DCIT, Ludhiana V. M/s Hero Cycles Ltd., Ludhiana

ITA 900/CHANDI/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5218 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-04-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 1996-1997
• Appeal Filed On: 11-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Condonation of delay; Revenue expenditure; Capital expenditure
• Section: 143(3); 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.900/CHD/2016 (ASSESSMENT YEAR : 1996-97) THE D.C.I.T., VS. M/S HERO CYCLES LTD., CIRCLE-5, G.T. ROAD, HERO NAGAR, LUDHIANA. LUDHIANA. PAN: AAACH4073P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL KUMAR, CIT DR RESPONDENT BY : SHRI SUBHASH AGGARWAL DATE OF HEARING : 16.01.2017 DATE OF PRONOUNCEMENT : 11.04.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINS T THE ORDER OF CIT(APPEALS)-2, LUDHIANA DATED 22.4.20 16 RELATING TO ASSESSMENT YEAR 1996-97. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN NOT APPRECIATING THE FACT THAT ON MERITS AS WELL, THE EXPENSES INCUR RED FOR SETTING UP BMW CAR PROJECT ESSENTIALLY CONSTITUTE CAPITAL EXPENDITURE AND HENCE ARE NOT ALLOWABLE AS DEDUCTIO N AS PER THE PROVISIONS OF I.T. ACT, 1961. THE CIT(A) HAS ER RED IN LAW & FACTS IN NOT APPRECIATING THAT IN THE CASE OF EXP ANSION OF EXISTING BUSINESS, INCURRING OF EXPENDITURE THEREON MAY BE 2 ALLOWABLE AS REVENUE EXPENDITURE BUT THE EXPENDITUR E INCURRED BY THE ASSESSEE FOR THE PURPOSE OF SETTING UP NEW LINE OF BUSINESS I.E. BMW PROJECT IN THE INSTANT CA SE, IT REPRESENTS CAPITAL EXPENDITURE. 2. THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN HO LDING THAT THE FACTS OF THE ASSESSEE'S CASE IN BMW CAR PROJECT ARE SIMILAR TO THE FACTS OF TELECOMMUNICATION & CEMENT PROJECT UNDER TAKEN BY THE ASSESSEE. 3. THAT THE APPELLANT CRAVED LEAVE TO ADD OR AMEND THE GROUND OF APPEAL BEFORE APPEAL IS FINALLY HEARD OR DISPOSED O FF. 3. AT THE OUTSET, IT MAY BE STATED THAT THE APPEAL FILED BY THE REVENUE WAS TIME BARRED BY 34 DAYS. A N APPLICATION REQUESTING FOR CONDONATION OF DELAY WA S FILED , DATED 10.8.2016, STATING THE REASON FOR THE DELAY I N FILING OF THE APPEAL AS BEING THAT THE OLD RECORDS PERTAINING TO CIRCLE- 5, LUDHIANA, WERE DAMAGED IN A RECENT FIRE INCIDENT AND DESPITE THE BEST EFFORTS FEW DOCUMENTS AND RECORDS IN THE SAID CASE WERE NOT TRACEABLE. IT WAS FURTHER STATE D IN THE SAID APPLICATION THAT SINCERE EFFORTS WERE MADE TO GET THE RECORDS RECONSTRUCTED BY MEANS OF SKELETON FOLDER A ND AS SOON AS COMPLETE DOCUMENTS WERE COLLECTED, ALL NECE SSARY RECORDS FOR FILING OF APPEAL WAS FURNISHED WITHOUT ANY FURTHER LAPSE OF TIME, BUT THE PROCESS OF RECONSTRU CTION AND RECOLLECTION OF RECORDS TOOK TIME WHICH LED TO THE DELAY IN FILING THE APPEAL. THE LD. COUNSEL FOR THE ASSESSE E DID NOT OBJECT TO THE SAME. SINCE WE FIND THAT THERE WAS R EASONABLE CAUSE WITH THE REVENUE FOR THE DELAY IN FILING THE SAID APPEAL, WE CONDONE THE SAME. 3 4. THE PRESENT APPEAL HAS BEEN FILED AGAINST THE ORDER OF THE LEARNED CIT (APPEALS) SETTING ASIDE TH E ORDER OF THE ASSESSING OFFICER PASSED UNDER RECTIFICATION PR OCEEDING UNDER SECTION 154 OF THE INCOME TAX ACT, 1961 (IN S HORT THE ACT). 5. BRIEF FACTS RELEVANT OF THE ACT THE CASE ARE TH AT IN THE RETURN OF INCOME FILED FOR THE IMPUGNED ASSESS MENT YEAR I.E. ASSESSMENT YEAR 1996-97, THE ASSESSEE HAD CLAI MED EXPENSES INCURRED ON BMW PROJECT OF RS.1,36,16,693/ -, AS CAPITAL IN NATURE BUT DURING THE COURSE OF ASSESSME NT PROCEEDINGS THE ASSESSEE FILED AN APPLICATION TO CO NSIDER THE CLAIM AS REVENUE IN NATURE. THE ASSESSING OFFICER REJECTED THE CLAIM AND THE SAME WAS UPHELD BY THE LEARNED CI T (APPEALS) ALSO. BEFORE THE I.T.A.T., THE ASSESSEE ADMITTED ITS CLAIM VIDE AN ADDITIONAL GROUND OF APPEAL WHICH WAS ADMITTED BY THE I.T.A.T. AND THE MATTER WAS THEREAF TER SET ASIDE TO THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH. THE ASSESSING OFFICER ACCORDINGLY RECONSIDERED THE MATTER IN DETAIL AND TREATED THE SAID EXPENDITURE AS CAPITAL IN NATURE. THE CIT (APPEALS), HOWEVER, ALLOWED THE CLAIM OF TH E ASSESSEE VIDE ORDER DATED 18.9.2012. WHILE PASSIN G THE APPEAL EFFECT ORDER THE ASSESSEE WAS GIVEN RELIEF O F RS.1,36,16,693/- ON THE INCOME ASSESSED UNDER SECTI ON 143(3) R.W.S. 254 DATED 17.10.2008. SUBSEQUENTLY, THE ASSESSING OFFICER OBSERVED THAT THERE WAS AN ERROR THAT NEEDED RECTIFICATION IN THE ORDER PASSED UNDER SECT ION 254 OF THE ACT SINCE NO ADDITION HAD BEEN MADE BY THE ASSE SSING 4 OFFICER IN THE ORIGINAL ORDER PASSED UNDER SECTION 143(3) OF THE ACT. THUS IN ORDER TO RECTIFY THE COMPUTATION IN THE APPEAL EFFECT ORDER, NOTICE UNDER SECTION 154 OF TH E ACT WAS ISSUED TO THE ASSESSEE AND THEREAFTER ORDER PASSED AFTER CONSIDERING THE ASSESSEES REPLY MAKING AN ADDITION OF RS.1,36,16,693/- ON ACCOUNT OF EXPENDITURE INCURRED ON BMW PROJECT. 6. THE MATTER WAS CARRIED IN APPEAL BEFORE THE LEARNED CIT (APPEALS), WHO HELD THAT THE ISSUE WAS VERY CLEAR AND THE ASSESSING OFFICER WAS BOUND TO GIVEN APPEAL EFFECT AFTER CONSIDERING THE EXPENDITURE INCURRED ON BMW P ROJECT. HE, THEREFORE, DIRECTED THAT THE ADDITION MADE BY T HE ASSESSING OFFICER UNDER SECTION 254 OF THE ACT TO B E QUASHED. 7. AGGRIEVED BY THE SAME THE REVENUE HAS NOW COME UP IN APPEAL BEFORE US. DURING THE COURSE OF HEARI NG, THE LD. COUNSEL FOR THE ASSESSEE RELIED UPON THE ORDER OF THE LEARNED CIT (APPEALS) AND STATED THAT THERE WAS NO ERROR IN THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SEC TION 254 GIVING APPEAL EFFECT TO THE ORDER OF THE CIT (APPEA LS) ALLOWING THE ASSESSEES CLAIM OF EXPENSES INCURRED ON BMW PR OJECT AS BEING REVENUE IN NATURE. THE LD. COUNSEL FOR THE A SSESSEE POINTED OUT THAT THE ASSESSEE HAD NOT CLAIMED THE S AID EXPENSES IN ITS ORIGINAL RETURN OF INCOME FILED AN D HAD MADE THE CLAIM ONLY DURING ASSESSMENT PROCEEDINGS, WHICH HAVING BEEN ALLOWED NOW WAS TO BE REDUCED FROM THE ASSESSE D INCOME OF THE ASSESSEE. THE LD. COUNSEL FOR THE AS SESSEE 5 ALSO POINTED OUT THAT THE SAID CLAIM OF THE ASSESSE E HAD BEEN UPHELD BY THE I.T.A.T. ALSO VIDE ITS ORDER IN ITA NO.139/CHD/2012 DATED 18.7.2016. 8. THE LEARNED D.R., ON THE OTHER HAND RELIED UPON THE ORDER OF THE ASSESSING OFFICER AND STATED THAT SINCE NO DISALLOWANCE/ADDITION HAD BEEN MADE IN THE FIRST PL ACE, THERE WAS NO REASON TO ALLOW THE SAID CLAIM WHILE G IVING APPEAL EFFECT. 9. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTI ES AND HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND NO INFIRMITY IN THE ORDER OF THE LEARNED CI T (APPEALS) IN QUASHING THE ORDER PASSED UNDER SECTION 154 OF T HE ACT IN THE PRESENT CASE. IT IS AN ADMITTED FACT THAT THE EXPENDITURE INCURRED ON BMW PROJECT AMOUNTING TO RS.1,36,16,693 /-, HAD NOT BEEN CLAIMED IN THE RETURN OF INCOME FILED BY THE ASSESSEE SINCE THE ASSESSEE HAD TREATED IT AS CAPIT AL IN NATURE. IT IS ALSO NOT DISPUTED THAT THE SAID CLAI M HAD BEEN MADE DURING THE ASSESSMENT PROCEEDINGS AND HAS BEEN ALLOWED BY THE CIT (APPEALS) AND ALSO THE I.T.A.T. AS IS EVIDENT FROM THE COPY OF ORDER PASSED BY THE ITAT I N ITA NO.1239/CHD/2012 DATED 18.07.2016. THUS IT GOES W ITHOUT SAYING THAT THE ASSESSEE IS ENTITLED TO CLAIM THE S AID EXPENSES AS REVENUE IN NATURE. IN VIEW OF THE SAME , THE SAID EXPENSES HAVE TO BE REDUCED FROM THE ASSESSED INCO ME OF THE ASSESSEE SINCE THE SAME HAVE NOT BEEN DONE IN T HE FIRST PLACE. THEREFORE, THE APPEAL EFFECT ORDER PASSED, ALLOWING THE SAID CLAIM OF THE ASSESSEE, REDUCING IT FROM AS SESSED 6 INCOME OF THE ASSESSEE IS CORRECT AND THERE IS NO E RROR IN THE SAME. THE ORDER PASSED UNDER SECTION 154 OF THE AC T DENYING THE SAID CLAIM HAS, THEREFORE, WE HOLD, BEE N RIGHTLY QUASHED BY THE LD.CIT (APPEALS). THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE DIS MISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 11 TH APRIL, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH