DCIT, New Delhi V. M/s. Prafful Industries Pvt. Ltd., New Delhi

ITA 5712/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3168 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2011-2012
• Appeal Filed On: 21-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY NATH
• Keywords: Capital expenditure
• Section: 37

Judgement Text

1 ITA NO. 5712/DEL/2014 IN THE INCOME TAX APPELLA TE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI G. D. AGRAWAL, PRESIDE NT AND SHRI CHANDRA MOHAN GARG, JU DICIAL MEMBER I.T.A .NO. 5712/DEL/2 014 (A.Y 2011-12) DCIT CIRCLE-14(1) NEW DELHI (APPELLANT) VS PRAFFUL INDUSTRIES PV T . LTD. 349, KATRA NAYA, CHANDNI CHOWK NEW DELHI AAACP1335N (RESPONDENT) APPELLANT BY SH. ATIQ AHMAD, SR. DR RESPONDENT BY SH. SANJAY NATH, CA ORDER PER CHANDRA MOHAN GARG, JUDICIAL MEMBER THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A)-XVII, NEW DELHI DATED 18/07/2014 FOR AS SESSMENT YEAR 2011-12. 2. THE GROUNDS RAISED BY THE REVENUE READ AS FOLLOW S:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.26,39,405/- MADE BY THE AO IGNORING THE FACT THAT THE ASSET PURCHASED ARE CLEARLY CAPITAL A SSET AND THE AO HAS ALSO MENTIONED THE REASONS FOR TREATING THE PARTS O F POWER PLANT AS DATE OF HEARING 11.12.2017 DATE OF PRONOUNCEMENT 12.12.2017 2 ITA NO. 5712/DEL/2014 CAPITAL EXPENSES WITH RESPECT TO QUANTUM OF THE EXP ENSES. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 16,70,000/- MADE BY TH E AO ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES IGNORING THE FACT THAT THE ABOVE EXPENSES ARE NOT SOLELY FOR THE YEAR UNDER CONSIDER ATION. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.4,91,714/- ON ACCOUNT O F DISALLOWANCE U/S 37 AND 38(2) BY NOT APPRECIATING THE FACT THAT THE ASSESSEE COMPANY HAS FAILED TO PRODUCE THE LOG BOOK WHICH IS THE ONL Y AUTHENTIC DOCUMENT WHICH CAN SHOW/RECORD THE USES OF VEHICLES FOR BUSI NESS PURPOSES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE APPELLANT CRAVES TO BE ALLOWED TO ADD ANY FRESH GROUNDS OF APPEAL AND/OR D ELETE OR AMEND ANY OF THE GROUNDS OF APPEAL. 3. GROUND NO.1 APROPOS GROUND NO.1, THE LD. SENIOR DEPARTMENTAL R EPRESENTATIVE SUBMITTED THAT THE LD.CIT(A) HAS ERRED AN DELETING THE ADDITION OF RS.26,39,405/- MADE BY THE A.O BY IGNORING THE FACT THAT THE ASSESSEE HAS PURCHASED ASSET OF CAPITAL NATURE AND A.O HAS GIVEN A CLEAR FINDING AND REASONING FOR TREATING THE PARTS OF POWER PLANT AS CAPITAL EXPENSES WITH RESPECT TO QUANTUM OF EXPENSE S. 4. THE LD. AR STRONGLY SUPPORTED THE FIRST APPELLAT E ORDER AND SUBMITTED THAT RIGHTLY THE LD.CIT(A) HAS RIGHTLY GR ANTED RELIEF TO THE ASSESSEE AS THE APPELLANT HAS GIVEN ALL THE DETAILS OF PARTS WHICH WERE PURCHASED TO KEEP THE MACHINERY IN RUNNING ORD ER AND THE EXPENDITURE WAS OF REVENUE WHICH CANNOT BE TERMED A S CAPITAL EXPENDITURE. 3 ITA NO. 5712/DEL/2014 5. ON CAREFUL CONSIDERATION OF RIVAL SUBMISSIONS AN D PERUSAL OF RELEVANT PARA 5.2 OF THE FIRST APPELLATE ORDER WE A RE SATISFIED WITH THE FINDINGS ARRIVED BY THE LD.CIT(A) THAT THE NATU RE OF WORK OF APPELLANT INVOLVED AS WORK WITH CHEMICALS, ACIDS ET C AND THUS SUBSTANTIAL AMOUNT HAVE TO BE INCURRED FOR REPLACI NG OF PART FOR PLANT AND MACHINERY. THE LD.CIT(A) FURTHER RECORDE D A FINDING THAT THE APPELLANT HAS GIVEN ALL DETAILS OF PARTS WHICH WERE PURCHASE TO KEEP THE MACHINERY IN RUNNING ORDER AND THE AMOUNT HAS BEEN SPENT ON PURCHASE OF VARIOUS PARTS FOR THE MACHINER Y. IT WAS ALSO OBSERVED THAT NO MACHINERY HAS BEEN PURCHASED WHICH CAN BE SAID TO HAVE ENDURING BENEFIT, THEREFORE, THE EXPENDITUR E INCURRED AND CLAIMED BY THE ASSESSEE WAS OF REVENUE IN NATURE AN D NOT CAPITAL EXPENDITURE. THUS, IN OUR CONSIDERED OPINION, THE FIRST APPELLATE AUTHORITY WAS RIGHT AND DEMOLISHING THE ACTION OF T HE A.O AND IN GRANTING RELIEF TO THE ASSESSEE. ACCORDINGLY, GROU ND NO.1 OF THE REVENUE IS DISMISSED. 6. GROUND NO.2 APROPOS GROUND NO.2, THE LD. DEPARTMENTAL REPRESE NTATIVE SUBMITTED THAT THE LD.CIT(A) HAS ERRED AND DELETIN G THE ADDITION OF RS.16,17,000/- MADE BY THE A.O ON ACCOUNT OF DISALL OWANCE OF PRIOR PERIOD EXPENSES IGNORING THE FACT THAT IMPUGNED EX PENSES WERE NOT SOLELY FOR THE YEAR UNDER CONSIDERATION. 7. THE LD. AR SUBMITTED THAT THE PAYMENT HAS BEEN M ADE IN COMPLIANCE WITH THE ORDER OF THE HON'BLE HIGH COURT DATED 10/12/2010 WHEREIN IT WAS HELD THAT THE APPELLANT I S LIABLE TO PAY 4 ITA NO. 5712/DEL/2014 CESS, THEREFORE, THE LIABILITY WAS CRYSTALLIZED DUR ING THE YEAR UNDER CONSIDERATION I.E ASSESSMENT YEAR 2011-12. 8. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSI ONS AND PERUSAL OF THE RELEVANT PART 6.2 OF THE FIRST APPEL LATE ORDER WE NOTE THAT PAYMENT OF CESS FROM MAY 1999 TO MAY 2007 HAS BEEN MADE BY THE ASSESSEE TO COMPLY WITH THE JUDGMENT OF HON' BLE SUPREME COURT DATED 10/12/2010 WHEREIN LIABILITY OF PAY CES S ON THE ASSESSEE WAS CONFIRMED BY HONBLE APEX COURT. THER EFORE, DUE TO THESE REASONS LIABILITY WAS CRYSTALLIZED DURING FIN ANCIAL YEAR 2010- 11 PERTAINING TO ASSESSMENT YEAR 2011-12. HENCE, W E ARE UNABLE TO SEE ANY VALID REASON TO INTERFERE WITH THE CONCL USION ARRIVED BY THE LD.CIT (A) AND THUS, WE ARE UPHOLD THE SAME. C ONSEQUENTLY, GROUND NO. 2 OF THE REVENUE BEING DEVOID OF MERITS IS DISMISSED. 9. GROUND NO.3 THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE CIT(A) HAS ERRED AND DELETING THE AMOUNT OF RS.4,91 ,714/- BY IGNORING THE FACT THAT THE COMPANY HAS FAILED TO PR ODUCE LOG BOOK WHICH IS ONLY AUTHENTIC DOCUMENT WHICH CAN SHOW AND ESTABLISHED THE USES OF VEHICLE FOR THE BUSINESS PURPOSES OF TH E ASSESSEE COMPANY. 10. THE LD. AR VEHEMENTLY POINTED OUT THAT IN THE C ASE OF A COMPANY PERSONA USES CANNOT BE ALLEGED IN VIEW OF T HE DECISION OF HONBLE DELHI HIGH COURT REPORTED AS 197 TAXMAN.COM 25 (DELHI). 5 ITA NO. 5712/DEL/2014 11. ON CAREFUL CONSIDERATION OF OUR RIVAL SUBMISSIO N, WE ARE OF THE VIEW THAT NO DISALLOWANCE CAN BE MADE ON ACCOUNT OF PERSONAL USE IN THE CASE OF A COMPANY, ESPECIALLY WHEN THE A.O H AS NOT BEEN ABLE TO MAKE THE ADDITION OF SOUND BASIS. THE A.O PROCE EDED TO MAKE DISALLOWANCE WITHOUT VERIFYING THE RELEVANT VOUCHER S/BILLS AND WITHOUT EXAMINING THE LOG BOOKS IN A RIGHT PERSPECT IVE. THEREFORE, HE LD.CIT(A) WAS RIGHT IN DISMISSING THE ADDITION. ACCORDINGLY, GROUND NO.3 OF THE REVENUE IS ALSO DISMISSED. 12. IN THE RESULT, THE APPEAL IS DISMISSED ON ALL T HREE GROUNDS. DECISION PRONOUNCED IN THE OPEN COURT ON 12.12.2 017 SD/- SD/- (G. D. AGRAWAL) (C. M GARG) PRESIDENT JUDICIAL MEMBER DATED: 12/12/2017 R. NAHEED * COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT R EGISTRAR ITAT NEW DELHI 6 ITA NO. 5712/DEL/2014 DATE 1. DRAFT DICTATED ON .10.2017 PS 2. DRAFT PLACED BEFORE AUTHOR .10.2017 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .2017 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS 18.12.2017 PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK 1 8 .12.2017 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.