DCIT, Cir.-1(2), Pune V. Intervalve (India) Pvt. Ltd., Pune

ITA 503/PUN/2010

• Counselvise Citation: 50324514 RSA 2010
• Duration Of Justice: 4 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-08-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 04-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S K AMBASTHA
• Keywords: Depreciation; Opportunity of being heard
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO 474/PN/10 (ASSTT. YEAR: 2006-07) INTERVALVE (INDIA) P.LTD., .. APPELLANT 16-B/1 SAROSH BHAVAN, DR AMBEDKAR ROAD, PUNE -1 PAN AAACI3917P VS. ADDL. COMMISSIONER OF INCOME-TAX, .. RESPONDENT RANGE-1, PUNE AND ITA NO 503/PN/10 (ASSTT. YR. 2006-07) DY. COMMISSIONER OF INCOME-TAX, .. APPELLANT CIR. 1(2), PUNE VS. INTERVALVE (INDIA) P.LTD., .. RESPON DENT PUNE ASSESSEE BY: SHRI NIKHIL PATHAK RESPONDENT BY: SHRI S K. AMBASTHA ORDER PER G.S. PANNU, AM THE CAPTIONED CROSS-APPEALS, ONE EACH BY THE ASSESSEE AND T HE REVENUE PERTAINING TO SAME ASSESSEE, WERE HEARD TOGETHER AND AR E BEING DISPOSED OFF BY A CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE AND BR EVITY. 2 2. BOTH THE CAPTIONED APPEALS ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-I, PUNE DATED 30.1 0.2009, WHICH IN TURN, HAS ARISEN FROM THE ORDER OF THE ASSESSING OFFICER DATED 1 0.12.2008 PASSED UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (IN SH ORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2006-07. 3. WE SHALL FIRST TAKE UP ASSESSEES APPEAL, VIDE ITA NO 47 4/PN/10. THE FIRST ISSUE RAISED IN GROUND NOS. (1) & (2) RELATES TO THE DISA LLOWANCE OF AIRCRAFT EXPENSES AND DEPRECIATION AT THE RATE OF 50% ON THE GR OUND THAT THE AIRCRAFT WAS NOT USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS. 4. BEFORE US, IT WAS A COMMON GROUND BETWEEN THE PAR TIES THAT THIS ISSUE HAS BEEN SUBJECT-MATTER OF APPEAL IN ITA NO 659/PN/09 IN ASSESSEES OWN CASE FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR 2005-06 AND OUR CO-ORDINATE BENCH, BY FOLLOWING THE DECISION OF THE TRIBUNAL IN TH E CASE OF AVINASH N. BHOSALE VIDE ITA NO 1425/PN/08 DATED 24.9.2010, HAS SE T ASIDE THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME AFRESH IN ACCORDANCE WITH THE DIRECTIONS GIVEN BY THE TRIBUNAL IN THE CASE OF AVINA SH N. BHOSALE (SUPRA). ACCORDINGLY, ON SIMILAR PARITY OF REASONING, WE HEREBY REMAND THE ISSUES INVOLVED IN GROUNDS NO, (1) & (2) TO THE FILE OF THE ASSESSING OFFICER WITH DIRECTIONS TO DECIDE THE SAME IN ACCORDANCE WITH THE DIRECT IONS GIVEN BY THE TRIBUNAL IN THE CASE OF AVINASH N. BHOSALE (SUPRA) AFTER PROVIDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 5. GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS 5,00 ,000/- BEING ENTRANCE FEE FOR MEMBERSHIP OF BUSINESS CLUB OF A HOTEL. 6. BEFORE US, IT WAS A COMMON GROUND BETWEEN THE PAR TIES THAT THIS ISSUE HAS BEEN SUBJECT-MATTER OF APPEAL IN ITA NO 659/PN/09 IN ASSESSEES OWN CASE FOR THE IMMEDIATE PRECEDING ASSESSMENT YEAR 2005-06 AND OUR CO-ORDINATE 3 BENCH, VIDE ORDER DATED 16.12.2010 HAS SET ASIDE THE M ATTER TO THE FILE OF THE COMMISSIONER OF INCOME-TAX (APPEALS) WITH FOLLOWING DIR ECTIONS: IN CONNECTION WITH GROUND NO. 3 LD. COUNSEL MENTIO NED THAT THE ISSUE IN QUESTION RELATES TO DISALLOWANCE OF RS 5,00,000/- TOWARDS ENTRANCE F EE FOR MEMBERSHIP OF THE BUSINESS CLUB IN A HOTEL. LTD. COUNSEL RELIED UPON GUJARAT HIGH COURT DECISION IN THE CASE OF GUJARAT STATE EXPORT CORPORATION LTD. (GUJ) 209 ITR 649 IN HIS FAVOUR. ON THE OTHER HAND, LD. DR FOR THE REVENUE RELIED ON THE KERALA HIGH CO URT JUDGMENTS IN THE CASE OF FRAMATONE CONNECTOR OEN LTD. (KER) REPORTED IN 294 ITR 559 FOR THE PROPOSITION THAT THE ENTRANCE FEE PAID IS CAPITAL IN NATURE. LD. COUNSEL ALSO MENTIONED WHEN THERE ARE TWO DIVERGENT DECISIONS, FAVOURABLE TO THE ASSESSEE MAY BE CONSIDERED LIN FAVOUR OF HE ASSESSEE. WE HAVE HEARD THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AND THE DECISIONS FILED BEFORE US. ON PERUSAL, WE FIND THER E IS NEED FOR COMPARISON OF THE FACTS OF THE PRESENT CASE TO THE FACTS OF THE BOTH CASES DEC IDED BY THE HONBLE HIGH COURTS OF KERALA AND GUJARATH. FOR THIS LIMITED EXERCISE, WE ARE OF THE OPINION, THE MATTER SHOULD GO TO THE FILE OF THE CIT(A) FOR WANT OF FACTS AND A F INDING ON THE APPLICABILITY OF THE DECISIONS. CIT(A) SHALL GRANT THE OPPORTUNITY OF BEING HEARD T O THE ASSESSEE. ACCORDINGLY, GROUND NO. 3, 3.1 AND 3.2 ARE SET ASIDE TO THE FILES OF TH E CIT(A). ACCORDINGLY, ON THE SIMILAR PARITY OF REASONING, WE SET ASIDE THE ISSUE TO THE FILE OF THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR THE INST ANT ASSESSMENT YEAR ALSO, WHO SHALL ADJUDICATE THE ISSUE AFRESH AFTER GIVING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. GROUND NOS. 4 & 5 RELATE TO THE AD HOC DISALLOWANCE S OF RS 25,000/- EACH MADE OUT OF TRAVELLING AND CONVEYANCE EXPENSES AND MISCEL LANEOUS EXPENSES. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS AND HAV E ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT OUT OF TOTAL EXPENDITURE OF RS 80,26,425/- INCLUDING GENERAL EXPENSES OF RS 8,49,211 /-, THE ASSESSING OFFICER MADE A DISALLOWANCE OF RS 50,000/- EACH, WHICH WAS REDUCE D IN APPEAL BY THE COMMISSIONER OF INCOME-TAX (APPEALS) TO RS 25,000/- EACH. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) IN THIS REGARD. WE, ACCORDINGLY, AFFIRM HIS DECISION AND TH E ASSESSEE FAILS ON THESE GROUNDS. 8. GROUND NO. 6 RELATES TO THE GRANTING OF DEDUCTION UNDER SECTION 43B OF THE ACT IN RESPECT OF THE LEAVE ENCASHMENT PROVISION OF RS 4, 15,553/-. AFTER HEARING BOTH THE SIDES, WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDE D IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE IN THE ASSESSEES OWN CASE FOR THE 4 ASSESSMENT YEAR 2005-06 VIDE ITA NO 659/PN/09 DATED 16. 12.2010, A COPY OF WHICH HAS BEEN PLACED ON RECORD. THEREFORE, FOLLOWING THE SAID ORDER IN THE ASSESSEES OWN CASE AND ON THE SIMILAR PARITY OF REASONING, WE SET ASIDE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) AND T HE ASSESSING OFFICER IS DIRECTED TO GRANT DEDUCTION UNDER SECTION 43B OF THE A CT IN RESPECT OF THE LEAVE ENCASHMENT OF RS 4,15,553/-. AS A RESULT, THIS GROUND O F APPEAL OF THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, ASSESSEES APPEAL, VIDE ITA NO 474/P N/10 FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. 10. VIDE ITA NO 503/PN/10 FOR THE ASSESSMENT YEAR 2006 -07, EVEN THOUGH THE REVENUE HAS RAISED MULTIPLE GROUNDS OF APPEAL, B UT ESSENTIALLY THE ISSUE INVOLVED IS REGARDING CORRECT RATE OF DEPRECIATION ALL OWABLE ON THE AIRCRAFT. SIMILAR ISSUE WAS SUBJECT-MATTER OF CONSIDERATION BY OUR CO-ORDINATE BENCH IN REVENUES APPEAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEA R 2005-06 AND THE TRIBUNAL VIDE ORDER DATED 16.12.2010 IN ITA NO 676/PN/09 AFFIRMED THE VIEW OF THE COMMISSIONER OF INCOME-TAX (APPEALS), BY HOLDING AS UNDER: 10. ONLY ISSUE IN THAT IS RAISED IN THIS APPEAL OF THE REVENUE RELATES TO THE ALLOWABLE CORRECT RATE OF DEPRECIATION TO THE AIRCRAFT IN QUE STION. ASSESSEE CLAIMED THE DEPRECIATION AT THE RATE OF 40% ON THE AIRCRAFT WHEREAS THE AO A LLOWED DEPRECIATION AT THE RATE OF 25%ONLY. DURING THE PROCEEDINGS LD. COUNSEL MENTION ED THAT THE AIRCRAFT IN QUESTION WAS OWNED COLLECTIVELY BY FOUR CO-OWNERS, WHERE THE ASS ESSEE IS ONE AMONGST THEM WITH THE SHARE OF 7.5% OUT OF THE CAPITAL OUTLET FOR ACQUISI TION OF THE AIRCRAFT. LD. COUNSEL FURTHER MENTIONED THAT REVENUE HAS ALLOWED THE CLAIM OF DEP RECIATION AT THE RATE OF 40% IN REST OF THE FOUR CO-OWNERS OF THE AIRCRAFT. IT IS ONLY I N THIS CASE, THE AO DISTURBED THE RATE OF DEPRECIATION. LD. DR RELIED ON THE ORDERS OF THE RE VENUE. WE HAVE PERUSED THE RELEVANT ORDERS AS WELL AS THE PAPER BOOK FILED BEFORE US IN PARA 3.3 OF THE IMPUGNED ORDER IT IS NOTICED THAT CIT(A) GAVE A FINDING THAT THE MEMORAN DUM OF UNDERSTANDING (MOU) DATED 27.5.2004, STATES THAT AIRCRAFT IS PURCHASED COLLEC TIVELY BY FOUR PARTIES NAMELY, 1) SERUM INSTITUTE OF INDIA LTD, 2) EI-O-MATIC INIA LTD., 3) M/S ARKI AVIATIONS AND 4) INTERVAL (INDIA) PVT. TD. WHERE THE ASSESSEE CONTRIBUTED 7.5% TOWARD S THE CAPITAL OUTLAY AS SEEN FROM PARA 3.3.2 THE CIT(A) HAS RIGHTLY COME TO THE CONCL USION THAT ASSESSEE IS NTO ONLY THE CO- OWNER OF THE AIRCRAFT BUT ALSO IN FACT HAS THE RIGH T TO USE IT. IN SUCH CIRCUMSTANCES WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE CIT(A). ACCORDINGLY, GROUNDS RAISED IN THE REVENUES APPEAL ARE DISMISSED. THE FACTS AND CIRCUMSTANCES OF THE CASE BEING IDENTICAL TO THAT OF THE ASSESSMENT YEAR 2005-06, WE FOLLOW THE PRECEDENT AND UP HOLD THE VIEW TAKEN BY 5 THE COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS ASPECT. AS A RESULT, REVENUE FAILS ON THIS GROUND OF APPEAL. 11. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 10 TH DAY OF AUGUST, 2011. SD/- SD/- (SHAILENDRA KUMAR YADAV) (G. S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEM BER PUNE, DATED: 10 TH AUGUST, 2011 B COPY TO:- 1) ASSESSEE 2) DEPARTMENT 3) THE CIT (A)-I, PUNE 4) CIT-I, PUNE 5) DR, A BENCH, ITAT, PUNE. 6) GUARD FILE TRUE COPY BY ORDER ASST. REGISTRAR, I.T.A.T., PUNE