DCIT, New Delhi V. M/s. Gaps Power Infrastructure Pvt. Ltd., New Delhi

ITA 905/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3414 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 13-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GUDRUN MEHAR
• Assessee Lawyers: SANJEEV KAPOOR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 37

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C : NEW DELHI BEFORE SHRI AMIT SHUKLA , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 905/DEL/2015 (ASSESSMENT YEAR: 2011 - 12 ) DCIT, CIRCLE - 10(1), NEW DELHI VS. GAPS POWER INFRASTRUCTURE PVT. LTD, 1E/5, JHANDEWALAN EXTN., NEW DELHI PAN:AACCG4550G (APPELLANT) (RESPONDENT) REVENUE BY : SMT GUDRUN MEHAR, SR. DR ASSESSEE BY: SHRI SANJEEV KAPOOR, CA DATE OF HEARING 22/02/2018 DATE OF PRONOUNCEMENT 2 3 / 0 2 / 201 8 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS APPEAL IS PREFERRED BY REVENUE AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) 4, NEW DELHI (LD. CIT (A)) DATED 27/11/2014 WHEREIN THE ADDITION MADE BY THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 12 (1), NEW DELH I DATED 31/01/2014 OF RS. 4877182/ MADE FOR MANAGEMENT OVERHAULING CHARGES IS DELETED. THE LD. ASSESSING OFFICER HELD THAT THESE EXPENDITURE ARE CAPITAL IN NATURE WHEREAS THE LD. CIT (A) HAS HELD THAT THESE EXPENDITURE ARE REVENUE IN NATURE AND ARE ALLOW ABLE AS UNDER SECTION 37 (1) OF THE ACT. 2. THE REVENUE HAS RAISED THE SOLITARY GROUND OF APPEAL, THE FACTS OF WHICH ARE THAT THAT IN THE PROFIT AND LOSS ACCOUNT OF THE ASSESSEE COMPANY, LEGAL AND PROFESSIONAL CHARGES OF RS. 8294955/ WERE CLAIMED AGAINST THE EARLIER YEARS EXPENSES OF RS. 2368331/ . THEREFORE THE LD. ASSESSING OFFICER ASKED FOR THE DETAIL OF THE EXPENSES INCURRED BY THE ASSESSEE DURING THE YEAR WHICH REVEALED THAT DURING THE YEAR UNDER REFERENCE THE ASSESSEE COMPANY HAS CARRIED OUT MANAGEMENT OVERHAULING EXERCISE AND INCURRED AN EXP ENDITURE OF RS. 5 419092/ . THE LD. ASSESSING OFFICER ON EXAMINATION OF THE DETAILS HELD THAT THESE EXPENDITURE ARE CAPITAL EXPENDITURE IN NATURE AND THEREFORE HE ALLOWED THE DEPRECIATION AT THE RATE OF 10% OF THESE EXPENDITURE AND MADE THE BALANCE DISALLO WANCE OF RS. 4877182/ . 3. THE ASSESSEE ,AGGRIEVED WITH THE ORDER OF THE LD. ASSESSING OFFICER PREFERRED AN APPEAL BEFORE THE LD. CIT (A) WHO HELD THAT THE PAYMENTS MADE BY THE ASSESSEE ARE ALLOWABLE AS REVENUE EXPENDITURE AND THEY ARE PAID FOR VARIOUS PURPO SES SUCH AS TOWARDS SALE OF CARBON EMISSION REDUCTIONS, TO THE FINANCIAL ADVISOR FOR PROVIDING ADVISORY SERVICES ON SMOOTH TRANSITION AND ON THE DUE DILIGENCE FEES. 4. THE REVENUE AGGRIEVED WITH THE ORDER OF THE LD. CIT (A) HAS PREFERRED AN APPEAL BEFORE US. 5. THE LD. DR VEHEMENTLY STATED THAT THE ASSESSEE HAS INCURRED THESE EXPENDITURE FOR THE MANAGEMENT OVERHAULING CHARGES WHICH ARE CAPITAL IN NATURE. SHE VEHEMENTLY SUPPORTED THE ORDER OF THE LD. ASSESSING OFFICER. 6. THE LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER OF THE LD. CIT (A) AND TOOK US THROUGH THE VARIOUS PAGES OF PAPER BOOKS AND EXPLANATION FILED BY THE ASSESSEE ON 22/1/2014 WHEREIN IT IS STATED THAT THESE EXPENDITURE ARE REVENUE IN NATURE. HE FURTHER STATED THAT ASSESSEE HAS NOT DERIVED ANY ADVA NTAGE OF ENDURING NATURE AND THEREFORE IT CANNOT BE HELD TO BE CAPITAL EXPENDITURE. HE STATED THAT THE SERVICES ARE RELATED TO THE COMMISSION ON SALE OF CARBON EMISSION REDUCTION WHICH HAS BEEN INCLUDED IN THE REVENUE. HE FURTHER REFERRED TO THE BILLS OF CORPORATE FINANCE ADVISERS FOR RS. 26 LACS AND OASIS COUNSEL AND ADVISORY PRIVATE LIMITED FOR LEGAL CONSULTANCY SERVICES AND STATED THAT THESE EXPENDITURE ARE FOR EXECUTING AGREEMENTS BETWEEN ASSESSEE AND ILFS AND ARE IN NATURE OF CONSULTANCY FEES. 7. WE H AVE CAREFULLY CONSIDERED THE RIVAL CONTENTION AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES. DURING THE YEAR THE ASSESSEE HAS SOLD 37187 UNITS OF CARBON EMISSION REDUCTION UNITS FOR WHICH THE ASSESSEE HAS SHOWN INCOME OF RS. 4260 8474/ . THE ASSESSEE HA S PAID SUCCESS FEE @ 5.5% TO EMERGENT VENTURES INDIA PRIVATE LIMITED AMOUNTING TO RS. 164922/AND AFTER THE STATUTORY LEVIES THE TOTAL AMOUNT IS RS. 1819092/ WHICH IS SUPPORTED BY BILL DATED 14/1/2011. IN VIEW OF THIS THE AMOUNT OF PROFESSIONAL FEES PAID OF RS. 1 819092/ CANNOT BE HELD TO BE CAPITAL EXPENDITURE. WITH RESPECT TO THE BILL OF THE CORPORATE FINANCE ADVISERS DATED 17/11/2010 FOR THE LUMP SUM SUCCESS FEE FOR ADVISORY SERVICES FOR THE CHANGE OF THE MANAGEMENT. THE PAYMENT WAS MADE TO OASIS COUNS EL IN ADVISORY PRIVATE LIMITED BY INVOICE DATED 30/9/2010 OF RS. 10 LACS. THE ABOVE EXPENDITURE HAS BEEN INCURRED FOR THE REVIEW OF REVISED SHARES SALE AND PURCHASE AGREEMENT TO BE EXECUTED BETWEEN THE ASSESSEE AND ILFS ENERGY DEVELOPMENT CO LTD. THEREFO RE THESE ARE THE MANAGEMENT OVERHAUL CHARGES WHICH HAS NOT RESULTED INTO ANY ENDURING BENEFIT TO THE ASSESSEE AND NO ASSETSAHAS COME IN TO EXISTENCE. THESE ARE EXPENDITURE INCURRED BY THE ASSESSEE DURING THE COURSE OF THE BUSINESS AND THEREFORE THE ALLO WABLE AS REVENUE EXPENDITURE. THE LD. CIT (A) HAS DEALT WITH ALL THESE EXPENDITURE AND GIVEN HIS DETAILED FINDINGS. ACCORDING TO HIM THE EXPENDITURE INCURRED BY THE ASSESSEE ARE ALLOWABLE UNDER SECTION 37 (1) OF THE INCOME TAX ACT . THE LD. DEPARTMENTAL RE PRESENTATIVE COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CIT (A). IN THE RESULT WE CONFIRM THE FINDING OF THE LD. CIT (A) AND DISMISS THE APPEAL OF THE REVENUE. 8. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN CO URT ON 23 / 0 2 / 2018 . SD/ - SD/ - ( AMIT SHUKLA ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 23 / 0 2 / 2018 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI DATE 1. DRAFT DICTATED ON PS 2. DRAFT PLACED BEFORE AUTHOR PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS/PS 6. KEPT FOR PRONOUNCEMENT ON PS 7. FILE SENT TO THE BENCH CLERK PS 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER.