILED BY T HE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 05 TH JULY, 2017. SD/ - SD/ - ( SUCHITRA KAMBLE ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 05 TH JU LY , 2017 * MANGA 10 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT 6 . - TRUE COPY - - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES NEW DELHI