ACIT, Ludhiana V. M/s Ramesh Steels, Ludhiana

ITA 757/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90172 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 20-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Capital asset; Business income; Depreciation; Business expenditure; Bad and doubtful debts
• Section: 80HHC; 14A; 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 757/CHD/2014 ASSESSMENT YEAR: 2008-09 ACIT, VS. RAMESH STEELS CIRCLE I B-XXX-2185, PHASE VII LUDHIANA FOCAL POINT LUDHIANA PAN NO. AADFR6048Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. MANJIT SINGH RESPONDENT BY : SH. SUDHIR SEHGAL DATE OF HEARING : 20/05/2015 DATE OF PRONOUNCEMENT : 26/05/2015 ORDER PER T.R.SOOD, A.M. THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE O RDER DATED 24/06/2014 PASSED BY THE CIT(A)-I, LUDHIANA. 2. IN THIS APPEAL REVENUE HAS RAISED THE FOLLOWING GROUNDS: I) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 15,60 ,000/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION CLAIMED BY THE ASSESSEE 80% ON WINDMILL PROJECTS, BY IGNORING THE DECISION OF HON BLE SUPREME COURT IN THE CASE OF TRAVANCORE COCHIN CHEMICAL LTD. V/S 106 ITR 900 AND ALLOWING DEPRECIATION ON CONTRIBUTION OF POWER EVACUATION INFRASTRUCTURE FAC ILITY EVEN THOUGH THE ASSESEE HAS NO OWNERSHIP OF THE ASSET, BEING ONLY A CONTRIB UTOR FOR AVAILING THE FACILITY. II) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) WAS JUSTIFIED IN TREATING THE POWER EVACUATION INFR ASTRUCTURE AS PART OF WIND MILL AND AS RENEWABLE ENERGY DEVICE WHEREAS THE AO HAS B ROUGHT ON RECORD SUFFICIENT MATERIAL TO PROVE THAT SAME WAS IN FACT NOT A RENEWABLE ENERGY DEVICE AND HENCE NOT ELIGIBLE FOR DEPRECIATION @80% . III) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 5,92,812/- MADE BY THE AO, BY TREATING ELECTRICAL LINE FOR POWER TRANSMISSION AND METERING AS PART OF RENEWABLE ENERGY DEVICE 2 ELIGIBLE FOR DEPRECIATION @80% WHEREAS THE AO HAS B ROUGHT ON RECORD SUFFICIENT MATERIAL TO PROVE THAT THE TRANSMISSION AND DISTRIB UTION NET WORK WAS ACTUALLY PLANT AND MACHINERY WHICH IS ELIGIBLE ONLY FOR NORM AL RATES OF DEPRECIATION @ 15% U/S 32 OF THE INCOME TAX ACT. 1961. IV) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 1,27,49,983/- PAID ON LIFE OF PARTNERS DEBITED TO P ROFIT AND LOSS ACCOUNT AS KEYMAN INSURANCE PREMIUM DISALLOWED BY THE ASSESSIN G OFFICER AS NON-BUSINESS EXPENDITURE, BY NOT DECIDING THE ISSUE ON MERITS. V) THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONSIDERING THE INTEREST INCOME EARNED FROM MONEY LENDING BUSINESS UNDER THE HEAD BUSINESS INCOME WHICH WAS HELD TO BE INCOME FROM OTHER SOURCES BY T HE ASSESSING OFFICER SINCE THE ASSESSEE FIRM WAS NOT ENGAGED IN THE BUSINESS O F MONEY LENDING AND NO EXPENSES UNDER THE HEAD ESTABLISHMENT, WAGES, ELECT RICITY HAVE BEEN DEBITED TO THE P&L ACCOUNT OF THE ALLEGED MONEY LENDING BUSINE SS DONE EVEN WITHOUT OBTAINING LICENSE FROM THE APPROPRIATE AUTHORITY FO R DOING SUCH BUSINESS. GROUND NO. I TO III 3. THE ISSUE RAISED THROUGH THESE GROUNDS IS WHETHE R POWER EVACUATION FACILITY WOULD CONSTITUTE A DEVICE FOR RENEWABLE EN ERGY AND WHETHER THE ASSESSEE WOULD BE ENTITLED TO DEPRECIATION @ 80%. T HE AO HELD THAT THIS IS NOT A PART OF RENEWABLE ENERGY DEVICES AND DEPRECIATION W AS ALLOWED ONLY @ 7.5% (15% FOR THE WHOLE YEAR). HOWEVER ON APPEAL THE LD. CIT(A) ALLOWED THE DEPRECIATION @40% (I.E., 80% FOR THE WHOLE YEAR). 4. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF AO. 5. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE P OINTED OUT THAT ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IN CASE OF CIT-I, LUDHIANA VS. M/S MAXWELL INC. IN IT A NO. 167 OF 2014. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT HONBLE PUNJAB & HARYANA HIGH COURT HAS CLEARLY HELD IN CASE OF CIT- I VS. M/S MAXWEL INC. (SUPRA) THAT CONTRIBUTION TOWARDS EVACUATION OF POWER WOULD CONSTITUTE A CAPITAL ASSET RELATING TO RENEWABLE ENERGY AND WAS ENTITLED FOR D EPRECIATION @ 80% ANNUALLY THEREFORE, FOLLOWING THIS DECISION WE DECIDE THIS G ROUND AGAINST THE REVENUE. GROUND NO. IV 7. DURING THE ASSESSMENT PROCEEDINGS IT WAS NOTICED BY AO THAT ASSESSEE HAS PAID A SUM OF RS. 1,27,49,983/- ON ACCOUNT OF I NSURANCE PREMIUM PAID FOR 3 LIFE OF THE PARTNERS AS KEYMAN IN THE FIRM. THIS EX PENDITURE WAS HELD TO BE NOT ALLOWABLE. 8. ON APPEAL THE LD. CIT ALLOWED THIS CLAIM IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF CIT VS. B.N. EXPORTS 3 23 ITR 178. 9. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER OF AO. 10. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS ALSO COVERED BY THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN CASE OF LAJ EXPORTS VS. DCIT 20 ITR(TRIB)111 AND ACIT VS. PARAM OUNT IMPEX IN ITA NO. 762/CHD/2011. 11. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT CHANDIGARH BENCH OF THE TRIBUNAL IN SIMILAR CIRCUMSTANCES IN THE CASE O F LAJ EXPORTS VS. DCIT (SUPRA) BY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH C OURT IN CASE OF CIT VS. B.N. EXPORTS (SUPRA) HAS HELD THAT PREMIUM PAID ON INSUR ANCE OF KEYMAN IS ALLOWABLE EXPENDITURE. BY FOLLOWING THIS DECISION WE DECIDE T HIS ISSUE AGAINST THE REVENUE. GROUND NO. V 12. AFTER HEARING BOTH THE PARTIES WE FIND THAT DUR ING THE ASSESSMENT PROCEEDINGS AO NOTICED THAT ASSESSEE HAD INTEREST I NCOME WHICH WAS TREATED BY HIM AS INCOME FROM OTHER SOURCES. 13. ON APPEAL LD. CIT(A) DECIDED THIS ISSUE IN FAVO UR OF THE ASSESSEE VIDE PARA 11 WHICH IS AS UNDER 11. I HAVE CONSIDERED THE FACTS OF THE CASE WHICH CLEARLY SHOW THAT THE ASSESSEE IS IN THE BUSINESS OF MONEY LENDING AND HE INCOME ON THIS ACCOUNT SHOULD BE ASSESSED UNDER THE HEAD INCOME FR OM BUSINESS AND PROFESSION AND NOT UNDER THE HEAD INCOME FROM THE O THER SOURCES. THE AR HAS ALSO HIGHLIGHTED THE DECISION OF HONBLE JURISD ICTIONAL HIGH COURT IN THE CASE OF SISTER CONCERNS OF THE ASSESSEE FIRM WH EREIN ON SIMILAR ISSUE THE DECISION HAS BEEN IN FAVOUR OF THE ASSESSEE THAT TH E INCOME FROM MONEY LENDING WAS TO BE TREATED AS BUSINESS INCOME. IN TH E CIRCUMSTANCES THE ADDITION MADE BY THE AO IS DIRECTED TO BE DELETED. 14. BEFORE US LD. DR STRONGLY SUPPORTED THE ORDER O F AO . 15. ON THE OTHER HAND LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN ONE OF THE GROUP CASES IN CASE OF CIT-I, LUDHIANA VS. M/S. EASTMAN INDUSTRIES, LUDHIANA 4 (HON'BLE HIGH COURT OF PUNJAB & HARYANA ) IN ITA NO . 2 OF 2010 SUCH INCOME WAS ACCEPTED AS INCOME FROM BUSINESS. 16. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT HONBLE PUNJAB & HARYANA HIGH COURT IN SIMILAR CIRCUMSTANCES IN CASE OF CIT-I, LUDHIANA VS. M/S. EASTMAN INDUSTRIES (SUPRA) CONSIDERED THE FOLLOWING QUESTION: (I) WHETHER ON THE FACTS AND IN LAW, THE INCOME TA X APPELLATE TRIBUNAL WAS JUSTIFIED IN DELETING THE ADDITION OF RS. 56,66,950 /- AND RS. 2,57,502/- MADE BY THE ASSESSING OFFICER BY DISALLOWING THE CLAIM O F THE BAD DEBTS WRITTEN OFF WHICH WERE DECLARED ON ACCRUAL BASIS IN EARLIER ASSESSMENT YEARS AND DEDUCTION UNDER SECTION 80HHC WAS CLAIMED ON THE SA ME IN THE RESPECTIVE YEARS, KEEPING IN VIEW THE PROVISIONS OF SECTION 14A OF THE INCOME TAX ACT, 1961 ? (II) WHETHER ON THE FACTS AND IN LAW, THE INCOME T AX APPELLATE TRIBUNAL WAS JUSTIFIED IN TREATING THE INTEREST INCOME EAR NED FROM MONEY LENDING AS BUSINESS INCOME WHEREAS THE SAME WAS ASSESSED UNDER THE HEAD INCOME FROM OTHER SOURCES? ULTIMATELY THE ORDER OF THE TRIBUNAL WAS FOLLOWING VIDE PARA 9 WHICH IS AS UNDER : 9. KEEPING IN VIEW THE AFORESAID FACTUAL FINDING, WE ARE NOT INCLINED TO ACCEPT THAT THERE WOULD BE A SUBSTANTIAL QUESTION O F LAW FOR DETERMINATION BY THIS COURT AS IT IS PERTINENT TO M ENTION THAT CHALLENGE HEREIN HAS BEEN LAID ONLY QUA TWO AFORESAID QUESTIO NS. HOWEVER, WITH REGARD TO SOME OF THE OTHER ISSUES, THE ORDER PASSE D BY THE TRIBUNAL IS FOR DETERMINATION OF FACT TO THE EXTENT OF THE AFORESAI D QUESTIONS OF LAW. THE ORDER IS UPHELD. HOWEVER, IN RESPECT OF THE OTHER P ART OF THE ORDER, THE REMAND ORDER SHALL APPLY AS DIRECTED BY THE TRIBUNA L. THEREFORE FOLLOWING THE ABOVE ORDER WE DECIDE THIS ISSUE ALSO AGAINST THE REVENUE. 17. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 26/05/2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26/05/2015 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR