ACIT, New Delhi V. Krishak Bharti Coop. Ltd., New Delhi

ITA 5446/DEL/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 3951 (ITAT-DELHI)
• Duration Of Justice: 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 02-05-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 02-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: H L DIHIANA
• Keywords: Opportunity of being heard; Earning of tax free income; Revenue expenditure
• Section: 14A

Judgement Text

THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI B.K. HALDAR, ACCOUNTANT MEMBER I.T.A. NO.5292/DEL/2010 ASSESSMENT YEAR : 2007-08 KRISHAK BHARTI COOPERATIVE ACIT, LTD., RED ROSE HOUSE, CIRCLE-23 (1), 49-50, NEHRU PLACE, NEW DELHI. V. NEW DELHI. AND I.T.A. 5446/DEL/2010 ASSESSMENT YEAR: 2007-08 ACIT, KRISHAK BHARTI COOPERATIVE CIRCLE-23 (1), LTD., RED ROSE HOUSE, NEW DELHI. V. 49-50, NEHRU PLACE, NEW DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAAAK AAAAK AAAAK AAAAK- -- -0203 0203 0203 0203- -- -G GG G APPELLANT BY : SHRI H.L. DIHIANA, CIT-DR RESPONDENT BY : SHRI K.V.S.R. KRISHNA, C.A. ORDER PER B.K. HALDAR, AM: PAGE 2 OF 9 ITA NO.5292&5446/DEL/08 & 10 THESE ARE CROSS APPEALS FILED BY THE ASSESSEE AND REVENUE RESPECT IVELY AGAINST THE ORDER OF LD CIT(A) XXIII, NEW DELHI DATED 3 .9.2010 FOR ASSESSMENT YEAR 2007-08. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OFF BY THIS COMMON ORDER. I.T.A. NO.5292/DEL/10 (ASSESSEES APPEAL): I.T.A. NO.5292/DEL/10 (ASSESSEES APPEAL): I.T.A. NO.5292/DEL/10 (ASSESSEES APPEAL): I.T.A. NO.5292/DEL/10 (ASSESSEES APPEAL): 2. IN THIS APPEAL THE ASSESSEE HAS TAKEN FOLLOWING GROU NDS OF APPEALS:- 1. THE CIT(A) HAS ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF `.6,17,364/- BEING AMOUNT WRITTEN OFF IN THE PREVIOUS Y EAR RELEVANT TO THIS ASSESSMENT YEAR TOWARDS AMORTIZATION OF LEASE AMOUNT PA ID TOWARDS LAND OBTAINED FROM NOIDA AUTHORITIES. THE EXPENDITURE IS ALLO WABLE REVENUE EXPENDITURE. 2. THE APPELLANT CONTENDS THAT THE AMOUNT PAID DID NOT CON FER ANY OWNERSHIP RIGHTS ON THE ASSESSEE BUT IT ALLOWED THE USE OF THE LAND F OR THE PURPOSE OF CONSTRUCTING ITS OFFICE AND THEREFORE SHOULD BE ALLOWED AS REVENUE EXPENDITURE, AS IT IS IN THE NATURE OF LEASE RENT. 3. THE APPELLANT CONTENDS THAT IN ALL THE EARLIER ASSESSMENT Y EARS FROM (1989- 90 TO ASSESSMENT YEAR 2003-04) THE WRITE OFF HAS BEEN DULY ALLOWED AS REVENUE EXPENDITURE AND SINCE SAME FACTS EXISTS FOR THE YEAR U NDER CONSIDERATION THE CLAIM OF THE ASSESSEE OF `.6,17,364/- A S REVENUE EXPENDITURE SHOULD BE ALLOWED ONM CONSISTENCY PRINCIPLE. 4. THE CIT(A) HAS ERRED IN NOT ADJUDICATING THE GROUND OF THE ASSESSEE FOR REFUND U/S 244A(1)(B) OF THE INCOME TAX ACT, 1961 FRO M IST APRIL, 2007 UP TO THE DATE OF GRANTING OF THE REFUND. THE SAME SHOULD BE DIR ECTED TO BE ALLOWED. PAGE 3 OF 9 ITA NO.5292&5446/DEL/08 & 10 5. THE CIT(A) HAS ERRED IN NOT ADJUDICATING THE GROUND OF THE ASSESSEE IN RESPECT OF ALLOWABILITY OF CLAIM OF CREDIT OF TDS AMO UNTING TO `.16,47,398/-. 6. THE ABOVE GROUNDS ARE INDEPENDENT AND WITHOUT PREJUDICE TO ONE ANOTHER. 3. GROUND NO.1 TO 3 RELATE TO CONFIRMATION OF DISALLO WANCE OF `.6,17,364/- BEING AMOUNT WRITTEN OFF IN THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR TOWARDS AMORTIZATION OF LEASE AMOUNT PAID TOWARDS LAN D OBTAINED FROM NOIDA AUTHORITIES. THE IMPUGNED AMOUNT WAS DISALLOWED BY TH E ASSESSING OFFICER ON THE SAME GROUND ON WHICH THE SAME WAS DISALLOWED IN ASSESSME NT YEAR 2005-06 & 2006-07.THE CASE OF THE ASSESSEE BEFORE THE LD CIT(A) WAS TH AT SUCH EXPENDITURE WAS ALLOWED AS REVENUE EXPENDITURE FROM ASSESSMENT YEARS 1989 -90 TO 2003-04. IT WAS CONTENDED THAT THE ASSESSEES CASE IS SUPPORTED BY FOLLOWING CASE LAWS:- 1. MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. V. CIT (225 ITR 802 (SC). 2. CIT V. GEMINI ARTS (P) LTD. 254 ITR 201. 4. HOWEVER, AS IN ASSESSMENT YEAR 2005-06 & 2006-07, THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE DEPARTMENT BY THE HON'BLE ITAT D ELHI BENCH, LD CIT(A) CONFIRMED THE IMPUGNED ADDITION. 5. BEFORE US THE ABOVE POSITION STATED BY THE LD CIT(A) HAS NOT BEEN DISPUTED BY EITHER OF THE PARTIES. WE ALSO FIND THAT THIS ISSUE HA S BEEN DISCUSSED AT LENGTH BY THE DELHI BENCH I DELHI OF ITAT IN I.T.A. NO.1696/DEL/ 2009 FOR ASSESSMENT YEAR 2004-05 WHEREIN THE IMPUGNED ISSUE HAS BEEN DECIDED IN FAVO UR OF THE REVENUE AFTER LENGTHY DISCUSSION IN PARAS 2 TO 4.2. OF THE ORD ER. IN VIEW OF THE ABOVE, WE REJECT THE GROUND NO.1 TO 3 OF THE ASSESSEES APPEAL. PAGE 4 OF 9 ITA NO.5292&5446/DEL/08 & 10 6. AS REGARDS GROUND NO.4 & 5 TAKEN BY THE ASSESSEE, TH E CONTENTION OF THE APPELLANT IS THAT THE IMPUGNED GROUNDS HAVE NOT BEEN DISP OSED OFF BY THE LD CIT(A). 7. WE FIND THAT THESE TWO GROUNDS TAKEN BY THE ASSESSEE BEF ORE THE LD CIT(A) AS GROUND NO.25 & 26 HAVE NOT BEEN ADJUDICATED BY THE L D CIT(A). IN VIEW OF THE ABOVE, WE REMIT THE ISSUES TO THE FILE OF THE LD CIT(A) WIT H A DIRECTION THAT THE GROUNDS BE DECIDED AS PER LAW AFTER GIVING THE APPELLANT A DEQUATE OPPORTUNITY OF BEING HEARD. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED IN PART. I.T.A. NO.5446/DEL/2008: (REVENUES APPEAL): I.T.A. NO.5446/DEL/2008: (REVENUES APPEAL): I.T.A. NO.5446/DEL/2008: (REVENUES APPEAL): I.T.A. NO.5446/DEL/2008: (REVENUES APPEAL): 9. IN THIS CASE, THE REVENUE HAS TAKEN THE FOLLOWING FO UR GROUNDS OF APPEALS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE L D CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE ADDITION OF `.3,57 ,19,415/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVOKING RULE 8D R.W.S . 14A OF THE IT ACT. 2. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE, THE L D CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE ADDITION OF `.2,13 ,56,497/- BEING THE INSURANCE PREMIUM PAID BY THE ASSESSEE UNDER SANKAT HARAN BIMA YOJNA. 3. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CASE THE LD CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE ADDITION OF `.2,09 ,67,383/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INVENTORY.. 4. THE APPELLANT CRAVES LEASE TO ADD, ALTER OR AMEND ANY OF T HE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APP EAL. PAGE 5 OF 9 ITA NO.5292&5446/DEL/08 & 10 10. IT IS THE COMMON CONTENTION OF BOTH THE PARTIES THA T GROUND NO.1 TAKEN BY THE REVENUE IS SQUARELY COVERED BY THE HON'BLE TRIBUNALS ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2006-07 EXCEPT FOR DIVIDEND INCOME OF `.2,43,75,000/- RECEIVED FROM M/S GUJARAT STATE ENERGY GENERATION LTD. IT HAS ALSO BEEN SUBMITTED BY LD AR FOR THE ASSESSEE THAT THE ASSESSEE HAS NOT BORROW ED ANY FUNDS FOR INVESTING IN GUJARAT STATE ENERGY GENERATION LTD. IT WAS , THEREFORE, CONTENDED THAT ONLY WITH REFERENCE TO THE DIVIDEND INCOME RECEIVED FROM M/ S GUJARAT STATE ENERGY GENERATION LTD., DISALLOWANCE U/S 14A OF THE ACT COULD BE MADE. AS THE EXPENDITURE INCURRED WITH REFERENCE TO EXEMPT INCOME U/S 10(34 ) AND THE INCOME DEDUCTIBLE U/S 80P(2)(D) IS ONLY ABOUT `.3,30,000/-, IT WAS CONTENDED THAT THE MOST THE AMOUNT OF `.50,000/- SHOULD BE DISALLOWED ON THIS ACCOUNT. LD DR HAS NOT CONTRADICTED THE ABOVE SUBMISSION OF THE LD AR FOR THE ASSESSEE. WE HAVE ALSO PERUSED THE BALANCE SHEET AND P&L A/C OF THE ASSESSEE WHICH S UPPORT THE CONTENTION RAISED BY THE LD AR FOR THE ASSESSEE. WE ALSO FIND THAT AS PER THE HON'BLE BOMBAY HIGH COURTS DECISION IN THE CASE OF VOD AFONE, RULE 8D IS NOT APPLICABLE PRIOR TO ASSESSMENT YEAR 2008-09. IN THIS V IEW OF THE MATTER, WE DIRECT THAT AN AMOUNT OF `.50,000/- BE DISALLOWED BEING THE EXP ENDITURE INCURRED BY THE ASSESSEE FOR EARNING DIVIDEND INCOME FROM M/S GUJARAT STAT E ENERGY GENERATION LT. AS REGARDS THE INCOME WHICH IS DEDUCTIBLE AS PER THE PROVISIONS OF SECTION 80P(2)(D), WE HOLD THAT THE SAME WOULD NOT FALL WITHI N THE AMBIT OF EXEMPT INCOME AS STATED IN SECTION 14A OF THE ACT. THIS GROU ND OF APPEAL TAKEN BY THE REVENUE IS ALLOWED IN PART. 11. AS REGARDS ALLOWABILITY OF INSURANCE PREMIUM PAID BY THE ASSESSEE UNDER SANKAT HARAN BIMA YOJNA WHICH HAS BEEN DISPUTED BY THE REVENUE IN GROUND NO.2, IT IS THE COMMON CONTENTION OF THE PARTIES THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE AS PER DELHI BENCH D NEW DELHI ORDER IN I.T.A. PAGE 6 OF 9 ITA NO.5292&5446/DEL/08 & 10 NO.4827/DEL/2009 IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2006-07. IN VIEW OF THE ABOVE, WE DISMISS THIS GROUND TAKEN BY THE REVENUE. 12. GROUND NO.3 TAKEN BY THE REVENUE IS WITH REFERENCE TO AD DITIONAL CLAIM OF INVENTORY LOSS OF `.2,09,67,383.82. THE ASSESSING OFF ICER NOTED THAT IN THE AUDITORS REPORT IN FORM NO.3 CD THERE WAS NO MENTION A BOUT THE LOSS OF INVENTORY AND PENDING INSURANCE CLAIM. THE SAME WAS ALSO NOT REFL ECTED IN THE BALANCE SHEET OR OTHER DOCUMENTS FILED BEFORE THE ASSESSING OFFICER. WHEN THE ASSESSEE WAS ASKED BY THE ASSESSING OFFICER TO JUSTIFY THE ABOVE CLAI M, IT WAS SUBMITTED BY THE ASSESSEE THAT THE LOSS OF INVENTORY RELATE TO INVENTORY OF SPARES. THE ASSESSEE ALSO FURNISHED DETAILED LIST OF INVENTORY LOSS DUE TO FLOOD. HOWEVER, AS THE LOSS OF INVENTORY WAS NEITHER REFLECTED IN THE BALANCE SHEET NOR THE AUDITORS HAD MENTIONED ANYTHING ABOUT THE SAME IN THE AUDIT REPORT, THE ASSESSIN G OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. 