M/s. Jindal Gas Appliances P. Ltd., New Delhi V. ACIT, Faridabad

ITA 6450/DEL/2014

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3337 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2010-2011
• Appeal Filed On: 25-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAKESH GUPTA
• Keywords: Revenue expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES D : DELHI BEFORE SHRI BHAVNESH SAINI, J.M. AND SHRI O.P. KANT , A.M. ITA.NO.6450/DEL./2014 ASSESSMENT YEAR 2010-2011 M/S. JINDAL GAS APPLIANCES P. LTD., RRA TAX INDIA, D-28, SOUTH EXTENSION, PART-1, NEW DELHI 110 049. PAN AAACJ4027B VS. THE ACIT, CIRCLE-2, FARIDABAD. (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI RAKESH GUPTA, ADVOCATE FOR REVENUE : SHRI AMIT JAIN , SR. D.R. DATE OF HEARING : 0 9 .11.2017 DATE OF PRONOUNCEMENT : 21 .11.2017 ORDER PER BHAVNESH SAINI, J.M. THIS APPEAL BY ASSESSEE HAS BEEN DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), FARIDABAD, DATED 31 ST OCTOBER, 2014, FOR A.Y. 2010-2011, CHALLENGING THE ADDITION OF RS.5,16,000. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSE SSEE-COMPANY FILED RETURN OF INCOME OF RS.50,32,110. THE ASSESSE E-COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING OF GAS-STO VE AND COMMERCIAL KITCHEN EQUIPMENTS. THE A.O. NOTICED FRO M THE LEDGER 2 ITA.NO.6450/DEL./2014 M/S. JINDAL GAS APPLIANCES P. LTD., FARIDABAD. ACCOUNT OF CONSUMABLE TOOLS, DIES AND FIXTURES THAT THE FOUR BILLS ARE DATED 2 ND MARCH, 2009 OF M/S. N.P. PATTERN WORKS RELATES TO PREVIOUS YEAR OF RS.5,16,000 AND THUS, WERE IN THE NATURE OF PRIOR PERIOD EXPENSES. THE ASSESSEE EXPLAINED BEFORE A.O. EXPENS ES RELATING TO CONSUMABLE TOOLS HAVE NO ELEMENT OF PRIOR PERIOD EX PENSES. ALL EXPENSES HAVE BEEN BOOKED ON THE RECEIPT OF BILLS O F THE SAME. ALL BILLS PERTAINING TO CONSUMABLE TOOLS HAVE BEEN RAIS ED IN THE IMPUGNED ASSESSMENT YEAR AND THEREFORE, THE LIABILI TY FOR THE EXPENSES HAS CRYSTALIZED IN THIS YEAR ONLY. THEREFO RE, THERE IS NO QUESTION OF TREATING ANY PORTION OF THE EXPENSE AS PRIOR PERIOD. IT WAS ALSO SUBMITTED THAT BILLS RELATING TO PURCHASE OF P ATTERNS WHICH HAVE TO BE TESTED AND EXAMINED BY THE ASSESSEE BEFORE AC CEPTING. THESE PATTERNS FORM THE BASIS FOR THE MANUFACTURING OF FI NISHED PRODUCTS OF THE ASSESSEE AND HAVE TO BE ACCURATE IN ALL PARAMET ERS TO ENABLE THE ASSESSEE TO MANUFACTURE HIGH QUALITY COMPONENTS AND REDUCE THE RISK OF REJECTIONS. THEREFORE, THE NEED TO EXAMINE AND TEST THEM ON ALL PARAMETERS BEFORE ACCEPTING THEM. THIS WOULD TA KE NUMBER OF DAYS TO FINISH THE PROCESS OF EXAMINATION. THEREFOR E, IT WAS RIGHTLY TAKEN AS EXPENDITURE IN ASSESSMENT YEAR UNDER APPEA L. THE A.O. 3 ITA.NO.6450/DEL./2014 M/S. JINDAL GAS APPLIANCES P. LTD., FARIDABAD. HOWEVER, DID NOT ACCEPT THE CONTENTION OF ASSESSEE BECAUSE BILLS WERE RAISED ON 2 ND MARCH, 2009 AND ASSESSEE COULD HAVE TESTED THE CONSUMABLE ITEMS IN A DAY OR SO. SINCE EXPENDITURE WERE NOT INCURRED IN PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR UNDER APPEAL, THEREFORE, A.O. HELD THAT THESE ARE PRIOR PERIOD EXPENSES AND CANNOT BE ALLOWED AS DEDUCTION UNDER SECTION 37 OF THE I.T. ACT. THE A.O. ALTERNATIVELY ALSO HELD THAT THE BILLS RELATE TO CAPITAL EXPENDIT URE AND AS SUCH, DISALLOWED THE CLAIM OF ASSESSEE. 3. THE ASSESSEE REITERATED THE SAME SUBMISSIONS MA DE BEFORE THE LD. CIT(A) AND SUBMITTED THAT IT WOULD T AKE SOME TIME TO APPROVE PATTERNS. THEREFORE, THESE ARE NOT PRIOR P ERIOD EXPENSES. THE LD. CIT(A) CONFIRMED THE ORDER OF THE A.O. AS REGAR DS THE DEDUCTION NOT ALLOWABLE UNDER SECTION 37 OF THE I.T. ACT. THE LD. CIT(A) HOWEVER, NOTED THAT THE EXPLANATION OF ASSESSEE REVEAL THAT THE VERY NATURE OF THE EXPENSES IS NOT CAPITAL. THE APPEAL OF ASSESSEE WAS HOWEVER, DISMISSED. 4. AFTER CONSIDERING THE RIVAL CONTENTIONS, WE ARE OF THE VIEW THAT THE ADDITION IS WHOLLY UNJUSTIFIED. THE ASSESS EE IS IN THE BUSINESS OF MANUFACTURING OF GAS-STOVE PARTS AND CO MMERCIAL 4 ITA.NO.6450/DEL./2014 M/S. JINDAL GAS APPLIANCES P. LTD., FARIDABAD. KITCHEN EQUIPMENTS. THE ASSESSEE SHALL HAVE TO USE CONSUMABLE TOOLS, DIES ETC., IN MANUFACTURING. ACCORDING TO TH E EXPLANATION OF ASSESSEE, THE PATTERNS ARE RECEIVED WHICH ARE USED IN THE MANUFACTURING/FINISHED PRODUCTS. THE ACCURATE PARAM ETERS OF THE SAME SHALL HAVE TO BE JUDGED BEFORE ACCEPTING THE S AME. ACCORDING TO THE ASSESSEE, IT WOULD TAKE SOME TIME TO COMPLET E THE PROCESS OF TESTING OF THE PATTERNS. THE A.O. WITHOUT BRINGING ANY MATERIAL ON RECORD, SIMPLY REJECTED THE CONTENTION OF ASSESSEE BY HOLDING THAT TESTING COULD BE DONE WITHIN A DAY OR SO. THE A.O. CANNOT STEP INTO THE SHOES OF THE BUSINESSMAN. THE A.O. SHALL HAVE T O APPRECIATE THE MANUFACTURING PROCESS OF THE ASSESSEE FROM THE VIEW OF BUSINESSMAN. THE LD. CIT(A), THEREFORE, CORRECTLY H ELD THAT THE VERY NATURE OF THE EXPENSES IS NOT CAPITAL. THERE IS NO CHALLENGE BY DEPARTMENT TO THE FINDINGS OF THE LD. CIT(A) TO THA T EXTENT. THE BILLS ARE OF 2 ND MARCH, 2009. THEREFORE, THE EXPLANATION OF ASSESSE E IS ACCEPTABLE THAT BILLS WOULD HAVE BEEN FINALISED AND CRYSTALISED IN ASSESSMENT YEAR UNDER APPEAL AFTER NECESSARY TESTIN G OF THE PATTERNS SO PURCHASED. THE CONTENTION OF THE ASSESSEE IS COR RECT THAT THE CONSUMABLE TOOLS HAVE NO ELEMENT OF PRIOR PERIOD EX PENSES BECAUSE 5 ITA.NO.6450/DEL./2014 M/S. JINDAL GAS APPLIANCES P. LTD., FARIDABAD. THE SAME HAVE BEEN USED IN MANUFACTURING PROCESS AF TER TESTING. THEREFORE, THERE WAS NO BASIS FOR THE A.O. TO REJEC T THE CONTENTION OF THE ASSESSEE. THE ASSESSEE HAS INCURRED THE EXPENDI TURE ON CRYSTALIZING THE BILLS IN ASSESSMENT YEAR UNDER APP EAL. THEREFORE, DEDUCTION OF THE EXPENDITURE AS REVENUE EXPENDITURE SHALL HAVE TO BE ALLOWED IN ASSESSMENT YEAR UNDER APPEAL. 5. LEARNED COUNSEL FOR THE ASSESSEE ALSO REFERRED TO PB-46 WHICH IS COMPUTATION OF INCOME IN PRECEDING ASSESSM ENT YEAR 2009- 10 IN WHICH YEAR ASSESSEE DECLARED TOTAL INCOME OF RS.24,74,354 FOR TAXATION. ACCORDING TO HIM, RATE OF TAX WAS SAME AS IN PRCEDING YEAR AS WELL AS IN ASSESSMENT YEAR UNDER APPEAL. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN IF ASSESSEE WOULD HAVE MADE A CLAIM OF DEDUCTION OF THE EXPENDITURE IN EARLIER A.Y. 2009-1 0, THE TAX WOULD REMAIN THE SAME IN ASSESSMENT YEAR UNDER APPEAL AS WELL AS IN PRECEDING ASSESSMENT YEAR. HE HAS THEREFORE, SUBMIT TED THAT IT WOULD NOT MAKE ANY DIFFERENCE FOR THE REVENUE. HE HAS THE REFORE, SUBMITTED THAT IT IS NOT AS IF THE REVENUE HAS BEEN DEPRIVED OF ANY TAX. THEREFORE, DEDUCTION IS ALLOWABLE IN ASSESSMENT YEA R UNDER APPEAL. IN SUPPORT OF THIS CONTENTION, HE HAS RELIED UPON T HE JUDGMENTS OF 6 ITA.NO.6450/DEL./2014 M/S. JINDAL GAS APPLIANCES P. LTD., FARIDABAD. THE DELHI HIGH COURT IN THE CASE OF CIT VS. DINESH KUMAR GOEL (2011) 331 ITR 10 (DEL.) AND CIT VS. M/S. VISHNU INDUSTRIA L GASES P. LTD., ITR.NO.229/1988 DATED 06 TH MAY, 2008 IN WHICH ON THE SAME PROPOSITION, THE HONBLE DELHI HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL IN ALLOWING THE EXPENDITURE TO THE ASSESSE E BY RELYING UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS. NAGRI MILLS CO. LTD., 33 ITR 681. LEARNED COUNSEL F OR THE ASSESSEE ALSO RELIED UPON THE DECISION OF THE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. VEE GEE INDUSTRIAL ENTERPRISES DATED 28 TH JULY, 2015 IN ITA.NO.187 OF 2014 ON THE SAME PROPOSITION . CONSIDERING THE ISSUE INVOLVED IN THE ABOVE DECISIONS, WE ARE O F THE VIEW THAT THE FACTS OF THE CASE OF THE ASSESSEE ARE SIMILAR. THER EFORE, ON THE BASIS OF THE ABOVE DECISIONS ALSO, ASSESSEE WOULD BE ENTI TLED FOR DEDUCTION OF THE EXPENDITURE IN ASSESSMENT YEAR UNDER APPEAL. IN VIEW OF THE ABOVE DISCUSSION, WE SET ASIDE THE ORDERS OF THE AU THORITIES BELOW AND DELETE THE ADDITION OF RS.5,16,000. 6. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. 7 ITA.NO.6450/DEL./2014 M/S. JINDAL GAS APPLIANCES P. LTD., FARIDABAD. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (O.P. KANT) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DELHI, DATED 21 ST NOVEMBER, 2017 VBP/- COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. CIT(A) CONCERNED 4. CIT CONCERNED 5. D.R. ITAT D BENCH, DELHI 6. GUARD FILE. // BY ORDER // ASST. REGISTRAR : ITAT DELHI BENCHES : DELHI.