CMI INDUSTRY AUTOMATION P.LTD(EARLIER KNOWN AS M.S, N.T. STRIPS & AUTOMATION P.LTD), MUMBAI V. ASST CIT CEN CIR 9, MUMBAI

ITA 4899/MUM/2012

• Counselvise Citation: 489919914 RSA 2012
• Duration Of Justice: 2 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-12-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 27-07-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Keywords: Depreciation; Capital expenditure
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA, AM & SHRI SANJAY GARG, JM ITA NO. 4899 / MUM/20 1 2 ( ASSESSMENT YEAR : 200 9 - 10 ) CMI INDUSTRY AUTOMATION PRIVATE LIMITED (EARLIER KNOWN AS M/S N.T. STRIPS & AUTOMATION PRIVATE LIMITED) , MEHTA HOUSE, PLOT NO. 64, ROAD NO. 13, MIDC, ANDHERI (E), MUMBAI - 400 093 VS. ACIT, CC - 9, MUMBAI - 400 020 PAN/GIR NO. : A AA CN 8192 M ( APPELLANT ) .. ( RESPONDENT ) /ASSESSEE BY : SHRI KETAN VED /REVENUE BY : SHRI PREMANAND J. DA TE OF HEARING : 1 7 TH DEC , 201 4 DATE OF PRONOUNCEMENT : 21/01 /2015 O R D E R PER R.C.SHARMA ( A .M.) : THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A), DATED 11 - 5 - 2012 , FOR THE ASSESSMENT Y EAR 200 9 - 10 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, WHEREIN FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE : - THE APPELLANT OBJECTS TO THE ORDER DATED 11 MAY 2012 PASSED BY THE COMMISSIONER OF INCOME - TAX (APPEALS) - 37, MUMBAI ON THE FOLLOWING, AMONG OTHER GROUNDS: DISALLOWANCE OF PROFESSIONAL FEES 1. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF AN AMOUNT OF RS.20,00,000 TOWARDS PAYMENT OF PROFESSIONAL FEES AS PRIOR PERIOD EXPENDITURE. ITA NO. 4899 /20 1 2 2 2. THE L EARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE LIABILITY OR OBLIGATION TO PAY THIS EXPENDITURE AROSE DURING THE FINANCIAL YEAR 2008 - 09 AND HENCE THE SAME IS DEDUCTIBLE IN THE ASSESSMENT YEAR 2009 - 10. 3. WITHOUT PREJUDICE TO ABOVE, THE L EARNED COMMISSIONER (APPEALS) ERRED IN NOT APPRECIATING THAT EVEN IF THIS EXPENDITURE IS PRESUMED TO BE ACCRUED IN FINANCIAL YEAR 2007 - 08, THE SAME IS TO BE ALLOWED DURING FINANCIAL YEAR 2008 - 09 AS PER THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT SINCE T HE CORRESPONDING WITHHOLDING TAX ON SUCH EXPENDITURE WAS DEDUCTED AND PAID DURING THE FINANCIAL YEAR 2008 - 09. DISALLOWANCE OF EXPENDITURE ON REPAIRS AND MAINTENANCE 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE DISALLOWANCE OF THE FOLLO WING AMOUNTS TOWARDS ROUTINE AND ANNUAL MAINTENANCE CHARGES TREATING IT AS A CAPITAL EXPENDITURE: (A) REPAIRS AS WELL AS REPLACEMENT OF SPARES OF OVERHEAD TANK RS.55,000 (B) ANNUAL MAINTENANCE CHARGES FOR MONSOON SHED RS.3,01,325 2 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF THAT THE ASSESSEE COMPANY IS ENGAGED IN AUTOMATION, GAUGE CONTROL SYSTEM, MANAGEMENT INFORMATION SYSTEM, MILL MANAGEMENT SYSTEM, STEERING SYSTEM, EQUIPMENT/COMPONENTS FOR COLD ROLLING MILLS ETC. THE ASSESS EE COMPANY FILED ITS E - RETURN OF INCOME DECLARING TOTAL LOSS OF RS. 2,43,04,135/ - . DURING THE COURSE OF ASSESSMENT, THE AO NOTED THAT THE ASSESSEE COMPANY HAD PAID RS.20 LACS AS CONSULTANCY CHARGES TO MR. RAMAN MADHOK FOR PROVIDING ADVISORY SERVICES TO THE MANAGEMENT DURING FINANCIAL YEAR 2007 - 08 RELEVANT TO ASSESSMENT YEAR 2008 - 09. THE SERVICE WHICH HE STARTED PROVIDING FROM THE YEAR 2007 - 08 ONWARDS WERE NOT ACCOUNTED IN THE BOOKS OF ACCOUNT FOR YEAR 2007 - 08 IN ABSENCE OF CONFIRMATION BY DIRECTORS. THEREFOR E, THE ASSESSEE COMPANY ACCOUNTED THE SAME IN THE YEAR 2008 - 09 AFTER CONFIRMING HIS SERVICE. 3 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND THAT BILL FOR THE SERVICES SO RENDERED WAS RECEIVED BY THE ASSESSEE DURING THE RELEVANT ITA NO. 4899 /20 1 2 3 ASSESSMENT YEAR UNDER CO NSIDERATION. THE ASSESSEE NOT ONLY MADE PAYMENT OF THE SAID BILL DURING THE YEAR UNDER CONSIDERATION BUT ALSO DEDUCTED DUE TAX THEREON AND ALSO DEPOSITED THE SAME IN THE GOVERNMENT TREASURY. THUS, THE EXPENDITURE WAS NOT ONLY CRYSTALLIZED DURING THE YEAR U NDER CONSIDERATION BUT ALSO PAID AFTER DEDUCTING DUE TAX THEREON. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE LOWER AUTHORITIES FOR DISALLOWING THE PAYMENT MADE FOR PROFESSIONAL FEES. 4. THE AO FURTHER NOTED THAT ASSESSEE COMPANY HAD DEBITE D EXPENSES OF RS. 55,000/ - FOR INSTALLING M.S.LADDER, WHICH HAS BEEN FOR THE PURPOSE OF OVERHEAD TANK OF THE ASSESSEE COMPANY, THEREFORE, THE AO OBSERVED THAT THE SAME WAS NOT IN THE NATURE OF REPAIRS BUT CAPITAL IN NATURE AND HENCE DISALLOWED THE AMOUNT AF TER ALLOWING DEPRECIATION OF RS. 2,750/ - @ 5%OF RS.55,000/ - . THE AO FURTHER DISALLOWED THE AMOUNT OF RS. 3,01,325/ - FOR CONSTRUCTION OF MONSOON SHED AT THE FACTORY PREMISES. 5 . BY THE IMPUGNED ORDER, THE CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH THE ASSESSEE IS FURTHER APPEAL BEFORE US. 6 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND PERUSED THE RECORD CAREFULLY. THE AO ALSO DISALLOWED REPAIRS AND REPLACEMENT OF SPARES OF OVERHEAD TANK OF RS.55,000/ - . AS THE AFORESAID EXPENDITURE IS REVENUE IN NATURE , ACCORDINGLY, THE AO IS DIRECTED TO DELETE THE DISALLOWANCE OF RS.55,000/ - INCURRED ON REPAIRS AND REPLACEMENT OF SPARE PARTS OF OVERHEAD TANK. 7 . WITH REGARD TO DISALLOWANCE OF FABRICATION AND INSTALLATION OF MONSOON SHED AMOUNTING TO RS.3,01,325/ - , WE FOUND THAT SAME IS CAPITAL IN NATURE. ACCORDINGLY, LOWER AUTHORITIES WERE JUSTIFIED IN DISALLOWING THE ITA NO. 4899 /20 1 2 4 SAME ON THE PLEA THAT EXPENDITURE WAS NOT OF REVENUE NATURE BUT OF CAPITAL NATURE. THEREFORE, NO INTERFERENCE IS REQUIRED IN THE ORDERS OF THE LOWER AUTH ORITIES. 1 1 . IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED IN PART . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST JANUARY . 201 5 . 21 ST JAN,201 5 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 21 / 01/201 5 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / T HE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A) - X, MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//