Headstrong Services India Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 5466/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61793 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-06-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS RENU JOUHRI
• Assessee Lawyers: MANONEET DALAL; G C SRIVASTAVA
• Keywords: Capital asset; Depreciation; Transfer pricing; Business expenditure; Opportunity of being heard; Principle of natural justice; Revenue expenditure; Capital expenditure
• Section: 143(3); 133(6); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI DELHI BENCH : E NEW DELHI BEFORE SHRI K.G. BANSAL, ACCOUNTANT MEMBER AND SHRI C.M. GARG, JUDICIAL MEMBER I.T.A NO. 5466/DEL/11 ASSTT. YEAR 2007-08 HEADSTRONG SERVICES INDIA PVT. LTD., 103, ASHOKA ESTATE, BARAKHAMBA ROAD, NEW DELHI 110 001 AABCT7650D VS. ACIT, CIRCLE-12(1) NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI G.C. SRIVASTAVA & SHRI MANONEET DALAL, ADVOCATE RESPONDENT BY: MRS. RENU JOUHRI, CIT (DR) DATE OF HEARING : 20-6-2012 DATE OF PRONOUNCEMENT : 17-07-2012 ORDER PER K.G. BANSAL, AM: IN THIS APPEAL, THE ASSESSEE HAS TAKEN UP 14 GROUN DS. GROUND NOS. 1 & 2 ARE GENERAL IN NATURE. GROUND NOS. 3 TO 7 DEAL WITH ADJUSTMENT MADE BY THE AO IN THE TOTAL INCOME ON ACCOUNT OF TRANSF ER PRICING. GROUND NOS. 8 TO 10 DEAL WITH OTHER ADDITIONS MADE TO THE TOTAL INCOME RETURNED BY THE ASSESSEE. GROUND NOS. 11 TO 14 ARE IN RESPEC T OF CHARGING OF INTEREST AND INITIATING PENALTY U/S 271 (1). ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 2 2. BRIEFLY THE FACTS ARE THAT THE RETURN WAS FILED ON 23.6.2008 DECLARING TOTAL INCOME OF ` 30,64,480/-. ASSESSMENT PROCEEDIN GS WERE INITIATED BY ISSUING STATUTORY NOTICE U/S 143(2) OF THE ACT ON 1 .5.2009, WHICH WAS SERVED ON THE ASSESSEE. THEREAFTER, QUESTIONNAIRE W AS ISSUED ALONG WITH STATUTORY NOTICE U/S 142(1). THE DRAFT ORDER WAS MA DE ON 31.12.2010 AT TOTAL INCOME OF ` 17,66,84,460. THE ASSESSEE OBJEC TED THE DRAFT ORDER. THE OBJECTIONS WERE HEARD BY THE DRP-I, NEW DELHI. FINALLY ORDER U/S 143(3) READ WITH SECTION 144(C) OF THE ACT WAS PASS ED ON 24.10.2011. DETERMINING THE TOTAL INCOME AT ` 14,56,46,530/-. A GGRIEVED BY THIS ORDER, THE ASSESSEE IS IN APPEAL BEFORE US. 3. AS MENTIONED EARLIER, GROUND NOS. 1 & 2 ARE GENE RAL IN NATURE. IN GROUND NO. 1 IT IS MENTIONED THAT THE ORDER PASSED BY THE TPO, THE DRAFT ORDER PASSED BY THE AO AND THE FINAL ORDER PASSED B Y THE AO IN PURSUANCE OF THE DIRECTIONS OF LD. DRP ARE BAD IN L AW. IN GROUND NO. 2 IT IS MENTIONED THAT THE AO ERRED IN DETERMINING THE TOTA L INCOME AT ` 14,56,46,530/- AGAINST THE RETURNED INCOME OF ` 30, 64,480/-. THESE GROUND ARE GENERAL IN NATURE AND THEY WERE NOT ARGU ED BY THE LD. COUNSEL FOR THE ASSESSEE. THEREFORE, THESE GROUNDS ARE DISM ISSED AS NOT PRESSED. 4. IN GROUND NOS. 3 TO 7, VARIOUS AVERMENTS HAVE BE EN MADE AGAINST ENHANCEMENT OF THE INCOME BY AN AMOUNT OF ` 13,54, 69,266/- ON ACCOUNT OF TRANSFER PRICING ADJUSTMENT MADE IN RESPECT OF INTERNATIONAL ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 3 TRANSACTIONS WITH ASSOCIATED ENTERPRISES (AES). SOM E GROUNDS ARE NARRATIVE AND ARGUMENTATIVE ALSO AND THUS THEY ARE NOT IN ACCORDANCE WITH ITAT RULES. THESE GROUNDS ARE DECIDED ON THE B ASIS OF SUBMISSIONS MADE BEFORE US. 4.1. IN THIS CONNECTION, THE LD. COUNSEL FILED A CH ART REGARDING 25 COMPARABLE COMPANIES ON THE BASIS OF WHICH TRANSFER PRICING ADJUSTMENT WAS MADE. IN RESPECT OF 10 SUCH COMPARABLES, INFORM ATION WAS OBTAINED BY THE AO BY ISSUING NOTICES U/S 133 (6) OF THE ACT . THE GENERAL OBSERVATION MADE IN THE CHART IN RESPECT OF THESE C OMPARABLES IS THAT THE USE OF INSTRUMENT OF NOTICE U/S 133(6) FOR GATHERIN G INFORMATION IS INAPPROPRIATE. HOWEVER, THE LD. COUNSEL COULD NOT S UBSTANTIATE THE AFORESAID OBSERVATION. THE CASE OF THE LD. CIT(DR) IS THAT THE AO CAN USE ALL INSTRUMENTS AVAILABLE IN THE ACT FOR BRINGING R ELEVANT INFORMATION ON RECORD FOR DETERMINING THE TOTAL INCOME. HAVING CON SIDERED SUBMISSIONS FROM BOTH THE SIDES, WE ARE OF THE VIEW THAT THERE IS NO SUBSTANCE IN THE ARGUMENT THAT THE AO CANNOT COLLECT INFORMATION ABO UT COMPARABLES BY ISSUING NOTICES U/S 133(6). THEREFORE, THIS SUBMISS ION IS REJECTED. 4.2 THE SECOND ARGUMENT IS THAT IN RESPECT OF 20 CO MPANIES, OF WHICH INFORMATION WAS OBTAINED U/S 133 (6), THE SAME WAS NOT PUT ACROSS TO THE ASSESSEE SO THAT IT COULD FILE ITS OBJECTIONS AS TO WHETHER THE CASES ARE COMPARABLE OR NOT AND WHETHER ANY ADJUSTMENT IS REQ UIRED TO THE BOOK RESULT OF THESE COMPANIES FOR BRINGING THEM AS NEAR AS POSSIBLE TO THE ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 4 CASE OF THE ASSESSEE. IT IS ARGUED THAT NON-SHARING OF THE INFORMATION WITH THE ASSESSEE HAS LED TO VIOLATION OF THE PRINCIPLE OF NATURAL JUSTICE. THE ASSESSEE WAS PREVENTED FROM STATING ITS CASE ON THE COMPARABLES FOR WANT OF INFORMATION OBTAINED BY THE AO DIRECTLY FRO M THE COMPANIES. THE LD. CIT(DR) COULD NOT REBUT THIS ARGUMENT. HOWEVER, IT HAS BEEN ARGUED BY HER THAT ANY LACUNA IN THE ASSESSMENT ORDER ON A CCOUNT OF THIS FAILURE CAN BE CURED IF THE MATTER IS RESTORED TO THE FILE OF THE AO. WE HAVE CONSIDERED THIS MATTER. SUCH ISSUE AROSE EARLIER BE FORE THE A BENCH OF DELHI TRIBUNAL IN THE CASE OF ADOBE SYSTEMS INDIA P VT. LTD. IN ITA NO. 5693(DEL)/2011 FOR ASSESSMENT YEAR 2007-08. THE ISS UE HAS BEEN DECIDED IN PARAGRAPH NO. 4 OF THIS ORDER, WHICH IS REPRODUC ED BELOW :- 4. WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. IN THE LIGHT OF THE DECISION IN THE CASE OF GENISYS INTEGRATING SYSTEMS (INDIA) PVT. LTD. (SUPRA) AND A LSO OTHERWISE WE ARE OF THE VIEW THAT ANY INFORMATION OBTAINED IN TH E COURSE OF ASSESSMENT PROCEEDINGS HAS TO BE SUPPLIED TO THE AS SESSEE FOR ITS OBJECTIONS, IF ANY. THE ABSENCE OF DOING SO LEADS T O VIOLATION OF FUNDAMENTAL PRINCIPLE OF NATURAL JUSTICE. IN VIEW T HEREOF, THE MATTER IS RESTORED TO THE FILE OF THE AO WITH A DIRECTION TO SUPPLY WHATSOEVER INFORMATION HE WANTS TO USE AGAINST THE ASSESSEE TO IT, GRANT IT REASONABLE OPPORTUNITY OF BEING HEARD AND THEREAFTER PASS A FRESH ASSESSMENT ORDER AS PER LAW. 4.2.1 AS A VIEW HAS ALREADY BEEN TAKEN BY THE TRIBU NAL IN THE AFORESAID CASE AND IN THE CASE OF AMERIPRISE INDIA PVT. LTD. IN ITA NO. 5694/DEL/2011 FOR ASSESSMENT YEAR 2007-08 DATED 26.3.2012, WE ARE BOUND THE FOLLOW THE VIEW. THEREFORE, IT IS HELD THAT IT WAS INCUMBE NT ON THE AO TO SUPPLY THE INFORMATION TO THE ASSESSEE, OBTAIN ITS OBJECTI ONS, IF ANY, AND PASS ORDER AFTER TAKING INTO ACCOUNT THE INFORMATION AND THE OBJECTIONS OF THE ASSESSEE. THIS HAS NOT BEEN DONE IN RESPECT OF 20 C OMPARABLES. ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 5 THEREFORE, THE MATTER OF TRANSFER PRICING ADJUSTMEN T IS RESTORED TO THE FILE OF THE AO FOR FOLLOWING PROPER PROCEDURE AS MENTION ED ABOVE AND DECIDE THE MATTER DENOVO. 4.3 THE ASSESSEE HAS ALSO TAKEN OTHER OBJECTIONS, I .E. SUPER-NORMAL PROFITS IN SOME CASES, DIFFERENCE IN SKILLS OF THE EMPLOYEES, R & D EXPENDITURE, DIFFERENCE IN BUSINESS MODELS ETC. THE SE ARE MATTER OF DETAILS ON WHICH THE OBJECTIONS CAN BE RAISED BY TH E ASSESSEE, IF ANY, TO DECIDE WHETHER THE CASES ARE REALLY COMPARABLES OR NOT OR WHETHER SOME ADJUSTMENT IS NECESSARY TO BE MADE. THUS IT IS NOT NECESSARY FOR US AT THIS STAGE TO GO INTO THESE SUBMISSIONS. 4.4. IN THE RESULT, THE MATTER OF TRANSFER PRICING ADJUSTMENT IS RESTORED TO THE FILE OF THE AO FOR FRESH DECISION AFTER HEARING THE ASSESSEE. THEREFORE, THESE GROUNDS ARE TREATED AS ALLOWED FOR STATISTICA L PURPOSE. 5. GROUND NO. 8 IS TO THE EFFECT THAT THE AO ERRED IN DISALLOWING DEDUCTION U/S 10A ON FOREIGN EXCHANGE FLUCTUATION GAIN AND OTHER INCOME OF ` 71,68,081/-, CONSISTING OF EXCESS PROVISION WR ITTEN BACK AND MISCELLANEOUS INCOME. 5.1 THE LD. COUNSEL REFERRED TO PAGE NO. 6 OF PB II , WHICH SHOWS THAT THE ASSESSEE EARNED INCOME OF ` 68,94,022/- ON ACCOUNT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE, ` 38,532/- ON ACCOUNT OF EXCES S PROVISION MADE IN EARLIER YEARS AND WRITTEN OFF IN THIS YEAR AND MISC ELLANEOUS INCOME OF ` ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 6 4,30,527/-. IT IS SUBMITTED THAT THE FINDING OF THE AO IS THAT THESE INCOMES ARE NOT RELATED TO EXPORT BUSINESS AND THEREFORE TH EY CANNOT BE TERMED AS INCOME DERIVED FROM THE ELIGIBLE UNDERTAKING. IT IS ARGUED THAT THE FINDING OF THE AO IS NOT IN CONSONANCE WITH THE RELEVANT PR OVISIONS. SECTION 10A GRANTS DEDUCTION OF SUCH PROFITS AS ARE DERIVED BY THE ELIGIBLE UNDERTAKING FROM THE EXPORT OF ARTICLES, THINGS OR COMPUTER SOF TWARE FOR A PERIOD OF 10 YEARS. IT IS ADMITTED THAT SUB SECTION (I) DOES USE THE WORD DERIVED. HOWEVER, SUB SECTION (4) DEFINES THE TERM PROFIT D ERIVED FROM EXPORT OF ARTICLES, THINGS OR COMPUTER SOFTWARE TO MEAN T HE AMOUNT WHICH BEARS TO THE PROFIT OF THE BUSINESS OF THE UNDERTAKING TH E SAME PROPORTION AS THE EXPORT TURNOVER BEARS TO THE TOTAL TURN OVER OF THE BUSINESS CARRIED ON BY THE UNDERTAKING. IT IS ARGUED THAT IN THE LIGHT OF THIS DEFINITION, WHAT IS TO BE COMPUTED AT THE FIRST INSTANCE IS THE PROFIT OF THE BUSINESS OF THE UNDERTAKING. WHILE DOING SO THE PROVISIONS CONTAINE D IN SECTIONS 28 TO 44DA COME INTO PLAY. THEREFORE, SUCH PROFIT HAS TO BE COMPUTED AS NORMALLY UNDERSTOOD WITHOUT INSISTING ON PROXIMATE CONNECTION BETWEEN THE BUSINESS OF UNDERTAKING AND THE PROFIT. IN THE ALTERNATIVE, IT IS ARGUED THAT THE CLAIM ON ACCOUNT OF FLUCTUATION IN RATE OF FOREIGN EXCHANGE IS IN THE REVENUE FIELD AS IT IS RELATES TO EXPORT PROCEE DS. FURTHER, IN EARLIER YEARS PROVISIONS WERE MADE WHICH WERE FOUND TO BE I N EXCESS OF THE ACTUAL LIABILITY BY AN AMOUNT OF ` 38,532/-. THE MI SCELLANEOUS INCOME IS ALSO THE INCOME DERIVED FROM THE BUSINESS OF THE UN DERTAKING. ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 7 5.2 IN REPLY, THE LD. CIT(DR) SUBMITTED THAT SINCE THE MAJOR ISSUE REGARDING TRANSFER PRICING ADJUSTMENT IS TO BE DECI DED DENOVO BY THE AO, THIS MATTER MAY ALSO BE RESTORED TO HIS FILE. IN PA RTICULAR, IT WAS MENTIONED BY HER THAT EXACT DETAILS ARE NOT AVAILABLE. 5.3 IN THE REJOINDER REPLY, THE LD. COUNSEL SUBMITT ED THAT THE ISSUE IS CLEAR AND THE BASIS OF DEDUCTION IS SAME AS U/S 80H HC. THERE IS AMPLE AUTHORITY UNDER THAT SECTION THAT PROXIMATE CONNECT ION IS NOT REQUIRED TO BE ESTABLISHED BETWEEN THE BUSINESS AND THE INCOME AND THE SAME HAS TO BE COMPUTED AS THE PROFIT IS COMPUTED UNDER THE BUS INESS HEAD. 5.4 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. THERE IS NO DISPUTE THAT FOREIGN EXCHANG E FLUCTUATION GAIN IS IN RESPECT OF EXPORT PROCEEDS, THEREFORE, THE AMOUNT R EPRESENTS INCOME AS IT IS IN THE REVENUE FIELD. IT IS ALSO CLEAR THAT THE AMOUNT, BEING IN THE NATURE OF EXPORT PROCEEDS, LEADS TO INCREASE IN TURN - OVE R AND TOTAL TURN OVER. FURTHER, THE PROVISIONS MADE IN EARLIER YEARS WOULD HAVE REDUCED THE INCOME OF THE ASSESSEE FOR THOSE YEARS, LEADING TO LOWER DEDUCTION U/S 10A. IN THIS YEAR THE SUM OF ` 38,532/- IS FOUND TO BE EXCESS PROVISION WHICH HAS BEEN CREDITED TO PROFIT AND LOSS ACCOUNT. THIS AMOUNT IS CLEARLY IN THE NATURE OF INCOME. THE MISCELLANEOUS INCOME ALSO REPRESENTS THE INCOME OF THE BUSINESS. THE ONLY POINT WHICH WE FIN D IS THAT THE INCOME IS SHOWN AT ` 4,30,527/- ON PAGE NO. 6 OF THE PB, WHIL E THE LD. COUNSEL IS MENTIONED THAT THE INCOME IS OF THE ORDER OF ` 2.30 LACS. THIS FACT MAY BE ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 8 VERIFIED BY THE AO. HOWEVER, THE POINT OF LAW IS CL EAR THAT THE PROFIT OF THE BUSINESS HAS TO BE FOUND OUT UNDER THE BUSINESS HEA D AND THERE IS NO NECESSITY TO ESTABLISH PROXIMATE OR IMMEDIATE CONNE CTION BETWEEN THE BUSINESS AND THE PROFIT. THUS, THESE ACCOUNTS ARE I NCLUDIBLE IN THE PROFITS OF THE BUSINESS. THE AO IS DIRECTED TO RECOMPUTE TH E DEDUCTION ACCORDINGLY AFTER VERIFYING THE FIGURE OF MISCELLAN EOUS INCOME. 6. GROUND NO.9 IS TO THE EFFECT THAT THE AO ERRED I N DISALLOWING OFFICE MAINTENANCE EXPENDITURE OF ` 24,08,018/- BY HOLDING IT TO BE CAPITAL EXPENDITURE. THE AO HAS FURNISHED THE DETAILS OF TH E EXPENDITURE UNDER 6 HEADS AND HELD THAT ALL OF THEM ARE OF CAPITAL NATU RE. BEFORE THE LD. DRP, THE ASSESSEE SUBMITTED THE DETAILS OF EXPENDITURE A ND THE VOUCHERS IN LETTER DATED 5.9.2011. THE EXPENDITURE HAS BEEN INC URRED ON OFFICE MAINTENANCE, ELECTRICITY CONNECTION CHARGES, METAL DETECTOR AND SCANNER TROLLEY, ASSORTED CIVIL WORK AND OTHER EXPENSES. T HE BILLS IN RESPECT OF THE EXPENSES WERE ALSO FILED. THE LD. DRP MENTIONED THA T LOOKING TO THE NATURE OF EXPENSES, THE ACTION OF THE AO IS UPHELD BUT DEPRECIATION IS TO BE ALLOWED AT APPROPRIATE RATE. 6.1 BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT PAYMENT IN RESPECT OF ELECTRICAL CONNECTION DOES NOT LEAD T O ACQUISITION OF A CAPITAL ASSET. IN RESPECT OF OTHER ITEMS, IT WAS SUGGESTED THAT THE MATTER MAY BE DECIDED ON MERITS BY THE BENCH. AS IN RESPECT OF EA RLIER GROUNDS, THE SUBMISSIONS OF THE LD. CIT(DR) HAS BEEN THAT THIS M ATTER MAY ALSO BE ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 9 RESTORED TO THE FILE OF THE AO BECAUSE THE MAIN ISS UE OF PRICING ADJUSTMENT IS BEING RESTORED TO HIS FILE. 6.