M/s Ferrous Township P.Ltd, Gurgaon V. DCIT, New Delhi

ITA 5812/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4544 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2012-2013
• Appeal Filed On: 23-10-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN GOTRU
• Assessee Lawyers: S K GUPTA
• Keywords: Business expenditure
• Section: 143(3); 142(1); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH D : NEW DELHI) BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 5812/DEL/2015 ASSESSMENT YEAR: 2012-13 M/S FERROUS TOWNSHIP P. LTD., VS. DCIT, CC-28, PLOT NO. 34, SECTOR-56, ARA CENTRE, GURGAON 122011 JHANDEWALAN EXTENSION, (PAN: AAFCS7813M) NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. S.K. GUPTA, CA REVENUE BY: SH. SHRAVAN GOTRU, SR. DR ORDER THE ASSESSEE HAS FILED THE APPEAL AGAINST THE ORDE R DATED 21.8.2015 OF THE LD. CIT(A)-29, NEW DELHI PERTAIN ING TO ASSESSMENT YEAR 2012-13 ON THE FOLLOWING GROUNDS:- 1. THAT THE LD. CIT(A) HAS ERRED BOTH ON FACTS AND LAW BY CONFIRMING AN ADDITION OF RS. 4,26,000/- OUT OF INTEREST PAYABLE IN EDC CHARGES TERMING THE SAME AS PENAL IN NATURE. 2. THAT EACH GROUND IS INDEPENDENT OF AND WITHOUT PREJUDICE TO THE OTHER GROUNDS RAISED HEREIN. PRAYER- 2 THE APPELLANT-ASSESEE PRAYS THAT THE RELIEF AS PER GROUNDS OF APPEAL ABOVE MAY KINDLY BE ALLOWED TO IT AND THE APPELLANT MAY ALSO BE ALLOWED TO ADD, DELETE, AMEND OR SUBSTITUTE ANY GROUNDS OF APPEAL EITHER AT OR BEFORE THE DATE OF HEARING. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE CO MPANY FILED ITS E-RETURN DECLARING A LOSS OF RS. 8,11,86,926/- ON 2 4.9.2012 WHICH WAS PROCESSED U/S. 143(1) OF THE INCOME TAX ACT, 1 961 (HEREINAFTER REFERRED AS THE ACT). THE CASE OF THE ASSESSEE WAS TAKEN UP FOR SCRUTINY UNDER CASS AND NOTICE U/S. 143(2) OF THE A CT WAS ISSUED ON 8.8.2013. ANOTHER NOTICE U/S. 143(2) AND 142(1) OF THE ACT ALONGWITH QUESTIONNAIRE WERE ISSUED TO THE ASSESSEE COMPANY ON 9.10.2014 AND SERVED THROUGH SPEED POST. IN RESPONS E TO STATUTORY NOTICES, THE A.R. OF THE ASSESSEE COMPANY ATTENDED THE PROCEEDINGS ON BEHALF OF THE ASSESSEE COMPANY, FILED THE DETAIL S. ON PERUSAL OF THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY , AO NOTICED THAT DURING THE FINANCIAL YEAR 2011-12, THE ASSESSE E COMPANY DEBITED INTEREST EXPENSES AMOUNTING TO RS. 1,74,48, 000/- TOWARDS DELAYED PAYMENT OF IDC/EDC CHARGES TO THE HARYANA G OVERNMENT. AO OBSERVED THAT THE AMOUNT OF RS. 1,74,48,000/-, P AID BY THE ASSESSEE COMPANY AS INTEREST TO HUDA FOR DELAYED P AYMENT OF THE EXTERNAL DEVELOPMENT CHARGES (EDC) AND CLAIMED AS R EVENUE EXPENDITURE, WAS DISALLOWED AS BEING PENAL AND CAP ITAL IN NATURE AND ACCORDINGLY, ASSESSED THE INCOME OF THE ASSESSEE AT TOTAL LOSS (-) RS. 3 6,37,38,926/- VIDE ORDER DATED 02.3.2015 PASSED U/S . 143(3) OF THE ACT. 3. AGAINST THE ORDER OF THE AO, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE IMPUGNED ORDER DATED 21.8.2015 HAS PARTLY ALLOWED THE APPEAL BY ALLOWING RS. 1,70,22,000/- AND TREATE D IT AS BUSINESS EXPENDITURE BEING REVENUE IN NATURE, AND RS. 4,26,0 00/- WAS NOT ALLOWED BEING PENALTY IN NATURE AND CONFIRMED THE S AME. 4. AGGRIEVED WITH THE AFORESAID IMPUGNED ORDER OF T HE LD. CIT(A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST N OT ALLOWING RS. 4,26,000/- BEING PENALTY IN NATURE AND CONFIRME D. 5. AT THE TIME OF HEARING, LD. COUNSEL OF THE ASSES SEE HAS STATED THAT ISSUE IN DISPUTE IS SQUARELY COVERED BY THE OR DER DATED 20.11.2012 OF THE HONBLE DELHI HIGH COURT IN THE C ASE OF CIT VS. ENCHANTE JEWELLERY LTD. PASSED IN IT APPEAL NO. 100 6 OF 2001 REPORTED IN [2013] 40 TAXMANN.COM 216 (DELHI) AND R EQUESTED THAT FOLLOWING THE SAID DECISION THE ADDITION IN DISPUTE MAY BE DELETED. 6. LD. DR RELIED UPON THE ORDER OF THE AUTHORITIES BELOW. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORDS ESPECIALLY THE IMPUGNED ORDER AS WELL AS THE CASE L AW CITED BY THE LD. COUNSEL OF THE ASSESSEE. FOR THE SAKE OF CONVEN IENCE, THE OBSERVATION OF THE HONBLE HIGH COURT IN THE CASE O F CIT VS. ENCHANTE JEWELLERY LTD. PASSED IN IT APPEAL NO. 1006 OF 2001 DATED 20.11.2012 REPORTED IN [2013] 40 TAXMANN.COM 216 (D ELHI) [HEADS NOTES ONLY] ARE REPRODUCED AS UNDER:- 4 SECTION 37(1) OF THE INCOME TAX ACT, 1961 BUSINESS EXPENDITURE ALLOWABILITY OF [PENALTY/ILLEGAL PAYMENTS] ASSESSEE WAS ENGAGED IN MANUFACTURE AND TRADE OF GOLD JEWELLERY ASSESSEE CLAIMED THAT IT USED TO IMPORT JETWELLERY MANUFACTURING MACHINERY UNDER EXPORT PROMOTION COUNCIL GOODS SCHEME (EPCG SCHEME) AT A CONCESSIONAL RATE WITH AN EXPORT OBLIGATION WHICH IT COULD NOT FULFILL AND, THUS, WAS REQUIRED TO PAY INTEREST TO DGFT ASSESSEES CLAIM FOR DEDUCTION OF INTEREST WAS REJECTED ON GROUND THAT SAID PAYMENT WAS PENAL IN NATURE COMMISSIONER (APPEALS) AS WELL AS TRIBUNAL HELD THAT AMOUNT PAID WAS NOT PENAL IN NATURE AS MUCH AS IT WAS AS PER DECLARED POLICY OF GOVERNMENT AND OCCASIONED BY FAILURE OF ASSESSEES CONDUCT WAS AN OFFENCE OR THAT IT DID ANYTHING THAT WAS PROHIBITED BY LAW, PAYMENT IN QUESTION DID NOT FALL WITHIN MISCHIEF OF EXPLANATION BELOW SECTION 38(12) HELD, YES WHETHER, THEREFORE, ASSESSEES CLAIM WAS TO BE ALLOWED HELD, YES [PARA 5] [IN FAVOUR OF ASSESSEE] 5 8. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND RESPECTFULLY FOLLOWING THE PRECEDENT, AS AFORESAID, WE ARE OF THE CONSIDERED VIEW THAT THE FACTS AND CIRCUMSTANCES O F THE CASE OF THE ASSESSEES CASE IS EXACTLY THE SIMILAR AND IDENTIC AL TO THE DECISION OF THE HONBLE HIGH COURT IN THE CASE OF CIT VS. ENCHA NTE JEWELLERY LTD. (SUPRA). THEREFORE, RESPECTFULLY FOLLOWING THE AFO RESAID DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ENCHANTE JEWELLERY LTD. (SUPRA), THE ADDITION OF RS. 4,26,00 0/- CONFIRMED BY THE LD. CIT(A) OUT OF INTEREST PAYABLE IN EDC CHARG ES TERMING THE SAME AS PENAL IN NATURE IS HEREBY DELETED AND THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS ALLOWED. 9. IN THE RESULT, THE ASSESSEES APPEAL STANDS AL LOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 06-09-2017. SD/- SD/- (PRASHANT MAHARISHI) (H.S. SIDHU) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :06-09-2017 SR BHATANGAR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A), NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI.