West Bengal State Warehousing Corporation, Kolkata V. DCIT, CIR-2, KOLKATA, Karnataka

ITA 632/KOL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 0610 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 15-05-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S ALLONG YADEN CIT LD
• Assessee Lawyers: T P KAR FCA LD
• Keywords: Depreciation
• Section: 43B; 32

Judgement Text

1 ITA NO. 632/KOL/2015 WBSWHC IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH: KOL KATA BEFORE: SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JU DICIAL MEMBER I.T.A NO. 632/KO L/2015 A.Y: 2009- 10 WEST BENGAL STATE VS. D.C.I.T., CIR-2, KOLKATA WAREHOUSING CORPORATION PAN: AAACW2341R [APPELLANT] [RESPONDENT] FOR THE APPELLANT : SHRI T.P. KAR, FCA, LD.AR FOR THE RESPONDENT : SHRI SALLONG YADEN, ADDL.CI T, LD.SR.DR DATE OF HEARING : 09-11-2017 DATE OF PRONOUNCEMENT : 14-12-2017 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS), 1, KOLKATA D T. 18-03-2015 FOR THE A.Y 2009-10. 2. GROUND NO. 1 IS RELATING TO CONFIRMATION OF DI SALLOWANCE OF RS.33,00,058/- MADE ON ACCOUNT OF PROVISION FOR LEA VE ENCASHMENT BY THE CIT-A. 3. AT THE OUTSET, THE LD.AR SUBMITS THAT THE ISSUE IN HAND IS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY AN ORDER OF THIS TRIBUNAL ON A SIMILAR ISSUE IN THE CASE OF EXIDE INDUSTRIES LTD SUPRA DT. 30-08- 2017 IN I.T.A NO. 1508/KOL/2012 FOR THE A.Y 2007-0 8 AND ORDER DT. 20-01-2016 IN ITA NOS. 189 & 1414/KOL/2007 FOR THE A.YS 2003-04 & 2004-05 AND BY THE ORDER DT. 15-09-2017 IN ASSESS EES OWN CASE ITA NOS. 951,952/KOL/2015 FOR THE A.YS 2006-07 & 20 08-09 AND IN VIEW OF THE SAME PRAYED THAT THE ISSUE INVOLVED MA Y BE RESTORED TO THE FILE OF AO. 2 ITA NO. 632/KOL/2015 WBSWHC 4. ON THE OTHER HAND, THE LD.DR DID NOT CONTROVERT THE ABOVE SUBMISSIONS OF THE LD.AR OF THE ASSESSEE. 5. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THIS TRIBUNAL IN THE CASE OF E XIDE INDUSTRIES LTD SUPRA DECIDED THE ISSUE IN RESTORING THE MATTER TO THE F ILE OF THE AO WITH A DIRECTION TO AWAIT TILL THE FINAL DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF SUPRA BY OBSERVING AS UNDER:- 25. THE ISSUE RAISED IN GROUND NO. 8 RELATES TO TH E DISALLOWANCE OF 1.51 CRORES MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF PROVISION MADE BY THE AS SESSEE FOR LEAVE ENCASHMENT. 26. THE ASSESSEE-COMPANY DURING THE YEAR UNDER CONS IDERATION HAD MADE A PROVISION OF RS.1.51 CRORES FOR LEAVE ENCASH MENT ON THE BASIS OF AN ACTURIAL VALUATION AND THE SAME WAS CLAIMED A S DEDUCTION BY RELYING ON THE DECISION OF THE HONBLE CALCUTTA HIG H COURT IN ASSESSEES OWN CASE REPORTED IN 292 ITR 470 AND THE DECISION O F THE HONBLE SUPREME COURT IN THE CASE OF BHARAT EARTH MOVERS RE PORTED IN 245 ITR 428. THE ASSESSING OFFICER, HOWEVER, DISALLOWED THE CLAIM OF THE ASSESSEE FOR PROVISION OF LEAVE ENCASHMENT RELYING ON THE CLAUSE (F) INSERTED IN SECTION 43B BY THE FINANCE ACT, 2001 W. E.F. 1 ST APRIL, 2002. THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANC E. THE ASSESSEE CHALLENGED THE CONSTITUTIONAL VALIDITY OF CLAUSE (F ) INSERTED IN SECTION 43B BEFORE THE HONBLE CALCUTTA HIGH COURT BY WAY O F A WRIT PETITION AND ALTHOUGH THE SAME WAS INITIALLY DISMISSED BY TH E SINGLE BENCH, IT WAS ADMITTED AND RULED IN FAVOUR OF THE ASSESSEE BY THE DIVISION BENCH OF THE HONBLE CALCUTTA HIGH COURT BY HOLDING THAT THE INTRODUCTION OF CLAUSE (F) TO SECTION 43B IS ULTRA VIRUS OF THE ACT IN THE ABSENCE OF DISCLOSURE OF THE OBJECTS AND BEING INCONSISTENT WI TH THE BASIC INTENT OF SECTION 43B. THEREAFTER THE DEPARTMENT FILED THE SL P AGAINST THE DECISION OF THE HONBLE CALCUTTA HIGH COURT AND WHI LE ADMITTING THE SAME, THE HONBLE SUPREME COURT VIDE ITS JUDGMENT D ATED 08.09.2008 STAYED THE JUDGMENT OF THE HONBLE CALCUTTA HIGH CO URT UNTIL FURTHER ORDERS. 27. AT THE TIME OF HEARING BEFORE US, THE LD. COUNS EL FOR THE ASSESSEE HAS CONTENDED THAT EVEN THOUGH THE DECISIO N OF THE HONBLE CALCUTTA HIGH COURT HOLDING CLAUSE (F) OF SECTION 4 3D AS ULTRA VIRUS IS STAYED BY THE HONBLE SUPREME COURT WHILE ADMITTING THE SLP FILED BY THE REVENUE, THE SAME HAS NOT BEEN REVERSED AND THI S TRIBUNAL, THEREFORE, IS BOUND TO FOLLOW THE SAME BEING A BIND ING PRECEDENT. HE HAS ALSO CONTENDED THAT THE DECISION OF THE HONBLE CALCUTTA HIGH COURT WAS STAYED BY THE HONBLE APEX COURT VIDE ITS JUDGM ENT DATED 08.09.2008 UNTIL FURTHER ORDERS AND THERE BEING ANO THER INTERIM ORDER PASSED BY THE HONBLE SUPREME COURT ON 08.05.2009, THE STAY GRANTED EARLIER STANDS AUTOMATICALLY VACATED. A COPY OF THE SAID INTERIM ORDER DATED 08.05.2009 IS PLACED ON RECORD BEFORE US, THE CONTENTS OF WHICH ARE EXTRACTED BELOW:- PENDING HEARING AND FINAL DISPOSAL OF THE CIVIL AP PEAL, DEPARTMENT IS RESTRAINED FROM RECOVERING PENALTY AN D INTEREST WHICH HAS ACCRUED TILL DATE. IT IS MADE CLEAR THAT AS FAR AS THE OUTSTANDING INTEREST DEMAND AS OF DATE IS CONCERNED, IT WOULD B E OPEN TO THE DEPARTMENT TO RECOVER THE AMOUNT IN CASE CIVIL APPE AL OF THE DEPARTMENT IS ALLOWED. WE FURTHER MAKE IT CLEAR THAT THE ASSESSEE WOULD DU RING THE PENDENCY OF THIS CIVIL APPEAL, PAY TAX AS IF SECTIO N 43B(F) IS ON THE STATUTE BOOK BUT AT THE SAME TIME IT WOULD BE ENTIT LED TO MAKE A CLAIM IN ITS RETURNS. 28. WE HAVE CAREFULLY PERUSED THE INTERIM ORDER DAT ED 8 TH MAY, 2009 PASSED BY THE HONBLE SUPREME COURT IN THE MAT TER. IT IS 3 ITA NO. 632/KOL/2015 WBSWHC OBSERVED THAT THE HONBLE APEX COURT IN THE SAID OR DER HAS MADE IT CLEAR THAT THE ASSESSEE, DURING THE PENDENCY OF THE CIVIL APPEAL, WOULD PAY TAX AS IF SECTION 43B(F) IS ON THE STATUTE BOOK , BUT AT THE SAME TIME, IT WOULD BE ENTITLED TO MAKE CLAIM IN ITS RET URN. KEEPING IN VIEW ALL THESE DEVELOPMENTS, THE COORDINATE BENCH OF THI S TRIBUNAL IN THE CASE OF DY. CIT VS.- BLA INDUSTRIES PVT. LTD. (ITA NO. 1434/KOL/2012 DATED 16.01.2015) HAS RESTORED THE SIMILAR ISSUE TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO AWAIT TILL TH E FINAL DECISION OF THE HONBLE SUPREME COURT ON THE ISSUE AND THEN TO DECI DE THE ISSUE ACCORDINGLY. FOLLOWING THE SAID DECISION OF THE COO RDINATE BENCH, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFF ICER WITH THE SIMILAR DIRECTION. GROUND NO. 8 IS ACCORDINGLY TREATED AS A LLOWED FOR STATISTICAL PURPOSES. 6. IN VIEW OF ABOVE DISCUSSION, WE REMAND THE ISSUE TO THE FILE OF THE AO TO AWAIT TILL THE FINAL DECISION OF HONBLE SUPREME COURT ON THE ISSUE. GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 7. GROUND NO. 2 IS RELATING TO CONFIRMATION OF DIS ALLOWANCE OF RS.22,37,863/- MADE ON ACCOUNT OF GRATUITY PREMIUM PAID TO LIC. 8. AT THE OUTSET, THE LD.AR OF THE ASSESSEE SUBMITS THAT THE ISSUE IN HAND IS SQUARELY COVERED IN FAVOUR OF ASSESSEE B Y THE ORDER DT. 11- 05-2016 IN ASSESSEES OWN CASE ITA NOS. 1761-1763/K OL/2011 FOR THE A.YS: 2003-04, 05-06 & 07-08, THE SAME IS ON RECORD AND REFERRED TO PARA 5 OF THE SAID ORDER AND PRAYED TO ALLOW THE GR OUND NO. 2 RAISED BY THE ASSESSEE. 9. ON THE OTHER HAND, THE LD. DR RELIED ON THE ORDE R OF THE CIT-A IN CONFIRMING THE ACTION OF THE AO ON THIS ISSUE. 10. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE LD. AR OF THE ASSESSEE HAS RIGHTLY POINTED OUT THAT THE ISSUE IN HAND IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE S AID ORDER DT. 11- 05-2017 IN ASSESSEES OWN CASE SUPRA . THE TRIBUNAL VIDE ORDER DT. 11-05-2016 HAS DECIDED THE ISSUE IN FAVOUR OF ASSES SEE AND THE RELEVANT PORTION OF WHICH IS REPRODUCED HEREIN BELO W:- 5. WE FIND FROM THE FACTS OF THE CASE THAT THE ASS ESSEE HAS APPLIED FOR APPROVAL OF GRATUITY FUND AND DESPITE NUMEROUS REMINDERS THE CI T HAS NOT TAKEN ANY ACTION. WE FIND THAT THERE IS NO FAULT ON THE PART OF THE ASSESSEE AND THE CIT HAS NOT RAISED ANY DISPUTE CONTRARY TO THE APPLICATION TILL DATE. WE ALSO FIND THAT THE ASSESSEE HAS FILED SEVERAL REMINDERS BUT OF NO AVAIL. IN SUCH CIRCUMSTANCES, W E ARE OF THE VIEW THAT THERE IS NO 4 ITA NO. 632/KOL/2015 WBSWHC FAULT ON THE PART OF THE ASSESSEE AND APPROVAL CAN BE TREATED AS DEEMED APPROVAL AND ASSESSEE IS ALLOWED TO TAKE BENEFIT OF PROVISION FO R GRATUITY. ACCORDINGLY, THIS ISSUE OF ASSESSEES APPEAL IS ALLOWED. 11. FOLLOWING THE SAME, WE ARE OF THE VIEW THAT THE CIT-A WAS NOT JUSTIFIED IN CONFIRMING THE IMPUGNED ADDITION. THE SAME IS LIABLE TO BE DELETED. THUS, GROUND NO. 2 RAISED BY THE ASSESSEE IS ALLOWED. 12. GROUND NO. 3 IS RELATING TO CONFIRMATION OF DIS ALLOWANCE OF RS.44,621/- MADE ON ACCOUNT OF AMORTIZATION OF EXPE NDITURE. 13. THE LD. AR ARGUED THAT THE ASSESSEE INCURRED EX PENDITURE IN CONSTRUCTING BOUNDARY WALL ON LEASEHOLD LAND. BUT, HOWEVER, THE AO ARBITRARILY DISALLOWED THE SAME BY OBSERVING THE CO ST OF BOUNDARY WALL IS ACTUALLY THE COST OF LAND. HE ALSO SUBMITS THAT THE ASSESSEE IS ENTITLED TO CLAIM THE COST OF SAID EXPENDITURE BY AMORTIZATION. IN SUPPORT OF THE CONTENTION, THE LD.AR OF THE ASSESSE E SUBMITTED THAT THE ASSESSEE HAS CLAIMED THE DEPRECIATION ON THE BO UNDARY WALL CONSTRUCTED TO COVER THE ENTIRE LAND. THE TOTAL COS T INCURRED ON CONSTRUCTION IS AMORTISED IN THE FORM OF DEPRECIATI ON OVER THE PERIOD OF THE LEASE OF 90 YEARS SINCE THIS EXPENDITURE IS OF REVENUE IN NATURE. THE AO TREATED THE BOUNDARY WALL CONSTRUCTI ON AS IMPROVEMENT COST TO THE LAND. THE BOUNDARY WALL IS DEPRECIATED BUT THE LAND IS NOT. THE LD. AR OF THE ASSESSEE BEFORE US DRAWN TO THE ATTENTION OF ACCOUNTING POLICY MENTIONED IN THE AU DITED BALANCE SHEET, WHEREIN THE COST OF BOUNDARY WALL ON LEASEHO LD LAND IS AMORTISED OVER THE PERIOD OF THE LEASE. ACCORDINGLY , IT IS IN THE NATURE OF DEPRECIATION BEING REVENUE IN NATURE. IN TERMS O F SECTION 32 THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRECIATION TOW ARDS COST OF CONSTRUCTION OF BOUNDARY WALL. BOTH THE AUTHORITIES (AO AND CIT-A) WERE NOT CORRECT IN MAKING SUCH PRESUMPTION THAT T HE COST OF CONSTRUCTION OF BOUNDARY WALL IS THE COST OF IMPROV EMENT OF LAND AND IN VIEW OF ABOVE, PRAYED TO ALLOW THIS GROUND OF AS SESSEE. 14. ON THE OTHER HAND, THE LD.DR SUBMITS THAT THE I SSUE IN HAND IS SQUARELY COVERED IN FAVOUR OF REVENUE VIDE PARA NO. 7 OF THE SAID 5 ITA NO. 632/KOL/2015 WBSWHC ORDER 11-05-2016 IN ASSESSEES OWN CASE SUPRA AND PRAYED TO DISMISS THE GROUND NO.3 RAISED BY THE ASSESSEE. 15. HEARD BOTH THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE LD.AR OF THE ASSESSEE BEFORE US SUBMITTED DETAILED SUBMISSION IN SUPPORT OF THIS CLAIM. WE FIND THAT THE TRIBUNAL WH ILE DECIDING THE SAME ISSUE INVOLVED FOR THE A.YS 2003-04, 05-06 AN D 07-08 IN ASSESSEES OWN CASE SUPRA HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM AMORTIZATION VALUING THE COST OF CONSTRUCTION OF BOUNDARY WALL ON LEASEHOLD LAND AND, THEREFORE, UPHOLD THE FINDIN GS OF AO AND CIT-A BEING CAPITAL IN NATURE AND THE RELEVANT PORTION IS REPRODUCED HEREIN BELOW:- 7. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUG H FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT THE ASSESSEE CLAIMED A SUM O F RS.44,628/- BEING AMORTISED VALUE OF COST OF BOUNDARY WALL ON LEASEHOLD LAND FOR CON ST OF CONSTRUCTION OF BOUNDARY WALL BEING EXPENDITURE OF IMPROVEMENT OF COST OF LAND. T HE AO AND CIT(A) DISMISSED THE CLAIM OF THE ASSESSEE. BEFORE US, IT WAS CLAIMED TH AT IT IS IN THE NATURE OF DEPRECIATION AND FIXED AMOUNT OF EXPENDITURE FOR THE COST OF BO UNDARY WALL WAS EQUALLY SPREAD OVER THE PERIOD OF LEASE. WE FIND THAT THE AO HAS TAKEN THE COST OF BOUNDARY WALL AS COST IMPROVEMENT AND THE ASSESSEE HAS CLAIMED THE SAME A S AMORTIZATION OF SUCH EXPENDITURE BUT SECTION 35D OF THE ACT DOES NOT PRO VIDE AMORTIZATION OF EXPENSES WHICH ARE CAPITAL IN NATURE. ACCORDINGLY, WE CONFIRM THE ORDER OF CIT(A) AND THIS ISSUE OF ASSESSEES APPEAL IS DISMISSED. 16. FOLLOWING THE SAME, WE ARE OF THE VIEW THAT THE CIT-A WAS JUSTIFIED IN DOING SO. WE FIND NO INFIRMITY IN THE IMPUGNED ORDER OF THE CIT-A IN CONFIRMING THE SAME ON THIS ISSUE. THUS, G ROUND NO. 3 RAISED BY THE ASSESSEE IS DISMISSED. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 14- 12-2017 SD/- SD/- P.M. JAGTAP S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 14-12-2017 6 ITA NO. 632/KOL/2015 WBSWHC PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/ASSESSEE:WEST BENGAL STATE WAREHOUSING CO RPORATION, 6A, RAJA SUBODH MULLICK SQUARE, 4 TH FLOOR, KOLKATA-13. 2 RESPONDENT/REVENUE: THE DCIT, CIR-2, AAYKAR BHAWAN, P-7 CHOWRINGHEE SQUARE, KOLKATA-69. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, SR.PS/H.O.O ITAT KOLKATA