Appeal details
Counselvise Citation
[2013] 120 COUNSELVISE.COM (IT) 1736 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 1 month(s) 26 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
15-02-2013
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
E
Assessment Year
2006-2007
Appeal Filed On
20-12-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI E BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI SANJAY ARORA , AM & SHRI VIJAY PAL RAO , JM ITA NO. 8886/MUM/2010 (ASST YEAR 2007-08) THE DY.COMMR OF INCOME TAX 8(1), MUMBAI VS M/S EXPRESSIT LOGISTICS WORLDWIDE LTD B-42 QUEENS APARTMENTS NARGIS DUTT ROAD BANDRA(W) MUMBAI 50 MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AABCE0314K ASSESSEE BY SH MAHESH O RAJORA REVENUE BY SH O P MEENA DT.OF HEARING 12 TH FEB 2013 DT OF PRONOUNCEMENT 15 TH , FEB 2013 ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 12TH OCT 2010 OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2007-08. 2 THE ONLY GROUND RAISED BY THE REVENUE IN THIS APP EAL IS AS UNDER: THE LD COMMISSIONER OF INCOME TAX(APPEALS) HAS ERRED ON FACTS AND IN LAW IN HOLDING THAT THE NETWORK DEVELOPMENT EXPENSES OF ` . 1,67,10,569/- ARE ALLOWABLE AS REVENUE EXPENSES ON THE GROUNDS THAT TH E ASSESSEE HAS NOT STARTED A NEW LINE OF BUSINESS BUT THE EXPENSES WERE INCURRED TO THE EXTEND THE BUSINESS BY OPENING NEW BRANCHES. 3 THE ASSESSEE HAS DEBITED AN AMOUNT OF ` 1,27,39,193/- IN THE COMPUTATION OF TOTAL INCOME. IN SUPPORT OF THIS CLAIM, THE ASSESS EE SUBMITTED THAT THE ASSESSEE IS ENGAGED IN THE COURIER BUSINESS, WHOSE STRENGTH LIE S IN THE NETWORK. THEREFORE, THE SAID EXPENDITURE STATED TO HAVE BEEN INCURRED FOR T HE NETWORK INCLUDING SETTING UP OF OFFICES, COLLECTION CENTRES, BRANCHES ETC., AT V ARIOUS LOCATIONS AND ACCORDINGLY, ITA NO .8886/M/2010 . 2 THE CLAIMED THAT THESE EXPENSES ARE OF REVENUE IN N ATURE. IT WAS SUBMITTED THAT THE NETWORK DEVELOPMENT ARE NOTHING BUT RENT, OFFICE , CONVEYANCE, TRAVELLING, VEHICLE AND OTHER SUCH ADMINISTRATIVE EXPENSES INCURRED B Y THE ASSESSEE DURING THE COURSE OF ITS BUSINESS. 3.1 THE ASSESSING OFFICER DID NOT ACCEPT THE CONTEN TION OF THE ASSESSEE AND OBSERVED THAT THE ASSESSEE HAS TREATED THE NETWORK DEVELOPMENT COST AS INTANGIBLE ASSETS IN THE BALANCE SHEET AND THE PRODUCT DEVELO PMENT COST INCLUDED UNDER WORK-IN-PROGRESS. HOWEVER, IN COMPUTATION, THE ASSE SSEE HAS CLAIMED THE SAME AS REVENUE EXPENDITURE. THUS, THE ASSESSING OFFICER F OUND THAT ON THE ONE HAND THE ASSESSEE HAS CAPITALIZED THE NETWORK AND PRODUCT DE VELOPMENT EXPENDITURE AND ON THE OTHER HAND, IT IS TREATED AS REVENUE EXPENDI TURE. THE ASSESSING OFFICER FURTHER NOTED THAT THE NETWORK AND PRODUCT DEVELOPMENT EXPE NSES ARE INCURRED FOR OPENING NEW BRANCHES, COLLECTION CENTRE AND FOR EXP ANDING THE THROUGH NET WORK THROUGHOUT THE COUNTRY. THEREFORE, THE ASSESSING O FFICER WAS OF THE VIEW THAT THE ABOVE EXPENSES ARE IN THE NATURE OF CAPITAL. HENCE , THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE. 3.2 ON APPEAL, THE COMMISSIONER OF INCOME TAX(APPEA LS) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER FOR THE ASSE SSMENT YEAR 2004-05 AND 2006-07. 4 BEFORE US, THE LD DR HAS SUBMITTED THAT THE EXPEN SES INCURRED BY THE ASSESSEE FOR OPENING NEW BRANCHES, COLLECTION CENTRE AND EXP ANDING THROUGH NET WORK THROUGHOUT THE COUNTRY, WHICH ITSELF SHOW THAT THE SAID EXPENDITURE IS CAPITAL IN NATURE HAVING THE BENEFIT OF ENDURING NATURE. HE HAS RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSING OFFICER HAS BROUGHT OUT THE RELEVANT FACTS WHILE TREATING THE SAID EXPENDITURE AS CAPITAL. ITA NO .8886/M/2010 . 3 4.1 ON THE OTHER HAND, THE LD AR HAS SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER FOR THE ASSESSMENT YEAR 2004-05 AND 2006-07 WHICH HAS BEEN CONFIRMED BY THE TRIBUNAL. THE LD AR HAS FILED THE COPIES OF THE ORDER FOR THE ASSESSMENT YEAR 2004-05 AND 2006-07 AND SUBMITTED THAT THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS TRIBUNAL IN THE CASE OF THE ASSESS EE. 5 HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CAREF ULLY GONE THROUGH THE RELEVANT MATERIAL ON RECORD, WE NOTE THAT FOR THE A SSESSMENT YEAR 2004-05 THE TRIBUNAL VIDE ORDER DATED 12.10.2011 IN ITA NO.5997 /MUM/2008 HAS CONSIDERED AN IDENTICAL ISSUE WHICH HAS BEEN FOLLOWED BY THE TRIB UNAL FOR THE ASSESSMENT YEAR 2006-07 IN THE ORDER DATED 3.1.2013 IN PARAS 6 &7 A S UNDER: 6. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF TH E RIVAL PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE FACTS ARE NOT IN DISPUTE INASMUCH AS IT IS ALSO NOT IN DISPUTE THAT SIMILAR DISALLOWANCE OF RS. 93,20,773/- MADE BY THE A.O. IN THE A.Y. 2004-05 W AS DELETED BY THE LD. CIT(A) AND THE TRIBUNAL IN REVENUES APPEAL UPHELD THE ORDER OF THE LD. CIT(A) VIDE FINDING RECORDED IN PARA 3 OF ITS ORDER AS UNDER:- 3. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). THE GENUINENESS OF THE EX PENDITURE ARE NOT DOUBTED BY THE A.O. IT IS ONLY THE ALLOWABILITY OF THE SAME DURING THIS YEAR AS PER THE COMPUTATION OF INCOME OR ITS ALLOWAB ILITY OVER A PERIOD OF 5 YEARS AS PER ACCOUNTING TREATMENT GIVEN IN THE BOOKS OF ACCOUNT. IT HAS BEEN HELD IN VARIOUS JUDICIAL DECISIONS THAT REVENUE EXPENDITURE IS ALLOWABLE IN THE YEAR OF ITS INCURRENCE U/S 37(1) OF THE ACT IRRESPECTIVE OF ACCOUNTING TREATMENT GIVEN BY THE ASSESSEE. WHET HER THE ASSESSEE IS ENTITLED TO A PARTICULAR DEDUCTION OR NOT WILL DEP END ON THE PROVISION OF LAW RELATING THERETO AND NOT ON THE VIEW WHICH THE ASSESSEE MIGHT TAKE OF HIS RIGHTS NOR CAN THE EXISTENCE OR ABSENCE O F ENTRIES IN HIS BOOKS OF ACCOUNT BE DECISIVE OR CONCLUSIVE IN THE MA TTER. IF THE NATURE OF EXPENSES ARE SUCH THAT THESE ARE ALLOWABLE AS IN CURRED FOR BUSINESS PURPOSE, IT SHOULD BE ALLOWED IN TOTO IRRESPECTIVE OF THE FACT THAT IT WAS CLAIMED TO BE DEFERRED REVENUE EXPENDITURE FOR THE PUR POSE OF COMPANIES ACT. FURTHER, THE ASSESSEE HAS ALREADY S ET UP ITS BUSINESS IN THE PRECEDING ASSESSMENT YEAR. THEREFORE, THE EXPENDI TURE INCURRED BY THE ASSESSEE FOR ITS VARIOUS BRANCHES WHICH ARE REVENU E IN NATURE HAS TO BE ALLOWED AS DEDUCTION DURING THE YEAR. IN THIS VIEW OF THE MATTER, THE GROUND RAISED BY THE REVENUE IS DISMISSED. ITA NO .8886/M/2010 . 4 7. IN THE ABSENCE OF ANY DISTINGUISHING FEATURE BROUG HT ON RECORD BY THE REVENUE, WE RESPECTFULLY FOLLOWING THE ORDER OF THE TR IBUNAL IN ASSESSEES OWN CASE (SUPRA) DECLINE TO INTERFERE WITH THE ORDER PASS ED BY THE LD. CIT(A) IN DELETING THE DISALLOWANCE MADE BY THE A.O. AND ACCO RDINGLY THE GROUND TAKEN BY THE REVENUE IS REJECTED. 5.1 WHEN THE ISSUE HAS BEEN REPEATEDLY DECIDED IN F AVOUR OF THE ASSESSEE, THEN IN THE ABSENCE OF ANY CHANGE IN THE FACTS AND CIRCU MSTANCES FOR THE YEAR UNDER CONSIDERATION, WE FOLLOW THE EARLIER ORDERS OF THIS TRIBUNAL AND ACCORDINGLY DECIDE THIS ISSUE AGAINST THE REVENUE AND IN FAVOUR OF THE ASSESSEE. 6 IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCEMENT IN THE OPEN COURT ON THIS 15 TH , DAY OF FEB 2013 SD/- SD/- ( SANJAY ARORA ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 15 TH , FEB 2013 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI
