M/s. Jyotindra International, Banaskantha V. Jt. Commissioner Of Income Tax, Palanpur

ITA 817/AHD/2015

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8073 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-08-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 09-04-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Depreciation; Rule of consistency; Initiation of penalty proceedings; Commercial expediency; Revenue expenditure; Capital expenditure
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI WASEEM AHMED, ACCOUNTANT MEMBER) ITA. NO: 817/AHD/2015 (ASSESSMENT YEARS: 2010-11) M/S. JYOTINDRA INTERNATIONAL JYOTINDRA GROUP COMPOUND, HIGHWAY, PALANPUR, BANASKANTHA-385001 V/S JCIT, B.K. RANGE, PALANPUR (APPELLANT) (RESPONDENT) PAN: AABFJ 6484E APPELLANT BY : SHRI BANDISH SOPARKAR, A. R. RESPONDENT BY : SHRI L. P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 13-06-2019 DATE OF PRONOUNCEMENT : 21 -08-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-4, AHMEDABAD DATED 04.03.2015 PERTAINING TO A.Y. 2010-11 AND FOLLOWING GROUNDS HAVE BEEN TAKEN: ITA NO. 817/ AHD/2015 . A.Y. 2010- 11 2 1. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIR MING ACTION OF AO TREATING EXPENSES INCURRED IN INSTALLATION OF EXHAUST FAN AS CAPITAL EXPENSE WITHOUT APPRECIATING THAT THE APPELLANT INCURRED EX HAUST FAN AS PART OF MACHINERY REQUIRING RECONDITIONING. LD. CIT (A) OUG HT TO HAVE ALLOWED THE EXPENSES INCURRED ON EXHAUST FAN TO BE REPLACED AS PART OF MACHINERY AND NOT INDEPENDENT MACHINERY AS REVENUE EXPENSES. IT BE SO HELD NOW. 2. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRMI NG DISALLOWANCE BY AO OF MILLING EXPENSES OF RS. 36,48, 850/- INCURRED FOR J OB WORK ASSIGNED TO M/S JYOTINDRA INDUSTRIES TREATING AS NON GENUINE. L D. CIT (A) FURTHER ERRED IN NOT FOLLOWING APPELLATE ORDERS OF HER PRED ECESSOR FOR EARLIER YEARS HOLDING EXPENSES AS GENUINE APPRECIATING EVID ENCES PLACED ON RECORD. LD. CIT (A) OUGHT TO HAVE DELETED DISALLOWA NCE OF EXPENSES. IT BE SO HELD NOW. 3. LD. CIT (A) ERRED IN LAW AND ON FACTS THAT AS PER THE INSTRUCTION BY CBDT AND SETTLED LEGAL POSITION THE APPELLANT & PAYEE JY OTINDRA INDUSTRIES BEING ASSESSED AT THE HIGHER FLAT RATE OF TAX THE E XPENSES INCURRED FOR LEGITIMATE NEEDS OF THE BUSINESS OUGHT NOT TO HAVE BEEN DISALLOWED. 4. LD. CIT (A) ERRED IN LAW AND ON FACTS IN CONFIRM ING DISALLOWANCE BY AO OF RS. 13,18,326/- ON ACCOUNT OF EMPLOYEES SKILL ENHAN CEMENT COST TREATING AS NOT INCURRED OUT OF COMMERCIAL EXPEDIEN CY FOR THE PURPOSE OF BUSINESS. LD CIT (A) FAILED TO APPRECIATE THAT E XPENDITURE RESULTED INTO ACTUAL BENEFIT OF THE BUSINESS. LD. CIT(A) OUG HT TO HAVE DELETED THE DISALLOWANCE. 5. LEVY OF INTEREST U/S. 234A, 234B, 234C & 234D OF TH E ACT IS UNJUSTIFIED. 6. INITIATION OF PENALTY PROCEEDINGS U/S. 271(1)(C) OF THE ACT IS UNJUSTIFIED. 2. FACTS OF THE CASE ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURING TRADING AND EXPORTING OF PSYLLIUM AND OTHER AGRI, BASED PRODUCTS. 3. ASSESSEE HAS TAKEN GROUND THAT LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF THE TREATING EXPENSES INCURRED IN INSTALLATION OF EXHAUST FAN AS CAPITAL EXPENSES WITHOUT APPRECIATING THAT T HE APPELLANT INCURRED EXHAUST FAN AS PART OF MACHINERY REQUIRING RECONDITIONING A ND FURTHER REQUESTED THAT LD. ITA NO. 817/ AHD/2015 . A.Y. 2010- 11 3 CIT(A) TO BE REPLACED AS PART OF MACHINERY AND NOT INDEPENDENT MACHINERY AS REVENUE EXPENSES. 4. NOW WE COME TO GROUND RELATING TO EXPENSES INCURRED AN EXHAUST FANS AND LD. CIT(A) OUGHT TO HAVE ALLOWED THE SAME AS REVENUE EX PENSES. 5. IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED A JUDG MENT OF ITAT, DELHI IN THE MATTER OF IAC VS. NUCHEM PLASTICS LTD. (1989) 35 TT J (DELHI) WHEREIN IT IS HELD THAT EXPENSES ON THE PURCHASE OF EXHAUST FAN A ND ELECTRIC MOTOR IN THE CHEMICAL DIVISION. SIMILARLY, CERTAIN AMOUNT WAS SP ENT BY THE ASSESSEE ON THE PURCHASE OF 4 ELECTRIC MOTORS IN THE ENGINEERING DI VISION. THE IAC (ASSTT.) REGARDED THE EXPENDITURE ON THESE ITEMS AS CAPITAL IN NATURE WHEREIN IT IS HELD THAT EXPENDITURE IN QUESTION WAS IN RESPECT OF REPL ACEMENT OF WORN OUT AND OBSOLETE ITEMS AND WAS ALLOWABLE AS CURRENT REPAIRS IN THE HANDS OF THE ASSESSEE. 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER AND ALSO CONSIDERED THE JUDGMENT OF ITAT DELHI BENCH HELD EX PENSES ARE ALLOWABLE U/S. 30, 31 OF INCOME TAX ACT. SEC. 31. IN RESPECT OF REPAIRS AND INSURANCE OF MAC HINERY, PLANT OR FURNITURE USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED (I) THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS THERE TO; (II) THE AMOUNT OF ANY PREMIUM PAID IN RESPECT OF INSURA NCE AGAINST RISK OF DAMAGE OR DESTRUCTION THEREOF. [EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS SHALL NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE.] ITA NO. 817/ AHD/2015 . A.Y. 2010- 11 4 7. IN THIS CASE, ASSESSEE HAS PURCHASED EXHAUST FANS F OR INSTALLATION IN GODOWN AND IN OUR CONSIDERED OPINION, LD CIT(A) HAS PASSED REA SONED ORDER BY ALLOWING THE DEPRECIATION AND WE CANNOT TERM EXHAUST FAN INS TALLED IN THE FACTORY AS REVENUE EXPENDITURE. THUS, THIS GROUND OF APPEAL I S DISMISSED. 8. DURING THE YEAR UNDER CONSIDERATION, LD. CIT(A) CON FIRMED DISALLOWANCE MADE BY A.O. OF MILLING EXPENSES OF RS. 36,48,850/- INCU RRED FOR JOB WORK ASSIGNED TO M/S. JYOTINDRA INDUSTRIES TREATING AS NON GENUIN E, LD. CIT(A) FURTHER ERRED IN NOT FOLLOWING APPELLATE ORDERS OF HER PREDECESSOR F OR EARLIER YEARS HOLDING EXPENSES AS GENUINE APPRECIATING EVIDENCES PLACED O N RECORD. ASSESSEE REQUESTED THAT LD. CIT(A) OUGHT TO HAVE DELETED THE DISALLOWANCE OF EXPENSES. 9. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER. LD. A.R. REITERATED EVEN BEFORE US THAT IDENTICAL DISALLOWAN CE MADE IN EARLIER YEAR IN ASESSEES OWN CASE FOR SIMILAR REASON AND IDENTICAL FACTS AND SAME WERE DELETED BY THE PREDECESSOR OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2008-09 AS ALSO IN A.Y. 2009-10. 10. IN SUPPORT OF ITS CONTENTION, ASSESSEE ALSO FILED A COPY OF THE ORDER OF THE LD. CIT(A). THE REVENUE HAS NOT PREFERRED ANY APPEAL A GAINST THE SAID ORDER, MEANING THEREBY THAT ORDER OF LD. CIT(A) GOT FINALI TY. THUS, ON THE PRINCIPLE OF CONSISTENCY, WE ALLOW THIS GROUND OF APPEAL AND DIR ECT THE A.O. TO ALLOW MILLING EXPENSES OF RS. 36,48,850/ INCURRED FOR JOB WORK AS SIGNED M/S. JYOTINDRA INDUSTRIES TREATING THEM AS GENUINE. 11. NOW WE COME TO NEXT GROUND THAT LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING DISALLOWANCE MADE BY A.O. OF RS. 13,18,3 26/- ON ACCOUNT OF ITA NO. 817/ AHD/2015 . A.Y. 2010- 11 5 EMPLOYEES SKILL ENHANCEMENT COST TREATING AS NOT IN CURRED OUT OF COMMERCIAL EXPEDIENCY FOR THE PURPOSE OF BUSINESS. 12. IN THIS REGARD, ASSESSEE SUBMITTED THAT ENTIRE AMOU NT WAS SPENT ON SPONSORING MS. MANSI J MODH, A KEY FAMILY MEMBER FOR A MBA COU RSE ABROAD. AND IN THE INSTANCE CASE, MS. MANSI J MODH IS A DAUGHTER OF A PARTNER WENT TO STUDY ABROAD FOR A MANAGEMENT COURSE OF EMPLOYEE. AND ASS ESSEE WAS ONLY ONE SELECTED FOR SUCH COURSE. SINCE ASSESSEE FIRM HAS N EVER CLAIMED THIS KIND OF EXPENDITURE EARLIER. AND MS. MANSI MODH A DAUGHTER OF A PARTNER AND CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE , LOWER AUTHORITIES DISALLOWED AND CONFIRMED THE EXPENSES OF RS. 13,18, 326/- WHICH WAS CLAIMED AS EMPLOYEE SKILL ENHANCEMENT FOR DONATION OF MS. M ANSI MODH AND SAME WAS TERMED AS NOT INCURRED WHOLLY OR EXCLUSIVELY FOR BU SINESS PURPOSE. 13. WE HAVE GONE THROUGH THE IMPUGNED ORDER AND RELEVAN T RECORD AS WELL AS HEARD BOTH THE PARTIES. WE CAN SEE THAT SINCE INCEPTION O F THE FIRM, NO EMPLOYEE HAS GONE ABROAD FOR STUDY PURPOSE OR FOR EMPLOYEE SKILL ENHANCEMENT PROGRAMME. SO FAR MS. MANSI J MODH FOREIGN STUDY/EMPLOYEE SKIL L ENHANCEMENT IS CONCERN, ASSESSEE FAILED DEMONSTRATE AND FRUITFUL C ONTRIBUTION TO THE FIRM EITHER FOR PRODUCTIVITY OR FOR THE BENEFIT OF THE FIRM. 14. IN OUR CONSIDERED OPINION, IN ORDER TO COVER PERSON AL EXPENSES OF A PARTNERS FAMILY MEMBER, FIRM MADE EXPENDITURE OF RS. 13,18,3 26/-. WE DO NOT HESITATE TO MENTION HERE IF ANY EXPENDITURE OF A FIRM IS SPE NT FOR PERSONAL GAIN OF A FAMILY MEMBER OF A PARTNER WHO DOES NOT HAVE, ANY C ONTRIBUTION WITH REGARD TO PRODUCTIVITY AND OPERATION OF THE FIRM SUCH EXPENDI TURE CANNOT BE ALLOWED U/S. ITA NO. 817/ AHD/2015 . A.Y. 2010- 11 6 37 AND BE HOLD TO SUCH EXPENSES CANNOT INCUR WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. THUS, THIS GROUND OF APPEAL OF TH E ASSESSEE IS DISMISSED. 15. SO FAR NEXT GROUND OF LEVY OF INTEREST AND PENALTY ARE CONCERNED, SAME ARE CONSEQUENTIAL AND AT THIS STAGE, WE DO NOT WANT TO ADJUDICATE BECAUSE ABOVE SAID ARE PREMATURE TO DECIDE. 16. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED IN THE TERM AND CONDITION MENTIONED THEREIN. ORDER PRONOUNCED IN OPEN COURT ON 21- 08- 2019 SD/- SD/- (WASEEM AHMED) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 21/08/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD