Moonlight Tools (P) Ltd., Ludhiana V. DCIT, Ludhiana

ITA 593/CHANDI/2016

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 9829 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-07-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2007-2008
• Appeal Filed On: 17-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Assessee Lawyers: S C JAIN
• Keywords: Business expenditure; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES SMC CHANDIGARH BEFORE SHRI GEORGE GEORGE K. JUDICIAL MEMBER ITA NO.593 /CHD/2016 (ASSESSMENT YEAR: 2007-08) MOONLIGHT TOOLS (P) LTD., VS. THE D.C.I.T., VILLAGE JASPALON, G.T. ROAD, CC-II, DORAHA, DISTT. LUDHIANA. LUDHIANA. PAN NO. AADCM4974D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S.C. JAIN RESPONDENT BY : SHRI S.K. MITTAL, DR DATE OF HEARING : 30.06.2016 DATE OF PRONOUNCEMENT : 01.07.2016 O R D E R THIS APPEAL AT THE INSTANCE OF THE ASSESS EE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-5, LUDHIANA DATED 18.3.2016 RELATING TO ASSESSMENT YEAR 2007-08, PASSED UNDER SECTION 250(6 ) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. THE SOLITARY ISSUE FOR MY CONSIDERATION IS , WHETHER THE CIT (APPEALS) IS JUSTIFIED IN CONFIRMING THE DI SALLOWANCE OF EXPENSES AMOUNTING TO RS.1,07,940/- MADE BY THE ASS ESSING OFFICER . 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE AS FO LLOWS : THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF AUTO PARTS. FOR THE ASSESSMENT YE AR 2007- 08, THE RETURN OF INCOME WAS FILED ON 30.10.2007 DE CLARING NIL INCOME. THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT WAS COMPLETED BY MAKING AN ADDITION OF RS.1,21,541/ -. AMONG OTHER ADDITIONS, THE ASSESSING OFFICER MADE A N ADDITION OF RS.1,07,940/- BY DISALLOWING THE EXPEND ITURE CLAIMED BY THE ASSESSEE. THIS EXPENDITURE CLAIMED BY THE ASSESSEE WAS A PAYMENT MADE TO PUNJAB STATE ELECTRI CITY BOARD (PSEB) BEING USAGE OF EXCESS LOAD DURING THE PEAK HOURS. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE PAYMENT IS IN THE NATURE OF PENALTY AND THE SAME CA NNOT BE ALLOWED AS A BUSINESS EXPENDITURE. 4. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE PREFERRED APPEAL TO THE FIRST APPELLATE AU THORITY. THE CIT (APPEALS) CONFIRMED THE ACTION OF THE ASSES SING OFFICER ON TWO COUNTS, NAMELY THAT THE SAID EXPENSE S WERE INCURRED FOR INFRACTION OF LAW BY USING UNAUTHORIZE D LOAD AND, THEREFORE, IS NOT AN ALLOWABLE EXPENDITURE. SECOND LY, THE CIT (APPEALS) WAS OF THE VIEW THAT THE CHARGES ARE NOT DIRECTLY RELATED TO THE UNITS CONSUMED AND, THEREFORE, IT IS A CAPITAL EXPENDITURE IN NATURE AND NOT A REVENUE EXPENDITURE . 5. AGGRIEVED BY THE ORDER OF THE CIT (APPEALS), TH E ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. THE LEA RNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE 3 BEFORE THE LOWER AUTHORITIES. THE LEARNED D.R. WAS DULY HEARD. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE HAD PRO DUCED IN THE PAPER BOOK, A PHOTOCOPY OF THE CERTIFICATE ISSU ED BY THE SDO, PSEB, WHEREIN IT IS CLEARLY STATED THAT THE SU M HAS BEEN PAID FOR EXCESS LOAD CHARGES. THE ASSESSEE HAS USE D 300.68 EXCESS LOAD AS ON THE DATE OF INSPECTION. THE AMOUN T PAID IS FOR USAGE OF LOAD IN EXCESS SANCTIONED TO THE ASSES SEE. THE ASSESSEE HAS ALSO FURNISHED PHOTOCOPY OF THE RECEIP T OF PAYMENT OF RS.1,07,940/-. THE PAYMENT IS FOR THE ELECTRICITY CONSUMED FOR THE MANUFACTURING ACTIVITIES OF THE AS SESSEE. THEREFORE, IT CANNOT BE STATED THAT THE PAYMENT IS FOR ANY INFRACTION OF LAW. ON THE CONTRARY, IT HAS A DIREC T NEXUS IN THE MANUFACTURING ACTIVITIES OF THE ASSESSEE. 7. ON IDENTICAL FACTS, THE I.T.A.T., CHANDIGARH BE NCH IN THE CASE OF DCIT VS. M/S OSWAL WOOLLEN MILLS LT D. IN ITA NO.1134/CHD/2011 HAD DECIDED THE ISSUE IN PARAS 15 AND 16 OF THE ORDER AND THE SAME READ AS FOLLOWS : 15. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT AND THE TRIBUNAL IN ASSESSEES O WN CASE, WE HOLD THAT THE EXCESS PEAK LOAD CHARGES LEVIED BY THE PSEB PAID BY THE ASSESSEE DURING THE YEAR UNDER CONSIDER ATION WERE ALLOWABLE EXPENDITURE IN THE HANDS OF THE ASSE SSEE AS BEING RELATABLE TO CARRYING ON THE BUSINESS OF THE ASSESSEE COMPANY. THE TOTAL EXPENDITURE PAID BY THE ASSESSE E DURING THE YEAR UNDER CONSIDERATION WAS RS.2.04 CRORES. T HE HON'BLE SUPREME COURT IN CIVIL APPEAL FILED BY THE ASSESSEE AGAINST PSEB & OTHERS (SUPRA) VIDE JUDGMENT DATED 4 28.4.2006 HAD REDUCED CHARGES TO RS.31,47,310/- AND THE ASSESSEE WAS ENTITLED TO REFUND OF RS.1,72,96,036/- , WHICH HAS BEEN SHOWN AS INCOME BY THE ASSESSEE IN THE SUB SEQUENT YEAR I.E. ASSESSMENT YEAR 2006-07. THE ASSESSEE HA D ALREADY DECLARED THE INCOME TO THE EXTENT OF RS.1.73 CRORES IN THE SUCCEEDING YEAR, WHICH HAS BEEN TAXED IN THE HANDS OF THE ASSESSEE. THE SAID EXPENDITURE IS DULY ALLOWABLE I N THE HANDS OF THE ASSESSEE AND THE BALANCE EXPENDITURE O F RS.31,47,310/- IS ALSO DIRECTED TO BE ALLOWED BY TH E ASSESSING OFFICER IN VIEW OF OUR FINDING IN THE PAR AS HEREINABOVE. IN VIEW THEREOF, GROUND OF APPEAL NO. 4 RAISED BY THE ASSESSEE ON THE MERITS IS ALLOWED AND THE GR OUNDS OF APPEAL NOS.1 AND 2 RAISED BY THE REVENUE ARE DISMIS SED. IN VIEW OF OUR ALLOWING THE ISSUE ON MERITS OF APPE AL, WE ARE NOT ADJUDICATING THE ISSUE OF REOPENING OF ASSESSME NT UNDER SECTION 147/148 OF THE ACT. 16. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED AND THE APPEAL OF THE REVENUE IS DISMISSED . 8. THE HON'BLE COORDINATE BENCH OF TRIBUNAL IN THE CASE OF DCIT VS. M/S OSWAL WOOLLEN MILLS LTD. (SUPR A) HAD FOLLOWED THE JUDGMENT OF HON'BLE JURISDICTIONAL HIG H COURT IN THE CASE OF CIT VS. HERO CYCLES LTD., WHEREIN IDEN TICAL PAYMENT MADE BY THE ASSESSEE IN THAT CASE WAS ALLOW ED AS A DEDUCTION HOLDING THE SAME IS NOT A PENALTY. THE R ELEVANT FINDING OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. HERO CYCLES LTD. (SUPRA) READS AS UNDER : 12. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. IN OUR CONSIDERED VIEW, THERE IS NO DIS TINCTION BETWEEN THE NATURE OF THE PAYMENT MADE BY THE ASSESSEE TO T HE PSEB IN THE CASE OF INDUSTRIAL CABLES 9 INDIA) LTD. ( SUPRA) AND IN THE CASE OF THE ASSESSEE. SINCE THE CLAIM OF THE ASSESSEE IN THE CASE OF INDUSTRIAL CABLES ( INDIA ) LTD. (SUPRA) HAS BEEN HELD NOT TO BE IN THE NATURE OF PENALTY, WE RESPECTFULLY FOLLOWING THE ORDER OF THE HO N'BLE PUNJAB 5 AND HARYANA HIGH COURT IN THE CASE OF INDUSTRIAL CABLE S ( INDIA) LTD. ( SUPRA) HOLD THAT THE ASSESSEE IS ENTITLED, TO DE DUCTION ON ACCOUNT OF EXTRA CHARGES PAID TO THE PSEB FOR DRAWIN G EXTRA LOAD IN PEAK HOURS. THE ADDITION OF RS.11,83,050 IS ACCORDI NGLY DELETED. 9. IN VIEW OF THE ABOVE-SAID REASONING AND THE JUD ICIAL PRONOUNCEMENT CITED SUPRA, I HOLD THAT THE AMOUNT P AID TO PSEB AMOUNTING TO RS.1,07,940/- IS TO BE ALLOWED AS BUSINESS EXPENDITURE. IT IS ORDERED ACCORDINGLY. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 1 ST DAY OF JULY, 2016 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER DATED : 1 ST JULY, 2016 *RATI* COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT(A)/TH E CIT/THE DR. ASSISTANT REGISTRAR, ITAT, CHANDIGARH