ASST CIT 15(1)(1), MUMBAI V. AAR AAR ARTS P.LTD, MUMBAI

ITA 7316/MUM/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8645 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 2 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 24-01-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJESH KUMAR YADAV
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI , , BEFORE S/SHRI RAJENDRA, A.M. AND SANJAY GARG,J.M. ./ ITA NO.7316/MUM/2014 / ASSESSMENT YEAR: 2010-11 ACIT 15(1)(1) ROOM NO.403, 4 TH FLOOR, AAYAKAR BHAVAN, MK ROAD MUMBAI-400 020. VS. M/S. AAR AAR ARTS PVT. LTD. SHED NO.2A, HANUMAN SILK MILLS OPP. HUMA ADLABS MUMBAI-400 078. PAN: AAACA 7254 R ( / // / APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI RAJESH KUMAR YADAV ASSESSEE BY: NONE / // / DATE OF HEARING: 24.01.2017 !'#$ / DATE OF PRONOUNCEMENT: 10.02.2017 , ,, , 1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) , ,, , -PER RAJENDRA,AM: CHALLENGING THE ORDER,DATED 26/09/2014,OF THE CIT ( A)-22, MUMBAI THE ASSESSING OFFICER(AO) HAS FILED THE PRESENT APPEAL.ASSESSEE, AN INDIVIDUAL,ENGAGED IN THE BUSINESS OF OFFSET AND SCREEN-PRINTING, FILED HIS RETURN OF IN COME ON 12/10/2010,DECLARING TOTAL INCOME AT RS.38.04 LAKHS.THE AO COMPLETED THE ASSESSMENT U/S. 143 (3) OF THE ACT,ON 14/02/ 2013, DETERMINING HIS INCOME AT RS.85.02 LAKHS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT DELETING THE DI SALLOWANCE OF BANK PROCESSING CHARGES OF RS.36.21 LAKHS.DURING THE ASSESSMENT PROCEEDINGS,TH E AO FOUND THAT THE ASSESSEE HAD DEBITED A SUM OF RS.36,21,006/-TOWARDS BANK PROCESS ING CHARGES IN THE PROFIT AND LOSS ACCOUNT,THAT THE AMOUNT PERTAINED TO THE TERM LOAN AVAILED FROM ABHAYUDAY COOPERATIVE BANK LTD. HE HELD THAT THE BANK CHARGES WERE WITH R EGARD TO VARIOUS TERM LOANS,THAT THE SAME WERE NOT IN THE NATURE OF REVENUE EXPENDITURE,THAT PROCESSING CHARGES HAD TO BE TREATED AS CAPITAL EXPENDITURE,THAT ASSESSEE WAS NOT ENTITLED TO CLAIM AMORTISATION OF THE EXPENDITURE U/S.35D OF THE ACT.FINALLY, HE ADDED THE SAID AMOUN T TO THE TOTAL INCOME OF THE ASSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFE RRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA).BEFORE HIM,THE ASSESSEE MA DE ELABORATE SUBMISSIONS. AFTER CONSIDERING THE ASSESSMENT ORDER AND THE SUBMISSION S OF THE ASSESSEE,THE FAA DIRECTED IT TO FILE CERTAIN DOCUMENTS,INCLUDING INVOICE FOR PURCHA SE OF MACHINERY,COPIES OF THE TERM LOANS 7316/M/14(10-11) AAR AAR ARTS PVT.LTD. 2 SANCTIONED, DETAILS OF LETTERS OF CREDIT.THE ASSESS EE FILED THE NECESSARY DETAILS BEFORE HIM. AFTER CONSIDERING THE SAME,HE OBSERVED THAT MACHINE RIES WERE PURCHASED IN THE EARLIER ASSESSMENT YEARS,THAT THE LETTER OF CREDIT WITH THE HDFC BANK WAS OPENED ON 30/08/2007,THAT SAME WAS SUBSEQUENTLY CLOSED BY THE ASSESSEE DURING THE YEAR UNDER APPEAL,THAT THE TERM LOAN WAS UTILISED FOR PURCHASE OF MACHINERY ONLY,THAT TH E PERUSAL OF THE BALANCE SHEETS FOR THE AY.2009-10 INDICATED ADDITION TO FIXED ASSETS TO TH E TUNE OF RS.93.26 LAKHS,THAT THE ASSESSEE HAD ALREADY PUT INTO USE THE PURCHASED MACHINERY,TH AT ANY PAYMENT AFTER MACHINERY WAS PUT INTO USE HAD TO BE ALLOWED AS REVENUE EXPENDITURE-W HETHER IT WAS TERMED AS PROCESSING CHARGE OR INTEREST EXPENDITURE IN THE BOOKS OF ACCO UNTS.HE FURTHER OBSERVED THAT MACHINERY HAD BEEN CAPITALISED IN THE YEAR 2008 ITSELF, THAT THE CLAIM MADE BY THE ASSESSEE WAS IN ORDER. FINALLY,HE ALLOWED THE APPEAL FILED BY THE ASSESSEE . 4. DURING THE COURSE OF HEARING BEFORE US,THE DEPARTME NTAL REPRESENTATIVE(DR) STATED THAT MATTER COULD BE DECIDED ON MERITS.AS STATED EARLIER NONE APPEARED ON BEHALF OF THE ASSESSEE. WE FIND THAT THE FAA HAS GIVEN A CATEGORICAL FINDIN G OF FACT OF PURCHASE OF MACHINERY IN THE EARLIER YEARS AND CAPITALISATION OF THE MACHINERY I N THAT YEAR,THAT THE ASSESSEE HAD PAID PROCESSING CHARGES TO THE BANK,THAT THE EXPENDITURE INCURRED HAS NOT BEEN DOUBTED BY THE AO,THAT THE AO HAS NOT GIVEN ANY REASON FOR TREATIN G THE EXPENDITURE AS CAPITAL EXPENDITURE. ANY EXPENDITURE INCURRED FOR RUNNING THE BUSINESS H AS TO BE TREATED AND ALLOWED AS REVENUE EXPENDITURE AND NOT CAPITAL EXPENDITURE.CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THE ORDER OF THE FAA HAS TO BE CONFIRMED.UPHOLDING HIS ORDER,WE DECIDE THE EFFECTIVE GROUND OF APPEAL AGAINST THE A O. AS A RESULT APPEAL FILED BY THE AO STANDS DISMISSED . . ORDER PRONOUNCED IN THE OPEN COURT ON 10 TH FEBRUARY, 2017. 10 2017 SD/- SD/- ( /SANJAY GARG) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 10 .02.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 7316/M/14(10-11) AAR AAR ARTS PVT.LTD. 3 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.