13. ON APPEAL, BEFORE THE LD CIT(A), IT WAS SUBMITTED B Y THE ASSESSEE THAT THE LOSS OF SPARES WAS DULY MENTIONED IN NOTE NO.7(H) OF SCH EDULE-XII OF NOTES FORMING PART OF STATEMENT OF ACCOUNTS FOR THE YEAR ENDED 31.3.20 07 WHEREIN IT WAS CLEARLY RECORDED THAT THE PLANT ATF HAZIRA WAS HIT BY FLOOD FR OM AUGUST 8, 2006 TO AUGUST 11, 2006. INSURANCE CLAIM WAS MADE FOR THE LOSS OF PR OFIT AND MATERIAL DAMAGED AND ON ACCOUNT PAYMENT OF `1,000 LAKHS WAS ALSO RECEIV ED DURING THE RELEVANT PREVIOUS YEAR BY THE ASSESSEE FROM THE INSURANCE COMPANY. T HE SAME WAS CREDITED TO MISC. INCOME. LD CIT(A) FOUND THE ABOVE SUBMISSION OF THE ASSESSEE TO BE TRUE AND ALSO NOTED THAT THE FINAL QUANTIFICATION OF THE L OSS WAS MADE BY THE SURVEYORS IN FINANCIAL YEAR 2008-09. THE ASSESSEE DID NOT CLAIM THE S AME DURING ASSESSMENT YEAR 2009-10 AS THE LOSS OCCURRED DURING THE PREVIOUS YEA R RELEVANT TO ASSESSMENT YEAR 2007-08. IN THE ABOVE FACTS, THE LD CIT(A) DELETED T HE IMPUGNED ADDITION. PAGE 7 OF 9 ITA NO.5292&5446/DEL/08 & 10 14. BEFORE US, LD DR HAS RELIED ON THE ORDER OF THE ASSESSI NG OFFICER. NOTHING HAS BEEN ARGUED TO SHOW THAT THE DECISION OF LD CIT(A) O N THIS ISSUE WAS FACTUALLY OR LEGALLY INCORRECT. LD AR FOR THE ASSESSEE, ON THE OTHER HA ND, RELIED ON THE ORDER OF THE LD CIT(A). 15. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. IT IS NOT DISPUTED THAT THE LOSS OCCURRED DURING THE PREVIOUS YEAR RELEVANT TO ASSESSM ENT YEAR 2007-08. IT HAS ALSO NOT BEEN DISPUTED THAT THE INSURANCE CLAIM RECEIVED ON SUCH LOSS WAS ALSO DISCLOSED AS INCOME BY THE ASSESSEE DURING THE RELEVANT ASSES SMENT YEAR. THE REVENUE HAS NEITHER CONTENDED THAT THE LOSS CLAIMED IS OF CA PITAL NATURE OR THAT FURTHER AMOUNT WAS RECEIVED BY THE ASSESSEE ON FINAL SETTLEMEN T OF THE LOSS FROM THE INSURANCE COMPANY WHICH WAS NOT REFLECTED BY THE ASSESSEE A S INCOME DURING THE ASSESSMENT YEAR 2007-08. IN THIS VIEW OF THE MATTER WE FI ND NO INFIRMITY IN THE ORDER OF LD CIT(A) AND CONFIRM THE SAME. THUS, THIS GROUND TAKEN BY THE REVENUE IS REJECTED. 16. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED IN PART. 17. ORDER PRONOUNCED IN THE OPEN COURT ON THE DAY OF 13T H MAY, 2011. SD/- SD/- (R.P. TOLANI) (B.K. HAL DAR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT. 13.5.2011. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DELHI. TRUE COPY. PAGE 8 OF 9 ITA NO.5292&5446/DEL/08 & 10 BY ORDER (ITAT, NEW DELHI). DATE OF HEARING 11.5.2011 DATE OF DICTATION 12.5.2011 DATE OF ORDER SIGNED BY THE HON'BLE MEMBER. DATE OF ORDER SENT TO THE CONCERNED BENCH PAGE 9 OF 9 ITA NO.5292&5446/DEL/08 & 10