M/s. KOTAK MAHINDRA CAPITAL CO. LTD., MUMBAI V. ACIT Rg. - 3(2), MUMBAI

ITA 5235/MUM/2005

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 1107 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2001-2002
• Appeal Filed On: 04-08-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: H N MOTIWALA
• Assessee Lawyers: DAYA SHANKAR
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI. BEFORE SHRI D.K. AGARWAL, JUDICIAL MEMBER AND SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER I.T.A. NO. 5235/MUM/2009 ASSESSMENT YEAR : 2006-07. DY. COMMISSIONER OF INCOME-TAX, M/S AS IAN ELECTRONICS LTD., CIRCLE-3(1), MUMBAI. VS. 1219, MAKER CHAMBER-V, NARIMAN POINT, MUMBAI 400021. PAN AABCA0832C APPELLANT. RESPONDENT APPELLANT BY : SHRI DAYA SHANKAR. RESPONDENT BY : SHRI H.N. MOTIWALA. O R D E R PER J. SUDHAKAR REDDY, A.M. THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED A GAINST THE ORDER OF THE CIT(APPEALS)-XXVII, MUMBAI DATED 09-07 -2009 FOR THE ASSESSMENT YEAR 2006-07. 2. FACTS IN BRIEF : THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND SALE OF ELECTRICAL LIGHTING PRODUCTS AND LEASING OF ENERGY CONSERVATION DEVICES. FOR THE ASSESSMENT YEAR 2006-07, THE ASSESSEE FILED A RETURN OF INCOME DECLARING NIL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT AND INCOME OF RS.22,05,00272/- U/S 115JB ON 27-11-2006. THE AO MADE DISALLOWANCES OF EXPENDITURE CLAIMED UNDER LEASE RE NTALS, UNUTILIZED CENVAT CREDIT AND U/S 40(A). THE ASSESSEE CARRIED T HE MATTER IN APPEAL. THE 2 FIRST APPELLATE AUTHORITY GRANTED PART RELIEF. THE REVENUE HAS FILED THIS APPEAL ON THE FOLLOWING EFFECTIVE GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A O AMOUNTING TO RS.2,96,26,332/- ON ACCOUNT OF LEASE RENTAL CLAIMED TO HAVE BEEN PAID IN RESPECT OF AUTOMATIC LOAD MONITORING SYSTEM (ALM S), WITHOUT APPRECIATING THE FACT THAT THE SAID ASSET HAS NOT B EEN COMMISSIONED / INSTALLED DURING THE YEAR UNDER CONSIDERATION AND H AS NOT YIELDED ANY INCOME TO THE ASSESSEE COMPANY. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THIS ALLEGED EXPENDITURE OF RS.2,96,26,332/- HAS NOT BEEN DEBITED BY THE ASS ESSEE TO IS PROFIT AND LOSS ACCOUNT BUT CLAIMED DIRECTLY IN THE COMPUT ATION OF INCOME. 3. WE HAVE HEARD SHRI DAYA SHANKAR, LEAR NED DR AND SHRI H.N. MOTIWALA, LEARNED COUNSEL FOR THE ASSESSEE. 4. AFTER HEARING THE RIVAL CONTENTIONS, WE OBSERVE THAT THE FACTS OF THE DISALLOWANCE IS BROUGHT OUT BY THE CIT(APPEA LS) AT PAGE 1 AND 2 OF HIS ORDER WHICH ARE EXTRACTED BELOW FOR READY REFER ENCE : THE BRIEF FACTS OF THE CASE IS THAT THE APPELLANT CLAIMED A SUM OF RS.2, 96,26,332/- AS DEDUCTION IN THE COMPUTATI ON OF INCOME. ACCORDING TO THE APPELLANT THE LEASE RENTALS ACCRUE D AND PAID DURING THE YEAR THOUGH NOT CHARGED TO THE P&L A/C H AS BEEN CLAIMED AS DEDUCTION. THE APPELLANT EXPLAINED THAT IT HAS PAID LEASE RENTALS IN RESPECT OF ASSETS WHICH HAVE BEEN GIVEN ON LEASE, BUT NOT COMMISSIONED DURING THE YEAR/NOR STARTED GIVING REV ENUE TO THE APPELLANT DURING THE YEAR. THE APPELLANT HAS PAID L EASE RENTALS TO THE FINANCE COMPANY ON THE ITEMS LEASED OUT DURING THE YEAR. HOWEVER, ACCORDING TO THE SUB-LEASE AGREEMENT WITH VARIOUS ELECTRICALLY BOARDS, THE LEASE RENTALS WOULD BE REC EIVED BY THE APPELLANT AFTER THE LEASE AGREEMENT COMES INTO EFFE CT AND/OR THE ASSETS INSTALLED UNDER THE CONTRACT ARE COMMISSIONE D AND STARTED EARNING LEASE RENTALS FOR THE APPELLANT. THE A.O. OBSERVED THAT THESE ISSUES OF LEASE RENTAL S HAVE BEEN CONSIDERED IN THE EARLIER ASSESSMENT YEARS WHEREIN THE REASONS FOR 3 DISALLOWANCE HAVE BEEN CONSIDERED ELABORATELY. ACCO RDING TO THE APPELLANT, LEASE RENTALS ARE PAID WHICH HAS BEEN TR EATED AS ADVANCE, BUT CLAIMED AS DEDUCTION IN THE COMPUTATION OF INCO ME. THE EXPENDITURE HAS NOT BEEN DEBITED TO THE P&L A/C. AC CORDING TO THE APPELLANT, IT IS FOLLOWING MATCHING PRINCIPLE OF AC COUNTING AND THEREFORE, THESE WILL BE CHARGED TO P&L A/C WHEN TH E LEASE RENTALS ARE RECEIVED IN THE SUBSEQUENT YEAR. THE AO VIEWED THAT THE DEDUCTION CLAIMED BY THE APPELLANT AMOUNTING TO RS. 2,96,26,332/- CANNOT BE ALLOWED AS THE SAME HAS NOT BEEN DEBITED TO THE P&L A/C. SECONDLY, THE ASSETS IN RESPECT OF WHICH THE L IABILITY HAS BEEN CLAIMED HAVE NOT BEEN COMMISSIONED OR INSTALLED DUR ING THE YEAR UNDER CONSIDERATION AND HAS ALSO NOT YIELDED ANY IN COME TO THE APPELLANT COMPANY. THE AO ALSO VIEWED THAT THE BALA NCE-SHEET AND P&L A/C OF THE APPELLANT ARE AUDITED BOTH UNDER THE COMPANIES ACT AS WELL AS FOR THE INCOME TAX ACT U/S 44AB. THE APPELLANT HAS ACCEPTED THE AUDIT REPORT ALONG WITH THE P&L A/C. THEREFORE, THERE WILL BE NO SANCTITY OF THE AUDIT R EPORT IF THE APPELLANT CAN CHANGE ITS ENTIRE INCOME AND START DE BITING ITEMS AT THE TIME OF FILING OF INCOME TAX RETURN. THEREFORE, THE AMOUNT SO PAID BY THE APPELLANT COULD ONLY BE ALLOWED ONLY WH EN THE ASSETS ARE COMMISSIONED. THUS, FOR THE REASONS GIVEN IN EA RLIER ASSESSMENT ORDERS AND ON THE BASIS OF FINDINGS GIVE N THEREIN, THE CLAIM OF THE APPELLANT FOR DEDUCTION OF RS.2, 96, 2 6,332/- IN RESPECT OF LEASE RENTALS ACCRUED/PAID DURING THE YEAR WAS D ISALLOWED. 5. AFTER CONSIDERING THE FACTS AND CIRCUMSTANCES O F THE CASE, THE CIT(APPEALS) IN PARA 2.5 AND 2.6 HELD AS FOLLOWS : 2.5 THE APPELLANT INVITED MY ATTENTION TO THE DECI SION OF HONBLE ITAT, MUMBAI BENCH-I IN APPELLANTS OWN CASE FOR A. YS. 1997-98 AND 1998-99 IN ITA NO.3599/MUM/02 AND ITA NO.3600/MUM/02 DATED 04/04/2008 WHEREIN THE HONBLE ITAT WHILE CONSIDERING THE SAME ISSUE FOR THE ASSESSMENT YEARS 1997-98 & 98-99 VIEWED THAT 9. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS A ND GONE THROUGH RECORD CAREFULLY. THE AO HAS NOT DOUBT ED THE TRANSACTION. HIS EXPECTATION IS THAT ASSESSEE SHOUL D HAVE SHOWN CORRESPONDING INCOME TO THE EXPENSES. ACCORDI NG TO THE ASSESSEE IT HAS INCURRED EXPENSES OVER THE INCO ME IN THE INITIAL YEARS BUT ULTIMATELY IT EARNED PROFIT FROM THIS TRANSACTION. IT IS A SETTLED POSITION THAT FOR ALLO WING BUSINESS 4 EXPENSES IT IS NOT NECESSARY THAT THE BUSINESS SHOU LD HAVE PRODUCED CORRESPONDING INCOME. THE EXPENSES ARE TO BE ALLOWED IF IT IS ESTABLISHED THAT THEY ARE INCURRED FOR THE PURPOSE OF THE BUSINESS. IN THIS CASE THE OBJECT AN D THE INCURRENCE OF THE EXPENSES IS NOT IN DOUBT. THE LD. CIT(A) HAS CONSIDERED THE ISSUE WITH ALL POSSIBLE ANGLE AN D TAKING INTO CONSIDERATION HIS FINDING RECORDED IN PAR 7.4 AND 7.5 WE DO NOT FIND ANY ERROR. 2.6 I HAVE GONE THROUGH THE FACTS, SUBMISSION MADE AND ALSO THE ASSESSMENT ORDER. I HAVE PERUSED THE ORDER OF THE H ONBLE ITAT, MUMBAI BENCH AS STATED ABOVE AND FIND THAT SIMILAR ADDITIONS MADE IN THE APPELLANTS EARLIER YEARS ASSESSMENT H AVE BEEN DELETED BY THE TRIBUNAL. RESPECTFULLY FOLLOWING THE DECISIO N OF THE HONBLE ITAT, MUMBAI BENCH-I IN ITA NO. 3599/MUM/02 (A.Y. 1 997-98) AND ITA NO. 3600/MUM/02 (A.Y. 98-99), I DIRECT THE AO TO DELETE THE ADDITION MADE. THIS GROUND IS ALLOWED. 6. AS THE FIRST APPELLANT AUTHORITY FOLLOWED THE D ECISION OF THE JURISDICTIONAL TRIBUNAL, WE FIND NO INFIRMITY IN TH E SAME. THE LD. DR HAS AGREED THAT THE ISSUE IS COVERED. THUS WE RESPECTFU LLY FOLLOW THE ORDER OF THE COORDINATE BENCH AND DISMISS THIS APPEAL. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON THIS 16 TH DAY OF JULY, 2010. SD. SD. (D.K. AGARWAL) (J. SUDHAKAR REDDY) JUDICIAL MEMBER. ACCOUNTANT MEMBER. MUMBAI, DATED : 16 TH JULY, 2010. WAKODE COPY FORWARDED TO : 1. APPELLANT. 2. RESPONDENT 3. C.I.T. 4. CIT(A) 5. DR, A-BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR,ITAT, MU MBAI BENCHES, MUMBAI.