ADDL.C.I.T. RG.16, MUMBAI V. TOTAL PETROLEUM INDIA LIMITED, MUMBAI

ITA 6795/MUM/2011

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0647 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 7 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2017
• Appeal Filed By: Department
• Bench Allotted: E
• Next Hearing Date: 01-02-2017
• Assessment Year: 2000-2001
• Appeal Filed On: 07-10-2011
• Court: TRIBUNAL
• Department Lawyers: M C OMI NINGSHEN
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H , MUMBAI BEFORE SHRI R C SHARMA , A M & SHRI SANDEEP GOSAIN , J M IT A NO. 6795 / MUM/20 1 1 ASSESSMENT YEAR : 20 0 0 - 0 1 THE ADDL CIT RANGE 16, MUMBAI TOTAL PETROLEUM INDIA LIMITED., 3 RD FLOOR, LEELA GALLERIA, ANDHERI KURLA ROAD, ANDHERI (E), MUMBAI 400 059 PAN AAA CT4597J ( APPELLANT ) (RESPONDENT) APPELLANT BY : SHRI M C OMI NINGSHEN RESPONDENT BY : SHRI NEERAJ SHETH DATE OF HEARING : 03 .0 5 .2017 DATE OF PRONOUNCEMENT : 17 .0 5 .2017 O R D E R PER R C SHARMA, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 25.07.2011, FOR THE ASSESSMENT YEAR 200 0 - 01, IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE INCOME TAX ACT, 1961. 2. IN THIS APPEAL, R EVENUE IS AGGRIEVED BY THE ACTION OF THE CIT(A) DELETING DISALLOWANCE OF DEPRECIATION, FEES PAID TO ROC, COMMISSION EXPENSES AND DEVELOPMENT EXPENSES. 3. IT WAS ARGUED BY THE LEARNED DR THAT WITHOUT CONTROVERTING THE DETAILED FINDING GIVEN BY THE AO DISALL OWING THE ABOVE EXPENDITURE, THE ITA NO . 6 795 /MUM/20 1 1 M/S. TOTAL PETROLEUM INDIA LTD. 2 CIT(A) DELETED THE SAME WITHOUT RECORDING ANY OF HIS INDEPENDENT FINDING SUBSTANTIATING ALLOWABILITY OF THESE EXPENDITURE. 4. ON THE OTHER HAND, THE LEARNED AR RELIED ON THE WRITTEN SUBMISSIONS FILED BEFORE THE AO, CIT(A) AND THE ORDER PASSED BY THE CIT(A). 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE IS IN THE BUSINESS OF BLENDING AND SALE OF AUTOMOTIVE OILS AND GREASES ETC. DURING THE YEAR UNDE R CONSIDERATION , THE ASSESSEE ACQUIRED BUSINESS OF FINA INDIA PETROLEUM PVT. LTD (FINA) AT THE CLOSE OF BUSINESS HOURS ON 31 ST MARCH, 2000. THE ASSESSEE IN ITS RETURN OF INCOME CLAIMED DEPRECIATION ON ASSETS TAKEN OVER FROM FINA. THE AO DISALLOWED THE CL AIM OF DEPRECIATION HOLDING THAT ASSETS TAKEN OVER FROM FINA COULD NOT BE SAID TO HAVE BEEN PUT TO USE SINCE THE ASSETS HAD BEEN ACQUIRED AT THE CLOSE OF BUSINESS HOURS ON 31 ST MARCH 2000. THE AO FURTHER HELD THAT THE DEPRECIATION CLAIMED ON ASSETS TAKEN OVER FROM FINA HAD BEEN INFLATED AS THE ASSESSEE CLAIMED DEPRECIATION ON BOOK VALUE INSTEAD OF WDV AS APPEARING IN THE TAX AUDIT REPORT OF FINA. 6. WITHOUT CONTROVERTING THE FINDINGS OF THE AO, THE CIT(A) ALLOWED ASSESSEES CLAIM OF DEPRECIATION . IT WAS ARGUED BY THE LEARNED AR THAT THE ACQUISITION OF ASSETS MADE PRIOR TO CLOSE OF BUSINESS HOURS ON 31 ST MARCH 2000 AND ON A GOING CONCERN BASIS (REFER SALE AND PURCHASE AGREEMENT ON ITA NO . 6 795 /MUM/20 1 1 M/S. TOTAL PETROLEUM INDIA LTD. 3 PAGE A1 TO A25 OF THE PAPER - BOOK), HENCE, THE ASSETS WERE ACQUIRED DURING T HE SUBJECT YEAR AND WERE CONTINUING IN USE. ACCORDINGLY, DEPRECIATION IS CLAIMED THEREON AT 50% RATES. 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND DO NOT FIND ANY MERIT IN THE ACTION OF THE CIT(A) IN ALLOWING ASSESSEES CLAIM FOR DEPRECIATION, WHEN TH E ASSETS WERE ACQUIRED AT THE CLOSE OF BUSINESS HOURS ON 31 ST MARCH 2000. THUS, USE OF ASSET WAS NOT SHOWN BY THE ASSESSEE FOR EVEN A SINGLE DAY. ACCORDINGLY, WE CONFIRM THE ACTION OF THE AO FOR DISALLOWING ASSESSEES CLAIM OF DEPRECIATION AND DIRECT THE AO TO CONSIDER THE WDV OF THE ASSETS ACQUIRED FROM FINA WHILE ALLOWING ASSESSEES CLAIM OF DEPRECATION IN THE SUBSEQUENT ASSESSMENT YEAR 2001 - 02. WE DIRECT ACCORDINGLY. 8. THE AO HAS DISALLOWED ASSESSEES CLAIM OF ROC FEES. THE CIT(A) HAS DELETED THE DISALLOWANCE BY OBSERVING THAT THE ROC FEE WAS DEBITED TO PROFIT AND LOSS ACCOUNT DURING THE A.Y 1999 - 2000 AND WAS REPORTED IN THE TAX AUDIT REPORT IN THE AY 1999 - 2000 (REFER PAGE D1 OF THE PAPER - BOOK). AS THE SAME WAS NOT CLAIMED DURING THE YEAR UNDER CO NSIDERATION , THE DISALLOWANCE WAS CORRECTLY DELETED BY THE LEARNED CIT(A). 9. WE HAVE CONSIDERED THE RIVAL CONTENTIONS. THERE APPEARS TO BE CONFUSION WITH REGARD TO CLAIM OF ROC FEES IN THE PROFIT & LOSS ACCOUNT DURING THE YEAR UNDER CONSIDERATION. AS PE R LEARNED AR, EXPENDITURE WAS NOT ITA NO . 6 795 /MUM/20 1 1 M/S. TOTAL PETROLEUM INDIA LTD. 4 CLAIMED DURING THE YEAR, THEREFORE, NO DISALLOWANCE IS WARRANTED. IN THE INTEREST OF JUSTICE, WE RESTORE THIS GROUND BACK TO THE FILE OF THE AO AND IF THE AO FINDS THAT NO ROC FEES WAS DEBITED IN THE PROFIT & LOSS ACCOUNT NOR CLAIMED IN THE COMPUTATION OF INCOME, WE DIRECT FOR NOT DIS ALLOWING ANY PART OF SUCH EXPENDITURE. WE DIRECT ACCORDINGLY. 10. THE AO HAS ALSO DISALLOWED ASSESSEES CLAIM OF COMMISSION BY OBSERVING THAT NO DETAILS OF COMMISSION PAID WAS FILED BY THE ASSESSEE INSPITE OF GIVING OPPORTUNITY. HOWEVER THE LEARNED CIT(A) HAS DELETED THE DISALLOWANCE WITHOUT CONTROVERTING THIS FINDING O F THE AO. 11. IT WAS CONTENDED BY LEARNED AR THAT ASSESSEE SUBMITTED 28 SAMPLE AGREEMENTS WITH C&F AGENTS (REFER PAGE G1 TO G 339). THE COMPARISON/RATIO CONSIDERED BY THE AO IS ERRONEOUS A S HAS CONSIDERED THE CASH DISCOUNT COMPONENT AS COMMISSION. THE CORRECT COMPARISON/RATIO SHOWS THE COMMISSION TO BE IS IN LINE WITH THE PRECEDING YEARS AS CAN BE OBSERVED FROM PAGE F2 OF THE PAPER - BOOK. HENCE, THE COMMISSION EXPENDITURE WERE CORRECTLY ALLOWE D BY THE LEARNED CIT(A). 1 2 . AS THERE IS CONTRADICTION IN THE FINDINGS RECORDED BY AO VIS - - VIS SUBMISSION OF ASSESSEE AND MOREOVER WHEN NO POSITIVE FINDINGS FOR DELETING THE DISALLOWANCE WAS RECORDED BY CIT(A), WE SET ASIDE THE ORDER OF CIT(A) AND RESTORE THE ISSUE BACK TO THE FILE OF THE AO FOR DECIDING AFRESH AFTER ITA NO . 6 795 /MUM/20 1 1 M/S. TOTAL PETROLEUM INDIA LTD. 5 VERIFYING THE AGREEMENT ENTERED BY THE ASSESSEE WITH C&F AGENT WITH REGARD TO PAYMENT OF COMMISSION. NEEDLESS TO SAY , THAT THE ASSESSEE SHOULD BE GIVEN DUE OPPORTUNITY BEFORE DECIDING THE ISS UE. 13 . THE AO HAS ALSO DISALLOWED PROVISION OF ADVERTISEMENT AND PUBLICITY EXPENSES, WHICH WAS DELETED BY THE CIT(A) AFTER OBSERVING THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF RO TORK CONTROLS INDIA 314 ITR 62, THE SAME IS ALLOWAB LE. HOWEVER, NO FACTUAL FINDING WAS RECORDED BY THE CIT(A) TO THE EFFECT THAT THESE EXPENSES WERE ACTUALLY INCURRED SO AS TO ENTITLE THE ASSESSEE TO CLAIM THE SAME ON ACCRUAL BASIS. IT WAS CONTENDED BY THE LEARNED AR THAT THE ASSESSEE PROVIDED FOR ADVERT ISEMENT AND PUBLICITY EXPENSES BASED ON THE EXPECTED OUTFLOWS AND PAST TRENDS. HE ALSO RELIED ON THE JUDGMENT OF HONBLE SUPREME COURT IN THE ROTORK CONTROLS (SUPRA) AND THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CARRIER AIR - CO NDITIONING AND REFRIGERATION. 14 . WE HAVE CONSIDERED RIVAL CONTENTIONS AND GONE THROUGH THE ORDERS OF LOWER AUTHORITIES, I T IS CLEAR FROM THE ORDER OF CIT(A) THAT JUSTIFICATION HAS BEEN RECORDED NO FINDING HAS BEEN RECORDED BY HIM FOR DELETING DISALLOWANCE OF ADVERTISEMENT AND PUBLICITY EXPENSES SO CLAIMED BY THE ASSESSEE. THE ASSESSEE HAS ALSO NOT BROUGHT ON RECORD THE DETAILS OF ACTUAL PAYMENTS MADE DURING THE YEAR WITH REFERENCE TO ANY OF SUCH PROVISION MADE IN THE EARLIER YEARS. NO DETAIL WITH REGARD T O ACTUAL PAYMENT TOWARDS PROVISION MADE ITA NO . 6 795 /MUM/20 1 1 M/S. TOTAL PETROLEUM INDIA LTD. 6 DURING THE RELEVANT YEAR BUT PAID IN THE SUBSEQUENT YEAR WAS PLACED ON RECORD. IN THE INTEREST OF JUSTICE, WE RESTORE TH IS GROUND ALSO TO THE FILE OF THE AO FOR DECIDING AFRESH AND THE ASSESSEE IS DIRECTED TO FILE D ETAILS OF ACTUAL PAYMENTS OF EXPENDITURE WITH REFERENCE TO THE PROVISION SO MADE, JUSTIFYING ITS ACCRUAL DURING THE YEAR UNDER CONSIDERATION. WE DIRECT ACCORDINGLY. 14. IN THE RESULT, THE APPEAL OF REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 17 TH D AY OF MAY , 2017 . SD/ - SD/ - ( SANDEEP GOSAIN ) ( R C SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI; DATED : 17TH MAY , 2017 SA / KARUNA COPY OF THE ORDER FORWARDED TO : 1. THE APP ELL ANT. 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI 4. THE CIT 5. DR, H BENCH, ITAT, MUMBAI BY ORDER, //TRUE COPY// ( ASS IS T AN T REGISTRAR) I NCOME T AX A PPELLATE T RIBUNAL , MUMBAI