NV International Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 6257/DEL/2015

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 6538 (ITAT-DELHI)
• Duration Of Justice: 3 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 08-02-2016
• Assessment Year: 2012-2013
• Appeal Filed On: 26-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Principle of natural justice; Capital expenditure

Judgement Text

1 ITA NO. 6257/DEL /2015 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: A SMC, NEW DELHI BEFORE SHRI S.V. MEHROTRA, ACCOUNTANT MEMBER AND MS. SUCHITRA KAMBLE, JUDICIA L MEMBER I.T.A .N O.-6257/DEL/2015 (ASSESSME NT YEAR-2012-13) NV INTERNATIONAL PVT. LTD. 10 TH FLOOR, VANDANA BUILDING, 11, TOLSTOY MARG NEW DELHI AAACN3085B (APPELLANT) VS ITO WARD-17(3) ROOM NI. 225D, C.R. BUILDING NEW DELHI (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE O RDER DATED 8/10/2015 PASSED BY THE CIT (A) - 20, NEW DELHI. 2. THE GROUNDS OF APPEAL ARE FOLLOWS:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEA LS)- 30 (HEREIN AFTER CIT(A) IS BAD BOTH IN THE EYES OF LAW AND ON FACTS. 2. THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN L AW BY CONCLUDING THAT THE ASSESSEE HAS FAILED TO ESTABLIS H THAT FUNDS INVESTED IN THE FDS IS MEANT FOR CAPITAL APPELLANT BY SH. MANOJ ANAND, CA RESPONDENT BY T. VASANTHAN, DR DATE OF HEARING 08.02.2016 DATE OF PRONOUNCEMENT 08.03.2016 2 ITA NO. 6257/DEL /2015 EXPENDITURE & CONSEQUENTLY MAKING IT AS BASIS OF SUSTAINING ADDITIONS BY RS.1,64,077/- AND PRAYED FO R GRANTING RELIEF AGAINST IT. 3. THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN L AW BY NOT ADJUDICATING THAT ADDITION OF RS.1,64,847/- WAS MAD E WITHOUT CONFRONTING THE ASSESSEE BY A.O OF THE SAME AND IS AGAINST THE NATURAL JUSTICE & FAIRPLAY. ON THIS BASIS THE ORDER OF LD. CIT(A) IS DECLARED NULL & VOID & BALAN CE ASKED RELIEF OF RS.1,64,847/- BEING GRANTED TO ASSESSEE. 3. THE ASSESSEE COMPANY WAS INCORPORATED ON 6/6/199 4 WITH OBJECT TO CARRY ON BUSINESS OF TRADERS IMPORTERS, EXPORTERS AND REPRESENTATIVES OF ALL KINDS OF BEER LIQUOR, FOOD P RODUCTS ETC. DURING THE YEAR UNDER CONSIDERATION, THE COMPANY PU RCHASED A LAND AND WAS IN THE PROCESS OF SETTING UP OF DISTIL LERY AT VILLAGE BADOLI, DISTRICT AMBALA, HARYANA. PERUSAL OF THE B ALANCE SHEET SHOWED THAT THE ASSESSEE WAS HAVING FDRS OF RS.18, 75,000/- ON WHICH INTEREST OF RS.1,64,847/- WAS RECEIVED. THE SAME WAS APPEARING IN FORM 26 AS ALSO. THE ASSESSING OFFICE R OBSERVED THAT TDS U/S 194A WAS DEDUCTED BY THE ORIENTAL BANK OF C OMMERCE FOR PAYMENT OF INTEREST OF RS.64, 847/-. THE ASSESSEE DID NOT OFFER THE INTEREST INCOME FOR TAXATION AND TREATED IT AS A CA PITAL INCOME. THE ASSESSING OFFICER MADE AN ADDITION TO THAT EFFECT A ND HELD IT AS REVENUE INCOME. 4. BEING AGGRIEVED THE ASSESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT (A) HELD THAT THE ASSESSEE FAILED TO BRING OUT THAT THE FUND INVESTED IN THE FDRS WAS MEANT FOR CAPITAL EXPENDIT URE. THE CIT (A) UPHELD THE ORDER OF ASSESSING OFFICER. 3 ITA NO. 6257/DEL /2015 5. THE LD. AR SUBMITTED THAT THE GUARANTEE/FDR WERE MADE TO THE HARYANA STATE POLLUTION CENTRE BOARD FOR THE PR OJECT WHICH WAS UNDER CONSTRUCTION. THE SAME WAS ON RECORD BEFORE THE ASSESSING OFFICER. 6. THE LD. AR SUBMITTED THAT THE SAID BANK GUARANTE E (FDR WAS GIVEN FOR CONSTRUCTION OF FACTORY AS PER THE NORMS SET OUT THEREIN. THE PRODUCTION OF THE ASSESSEE STARTED ONLY IN SEPT EMBER 2014 AND THE ASSESSING OFFICER CANNOT TAKE THE SAME FOR THE ASSESSMENT YEAR 2012-14 AT PRESENT. AS PER THE BALANCE SHEET AND P ROFIT AND LOSS ACCOUNT, IT WAS CLEAR THAT THERE WAS NO REVENUE ACT IVITY CARRIED OUT BY THE ASSESSEE DURING THE YEAR. ALL FUNDS WERE US ED FOR CAPITAL EXPENDITURE ONLY. THE FDR WHICH WAS TREATED AS SUR PLUS POINTS WAS IN FACT A PRE-REQUISITE CONDITION TO HARYANA ST ATE POLLUTION CONTROL BOARD FOR PROVIDING GUARANTEE IN RESPECT OF CONSTRUCTION OF FACTORY AS PER THEIR NORMS. THUS, IT AMOUNTS TO CA PITAL EXPENDITURE. 7. THE LD. DR RELIED UPON THE ORDER OF CIT (A) AND ASSESSMENT ORDER. 8. WE HAVE PERUSED ALL THE RECORDS AND HEARD BOTH T HE PARTIES. THE ASSESSEE COMPANY WAS IN THE PROCESS OF SETTING UP A POWER PROJECT FOR WHICH ADDITIONAL SHARE CAPITAL WAS RAIS ED FROM VARIOUS SOURCES. THE FDR WAS A PRE-REQUISITE CONDITION FOR THE GUARANTEE BEFORE THE HARYANA STATE POLLUTION CENTRE BOARD. T HUS, IT CANNOT BE TREATED AS SURPLUS POINT. THEREFORE, THE CIT(A) AS WELL AS ASSESSING OFFICER BOTH OVER-LOOKED THE FACTUAL ASPE CT THAT THE 4 ITA NO. 6257/DEL /2015 ASSESSEE HAS NOT COMMENCED ANY BUSINESS ACTIVITY IN THIS PARTICULAR ASSESSMENT YEAR AND THE ENTIRE PROCESS W AS OF CAPITAL IN NATURE AND THE SAME CANNOT BE TREATED AS REVENUE IN COME. 9. IN RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED . THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 8 TH OF MARCH 2016. SD/- SD/- ( S. V. MEHROTRA) (SUCH ITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 08/03/2016 *R. NAHEED* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE 1. DRAFT DICTATED ON 09.02.2016 PS 2. DRAFT PLACED BEFORE AUTHOR 10.02.2016 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER .02.2016 JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. .02.2016 JM/AM 5 ITA NO. 6257/DEL /2015 5. APPROVED DRAFT COMES TO THE SR.PS/PS 08.02.2016 PS/PS 6. KEPT FOR PRONOUNCEMENT ON .02.2016 PS 7. FILE SENT TO THE BENCH CLERK 08.02.2016 PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.