Mapex Infrastructure Pvt. Ltd., Kolkata V. DCIT, Circle - VIII, Kolkata, Kolkata

ITA 760/KOL/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4939 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 3 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2005-2006
• Appeal Filed On: 18-05-2011
• Court: TRIBUNAL
• Department Lawyers: K R MONDAL LD
• Assessee Lawyers: G BANERJEE FCA LD
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 32; 145

Judgement Text

ITA NO.760/K/11-B-PK 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KO LKATA () , !' # ! , ( BEFORE SRI PRAMOD KUMAR, AM & SRI MAHAVIR SINGH , JM ) $ / I.T.A NO. 760/KOL/2011 #%& '(/ ASSESSMENT YEAR :2005-06 M/S. MAPEX INFRASTRUCTURE PVT.LTD VS. D.C. I.T, CIRCLE-VIII, KOLKATAI PAN: AACCM6729K ( *+ /APPELLANT ) ( ,*+/ RESPONDENT ) *+ / FOR THE APPELLANT/ASSESSEE: - / SHRI G.BANERJEE, F.C.A, LD.AR ,*+ / FOR THE RESPONDENT/DEPARTMENT: - / SHRI K.R MONDAL, LD.DR %. / 0 /DATE OF HEARING: 12-08-2013 1' / 0 /DATE OF PRONOUNCEMENT: 23-08-2013 2 /ORDER , SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AND IS DI RECTED AGAINST LEARNED COMMISSIONER OF INCOME-TAX (APPEALS)S ORDER DATED 31 ST JANUARY 2011 FOR THE ASSESSMENT YEAR 2005-06. 2. GRIEVANCES RAISED BY THE ASSESSEE ARE AS FOLLOWS :- 1. FOR THAT THE DISALLOWANCE OF CLAIM OF DEPRECIATI ON OF RS. 4,22,96,020 ON ALLEGED GROUND THAT SUCH EXPENDITURE I.E. TAX DEPRE CIATION IS CAPITAL IN NATURE OR THAT THE BUSINESS DID NOT COMMENCE OR THA T OTHER EXPENSES WERE CAPITALIZED IN THE BOOKS, ARE WRONG, ARBITRARY, ILL EGAL, AGAINST THE FACTS OF THE CASE, CONTRADICTORY AND UNJUST. 2. FOR THAT ONCE THE FACT OF OWNERSHIP AND USE OF F IXED ASSETS FOR THE PURPOSE OF BUSINESS ARE NOT DISPUTED, THE CLAIM OF DEPRECIATION OF RS. 4,22,96,020 IN ITS ENTIRETY OR IN PART IS ALLOWABLE AS A DEDUCTION. 3. FOR THAT THE INTEREST EXPENSES DIRECTLY AND INEX TRICABLY LINKED TO THE FUNDS USED FOR EARNING INTEREST, SHOULD BE CONSIDER ED AND REDUCED FROM THE INTEREST INCOME AS ASSESSED AND TAXED. 4. FOR THAT IN THE EVENT OF DISALLOWANCE OR CAPITAL IZATION OF DEPRECIATION OF RS. 4,22,96,020, THE INTEREST INCOME OF RS. 1,45,82 ,025 HAS TO BE REDUCED FROM THE AGGREGATE EXPENDITURE CUMULATED UNDER NAT IONAL HIGHWAY DEVELOPMENT EXPENDITURE A/C. AND CANNOT BE ASSESSE D AS INCOME SEPARATELY. ITA NO.760/K/11-B-PK 2 3. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THE I SSUES ARE COVERED BY HONBLE CALCUTTA HIGH COURTS JUDGMENT IN ASSESSEES OWN CASE FOR T HE ASSESSMENT YEAR 2003-04 IN FAVOUR OF THE ASSESSEE, WHEREIN THEIR LORDSHIPS HAVE OBSERVED AS FOLLOWS:- AFTER HEARING THE LEARNED COUNSEL FOR THE PARTIES AND READING THE JUDGMENT OF ALL THE AUTHORITIES BELOW WE FEEL THAT THE ASSES SING OFFICER AS WELL AS THE CIT (APPEALS) DISALLOWED THE CLAIM OF DEPRECIATION BECA USE IN ITS OWN ACCOUNTING SYSTEM (MERCANTILE, OF COURSE) AND ALSO IN THE PROF IT AND LOSS THE ASSESSEE ITSELF HAS SHOWN THE AFORESAID DEPRECIATION WAS CAPITALIZE D AND THIS WAS SHOWN UNDER THE HEADING NATIONAL HIGHWAY DEVELOPMENT ACCOUNT. IN OTHER WORDS, THE AUTHORITY CONCERNED BY NECESSARY IMPLICATION HELD T HAT ASSESSE AFTER HAVING SHOWN IN ITS OWN ACCOUNT IS ESTOPPED FROM CLAIMING DEPRECIATION IN THE INCOME TAX RETURNS CONSEQUENTLY, DISALLOWED CARRY FORWARD OF THE BALANCE LOSS. THEREFORE, CARDINAL QUESTION TO BE ANSWERED IN THIS APPEAL IS WHETHER IN VIEW OF THE AFORESAID CAPITALIZATION IN ITS ACCOUNT DEBAR T HE APPELLANT FROM CLAIMING ALLOWANCE OF DEPRECIATION IN THE RETURN BEFORE OFFI CER CONCERNED. ON FACT IT IS NOT DISPUTED THAT THE PLANT AND MACHINERY EQUIPMENT S ARE ASSETS AND IT WAS UTILIZED FOR THE BUSINESS. THE ABOVE QUESTION WE HA VE SUMMARIZED HAS BEEN ANSWERED BY THE DIVISION BENCH OF THE MADRAS HIGH C OURT IN CASE OF COMMISSIONER OF INCOME TAX V. SAKTHI SOYAS LTD. REP ORTED IN [2006] 283 ITR 194 (MAD). IN THAT JUDGMENT IT WAS HELD ON THE PRIN CIPLE OF LAW AS FOLLOWS:- CAPITALISATION OF THOSE EXPENDITURE IN THE BOOKS O F ACCOUNT ALONE WAS NOT THE DECISIVE FACTOR IN EXAMINING AN EXPENDITURE FOR THE PURPOSE OF INCOME-TAX. THE NAME GIVEN TO AN EXPENDITURE OR A N OMENCLATURE GIVEN TO AN EXPENDITURE IN THE BOOKS OF ACCOUNT OF THE ASSES SEE IS NOT THE LITMUS TEST TO DECIDE THE EXACT NATURE OF EXPENDITURE FOR THE PURPOSE OF INCOME- TAX. THE PURPOSE OF THE COMPANIES ACT IS DIFFERENT FROM THE PURPOSE OF THE INCOME- TAX ACT. THEREFORE, THE CLASSIFICATION OF T HOSE EXPENSES AS CAPITAL IN NATURE FOR THE PURPOSE OF THE COMPANIES ACT, DOE S NOT IPSO FACTO MAKE THAT EXPENDITURE A CAPITAL EXPENDITURE FOR THE PURP OSE OF THE INCOME- TAX ACT. IN THE CASE BEFORE MADRAS HIGH COURT THE AFORESAID DECISION WAS RENDERED ON THE FACTUAL ASPECT THAT ASSESSEE THEREIN FILED A RETURN OF INCOME ADMITTING A TOTAL LOSS OF RS.8,58,4 1,145/ THE ASSESSING OFFIC ER DISALLOWED THE CLAIM OF EXPENDITURE TO THE EXTENT OF RS.20,36,157/- TOWARDS CROP DEVELOPMENT EXPENSES ON THE GROUND THAT THE SAME WAS NOT CONSIDERED AS A REVENUE EXPENDITURE BY THE ASSESSEE IN ITS ACCOUNTS. HOWEVER, THE ASSESSEE CLA IMED IT AS REVENUE IN THE STATEMENT OF COMPUTATION OF TOTAL INCOME. THE ASSES SING OFFICER HOWEVER DISALLOWED THE EXPENSES INCURRED AMOUNTING TO RS.16 ,41,125/- TOWARDS ADVERTISEMENT IN RESPECT OF THE SOYA PRODUCTS AND S ALES PROMOTIONAL EXPENSES. ON FACT IN THOSE CASES AUTHORITIES BELOW TOOK NOTE OF WHAT WAS STATED IN THE AUDITED ACCOUNT NOT WHAT WAS CLAIMED IN THE RETURNS . OUR HIGH COURT IN CASE OF COMMISSIONER OF INCOME-TA X V. BERGER PAINTS (INDIA) LTD. REPORTED IN [2002] 254 ITR PAGE 503 WH ILE TAKING NOTE OF THE OLD ITA NO.760/K/11-B-PK 3 DECISION OF THE SUPREME COURT IN CASE OF KEDARNATH JUTE MANUFACTURING CO. LTD. V. CIT AND CIT V. INDIA DISCOUNT CO. LTD. REPORTED IN [1971] 82 ITR 363 (SC) AND [1970] 75 ITR 191 (SC) HELD THAT IF ACCORDING T O THE REVENUE LAWS THE ASSESSEE IS ENTITLED TO TREAT A SUM AS A REVENUE EX PENDITURE, THEN THAT LEGAL RIGHT OF THE ASSESSEE IS NOT SELF ESTOPPED BY THE TREATME NT GIVEN BY THE ASSESSEE TO IT IN ITS OWN BOOKS OF ACCOUNT. IT APPEARS THAT THE AUTHORITIES BELOW HAVE HEAVILY RELIED ON THE ACCOUNT IN VIEW OF SECTION 145 OF THE ACT. IN VIEW OF SUB-SECT ION (3) OF THE SAME THE SAID SUB- SECTION HAS GIVEN AMPLE DISCRETION OF THE A.O WITH REGARD TO CORRECTNESS AND COMPLETENESS OF ANY ACCOUNT OF THE ASSESSEE IN CASE WHERE THE METHOD OF ACCOUNTING PROVIDED IN SUB-SECTION (1) OR ACCOUNTIN G STANDARDS AS NOTIFIED UNDER SUB-SECTION (2) HAVE NOT BEEN REGULARLY FOLLOWED BY THE ASSESSEE, THE ASSESSING OFFICER MAY MAKE AN ASSESSMENT IN THE MANNER PROVID ED IN SECTION 144. WE THINK THAT THE AFORESAID SUB-SECTION (3) IN THIS CASE HAS NO MANNER OF APPLICATION AS IT IS NOT A CASE HERE THAT THE APPELLANT HAS FREQUENTL Y SHIFTING ITS ACCOUNTING PROCESS AND METHOD. IN THIS CASE THE ACCOUNTING SYSTEM IS U NIFORM HOWEVER, WHILE FILING RETURNS THE DEPRECIATION OF THOSE ASSETS HAVE BEEN CLAIMED UNDER THE PROVISIONS OF THE LAW IN ITS RETURN. THE AFORESAID TWO PRONOUNCEMENTS HAVE CLEARLY ANSWE RED THIS QUESTION. WE FEEL IN THIS CASE WHILE MAKING ASSESSMENT OF ANY RETURNS ANY DEDUCTION IS SOUGHT FOR IT IS THE DUTY OF THE REVENUE OFFICIAL T O EXAMINE NOT ONLY THE ACCOUNT BUT ALSO SUBSTANTIVE RIGHT OF CLAIMING DEDUCTION UNDER THE ACT ON THE FACTS AND CIRCUMSTANCES OF THIS CASE. IT IS NOT A CASE THAT T HE SAID ASSETS AND PROPERTIES DO NOT BELONG TO THE APPELLANT, THEREFORE DEPRECIATION IN ANY ASSETS AND PROPERTIES IS A REGULAR PHENOMENON AND DEDUCTION ON THIS ACCOUNT IS ALLOWABLE UNDER SECTION 32 AUTOMATICALLY. IT APPEARS THAT LEARNED TRIBUNAL WHILE READING SECT ION 32 OF THE ACT HAS ACCEPTED THE LEGAL PRINCIPLE BUT UNFORTUNATELY WHIL E GRANTING RELIEF AS RIGHTLY POINTED OUT BY MR. KHAITAN HAS NOT ALLOWED THE SETT ING OFF OF THE INTEREST INCOME AS REGARD THE AFORESAID AMOUNT OF DEPRECIATION. WE THEREFORE ALLOW THIS APPEAL AND SET ASIDE THE JUDGMENT AND ORDER OF THE AUTHORI TIES BELOW. WE DIRECT THE A.O. TO WORK OUT AGAIN ALLOWING THE DEDUCTION AND SETTIN G OFF OF THE AMOUNT OF INTEREST INCOME AND TO ALLOW CARRY FORWARD. THUS THE APPEAL IS ALLOWED WITHOUT ANY ORDER AS TO COSTS. 4. IN VIEW OF THE ABOVE STATED ESTEEMED VIEWS OF HO NBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE, AND AS AGREED TO BY THE PARTIE S THE MATTER STANDS RESTORED TO THE FILE OF THE ASSESSING OFFICER IN THE LIGHT AND FOR DECIDING THE MATTER OF ABOVE OBSERVATIONS. ORDERED, ACCORDINGLY. ITA NO.760/K/11-B-PK 4 5. IN THE RESULT, THE APPEAL IS ALLOWED IN THE TER MS INDICATED ABOVE. ! 2 3 % 4 !5 THIS ORDER IS PRONOUNCED IN THE OPEN COURT ON 23- 08-2013 SD/- SD/- *PP/SPS 2 / ##6 76'8 / COPY OF THE ORDER FORWARDED TO: 1. . *+ / THE APPELLANT: M/S. MAPEX INFRASTRUCTURE PVT. LT D 53A, MIRZA GHALIB ST., KOL-16 2 ,*+ / THE RESPONDENT: DCIT, CIRCLE-VIII, P-7, CHOWRING HEE SQ, KOL-69. 3 4. . #2% / THE CIT #2% ( )/ THE CIT(A) 5 . 9#4 #% / DR, KOLKATA BENCH 6 . GUARD FILE . ,6 #/ TRUE COPY, 2%/ BY ORDER, ! : /ASSTT REGISTRAR ( !' # ! , ) ( MAHAVIR SINGH, JUDICIAL MEMBER) ( . , ) ( PRAMOD KUMAR, ACCOUNTANT MEMBER) ( (( ( 0 0 0 0 ) )) ) DATE: 23-08-2013