ACIT, Circle-3, Kolkata, Kolkata V. M/s Khadim India Ltd., Kolkata

ITA 953/KOL/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6537 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-07-2014
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 18-06-2012
• Court: TRIBUNAL
• Department Lawyers: P B PRAMANIK
• Keywords: Tax effect; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH A , KOLKATA [BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SR I GEORGE MATHAN, JM] ITA NO.953-955/KOL/2012 ASSESSMENT YEARS : 2006-07 & 2008-09 ( APPELLANT ) (RESPONDENT) A.C.I.T., CIRCLE-3, . , -VS- M/S.KHADIM INDIA LTD ., KOLKATA KOLKATA (PAN:AABCK 3341 A) ITA NO.713/KOL/2012 ASSESSMENT YEAR : 2008-09 ( APPELLANT ) (RESPONDENT) M/S.KHADIM INDIA LTD. . ,-VS- A.C.I.T., CIRCLE-3, KOLKATA KOLKATA (PAN:AABCK 3341 A) FOR THE DEPARTMENT SHRI P.B.PRAMANIK, JCIT, SR.DR FOR THE RESPONDENT SHRI SUBASH AGARWAL, ADVOCATE DATE OF HEARING : 10.07.2014 DATE OF PRONOUNCEMENT : 10. 07.2014. ORDER PER SHRI SHAMIM YAHYA, AM THESE APPEALS BY THE REVENUE AND ASSESSEE EMANATE OUT OF RESPECTIVE ORDERS OF LD. C.I.T.(A)- I, KOLKATA AND PERTAIN TO ASSESSM ENT YEARS 2006-07 AND 2008-09. SINCE THE APPEALS WERE HEARD TOGETHER THESE ARE BEI NG DISPOSED OF BY THIS COMMON ORDER. ITA NO.953/KOL/2012 (REVENUES APPEAL)(A.YR.2006-07 ) 2. THE ISSUE RAISED IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN DELETING THE PENALTY LEVIED BY THE AO U/S 271(1)(C) OF THE IT AC T OF RS.3,38,956/-. ITA.NOS953-955&713/KOL/2012 M/S.KHAD IM INDIA LIMITED A.YRS.2 006-07 & 2008-09 2 3. IN THIS CASE THE AO OBSERVED THAT THE EXAMINATI ON OF BREAK UP OF RATES AND TAXES REVEAL THAT ROC FEES OF RS.10,07,000/- WAS DE BITED UNDER THE HEAD. THIS FEE WAS PAID FOR INCREASE IN AUTHORISED CAPITAL OF THE ASSE SSEE FROM RS.5CRORES TO RS.25 CRORES. THE AO OPINED THAT THIS FEE IS A CAPITAL EXPENDITUR E. HENCE EXPENSES WAS DISALLOWED AND PENALTY U/S 271(1)(C) OF THE ACT WAS ALSO LEVIE D. THE ASSESSEE PLEADED THAT IT WAS AN INADVERTENT ERROR AND THERE WAS NO DELIBERATE AT TEMPT OR CONCEALMENT ON THE PART OF THE ASSESSEE TO EVADE TAXATION IN THIS RESPECT. HOW EVER, THE AO WAS NOT SATISFIED AND HE LEVIED PENALTY U/S 271(1)(C) OF THE ACT OF RS.3, 38,956/-. 4. UPON ASSESSEES APPEAL THE LD. CIT(A) CONSIDERED THE ISSUE AND DELETED THE PENALTY HOLDING AS UNDER :- AFTER CAREFUL CONSIDERATION OF THE WRITTEN SUBMISS ION AND PENALTY ORDER IT IS NOTICED THAT THE DURING THE RELEVANT ASSESSMENT YEAR ROC FI LING FEES OF RS.10,07,000/- WAS INCLUDED UNDER THE HEAD RATES AND TAXES. DURING THE ASSESSMENT ASSESSEE PROVIDED THE BREAK-UP OF RATES AND TAXES WHICH INCLUDED ROC FEES AND ACCORDINGLY DISALLOWANCE WAS MADE SINCE EXPENDITURE WAS CAPITAL IN NATURE. THE A SSESSEE FURNISHED ITS REPLIED IN RESPECT OF PENALTY PROCEEDINGS ON 17.11.2008 EXPLAI NING THE CIRCUMSTANCES IN WHICH MISTAKE WAS COMMITTED. THE ERROR MENTIONED ABOVE WA S A BONEFIDE ERROR AND THERE WAS CONSCIOUS ATTEMPT TO CONCEAL THE PARTICULARS OF THE INCOME AS ASSESSEE HIMSELF FURNISHED THE DETAIL OF EXPENSES DEBITED UNDER THE HEAD RATES AND TAXES, THEREFORE ASSESSEE HAS BEEN ABLE TO DISCHARGE HIS ONUS IN TERMS OF EXPLANA TION 1 TO SECTION 271(1)(C) OF THE INCOME TAX ACT. AND PENALTY LEVIED IS DELETED. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. 5. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT SECTION 271(1)(C) OF THE ACT POSTULATES LEVY OF PENALTY FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT OF INCOME. IN THIS CASE THE ROC FEE S OF RS.10,07,000/- WAS DULY DISCLOSED. HENCE THERE IS NO CASE OF CONCEALMENT. A S REGARDS THE ISSUE IT WAS A CAPITAL EXPENDITURE, THE ASSESSEE HAS PLEADED THAT IT WAS A N INADVERTENT ERROR AND HENCE LEVY OF PENALTY U/S 271(1)(C) OF THE ACT SHOULD NOT BE R ESORTED TO. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESEE IS A LARGE COMP ANY AND DECLARED A HUGE OF AMOUNT OF INCOME. HE SUBMITTED THAT THE ASSESSEE DID NOT S TAND TO MAKE ANY MATERIAL GAIN BY DELIBERATELY FURNISHING INACCURATE PARTICULARS IN T HIS REGARD. THE LD. DR, ON THE OTHER HAND, RELIED ON THE ORDERS OF THE AO. ITA.NOS953-955&713/KOL/2012 M/S.KHAD IM INDIA LIMITED A.YRS.2 006-07 & 2008-09 3 5.1. UPON CAREFUL CONSIDERATION WE FIND THAT THE AS SESSEES PLEA THAT THERE WAS AN INADVERTENT ERROR DESERVES TO BE ACCEPTED. THERE WA S NO CONCEALMENT OF INCOME ON THE PART OF THE ASSESSEE. THE EXPENDITURE MADE WAS DULY DISCLOSED. ONLY THE TREATMENT THEREOF AS CAPITAL OR REVENUE WAS UNDER DISPUTE. HE NCE, IN OUR CONSIDERED OPINION, PENALTY U/S 271(1)(C) OF THE ACT IS NOT EXIGIBLE. I N THIS REGARD RELIANCE IS PLACED UPON THE DECISION OF THE DECISION OF THE HONBLE APEX CO URT IN THE CASE OF CIT VS RELIANCE PETROPRODUCTS (P) LTD. 322 ITR 158 (SC) WHERE IT WA S EXPOUNDED THAT NON ACCEPTANCE OF A CLAIM MADE BY THE ASSESSEE CANNOT RESULT IN AU TOMATIC LEVY OF PENALTY U/S 271(1)(C).. FURTHERMORE WE ALSO PLACE RELIANCE ON T HE DECISION OF THE HONBLE APEX COURT IN THE CASE OF PRICE WATER HOUSE COOPERS PVT. LTD. 348 ITR 308 (SC). IN THIS CASE LEVY OF PENALTY AS A RESULT OF INADVERTENT ERR OR WAS SET ASIDE. IN THE BACKGROUND OF THE AFORESAID DISCUSSION AND PRECEDENT WE DO NOT FI ND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND WE UPHOLD THE SAME ON THIS ISSUE. 6. IN THE RESULT THE APPEAL FILED BY THE REVENUE ST ANDS DISMISSED. ITA NO.954/KOL/2012 (REVENUES APPEAL)(A.YR.2008-09 ): 7. THE ISSUE RAISED IN THIS APPEAL IS THAT THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS.36,36,661/- MADE BY THE AO ON ACCOUN T OF STAMP DUTY AND REGISTRATION CHARGES PAID BY THE ASSESSEE ON LEASEHOLD PROPERTY . 