DCIT, Nashik V. FORTUNA ENGG.(NASHIK)PVT lTD., Nashik

ITA 688/PUN/2012

• Counselvise Citation: 68824514 RSA 2012
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 03-04-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S PRAVEENA
• Keywords: Depreciation; Retrospective amendment
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCHES B, PUNE BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 688/PN/2012 (ASSESSMENT YEAR: 2005-06) DY. COMMISSIONER OF INCOME TAX CIRCLE - 1, NASHIK . APPELLANT VS. FORTUNA ENGINEERING (NASHIK) PVT. LTD. AMBAD, NASHIK 10 PAN : AAACF2767Q . RESPONDENT APPELLANT BY : MS. S. PRAVEENA RESPONDENT BY : MR. C.H. NANIWADEKAR DATE OF HEARING : 22-04-2013 DATE OF PRONOUNCEMENT : 30-04-2013 ORDER PER G. S. PANNU, AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, NASHIK DATE D 31.01.2012 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 26.12.2007 PAS SED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME TAX ACT , 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2005-06. 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING TWO SUBSTANTIVE GROUNDS OF APPEAL :- 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES O F THE CASE, THE LD. CIT(A)-1, NASHIK WAS JUSTIFIED IN ALLOWING THE ADDITION OF RS. 2,37,617/- MADE U/S 40(A)(IA) OF THE INCOME TAX ACT. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-1, NASHIK WAS JUSTIFIED IN GIVING THE AS SESSEE RELIEF OF RS. 7,50,000/- WHICH WAS DECLARED ITSELF AS THE INC OME OF THE ASSESSEE IN ITS RETURN OF INCOME. ITA NO. 688/PN/2012 FORTUNA ENGINEERING (NASHIK) PVT. LTD. A.Y. 2005-06 3. IN SO FAR AS THE FIRST GROUND IS CONCERNED THE I SSUE RELATES TO DISALLOWANCE MADE OUT OF THE EXPENDITURE FOR THE RE ASON THAT THE CORRESPONDING TAX DEDUCTED AT SOURCE (TDS) WAS DEPO SITED BELATEDLY. THE CIT(A) HAS ALLOWED THE ASSESSEES CLAIM FOR DEDUCTI ON OF RS. 2,37,617/- REPRESENTING PAYMENTS MADE TO CONTRACTORS ON THE GR OUND THAT THE CORRESPONDING TDS HAS BEEN PAID BY THE ASSESSEE BY 13.05.2005, WHICH IS BEFORE FILING OF THE INCOME-TAX RETURN FOR THE IMPU GNED ASSESSMENT YEAR AND THEREFORE, IN TERMS OF THE AMENDMENT TO SECTION 40( A)(IA) OF THE ACT WITH EFFECT FROM 01.04.2005 BY THE FINANCE ACT 2008, SUCH A DIS ALLOWANCE IS NOT PERMISSIBLE. 4. BEFORE US, THE FACTUAL MATRIX BROUGHT OUT BY THE CIT(A) HAS NOT BEEN CONTROVERTED BY THE DEPARTMENT. IT IS ALSO NOT DISP UTED THAT THE AMENDMENT MADE BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EF FECT FROM 01.04.2005 PRESCRIBED THAT WHERE THE TAX WAS DEDUCTIBLE AND DE DUCTED DURING THE LAST MONTH OF THE PREVIOUS YEAR AND IT HAS BEEN PAID BEF ORE DUE DATES SPECIFIED IN SECTION 139(1) OF THE ACT, NO DISALLOWANCE SHALL BE MERITED. IN THE PRESENT CASE, THE TDS CORRESPONDING TO THE EXPENDITURE OF R S. 2,37,617/- REPRESENTING PAYMENTS TO CONTRACTORS WAS DEDUCTED IN THE MONTH O F MARCH, 2005 AND IT HAS BEEN PAID ON 13.05.2005, AS NOTED BY THE CIT(A). FO LLOWING THE AMENDMENT MADE TO SECTION 40(A)(IA) BY THE FINANCE ACT, 2008 WITH RETROSPECTIVE EFFECT FROM 01.04.2005 THE IMPUGNED AMOUNT OF TDS HAVING B EEN PAID BEFORE THE DUE DATE OF FILING OF RETURN PRESCRIBED UNDER SECTI ON 139(1) OF THE ACT, THE SAME MITIGATES THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE FIND NO REASON TO INTERFERE WITH THE CONCLUSION DRAWN BY THE CIT(A), WHICH WE HEREBY AFF IRM. THUS ON THIS GROUND, REVENUE FAILS. 