ACIT, Trichy V. Dhandapani Cements (P) Ltd., Trichy

ITA 836/CHNY/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7869 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-12-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 01-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: A V SHREEKANTH
• Assessee Lawyers: T BANUSEKAR
• Keywords: Capital asset; Business income; Depreciation; Additional evidence; Commercial expediency
• Section: 40A(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : CHENNAI . . . , !' . #$#% , & '' ( [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NOS.836 & 1352/MDS/2014 & C.O. NO. 54/2014 & 01/MDS/2015 (IN I.T.A. NOS. 836 & 1352/MDS/2014) / ASSESSMENT YEAR : 2009-10 & 2008-09 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I(1) TRICHY. VS M/S. DHANDAPANI CEMENTS (P) LTD, NO.69, GANAPATHY NAGAR, THIRUVANAIKOIL, TRICHY 620 005. ( )* / APPELLANT) (RESPONDENT/ CROSS OBJECTOR ) ./I.T.A. NO.1851/MDS/2014 / ASSESSMENT YEAR : 2009-10. M/S. DHANDAPANI CEMENTS (P) LTD, NO.69, GANAPATHY NAGAR, THIRUVANAIKOIL, TRICHY 620 005. VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE I(1) TRICHY. [PAN AAACD 3941N ] ( )* / APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI. A.V. SHREEKANTH, JCIT. ASSESSEE BY : SHRI. T. BANUSEKAR, C.A. /DATE OF HEARING : 01-12-2016 /DATE OF PRONOUNCEMENT : 14-12-2016 ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 2 -: / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER APPEAL AND CROSS OBJECTION FILED BY THE ASSESSEE FOR ASSESSMENT YEAR 2008-09 ARE TAKEN UP FIRST FOR DI SPOSAL. 2. APPEAL FILED BY THE DEPARTMENT IS DELAYED BY TEN DA YS. CONDONATION PETITION HAS BEEN FILED. REASON SHOWN FOR THE DELAY SEEMS TO BE JUSTIFIED. LD. AUTHORISED REPRESENTATIV E DID NOT RAISE ANY SERIOUS OBJECTION. DELAY IS CONDONED. APPEAL IS A DMITTED 3. DEPARTMENT HAS TAKEN ALTOGETHER SEVEN GROUNDS OF W HICH GROUNDS 1 & 7 ARE GENERAL IN NATURE NEEDING NO SPEC IFIC ADJUDICATION. 4. VIDE GROUND NO.2, GRIEVANCE RAISED BY THE REVENUE IS ON THE DELETION OF AN ADDITION OF B63,97,650/- MADE F OR CLOSING STOCK OF STORES IN THE CEMENT DIVISION. 5. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUS INESS OF MANUFACTURING AND SELLING OF CEMENT, STEEL INGOTS A ND RODS HAD FILED RETURN OF INCOME FOR THE IMPUGNED ASSESSMENT YEAR D ISCLOSING INCOME OF B38,65,700/-. ITS TURNOVER FOR THE RELEVANT PREV IOUS YEAR CAME TO B59.15 CRORES WITH A GROSS PROFIT OF B9.59 CRORES A ND NET PROFIT OF ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 3 -: B1.44 CRORES. IT HAD TWO DIVISIONS NAMELY CEMENT DI VISION AND STEEL DIVISION. CEMENT DIVISION HAD TURNOVER OF B23.41 C ORES, NET PROFIT OF 0.90 CRORES AND STEEL DIVISION HAD TURNOVER OF 35.7 4 CRORES WITH NET PROFIT OF 0.54 CRORES. IN PERCENTAGE TERMS GROSS PROFIT CAME TO 16.22% OF THE TURNOVER AND NET PROFIT CAME TO 2.43% OF THE TURNOVER. ITS STEEL DIVISION HAD STARTED FUNCTIONING FROM PR EVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2007-2008 ONLY. COMPARATIVE WOR KING RESULTS OF THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEAR AND T HE PRECEDING TWO ASSESSMENT YEARS WERE AS UNDER:- ( RUPEES IN LAKHS ) CEMENT STEEL A.Y.06 - 07 A.Y.07 - 08 A.Y.08 - 09 A.Y. 07 - 08 A.Y. 08 - 09 TOTAL SALES 1058 1873 2341 2625 3574 NET PROFIT 67.44 341.68 90.03 ( - ) 228.64 53.72 PERCENTAGE 6.37% 18.24% 3.84% ( - ) 8.71% 1.5% 6. THE REASON FOR FALL IN THE PROFITS OF CEMENT DIVISI ON WAS QUESTIONED BY THE LD. ASSESSING OFFICER. REPLY OF T HE ASSESSEE WAS THAT COST OF IMPORTED ITEMS AS OTHER MATERIAL COST HAD GONE UP. LD. ASSESSING OFFICER MADE AN ANALYSIS OF THE CLAIM OF CONSUMPTION OF STORES WORTH B1,27,95,299/- BY THE ASSESSEE. ASSES SEE HAD SHOWN WHOLE OF THE PURCHASES OF STORES AS CONSUMED. LD. ASSESSING OFFICER ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 4 -: WAS OF THE OPINION THAT ENTIRE STORE PURCHASES COUL D NOT HAVE BEEN CONSUMED DURING THE YEAR ITSELF. THOUGH THE PURCHA SES WERE SUPPORTED BY PROPER BILLS, IT SEEMS CONSUMPTION REC ORD FOR THE STORES ITEMS WERE NOT MAINTAINED BY THE ASSESSEE. APART F ROM ITEMS BROUGHT AS STORES, ASSESSEE HAD PURCHASED RAW MATERIALS WOR TH OF B6.95 CRORES ON WHICH A CLOSING STOCK WORTH B4.71 CRORES WAS SHO WN. THE PERCENTAGE CAME TO 67.77%. AS PER LD. ASSESSING OF FICER ASSESSEE HAD FAILED TO SHOW THE CLOSING STOCK OF STORES. HE CONSIDERED 50% OF THE VALUE OF THE STORES PURCHASED DURING THE RELEVA NT PREVIOUS YEARS AS CLOSING STOCK AND AN ADDITION OF B63,97,650/- WAS M ADE. 7. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMM ISSIONER OF INCOME TAX (APPEALS) DELETED THE ADDITION NOTING TH AT TYPES OF ITEMS WHICH WERE FALLING UNDER THE STORES WERE INNUMERABL E AND NOT OF A HOMOGENEOUS IN NATURE. AS PER LD. COMMISSIONER OF I NCOME TAX (APPEALS), RAW MATERIAL TO PRODUCT RATIO OF THE ASS ESSEE INCREASED BY 20%. FURTHER, AS PER LD. CIT(A) AVERAGE CONSUMPTIO N OF THE ASSESSEE MATCHED WITH THE INDUSTRIAL AVERAGE OF 16%. LD. C OMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE OPINION THAT PRESUM PTION TAKEN BY THE ASSESSING OFFICER THAT 50% OF THE STORES ITEMS WOULD HAVE BEEN THERE IN STOCK WAS A MERE SURMISE. HE DELETED THE ADDITION. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 5 -: 8. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT WHEN OTHER RAW MATERIALS WERE IN STO CK, IT WAS UNBELIEVABLE THAT ALL STORES ITEMS WERE CONSUMED. 9. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). 10. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CLAIM OF THE ASSE SSEE IS THAT PURCHASE OF STORES COMPRISED OF ITEMS WHICH WERE CONSUMED AN D THEREFORE ITS COST WAS CHARGED TO THE ACCOUNTS THEN AND THERE. RE VENUE HAS NOT DOUBTED THE CLAIM OF THE ASSESSEE THAT THE STORES I TEMS WHICH WERE CONSIDERED BY THE ASSESSEE AS CONSUMED WERE SMALL V ALUE ITEMS WHICH WERE NOT SIGNIFICANT ENOUGH TO BE SHOWN THROUGH A S TOCK REGISTER OR THROUGH A CONSUMPTION RECORD. EVEN IF, WE PRESUME THAT THERE WOULD HAVE BEEN SOME ITEMS LEFT IN CONSUMABLES AT T HE END OF THE RELEVANT PREVIOUS YEAR, VALUE THEREOF WOULD HAVE CO ME AS OPENING STOCK ALSO AND NO SIGNIFICANT EFFECT WHATSOEVER WO ULD BE THERE ON THE REVENUE OF THE ASSESSEE WHEN CONSIDERED SO. NORMAL ACCOUNTING METHODS DO NOT SPURN A WRITE-OFF OF STORE ITEMS IN THE YEAR OF PURCHASE ITSELF WHEN SUCH ITEMS ARE OF SMALL VALUE . IN OUR OPINION, LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTI FIED IN TAKING A ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 6 -: VIEW WHICH ANY BUSINESSMAN WOULD HAVE TAKEN IN RESP ECT OF SUCH ITEMS. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). GROUND NO.2 O F THE REVENUE STANDS DISMISSED. 11. VIDE ITS GROUND NO.3, REVENUE IS AGGRIEVED ON DELE TION OF AN ADDITION OF B8,30,285/- FOR DIFFERENCE IN STOCK OF COAL FINES. 12. FACTS APROPOS ARE THAT THE LD. ASSESSING OFFICER FR OM THE QUANTITY OF COAL FINES PURCHASED AND QUANTITY OF CO AL FINES CONSUMED ARRIVED AT THEORETICAL YEAR END QUANTITY OF 156.8 3 MT. ASSESSEE HAD ADMITTED ONLY 44.335 MT ON COAL FINES AS CLOSING ST OCK. DIFFERENCE WAS WORKED OUT BY LD. ASSESSING OFFICER AS UNDER:- OPENING STOCK NIL PURCHASES (AS PER PURCHASE LEDGER A/C FILED) 1710.185 MT CONSUMPTION DURING THE YEAR 1509.020 MT CLOSIN G STOCK 201.165 MT LESS: CLOSING STOCK ADMITTED 44.335 MT DIFFERENCE 156.83 MT THE VALUE FOR DIFFERENCE WAS ARRIVED BY THE ASSESSI NG OFFICER APPLYING THE FIFO METHOD AND AN ADDITION OF BB8,30,285/- WA S MADE. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 7 -: 13. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF THE ASSESSEE WAS THAT ACTUAL QUANTITY OF COAL FINES PURCHASED BY IT WAS 1553.335 MT AND NOT 1710.185 MT. CONTENTION OF THE ASSESSEE WA S THAT LATTER FIGURE WAS WRONGLY MENTIONED IN THE LEDGER. IN SUPP ORT, ASSESSEE PRODUCED PURCHASE BILLS. LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS OF THE OPINION THAT EXCESS STOCK WORKED OUT BY THE LD.AO WAS BASED ON A WRONG ENTRY IN THE LEDGER. ACCORDING TO HIM, ACTUAL QUANTITY OF COAL FINES PURCHASE WERE 1553.355 MT ON LY AND THUS THERE WAS NO QUESTION OF ANY ADDITION IN CLOSING STOCK. H E DELETED THE ADDITION. 14. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT CO-RELATION OF PURCHASE BILLS AND PU RCHASE QUANTITIES WAS NEVER ATTEMPTED BY THE ASSESSEE BEFORE LD. ASS ESSING OFFICER. ACCORDING TO HIM, LD. ASSESSING OFFICER WAS NOT GIV EN A PROPER OPPORTUNITY, BEFORE RELIEF WAS GRANTED TO THE ASSES SEE BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 15. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 8 -: 16. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. ASSESSEE HAD PROD UCED BOOKS OF ACCOUNTS BEFORE THE ASSESSING OFFICER AND THESE WER E TEST CHECKED. IT IS ALSO MENTIONED BY THE ASSESSING OFFICER THAT VA RIOUS DETAILS CALLED FOR WERE FILED BY THE ASSESSEE. THIS BEING THE CAS E, WE CANNOT ACCEPT THE CONTENTION OF THE LD. DEPARTMENTAL REPRESENTATI VE THAT PURCHASE BILLS FOR COAL FINES WERE NOT PRODUCED BY THE ASSES SEE. THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD ONLY AGGRE GATED THE PURCHASE BILLS AND REACHED A CONCLUSION THAT TOTAL PURCHASES WERE ONLY 1553.355 MT AND WHAT WAS SHOWN BY THE ASSESSEE IN I TS LEDGER WAS AN ERROR. WHAT WE FIND IS THAT NO NEW EVIDENCE HAS BEEN PRODUCED BY THE ASSESSEE BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). THE LD. COMMISSIONER OF INCOME TAX (APPEALS) COMPUT ED THE ACTUAL PURCHASE QUANTITY AND MADE A COMPARISON. THIS CANN OT BE CONSIDERED AS AN ADDITIONAL EVIDENCE. HENCE, THE QUESTION OF GIVING AN OPPORTUNITY TO THE LD. ASSESSING OFFICER AS MANDATE D U/S.46A OF THE INCOME TAX RULES DOES NOT ARISE. WE ARE OF THE OPI NION THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN DELETING THE ADDITION. GROUND NO.3 OF THE REVENUE STANDS DISMIS SED. 17. VIDE ITS GROUND NO.4, GRIEVANCE OF THE REVENUE IS THAT AN ADDITION FOR PRO-RATA BANK INTEREST OF B4,96,460/- WAS DELETED BY THE ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 9 -: LD. COMMISSIONER OF INCOME TAX (APPEALS), RELYING O N THE JUDGMENT OF APEX COURT IN THE CASE OF S.A. BUILDERS LTD VS. CIT (A) AND ANOTHER (2007) 288 ITR 1(SC). 18. ASSESSEE HAD DURING THE RELEVANT PREVIOUS YEAR PAID INTEREST OF B68,57,763/- ON ITS OVER DRAFT AND CASH CREDIT A CCOUNT. LD. ASSESSING OFFICER FOUND THAT ASSESSEE HAD GIVEN INTEREST FREE ADVANCES TO ITS SISTER CONCERNS, WHICH WERE DEFUNC T OR WERE NOT HAVING ANY BUSINESS. LD. ASSESSING OFFICER WAS OF T HE OPINION THAT INTEREST BEARING BORROWED FUNDS WERE USED FOR PUR POSES OTHER THAN ASSESSEES BUSINESS. PRO-RATA DISALLOWANCE OF B4,9 6,460/- WAS MADE. 19. IN ITS APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THE L OANS GIVEN TO SISTER CONCERNS WERE COVERED BY RESERVES & SURPLUS B25,65, 446/- AND INTEREST FREE LOANS OF B49,36,117/- RECEIVED FROM I TS DIRECTOR. FURTHER AS PER ASSESSEE TOTAL LOANS DUE FROM SISTER CONCERN S CAME TO B1,46,60,880/- AND PURPOSE OF GIVING THE LOANS WA S ONLY TO MEET THE BUSINESS NEEDS. LD. COMMISSIONER OF INCOME TAX (APP EALS) WAS APPRECIATIVE OF THESE CONTENTIONS. RELYING ON THE JUDGMENT OF APEX COURT IN THE CASE OF S.A. BUILDERS (SUPRA ), HE DELETED THE ADDITION. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 10 -: 20. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT ASSESSEE COULD NOT SHOW ANY COMMERCI AL EXPEDIENCY FOR GIVING THE LOANS AND THE LOANS WERE MUCH MORE THAN INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. 21. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) 22. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THE LD. COMMISSI ONER OF INCOME TAX (APPEALS) HAD ACCEPTED THE CONTENTION OF THE ASSESS EE THAT LOANS WERE GIVEN TO SISTER CONCERN FOR COMMERCIAL EXPEDIENCY. WHAT WE FIND THAT NONE OF THE LOWER AUTHORITIES HAD VERIFIED THE RELA TIONSHIP BETWEEN THE ASSESSEE AND THE DEBTORS. ASSESSEE IS A COMPANY A ND HOW IT WAS RELATED TO THE DEBTORS REQUIRE VERIFICATION BEFOR E, WE CAN ANSWER THE QUESTION REGARDING COMMERCIAL EXPEDIENCY OF SUCH LO ANS. WE ARE OF THE OPINION THAT ISSUE REQUIRES A FRESH LOOK BY THE LD. ASSESSING OFFICER. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES A ND REMIT THE ISSUE REGARDING INTEREST DISALLOWANCE FOR INTEREST FREE LOANS GIVEN BY THE ASSESSEE, BACK TO THE FILE OF THE LD. ASSESSING OF FICER FOR CONSIDERATION A FRESH IN ACCORDANCE WITH LAW. GROUND NO.4 IS AL LOWED FOR STATISTICAL PURPOSE. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 11 -: 23. VIDE ITS GROUND NO.5, GRIEVANCE RAISED BY THE REV ENUE IS THAT AN ADDITION OF B39,96,726/- MADE BY THE LD. A SSESSING OFFICER CONSIDERING PURCHASE OF PART OF THE STORES AND BUI LDING MATERIAL AS CAPITAL IN NATURE WAS DELETED BY THE LD. COMMISSION ER OF INCOME TAX (APPEALS). 24. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE LD. ASSESSING OFFICER THAT OUT OF TOTAL STOR ES OF VALUE ON B1,01,47,637/- PURCHASED, A SUM OF B39,96,726/- WAS REPRESENTED PURCHASE OF STEEL RODS, M S ANGLES FROM ONE M/S. B AWA STEEL CORPORATION. LD. ASSESSING OFFICER WAS OF THE OPIN ION THAT THESE MATERIALS RESULTED IN ACQUISITION OF CAPITAL ASSET AND COULD NOT CONSIDERED AS CONSUMABLE STORES. HE MADE A DISALLO WANCE OF B39,96,726/-. 25. IN ITS APPEAL BEFORE THE LD. COMMISSIONER OF INCOM E TAX (APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT STEEL RODS AND M S ANGLES WERE USED FOR POKING PURPOSE IN THE MANUFAC TURING PROCESS. AS PER ASSESSEE SUCH STEEL RODS AND M S ANGLES MELTED IN THE PROCESS AND FORMED PART OF THE FINISHED GOODS. AS PER AS SESSEE, FOR THIS REASON, THE VALUE OF SUCH STEEL RODS AND M S ANGLES WERE SHOWN AS ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 12 -: ADDITIVES. LD. COMMISSIONER OF INCOME TAX (APPEALS ) WAS APPRECIATIVE OF THESE CONTENTIONS. HE DELETED THE ADDITION MADE BY THE LD. ASSESSING OFFICER. 26. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDERS OF THE LOWER AUTHORITIES SUBMI TTED THAT PRIME FACIE THE MATERIALS PURCHASED WERE CAPITAL IN NATURE. 27. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). 28. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. WHAT WE FIND IS T HAT ASSESSEE HAD NOT DONE ANY CONSTRUCTION WORK DURING THE RELEVANT PRE VIOUS YEAR. THIS HAS BEEN SPECIFICALLY POINTED OUT BY THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) IN HIS ORDER AND STANDS UNREBUTTED BY THE REVENUE. LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD EXAMINED P ROCESS OF MANUFACTURE AND FOUND THAT STEEL ROD AND M S ANGLE S USED FOR POKING, ULTIMATELY MELTED, AND WENT INTO THE FI NISHED PRODUCT. IN THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINI ON THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS JUSTIFIED IN TREATING THE EXPENDITURE INCURRED FOR SUCH STEEL RODS AND M S AN GLES AS REVENUE OUTGO. WE FIND NO REASON TO INTERFERE WITH THE ORD ER OF THE LD. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 13 -: COMMISSIONER OF INCOME TAX (APPEALS). GROUND NO.5 OF THE REVENUE STANDS DISMISSED. 29. VIDE ITS GROUND NO.6, GRIEVANCE RAISED BY THE REVE NUE IS ON THE DELETION OF AN ADDITION FOR CLOSING STOCK OF ST ORES B4,52,667/- IN THE STEEL DIVISION. 30. FACTS APROPOS ARE THAT SIMILAR TO THE PURCHASE OF STORE ITEMS IN CEMENT DIVISION, THERE WERE PURCHASES IN THE S TEEL DIVISION ALSO. TOTAL PURCHASE IN STEEL DIVISION CAME TO B1,63,58,5 96/-. OUT OF THIS LD. ASSESSING OFFICER HAD TREATED B50,41,917/- AS CAPIT AL OUTGO AND THE BALANCE CAME TO B1,13,16,679/-. LD. ASSESSING OFFI CER WAS OF THE OPINION THAT ASSESSEE WOULD HAVE HAD A CLOSING STOC K OF 4% OF THIS. THE RATIO WAS ARRIVED IN THE BASIS OF STOCK OF OTHE R RAW MATERIAL TO TOTAL PURCHASE. AN ADDITION OF B4,52,667/- WAS MAD E. 31. ON ASSESSEES APPEAL, LD. COMMISSIONER OF INCOME TA X (APPEALS) DELETED THE ABOVE ADDITION GIVING THE SAM E REASONS WHICH WERE GIVEN BY HIM FOR DELETING SIMILAR ADDITION MAD E FOR THE CEMENT DIVISION. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 14 -: 32. FOR THE SAME REASONS WHAT WE HAVE MENTIONED AT ABO VE PARA 10 ABOVE, WE ARE OF THE OPINION THAT THE ADDIT ION WAS RIGHTLY DELETED BY THE LD. COMMISSIONER OF INCOME TAX (APPE ALS). WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMI SSIONER OF INCOME TAX (APPEALS). GROUND NO.6 OF THE REVENUE STANDS D ISMISSED. 33. WHEN CROSS APPEAL OF THE ASSESSEE WAS TAKEN UP, TH E LD. AUTHORISED REPRESENTATIVE THAT THE ONLY GROUND HE WAS PRESSING WAS THE ONE WHICH SOUGHT CARRY FORWARD OF CLOSING STOCK TO THE EXTENT ADDITIONS MADE IN THE CLOSING STOCK OF STORES ARE SUSTAINED. 34. WE HAVE ALREADY UPHELD THE ORDER OF THE LD. COMMISS IONER OF INCOME TAX (APPEALS) DELETING SUCH ADDITIONS IN CL OSING STOCK OF STORES. OTHER GROUNDS IN THE CROSS OBJECTION SUPPOR T THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN SO FAR AS IT WENT IN FAVOUR OF THE ASSESSEE. HENCE, CROSS OBJECTION FIL ED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 35. NOW, WE TAKE CROSS APPEAL OF THE REVENUE AND ASSESS EE FOR THE ASSESSMENT YEAR 2009-2010 ALONGWITH ASSESSEE S CROSS OBJECTION. 36. APPEAL OF THE REVENUE IS FIRST TAKEN UP FOR DISPOSA L. REVENUE HAS RAISED THREE GRIEVANCES IN-TOTO. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 15 -: 37. FIRST GRIEVANCE RAISED BY THE REVENUE IS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) RELIED ON A JU DGMENT OF HONBLE APEX COURT IN THE CASE OF DCIT VS. CORE HEALTHCARE LTD (2008) 298 ITR 194 WITHOUT CONSIDERING THE PROVISO WHICH WAS ADDED TO SECTION 36(1)(III) OF THE ACT BY FINANCE ACT, 2003 , WHILE DELETING AN INTEREST DISALLOWANCE OF B16,90,705/- 38. FACTS APROPOS ARE THAT ASSESSEE HAD ACQUIRED MACHIN ERY DURING THE RELEVANT PREVIOUS YEAR WHICH AS PER LD. ASSESSING OFFICER WERE UNDER ERECTION AT THE CLOSE OF THE YEAR. LD. ASSESSING OFFICER WAS OF THE OPINION THAT INTEREST PAYMENTS ON LOANS RAISED FOR ACQUIRING SUCH MACHINERY, WHICH WAS UNDER ERECTION HAD TO BE DISALLOWED. AS PER LD. ASSESSING OFFICER THESE WERE PRE-OPERATIVE EXPENDITURE. AN INTEREST DISALLOWANCE OF B 16,90,705/- WAS MADE. 39. IN ITS APPEAL BEFORE THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) ARGUMENT OF THE ASSESSEE WAS THAT THE OUT GO WAS REVENUE IN NATURE AND WAS ADMISSIBLE U/S.36(1)(III) OF THE ACT. AS PER THE ASSESSEE IT WAS AN EXISTING MANUFACTURING CONCERN A ND THE MACHINERY UNDER ERECTION WAS NOT FOR ANY EXPANSION. RELIANCE WAS PLACED ON THE JUDGMENT OF APEX COURT IN THE CASE OF CORE HEALTH C ARE LTD (SUPRA). LD. COMMISSIONER OF INCOME TAX (APPEALS) WAS APPREC IATIVE OF THIS ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 16 -: CONTENTION. AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) SEC. 36(1)(III) OF THE ACT REQUIRED USE OF CAPITAL AND N OT USE OF ASSET. AS PER LD. COMMISSIONER OF INCOME TAX (APPEALS) THERE WAS NO DISTINCTION BETWEEN CAPITAL BORROWED FOR REVENUE PURPOSE AND C APITAL BORROWED FOR CAPITAL PURPOSE. HE DELETED THE DISALLOWANCE M ADE BY THE LD. ASSESSING OFFICER. 40. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD.CIT(A) SUBMITTED THA T PROVISO TO SEC. 36(1)(III) OF THE ACT INTRODUCED BY THE FINANCE ACT , 2003 W.E.F. 1.04.2004, OBLITERATED THE EFFECT OF JUDGMENT OF AP EX COURT IN THE CASE OF CORE HEALTH CARE LTD (SUPRA). AS PER LD. DEPART MENTAL REPRESENTATIVE INTEREST EXPENDITURE ON CAPITAL BOR ROWED FOR ACQUISITION OF AN ASSET TILL THE DAY ON WHICH IT WA S FIRST PUT TO USE COULD NOT BE ALLOWED AS A DEDUCTION. ACCORDING TO HIM ERE CTION OF THE MACHINERY HAD NOT BEEN COMPLETED DURING THE RELEVAN T PREVIOUS YEAR. AS PER LD. DEPARTMENTAL REPRESENTATIVE , LD. ASSESS ING OFFICER WAS JUSTIFIED IN MAKING PRO-RATA DISALLOWANCE OF INTERE ST ON LOANS RAISED FOR ACQUIRING SUCH PLANT AND MACHINERY. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 17 -: 41. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE SUBMI TTED THAT PROVISO WOULD APPLY ONLY WHERE THERE WAS EXPANSION OF AN EXISTING BUSINESS AND NOT FOR ALL ACQUISITIONS OF MACHINERY. 42. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. SEC. 36(1)(III) A ND ITS PROVISO ARE REPRODUCED HEREUNDER:- (III) THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS O R PROFESSION : PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID, IN RESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION OF EXISTING BUSINESS OR PROFESSION (WHETHER CAPITALISED IN THE BOOKS OF ACCOUNT OR NOT) ; FOR ANY PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQUISITION OF THE ASSET TILL THE DATE ON WHICH SUC H ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION : IF WE APPLY THE JUDGMENT OF HONBLE APEX COURT IN T HE CASE OF CORE HEALTH CARE LTD (SUPRA) THERE CAN BE NO DISTINCTION MADE ON BORROWINGS BY AN EXISTING BUSINESS, WHETHER IT WA S FOR ACQUIRING A CAPITAL ASSET OR IT WAS FOR MEETING EXPENDITURE WHI CH WAS NON-CAPITAL IN NATURE. HOWEVER, BY VIRTUE OF PROVISO TO SECTIO N 36(1)(III) INTEREST ON LOANS WHERE ASSETS ACQUIRED USING SUCH LOANS WER E STILL TO BE PUT TO USE CANNOT BE ALLOWED AS A DEDUCTION. NEVERTHELESS , AS MENTIONED BY THE LD. AUTHORISED REPRESENTATIVE THIS PROVISO WOUL D APPLY ONLY IF THERE ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 18 -: WAS AN EXTENSION OF EXISTING BUSINESS. LD. ASSESSI NG OFFICER HAS NOT VERIFIED WHETHER ASSESSEE HAD DONE ANY EXPANSION O F ITS EXISTING BUSINESS. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT ISSUE WHETHER THE MACHINERY ACQ UIRED WAS FOR EXPANSION OF ANY EXISTING BUSINESS, AND WHETHER PRO VISO 36(1)(III) OF THE ACT APPLIED REQUIRES A FRESH LOOK BY THE LD. A SSESSING OFFICER. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORI TIES AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. RELATED GROUND OF THE REVE NUE IS ALLOWED FOR STATISTICAL PURPOSE. 43. NEXT GRIEVANCE RAISED BY THE REVENUE IS ON THE DIRE CTION OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) TO ALL OW DEPRECIATION ON ITEMS VALUED B51,71,191/-. 44. FACTS APROPOS ARE THAT ASSESSEE HAD CHARGED IN ITS PROFIT AND LOSS ACCOUNT PURCHASES OF CAPITAL ITEMS AGGREGATIN G TO B1,19,50,399/- AS A REVENUE OUTGO. DURING THE COURSE OF ASSESSMEN T PROCEEDINGS, ASSESSEE ADMITTED THAT THE ACQUISITION WERE OF CAPI TAL ASSET BUT WRONGLY CHARGED TO THE PURCHASE ACCOUNT. LD. ASSES SING OFFICER DISALLOWED CLAIM. HOWEVER, DEPRECIATION WAS ALLOWE D BY THE LD. ASSESSING OFFICER ONLY ON B67,79,208/-, OUT OF THE TOTAL DISALLOWANCE ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 19 -: OF B1,19,50,399/-. IN OTHER WORDS, DEPRECIATION WA S DENIED BY THE LD. ASSESSING OFFICER ON THE CAPITAL OUTGO OF B51,71,19 1/-. 45. AGGRIEVED, ASSESSEE MOVED IN APPEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). ARGUMENT OF T HE ASSESSEE WAS THAT DEPRECIATION WAS UNFAIRLY RESTRICTED, WITHOUT ANY REASON. AS PER THE ASSESSEE, ASSESSING OFFICER, WITHOUT SPECIFYING ANY REASON MADE A DIFFERENTIAL TREATMENT BETWEEN VARIOUS ITEMS COMPRI SED IN THE SUM OF B1,19,50,399/-. LD. COMMISSIONER OF INCOME TAX (AP PEALS) WAS APPRECIATIVE OF THIS CONTENTION. ACCORDING TO HIM, ACQUISITIONS WERE OF BUSINESS ASSETS AND EVEN IF IT WAS NOT USED FOR MAN UFACTURING PURPOSE, DEPRECIATION WAS ADMISSIBLE. HE DIRECTED THE LD. ASSESSING OFFICER TO ALLOW DEPRECIATION ON BALANCE AMOUNT OF B51,71,191 /- ALSO. 46. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT CAPITAL GOODS WORTH B51,71,191/- REP RESENTED MACHINERY UNDER ERECTION. AS PER LD. DEPARTMENTAL REPRESENTATIVE IT WAS FOR THIS REASON THAT THE LD. ASSESSING OFFICER HAD DISALLOWED DEPRECIATION ON SUCH AMOUNT. SUBMISSION OF THE LD . DEPARTMENTAL REPRESENTATIVE WAS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) ADMITTED THE CLAIM WITHOUT VERIFYING THE FACTS. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 20 -: 47. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). 48. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THOUGH THE LD. ASS ESSING OFFICER HAS GIVEN THE DETAILS OF THE EXPENDITURE OF B1,19,50,3 99/- TREATED BY HIM AS CAPITAL OUTGO, AT PAGES 6 & 7 OF ASSESSMENT ORDE R, THE NATURE OF THESE ITEMS WERE NOT MENTIONED. HOWEVER, DEPRECIAT ION WAS ALLOWED BY HIM ONLY ON A SUM OF B67,79,208/- OUT OF THE TO TAL B1,19,50,399/-. LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE OTH ER HAND HELD THAT ASSESSEE WAS ELIGIBLE FOR DEPRECIATION ON THE WHOLE OF THE AMOUNT. NATURE OF THE ASSETS WHICH WERE ACQUIRED B Y THE ASSESSEE AND THE RATES OF DEPRECIATION THAT WERE TO BE APPL IED ON IT, IF IT ALL THESE WERE ELIGIBLE FOR DEPRECIATION, IS NOT COMING OUT OF ORDER OF THE LD. ASSESSING OFFICER OR LD. COMMISSIONER OF INCOME TAX (APPEALS). WE ARE THEREFORE OF THE OPINION THAT ISSUE REQUIRES A FRESH LOOK BY THE LD. ASSESSING OFFICER. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. RELATE D GROUND RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 21 -: 49. LAST GRIEVANCE RAISED BY THE REVENUE IS ON A DELET ION OF DISALLOWANCE OF B 17,56,127/- MADE U/S.40A(3) OF T HE ACT. 50. FACTS APROPOS ARE THAT LD. ASSESSING OFFICER ON VER IFYING THE BOOKS OF THE ASSESSEE FOUND THE FOLLOWING CASH EXPE NDITURE UNDER THE HEAD FREIGHT, REPAIRS AND MAINTENANCE AND ADM INISTRATIVE EXPENDITURE BEYOND THE LIMIT SPECIFIED U/S.40A(3 ) OF THE ACT AS UNDER:- FREIGHT CHARGES, REPAIRS & MAINTENANCE :- SL.NO DATE OF PAYMENT AMOUNT B 1 31.08.2008 23000 2 20.11.2008 25020 3 31.01.2009 34600 4 27.06.2008 32000 TOTAL 1,14,620 REPAIRS AND MAINTENANCE :- SL.NO DATE OF PAYMENT AMOUNT 1 02.04.2008 25155 2 05.04.2008 45794 3 06.04.2008 44200 4 06.04.2008 45510 5 08.04.2008 43659 6 17.04.2008 44605 7 18.04.2008 44550 8 18.04.2008 24148 9 09.05.2008 39200 10 28.05.2008 41630 11 05.06.2008 39575 12 06.06.2008 40370 ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 22 -: 13 13.06.2008 42000 14 23.06.2008 41923 15 27.06.2008 40000 16 30.06.2008 31834 17 11.07.2008 20734 18 24.07.2008 44000 19 25.08.2008 38100 20 16.09.2008 31900 21 16.09.2008 31900 22 18.09.2008 25162 23 18.09.2008 54400 24 18.09.2008 39700 25 19.09.2008 39700 26 02.10.2008 36550 27 03.10.2008 36550 28 07.10.2008 33120 29 11.10.2008 39075 30 30.11.2008 48924 31 08.12.2008 40000 32 08.12.2008 50000 33 09.12.2008 44400 34 22.01.2009 24380 35 31.01.2009 45600 36 01.02.2009 46040 37 01.02.2009 45685 38 01.02.2009 45885 39 28.02.2009 29324 40 09.03.2009 36225 41 15.03.2009 40000 42 17.03.2009 40000 TOTAL 1641507 AGGREGATE OF THESE SUMS COMING TO B17,56,127/- WAS DISALLOWED U/S.40A(3) OF THE ACT. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 23 -: 51. LD. COMMISSIONER OF INCOME TAX (APPEALS) ON THE APP EAL OF THE ASSESSEE DELETED THE DISALLOWANCE NOTING THAT E ACH OF THE AMOUNT INCLUDED IN THE TABLE MENTIONED AT PARA 50 ABOVE CO VERED MORE THAN ONE BILL AND MORE THAN ONE PERSON. AS PER LD. COMMI SSIONER OF INCOME TAX (APPEALS) ENTRIES IN THE BOOKS OF ACCOUNTS REPR ESENTED COMPOSITE AMOUNTS COMPRISING OF MORE THAN ONE BILL AND IF IND EPENDENTLY SEEN THE PAYMENTS WERE BELOW THE LIMIT PRESCRIBED U/S. 4 0A(3) OF THE ACT. 52. NOW BEFORE US, LD. DEPARTMENTAL REPRESENTATIVE STR ONGLY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX ( APPEALS) WITHOUT GIVING AN OPPORTUNITY TO THE ASSESSING OFFICER HAD ACCEPTED THE SUBMISSION OF THE ASSESSEE THAT EACH OF THE ENTRY R EPRESENTED MORE THAN ONE TRANSACTIONS. 53. PER CONTRA, THE LD. AUTHORISED REPRESENTATIVE STRON GLY SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS). 54. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CONTENTION OF THE ASSESSEE IS THAT EACH OF THE ENTRY IN TABLE MENTIONED PARA 50 ABOVE REPRESENTED MULTIPLE BILLS FOR DIFFERENT PARTIES EACH OF WHICH WAS LESS THAN B20,000/-. IN OTHER WORDS AS PER ASSESSEE EACH PAY MENT BEING LESS THAN B20,000/- SEC. 40A(3)OF THE ACT COULD NOT BE APPLIED. WE ARE OF ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 24 -: THE OPINION THAT FACTUAL ASPECTS ARE NOT CLEARLY CO MING OUT FROM THE ORDERS OF THE AUTHORITIES BELOW. IN OUR OPINION TH E ISSUE REQUIRES A FRESH LOOK BY THE LD. ASSESSING OFFICER. LD. ASSES SING OFFICER HAS TO VERIFY WHETHER THE CLAIM OF THE ASSESSEE THAT EACH OF THE ENTRY REPRESENTED PAYMENTS TO MULTIPLE PARTIES, AND EACH PAYMENT WAS LESS THAN THE LIMIT UNDER SECTION 40A(3) OF THE ACT IS C ORRECT OR NOT. WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR CONSIDERATION AFRESH IN ACCORDANCE WITH LAW. RELATED GROUND OF THE REVENUE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 55. NOW, WE TAKE UP THE CROSS APPEAL FILED BY THE ASSE SSEE. 56. ASSESSEE HAS FILED THIS APPEAL WITH A DELAY OF EIG HTY TWO DAYS. CONDONATION PETITION HAS BEEN FILED. REASON S SHOWN FOR THE DELAY SEEMS TO BE JUSTIFIED. LD. DEPARTMENTAL REPRE SENTATIVE DID NOT RAISE ANY SERIOUS OBJECTION. DELAY IS CONDONED. A PPEAL IS ADMITTED. 57. THE SOLE GRIEVANCE RAISED BY THE ASSESSEE IS ON A DISALLOWANCE OF B11,22,550/- PAID TO ONE M/S. SIVA EARTH MOVERS. 58. FACTS APROPOS ARE THAT ASSESSEE HAS CLAIMED AN EXPE NDITURE OF B11,22,550/- AS PAID TO M/S. SIVA EARTH MOVERS. IT SEEMS ASSESSEE COULD NOT PRODUCE ANY EVIDENCE FOR SUCH CLAIM BEFOR E LD. ASSESSING ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 25 -: OFFICER. LD. ASSESSING OFFICER WAS OF THE OPINION THAT THE EXPENDITURE WAS ACTUALLY INCURRED DURING THE FINANCIAL YEAR 200 3-04. HE DISALLOWED THE CLAIM. 59. ASSESSEES APPEAL BEFORE LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT MEET WITH ANY SUCCESS. THOUGH THE ASSESSEE STATED THAT IT WAS HAVING BILL DATED 28.04.2008 RAISED BY THE ABOVE PARTY AS CHARGES FOR MINES DEVELOPMENT, MINING AND LOADING OF LIMESTONE AT VAYALAPADI AND VENKAACHALAPURAM, THE LD. COMMISSION ER OF INCOME TAX (APPEALS) WAS NOT IMPRESSED. ACCORDING TO HIM, THE PAYMENT OF B11,22,550/- WAS EFFECTED ON 31.03.2004 AND THE BIL L BROUGHT IN AS EVIDENCE WAS RAISED ON 28.04.2008. THE LD. COMMISS IONER OF INCOME TAX (APPEALS) ALSO NOTED THAT BILL PRODUCED DID NOT HAVE A NUMBER. ACCORDING TO HIM, THE CLAIM OF THE ASSESSEE IF AT A LL COULD BE CONSIDERED WAS ONLY RELEVANT FOR THE PREVIOUS YEAR ENDING 31.03.2005. AS PER THE LD.CIT(A) THE PAYMENTS WERE FOR WORK D ONE FOR FINANCIAL YEAR 2003-2004. 60. NOW BEFORE US, LD. AUTHORISED REPRESENTATIVE STRONG LY ASSAILING THE ORDER OF THE LD. COMMISSIONER OF INCO ME TAX (APPEALS) SUBMITTED THAT M/S. SIVA EARTH MOVERS HAD CONFIRMED RAISING THE BILL VIDE THEIR LETTER DATED 25.01.2012. ACCORDING TO H IM, EVEN TAX WAS ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 26 -: DEDUCTED AT SOURCE ON THE PAYMENT AND THEREFORE DIS ALLOWANCE WAS NOT WARRANTED. 61. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 62. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. NO DOUBT IT MAY BE TRUE THAT ASSESSEE HAD EFFECTED AN PAYMENT OF B11,22,550/- TO M/S. SIV A EARTH MOVERS ON 31.03.2004, TAX WAS DEDUCTED AT SOURCE THEREON AND REMITTED TO GOVERNMENT. FORM 16A DATED 29.05.2004 IS AVAILABLE ON RECORD. HOWEVER, BILL RAISED BY M/S. SIVA EARTH MOVERS IS D ATED 28.04.2008. ESSENTIAL PARTICULARS IN THE BILL IS REPRODUCED HE REUNDER:- BILL NO. TO DHANDAPANI CEMENTS PRIVATE LTD, 69, GANAPATHY NAGAR, THIRUVANI KOIL, TRICHY 620 005. SL.NO PARTICULAR QUANTITY RATE AMOUNT 1 TOWARDS MINES DEVELOPMENT, MINING AND LOADING OF LIMESTONE CARRIED OUT DURING SEPT 2003 TO MARC 2004 AT VAYALAPADI & VENKATACHPURAM 11,22,550/- 11,22,550/ - ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 27 -: (RUPEES ELEVEN LAKHS TWENTY TWO THOUSAND FIVE HUNDR ED AND FIFTY ONLY) BILL CLEARLY SHOW THAT IT HAS BEEN RAISED FOR WORK DONE DURING THE PERIOD SEPTEMBER, 2003 TO MARCH, 2004. IN THE FIRS T PLACE, WORK WAS DONE LONG BACK MUCH BEFORE THE RELEVANT PREVIOUS Y EAR AND THE LIABILITY IF ANY WAS OF AN EARLIER YEAR AND NOT OF THE RELEVANT PREVIOUS YEAR. ASSESSEE BEING A COMPANY, IT COULD NOT HAVE POSTPONED THE CHARGE OF THE EXPENDITURE TO A SUBSEQUENT YEAR. IT IS ALSO BEYOND COMPREHENSION AS TO WHY M/S. SIVA EARTH MOVERS, C HOOSE TO RAISE A BILL AS LATE AS APRIL, 2008 FOR WORK DONE ALMOST FO UR YEARS BACK. IN THE CIRCUMSTANCES, WE ARE OF THE OPINION THAT THE DISAL LOWANCE WAS RIGHTLY MADE BY THE LD. ASSESSING OFFICER AND CONFIRMED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS). WE DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDERS OF THE LOWER AUTHORITIES. CROSS APPEAL FILED BY THE ASSESSEE IS DISMISSED. 63. WHEN THE CROSS OBJECTION OF THE ASSESSEE WAS TAKEN, LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT IT SUPPORTED THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) IN SO FAR AS IT WENT IN FAVOUR OF THE ASSESSEE. 64. THE CROSS OBJECTION FILED BY THE ASSESSEE IS DISMIS SED AS INFRUCTUOUS. ITA NO. 836, 1352 & 1851/MDS/14 C.O. NO. 54/14 & 01/MDS/15 :- 28 -: 65. IN THE RESULT, APPEAL OF THE REVENUE IN ITA NO.1352 /14 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND C.O OF T HE ASSESSEE 01/2015 IS DISMISSED, THE APPEAL OF THE REVENUE IN ITA NO.8 36/MDS/2014 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND CROSS APPEAL OF THE ASSESSEE IN ITA NO.1851/2014 IS DISMISSED. C.O.NO.5 4/2014 OF THE ASSESSEE ALSO STAND DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 14TH DAY OF DEC EMBER, 2016, AT CHENNAI. SD/- SD/- ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( !' . #$#% ) (ABRAHAM P. GEORGE) & / ACCOUNTANT MEMBER / CHENNAI ! / DATED: 14TH DECEMBER, 2016 KV !' # $% &% / COPY TO: 1. '( / APPELLANT 3. ) () / CIT(A) 5. %+, # - / DR 2. #.'( / RESPONDENT 4. ) / CIT 6. ,/ 0 / GF