ACIT 6(3), MUMBAI V. GLOBAL PROSERV LTD, NAVI MUMBAI

ITA 6141/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79004 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 22-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: DR K SHIVRAM
• Keywords: Opportunity of being heard; Revenue expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G, BENC H MUMBAI . . , ..'#. , BEFORE SHRI B.R.BASKARAN, AM & DR.S.T.M.PAVALAN, JM ./ ITA NO.6141/MUM/2012 ( % % % % / ASSESSMENT YEAR :2008-09) ACIT 6(3), MUMBAI-400 020 VS. M/S GLOBAL PROSERV LT D., EL III, GLOBAL ENCLAVE, TTC INDL. ESTATE, MIDC, MAHAPE, NAVI MUMBAI- 400 710 & ./ ' ./ PAN/GIR NO. : AAACE 7830 M ( &( / APPELLANT ) .. ( )*&( / RESPONDENT ) + ++ + , , , , /REVENUE BY : MR. R.K.SAHU -. + ++ + , , , , /ASSESSEE BY : DR. K.SHIVRAM + .# / DATE OF HEARING : 22 ND MAY, 2014 /0% + .# / DATE OF PRONOUNCEMENT : 28 TH MAY, 2014 1 1 1 1 / O R D E R PER B.R.BASKARAN (A.M.) : THE APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 17-07-2012 PASSED BY LD CIT(A) -12, MUMBAI AND IT R ELATES TO THE ASSESSMENT YEAR 2008-09. 2 . THE REVENUE IS AGGRIEVED BY THE DECISION TAKEN BY THE LD CIT(A) IN PARTIALLY DELETING THE DISALLOWANCE OF INTEREST EXP ENDITURE. 3 . THE FACTS RELATING TO THE ISSUE ARE STATED IN BRI EF. THE ASSESSEE HAD CLAIMED FINANCE CHARGES OF RS.1,48,00,667/- DURING THIS YEAR IN ITS RETURN OF INCOME. THE AO NOTICED THAT THE SAID FINANCE CH ARGES WERE INCURRED FOR CAPITAL REQUIREMENTS OF THE ASSESSEE COMPANY. HE FURTHER NOTICED THAT THE ASSESSEE HAS SHOWN WORK IN PROGRESS TO THE TUNE OF RS.87.89 CRORES ITA NO.6141/12 2 UNDER THE HEAD INVENTORIES. ACCORDINGLY, THE AO TOOK THE VIEW THAT THE ASSESSEE HAS USED THE BORROWED FUNDS FOR THE PURPOS E OF WORK IN PROGRESS AND ACCORDINGLY DISALLOWED THE CLAIM OF FI NANCE CHARGES BY INCREASING THE AMOUNT OF WORK IN PROGRESS BY THE AMOUNT OF SAID DISALLOWANCE, I.E., THE AO HAS HELD THAT THE FINANC E CHARGES SHOULD BE INCLUDED IN THE VALUE OF WORK IN PROGRESS AND ACCOR DINGLY DISALLOWED THE SAID CLAIM. 4 . IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) EXAMI NED THE DETAILS RELATING TO THE FINANCE CHARGES. THE ASSESSEE WAS HAVING TWO TYPES OF WORK IN PROGRESS VIZ., CAPITAL WORK IN PROGRESS AND THE WORK IN PROGRESS RELATING TO THE INVENTORY. THE ASSESSEE SUBMITTED THAT A SUM OF RS.64,49,625/-, OUT OF THE FINANCE CHARGES OF RS.1, 48,00,667/-, RELATE TO CAPITAL WORK IN PROGRESS. ACCORDINGLY IT WAS SUBMI TTED THAT THE BALANCE AMOUNT OF RS.83,51,040/- REPRESENTS EXPENDITURE OF REVENUE NATURE. THE LD CIT(A) WAS CONVINCED WITH THE SAME AND ACCORDING LY DIRECTED THE AO TO DELETE THE DISALLOWANCE TO THE EXTENT OF RS.83,5 1,040/- AND CONFIRMED THE ADDITION TO THE EXTENT OF RS.64,49,625/-. AGGR IEVED, THE REVENUE HAS FILED THIS APPEAL BEFORE US. 5 . WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. AS NOTICED EARLIER, THE ASSESSEE WAS HAVIN G TWO TYPES OF WORK IN PROGRESS VIZ., CAPITAL WORK IN PROGRESS AND THE WOR K IN PROGRESS RELATING TO THE INVENTORY. THOUGH IN THE RETURN OF INCOME T HE ASSESSEE CLAIMED ENTIRE AMOUNT OF FINANCE CHARGES AS REVENUE EXPENDI TURE, YET BEFORE LD CIT(A), THE ASSESSEE HAS CONCEDED THAT A SUM OF RS. 64,49,625/- RELATES ITA NO.6141/12 3 TO THE CAPITAL WORK IN PROGRESS AND ACCORDINGLY AGR EED FOR THE DISALLOWANCE OF THE SAME. 6 . NOW THE DISPUTE SURROUNDS AROUND THE BALANCE AMOUNT OF RS.83,51,040/-. WE HAVE ALREADY NOTICED THAT THE D ISALLOWANCE MADE BY THE AO IS NOT AN ABSOLUTE DISALLOWANCE, I.E., THE A O HAS ONLY INCLUDED THE FINANCE CHARGES IN THE VALUATION OF WORK IN PROGRE SS UNDER THE HEAD INVENTORY (WIP INVENTORY). UNDER THIS SCENARIO, THE QUESTION THAT ARISES IS WHETHER THE AO WAS JUSTIFIED IN INCLUDING THE AMOUNT OF FINANCE CHARGES IN THE COST OF WIP INVENTORY. IN OUR VI EW, MERELY HOLDING THAT THE AMOUNT OF RS. 83,51,040/- REPRESENTS REVENUE EX PENDITURE WOULD NOT ANSWER THE ABOVE SAID QUESTION. 7 . THERE SHOULD NOT BE ANY DISPUTE THAT THE VALUA TION OF INVENTORIES WOULD DEPEND UPON THE METHOD OF VALUATION CONSISTEN TLY FOLLOWED BY THE ASSESSEE. HENCE, IT IS REQUIRED TO BE SEEN AS TO W HETHER THE ASSESSEE, FOR THE PURPOSE OF VALUING ITS INVENTORIES, IS INCL UDING THE FINANCE CHARGES IN THE COST OF WIP INVENTORIES OR NOT. THE DISP UTE CITED ABOVE, IN OUR VIEW, SHOULD HAVE BEEN DECIDED BY CONSIDERING THE M ETHOD OF VALUATION CONSISTENTLY FOLLOWED BY THE ASSESSEE. 8 . WE NOTICE THAT NEITHER THE AO NOR THE LD CIT( A) CONSIDERED THE METHOD OF VALUATION OF WIP INVENTORIES CONSISTE NTLY FOLLOWED BY THE ASSESSEE. HENCE, IN OUR VIEW, THIS ISSUE REQUIRES PROPER EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO EXAMINE THE ISSUE AFR ESH IN THE LIGHT OF ITA NO.6141/12 4 DISCUSSIONS MADE SUPRA. THE ASSESSEE SHOULD BE GIV EN NECESSARY OPPORTUNITY OF BEING HEARD. 9 . IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS T REATED AS ALLOWED FOR STATISTICAL PURPOSES. - .2 + 3+ 456 7. + . 89 ORDER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH MAY, 2014. 1 + /0% : ;2 28 TH MAY,2014 0 + < SD/- SD/- ( . . '# . ) (DR.STM PAVALAN) ( . . ) (B.R.BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; ; DATED 28/05/2014 ). . /PKM , . / PS 1 1 1 1 + ++ + ).= ).= ).= ).= >=%. >=%. >=%. >=%. / COPY OF THE ORDER FORWARDED TO : 1 1 1 1 / BY ORDER, 4 44 4 / 8 8 8 8 ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. &( / THE APPELLANT 2. )*&( / THE RESPONDENT. 3. ? ( ) / THE CIT(A), MUMBAI. 4. ? / CIT 5. =@< ). , , / DR, ITAT, MUMBAI 6. < A / GUARD FILE. *=. ). //TRUE COPY//