5. THE SECOND GROUND IS WITH REGARD TO THE SUM OF R S. 7,50,000/- REPRESENTING AN AMOUNT CREDITED TO THE PROFIT AND L OSS (P&L) ACCOUNT. THE ITA NO. 688/PN/2012 FORTUNA ENGINEERING (NASHIK) PVT. LTD. A.Y. 2005-06 SAID AMOUNT REPRESENTED DEDUCTION MADE BY THE ASSES SEE OUT OF THE BILLS PAID TO M/S PRATAP SERVICES, A CONTRACTOR ENGAGED FOR CO NSTRUCTION OF THE FACTORY BUILDING. THE ASSESSEE SUBMITTED BEFORE THE ASSESSI NG OFFICER THAT THE SAID AMOUNT WAS WRONGLY CREDITED TO THE P&L ACCOUNT AND INSTEAD THE SAME SHOULD HAVE BEEN REDUCED FROM THE CAPITALIZED COST OF CONS TRUCTION OF THE BUILDING. ACCORDINGLY, THE ASSESSEE SUBMITTED TO THE ASSESSIN G OFFICER THAT THE AFORESAID AMOUNT BE REDUCED FROM THE INCOME AND INS TEAD THE COST OF BUILDING BE REDUCED AND THE DEPRECIATION CLAIMED IN THE RETU RN OF INCOME WOULD BE REDUCED CORRESPONDINGLY. THE ASSESSING OFFICER DID NOT CONTROVERT THE MERITS OF THE PLEA SET UP BY THE ASSESSEE BUT OBSERVED THA T AT THE STAGE OF COMPLETION OF ASSESSMENT, THE AFORESAID PLEA COULD NOT BE RAISED BY THE ASSESSEE. AGGRIEVED WITH THE ACTION OF THE ASSESSIN G OFFICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) HAS ACCEPTED THE PLEA OF THE ASSESSEE BY OBSERVING THAT THE AMOUNT O F RS. 7,50,000/- WAS ERRONEOUSLY CREDITED TO THE P&L ACCOUNT AND THAT TH E SAME WAS LIABLE TO BE CORRECTED AT THE STAGE OF ASSESSMENT ALSO. AS A RES ULT, THE CIT(A) DIRECTED THE ASSESSING OFFICER TO REDUCE THE INCOME BY AN AMOUNT OF RS. 7,50,000/- AND ALSO ADD BACK THE CORRESPONDING DEPRECIATION WITH R ESPECT TO THE BUILDING AFTER REDUCING THE COST OF THE BUILDING BY THE SUM OF RS. 7,50,000/-. AGAINST SUCH ACTION OF THE CIT(A), REVENUE IS IN APPEAL BEFORE U S. BEFORE US, THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT MADE OUT A CASE THAT THERE IS ANY INFIRMITY IN THE MERITS OF THE ASSESSEES PLEA. THE ONLY PLEA RAISED BY THE REVENUE IS THAT SUCH POSITION COULD NOT BE TAKEN BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS WHEN THE SAID CLAIM WAS N OT MADE IN THE RETURN OF INCOME. 6. IN OUR CONSIDERED OPINION, THE CIT(A) MADE NO MI STAKE IN UPHOLDING THE CLAIM OF THE ASSESSEE FOR ADJUSTMENT OF INCOME AS A LSO REDUCTION OF DEPRECIATION CLAIM ALLOWABLE ON THE COST OF BUILDIN G AFTER REDUCING THE SAME BY A SUM OF RS. 7,50,000/-. NOTABLY, THE AMOUNT OF RS. 7,50,000/- WAS DEDUCTIBLE OUT OF THE BILLS PAID TO THE CONTRACTOR FOR CONSTRU CTION OF BUILDING AND THEREFORE ITA NO. 688/PN/2012 FORTUNA ENGINEERING (NASHIK) PVT. LTD. A.Y. 2005-06 THE CAPITALIZED COST OF BUILDING WAS LIABLE TO BE R EDUCED BY THAT EXTENT. CONSIDERING THE ENTIRETY OF CIRCUMSTANCES, WE, THER EFORE, FIND THAT THE CIT(A) WAS QUITE JUSTIFIED IN ACCEPTING THE PLEA OF THE AS SESSEE AND ACCORDINGLY, THE PRESENT GRIEVANCE OF THE REVENUE IS MISPLACED. THUS , ON THIS ASPECT ALSO REVENUE HAS TO FAIL. 7. RESULTANTLY, THE APPEAL OF THE REVENUE IS DISMIS SED. ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH APRIL, 2013. SD/- SD/- (R.S. PADVEKAR) (G.S. PANNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 30 TH APRIL, 2013 SUJEET COPY OF THE ORDER IS FORWARDED TO : - 1) THE ASSESSEE; 2) THE DEPARTMENT; 3) THE CIT(A)- I , NASHIK; 4) THE CIT- I , NASHIK; 5) THE DR, B BENCH, I.T.A.T., PUNE; 6) GUARD FILE. BY ORDER //TRUE COPY// PRIVATE SECRETARY I.T.A.T., PUNE