BHARAT CABLE INDUSTRIES, MUMBAI V. ACIT CIR 18(3), MUMBAI

ITA 7528/MUM/2013

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8466 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 23-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUMAN KUMAR LD
• Assessee Lawyers: SHAILESH PARMARLD
• Keywords: Capital expenditure
• Section: 143(3)

Judgement Text

ITA NO.7528/MUM/2013 BHARAT CABLE INDUSTRIES ASSESSMENT YEAR 2008-09 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE SHRI MAHAVIR SINGH, JM AND SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO. 7528/MUM/2013 ( / ASSESSMENT YEAR: 2008-09) BHARAT CABLE INDUSTRIES 1 ST FLOOR, HICO HOUSE 771, PANDIT SATWALEKAR MARG MAHIM MUMBAI 400 016 / VS. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 18(3) MUMBAI ./ ./PAN/GIR NO. AAIFB-3172-A ( /APPELLANT ) : ( !' / RESPONDENT ) A SSESSEE BY : SHAILESH PARMAR,LD.AR RE VENUE BY : SUMAN KUMAR, LD.DR / DATE OF HEARING : 05/10/2017 / DATE OF PRONOUNCEMENT : 08/11 /2017 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. THE CAPTIONED APPEAL BY ASSESSEE FOR ASSESSMENT YEAR [AY] 2008-09 ASSAILS THE ORDER OF THE LD. COMMISSIONER OF INCOME-TAX (APPEALS)- 16 [CIT(A)], MUMBAI, APPEAL NO.CIT(A)-16/ACIT-18(3)/IT- ITA NO.7528/MUM/2013 BHARAT CABLE INDUSTRIES ASSESSMENT YEAR 2008-09 2 392/2010-11 ORDER DATED 29/10/2013 . THE ASSESSMENT FOR IMPUGNED AY WAS FRAMED BY THE LD. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE- 18(3) U/S 143(3) OF THE INCOME TAX ACT, 1961 ON 30/12/20 10. THE ONLY EFFECTIVE GROUND RAISED BY ASSESSEE READS AS FOLLOW S:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE APPELLA NTS CASE AND IN LAW THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 12,85,262/- MADE BY THE LD. AO ON ACCOUNT OF PAYMENT OF GRATUITY. 2.1 FACTS LEADING TO THE SAME ARE THAT THE ASSESSEE BEING RESIDENT FIRM ENGAGED IN MANUFACTURING AND SALE OF ELECTRIC WIRES WAS ASSESSED FOR IMPUGNED AY U/S 143(3) ON 30/12/2010 AT LOSS OF RS. 5.68 CRORES AS AGAINST RETURNED LOSS OF RS.5.81 CRORES FILED BY THE ASSESSEE ON 29/09/2008. THE ONLY ADJUSTMENT MADE IN THE ASSESSM ENT WAS DISALLOWANCE OF GRATUITY OF RS.12,85,262/- 2.2 DURING ASSESSMENT PROCEEDINGS, IT WAS NOTED THA T THE ASSESSEE FIRM ACQUIRED THE BUSINESS OF PROPRIETARY CONCERN O F ONE OF THE PARTNER WITH EFFECT FROM 01/10/2007. ALL THE ASSETS AND LIA BILITIES OF THE PROPRIETARY CONCERN WERE TAKEN OVER AT ITS BOOK VAL UE AS ON 30/09/2007. IT WAS FURTHER NOTED THAT THE ASSESSEE DEBITED GRATUITY OF RS.12,85,262/- IN THE PROFIT & LOSS ACCOUNT. THE LD. AO OPINED THA T THE LIABILITY WAS THE LIABILITY OF EARLIER YEARS AND BELONGED TO PROPRIET ARY CONCERN AND HENCE THE SAME COULD NOT BE ALLOWED TO THE ASSESSEE FIRM. 3. AGGRIEVED, THE ASSESSEE CONTESTED THE SAME WITHO UT ANY SUCCESS BEFORE LD.CIT(A) VIDE IMPUGNED ORDER DATED 29/10/20 13 WHERE LD. CIT(A), PLACING RELIANCE ON SEVERAL JUDICIAL PRONOU NCEMENTS, CONCLUDED THAT THE SAID PAYMENT WERE CAPITAL EXPENDITURE OF T HE ASSESSEE FIRM AND COULD NOT BE ALLOWED TO ASSESSEE IN TERMS OF PROVIS IONS OF SECTION ITA NO.7528/MUM/2013 BHARAT CABLE INDUSTRIES ASSESSMENT YEAR 2008-09 3 36(I)(V) AND SECTION 43B. AGGRIEVED, THE ASSESSEE I N FURTHER APPEAL BEFORE US. 4. THE LD. COUNSEL FOR ASSESSEE [AR] DREW OUR ATTEN TION TO BREAK-UP OF THE GRATUITY EXPENSES AND CONTENDED THAT THE EXP ENSES WERE TOWARDS FUTURE LIABILITIES AND HENCE ALLOWABLE TO THE ASSES SEE. PER CONTRA , LD. DR CONTENDED THAT NO DEDUCTION COULD BE ALLOWED TO THE ASSESSEE FOR THE LIABILITIES OF THE PROPRIETARY CONCERN. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED RELEVANT MATERIAL ON RECORD. AS EVIDENT FROM DOCUMENTS ON RECORD, THE BREAK-UP OF THE GRATUITY AMOUNT CLAIMED BY THE ASSESSEE IS AS FOLLO WS:- NO. PARTICULARS AMOUNT (RS.) 1. PRESENT VALUE OF PAST SERVICES GRATUITY LIABILITIES ON DISCOUNTED BASIS 11,60,926/- 2. ANNUAL CONTRIBUTION 1,08,854/- 3. OTHERS 15,482 TOTAL 12,85,262/- PRIMA FACIE, IT APPEARS THAT THE AMOUNT OF RS.11,60,926/- COMPUT ED BY THE ASSESSEE RELATES TO SERVICES RENDERED IN THE PA ST BY THE EMPLOYEES TO ERSTWHILE PROPRIETARY CONCERN. NO DETAILS OF ANN UAL CONTRIBUTION OF RS.1,08,854/- HAS BEEN PLACED ON RECORD. IN PRINCIP LE, WE AGREE WITH THE STAND OF LD. CIT(A) THAT DISCHARGE OF LIABILITY OF THE TRANSFEROR CONCERN FOR SERVICES RENDERED IN THE PAST ARE CAPITAL EXPENDITU RE AND HENCE, THE SAME COULD NOT BE ALLOWED TO THE ASSESSEE. WITH THE SE OBSERVATIONS AND FOR WANT OF REQUISITE DETAILS, WE DEEM IT FIT TO RE STORE THE MATTER BACK TO LD. AO FOR NECESSARY ADJUDICATION WITH A DIRECTION TO ASSESSEE TO PROVIDE NECESSARY DETAILS AND SUBSTANTIATE HIS CLAIM IN THI S REGARD. ITA NO.7528/MUM/2013 BHARAT CABLE INDUSTRIES ASSESSMENT YEAR 2008-09 4 6. THE ASSESSEES APPEAL STANDS ALLOWED FOR STATIST ICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 08 TH NOVEMBER, 2017. SD/- SD/- (MAHAVIR SINGH) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 08.11.2017 SR.PS:- THIRUMALESH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT 3. * ( ) / THE CIT(A) 4. * / CIT CONCERNED 5. !$- , - , / DR, ITAT, MUMBAI 6. ./ / GUARD FILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI