DCIT, New Delhi V. M/s. Escorts Assets Management (P) Ltd., New Delhi

ITA 5767/DEL/2011

• Counselvise Citation: 576720114 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-02-2015
• Assessment Year: 2003-2004
• Appeal Filed On: 26-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARWINDER KAUR
• Assessee Lawyers: R M MEHTA
• Keywords: Depreciation; Revenue expenditure
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B NEW DELHI BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER ITA NO: 5767/DEL/2011 AY : - 2003-04 DY. CIT VS. M/S. ESCO RTS ASSETS MANAGEMENT (P) LTD. CIRCLE-11(1), 11, SCIND IA HOUSE, CONNAUGHT CIRCLE, NEW DELHI. NEW DELHI 110 001. (PA N AAACE2671E) (APPELLANT) (RESP ONDENT) APPELLANT BY : SMT. PARWINDER KAUR, SR. DR RESPONDENT BY : SHRI R.M. MEHTA, ADVOCATE DATE OF HEARING : 16.2.2015 DATE OF PRONOUNCEMENT :4.3.2 015 O R D E R PER G.C. GUPTA, VICE PRESIDENT THIS IS AN APPEAL FILED BY THE REVENUE FOR T HE ASSESSMENT YEAR 2003-04 IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A). GROUN D NO. 1 OF THE APPEAL OF THE REVENUE IS AS UNDER :- 1. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELEING THE ADDITION OF RS. 12,35,472/- MA DE ON ACCOUNT OF DISALLOWANCE OF DEFERRED REVENUE EXPENDITURE. 2. LD. DR SUBMITTED THAT THE ASSESSEE HAS NOT GIVEN EFFECT TO THE LAST YEAR ADDITION OF RS. 994298/-( RS. 21,82,298/- - RS. 11, 88,000/- BEING DEPRECIATION ALLOWED) UNDER THE HEAD DEFERRED REVENUE EXPENDIT URE DISALLOWED IN THE ASSESSMENT YEAR 2002-03. SHE SUBMITTED THAT THE DEF ERRED REVENUE EXPENDITURE SHOULD HAVE ONLY RS. 20,91,155/- WHEREAS THE ASSESS EE HAS SHOWN THE SAME AT RS. 33,26,627/- AND THEREFORE THE ADDITION MADE WAS JUS TIFIED. SHE RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE HAS OPPOSE D THE SUBMISSIONS OF THE LD. ITA NO. 5767/DEL/2011 DCIT VS. ESCORTS ASSETS MANAGEMENT (P) LTD. 2 DR. HE SUBMITTED THAT THE AMOUNT CHARGED TO THE P & L ACCOUNT HAS BEEN DULY ADDED BACK TO THE INCOME AS IS EVIDENT FROM THE COM PUTATION OF INCOME OF THE ASSESSEE , COPY FILED IN THE COMPILATION BEFORE THE TRIBUNAL. HE SUBMITTED THAT THEREFORE THERE WAS NO CASE FOR MAKING ANY DISALLOW ANCE ON ACCOUNT OF DEFERRED REVENUE EXPENDITURE WHEN THE ASSESSEE HAS NOT CLAI MED ANY SUCH AMOUNT AS DEDUCTION DURING THE RELEVANT ASSESSMENT YEAR 2003- 04. HE SUBMITTED THAT THE SUM OF RS.6,42,598/- IN THE NATURE OF DEFERRED REVENUE CHARGED TO BE EXPENDITURE IN THE P & L ACCOUNT HAS BEEN SUO MOTO WRITTEN BACK IN THE STATEMENT OF COMPUTATION OF INCOME AND IS INCLUDED UNDER THE HEAD MISCELLANEOU S EXPENSES OF RS. 10,80,773/- , WHICH HAS BEEN ADDED BACK. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSION S AND HAVE PERUSED THE ORDER OF THE AO AND ALSO THE COPIES OF DOCUMENTS FILED IN TH E COMPILATION BEFORE US. WE FIND THAT ASSESSEE IS AN ASSET MANAGEMENT COMPANY WHICH MANAGES THE ASSETS OF ESCORTS MUTUAL FUND. WE FIND THAT THE ASSESSEE HAS DEBITED A SUM OF RS. 10,80,773/- TO THE P & L ACCOUNT UNDER THE HEAD AD MINISTRATIVE AND OTHER EXPENSES- SCHEDULE K AND THIS AMOUNT INCLUDES DEFE RRED REVENUE EXPENDITURE WRITTEN OFF TO THE EXTENT OF RS. 6,42,598/- OUT OF THE DEFERRED REVENUE EXPENDITURE OF THE EARLIER YEARS. THE AMOUNT CHARGED TO THE P & L ACCOUNT HAS BEEN DULY ADDED BACK TO THE INCOME AS IS EVIDENT FROM THE COMPUTATI ON OF INCOME OF THE ASSESSEE FOR THE ASST. YEAR 2003-04, COPY OF WHICH HAS BEEN FILE D AT PAGE 4 OF THE COMPILATION FILED BEFORE US. IN THESE FACTS WE FIND THAT THERE COULD NOT BE ANY CASE FOR MAKING ANY DISALLOWANCE OF ACCOUNT OF DEFERRED REVENUE EXP ENDITURE WHEN THE ASSESSEE HAD NOT CLAIMED ANY SUCH AMOUNT AS DEDUCTION DURING THE ASSTT. YEAR 2003-04. A SUM OF RS. 6,42,598/- IN THE NATURE OF DEFERRED REVENUE C HARGED TO THE EXPENDITURE IN THE ITA NO. 5767/DEL/2011 DCIT VS. ESCORTS ASSETS MANAGEMENT (P) LTD. 3 P & L ACCOUNT HAS BEEN SUO MOTTO WRITTEN BACK IN T HE STATEMENT OF COMPUTATION OF INCOME BY THE ASSESSEE. IT IS INCLUDED IN THE MISCE LLANEOUS EXPENSES OF RS. 10,80,773/- WHICH HAS BEEN ADDED BACK. THE CIT(A) H AS GIVEN A FINDING THAT THE P & L ACCOUNT AND ACCOMPANYING SCHEDULES DO NOT REFLECT ANY OTHER DEFERRED REVENUE EXPENDITURES. IN THESE FACTS OF THE CASE WE ARE OF THE CONSIDERED VIEW THAT THERE WAS NO BASIS FOR MAKING DISALLOWANCE OF DEFERRED RE VENUE EXPENDITURE OF RS. 12,35,472/- AND THE DISALLOWANCE WAS RIGHTLY DELETE D BY THE CIT(A). IN THIS VIEW OF THE MATTER THE ORDER OF THE CIT(A) ON THIS ISSUE IS CONFIRMED AND THE GROUND NO. 1 OF THE APPEAL OF THE REVENUE IS DISMISSED. 4. GROUND NO. 2 OF THE REVENUE IS AS UNDER :- 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 69,158/- MADE ON ACCOUNT OF DISALLOWANCE OF EXPENSES PERTAINING TO PRIOR PERIOD. 4.1 THE LD. DR SUBMITTED THAT THE EXPENDITUR E PERTAINS TO EARLIER ASSESSMENT YEARS AND WAS NOT ASCERTAINED LIABILITY FOR THE ASS ESSMENT YEAR 2003-04 AND THEREFORE WAS RIGHTLY DISALLOWED BY THE AO. SHE REL IED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESEE HAS RELIED THE ORDER OF THE CIT(A) 5. WE HAVE CONSIDERED THE RIVAL SUBMISSION S AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT ALTHOUGH THE BILLS FOR CERTAIN EXPENDITURE PERTAINS TO THE PREVIOUS ASSESSMENT YEAR BUT WERE SETTLED IN PERIOD RELEVANT TO THE ASSESSMENT YEAR 2003-04 AND THE EXPENDITURE WAS FULLY VERIFIED AND RELATES TO THE BUSINESS OPERATIONS OF THE ASSESSEE AND THEREFORE WAS ALLOWA BLE IN THE ASSTT. YEAR 2003-04. THE CIT(A) HAS GIVEN A FINDING THAT THE BILLS IN DI SPUTE RELATES TO TRAVELLING, ENTERTAINMENT CLAIM OF EMPLOYEES AS ALSO THE FULL A ND FINAL SETTLEMENT OF THE EMPLOYEES AND THAT AS THE LIABILITY WAS ASCERTAINED AFTER VERIFICATION IN THE ASSTT YEAR ITA NO. 5767/DEL/2011 DCIT VS. ESCORTS ASSETS MANAGEMENT (P) LTD. 4 2003-04 AND THE EXPENDITURE WAS ADMISSIBLE FOR DEDU CTION IN ASSTT. YEAR 2003-04. THERE BEING NO MISTAKE IN THE ORDER OF THE CIT(A) T HE SAME IS CONFIRMED AND THE GROUND NO. 2 OF THE APPEAL OF THE REVENUE IS DISMIS SED. 6. GROUND NO. 3 AND 4 OF THE REVENUE ARE AS UND ER :- 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5,46,251/- MADE ON ACC OUNT OF PROVISION FOR EXPENSES. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 5,46,251/- MADE ON ACC OUNT OF ADJUSTMENT MADE OF PROVISION FOR EXPENSES WHILE COMPUTING BOOK PROFIT U/S 115JB OF THE I.T. ACT. 6.1 THE LD. DR SUBMITTED THAT THE EXPENDITURE WAS MERELY PROVISION FOR ASCERTAINED LIABILITIES AND THE ASSESSEE COULD NOT FILE THE NECESSARY DETAILS BEFORE THE AO. SHE SUBMITTED THAT THE EXPENDITURE WAS INCURRE D BY THE GROUP COMPANY AND NOT BY THE ASSESSEE ITSELF AND ASSESSEE COULD NOT PROVE THAT IT WAS INCURRED FOR BUSINESS PURPOSES ONLY. SHE RELIED ON THE ORDER OF THE AO. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE IDENTICAL DISALLOWANCE MADE IN THE EARLIER ASSESSMENT YEAR 2002-03 WAS DELETED BY THE CIT(A) AND THERE WA S NO FURTHER APPEAL TO THE TRIBUNAL. THE EXPENDITURE WAS MADE FOR ASCERTAINED LIABILITIES AND THEREFORE ALLOWABLE. HE SUBMITTED THAT EVEN THE AMOUNT IS AD DED IN ASSESSMENT U/S 143(3), IT COULD NOT BE UNDER PROVISION OF 115JB WHILE COMPUTI NG THE BOOK PROFIT OF THE ASSESSEE AND THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE WITH THE DECISION OF SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF JOINT COMMISSIONER OF INCOME TAX VS. USHA MARTIN INDUSTRIES LTD. 288 ITR (AT) 63 (KOLKAT A) (SB). HE RELIED ON THE ORDER OF THE CIT(A) . ITA NO. 5767/DEL/2011 DCIT VS. ESCORTS ASSETS MANAGEMENT (P) LTD. 5 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS A ND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE SUBMISSION THAT IDENTICAL DISALLOWANCE MADE BY THE AO IN IMMEDIATELY PRECEDING ASSESSMENT YEAR 2002-03 WAS D ELETED BY THE CIT(A) AND THERE WAS NO APPEAL BY THE REVENUE TO THE TRIBUNAL, HAS NOT BEEN CONTROVERTED. WE FIND THAT THE PROVISION WAS MADE FOR EXPENDITURE IN THE FORM OF REPAIRS, ELECTRICITY EXPENSES, TRAVELLING AND OTHER OFFICE E XPENSES WHICH ARE ASCERTAINED LIABILITIES. THE CIT(A) HAS RECORDED IN HIS ORDER T HAT THE COPY OF THE BILLS OF THE EXPENSES FILED BEFORE THE AO WERE FILED BEFORE HIM AND THE RELEVANT BILLS HAVE BEEN RAISED BETWEEN 1.4.2002 TO 31.3.2003 THE CIT(A) HAS GIVEN A FINDING THAT THE EXPENDITURE IS SPECIFIC IN NATURE AND THE TERM PROV ISION FOR EXPENSES APPEARS TO BE A MERE MISNOMER. WE FIND THAT THE EXPENDITURE INCURRE D WAS FOR BUSINESS PURPOSES ONLY AND NO CASE FOR DISALLOWANCE COULD BE MADE OUT BY THE REVENUE. WITH REGARD TO THE ADJUSTMENT MADE U/S 115JB OF THE ACT WE FIND TH AT SINCE THE PROVISION OF RS. 5,46,251/- WAS NOT IN RELATION TO CONTINGENT LIABIL ITIES AND SINCE THE EXPENDITURE FOR WHICH THE PROVISION WAS CREATED WAS FULLY ASCERTAIN ED, THE ADJUSTMENT OF RS. 5,46,251/- UNDER THE PROVISION OF 115JB WAS NOT JUS TIFIED. IN THIS VIEW OF THE MATTER THE ORDER OF THE CIT(A) WAS ISSUED IS CONFIRMED AND THE GROUND NO. 3 AND 4 OF THE APPEAL OF THE REVENUE ARE DISMISSED. 8. IN THE RESULT THE APPEAL OF THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 4 TH MARCH, 2015. SD/- SD/- (T.S. KAPOOR) (G.C. GUPTA) ACCOUNTANT MEMBER VICE PRESIDE NT DATED: THE 2015 *VEENA ITA NO. 5767/DEL/2011 DCIT VS. ESCORTS ASSETS MANAGEMENT (P) LTD. 6 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR 6. GUARD FILE BY ORDER DY. REGISTRAR SL. NO. DESCRIPTION DATE 1. DATE OF DICTATION BY THE AUTHOR 16.2.2015 2. DRAFT PLACED BEFORE THE DICTATING MEMBER 16.2.2015 3. DRAFT PLACED BEFORE THE SECOND MEMBER 4. DRAFT APPROVED BY THE SECOND MEMBER 5. DATE OF APPROVED ORDER COMES TO THE SR. PS 6. DATE OF PRONOUNCEMENT OF ORDER 7. DATE OF FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK 9. DATE OF DISPATCH OF ORDER