ASST CIT CIR 4, THANE V. SHRI SWASTIIK HOMELAND AGENCIES (P) LTD, THANE

ITA 679/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0302 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 4 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 14-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 29-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR A K NAYAK
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH E, MU MBAI BEFORE SHRI P.K. BANSAL, VICE-PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 679/MUM/2014 (ASSESSMENT YEAR- 2009-010) ACIT CIRCLE- 4, A ROOM NO.2, 6 TH FLOOR, ASHAR IT PARK, WIE, ROAD NO.16Z, THANE. VS. SWASTIK HOME LAND AGENCIES (P) LTD. FUN FIESTA MULTIPLEX, SRI PRASTHA COMPLEX, NALLASOPARA (W), THANE. PAN: AAJCS4373E (APPELLANT) (RESPONDENT) REVENUE BY : DR. A.K. NAYAK (DR) ASSESSEE BY : NONE DATE OF HEARING : 14.06.2017 DATE OF PRONOUNCEMENT : 14 .06.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY REVENUE U/S. 253 OF THE INCOME-TAX A CT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-II [THE CIT(A)], THANE DATED 05.12.2013 FOR THE ASSESSMENT YEAR 2009 -10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE AND IN THE LAW, THE HON.CIT(A)-II, THANE, ERRED IN ALLOWING THE DEPRECI ATION U/S 40A(IA) ON THE GROUND THAT THE TAX NEED NOT BE DEDUCTED BY THE ASS ESSEE ON CONTRACTUAL PAYMENTS WHICH HAVE BEEN CAPITALIZED AS FIXED ASSET , EVEN THOUGH ASSESSEE'S AUTHORIZED REPRESENTATIVE VIDE LETTER DATED 08/12/2 009, HAD SUBMITTED DURING THE ASSTT PROCEEDINGS FOR AY 2007-08 AS UNDER:- 'FURTHERMORE, AS THE BUILDING CONSTRUCTION CONTRACT CONSISTS OF MATERIAL OF RS 2,75,01,415/- AND LABOUR CHARGES OF RS 1,74,98,585/ -, THE TAX AT SOURCE IS DEDUCTIBLE ONLY ON LABOUR CHARGES OF RS 1,74,98,585 /- ONLY AND IF YOUR GOODSELVES WISH TO DISALLOW DEPRECIATION ON BUILDIN G CONTRACT THE SAME SHOULD ITA NO.679/M/2014- SWASTI K HOME LAND AGENCIES (P) LTD. 2 BE RESTRICTED TO ONLY RS 17,49,859/- AND NOT RS 45, 00,000/- DURING THE YEAR UNDER CONSIDERATION I.E AY 2009-10, THE AO HAS DISA LLOWED RS 36,45,000/-. THE ASSESSEE HAS NOT PRODUCED ANY CONTRACT AGREEMEN T, SEC 194 HAS CAST A RESPONSIBILITY UPON SPECIFIED PERSONS MAKING PAYMEN TS TO A RESIDENT CONTRACTOR TO DEDUCT TAX AT SOURCE FROM PAYMENTS MADE TO SUCH CONTRACTOR IN PURSUANCE OF A CONTRACT OF WORK AT THE TIME OF CREDIT OF SUCH SU M TO THE ACCOUNT OF THE CONTRACTOR OR AT THE TIME OF PAYMENT THEREOF IN CAS H OR ISSUE OF CHEQUE OR DRAFT OR BY ANY OTHER MODE WHICHEVER IS EARLIER AT THE SP ECIFIED RATES. SECTION 194 DOES NOT SPECIFY THAT SUCH TAX DEDUCTION IS NOT WAR RANTED IN THE CASE OF PAYMENTS TO CONTRACTOR FOR WORK INVOLVING BUILDING OF CAPITAL ASSET. IN OTHER WORDS, THE SECTION APPLIES TO ALL PAYMENTS INCLUDIN G PAYMENTS ON ACCOUNT OF CAPITAL EXPENDITURE. 2. THE APPELLANT PRAYS THAT THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (A)-II, THANE MAY BE VACATED AND THAT OF ASSESSING OFFICER BE RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF MULTIPLEX CINEMA THEATRE AND OTHER ALLIED ACTIVITIES FILED RETURN OF INCOME FOR RELEVANT ASSESSMENT YEAR ON 25.09.2009 DECLARING INCOME OF RS. 72,41,410/-. THE ASSESSMENT WAS COMPL ETED ON 19.12.2011 U/S 143(3) OF THE ACT. THE ASSESSING OFFICER (AO) WHILE FRAMING THE ASSESSMENT ORDER BESIDES THE OTHER ADDITION AND DISALLOWANCE MADE TH E ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION OF RS. 36,45,000/-. ON APPEAL BEFORE THE LD. CIT(A), THE ADDITION WAS DELETED. THUS, AGGRIEVED BY THE O RDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. NONE APPEARED ON BEHALF OF ASSESSEE DESPITE REPEAT ED CALLS. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENUE AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE SUP PORTED THE ORDER OF AO. THE LD. DR FOR THE REVENUE FURTHER ARGUED THAT THE ORDE R OF LD. CIT(A) MAY BE SET- ASIDE AND THAT OF AO MAY BE RESTORED. IT WAS FURTH ER ARGUED THAT ASSESSEE- ITA NO.679/M/2014- SWASTI K HOME LAND AGENCIES (P) LTD. 3 COMPANY MADE A PAYMENT OF RS. 4.5 CRORE TO ITS SIST ER CONCERN DURING THE AY 2007-08 AND NO TAX WAS DEDUCTED. HENCE, THE AO INVO KE THE PROVISION OF SECTION 40(A)(IA) AND DISALLOWED THE DEPRECIATION CLAIMED O N THE ASSET GENERATED THROUGH CONTRACTUAL PAYMENT TO ITS SISTER CONCERN. 4. WE HAVE CONSIDERED THE SUBMISSION OF DR FOR THE REV ENUE AND HAVE GONE THROUGH THE ORDER OF AUTHORITIES BELOW. THE AO DISALLOWED T HE DEPRECIATION HOLDING THAT SECTION 194C OF THE ACT DOES NOT DIFFERENTIATE BETW EEN CAPITAL EXPENDITURE AND REVENUE EXPENDITURE. THE AO FURTHER HELD THAT SECT ION 40 START WITH NONOBSTACLE CLAUSE VIZ NOTWITHSTANDING ANYTHING CONTRARY TO S ECTION 30 TO 36, THE FOLLOWING AMOUNT SHALL NOT BE DEDUCTED IN. THE AO ALSO HE LD THAT THE STAND OF THE ASSESSEE THAT THEY HAVE NOT CLAIMED THE EXPENDITURE IN P&L A/C AND NOT DISALLOWABLE IS NOT ACCEPTABLE. THE DEPRECIATION IS NOTHING BUT BENEFIT GIVEN TO A RIGHT OF A CAPITAL EXPENDITURE OFFERED IN A PERIOD OF TIME AND DISALLOWED THE DEPRECIATION. THE LD.CIT(A) AFTER CONSIDERING THE C ONTENTION OF THE ASSESSEE PASSED THE FOLLOWING ORDER; 4. I HAVE CAREFULLY CONSIDERED THE FACTS ON RECORD AND SUBMISSION OF THE LD. A.R. I FIND THAT THE PROVISIONS OF SECTION 40(A)(IA ) ARE SPECIFICALLY MEANT FOR DISALLOWANCE OF INTEREST, COMMISSION OR BROKERAGE, RENT, ROYALTY, FEES FOR PROFESSIONAL SERVICES OR FEES FOR TECHNICAL SERVICE S OR PAYMENT TO THE CONTRACTOR OR SUB-CONTRACTORS FOR CARRYING OUT ANY WORK ON 'WH ICH TAX HAS NOT BEEN DEDUCTED AND THERE IS NO MENTION OF THE DEPRECIATIO N. THIS ISSUE HAS BEEN ALSO CONSIDERED BY THE HON'BLE ITAT, IN THE CASE OF SMS DEMAG (P) LTD. VS. DCIT, 132 TTJ 498 (DEL) WHEREIN IT HAS BEEN HELD TH AT THE DEPRECIATION CANNOT BE DISALLOWED U/S. 40(A)(IA) ON THE GROUND THAT AT THE TIME OF PAYMENT FOR CAPITAL ASSET, THE TAX WAS NOT DEDUCTED. IN VIEW OF THESE FACTS AND ALSO LEGAL POSITION, I ALSO TAKE A VIEW THAT THE DEPRECIATION CANNOT BE DISALLOWED U/S. 40(A)(IA) ON THE GROUND THAT THE TAX WAS NOT DEDUCT ED BY THE APPELLANT ON CONTRACTUAL PAYMENTS WHICH HAVE BEEN CAPITALIZED AS FIXED ASSET. THUS, APPELLANT SUCCEEDS IN RESPECT OF GROUND NO. 1A. SIN CE THE GROUND NO. 1A HAS ITA NO.679/M/2014- SWASTI K HOME LAND AGENCIES (P) LTD. 4 BEEN ALLOWED, GROUNDS NO. 1B & 1C BECOME INFRUCTUOU S AND HENCE, THE SAME ARE NOT REQUIRED TO BE ADJUDICATED.' 4.1 SINCE THE FACTS ARE IDENTICAL IN THIS YEAR ALSO , I FOLLOWING MY APPELLATE ORDER IN THE CASE OF APPELLANT COMPANY IN A.Y. 2007-08 AS REPRODUCED ABOVE, HOLD THAT THE DEPRECIATION CANNOT BE DISALLOWED U/S. 40( A)(IA) ON THE GROUND THAT AT THE TIME OF MAKING PAYMENT FOR CAPITAL ASSET, TAX W AS NOT DEDUCTED. ACCORDINGLY, THE A.O. IS DIRECTED TO DELETE THE DIS ALLOWANCE OF DEPRECIATION AT RS. 36,45,000/-. 5. WE HAVE SEEN THAT THE LD. CIT(A) PASSED THE ORDER C ONSIDERING HIS ORDER FOR EARLIER YEAR ORDER I.E. IN AY 2007-08 AND ALLOWED THE DEPRE CIATION TO THE ASSESSEE. WE FIND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS IN FACT COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE IN ITS OWN CASE AS WELL AS BY THE DECISION OF DELHI TRIBUNAL IN SMS DEMAG (P) LTD VS DCIT (SUPRA) . THUS, WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). HENCE, THE GROUND OF APPEAL RAISED BY REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH DAY OF JUNE 2017. SD/- SD/- (P.K. BANSAL) (PAWAN SINGH) VICE-PRESIDENT JUDICIAL MEMBER MUMBAI; DATED 15/06/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/