M/s.Bekal Resorts Development Corpn Ltd, Calicut V. ACIT, Trivandrum

ITA 49/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 68958 (ITAT-COCHIN)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 28-08-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Keywords: Depreciation; Revenue expenditure
• Section: 32

Judgement Text

1 ITA NO. 49/COCH/2013 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI B.R. BASKA RAN(AM) I.T.A NO. 49/COCH/2013 (ASSESSMENT YEAR 2009-10) M/S BEKAL RESORTS DEVELOPMENT CORPN LTD VS A.C.I.T ., CIR.1(1) 2 ND FLOOR, KVS HYPER MARKET BLDG TRIVANDRUM BEKAL PO, KASARGOD-671 318 PAN : AAACB9208Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ANIL D NAIR RESPONDENT BY : SMT. S VIJAYAPRABHA DATE OF HEARING : 28-08-2013 DATE OF PRONOUNCEMENT : 30-08-2013 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A), TRIVANDRUM DATED 23-11-2012 AND PERTAINS TO ASSESSMENT YEAR 2009-10. 2. SHRI ANIL D NAIR, THE LD.COUNSEL FOR THE ASSESSE E SUBMITTED THAT THE ASSESSEE IS A COMPANY OWNED BY GOVERNMENT OF KERALA . DURING THE COURSE OF ITS BUSINESS ACTIVITY, THE ASSESSEE CONST RUCTED A WATER TANK FOR PROVIDING DRINKING WATER TO THE VILLAGERS OF PALLIK KARA GRAMA PANCHAYAT. 2 ITA NO. 49/COCH/2013 ACCORDING TO THE LD.COUNSEL, THE ASSESSEE HAS INCUR RED AN EXPENDITURE OF RS.2,86,62,882 FOR IMPLEMENTATION OF THE WATER SUPP LY SCHEME TO THE VILLAGERS. THE ASSESSEE ALSO CLAIMED DEPRECIATION ON THE WATER TANK. HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT THERE WAS NO EVIDENCE TO SHOW THAT THE WATER SUPPLY SCHEME AND WATER SUPPLY TANK WERE USED FOR THE PURPOSE OF BUSINESS. ACCORDING TO THE LD.COUNSEL, THE ENTIRE SCHEME WAS FOR THE PU RPOSE OF BUSINESS AND FOR SUPPLY OF WATER TO THE PEOPLE OF PALLIKKARA GRA MA PANCHAYAT. THEREFORE, PART OF THE EXPENDITURE IS FOR THE PURP OSE OF BUSINESS AND THE OTHER PART IS FOR THE PURPOSE OF BENEFITS OF THE LO CAL VILLAGERS. THE ASSESSEE HAS FILED A COPY OF THE LETTER SAID TO BE RECEIVED FROM THE PRESIDENT OF PALLIKKARA GRAMA PANCHAYAT. THE ASSES SEE HAS ALSO FILED COPY OF THE LETTER WRITTEN TO THE DISTRICT COLLECTO R, KASARGOD REQUESTING FOR PERMISSION TO CARRY 300 LITRES OF DIESEL. THE LD.C OUNSEL SUBMITTED THAT THESE DOCUMENTS COULD NOT BE PLACED BEFORE THE LOWE R AUTHORITIES DURING THE COURSE OF ASSESSMENT PROCEEDINGS AS ALSO AT THE FIRST APPELLATE PROCEEDINGS. THEREFORE, THE LD. COUNSEL PRAYED THA T THE MATTER MAY BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION. 3. THE LD.COUNSEL FURTHER SUBMITTED THAT THE ASSESS EE HAS ALSO INCURRED EXPENDITURE FOR CONSTRUCTION OF ROADS. ACCORDING T O THE LD.COUNSEL, THE ROADS WERE CONSTRUCTED IN THE LAND OWNED BY THE ASS ESSEE AND THE LAND 3 ITA NO. 49/COCH/2013 OWNED BY THE GOVERNMENT ALSO. THE ASSESSEE CLAIMED DEPRECIATION FOR THE ENTIRE ROADS CONSTRUCTED BY THEM. HOWEVER, THE ASSESSING OFFICER ALLOWED DEPRECIATION ON THE ROAD CONSTRUCTED ON THE LAND OWNED BY THE ASSESSEE AND REJECTED THE CLAIM OF DEPRECIATION IN RESPECT OF THE COST OF CONSTRUCTION OF THE ROAD CONSTRUCTED ON THE LAND BE LONGING TO THE GOVERNMENT. ACCORDING TO THE LD.COUNSEL, THE ROAD IS CONSTRUCTED FOR THE BUSINESS OF THE ASSESSEE AND ALSO FOR THE BENEFIT O F THE GENERAL PUBLIC. THEREFORE, THE ASSESSEE IS ENTITLED FOR DEPRECIATIO N. SINCE THE ISSUE OF DEPRECIATION ON THE WATER TANK NEEDS TO BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RECONSIDERATION, THE LD. COUN SEL SUBMITTED THAT THE ISSUE OF DEPRECIATION IN RESPECT OF COST OF CONSTRU CTION OF ROAD ON THE GOVERNMENT LAND ALSO NEEDS TO BE REMANDED BACK TO T HE FILE OF THE ASSESSING OFFICER. 4. ON THE CONTRARY, SMT. S VIJAYAPRABHA, THE LD.DR SUBMITTED THAT THE ASSESSEE CONSTRUCTED WATER TANK AND ROADS NOT FOR T HE PURPOSE OF BUSINESS. THERE IS NO MATERIAL AVAILABLE ON RECORD THAT THE WATER TANK AND ROADS WERE USED FOR THE PURPOSE OF BUSINESS. REFER RING TO SECTION 32 OF THE ACT, THE LD.DR SUBMITTED THAT DEPRECIATION COUL D BE CLAIMED ON THE MACHINERY OR BUILDING WHICH WAS USED FOR THE PURPOS E OF BUSINESS OF THE ASSESSEE. IN THE ABSENCE OF ANY MATERIAL TO SHOW T HAT THE ASSESSEE USED THE ROADS AND WATER TANK FOR THE PURPOSE OF BUSINES S, ACCORDING TO THE 4 ITA NO. 49/COCH/2013 LD.DR, THE CIT(A) HAS RIGHTLY CONFIRMED THE DISALLO WANCE MADE BY THE ASSESSING OFFICER. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSE SSEE BEING A COMPANY OWNED BY GOVERNMENT OF KERALA, UNDERTOOK SOME SCHEM ES BENEFICIAL TO THE LOCAL VILLAGERS. THE ASSESSEE CONSTRUCTED A WA TER TANK FOR THE BENEFIT OF PALLIKKARA GRAMA PANCHAYAT. FROM THE LETTER DAT ED 04-11-2008 ADDRESSED TO THE DISTRICT COLLECTOR FOR PERMISSION TO CARRY 300 LITRES OF DIESEL, THE ASSESSEE HAS STATED THAT THE WATER SUPP LY SCHEME WAS FOR THE BENEFITS OF THE PEOPLE OF PALLIKKARA GRAMA PANCHAYA T. WHEN A GOVERNMENT COMPANY INCURRED EXPENDITURE IN THE PROC ESS OF CARRYING ON THEIR BUSINESS, WHICH INCIDENTALLY BENEFITS THE LOC AL PUBLIC COULD BE ALLOWED AS REVENUE EXPENDITURE. UNFORTUNATELY, THE ASSESSE E COMPANY HAS NOT MADE ANY CLAIM BEFORE THE ASSESSING OFFICER AS REVE NUE EXPENDITURE. HOWEVER, IT CLAIMED DEPRECIATION ON THE ROAD AND TH E WATER TANK. THE CLAIM OF THE ASSESSEE IS THAT THE ROADS WERE PARTLY USED FOR THE BUSINESS OF THE ASSESSEE AND PARTLY USED BY THE GENERAL PUBLIC. THE CLAIM THAT THE ASSESSEE IS USING THE WATER TANK AND ROAD CONSTRUCT ED ON THE GOVERNMENT LAND IS NOT SUPPORTED BY ANY MATERIAL EVIDENCE. TH EREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS TO NECESSARILY PRODUCE MATERIAL EVIDENCE BEFORE THE ASSESSING OFFICER TO S UPPORT THE CLAIM OF 5 ITA NO. 49/COCH/2013 DEPRECIATION. UNDER SECTION 32 OF THE INCOME-TAX A CT, DEPRECIATION COULD BE CLAIMED ONLY ON THE MACHINERY AND THE BUILDING W HICH WERE USED FOR THE BUSINESS OF THE ASSESSEE. IF THE BUILDING OR MACHI NERY INCIDENTALLY BENEFITS THE PUBLIC, THAT MAY NOT BE A REASON TO DISALLOW TH E ENTIRE CLAIM OF THE ASSESSEE. THE ASSESSEE COMPANY BEING A COMPANY BEL ONGING TO GOVERNMENT OF KERALA EXISTS ONLY FOR THE BENEFIT OF THE PEOPLE OF KERALA. THEREFORE, THE INCIDENTAL BENEFITS ENJOYED BY THE L OCAL PEOPLE CANNOT BE A REASON TO DENY DEPRECIATION AS CLAIMED BY THE ASSES SEE. THE PRIMARY INTENTION OF THE ASSESSEE TO ESTABLISH WATER SUPPLY SCHEME AND CONSTRUCTION OF ROADS IS TO CARRY OUT THE BUSINESS OF THE ASSESSEE EFFECTIVELY AND EFFICIENTLY. THEREFORE, THIS TRIBU NAL IS OF THE CONSIDERED OPINION THAT THE ISSUE NEEDS TO BE RECONSIDERED IN THE RIGHT PERSPECTIVE BY THE ASSESSING OFFICER ON THE BASIS OF MATERIAL THAT MAY BE PRODUCED BY THE ASSESSEE. ACCORDINGLY, THE ORDERS OF LOWER AUTHORI TIES ARE SET ASIDE AND THE ISSUE OF DEPRECIATION ON WATER TANK AND THE ROA D CONSTRUCTED ON THE GOVERNMENT LAND IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RECONSIDER THE ISSUE AFRESH IN THE LIGHT OF MATERIAL THAT MAY BE PRODUCED BY THE ASSESSEE AND THEREAFTER DECIDE THE SAME IN ACCORDANCE WITH LAW AFTER GIVING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE. 6 ITA NO. 49/COCH/2013 6. WITH THE ABOVE OBSERVATION, THE APPEAL OF THE AS SESSEE IS ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 30 TH AUGUST, 2013. SD/- SD/- (B.R. BASKARAN) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 30 TH AUGUST, 2013 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE COMMISSIONER OF INCOME-TAX 4. THE COMMISSIONER OF INCOME-TAX(A) 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH