ACIT, Chandigarh V. M/S.Surn Singh Lachman Singh, Chandigarh

ITA 705/CHANDI/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 7413 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 7 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 19-01-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 28-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B M KHANNA
• Assessee Lawyers: JAI SHREE SHARMA
• Keywords: Depreciation; Assessment record; Capital expenditure
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 705/CHD/2010 ASSESSMENT YEAR: 2007-08 ACIT, C-1(1), V M/S SURN SINGH CHANDIGARH. LACHMAN SINGH, 316, SECTOR 9, CHANDIGARH. PAN: AAPFS-5991M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.M.KHANNA RESPONDENT BY : SMT.JAISHREE SHARMA DATE OF HEARING : 19.01.2012 DATE OF PRONOUNCEMENT : 25.01.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 25.03.2010 PASSED BY THE LD . CIT(A) U/S 250 OF THE INCOME-TAX ACT,1961 (IN SHORT 'THE A CT'). 2. IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL: 1. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING TH E ADDITION OF RS.28,50,664/- AND FAILED TO APPRECIATE THE FACTS AND CIRCUMSTANCES OF THE CASE AND THEREBY ERRED IN CAPITALIZING EXPENDITURE OF RS.28,50,664/-. AO HAS MENTIONED DETAILED REASONING IN HIS ORDER WHILE MAKING THE DISALLOWANCE ON THIS ISSUE. THE FACTS OF THE CASE 2 ON THIS ISSUE ARE DIFFERENT AS MENTIONED BY LD. CIT(A) IN HER ORDER. 2. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING TH E ADDITION OF RS.16,38,033/- (NET) AND HAS ERRED IN CAPITALIZING A SUM OF RS.16,38,033/- (NET) ON ACCOUNT OF STORE AND SPARES. AO HAS MENTIONED DETAILED REASONING IN HIS ORDER WHILE MAKING THE DISALLOWANCES ON THIS ISSUE. THE FACTS OF THE CASE ON THIS ISSUE ARE DIFFERENT AS MENTIONED BY LD. CIT(A) IN HER ORDER. 3. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING TH E ADDITION OF RS.1318950/- U/S 40(A)(IA) ON ACCOUNT OF PAYMENT MADE ON ACCOUNT OF FREIGHT TO CONTAINER CORPORATION OF INDIA. AO HAS MENTIONED DETAILED REASONING IN HIS ORDER WHILE MAKING THE DISALLOWANCE ON THIS ISSUE. THE FACTS OF THE CASE ON THIS ISSUE ARE DIFFERENT AS MENTIONED BY LD. CIT(A) IN HER ORDER. 4. THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) WAS JUSTIFIED IN DELETING TH E ADDITION OF RS.51,66,120/- ON ACCOUNT OF COMMISSION ON EXPORT SALES. THE COMMISSION WAS PAID ON AGREED TERMS AND CONDITIONS AND FOR OBTAINING EXPORT ORDERS. THE ADDITION HAS BEEN MADE WITHOUT APPRECIATING THE NATURE OF BUSINESS AND BUSINESS EXPEDIENCY. AO HAS MENTIONED DETAILED REASONING IN HIS ORDER WHILE MAKING THE DISALLOWANCE ON THIS ISSUE. THE FACTS OF THE CASE ON THIS ISSUE ARE DIFFERENT AS MENTIONED BY LD. CIT(A) IN HER ORDER. 3. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, LD. 'DR' PLACED RELIANCE ON THE ORDER OF THE AO AND LD. 'AR' PLACED RELIANCE ON THE ORDER OF THE CIT(A). 3 4. IN THE FIRST GROUND OF APPEAL, REVENUE CONTENDED THAT CIT(A) ERRED IN DELETING THE ADDITION OF RS.28,50,6 64/- MADE BY THE AO, ON THE GROUND OF TREATING THE SAME AS CA PITAL EXPENDITURE. 5. WE HAVE CAREFULLY PERUSED THE RIVAL SUBMISSIONS AND THE RECORD AVAILABLE, INCLUDING THE STATEMENT FILED BY THE ASSESSEE BEFORE THE AO AND THE CIT(A). IN THE COUR SE OF ASSESSMENT PROCEEDINGS, THE DETAILS OF THE MANUFACT URING PROCESS OF THE ASSESSEE WERE CALLED FOR BY THE AO. THE ASSESSEE IS A MANUFACTURER OF RECLAIMED RUBBER. IN THE COURSE OF EXAMINATION OF ALL THE ACCOUNTS AND DOCUM ENTS OF THE ASSESSEE, IT WAS FOUND THAT ASSESSEE HAD PURCHA SED MACHINERY RELATED TO THE AUTOCLAVE UNIT, DETAIL OF THE MACHINERY IS GIVEN AS UNDER : SR.NO. BILL DATE BILL AMOUNT REMARKS 1 03.07.2006 15000.00 LABOUR CHARGES FOR REPAIR 2 06.03.2007 1560000.00 AUTO CLAVE UNIT 3 12.03.2007 1248000.00 DRIVER PART FOR AUTO CLAVE 4 15.03.2007 27664.00 M.S.LINES FOR AUTO CLAVE RS.2850664.00 TOTAL 6. THE AO HAS TREATED THE PURCHASE OF SUCH MACHINER Y AS CAPITAL EXPENDITURE AND DISALLOWED THE CLAIM OF THE ASSESSEE OF RS.28,50,664/- AS ALLOWABLE EXPENDITURE. HOWEVE R, THE ASSESSEE WAS GRANTED DEPRECIATION ON SUCH EXPENDITU RE. LD. CIT(A), AFTER APPRECIATION OF THE SUBMISSIONS AND T HE CASE LAWS RELIED UPON BY THE ASSESSEE, DECIDED THE ISSUE IN 4 FAVOUR OF THE ASSESSEE. THE RELEVANT PART OF THE O RDER OF THE CIT(A), AS CONTAINED IN PARA 9 IS REPRODUCED HEREUN DER : HAVING CONSIDERED THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD AND IN VIEW OF THE ABOVE DISCUSSION, I AM OF THE OPINION THAT THE 4 BILLS AR E FOR THE PURCHASE OF AUTOCLAVE UNIT PARTS, REPAIRS & FITTINGS. THERE IS NOTHING TO ESTABLISH THAT THE ASSESSEE PURCHASED NEW AUTOCLAVE UNIT. FURTHER, KEEPING IN VIEW THE WORKING OF THE UNIT, THE WEAR A ND TEAR, IT GOES THOUGH, REPLACEMENT OF PARTS IS NOTHI NG UNUSUAL AS EVIDENT FROM EARLIER YEARS EXPENSES ON REPLACEMENTS & REPAIRS OF MACHINERY. RELYING ON THE CASES QUOTED (SUPRA) BY THE ASSESSEE, I HOLD THAT T HE EXPENDITURE OF RS.28,50664/- IS NOT A CAPITAL EXPEN SE, BUT IS REVENUE IN NATURE ALLOWING ASSESSEE'S PLEA O N THIS GROUND. 7. LD. CIT(A) HAS HELD THE SAID EXPENDITURE AS REVE NUE EXPENDITURE AND ALLOWED THE GROUND OF THE ASSESSEE ON APPRECIATION OF THE LEGAL AND FACTUAL POSITION OF T HE CASE. HAVING REGARD TO THE FACT SITUATION OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF THE CIT(A) AN D, HENCE, THE SAME ARE UPHELD. 8. IN GROUND NO.2, THE REVENUE CONTENDED THAT CIT(A ) WAS NOT JUSTIFIED IN DELETION OF RS.16,38,033/- (NET) A ND FURTHER ERRED IN CAPITALIZING A SUM OF RS.16,38,033/- ON AC COUNT OF STORE AND SPARES. IN THE COURSE OF ASSESSMENT PROC EEDINGS , IT WAS FOUND THAT THE ASSESSEE HAD MADE PURCHASES F ROM M/S JAMSHADEPUR ENGG & MACHINERY MANUFACTURING CO. AMOUNTING TO RS.18,32,738/-, AS PER THE FOLLOWING D ETAILS : SR.NO. BILL DATE BILL AMOUNT REMARKS 1 30.08.2006 267350.00 (1) NO. ROLL 5 2 30.08.2006 495988.00 (2) NOS ROLL 3 22.02.2007 1069400.00 CHILLED CAST IRON ROLLS RS.1832738.00 TOTAL 9. THE AO DISALLOWED SUCH PURCHASES AS CAPITAL EXPENDITURE. HOWEVER, THE DEPRECIATION WAS ALLOWED ON SUCH PURCHASES OF MACHINERY BY THE AO. THE LD. CIT(A), O N APPRECIATION OF THE SUBMISSIONS FILED BY THE ASSESS EE, PARTLY ALLOWED THE APPEAL OF THE ASSESSEE, AS IS EVIDENT F ROM THE FINDINGS OF THE LD. CIT(A), REPRODUCED HEREUNDER : 13. I HAVE ALSO PERUSED ANOTHER STATEMENT WHICH SHOWS THAT ADDITION TO PLANT & MACHINERY DURING JANUARY 2007 WAS RS.2,80,000/- AND ADDITION DURING FEBRUARY WAS RS.9,52,631/-. THE AO IN HIS ORDER AT PARA 3.2 HAS REPRODUCED THE LEDGER ACCOUNT UNDER TH E NEW MACHINERY WHICH STARTS WITH AN OPENING BALANCE ON 1.4.06 AT NIL WITH ADDITION ON 21.3.07 AT RS.9,25,1 31/- AND RS.27,500/- AND ADDITION ON 31.3.07 AT RS.2,80,000/-. THUS THE TOTAL ADDITION UNDER NEW MACHINERY HAS BEEN SHOWN AT RS.12,32,631/- WHICH IS ADDITION MADE AFTER 1.10.06. THE BILLS OF ROLLS FUR NISHED DURING APPELLATE PROCEEDINGS ARE FOR RS.2,67,350/-, RS.4,95,988/- AND RS.10,69,400/- AND ONLY WHEN READ WITH VOUCHER DATED 14.3.07, THE ADDITION OF RS.9,25,131/- IN MACHINERY ACCOUNT STANDS EXPLAINED . THERE IS NO EXPLANATION AS TO WHY THE OTHER PURCHAS ES OF ROLLS HAVE NOT BEEN DEBITED TO MACHINERY ACCOUNT AND WHY DIFFERENT TREATMENT IS SHOWN IN RESPECT OF ROLL S PURCHASED FOR RS.2,67,350/- AND RS.4,95,988/-. THE COST OF ROLLS BEING CAPITAL IN NATURE ARE ALREADY S HOWN BY THE APPELLANT HIMSELF IN CASE OF ONE PURCHASE OF RS.9,25,131/-. 14. KEEPING THE ABOVE DISCUSSION IN VIEW, THE APPELLANT GETS A RELIEF OF RS.10,69,400/- AS AMOUNT OF RS.9,25,131/- (EXCLUDING MODVAT) HAS RIGHTLY BEEN 6 CAPITALIZED. THE BALANCE ADDITION OF RS.7,63,338/- (RS.2,67,350/- + RS.4,95,988/-) SUBJECT TO ALLOWANC E OF DEPRECIATION IS CONFIRMED, PARTLY ALLOWING ASSESSEE 'S CONTENTION ON THIS GROUND. 10. WE HAVE GONE THROUGH THE DETAILED ANALYSIS OF T HE PURCHASE OF MACHINERY IN VIEW OF BACKGROUND GIVEN B Y THE ASSESSEE AS ALSO THE LD. CIT(A) PASSED THE SPEAKING ORDER, WHICH CANNOT BE ASSAILED. THEREFORE, THE FINDINGS OF THE LD. CIT(A) ARE UPHELD AND THE GROUND OF APPEAL RAISED B Y THE REVENUE IS DISMISSED. 11. IN GROUND NO.3, THE REVENUE CONTENDED THAT CIT( A) ERRED IN DELETING THE ADDITION OF RS.13,18,950/- U/ S 40(A)(IA) OF THE ACT ON ACCOUNT OF PAYMENT OF FREIGHT TO M/S CONTAINER CORPORATION OF INDIA. THE AO HELD THAT M/S CONTAIN ER CORPORATION OF INDIA IS A SUBORDINATE CORPORATE ENT ITY AND THE PAYMENTS TO BE MADE TO IT ARE SUBJECT TO TDS DE DUCTION. SINCE THE ASSESSEE HAD FAILED TO DEDUCT TDS ON THES E PAYMENTS AS PER SECTION 194C READ WITH SECTION 40(A )(IA) OF THE INCOME-TAX ACT, ASSESSEE WAS NOT ELIGIBLE FOR C LAIMING THE ABOVE AMOUNT AS EXPENSES. THE AO, CONSEQUENTLY , MADE ADDITION OF RS.13,18,950/-. THE CIT(A), ON APPRECIA TION OF THE SUBMISSION MADE BY THE ASSESSEE AND ALSO IN THE LIGHT OF THE DECISION OF THE ITAT CHANDIGARH BENCH IN THE CA SE OF PARTAP HOON V ADDL.CIT, RANGE-1, CHANDIGARH IN ITA NO. 536/CHANDI/2009 ALLOWED THE RELIEF TO THE ASSESSEE. 12. HAVING REGARD TO THE FACT SITUATION OF THE PRES ENT CASE, WE ARE INCLINED TO ACCEPT THE FINDINGS OF THE CIT(A ) AS THE CIT(A) PLACED RELIANCE ON THE DECISION OF THE CO-OR DINATE 7 BENCH, AS INDICATED ABOVE, AND ADJUDICATED THE ISSU E. THIS GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 13. IN GROUND NO.4, THE REVENUE CHALLENGED THE DELE TION OF ADDITION OF RS.51,66,120/-, BY THE CIT(A), ON ACCOU NT OF COMMISSION ON EXPORT SALES. THE AO DISALLOWED THE IMPUGNED AMOUNT, ON THE GROUND THAT NO EXPLANATION REGARDING THE GENUINENESS OF THE BUSINESS EXPENDITU RE IN THE FORM OF COMMISSION, HAD BEEN FURNISHED BY THE A SSESSEE. THE AO ALSO OBSERVED THAT NO WRITTEN AGREEMENT WAS PROVIDED BY THE ASSESSEE. THE CIT(A), FOLLOWING THE DECISION IN THE CASE OF CIT V GAUTAM CREATING 171 TAXMAN 271 (DEL), CIT V SEPTU INDIA (P) LTD. 305 ITR 295 (P&H) AND CI T V ISHWAR PRAKASH BROS 159 ITR 843 (P&H), ALLOWED THE CLAIM OF THE ASSESSEE. THE RELEVANT FINDINGS OF THE CIT(A ) ARE REPRODUCED HEREUNDER : 21. I HAVE GONE THROUGH THE ASSESSMENT RECORDS, SUBMISSIONS OF THE COUNSEL AND DOCUMENTS FILED DURI NG THE APPELLATE PROCEEDINGS AND IN PARTICULAR THE COP IES OF LETTERS ADDRESSED TO BANKS ALONGWITH THE INVOICES. I FIND THAT THE NAME AND ADDRESSES OF THE AGENT AS WE LL AS THE AMOUNT OF COMMISSION APPEARS ON THE LETTERS. I AGREE WITH THE COUNSEL THAT FOR EXPORT BUSINESS, ON E HAS TO SEEK HELP AND ASSISTANCE OF SALES AGENTS. SINCE DESIRED INFORMATION IS AVAILABLE ON EXPORT DOCUMENT S, THE NECESSITY FOR AN AGREEMENT WITH COMMISSION AGEN T CAN BE DONE AWAY WITH. THE EXPENSES CLAIMED SEEM TO HAVE BEEN MADE FOR CARRYING ON THE EXPORT. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, CLAIM OF COMMISSION PAID FOR CARRYING ON EXPORT BUSINESS, BEING AN EXPENSE I S ALLOWED. THE APPELLANT GETS A RELIEF OF RS.51,66,12 0/- ON THIS GROUND. 8 14. THE CIT(A) OBSERVED THAT COMPLETE DETAILS AND PARTICULARS OF THE AGENTS, INCLUDING THE AMOUNT OF COMPENSATION HAS BEEN FURNISHED BY THE ASSESSEE AND CIT(A), ON APPRECIATION OF THE DETAILS OF SUCH COMM ISSIONS AND SUBMISSIONS MADE BY THE ASSESSEE AND ALSO RELYI NG UPON THE ABOVE REFERRED TWO CASE LAWS, HELD THAT TH E EXPENSES CLAIMED BY THE ASSESSEE HAD BEEN INCURRED FOR CARRYING ON THE EXPORT BUSINESS. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THE GROUND OF APPEAL OF THE REVENUE IS DISMISSED. 15. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JAN.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH