DCIT 10(3), MUMBAI V. RELIANCE HOME STORE LTD, NAVI MUMBAI

ITA 6185/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3518 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-08-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 07-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 37(1)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI BEFORE SHRI SAKTIJIT DEY(JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 6185 /MUM/2014 ASSESSMENT YEAR: 2010-11 DCIT 10(3) VS. RELIANCE HOME STORE LTD. R.NO. 45,14 TH FLOOR, RELIANCE CORPORATE PARK AAYAKAR BHAVAN, M.K. RD. GROUND FLOOR, BUILDING N O. 4 MUMBAI - 400020 C- WING, THANE BELAPUR RD. GHANSOLI, NAVI MUMBAI- 400701 PAN NO. AABCF1520G (APPELLANT) (RESPONDENT) REVENUE BY : SMT. AMRITA SINGH ASSESSEE BY : SHRI. VIJAY MEHTA DATE OF HEARING : 17/08/201 6 DATE OF PRONOUNCEMENT : 19/08/2016 ORDER PER N.K. PRADHAN, A.M THE APPEAL HAS BEEN FILED BY THE REVENUE. THE RELEV ANT ASSESSMENT YEAR 2010-11. THE APPEAL IS DIRECTED AGAINST THE OR DER OF THE LEARNED CIT(A) 22 AT MUMBAI AND ARISES OUT OF ASSESSMENT COMPLETED BY THE ASSESSING OFFICE (AO) UNDER SECTION 143(3) OF THE INCOME TAX ACT 196 1 (HEREINAFTER THE ACT). 2. THE SOLE GROUND RAISED BY THE REVENUE IN THIS AP PEAL IS THAT THE LEARNED CIT(A) ERRED IN DIRECTING THE AO TO TREAT AN EXPEND ITURE OF RS. 5,65,23,676/- AS REVENUE EXPENDITURE WHICH WAS TREATED BY THE AO AS CAPITAL EXPENDITURE. ALSO IT IS RAISED THAT THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT THE SAID EXPENDITURE WAS PRE OPERATIVE IN NATURE AN D IS NOT COVERED UNDER SECTION 37(1) OF THE ACT. 2 3. THE AO MADE AN ADDITION OF RS. 5,65,23,676/- ON THE REASON THAT (I) IN NOTES TO SCHEDULE C (FIXED ASSETS) TO THE BALANCE S HEET, THE SAID AMOUNT IS SHOWN AS PRE OPERATIVE EXPENSES, WHICH CANNOT BE AL LOWED AS REVENUE EXPENDITURE FOR THE YEAR UNDER CONSIDERATION, (II) PRE COMMENCEMENT PERIOD EXPENDITURE IS REQUIRED TO BE TREATED AS CAPITAL WO RK-IN-PROGRESS ONLY, AS IS DONE IN THE BOOKS OF THE ASSESSEE, (III) THE ASSESS EE ITSELF IN ITS BOOKS OF ACCOUNT TREATED THE SAME TO BE CAPITAL IN NATURE AN D ACCORDINGLY CAPITALIZED THE SAME AS CAPITAL WIP. AS PER CLAUS E NO. 17 TO THE TAX AUDIT REPORT, THE ASSESSEE HAD LAUNCHED A PROJECT AND THE SAME IS IMPLEMENTED IN A PHASED MANNER. IF THE SAID EXPENDITURE PERTAINS T O A PARTICULAR PROJECT, THEN ALL THE EXPENDITURE INCURRED ON THE PROJECT T ILL IT IS IMPLEMENTED, NEEDS TO BE CAPITALIZED AND THE SAME CANNOT BE CLAIMED AS REVENUE. 4. THE LEARNED CIT(A) DELETED THE ABOVE ADDITION OF RS. 5,65,23,674/- RELYING ON THE ORDER DATED 23/10/2013 OF THE ITAT D BENCH MUMBAI IN THE CASE OF RELIANCE FOOTPRINT LTD. VS. ACIT- CIRCLE 10(3) IN ITA NO. 5997/M/2011 FOR THE AY 2008-09. 5. THE LEARNED DR RELIED ON THE ORDER PASSED BY THE AO. 6. THE LEARNED COUNSEL OF THE ASSESSEE RELIED ON TH E FOLLOWING DECISIONS : SL.NO. PARTICULARS DATE 1. RELIANCE FOOTPRINT LTD. VS. ACIT FOR AY 2008-09 IN ITA NO. 5997/MUM/2011 23/10/2013 2 RELIANCE HOME STORE LTD. VS. ACIT FOR AY 2008-09 IN ITA NO. 5996/MUM/2011 15/10/2015 3 DCIT VS. RELIANCE SUPPLY CHAIN SOLUTIONS LTD. FOR AY 2008-09 IN ITA NO. 5759/MUM/2012 27/11/2013 4. ACIT VS. RELIANCE SUPPLY CHAIN SOLUTIONS LTD. FO R AY 2009-10 IN ITA NO. 6342/MUM/2013 25/03/2015 5. ACIT VS. RELIANCE SUPPLY CHAIN SOLUTIONS LTD. FO R AY 2010-11 IN ITA NO. 1273/MUM/2014 13/08/2015 6 RELIANCE WELLNESS LTD. VS. DCIT FOR AY 2008-09 IN ITA NO. 3444/MUM/2013 09/09/2015 7 RELIANCE GEMS & JEWELS LTD. VS. DCIT FOR AY 2008- 09 IN ITA NO. 3855/MUM/2013 28/10/2015 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD, WE FIND THAT THE ISSUE IN THE INSTANT APPEAL IS COVERED BY 3 THE DECISIONS CITED BY THE LEARNED COUNSEL OF THE A SSESSEE. A SIMILAR ISSUE AROSE BEFORE THE ITAT D BENCH MUMBAI IN THE CASE OF THE ASSESSEE FOR THE AY 2008-09 [ITA NO. 5996/MUM/2011]. IN THAT CASE ON SIMILAR GROUND A DISALLOWANCE OF RS. 4,08,41,533/- WAS MADE BY THE A O. THE TRIBUNAL FOLLOWING THE ORDER IN THE CASE OF RELIANCE FOOTPRINT LTD. (SUPRA) DELETED THE ADDITION MADE BY THE AO. FOR DISCUSSION, WE EXTRACT BELOW TH E RELEVANT PORTION OF THE ORDER PASSED BY THE ITAT IN THE SAID CASE . : IN THE LETTER SUBMITTED BY THE ASSESSEEE BEFORE AO IT IS CLEARLY MENTIONED THAT WHEN THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF EXPANSION OF BUSINESS WHICH IS ALREADY IN EXISTENCE AND, WHICH IS IN THE NATURE OF REVENUE, THEN THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE IRRESPECTIVE OF TH E TREATMENT GIVEN BY THE ASSESSEEE TO SUCH EXPENDITURE IN ITS BOOKS OF ACCOU NT. NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE AO TO NEGATE SUCH SUBMISSI ONS MADE BY THE ASSESSEE. THESE PROPOSITIONS PUT FORTH BY OF THE ASSESSEE BEF ORE AO ARE SUPPORTED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. KOTHARI AUTO PARTS MANUFACTURERS PVT. LTD. (SUPRA), AND THE DECI SION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. ALEMBIC GLASS INDUSTRI ES LTD. (SUPRA). THEREFORE, IT HAS TO BE HELD THAT THESE EXPENDITURES INCURRED BY THE ASS ESSEE ARE FOR THE PURPOSE OF EXPANSION OF ITS BUSINESS AND THOSE EXPENDITURE ARE IN THE NATURE OF REVENUE (BEING MOSTLY PAID TO EMPLOYEES). THESE ARE ALLOWAB LE IN THE YEAR ITSELF AS PER RATIO OF AFOREMENTIONED DECISION OF THE HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. KOTHARI AUTO PARTS MANUFACTURERS PVT. LTD. (SUPRA) AND HONBLE HIGH COURT OF GUJARAT IN THE CASE OF CIT VS. ALEMBIC GLASS IND USTRIES LTD. (SUPRA). THESE EXPENDITURES DID NOT CREATE ANY ASSET AND ALSO DID NOT PROVIDE ENDURING BENEFIT TO THE BUSINESS OF THE ASSESSEE SO AS TO SAY THAT T HE EXPENDITURE WAS CAPITAL IN NATURE. THEREFORE, WE HOLD THAT EXPENDITURE ARE ALL OWABLE TO THE YEAR UNDER CONSIDERATION IRRESPECTIVE OF THE FACT THAT ASSESSE E HAS GIVEN DUAL STATUS TO SUCH EXPENDITURE TO ITS BOOKS OF ACCOUNT VIS--VIS COMPU TATION OF INCOME FILED ALONG WITH RETURN. 7.1 AS THE ISSUE IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ABOVE ORDER, WE UPHOLD THE ORDER OF THE LEARNED CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT 19/08/2016 SD/- SD/- (SAKTIJIT DEY) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMB ER MUMBAI; DATED: 19/08/2016 AG(ON TOUR) 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A)- 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT. REGISTRAR) ITAT, MUMBAI