8. IN THIS CASE THE AO OBSERVED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE OF RS.36,36,611/- UNDER THE HEAD STAMP DUTY AND REGIS TRATION CHARGES. ON 8 LEASEHOLD PROPERTIES, SITUATED ALL OVER INDIA THE PERIOD FOR THE LEASE EXTENDED FROM 13 TO 20 YEARS. THE AO OPINED THAT THE ASSET OBTAINED BY WAY OF LEASE WAS OF ENDURING IN NATURE. HENCE HE TREATED THE EXPENDITURE AS CAPITAL EXPENDITURE. LD.CIT(A) DELETED THE ADDITION BY HOLDING THAT SINCE THE OWNERSHIP OF THE ASSET WAS NOT WITH THE ASSESSEE COMPANY HENCE THE EXPENDITURE INVOLVED WAS REVENUE IN NATURE. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BE FORE US. ITA.NOS953-955&713/KOL/2012 M/S.KHAD IM INDIA LIMITED A.YRS.2 006-07 & 2008-09 4 9. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. WE FIND THAT THE ISSUE INVOLVED IS COVERED IN FAVOUR OF THE ASSESSEE BY VA RIOUS DECISIONS OF THE HIGHER COURTS. IN THIS REGARD WE NOTE THE DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS BOMBAY CYCLE & MOTOR AGENCY 118 ITR 42 (BOM) WHE RE THE MATTER PERTAINS TO TREATMENT OF BROKERAGE OF STAMP DUTY PAID FOR ACQUI SITION OF LEASE HOLD PROPERTIES. THE HONBLE HIGH COURT HELD THAT THE PERIOD OF THE LEAS E WAS ONE OF TEN YEARS, IT DOES NOT CONSTITUTE STARTLING DIFFERENCE AS WOULD APPEAL TO US TO APPLY A DIFFERENT TEST THAN THE ONE WHICH WE APPLIED IN HOECHST PHARMACEUTICALS LTD S CASE 113 877 (BOM). IT WAS HELD THAT IN THEIR VIEW THE EXPENSES WERE RIGHTLY C ONSIDERED BY THE TRIBUNAL AS BEING OF REVENUE IN NATURE. SIMILARLY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS CINCEITA PRIVATE LIMITED 137 ITR 652 CONSIDERED THE ISSUE WHERE THE PERIOD OF LEASE WAS 20 YEARS. THE HONBLE BOMBAY HIGH COURT HELD TH AT IT MUST ALSO BE NOTED THAT THE EXPENDITURE WAS IN RESPECT OF STAMP DUTY, REGISTRAT ION CHARGES AND PROFESSIONAL FEE. THERE WAS NO ELEMENT OF THE PREMIUM IN THE AMOUNT C LAIMED AS EXPENDITURE. MOREOVER, THIS EXPENDITURE WOULD HAVE BEEN THE SAME EVEN IF THE LEASE HAD BEEN OF A SHORTER DURATION PROVIDED THE PERIOD OF LEASE WAS M ORE THAN ONE YEAR. 9.1. THUS IN THE BACKGROUND OF THE AFORESAID DISCUS SION AND PRECEDENT WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A) AND ACCORD INGLY WE UPHOLD THE SAME. 10. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ITA NO.955/KOL/2012 (REVENUES APPEAL)(A.Y.2008-09) 11. THE ISSUE IN THIS CASE PERTAINS TO DELETION OF ADDITION OF RS.3,06,649/- BY THE LD. CIT(A) MADE BY THE AO ON ACCOUNT OF FBT ON INTERNET CHARGES. 12. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE TAX EFFECT IN THIS CASE IS LESS THAN RS.3 LAKHS, LIMIT FIXED BY THE CB DT FOR FILING THE APPEAL BEFORE ITAT. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THA T THE APPEAL FILED BY THE REVENUE IS NOT MAINTAINABLE. THE LD. DR COULD NOT CONTROVER T THE SUBMISSIONS MADE BY THE LD. ITA.NOS953-955&713/KOL/2012 M/S.KHAD IM INDIA LIMITED A.YRS.2 006-07 & 2008-09 5 COUNSEL OF THE ASSESSEE. WE FIND THAT IT IS A SETT LED LAW THAT CBDT CIRCULAR ARE BINDING UPON THE REVENUE. ACCORDINGLY AS THIS APPEA L HAS BEEN FILED IN CONTRAVENTION OF THE CIRCULAR ISSUED BY THE CBDT REGARDING THE MO NETARY LIMIT FOR FILING THE APPEAL BEFORE ITAT WE ARE INCLINED TO DISMISS THE APPEAL O F THE REVENUE ON TAX EFFECT. ACCORDINGLY THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. 13. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ITA NO.713/KOL/2012 (ASSESSEES APPEAL)(A.YR.2008-0 9): 14. THE ISSUE RAISED IN THIS APPEAL IS THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ADDITION OF RS.23,18,000/- MADE BY T HE AO ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT U/S 43B(F) OF THE ACT. 15. IN THIS CASE THE AO NOTED THAT THE ASSESSEE HAS MADE PROVISION FOR LEAVE ENCASHMENT FOR AN AMOUNT OF RS.23,18,000/- AND THE ASSESSEE STATED THAT DUE TO CALCUTTA HIGH COURTS DECISION IN THE CASE OF EXIDE INDUSTRIES LTD. THE SAME WAS NOT ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AO OBSER VED THAT AGAINST THE ABOVE ORDER OF THE HONBLE CALCUTTA HIGH COURT THE REVENUE FILED A PPEAL BEFORE THE HONBLE SUPREME COURT AND THE HONBLE SUPREME COURT HAS PAS SED STAY ORDER ON THE DECISION OF THE HONBLE CALCUTTA HIGH COURT. IN THIS VIEW OF THE MATTER THE AO DISALLOWED THE EXPENDITURE. 16. UPON ASSESSEES APPEAL THE LD. CIT(A) CONFIRMED THE ADDITION. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEAL BEFORE US. 17. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS IN FAVOUR OF T HE ASSESSEE BY THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT. HE SUBMITTED THA T THE HONBLE SUPREME COURT HAS ONLY GRANTED STAY ON THE DECISION OF THE CALCUTTA H IGH COURT. THE LD. COUNSEL OF THE ASSESSEE PLEADED THAT THE MATTER MAY BE REMITTED TO THE FILE OF THE AO AND HE MAY BE ITA.NOS953-955&713/KOL/2012 M/S.KHAD IM INDIA LIMITED A.YRS.2 006-07 & 2008-09 6 ASKED TO APPLY THE RATIO AS WILL EMANATE OUT OF DEC ISION OF HONBLE APEX COURT IN THIS REGARD. THE LD. DR DID NOT HAVE ANY SERIOUS OBJECTI ON TO THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. ACCORDINGLY WE REMIT THIS ISSUE TO THE FILE OF AO TO CONSIDER THIS ISSUE AFRESH AFTER PRONOUNCEMENT OF THE DECISI ON ON THIS ISSUE BY THE HONBLE APEX COURT. 18. IN THE RESULT FILED BY THE ASSESSEE STANDS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10.07.2014. SD/- SD/- [ GEORGE MATHAN ] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 10.07.2014. R.G.(.P.S.) COPY OF THE ORDER FORWARDED TO: 1. M/S.KHADIM INDIA LIMITED, 6, LITTLE RUSSEL STREET, 5 TH FLOOR, KOLKATA-700071. 2 A.C.I.T., CIRCLE-3, KOLKATA. 3 . CIT(A)-I KOLKATA 4. CIT KOLKATA 5 CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY, BY ORDER, ASST. REGISTRAR , ITAT, KOLKATA BENCHES