ACIT, Kota V. M/S ASSOCIATED STONE INDUSTRIES (K) LTD., Kota

ITA 546/JPR/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7832 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 04-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MRS NEENA JEPH
• Keywords: Capital asset; Depreciation; Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL JAIPUR BENCH: JAIPUR (BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA) I.T.A. NO. 546/JP/2012 ASSTT. YEAR- 2008-09 PAN NO. AACCA 3549 F THE A.C.I.T. M/S ASSOCIATED STONE INDUSTRIES CIRCLE-1, KOTA. VRS. (KOTAH) LTD., BAZAR NO. 1, R AMGANJ MANDI, KOTA. (APPELLANT) (RESPONDENT) DEPARTMENT BY :- MRS. NEENA JEPH. ASSESSEE BY :- NONE. DATE OF HEARING : 27/10/2014 DATE OF PRONOUNCEMENT : 05/12/2014 O R D E R PER: T.R. MEENA, A.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 20/03/2012 OF THE LEARNED CIT(A)- KOTA FOR THE A.Y. 2008-09. THE EFFECTIVE GROUNDS OF APPEAL ARE AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LEARNED CIT(A) HAS ERRED IN:- (I) DELETING THE DISALLOWANCE OF DEPRECIATION OF RS . 7,16,132 ON MERCEDES BENZ; (II) DELETING ADDITION MADE OUT OF CAPITAL NATURE OF EXPENSES AT RS. 1,49,925/-; (III) REDUCING THE DISALLOWANCE FROM RS. 6,39,203/- TO RS. 60,269/- OUT OF INSURANCE OF VEHICLES; ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 2 (IV) DELETING THE DISALLOWANCE OF RS. 1,77,801/- ON ACCOUNT OF INSURANCE EXPENSES; (V) DELETING THE DISALLOWANCE OF RS. 5,77,023/- ON ACCOUNT OF HIRE CHARGES; (VI) DELETING DISALLOWANCE OF RS. 3,59,217/- OUT OF MOTOR CAR EXPENSES; (VII) THE APPELLANT CRAVES LIBERTY TO RAISE ADDITI ONAL GROUND AND TO MODIFY/AMEND THE GROUND OF APPEAL AT THE TIME OF HE ARING. 2. THE FIRST GROUND OF REVENUES APPEAL IS AGAINST D EPRECIATION OF RS. 7,16,132/- ON MERCEDES BENZ, WHICH WAS PURCHASED IN T HE NAME OF SHRI DEEPAK JATIA, DIRECTOR OF THE COMPANY. AS THIS CAR WAS OWNED BY THE DIRECTOR, THEREFORE, DEPRECIATION WAS NOT ALLOWABLE A S PER ASSESSING OFFICER. THE ASSESSEE SUBMITTED BEFORE THE ASSESSING OFFICER THAT THE PAYMENTS WERE MADE FROM THE BOOKS OF ACCOUNT OF THE COMPANY BUT PURCHASED IN THE NAME OF SHRI DEEPAK JATIA TO MINIM IZE THE REGISTRATION EXPENSES AND THEREAFTER IT HAS BEEN SOLD AND SALE P ROCEED HAS BEEN CREDITED IN THE BOOKS OF ACCOUNT. THE LEARNED CIT(A) ALLOWED THE DEPRECIATION ON MERCE DES BENZ CAR BY OBSERVING THAT THE COMPANY IS A REAL AND BENEFIC IAL OWNER. AS MENTIONED ABOVE, THE ASSESSEE HAS NOT ATTENDED HEAR ING. THEREFORE, WE HAVE CONSIDERED THE ASSESSEES REPLY FILED BEFORE T HE LOWER AUTHORITY FOR DISPOSAL OF THIS GROUND. ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 3 THE LEARNED DR ARGUED THAT THE ASSESSEE HAS NOT FUR NISHED ANY EVIDENCE THAT THIS CAR HAS BEEN DISCLOSED IN THE BL OCK OF ASSETS OF THE BALANCE SHEET AND THE CAR WAS ALSO USED BY THE DIREC TOR OF THE COMPANY. IT IS NOT CLEAR WHETHER THE CAR PROVIDED BY THE COMP ANY HAS BEEN CONSIDERED FOR CALCULATION OF PERKS IN THE HANDS OF THE DIRECTOR. THERE IS NO EVIDENCE FOR PURCHASE AND SALE OF CAR ON RECORD. THE LEARNED CIT(A) HAS NOT GIVEN SPECIFIC FINDING ON IT, THEREFORE, TH E MATTER MAY BE RESTORED BACK TO THE CIT(A). AS DISCUSSED ABOVE, WE FIND THAT THE ORDER OF THE L EARNED CIT(A) IS VERY SKETCHY AND CRYPTIC. NO DETAILS HAVE BEEN TAKE N TO ALLOW THE DEPRECIATION, WHICH HAS NOT BEEN COME OUT FROM THE O RDER ITSELF. THEREFORE, THE LEARNED CIT(A) IS DIRECTED TO VERIFY T HESE ASPECTS AND CONCLUDED THIS GROUND OF APPEAL ON THE BASIS OF EVI DENCE. ACCORDINGLY, THIS GROUND OF APPEAL IS SET ASIDE TO THE LEARNED C IT(A). 3. THE SECOND GROUND OF REVENUES APPEAL IS AGAINST THE CAPITAL EXPENDITURE CLAIMED AS REVENUE EXPENSES BY THE ASSE SSEE OF RS. 1,49,925/-. THE ASSESSEE INCURRED RS. 1,49,925/- FO R REINSTALLATION OF HASTI PIPE LINE. IT WAS SUBMITTED BEFORE THE ASSESS ING OFFICER THAT THE COMPANY HAD INCURRED RS. 1,49,925/- TOWARDS JOB WORK FOR DISMANTLING AND REINSTALLATION OF OLD EXISTING HASTI PIPE LINE IN NEW ROUTE INCLUDING ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 4 PIPE CUTTING, FINISHING, JOINTING, LAYING ETC. THE A SSESSEE WAS IN THE MINING BUSINESS AND CONTINUOUSLY IT HAD TO REMOVE K OTAH STONE. THE PIPES WERE INSTALLED TO SUPPLY OF WATER FOR RUNNING O F JHIRI MACHINES AND FOR DEWATERING IN RAINY SEASON. THE ASSESSEE HAD SHI FTED THESE PIPE LINE IN THE NEW ROUTE AND CLAIMED THERE WAS NO INCREASE IN THE EFFICIENCY/CAPACITY BUT THE LEARNED ASSESSING OFFI CER HELD THAT PIPES WERE INSTALLED IN NEW ROUTES AND HAD SOME OTHER BENEFITS TO THE ASSESSEE. THEREFORE, HE TREATED THIS AS A CAPITAL EXPENDITURE. THE LEARNED CIT(A) ALLOWED THE APPEAL BY OBSERVING T HAT THE ASSESSEE DISMANTLED OLD PIPE LINE AND REINSTALLED I T ON A NEW ROUTE. THE EXPENDITURE WAS INCURRED FOR USE OF EXISTING CAPITAL ASSETS. THUS, HE ALLOWED THE ASSESSEES APPEAL BY TREATING AS REVENUE EXPENDITURE. THE ASSESSEES REPLY WAS SAME AS WAS BEFORE THE LEARN ED ASSESSING OFFICER AND AS IT BEFORE THE LEARNED CIT(A ). IT IS MENTIONED BY THE ASSESSEE THAT THESE EXPENSES WERE TOWARDS JOB WORK FOR DISMANTLING, REINSTALLATION AND OLD EXISTING HASTI PIPE LINE IN NEW ROUTE. THE LEARNED DR OBJECTED THE FINDINGS OF THE LEARNED CIT(A) ON TH E GROUND THAT HASTI PIPE LINE GENERALLY IS MADE UP BY PLASTIC. AFTER DI SMANTLING THE OLD HASTI PIPE LINE, THE ASSESSEE GETS ONLY PLASTIC SCRAP AND SAME CANNOT BE INSTALLED IN NEW ROUTES. THEREFORE, THE DETAILS SUBMI TTED BY THE ASSESSEE ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 5 REQUIRED TO BE VERIFIED AND THIS ISSUE ALSO REQUIRE D TO BE SET ASIDE TO THE CIT(A). WE AFTER PERUSAL OF ORDER OF LOWER AUTHORITY, THE A SSESSEE SUBMITTED SAME REPLY BEFORE THE LEARNED CIT(A) BUT I T IS NOT CLEAR THAT WHETHER THESE CHARGES WERE MADE FOR DISMANTLING AND R EINSTALLATION OF OLD EXISTING HASTI PIPE LINE OR BY PURCHASING A NEW HASTI PIPE LINE AS ARGUED BY THE LEARNED DR THAT THE PLASTIC HASTI PIP E LINE CANNOT BE REINSTALLED IN NEW ROUTE. ACCORDINGLY, WE SET ASIDE T HIS ISSUE TO THE LEARNED CIT(A). 4. THE THIRD GROUND OF REVENUES APPEAL IS AGAINST R EDUCING THE DISALLOWANCE FROM RS. 6,39,203/- TO 60,269/- OUT OF INSURANCE OF VEHICLES. THE ASSESSEE HAD CLAIMED INSURANCE ON VEHICLES AT RS . 7,52,004/-. THE INSURANCE ON VEHICLES WAS NOT CAPITALIZED ALONGWITH ORIGINAL COST OF VEHICLE. THEREFORE, THE LEARNED ASSESSING OFFICER CA PITALIZED THESE EXPENSES AND ALLOWED 15% DEPRECIATION ON IT. THE LEAR NED CIT(A) PARTLY ALLOWED THIS ADDITION BY OBSERVING THAT INSURANCE FR OM TIME TO TIME WAS PAID FOR THE PERIOD MAY, 2007 TO MAY, 2008 (ONE YEA R). ACCORDINGLY, THE SAME IS HELD AS REVENUE EXPENDITURE. THE CERTAIN PA RT OF THIS INSURANCE WAS RELATED TO NEXT YEAR, WHICH WAS CONFIRMED BY THE L EARNED CIT(A). THE ASSESSEE SUBMITTED BEFORE THE LEARNED CIT(A) THA T INSURANCE FROM ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 6 TIME TO TIME DEBITED IN THE P&L ACCOUNT PROPORTIONA TELY DURING THE YEAR UNDER THE HEAD INSURANCE CHARGES AND BALANCE AMOUNT OF RS. 62,667/- DEBITED TO PREPAID EXPENSES ACCOUNT, WHICH WAS CLAIME D IN NEXT YEAR. THE LEARNED AR FOR THE ASSESSEE FAIRLY ACCEPTED THA T THIS AMOUNT IS PERTAINED TO ONE YEAR AND REMAINING AMOUNT FOR NEXT YEAR. WE FOUND THAT THE LEARNED CIT(A) HAS RIGHTLY ALLOWED THE INSUR ANCE EXPENSES, WHICH PERTAINED TO ONE YEAR AND REMAINING EXPENDITUR E FOR NEXT YEAR, THEREFORE, WE DISMISS THE REVENUES APPEAL ON THIS G ROUND. 5. THE FOURTH GROUND OF REVENUES APPEAL IS AGAINST DELETING THE DISALLOWANCE OF RS. 1,77,801/- ON ACCOUNT OF INSURAN CE EXPENSES. THE COMPANY INCURRED INSURANCE EXPENSES ON VEHICLE, WHIC H WAS REGISTERED IN THE NAME OF THE DIRECTOR OF THE COMPANY. THE ASSESSI NG OFFICER OBSERVED THAT THE EXPENSES INCURRED FOR INSURANCE CANNOT BE SAID BUSINESS EXPENDITURE. THE ASSESSEE HAD SUBMITTED SAME REPLY A S SUBMITTED FOR DEPRECIATION OF CLAIM, THEREFORE, WE ALSO SET ASIDE THIS ISSUE TO THE LEARNED CIT(A) TO VERIFY THE OWNERSHIP OF THE ASSETS ON THE BASIS OF PURCHASE BILLS, PAYMENTS MADE AND ASSETS INCLUDED I N THE BLOCK OF ASSETS IN THE ASSETS OF THE COMPANY. ACCORDINGLY, THIS GRO UND OF APPEAL IS SET ASIDE TO THE LEARNED CIT(A). ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 7 6. THE FIFTH GROUND OF APPEAL IS AGAINST DELETING TH E DISALLOWANCE OF RS. 5,77,023/- ON ACCOUNT OF HIRE CHARGES. THE ASSES SEE COMPANY HAD DEBITED RS. 5,77,023/- FOR HIRE CHARGES. THE ASSESSI NG OFFICER GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON THIS ISSUE , WHICH WAS REPLIED BY THE ASSESSEE. IT WAS SUBMITTED THAT THE HIRE CHARGES PAID DURING THE YEAR WAS BASICALLY PAYMENT OF INTEREST MADE TO VARIOUS BA NKS ON EMI FOR THE LOAN TAKEN FOR PURCHASE OF VEHICLES AT MUMBAI OFFIC E BUT THESE VEHICLES WERE NOT IN THE NAME OF DIRECTOR AND WITHOUT TITLE OF VEHICLE IN THE NAME OF COMPANY, THEREFORE, THE LEARNED ASSESSING OFFICE R MADE ADDITION OF RS. 5,77,023/- ON ACCOUNT OF HIRE CHARGES. THE LEARNED CIT(A) IN HIS ORDER DELETED THE ADDITIO N BY OBSERVING THAT THE ASSESSEE IS A BENEFICIAL OWNER OF THESE VEH ICLES, THEREFORE, HIRE CHARGES CLAIMED BY THE ASSESSEE WAS ALLOWABLE. THE LEARNED DR ARGUED THAT THESE VEHICLES ARE IN TH E NAME OF DIRECTOR, WHICH HAS NOT BEEN VERIFIED BY THE LEARNED CIT(A) WHETHER THIS CAR PURCHASED FROM THE FUND OF THE COMPANY OR NOT, WHETHER INCLUDED IN THE BALANCE SHEET OF THE ASSESSEES COMPANY OR NOT. THEREFORE, THE SAME IS REQUIRED TO BE VERIFIED FROM THE RECORD. WE ALREADY DECIDED IN GROUND NO. (I) AND GROUND NO (IV) THAT THE LEARNED CIT(A) SHOULD HAVE ASKED TO FURNISH THE COP Y OF BILLS OF THE ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 8 PURCHASE OF THESE CARS, PAYMENTS MADE TO THE PURCHA SE OF CAR FROM THE BOOKS OF ACCOUNT OF THE ASSESSEE AND USED BY THE AS SESSEE FOR BUSINESS PURPOSES, REQUIRED TO VERIFY. ACCORDINGLY, WE SET AS IDE THIS ISSUE TO THE LEARNED CIT(A) FOR DE NOVO. 7. THE SIXTH GROUND OF REVENUES APPEAL IS AGAINST D ELETING THE DISALLOWANCE OF RS. 3,59,217/- OUT OF MOTOR CAR EXPE NSES. THE ASSESSEE HAS DEBITED RS. 3,59,217/- FOR MOTOR CAR EXPENSES. IT WAS SUBMITTED BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS THAT VEHICLES WERE USED BY THE ASSESSEE IN VARIOUS ACTIVITIES HAND LED AT MUMBAI OFFICE. THESE EXPENSES WERE FOR RUNNING AND MAINTENANCE OF VE HICLES AND IT SHOULD BE ALLOWABLE AS BUSINESS EXPENDITURE. THE LEAR NED ASSESSING OFFICER HELD THAT THESE VEHICLES ARE IN THE NAME OF DIRECTOR OF THE COMPANY AND IT CANNOT BE SAID THAT THESE VEHICLES WE RE OWNED AND USED BY THE ASSESSEE FOR BUSINESS PURPOSES. WHETHER VEHI CLES USED BY THE DIRECTOR WERE INCLUDED IN THE PERKS OF THE DIRECTOR IN COMPUTING THE INCOME. THE LEARNED CIT(A) ACCEPTED THE ASSESSEES SUBMISSI ON AND ALLOWED THE APPEAL IN FAVOUR OF THE ASSESSEE ON THE SIMILAR FINDINGS IN GROUND NO. (I) THAT THE ASSESSEE COMPANY IS BENEFI CIAL OWNER OF THE CAR. ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 9 THE LEARNED DR AGAIN OBJECTED THAT THE FACTS ARE NO T CLEAR FROM THE ORDER ITSELF THAT THESE CARS WERE REGISTERED IN THE NAME OF DIRECTOR OF THE COMPANY AND CLAIMED EXPENSES IN THE HANDS OF THE CO MPANY. THE ASSESSEE TOOK SIMILAR ARGUMENT MADE BEFORE THE ASSE SSING OFFICER. THE LEARNED AR FOR THE ASSESSEE SUBMITTED BEFORE THE L EARNED CIT(A) THAT THE ASSESSEE COMPANY HAS A CORPORATE OFFICE AT 419 -B, KALBADEVI ROAD, 2 ND FLOOR, JOSHIWADI, MUMBAI. THE COMPANY WAS CONTROLLED BY THE TOP MANAGEMENT HEADED BY PROMOTER DIRECTOR ALONGWITH HIS TEAM OF PROFESSIONALS SUCH AS CHARTERED ACCOUNTANTS, COMPAN Y SECRETARY, GENERAL MANAGERS ETC. ALL THE ACTIVITIES WERE CARRIE D OUT FROM THE MUMBAI OFFICE, THEREFORE, MOTOR CAR EXPENSES WERE INCURRED BY THE MANAGEMENT. THE LEARNED CIT(A) ACCEPTED THE ASSESSEES REPLY AS SUCH WITHOUT GIVING ANY REASONING ON MOTOR CAR EXPENSES WHETHER ALLOWABL E U/S 37 OF THE IT ACT WHOLLY AND EXCLUSIVELY INCURRED FOR THE BUSINESS PURPOSES. WE ALSO DO NOT FIND ANY MERIT IN ALLOWING THESE EXP ENSES BY THE LEARNED CIT(A) THAT NO EVIDENCE HAS BEEN TAKEN ON R ECORD BEFORE ALLOWING THE APPEAL IN FAVOUR OF THE ASSESSEE WHETHER THESE VEHICLES WERE USED BY THE DIRECTOR OR THEIR FAMILY MEMBERS OR THEIR STAFFS. THEREFORE, IT IS DIRECTED TO VERIFY THE USE OF THE V EHICLES, OWNERSHIP OF THE VEHICLES AND EXPENSES INCURRED WHOLLY & EXCLUSIVELY FOR BUSINESS ITA 546/JP/2012 ACIT VS. ASSOCIATED STONE INDUSTRIES LTD. 10 PURPOSES. ACCORDINGLY, THIS GROUND OF APPEAL IS SET ASIDE TO THE LEARNED CIT(A). 8. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED FO R STATISTICAL PURPOSES ONLY. ORDER PRONOUNCED IN THE OPEN COURT ON 05/12/2014. SD/- SD/- (R.P. TOLANI) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER JAIPUR, DATED : 05 TH DECEMBER, 2014 * RANJAN COPY FORWARDED TO :- 1. THE ACIT, CIRCLE-1, KOTA. 2. M/S ASSOCIATED STONE INDUSTRIES (KOTAH) LTD., KO TA. 3. THE CIT (A) 4. THE CIT 5. THE D/R GUARD FILE (I.T.A. NO. 546/JP/2012) BY ORDER, AR ITAT JAIPUR.