M/s. Mantri Housing & Construction Ltd., Pune V. JCIT SR.-16 Mumbai ( now Jurisdiction is with, Pune

ITA 895/PUN/2002

• Counselvise Citation: 89524514 RSA 2002
• Duration Of Justice: 11 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-06-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-10-2012
• Assessment Year: 1997-1998
• Appeal Filed On: 11-06-2002
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: PUSHPLATA SRIVASTAV
• Keywords: Depreciation; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G. S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 895 / P N/ 20 02 ASSESSMENT YEAR : 1997 - 98 M/S. MANTRI HOUSING & CONSTRUCTION L TD. (NOW KNOWN AS M/S. GLOBAL INFRASTRUCTURE AND TECHNOLOGIES LTD.), MANTRI HOUSE, 929, F.C. ROAD, PUNE VS. DY. COMMISSIONER OF ICOME - TAX, CIRCLE - 1(1), PUNE (APPELLANT) (RESPONDENT) PAN NO. AAACM8350N APPELLANT BY: SHRI M.K. KULKARNI RESPONDENT BY: SMT. PUSHPLATA SRIVASTAV DATE OF HEARING : 2 0 - 06 - 2013 DATE OF PRONOUNCEMENT : 25 - 06 - 2013 ORDER P ER R.S. PADVEKAR , JM : - IN THIS APPEAL, THE ASSESSEE HAS CHALLENGED THE IMPUGNED ORDER OF THE LD. CIT(A) - I, PUNE DATED 2 6 - 03 - 2002 FOR THE A.Y. 1997 - 98 . AT THE OUTSET THE LEARNED COUNSEL SUBMITS THAT THE ASSESSEE IS NOT PRESSING GROUND NOS. 1 TO 5. AS GROUND NOS. 1 TO 5 ARE NOT PRESSING, THE SAME ARE DISMISSED AS NOT PRESS. 2. NOW THE NEXT GROUND NO. 6 IN RESPECT OF DISALLOWANCE OF EXPENDITUR E OF RS.4,62,244/ - WHICH IN RESPECT OF BOND ISSUE TREATING THE SAME AS A DEFERRED REVENUE EXPENDITURE. THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE COMPANY HAS CLAIMED A SUM OF RS.23,11,223 / - AS BOND ISSUE EXPENSES. THOSE EXPENSES WERE INCURRED I N CONNECTION WITH THE ISSUE OF SECURED REDEEMABLE NON - CONVERTIBLE BONDS. THE ASSESSEE STATED THAT THOSE EXPENSES WERE INCURRED TO COMPLY WITH VARIOUS FORMALITIES AND FOR HIRING SERVICES OF VARIOUS CONSULTANTS AND TRUSTEES. THE ASSESSING OFFICER HELD THAT THOSE EXPENSES WERE 2 ITA NO. 895/PN/2002, M/S. MANTRI HOUSING & CONSTRUCTIN LTD., PUNE INCURRED FOR RAISING ADDITIONAL SOURCES OF FINANCE AND IS THEREFORE IN THE CAPITAL NATURE. THE ASSESSING OFFICER ALSO PLACED THE RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF BROKE BOND INDIA LTD. VS. CIT 225 ITR 798 (SC). THE ASSESSEE CARRIED THE ISSUE BEFORE LD. CIT(A) . LD. CIT(A) HELD THAT THE NATURE OF EXPENDITURE IS A REVENUE EXPENDITURE BUT THE SAME CANNOT BE ALLOWED AT ENTIRETY . THE LD. CIT(A) FOLLOWED THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE CA SE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT 225 ITR 802 AND ALLOWED THE 1/5 TH OF THE TOTAL EXPENSES OF RS.23,11,223. THE OPERATIVE PART OF FINDINGS OF THE LD. CIT(A) IS AS UNDER: IN MY HUMBLE OPINION THE EXPENDITURE IS OF REVENUE NATURE BU T BASICALLY IT IS A DEFERRED EXPENDITURE WHICH CAN N OT BE ALLOWED IN FULL IN THE VERY YEAR WHEN IT IS INCURRED. THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. VS. CIT 225 ITR 802 WHICH IS ON THE PRINC IPLE OF ALLOWABILITY OF DEFERRED REVENUE EXPENDITURE IS RELIED UPON. THE HON'BLE COURT HAS HELD THAT THOUGH THE DEFERRED REVENUE EXPENDITURE IS ALLOWABLE BUT THIS CAN N OT BE ALLOWED IN ONE YEAR AS IT WIL L DISTORT THE PROFIT AND LOSS ACCOUNT OF THE COMPANY N THE YEAR WHEN IT IS CLAIMED AND IT ALLOWED. CONSIDERING THE FACTS OF THE CASE IN MY OPINION IT WILL BE FAIR AND REASONABLE TO ALLOW 1/5 TH OF THE BOND ISSUE EXPENSES CONSIDERING THE LIFE OF THE BOND ISSUED AND ALSO CONSIDERING THE FACTS OF ACTUAL REPAYME NT DO NE BY THE APPELLANT COMPANY IN THE RELEVANT YEAR. THUS, AS AGAINST THE CLAIM OF RS.23,11,223/ - THE APPELLANT WILL GET ALLOWANCE OF RS.4,62,244/ - AND THE BALANCE AMOUNT WILL BE CONSIDERED IN THE SUBSEQUENT YEARS IN THE NEXT FOUR YEAR. THE GROUND TAKE N PARTLY SUCCEEDS AS APPELLANT GETS RELIEF OR RS.4,62,244/ - AND THE BALANCE ADDITION OF RS.18,48,979/ - GETS CONFIRMED. 3. WE HAVE HEARD THE PARTIES AND PERUSED THE RECORD. ADMITTEDLY THE EXPENDITURE INCURRED IS IN CONNECTION WITH BONDS. M OREOVER , TH E LD. CIT(A) HAS RIGHTLY RESTRICTED THE ALLOWANCE OF THE SAID EXPENDITURE AT 1/5 TH OF THE TOTAL OF RS.23,11,223/ - BY FOLLOWING THE DECISION IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD. (SUPRA). IN THE SAID 3 ITA NO. 895/PN/2002, M/S. MANTRI HOUSING & CONSTRUCTIN LTD., PUNE CASE THE LORDSHIPS HAVE OBSERVED THAT THE CORRECT PICTURE OF THE PROFIT TO BE MADE OUT NOTHING IS WRONG IN THE ACCOUNTING PRINCIPLES TO SP READ THE EXPENDITURE. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY GROUND NOS. 6 AND 6A ARE DISMISSED. 4. NOW THE NEXT ISSUE IS THE DISALLOWANCE OF DEPRECIATION OF RS.1,01,47,058/ - WHICH WAS CLAIMED ON THE ELECTRICAL METERS @100% AND THIS ARISES FROM GROUND NOS. 7, 7A, 7B AND 7C. WE HAVE HEARD THE PARTIES. THE LEARNED COUNSEL SUBMITS THAT AS PER THE SCHED ULE OF DEPRECIATION I.E. OLD APPENDIX - I - APPLICABLE FOR THE A.Y. 1997 - 98 AS PER RULE - V OF THE INCOME - TAX RULE, 1962 , T HE ELECTRICAL METERS ARE ENERGY SAVING DEVICES AND ARE COVERED IN ENTRY NO. - 3(III)(B)(E) OF PART - A UNDER THE HEAD MACHINERY AND PLANT . ADM ITTEDLY , THE ASSESSEE HAS NOT DEMONSTRATED WITH THE TECHNICAL SPECIFICATIONS THAT THE METERS IN QUESTION ARE ELECTRICAL ENERGY AND POWER FACTORS METERS AS CONTEMPLATED IN THE SCHEDULE. THE ASSESSE E ALSO DID NOT FILE ANY TECHNICAL SPECIFICATIONS TO ESTAB LISH THAT IN FACT THESE ARE THE METERS WHICH A RE CONTEMPLATED UNDER THE HEAD I NSTRUMENTS AND MONITORING SYSTEM FOR MONITORING ENERGY FLOWS WITH SUB - CLAUSE - E IN THE SAID HEAD . W E THEREFORE CONSIDER IT FIT TO RESTORE THE ISSUE TO FILE OF THE ASSESSING OFF ICER FOR FRESH ADJUDICATION. THE ASSESSEE SHOULD DEMONSTRATE BY PUTTING ALL THE RELEVANT TECHNICAL DATA BEFORE THE ASSESSING OFFICER THAT THE SAID METERS ARE COVERED IN THE SAID ENTRY AS MENTIONED ABOVE. THE ASSESSING OFFICER SHOULD GIVE REASONABLE OPPOR TUNITY OF BEING HEARD TO THE ASSESSEE AND DECIDE THE ISSUE DE NOVO AND THE RELEVANT GROUNDS ARE ALLOWED FOR THE STATISTICAL PURPOSE. 5. TH E GROUND NO. 8 READS AS UNDER. THE SAID GROUND IS DEPENDING ON RESULT OF THE ISSUE INVOLVE IN A.Y. 1996 - 97 , WE THE REFORE KEEP THE SAID GROUND OPEN AND THE ASSESSEE CAN MAKE APPROPRIATE APPLICATION TO THE 4 ITA NO. 895/PN/2002, M/S. MANTRI HOUSING & CONSTRUCTIN LTD., PUNE ASSESSING OFFICER FOR CLAIMING THE RELIEF. THE GROUND NO. 9 ONLY CONSEQUENTIAL. 6. IN THE RESULT, THE ASSESSEES APPEAL IS PARTLY ALLOWED FOR THE STATISTICAL PURP OSE. PRONOUNCED IN THE OPEN COURT ON 25 - 06 - 20 1 3 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 25 TH JUNE, 20 1 3 COPY TO 1 ASSESSEE 2 DEPARTME NT 3 THE CIT(A) - I, PUNE 4 THE C CIT 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE