Indo Hongkong Industries (P) Ltd., New Delhi V. DCIT, Circle- 12(1), New Delhi

ITA 6247/DEL/2017

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0191 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 09-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GAURAV DUDEJA
• Assessee Lawyers: SOBAGYA AGARWAL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 271(1)(c)

Judgement Text

ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: C NEW DELHI BEFORE SHRI G.S. PANNU, HONBLE VICE PRESIDENT & SHRI K.N. CHARY, JUDICIAL MEMBER ITA NO.-6247/DEL/2017 (ASSESSMENT YEAR:2006-07) INDO HONGKONG INDUSTRIES (P) LTD., B-56, SHIVALIK MALVIYA NAGAR NEW DLEHI. PAN NO. AAACI0265N VS. DCIT, CIRCLE 12(1) NEW DELHI. APPELLANT RESPONDENT ASSESSEE BY SH. SOBAGYA AGARWAL, ADV. REVENUE BY SH. GAURAV DUDEJA, SR. DR DATE OF HEARING: 30 .12.2020 DATE OF PRONOUNCEMENT : 30 .12.2020 ORDER PER K. NARASIMHA CHARY, JM AGGRIEVED BY THE ORDER DATED 30/08/2017 IN APPEAL NO. 67/2017- 18/CIT (A), NEW DELHI PASSED BY THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS)-22 DELHI (LD. CIT(A)), IN THE CASE OF M /S INDO HONG KONG INDUSTRIES (P) LTD (THE ASSESSEE) FOR THE ASSESSM ENT YEAR 2006-07 CONFIRMING THE PENALTY, ASSESSEE PREFERRED THIS APP EAL. 2. BRIEF FACTS OF THE CASE ARE THAT FOR THE ASSESSM ENT YEAR 2006-07, THE ASSESSEE FILED THE RETURN OF INCOME ON 30/11/2006 S HOWING A TOTAL INCOME ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 2 OF RS. 12, 48, 000/-AND DURING THE COURSE OF ASSESS MENT PROCEEDINGS, LEARNED ASSESSING OFFICER MADE AN ADDITION OF RS. 1 , 19, 56, 652/-ON ACCOUNT OF DEFAULT REVENUE EXPENDITURE, ADMINISTRATIVE EXPE NSES, BUSINESS PROMOTION AND DEPRECIATION. THE CLAIM OF THE ASSESS EE THAT THE DEFAULT REVENUE EXPENSES TO THE TUNE OF RS. 1, 00, 43, 676/ -DEBITED IN P&L ACCOUNT WAS DENIED AND SUCH AN EXPENDITURE WAS INADMISSIBLE BUT THE LEARNED ASSESSING OFFICER ALLOWED DEPRECIATION ON SUCH ACCO UNT BY TREATING IT AS CAPITAL EXPENDITURE. PROCEEDINGS UNDER SECTION 271( 1)( C ) OF THE ACT WERE INITIATED SIMULTANEOUSLY AND BY ORDER DATED 21/3/20 16 PASSED UNDER SECTION 271(1)( C ) OF THE ACT, LEARNED ASSESSING O FFICER LEVIED A PENALTY OF RS. 33, 80, 701/-. 3. AGGRIEVED BY THE SAME, ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT THOUGH THE LD. CIT(A) IN THE QUANTUM APPEAL OBSERVED THAT THERE IS NO CONCEPT OF DEFERRED REVEN UE EXPENDITURE UNDER THE INCOME TAX ACT, 1961, THE HONBLE APEX COURT IN THE CASE OF TAPARIA TOOLS LTD VS. JCIT HELD THAT IN CASES WHERE THE ASS ESSEE HIMSELF WANTS TO SPREAD THE EXPENDITURE OVER A PERIOD OF ENSUING YEA RS, IT CAN BE ALLOWED ONLY IF THE PRINCIPLE OF MATCHING CONCEPT IS SATI SFIED, WHICH UP TO NOW HAS BEEN RESTRICTED TO THE CASES OF DEBENTURES. BASING ON SUCH PLEA AND ALSO CONTENDING THAT THE ASSESSEE DID NOT CONCEAL ANY IN COME NOR DID FURNISH ANY INACCURATE PARTICULARS, ASSESSEE PRAYED TO DELE TE THE PENALTY. LD. CIT(A) HOWEVER DID NOT AGREE WITH THE ASSESSEE AND REFERRI NG TO THE DECISION OF THEHONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. ANGEL TECHNOLOGIES LTD TS 743 HC 2014 (DELHI) OBSERVED THAT THE ASSESSEE WOUL D NORMALLY RELY UPON LEGAL OPINION OF CHARTERED ACCOUNTANTS, WHO WAS REQ UIRED TO AUDIT ACCOUNT OF COMPANY AND ALSO SUBMIT AN AUDIT REPORT AND THER EFORE, THE CLAIM OF THE ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 3 ASSESSEE IN RESPECT OF DEFERRED REVENUE EXPENDITURE AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS. HENCE THIS APPEAL BY THE ASSESSEE. 4. LD. DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE VERY CLAIM PREFERRED BY THE ASSESSEE TOWAR DS DEFERRED REVENUE EXPENDITURE ITSELF IS SOMETHING FALSE, AND SUCH FAL SE STATEMENT EVEN AFTER HAVING THE EXPERT OPINION AMOUNTS TO FURNISHING OF INACCURATE PARTICULARS AND THEREFORE THE ORDER OF THE LD. CIT(A) DOES NOT WARRANT ANY INTERFERENCE IN THIS APPEAL; WHEREAS IT IS THE CONTENTION ON BEH ALF OF THE ASSESSEE THAT THERE IS NO CONCEALMENT OF ANY INCOME OR EXPENDITUR E EVEN ACCORDING TO THE REVENUE, BUT IT IS ONLY THE DIFFERENCE OF OPINI ON BETWEEN THE ASSESSEE AND THE LEARNED ASSESSING OFFICER THAT RESULTED IN THE ADDITION. IT IS FURTHER SUBMITTED THAT BY TREATING THE EXPENSE AS CAPITAL I N NATURE, AS A MATTER OF FACT, LEARNED ASSESSING OFFICER ALLOWED DEPRECIATIO N AT 10%, WHEREAS ACCORDING TO THE ASSESSEE BASING ON THE CONTRACT 50 % OF REVENUE EXPENDITURE IS CLAIMED IN RESPECT OF THE BLOCK OF I NITIAL 3 YEARS AND THE REMAINING 50% FOR THE SUBSEQUENT BLACK OF 3 YEARS A ND IT IS ONLY A MATTER OF THE PERCENTAGE OF EXPENDITURE ALLOWABLE BUT NOT ANY SUBSTANTIAL DIFFERENCE IS THERE. 5. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. THERE IS NO DISPUTE IN RESPECT OF FACTS. ACCORDING TO THE ASSESSEE DURING THE ASSESSMENT YEAR 2005-06, THE AS SESSEE INCURRED A SUM OF RS. 4, 43, 59, 569/-ON FURNISHING, MAKING WORKST ATIONS AND PROVIDING CERTAIN INFRASTRUCTURE AS PER THE SPECIFICATION GIV EN BY ONE CUSTOMER WHO HAD TAKEN SUCH FACILITIES ON HIRE FOR A PERIOD OF 3 5 MONTHS; THAT THE AGREEMENT WAS ALSO HAD A CLAUSE AS TO THE LOCKIN PE RIOD OF 36 MONTHS AT 50% OF THE GUARANTEED AMOUNT AND BASING ON THE OPIN ION RECEIVED FROM ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 4 ONE OF THE LEADING AND THE RENOWNED LAW FIRMS, NAME LY, M/S IN SOME PART IYENGAR ASSOCIATES AND ALSO KEEPING IN NATURE OF EX PENSES, IT WAS ESTIMATED THAT ALL THE FIXTURES AND FITTINGS WOULD HAVE A NEG LIGIBLE VALUE AFTER THE USE OF THE PRESENT OCCUPANT, AND DECIDED TO WRITE OF SU CH EXPENSES OVER A PERIOD OF 71 MONTHS, THAT IS, 1 ST TO 35 MONTHS IN FULL AND HALF OF NEXT 36 MONTHS RELATING TO LOCK IN PERIOD, ON THE PROPORTIO NATE RATIO WHICH CAME TO RS. 8, 36, 973/-FOR THE 1 ST 36 MONTHS AND RS. 4, 18, 486.50 FOR THE BALANCE 36 MONTHS FOR 50% LOCK IN PERIOD; AND THAT ACCORDINGLY WHILE FINALISING THE BALANCE SHEET OF THE COMPANY RELATING TO THE ASSESS MENT YEAR 2006-07 A SUM OF RS. 1, 00, 43, 676/-WAS DEBITED IN THE P & L ACCOUNT UNDER THE HEAD AND DEFERRED REVENUE EXPENSES. 6. LEARNED ASSESSING OFFICER HOWEVER DID NOT AGREE WITH THIS TREATMENT OF THE EXPENSE BY THE ASSESSEE AND WHILE TREATING I T AS CAPITAL EXPENSES AND WHILE DISALLOWING THE ENTIRE REVENUE EXPENSES, ALLO WED DEPRECIATION AT 10%. IT IS THEREFORE, CLEAR THAT ITS NOT THE CASE OF THE REVENUE THAT THE ASSESSEE CONCEALED ANY INCOME OR EXPENDITURE BUT TH EY HAVE ONLY CLAIMED THE EXPENSE AS DEFERRED REVENUE EXPENSES WHEREAS AC CORDING TO THE LEARNED ASSESSING OFFICER, IT HAS TO BE TREATED AS CAPITAL EXPENSES WHILE ALLOWING THE DEPRECIATION. ACCORDING TO THE ASSESSE E THEY HAVE ALLOWED 50% EXPENSES FOR THE 1 ST BLOCK OF 3 YEARS AND BALANCE 50% IN THE FOLLOWING BLOCK OF 3 YEARS, WHICH ROUGHLY WORKS OUT TO 16% PER ANNU M, AND THEREFORE THE DIFFERENCES WORKED OUT ONLY TO 6%. 7. IT IS CONTENDED BY THE LD. AR THAT THOUGH THERE IS NO CONCEPT OF DEFERRED REVENUE EXPENDITURE UNDER THE ACT, IN TAPA RIA TOOLS LTD (SUPRA) THE HONBLE APEX COURT OBSERVED THAT WHERE THE ASSE SSEE WANTS TO SPREAD THE EXPENDITURE OVER A PERIOD OF ENSUING YEARS, IT CAN BE ALLOWED ONLY IF THE ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 5 PRINCIPLE OF MATCHING CONCEPT IS SATISFIED, WHICH U PON NOW HAS BEEN RESTRICTED TO THE CASES OF DEBENTURES. FURTHER ACCO RDING TO THE ASSESSEE THEY HAVE OBTAINED THE OPINION OF M/S ARE SOME PART IYENGAR ASSOCIATES AS TO THE TREATMENT TO BE GIVEN TO HIS EXPENSE. FURTHE R, THE DIFFERENCE TO BE ALLOWED IS ONLY 6%. 8. ON A CAREFUL CONSIDERATION OF THE FACTS BEFORE U S, WE ARE SATISFIED THAT ITS NOT THE CASE OF CONCEALMENT OF INCOME NOR OF FURNISHING OF ANY INACCURATE PARTICULARS BUT IT IS ONLY A CASE OF DIF FERENCE OF OPINION BETWEEN THE ASSESSEE AND THE LEARNED ASSESSING OFFICER IN R ESPECT OF THE TREATMENT TO BE GIVEN TO A PARTICULAR EXPENDITURE. FURTHER TH E ASSESSEE DOES NOT STAND TO MUCH GAIN BY THIS DIFFERENTIAL TREATMENT ALSO. T HE ESSENTIAL INGREDIENTS TO ATTRACT THE PROVISIONS UNDER SECTION 271(1)( C ) OF THE ACT DO NOT SEEM TO HAVE BEEN EXISTING IN THIS CASE. 9. IN THIS CONTEXT WE WOULD LIKE TO REFER TO THE D ECISION OF THE JURISDICTIONAL HIGH COURT IN CIT VS. DCM LIMITED(20 13) 359 ITR 0101 (DELHI), WHEREIN THE HONBLE HIGH COURT OF DELHI HELD THAT L AW DOES NOT BAR OR PROHIBIT AN ASSESSEE FOR MAKING A CLAIM, WHICH HE B ELIEVES MAY BE ACCEPTED OR IS PLAUSIBLE; THAT WHEN SUCH A CLAIM IS MADE DUR ING THE COURSE OF REGULAR OR SCRUTINY ASSESSMENT, LIBERAL VIEW IS REQUIRED TO BE TAKEN AS NECESSARILY THE CLAIM IS BOUND TO BE CAREFULLY SCRUTINIZED BOTH ON FACTS AND IN LAW; THAT FULL PROBE AND APPRAISAL IS NATURAL AND NORMAL; THA T THREAT OF PENALTY CANNOT BECOME A GAG AND/OR HAUNT AN ASSESSEE FOR MAKING A CLAIM WHICH MAY BE ERRONEOUS OR WRONG, WHEN IT IS MADE DURING THE COUR SE OF THE ASSESSMENT PROCEEDINGS; THAT NORMALLY, PENALTY PROCEEDINGS IN SUCH CASES SHOULD NOT BE INITIATED UNLESS THERE ARE VALID OR GOOD GROUNDS TO SHOW THAT FACTUAL CONCEALMENT HAS BEEN MADE OR INACCURATE PARTICULARS ON FACTS WERE ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 6 PROVIDED IN THE COMPUTATION. LAW DOES NOT BAR OR PR OHIBIT A PERSON FROM MAKING A CLAIM, WHEN HE KNOWS THE MATTER IS GOING T O BE EXAMINED BY THE ASSESSING OFFICER. 10. IN CIT VS RELIANCE PETROPRODUCTS PVT LTD [ 2010] 322 ITR 158 HONBLE APEX COURTHELD THAT WHEN THE ASSESSEE PREFERRED A C LAIM, IT WAS UP TO THE AUTHORITIES TO ACCEPT ITS CLAIM IN THE RETURN OR NO T, BUT MERELY BECAUSE THE ASSESSEE HAD CLAIMED THE EXPENDITURE, WHICH CLAIM W AS NOT ACCEPTED OR WAS NOT ACCEPTABLE TO THE REVENUE, THAT BY ITSELF WOULD NOT ATTRACT THE PENALTY UNDER SECTION 271(1 )(C) OF THE ACT. IT WAS FURTHER HELD THAT IF THE CONTENTION OF THE REVENUE IS ACCEPTED, THEN IN CASE OF EVERY R ETURN WHERE THE CLAIM MADE IS NOT ACCEPTED BY ASSESSING OFFICER FOR ANY R EASON, THE ASSESSEE WILL INVITE PENALTY UNDER SECTION 271(1)(C) AND THAT IS CLEARLY NOT THE INTENDMENT OF THE LEGISLATURE. 11. FOR THE FOREGOING REASONS, WE ARE OF THE CONSI DERED OPINION THAT THERE IS NO BASIS FOR THE AUTHORITIES BELOW TO LEVY ARE SUSTAINED THE PENALTY AND THE SAME HAS TO BE DELETED. WE ACCORDINGLY ALLO W THE APPEAL AND DELETE THE PENALTY LEVIED BY THE LEARNED ASSESSING OFFICER . 12. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFTE R THE CONCLUSION OF THE HEARING IN THE VIRTUAL COURT ON 3 0/12/2020. SD/- SD/- (G.S. PANNU) (K. NARSIMHA C HARY) VICE PRESIDENT JUDICIAL MEMBER DATED: 30/12/2020 *KAVITA ARORA, SR. PS ITA NO. 6247/DEL/2017 INDO HONGKONG INDUSTRIES P. LT D. 7 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI