IOT INFRASTRUCTURE & ENGERY N SERVICES LTD ( FORMERLY INIDA OILTANKING LTD), MUMBAI V. ADDL CIT 10(3), MUMBAI

ITA 7702/MUM/2010

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4124 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 15-07-2013
• Assessment Year: 2003-2004
• Appeal Filed On: 10-11-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K C P PATNAIK
• Keywords: Depreciation; Unabsorbed depreciation; Revenue expenditure
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI .. , !'# $ $ $ $ ! %, & !'# !' BEFORE SHRI P.M. JAGTAP, AM AND SHRI SANJAY GARG, J M !./ I.T.A. NO. 7702 /MUM/2010 ( &) % $*% &) % $*% &) % $*% &) % $*% / / / / ASSESSMENT YEAR : 2003-04) M/S IOT INFRASTRUCTURE & ENERGY SERVICES LIMITED, (FORMERLY INDIAN OILTANKING LIMITED), 103, SPECTRA, HIRANANDANI GARDENS, POWAI, MUMBAI 400 076. ) ) ) ) / VS. THE ADDL. COMMISSIONER OF INCOME TAX 10(3), 4 TH FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 400 020. #+ !./ PAN : AAAC16794E ( +, / // / APPELLANT ) .. ( -.+, / RESPONDENT ) +, / 0 ! / APPELLANT BY : MS. VASANTI PATEL -.+, / 0 ! / RESPONDENT BY : SHRI K.C.P. PATNAIK !)$ / / // / DATE OF HEARING : 16-07-2013 12* / / DATE OF PRONOUNCEMENT : 31-07-2013 '3 / O R D E R PER P.M. JAGTAP, A.M . : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A) 22, MUMBAI DTD. 17-08-2010. 2. THE COMMON ISSUE RAISED IN GROUND NO. 1 TO 5 OF THE ASSESSEES APPEAL RELATES TO THE DISALLOWANCE OF RS. 53,05,629/- MADE BY THE A.O. AND ITA 7702/MUM/2010 2 CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF THE ENTIR E PROVISION MADE FOR PERFORMANCE WARRANTY TREATING THE SAME AS UN-ASCERT AINED LIABILITY. 3. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL DATED 17-05-2013 PASSED IN ASSESSEES OWN CASE FOR A.Y. 2004-05 WHEREIN AFTER CONSIDERING THE RELEVANT DATA OF THE EARLIER YEARS AS WELL AS SUBSEQUENT YEA RS, IT WAS HELD BY THE TRIBUNAL THAT PROVISION FOR PERFORMANCE WARRANTY TO THE EXTENT OF 0.2% OF THE VALUE OF WORK COMPLETED IS FAIR AND REASONABLE. RE SPECTFULLY FOLLOWING THE SAID DECISION OF THE CO-ORDINATE BENCH OF THIS TRIB UNAL IN ASSESSEES OWN CASE, WE MODIFY THE IMPUGNED ORDER OF THE LD. CIT(A) AND DIRECT THE A.O. TO ALLOW THE DEDUCTION ON ACCOUNT OF PROVISION FOR PERFORMAN CE WARRANTY ONLY TO THE EXTENT OF 0.2% OF THE VALUE OF WORK COMPLETED AS AG AINST 5% CLAIMED BY THE ASSESSEE. GROUND NO. 1 TO 5 OF THE ASSESSEES APPE AL ARE ACCORDINGLY PARTLY ALLOWED. 4. THE NEXT ISSUE INVOLVED IN GROUND NO. 6 & 7 OF T HE ASSESSEES APPEAL RELATES TO THE DISALLOWANCE OF RS. 53,05,629/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT (A)ON ACCOUNT OF PROVISION FOR WARRANTY WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. 5. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THIS ISSUE IS ALSO SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL DATED 17-5-2013 (SUPRA) WHEREIN IT WAS HELD THAT THE PROVISION MADE FOR WAR RANTY BY THE ASSESSEE HAVING BEEN HELD TO BE FAIR AND REASONABLE ONLY TO THE EXTENT OF 0.2% OF THE VALUE OF WORK COMPLETED ON THE BASIS OF PAST DATA, THE SAID PROVISION TO THAT EXTENT ALONE COULD BE SAID TO BE THE ASCERTAINED LI ABILITY OF THE ASSESSEE AND THE BALANCE PROVISION, WHICH IS FOUND TO BE EXCESSI VE ON THE BASIS OF PAST DATA, CLEARLY REPRESENTED UNASCERTAINED LIABILITY W HICH IS LIABLE TO BE ADDED BACK WHILE COMPUTING THE BOOK PROFIT OF THE ASSESSE E U/S 115JB OF THE ACT. RESPECTFULLY FOLLOWING THE SAID DECISION OF THE CO- ORDINATE BENCH OF THIS ITA 7702/MUM/2010 3 TRIBUNAL RENDERED IN ASSESSEES OWN CASE, WE DIRECT THE A.O. TO ALLOW PROVISION FOR WARRANTY ONLY TO THE EXTENT OF 0.2% O F THE VALUE OF WORK COMPLETED WHILE COMPUTING THE BOOK PROFIT OF THE AS SESSEE U/S 115JB OF THE ACT. GROUND NO. 6 & 7 ARE THUS PARTLY ALLOWED. 6. THE ISSUE RAISED IN GROUND NO. 8 OF THE ASSESSEE S APPEAL RELATES TO THE DISALLOWANCE OF RS. 2,66,53,121/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF PROPORTIONATE DEDUCTION CLAIME D IN RESPECT OF EXPENDITURE INCURRED IN THE EARLIER YEAR ON RIGHT OF WAY WHILE THE ISSUE INVOLVED IN GROUND NO. 9 RELATES TO THE DISALLOWANC E OF RS. 44,12,06,710/- MADE BY THE A.O. AND CONFIRMED BY THE LD. CIT(A) ON ACCOUNT OF PROPORTIONATE DEDUCTION CLAIMED BY THE ASSESSEE FOR EXPENDITURE I NCURRED IN THE EARLIER YEARS OF PREMIUM AND OTHER CHARGES PAID IN RESPECT OF LEASEHOLD LAND. 7. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE MATERIAL AVAILABLE ON RECORD, IT IS OBSERVED THAT A SIMILAR ISSUES INVOLVED IN ASSESSEES OWN CASE FOR A.Y. 2004-05 HAVE BEEN RESTORED BY THE TRIBUNAL VIDE ITS ORDER DATED 17-5-2013 (SUPRA) TO THE FILE OF THE A.O. FOR THE FOLLOWING REASONS GIVEN IN PARA 18 & 19 OF ITS ORDER:- 18. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS REGA RDS THE CHARGES PAID BY THE ASSESSEE FOR RIGHT TO WAY, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE RIGHT TO WAY ACQUIRED BY THE A SSESSEE IS NOTHING BUT CASEMENT RIGHT. HE SUBMITTED THAT THIS ISSUE W AS INVOLVED IN THE INITIAL YEAR I.E. 2002-03 AND THE APPEAL FOR THE SA ID YEAR ON THE SIMILAR ISSUE IS PENDING BEFORE THE TRIBUNAL. HE HAS CONTE NDED THAT THIS ISSUE INVOLVED IN THE YEAR UNDER CONSIDERATION THEREFORE MAY BE RESTORED TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME IN THE LIGHT OF THE DECISION TO BE RENDERED BY THE TRIBUNAL IN A.Y. 200 2-03. HE HAS CONTENDED THAT A SIMILAR DIRECTION HAS BEEN GIVEN B Y THE TRIBUNAL IN THE CASE OF AVAYA GLOBAL CONNECT LTD. REPORTED IN (2008 ) 26 SOT 397 (MUM) WHEREIN THE MATTER WAS REMANDED BY THE TRIBUN AL TO THE LD. CIT(A) FOR DECIDING THE ISSUE AFTER TAKING INTO CON SIDERATION THE DECISION ON THE SIMILAR ISSUE AS INVOLVED IN THE EARLIER YEA RS WHICH WAS PENDING AT THE RELEVANT TIME. KEEPING IN VIEW THE SAID DEC ISION OF THE TRIBUNAL AND NO OBJECTION OF THE LD. D.R. IN THIS REGARD, WE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRESH I N ACCORDANCE WITH LAW ITA 7702/MUM/2010 4 AFTER TAKING INTO CONSIDERATION THE DECISION OF THE TRIBUNAL FOR A.Y. 2002-03. 19. AS REGARDS THE PREMIUM AND OTHER CHARGES PAID I N RESPECT OF LEASEHOLD LAND, THE LD. COUNSEL FOR THE ASSESSEE HA S SUBMITTED THAT ALTHOUGH A SIMILAR ISSUE HAS BEEN DECIDED BY THE TR IBUNAL AGAINST THE ASSESSEE IN A.Y. 1999-2000, THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SUN PHARMACEUTICALS IND. LTD. REPORT ED IN (2010) 329 ITR 479 RENDERED SUBSEQUENTLY ON A SIMILAR ISSUE IS IN FAVO UR OF THE ASSESSEE. A PERUSAL OF THE JUDGMENT PASSED BY THE HONBLE GUJARAT HIGH COURT IN THE SAID CASE SHOWS THAT THE TRIBUNAL IN THAT CASE HAD FOUND ON ANALYSIS OF THE RELEVANT LEASE AGREEMENT T HAT THE LAND IN QUESTION WAS NOT ACQUIRED BY THE ASSESSEE. THE LEA SE DEED WAS REGISTERED BECAUSE AS PER THE REGISTRATION ACT IT W AS COMPULSORY TO DO SO. THERE WAS NO CHANGE IN THE OWNERSHIP OF THE LA ND AND THE LEASE RENT PAYABLE WAS VERY NOMINAL. KEEPING IN VIEW ALL THESE FACTS, IT WAS HELD BY THE TRIBUNAL THAT THE BENEFIT ACCRUED TO TH E ASSESSEE WAS ONLY IN THE NATURE OF AN ADVANTAGE FOR CARRYING ON THE BUSINESS BY PAYING NOMINAL RENT OF THE LAND AND BY OBTAINING THE LAND ON LEASE, THE CAPITAL STRUCTURE OF THE ASSESSEE DID NOT UNDERGO ANY CHANG E. KEEPING IN VIEW ALL THESE FINDINGS OF FACT RECORDED BY THE TRIBUNAL , WHICH WERE NOT SPECIFICALLY DISPUTED BY THE REVENUE, THE HONBLE G UJARAT HIGH COURT DID NOT FIND ANY INFIRMITY IN THE ORDER OF THE TRIB UNAL DELETING THE DISALLOWANCE MADE ON ACCOUNT OF LEASE RENT PAID BY THE ASSESSEE TO GIC TREATING THE SAME AS REVENUE EXPENDITURE. IN OUR O PINION, BEFORE THE RATIO OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SUN PHARMACEUTICALS IND. LTD. (SUPRA) IS APPLIED IN THE PRESENT CASE, THE RELEVANT FACTS ARE REQUIRED TO BE VERIFIED, WE THER EFORE RESTORE THIS ISSUE TO THE FILE OF THE A.O. FOR DECIDING THE SAME AFRES H IN THE LIGHT OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SUN PHARMACEUTICALS IND. LTD. (SUPRA) AFTER VERIFYING T HE RELEVANT FACTS. GROUND NO. 4 & 5 OF THE ASSESSEES APPEAL ARE ACCOR DINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSE. 8. AS THE FACTS RELEVANT TO THIS ISSUE AS INVOLVED IN THE ASSESSMENT YEAR. 2003-04 ARE SIMILAR TO A.Y. 2004-05, WE RESPECTFULL Y FOLLOW THE DECISION FOR A.Y. 2004-05 AND RESTORE BOTH THESE ISSUES TO THE F ILE OF THE A.O. WITH A DIRECTION TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF SUN PHARMACEUTICA LS (I) LTD., (2010) 329 ITR 479 AFTER VERIFYING THE RELEVANT FACTS. GROUND NO. 8 & 9 OF THE ASSESSEES APPEAL ARE ACCORDINGLY TREATED AS ALLOWED FOR STATI STICAL PURPOSE. ITA 7702/MUM/2010 5 9. THE ISSUE RAISED IN GROUND NO. 10 RELATING TO TH E ADDITION MADE ON ACCOUNT OF UNPAID SERVICE TAX AMOUNTING TO RS. 19,1 56/- AND THE ISSUE RAISED IN GROUND NO. 11 RELATING TO ASSESSEES CLAIM FOR C ORRECT QUANTIFICATION OF THE AMOUNT OF UNABSORBED DEPRECIATION AND CAPITAL LOSS TO BE CARRIED FORWARD ARE NOT PRESSED BY THE LD. COUNSEL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US. THE SAME ARE ACCORDINGLY DISMISSED AS NOT PRES SED. 10. THE ISSUE RAISED IN GROUND NO. 12 RELATING TO T HE ASSESSEES ALTERNATIVE CLAIM FOR DEDUCTION ON ACCOUNT OF PROVISION FOR PER FORMANCE WARRANTY U/S 36(1)(VII) OF THE ACT HAVE BECOME INFRUCTUOUS AS A RESULT OF OUR DECISION RENDERED ON GROUND NO. 1 TO 5 OF ASSESSEES APPEAL AS AGREED EVEN BY THE LD. COUNSEL FOR THE ASSESSEE. THE SAME IS ACCORDINGLY DISMISSED. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PART LY ALLOWED 4 5 &) %4 / 63 #$ 7 / 89 ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2013 . '3 / 12* :')5 31-07-2013 2 / SD/- SD/- (SANJAY GARG) (P.M. JAGTAP ) & !'# JUDICIAL MEMBER !'# / ACCOUNTANT MEMBER MUMBAI ; :') DATED 31-07-2013 $.&).!./ RK , SR. PS '3 / -&6; <;* '3 / -&6; <;* '3 / -&6; <;* '3 / -&6; <;*/ COPY OF THE ORDER FORWARDED TO : 1. +, / THE APPELLANT 2. -.+, / THE RESPONDENT. 3. = () / THE CIT(A)- 22, MUMBAI 4. = / CIT 10, MUMBAI 5. ;$@ -&&) , , / DR, ITAT, MUMBAI I BENCH 6. A% B / GUARD FILE. '3)! '3)! '3)! '3)! / BY ORDER, !.; -& //TRUE COPY// C C C C/ // /!8 !8 !8 !8 ( DY./ASSTT. REGISTRAR) ITA 7702/MUM/2010 6 , , , , / ITAT, MUMBAI DRAFT DICTATED ON 24.7.13 SR PS 2 DRAFT PLACED BEFORE AUTHOR ON 24.7.13 SR PS 3 DRAFT PROPOSED & PLACE BEFORE THE 2 ND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY 2 ND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR PS SR.PS 6 KEPT FOR PRONOUNCEMENT ON SR PS 7 FILE SENT TO THE BENCH CLERK SR PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH SR PS