RAMANIKLAL S. GOSALIA & CO, MUMBAI V. ASST CIT RG 21(2), MUMBAI

ITA 7347/MUM/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 7456 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-04-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 13-12-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Business expenditure; Opportunity of being heard; Revenue expenditure; Capital expenditure
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAMIT KOCHAR , ACCOUNTANT MEMBER ITA NO. 7347/MUM./2016 ( ASSESSMENT YEAR : 20 08 09 ) RAMANIKLAL S. GOSALIA & CO. 608, NATIONAL HOUSE, B.J. MARG JACOB CIRCLE, MUMBAI 400 011 PAN AADCFR2284G . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX RANGE 21(2), MUMBAI . RESPONDENT ASSESSEE BY : SMT. M.K. PATEL REVENUE BY : SHRI RAM TIWARI DATE OF HEARING 19.04.2018 DATE OF ORDER 25.04.2018 O R D E R PER SAKTIJIT DEY, J.M. THIS APPEAL BY THE ASSESSEE IS AGAINST ORDER DATED 19 TH SEPTEMBER 2016, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 33 , MUMBAI, FOR THE ASSESSMENT YEAR 20 08 09 . 2 . GROUND NO.1, IS NOT PRESSED, HENCE, DISMISSED. 3 . IN GROUND NO.2, ASSESSEE HAS CHALLENGED DISALLOWANCE OF DEPRECIATION ON INTANGIBLE ASSET. 2 RAMANIKLAL S. GOSALIA & CO. 4 . BRIEF FACTS RELATING TO THE AFORESAID ISSUE ARE, THE ASSESSEE A PARTNERSHIP FIRM IS A WHOLESEL LE R OF CHEMICALS, SOLVENTS AND POLYMERS. A SSESSEE IS ALSO IN THE BUSINESS OF GENERATING ELECTRICITY THROUGH WIND MILLS. FOR THE ASSESSMENT YEAR UNDER DISPUTE, THE ASSESSEE FI LED ITS RETURN OF INCOME ON 4.09.2008 DECLARING TOTAL INCOME OF ` 3,10,38,071. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER NOTICING THAT ASSESSEE HAS CLAIMED DEPRECIATION OF ` 13,18,359 O N THE OPENING WRITTEN DOWN VALUE OF ` 52,73,460, RELATING TO RIGHTS IN COMMON INFRASTRUCTURE I AND II BY TREATING IT AS INTANGIBLE ASSET , CALLED UPON THE ASSESSEE TO FURNISH DETAIL S OF SUCH CLAIM . O N VERIFYING THE DETAILS HE FOUND THAT THE EXPENDITURE WAS INCURRED TOWARDS PAYMENT FOR A COMMON INFRASTRUCTURE FACILITY CREATED BY SUZLON ENERGY LTD. FOR USE OF ALL WIND MILLS SITUATED IN THAT AREA. THE ASSESSING OFFICER WAS OF THE VIEW T HAT THE EXPENDITURE INCURRED BY THE ASSESSEE WAS A CAPITAL EXPENDITURE, HENCE, DEPRECIATION CANNOT BE ALLOWED BY HOLDING IT AS INTANGIBLE ASSET. ACCORDINGLY, THE ASSESSING OFFICER PROPOSED TO DISALLOW THE DEPRECIATION CLAIMED BY THE ASSESSEE. THE ASSESSEE OBJECTED TO THE PROPOSED DISALLOWANCE BY RELYING UPON AN ORDER OF THE FIRST APPELLATE AUTHORITY FOR ASSESSMENT YEAR 2006 07, WHEREIN ASSESSEES CLAIM OF DEPRECIATION WAS PARTLY ALLOWED. THE ASSESSING OFFICER, HOWEVER, WAS NOT CONVINCED WITH THE SUBMISSIONS OF THE ASSESSEE. HE HELD THAT THE COMMON INFRASTRUCTURE FACILITY ON WHICH THE ASSESSEE HAD CLAIMED DEPRECIATION @ 25% , AS APPLICABLE TO INTANGIBLE 3 RAMANIKLAL S. GOSALIA & CO. ASSET , NOT BEING IN THE NATURE OF KNOWHOW, PATENT, COPY RIGHT FOR TRADE MARK OR LICENSE OR A FRANCHISE CANNO T BE TREATED AS INTANGIBLE ASSET, HENCE, ASSESSEES CLAIM OF DEPRECATION @ 25% IS NOT ALLOWABLE. FURTHER, THE ASSESSING OFFICER ALSO HELD THAT THOUGH , THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE COMMON INFRASTRUCTURE FACILITY IS A CAPITAL EXPENDITURE , BUT , THE ASSESSEE HAS NOT ACQUIRED ANY ASSET BY INCURRING SUCH EXPENDITURE. ACCORDINGLY, HE DISALLOWED ASSESSEES CLAIM OF DEPRECIATION. BEING AGGRIEVED OF THE DISALLOWANCE OF DEPRECIATION, ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 5 . THE LEARNED COMMISSIONER (APPEALS) AFTER EXAMINING THE F ACTS ON RECORD OBSERVED THAT NEITHER THE ASSESSEE HAS ACQUIRED ANY OWNERSHIP IN POWER EVACUATION FACILITY NOR ANY COST IS BORNE BY THE ASSESSEE SINCE THE ENTIRE COST OF THE EVACUATION FACILITY WAS MAD E BY WAY OF LOANS AND GRANTS . HENCE, HE HELD THAT ASSESSEES CLAIM OF DEPRECATION CANNOT BE ALLOWED , SINCE , ACCORDING TO HIM, BY PAYING FOR COMMON INFRASTRUCTURE FACILITY NO RIGHT IN THE FORM OF AN INTANGIBLE ASSET HAS BEEN CREATED. THEREFORE , HE DISALLOWE D ASSESSEES CLAIM OF DEPRECIATION. 6 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SIMILAR ISSUE RELATING TO ASSESSEES CLAIM OF DEDUCTION OF THE EXPENDITURE INCURRED TOWARDS INFRASTRUCTURE FACILITY OF COMMON POWER EVACUATION EITHER AS 4 RAMANIKLAL S. GOSALIA & CO. REVENUE EXPENDIT URE OR TOWARDS DEPRECIATION CAME UP FOR CONSIDERATION BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2007 08. V IDE ORDER DATED 22 ND SEPTEMBER 2016, IN ITA NO.6463/MUM./2012, THE TRIBUNAL HAS RESTORED THE ISSUE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION. THERE FORE, IT WAS SUBMITTED, THE CLAIM OF THE ASSESSEE IN THE IMPUGNED ASSESSMENT YEAR WILL BE CONSEQUENTIAL TO THE DECISION TO BE TAKEN BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2007 08. THEREFORE, SHE SUBMITTED THAT THE ISSUE MAY BE RESTORED BACK TO THE FIL E OF THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION. 7 . THE LEARNED DEPARTMENTAL REPRESENTATIVE AGREED WITH THE AFORESAID SUBMISSIONS OF THE LEARNED AUTHORISED REPRESENTATIVE. 8 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED MAT ERIALS ON RECORD. UNDISPUTED LY, DEPRECIATION CLAIMED BY THE ASSESSEE WHICH IS THE SUBJECT MATTER OF DISPUTE IN THE PRESENT APPEAL RELATES TO THE EXPENDITURE INCURRED TOWARDS CONTRIBUTION TO COMMON INFRASTRUCTURE FACILITY CREATED BY SUZLON ENERGY LTD. NOTABLY, IN COURSE OF THE APPEAL PROCEEDINGS BEFORE THE LEARNED COMMISSIONER (APPEALS) IN ASSESSMENT YEAR 2007 08, THE ASSESSEE CLAIMED DEDUCTION OF SUCH EXPENDITURE INCURRED AS REVENUE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. ALTERNATIVELY, ASSESSEE CLAIMED DEPRECIATION BY TREATING IT AS AN INTANGIBLE ASSET. HOWEVER, THE LEARNED COMMISSIONER (APPEALS) REJECTED ASSESSEES CLAIM. WHEN THE ASSESSEE CHALLENGED THE DECISION 5 RAMANIKLAL S. GOSALIA & CO. OF THE LEARNED COMMISSIONER (APPEALS) BEFORE THE TRIBUNAL, THE TRIBUNAL IN THE ORDER REFERRED TO ABOVE, RESTORED THE ISSUE TO THE ASSESSING OFFICER WITH THE FOLLOWING OBSERVATIONS: 4. AFTER HEARING THE RIVAL CONTENTIONS, WE FIND THAT THE ASSESSEE HAS MADE CLAIM OF PAYMENT OF RS.37.50 LACS IN THE COURSE OF BUSINESS OF GENERATION OF POWER FROM WINDMILL AND CLAIMED THE SAME AS BUSINESS EXPENDITURE U/S 37(1) OF THE ACT. WE HAVE GONE THROUGH THE ASSESSMENT ORDER AND NOTICED THAT AT PAGE 2 OF THE ASSESSMENT ORDER IN PARA 4.1 THE ASSESSEE HAS MADE A CLAIM REGARDING PAYMENT IN RESPECT TO INFRASTRUCTURE FACILITY O F COMMON POWER EVACUATION OF RS.37.50 LACS TO SUZLON ENERGY LTD. WE FIND THAT THESE FACTS ARE VERY MUCH AVAILABLE ON RECORD OF THE AO AS WELL AS THE CIT (A). THE ONLY ISSUE WHICH IS TO BE CONSIDERED IS AS TO WHETHER THESE FACTS NEED VERIFICATION AND THE IS SUE IS TO BE SET ASIDE TO THE FILE OF THE AO. HENCE, WE ADMIT THE ADDITIONAL GROUNDS OF APPEAL AND SET ASIDE THE ISSUE TO THE FILE OF THE AO FOR DECIDING THE ISSUE AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS ISSUE OF THE ASSE SSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSE. 9 . AFTER PERUSING THE OBSERVATIONS OF THE CO ORDINATE BENCH AS ABOVE, WE AGREE WITH THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ISSUE RELATING TO ASSESSEES CLAIM OF DEPRECIATION IN THE IMPUGNED ASSESSMEN T YEAR IS DEPENDENT UPON THE ULTIMATE OUTCOME OF THE DECISION TO BE TAKEN WITH REGARD TO ASSESSEES CLAIM OF DEDUCTION IN RESPECT OF SIMILAR EXPENDITURE IN ASSESSMENT YEAR 2007 08. THAT BEING THE CASE, WE RESTORE THE ISSUE RAISED IN THIS GROUND TO THE FILE OF THE ASSESSING OFFICER FOR DE NOVO ADJUDICATION AFTER DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 6 RAMANIKLAL S. GOSALIA & CO. 10 . IN THE RESULT, ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPE N COURT ON 25.04.2018 SD/ - RAMIT KOCHAR ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 25.04.2018 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (ASSTT. REGISTRAR /SR.P.S ) ITAT, MUMBAI