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. WE FIND THAT THE FIRST EXPENDITURE OF ` 37,584/- IS ON PURCHASE OF DOOR ACCESS CONTROLLER, PROXIMITY READERS UNITS FOR CENTRAL ACCESS CONTROL PANEL AND POWER SUPPLY UNITS. THESE ARE NEW ITEMS AND THEREFORE REPRESENT CAPITAL EXPENDITURE. THE SECOND EXPENDITU RE OF ` 14,09,610/- IS FOR OBTAINING ELECTRICAL CONNECTION. IT IS SEEN FRO M THE CORRESPONDING ORDER THAT 600 KVA LOAD WAS SERVED ON 24.8.2006. IN THIS CONNECTION SECURITY DEPOSIT OF ` 13.16 LACS WAS PAID ALONGWITH SUPERVISION CHARGES AND SYSTEM LOADING CHARGES. THE ASSESSEE HAS CLAIME D EXPENDITURE ONLY IN RESPECT OF SUPERVISION CHARGES AND SYSTEM LOADIN G CHARGES. THE EXPENDITURE IS IN THE NATURE OF INITIAL EXPENDITURE GRANTING BENEFIT OF ENDURING NATURE TO THE ASSESSEE. WITHOUT INITIALIZA TION OF ELECTRICITY CONNECTION, NO WORK CAN BE DONE IN OFFICE. THEREFOR E, WE ARE OF THE VIEW THAT THE EXPENDITURE IS CAPITAL IN NATURE. THE THIR D EXPENDITURE OF ` 47,942/- IS ON PURCHASE OF CARPETS WHICH IS OBVIOUS LY A CAPITAL EXPENDITURE AS A NEW ASSET HAS BEEN CREATED. SIMILARLY 4 TH EXPENDITURE OF ` 22,275/- IS FOR PURCHASE OF 4 HANDLED METAL DETECTOR, SCANNER TROLLEY. THIS HAS LED TO ACQUISITION OF A NEW ASSET AND THEREFORE IT IS A CA PITAL EXPENDITURE. IN RESPECT OF OTHER MISCELLANEOUS EXPENDITURE FOR CIV IL WORK ETC. NO PARTICULAR REASON HAS BEEN ASSIGNED TO HOLD THEM TO BE CAPITAL EXPENDITURE. THESE EXPENSES AMOUNT TO ` 5,47,895/- AND ` 3,42,713/- IT IS ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 10 HELD THAT THESE EXPENSES ARE ALLOWABLE AS BUSINESS EXPENDITURE U/S 37(1). THE RESULT IS THAT WHILE EXPENDITURE OF ` 8,90,608/ - IS HELD TO BE REVENUE IN NATURE, THE BALANCE EXPENDITURE IS HELD TO BE CAPIT AL IN NATURE. THUS THIS GROUND IS PARTLY ALLOWED. 7. GROUND NO. 10 IS THAT THE AO ERRED IN DISALLOWIN G DEBONDING CHARGES OF ` 13,59,057/-. IN THIS CONNECTION, IT HAS BEEN S UBMITTED BEFORE THE LOWER AUTHORITIES THAT THE AMOUNT REPRESENTS THREE ITEMS 1) DUTY PAID ON LOSS OF LAPTOP OF ` 70,731/- ; 2) DUTY PAID OF ` 7,71,02 1/- ON CAPITAL ASSET ON DEBONDING THE GOODS AND 3) DUTY PAID OF ` 5,17,305/ - ON CAPITAL GOODS LOCATED AT BANGALORE FOR DEBONDING. THE SUBMISSION OF THE ASSESSEE IS THAT IT WAS ALREADY IN POSSESSION OF THESE ASSETS A ND DEPRECIATION WAS BEING CLAIMED AND ALLOWED. PAYMENT OF DEBONDING CHA RGES DOES NOT LEAD TO CREATION OF ANY NEW CAPITAL ASSET, HENCE THE CHA RGES SHOULD BE TREATED AS REVENUE EXPENDITURE. IN PARTICULAR RELIANCE HAS BEEN PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF EM PIRE JUTE COMPANY OF INDIA LTD. VS. CIT, 124 ITR,1 IN WHICH IT HAS BEEN HELD THAT APART FROM THE TESTS OF CREATION OF AN ASSET OR OBTAINING BENEFIT OF ENDURING NATURE, IT SHOULD ALSO BE EXAMINED WHETHER THE EXPENDITURE IS IN CAPITAL FIELD OR REVENUE FIELD. 7.1 BEFORE US, THE LD. COUNSEL REFERRED TO THE SUBM ISSIONS MADE BEFORE THE LOWER AUTHORITIES AND REITERATED THAT SHIFTING OF CAPITAL GOODS FROM BONDED WARE HOUSE ON PAYMENT OF DUTY DOES NOT CREAT E ANY ASSET AND ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 11 DOES NOT LEAD TO BENEFIT OF ENDURING NATURE AS THE ASSET REMAINS THE SAME. THEREFORE, THE EXPENDITURE IS REVENUE IN NATU RE. THE ARGUMENT OF LD. CIT(DR) HAS BEEN THAT THE MATTER MAY BE RESTORE D TO THE FILE OF AO. 7.2 WE HAVE CONSIDERED THE FACTS OF THE CASE AND SU BMISSIONS MADE BEFORE US. THE CAPITAL GOODS PLACED IN THE BONDED A REA ARE SUBJECT TO RESTRICTIONS THAT THEY CANNOT BE SOLD AND THEY CANN OT BE REMOVED OUTSIDE THE AREA FOR USE OF SELF. THIS ENCUMBRANCE IS REMOV ED ONCE THE GOODS ARE CLEARED FROM THE BONDED AREA ON PAYMENT OF DUTY. TH E RESULT IS THAT THE ASSESSEE CAN DEAL WITH THE GOODS IN ANY MANNER IT D ESIRES INCLUDING SALE THEREOF. THEREFORE, PAYMENT OF CUSTOM DUTY FOR DE B ONDING INCREASES VALUE OF THE ASSET AND IT IS REQUIRED TO BE ADDED T O THE COSTS OR WRITTEN DOWN VALUE, AS THE CASE MAY BE. THEREFORE, THIS GRO UND IS DISMISSED. 7.3. GROUND NO. 11 IS GENERAL IN NATURE AGAINST CON FIRMING OF THE ADDITIONS PROPOSED BY THE AO BY THE LD. DR(P). IN A BSENCE OF ANY SPECIFIC ARGUMENT, THIS GROUND IS TAKEN AS DISMISSED. 7.4 GROUND NO. 12 AND 13 ARE AGAINST CHARGING OF IN TEREST UNDER SECTIONS 234B, 234D AND 244A. THE ASSESSMENT HAS BE EN SET ASIDE ON ONE GROUND AND RELIEF HAS BEEN GRANTED TO THE ASSES SEE ON SOME OTHER GROUNDS. THEREFORE, THE CHARGEABILITY OF THESE INTE RESTS REQUIRES A FRESH LOOK ON MAKING DENOVO ASSESSMENT AND GIVING EFFECT TO THIS ORDER. ITA NO. 5466/DEL/11 ASSTT. YEAR 2007-08 12 THEREFORE, THESE MATTERS ARE RESTORED TO THE FILE O F THE AO. THE RESULT IS THAT THESE GROUNDS ARE TREATED AS ALLOWED. 8. THERE IS NO APPEAL PROVIDED FOR INITIATING PENAL TY U/S 271(1)(C), THEREFORE GROUND NO. 14 IS DISMISSED. 9. IN THE RESULT, THE APPEAL IS TREATED AS PARTLY A LLOWED AS DISCUSSED ABOVE. SD/- SD/- [C.M. GARG] [K.G. BANSAL] JUDICIAL MEMBER ACCOUNTANT MEMBER VEENA COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT