Ganapati Ropeways Pvt. Ltd., Kolkata V. ACIT, CC-XVIII, Kolkata, Kolkata

ITA 619/KOL/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7914 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 21-04-2011
• Court: TRIBUNAL
• Department Lawyers: SNEHOTPAL DUTTA
• Keywords: Capital asset; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH C , KOLKATA [BEFORE HONBLE SRI MAHAVIR SINGH, JM & HONBLE SRI SHAMIM YAHYA, AM] ITA NO.619/KOL/2011 ASSESSMENT YEAR : 2007-08 ( APPELLANT ) (RESPONDENT) GANAPATHI ROPEWAYS PVT.LTD. ..-VS- A.C.I.T., CENT RAL CIRCLE-XVIII, KOLKATA KOLKATA (PAN:AAACG 9562 A) FOR THE APPELLANT SHRI SUBASH AGARWAL, ADVOCATE FOR THE RESPONDENT SHRI SNEHOTPAL DUTTA, JCIT, SR.DR DATE OF HEARING : 30.09.2014 DATE OF PRONOUNCEMENT : 14. 10.2014. ORDER PER SHRI SHAMIM YAHYA, AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. C.I.T.(A)- CENTRAL-II, KOLKATA DT. 24.12.2010 AND PERTAINS TO ASSESSMENT YEAR 2007-08. 2. THE GROUNDS OF APPEAL RAISED IN ASSESSEES APPEA L READ AS UNDER :- 1. THAT UNDER THE FACTS AND CIRCUMSTANCES, THE LD. CIT(A)C-II/KOL ERRED IN LAW AS WELL AS IN FACTS IN CONFIRMING THE LD.ACIT,CC-XVIII/KOLK ATAS ADDITIONS/DISALLOWANCE OF RS.1,48,033/- INCURRED BY THE ASSESSEE FOR THE DEVE LOPMENT OF ABANDONED CHILDREN PART ON THE GROUND OF EXPENDITURE IN CAPITAL NATURE INS TEAD OF REVENUE XPENDITURE AS CLAIMED BY THE ASSESSEE. 2. THAT THE APPELLANT CRAVES LEAVE TO ADD, OR AMEND ANY GROUNDS OF APPEAL. 3. THE ASSESEE COMPANY IN THIS CASE RUNS A PASSENG ER ROPEWAY SERVICE AT NAINA DEVI IN HIMACHAL PRADESH. DURING THE COURSE OF EXAM INATION AO NOTED THAT IN THE P&L A/C THE ASSESSEE HAS SHOWN AN EXPENSE OF RS.1,4 8,033/- BEING REPAIR AND MAINTENANCE (CHILDREN PARK). ON QUERY IN THIS REGAR D THE ASSESSEE SUBMITTED AS UNDER : THE ASSESSEE DECIDED TO DEVELOP THE GROUND LEVEL S ITE FOR BEAUTIFICATION/PLAY GROUND FOR CHILDREN AND STARTED THE EARTH CUTTING/EARTH FILLIN G ACTIVITIES BY GIVING CONTRACT TO ONE ITA.NO.619/KOL/2011 GANAPATI ROPEWAYS PVT.LTD. A.YR.2007-08 2 M/S.JAGAT & CO. THE ASSAESSEE CALLED THE AFORESAID ASSIGNMENT AS CHILDREN PARK. THE ASSESSEE LATER ON REALIZED THAT THE PROPOSAL FOR CH ILDREN PARK MAY NOT EARN MUCH REVENUE AND THEREFORE MAY NOT BE ECONOMICALLY VIABL E AND DECIDED TO ABANDON THE PROJECT. HOWEVER, IN THE MEANTIME M/S. JAGAT & CO., THE CONTRACTOR, MADE SOME PROGRESS IN THE EARTH CUTTING/EARTH FILLING AND OTHER ALLIED WORK AND THEREFORE THE ASSESSEE AGREED TO PAY HIM RS.1,48,033/- WHICH HAVE BEEN PROVIDED A S REPAIRING CHARGES. IT IS FURTHER SUBMITTED THAT THE ASSESSEE H AVE MADE THE PAYMENT IN SUBSEQUENT YEAR TO THE AFORESAID CONTRACTOR AFTER DEDUCTION OF TDS AS UNDER .. CONSIDERING THE ABOVE, THE AO HELD THAT THE ASSESSE E COMPANY WAS TRYING TO DEVELOP A CAPITAL ASSET IN THE FORM OF CHILDREN PARK WHICH DI D NOT MATERIALIZE. SO THE AO HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE FOR T HE PURPOSE WERE OF CAPITAL NATURE AND CANNOT BE ALLOWED AS REVENUE EXPENSES. 4. BEFORE THE LD. CIT(A) ASSESSEE INTER ALIA SUBMIT TED THAT THE ASSESSEE DID NOT TAKE UP ANY NEW PROJECT BUT INCURRED EXPENDITURE ON ACCOUNT OF BEAUTIFICATION OF THE EXISTING PROJECT AND THEREFORE THE EXPENSES INCUR RED THEREON WERE REVENUE IN NATURE. IT WAS SUBMITTED THAT THE ACTIVITY IN THE NAME OF C HILDREN PARK WAS SIMPLY BEAUTIFICATION OF THE SURROUNDING AREA TO MAKE IT M ORE ATTRACTIVE AND USABLE BY THE VISITORS AND THEIR CHILDREN. IT WAS SUBMITTED THAT THE EXPENDITURE SO INCURRED WERE ACCOUNTED FOR AS CAPITAL WORK-IN-PROGRESS IN THE AC COUNTS OF A.YR.2006-07, HOWEVER, IN THE FINANCIAL YEAR 2006-07 (A.YR.2007-08) ASSESS EE HAS DECIDED TO ABANDON THE PROJECT AND CLAIMED THE EXPENSES AS REVENUE EXPENSE S. HOWEVER, THE LD. CIT(A) WAS NOT CONVINCED. HE HELD THAT THE ASSESSEE ITSELF TRE ATED THE EXPENDITURE OF RS.1,48,033/- IN A.YR.2006-07 AS CAPITAL EXPENDITURE IN ITS BOOKS AND WROTE IT OFF IN A.YR.2007-08. HENCE THE LD. CIT(A) HELD THAT THE EXPENDITURE CANN OT BE ALLOWED AS REVENUE EXPENDITURE. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL B EFORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND CAREFULLY PER USED THE RECORDS. THE ASSESSEE IS RUNNING A PASSENGER ROPEWAY SERVICE AT NAINA DEVI IN HIMACHAL PRADESH. THE ASSESSEE INCURRED A SUM OF RS.1,48,033/- TO MAK E IMPROVEMENT OF THE AREA ITA.NO.619/KOL/2011 GANAPATI ROPEWAYS PVT.LTD. A.YR.2007-08 3 SURROUNDING THE ROPEWAY SYSTEM AT THE GROUND LEVEL FOR BEAUTIFICATION AND ALSO WANTED TO CREATE CERTAIN FACILITIES AS SMALL GREENERIES AN D PLAY GROUND FOR VISITORS AND THEIR CHILDREN. THESE WERE MEANT FOR BEAUTIFICATION OF TH E SURROUNDING AREA TO MAKE IT MORE ATTRACTIVE AND USEFUL FOR THE VISITORS AND THEIR CH ILDREN. THE ASSESSEE HAS ERRONEOUSLY PUT AN AMOUNT AS CAPITAL WORK IN PROGRESS IN THE PR EVIOUS YEAR, HOWEVER, IN THE CURRENT YEAR THE AMOUNT WAS CLAIMED AS REVENUE EXPENDITURE. IN OUR CONSIDERED OPINION THE ASSESSEES CLAIM IS COGENT ENOUGH TO QUALIFY AS REV ENUE EXPENSES. THE DEVELOPMENT AND BEAUTIFICATION OF THE SURROUNDING AREAS TO MAKE IT MORE ATTRACTIVE IS CERTAINLY A PART OF ASSESSEES CURRENT BUSINESS OF RUNNING ROPE WAY SERVICE AND IT CANNOT BE SAID TO BE GIVING RISE TO ANY CAPITAL EXPENDITURE. IN THIS REGARD THE FOLLOWING CASE LAWS RELIED UPON BY THE LD. COUNSEL OF THE ASSESSEE ALSO SUPPOR T THE CASE OF THE ASSESSEE. 1. INDO RAMA SYNTHETICS INDIA LTD. VS CIT 333 ITR 18 ( DELHI) 2. CIT VS PRIYA VILLAGE ROADSHOWS LTD. 332 ITR 594 (DE LHI) 3. KESORAM INDUSTRIES AND COTTON MILLS LTD. VS CIT 196 ITR 845 (CAL) 4. VANAJA TEXTILES LTD. VS CIT 208 ITR 161 (KER) 5.1. ACCORDINGLY IN THE BACKGROUND OF AFORESAID DIS CUSSION AND PRECEDENCE WE HOLD THAT THE EXPENDITURE INVOLVED SHOULD BE ALLOWED AS REVENUE EXPENDITURE. 6. IN THE RESULT THE APPEAL OF THE ASSESSEE STANDS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 14.10.2014. SD/- SD/- [ MAHAVIR SINGH ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 14.10.2014. R.G.(.P.S.) ITA.NO.619/KOL/2011 GANAPATI ROPEWAYS PVT.LTD. A.YR.2007-08 4 COPY OF THE ORDER FORWARDED TO: 1. GANAPATI ROPEWAYS PVT.LTD., 14B, CAMAC STREET, 4 TH FLOOR, KOLKATA-700017. 2 A.C.I.T., CENTRAL CIRCLE-XVIII, KOLKATA. 3 . CIT(A)-CENTRAL-II, KOLKATA. 4. CIT KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES