DCIT, New Delhi V. M/s. Bharti Wal-Mart Pvt. Ltd., New Delhi

ITA 515/DEL/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2791 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-01-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: KANCHAN KAUSAL
• Keywords: Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A NEW DELHI BEFORE SHRI R. S. SYAL, ACCOUNTANT MEMBER AND SMT SUCHITRA KAMBLE , JUDICIAL MEMBER I.T.A .NO.- 515/DEL/2014 (ASSESSMENT YEA R-2009-10) DCIT, CIRCLE 2(1), ROOM NO. 398D, C.R. BUILDING, NEW DELHI (APPELLANT) VS M/S. BHARATI WAL - MART PVT. LTD. NO. 1, ARAVALI CRESCENT, NELSON MANDELA ROAD, VASANT KUNJ, PHASE III, NEW DELHI - 110 070 AADCB2110L (RESPONDENT) APPELLANT BY SH. K. K. JAISWAL, DR RESPONDENT BY SHRI RAVI SHARMA, ADV AND KANCHAN KAUSAL, ADV. ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 29/11/ 2013 PASSED BY CIT (A)-V, NEW DELHI. THIS APPEAL IS FIL ED BY THE REVENUE FOR THE ASSESSMENT YEAR 2009-10. 2. THE GROUNDS OF APPEAL ARE AS FOLLOWS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. DATE OF HEARING 07.01.2016 DATE OF PRONOUNCEMENT 07.01.2016 87731145/- BEING 10% OF OPERATING EXPENSES DISALLO WED WHEN DESPITE AMPLE OPPORTUNITIES THE ASSESSEE HAD F AILED TO FURNISH DETAILS CALLED FOR BY THE AO TO ASCERTAI N THE ALLOWABILITY OF EXPENSES U/S. 37(1) OF THE ACT, 196 1. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIG HT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND(S) O F APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 3. THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINESS OF WHOLE- SALE CASH AND CARRY BUSINESS IN INDIA. ASSESSEE DEB ITED OPERATING EXPENSES OF RS. 87,73,11,453/- IN COMPARISON TO RS . 31,09,79,676/- IN THE IMMEDIATE PRECEDING ASSESSMEN T YEAR IN THE P & L ACCOUNT. THE ASSESSING OFFICER OBSERVED THAT THE COMPANY STARTED COMMERCIAL OPERATIONS DURING THE PREVIOUS Y EAR WHICH WAS INITIAL GESTATION PERIOD WHERE THE COMPANY WAS EXPE CTED TO INCUR EXPENSES ON ACCOUNT OF BUILDING INFRASTRUCTURE. THE SE EXPENSES INCURRED ON BUILDING INFRASTRUCTURE ARE OF CAPITAL IN NATURE AND NOT REVENUE IN NATURE. THE YEAR UNDER CONSIDERATION WAS THE SECOND YEAR AND IN GENERAL OPERATIONAL EXPENSES WERE EXPEC TED TO BE LESS THAN THE EXPENSES INCURRED IN PREVIOUS YEAR. WHILE EXAMINING BOOKS OF ACCOUNT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE COMPANY DID NOT M AINTAIN PROPER RECORDS OF THESE OPERATIONAL EXPENSES AND GENUINENE SS OF THESE EXPENSES COULD NOT BE FULLY EXAMINED. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY DEBITED AN AMOUN T OF RS. 49,37,93,957/- ON ACCOUNT OF BUSINESS SUPPORT SERVI CES. DURING THE COURSE OF DISCUSSION, THE ASSESSEE COMPANY WAS SPEC IFICALLY ASKED TO FURNISH THE DETAILS OF THESE EXPENSES CLAIMED. T HE ASSESSEE COMPANY FAILED TO ADDUCE THE DOCUMENTARY EVIDENCES OR TO FURNISH ANY EXPLANATION IN THIS REGARD. THERE MAY BE SOME I TEMS INCLUDED IN THIS HEAD WHICH MAY BE OF CAPITAL IN NATURE. THE ASSESSING OFFICER OBSERVED THAT THE EXPENSES CLAIMED BY THE A SSESSEE COMPANY AMOUNTING TO RS. 87,73,11,453/- ON ACCOUNT OF OPERATIONAL ACTIVITIES IS EXCESSIVE AND WAS SUBSTAN TIATED 10% OF THOSE EXPENSES I.E. RS.8,77,31,145/-, THEREFORE THE SAME WAS DISALLOWED AND ADDED TO THE INCOME OF THE ASSESSEE BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED, THE ASSESSEE FILED APPEAL BEFOR E THE CIT(A). THE CIT(A) ALLOWED THE APPEAL OF THE ASSESSEE BY GI VING A FINDING THAT THE DETAILS OF THE OPERATING EXPENSES WERE GIV EN IN SCHEDULE 15 OF THE FINANCIAL STATEMENTS AND FURTHER DETAILS OF THE OPERATING EXPENSES (NATURE, AMOUNT ETC.) WAS SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS WHICH WERE ON RECORD. TH US THE CIT(A) HELD THAT THE ASSESSEE MAINTAINED ITS FINANCIAL STA TEMENTS AND RELATED RECORDS IN ACCORDANCE WITH THE REQUIREMENT OF LAW. THE CIT(A) FURTHER HELD THAT THE EXPENDITURE WERE NORMA L OPERATING EXPENSES AND THERE IS NO BASIS FOR TREATING A CERTA IN PERCENTAGE OF THE SAID EXPENSES AS CAPITAL EXPENDITURE IN ABSENCE OF ANY SPECIFIC FINDING OR JUSTIFICATION. THE REASONING OF THE ASSE SSING OFFICER THAT OPERATING EXPENSE CANNOT INCREASE IN SECOND YEAR OF OPERATION IS WITHOUT ANY RATIONALE AND WITHOUT TAKING INTO ACCOU NT THE INCREASE IN BUSINESS OF THE ASSESSEE. THEREFORE, THE CIT(A) HELD THAT THERE IS NO BASIS FOR TREATING 10% OF OPERATING EXPENSES THA T IS AN AMOUNT OF RS. 87,731,145/- AS CAPITAL EXPENDITURE AND DISA LLOWING THE SAME ON AN ADHOC BASIS BY THE ASSESSING OFFICER. 5. THE DR RELIED UPON THE ASSESSMENT ORDER. THE DR SUBMITTED THAT THE REASONING OF THE ASSESSING OFFICER THAT OP ERATING EXPENSE CANNOT INCREASE IN SECOND YEAR OF OPERATION IS PROP ER. 6. THE AR SUBMITTED THAT THE DETAILS OF THE OPERATI NG EXPENSES WERE GIVEN IN SCHEDULE 15 OF THE FINANCIAL STATEMEN TS AND FURTHER DETAILS OF THE OPERATING EXPENSES (NATURE, AMOUNT E TC.) WAS SUBMITTED DURING THE COURSE OF THE ASSESSMENT PROCE EDINGS WHICH WERE ON RECORD. THE SAID RECORDS WERE DULY CONSIDER ED BY THE CIT(A) AND CIT(A) HAS RIGHTLY ALLOWED THE APPEAL OF THE AS SESSEE. 7. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. IT IS PERTINENT TO NOTE THAT THE EXPENDITURE WERE NORM AL OPERATING EXPENSES AND THERE IS NO BASIS FOR TREATING A CERTA IN PERCENTAGE OF THE SAID EXPENSES AS CAPITAL EXPENDITURE AS THERE I S NO SPECIFIC FINDING OR JUSTIFICATION GIVEN BY THE ASSESSING OFF ICER TO THAT EFFECT. MERELY ESTIMATING THE SAME IS NOT PROPER ON PART OF THE ASSESSING OFFICER. THE ASSESSEE MAINTAINED ITS FINANCIAL STAT EMENTS AND IT WAS PROPERLY TAKEN COGNIZANCE BY THE CIT(A) AND OVERLOO KED BY THE ASSESSING OFFICER. THEREFORE, THE CIT(A) HAS RIGHTL Y ALLOWED THE APPEAL OF THE ASSESSEE. 8. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 7 TH OF JANUARY 2016. SD/- SD/- (R.S. SYAL) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 07 /01/2016 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 07.01.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 07.01.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 07.01.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 07.01.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.