DCIT, New Delhi V. M/s. Interocean Ocean Shipping India Pvt. Ltd., New Delhi

ITA 956/DEL/2015

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3190 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 16-02-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Depreciation; Tax effect; Capital expenditure
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT ME MBER ITA NO.:- 956/DEL/2015 ASSESSMENT YEAR: 2010-11 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE REVEN UE AGAINST IMPUGNED ORDER DATED 24.11.2014, PASSED BY LD. CIT (APPEALS) -4, NEW DELHI FOR THE QUANTUM OF ASSESSMENT U/S 143(3) FOR THE ASSESSMENT YEAR 2010-11. IN THE GROUNDS OF APPEAL THE REVENUE HAS RAISED FOLLOWING GROUNDS:- 1. THE LD. CIT(A) ERRED IN TREATING THE EXPENDITURE ON FURNITURE AND FIXTURE OF RS. 11,26,250/- AS REVENUE EXPENDITU RE AND DCIT, NEW DELHI. VS. M/S. INTEROCEAN OCEAN SHIPPING INDIA PVT. LTD., 552, BANK COLONY, DEVLI VILLAGE, NEW DELHI 110 062. (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. GUDRUN NEHAR, SR. DR ASSESSEE BY : SHRI S.R. MEHRA, CA DATE OF HEARING 22/02/2018 DATE OF PRONOUNCEMENT 27/02/2018 ITA NO. 956/DEL/2015 DCIT VS. M/S. INTEROCEAN OCEA N SHIPPING INDIA PVT. LTD. 2 THEREBY DELETING THE ADDITION OF RS. 11,26,250/- MA DE BY THE AO. 2. ON THE FACTS AND CIRCUMSTANCE OF THE CASE AND IN LA W, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 60 ,09,035/- MADE ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION. 3. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND A NY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE GROUNDS OF APPEAL AS RAISED BY THE REVENUE ARE NOT M AINTAINABLE AND ARE INFRUCTUOUS. HIGHLIGHTING THE BACKGROUND OF THE CA SE ON SUCH CONTENTION, HE SUBMITTED THAT HERE IN THIS CASE THE AO IN TH E ASSESSMENT ORDER DATED 13.8.2012 HAD MADE ADDITION, FIRSTLY , ON ACCOUNT OF CAPITALISING CERTAIN EXPENDITURE WHICH WAS CLAIMED AS REVENUE BY THE ASSESSEE FOR SUMS AMOUNTING TO RS. 11,26,250/- -; AND SECONDLY , DISALLOWANCE OF DEPRECIATION OF RS. 60,09,035/- ON INSTALLATION OF WIND MILL. AGAINST THE SAID ASSESSMENT ORDER, THE ASSESSEE HAD PREFERRED AN APPEAL BEFORE FIRST APPELL ATE AUTHORITY, WHEREIN THE LD. CIT (A) VIDE ORDER DATED 17.5.2013, HAS DELETED BOTH THE ADDITIONS. AGAINST THE SAID THE REVENUE PREFERRED A PPEAL BEFORE THE TRIBUNAL, WHEREIN THE TRIBUNAL VIDE ORDER DATED 17.4 .2014 IN ITA NO. 4715/DEL/2013, SO FAR AS THE ISSUES RELATING TO DISALL OWANCE OF DEPRECIATION IS CONCERNED, THE ORDER OF THE LD. CIT (A ) ALLOWING THE DEPRECIATION WAS UPHELD. HOWEVER, SO FAR AS THE ISSUE OF DISALLOWANCE OF RS. 11,26,250/- ON ACCOUNT TREATMENT OF REPAIR CHAR GES AS CAPITAL EXPENDITURE BY THE AO, THE TRIBUNAL HAS SET ASIDE THIS ISSUE TO THE FILE OF THE CIT (A) ON THE GROUND THAT AO HAS NOT TREATED SUM OF RS.10,13,625/- AS CAPITAL EXPENDITURE BUT HAS TREATED S UM OF RS. ITA NO. 956/DEL/2015 DCIT VS. M/S. INTEROCEAN OCEA N SHIPPING INDIA PVT. LTD. 3 11,26,250/- AS CAPITAL EXPENDITURE AND AFTER ALLOWING DEPRECIATION, HE HAD DISALLOWED THE SUM OF RS. 10,13,625/-; WHEREAS TH E LD. CIT(A) WHILE DELETING THE DISALLOWANCE HAS TREATED RS. 10,13, 625/- AS CAPITAL IN NATURE. IN PURSUANCE OF THE DIRECTION GIVEN BY THE TRIBUNAL, LD. CIT (A) HAS RECTIFIED THIS FIGURE. THUS, GROUND NO.2 HAS WRONGLY BEEN TAKEN; AND IF ONLY GROUND NO. 1 SURVIVES, THEN TAX EFF ECT OF THE SAID DISPUTED AMOUNT IS MUCH BELOW THE MONETARY LIMIT PRESCRI BED BY THE CBDT FOR FILING OF APPEAL VIDE CIRCULAR NO. 21/2015 DATED 10 TH DECEMBER, 2015. 3. LD. DR ADMITTED THAT GROUND NO. 2 HAS BEEN IN ADVERTENTLY RAISED, BECAUSE THIS ISSUE ALREADY STANDS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE. SO FAR AS THE FIRST ISSUE IS C ONCERNED, HE RELIED UPON THE ORDER OF THE AO. 3. AFTER CONSIDERING THE AFORESAID FACTS AND SUB MISSIONS MADE BY THE PARTIES, WE FIND THAT SO FAR AS GROUND NO. 2 IS CO NCERNED, THAT IS, WITH REGARD TO DISALLOWANCE OF DEPRECIATION OF RS. 60 ,09,035/-, THE TRIBUNAL HAS CONFIRMED THE ORDER OF THE LD. CIT(A) IN THE FOLLOWING MANNER:- 7. APROPOS GROUND NO. 2 BRIEF FACTS ARE THAT ASSESSEE HAD CLAIMED DEPRECIATION @ 80% OF RS. 11,01,88,652/-. T HE AO NOTICED THAT ASSESSEE HAD INCURRED MANY PERIPHERAL EXPENSES FOR THE INSTALLATION OF THE WIND MILL ON THE HEADS LIKE ERE CTION AND COMMISSIONING CHARGES AND INFRASTRUCTURE DEVELOPMEN T CHARGES. HE WAS OF THE OPINION THAT 80% DEPRECIATION COULD N OT BE ALLOWED ON THE EXPENDITURE RELATING TO INSTALLATION OF THE WIND MILL. AFTER CONSIDERING THE DETAILS, HE CONCLUDED THAT DEPRECIA TION ON AN AMOUNT OF RS. 92,44,670/- IS TO BE ALLOWED UNDER TH E HEAD OF ITA NO. 956/DEL/2015 DCIT VS. M/S. INTEROCEAN OCEA N SHIPPING INDIA PVT. LTD. 4 NORMAL PLANT AND MACHINERY @ 15% RATHER THAN 80%. H E, ACCORDINGLY, MADE AN ADDITION OF RS. 60,090,35/-. L D. CIT (A) ALLOWED THE ASSESSEE'S APPEAL, INTER-ALIA, OBSERVIN G THAT SINCE THE ASSET IN THE NATURE OF WIND MILL WOULD NOT HAVE COM E INTO THE OPERATION WITHOUT INCURRING THESE EXPENSES, THE SAM E ARE PART AND PARTIAL OF THE ACTUAL COST OF THE PAYMENT. 7.1 WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. 8. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF ID. CIT(A) ON THIS ISSUE BECAUSE, AS RIGHTLY OBSERVED B Y HIM, ALL THE EXPENSES INCURRED UPTO THE STAGE OF FINAL INSTALLAT ION OF WIND MILL TO MAKE IT OPERATIONAL HAVE TO BE TREATED AS PART A ND PARTIAL OF ACTUAL COST. 4. THUS, WHEN IN THE FIRST ROUND, TRIBUNAL HAS AL READY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENU E, THE SAME ISSUE NOW CANNOT BE RAKED IN THIS PROCEEDING WHICH WA S ONLY LIMITED TO VERIFY THE FIGURES OF DISALLOWANCE OF CAPITAL EXPEN DITURE. ACCORDINGLY, GROUND NO. 2 IS DISMISSED. 5. NOW SO FAR AS DISALLOWANCE OF RS. 11,26,250 /- ON ACCOUNT OF CAPITAL GOODS, WE FIND THAT LD. CIT(A) IN THE FIRST ROUN D HAS DISCUSSED THE ISSUE ON MERITS AND HAS DELETED THE SAID ADDITION IN PRINCIPLE, HOWEVER HE HAD ERRONEOUSLY TAKEN THE FIGURE OF CAPITAL EXPENDITURE OF RS. 10,13,625/- INSTEAD OF RS. 11,26,250/-. THE TRIB UNAL HAS RESTORED THIS ISSUE TO THE FILE OF THE LD. CIT (A) TO CONSIDER THI S FACT. LD. CIT (A) HAS NOW RECTIFIED THE SAID MISTAKE IN THE FIGURES AND ALSO DECIDED THE ISSUE ON MERITS AFTER OBSERVING AND HOLDING AS UNDER :- ITA NO. 956/DEL/2015 DCIT VS. M/S. INTEROCEAN OCEA N SHIPPING INDIA PVT. LTD. 5 4. BEFORE ME, THE LD. COUNSEL APPEARED AND FILE D COPY OF THE ORDER OF THE ITAT AND BROUGHT MY ATTENTION TO THE F ACT THAT WHILE DECIDING THE APPEAL, I HAD ERRONEOUSLY CONSIDERED R EPAIR EXPENSES OF RS.10,13,625/- INSTEAD OF THE FIGURES OF RS.11,2 6,250/- CLAIMED BY APPELLANT. IT WAS PLEADED THAT THE CORRECT AMOUN T MAY BE APPRECIATED IN MY ORDER. 5. ON CAREFUL CONSIDERATION, I FIND THAT THE HON' BLE ITAT HAS CORRECTLY OBSERVED THAT THE LD. AO HAD DISALLOWED A N AMOUNT OF RS.10,13,625/- AFTER TREATING EXPENSES OF RS.11,26, 250/- AS CAPITAL IN NATURE ON WHICH DEPRECIATION @ 10% WAS G RANTED. IN THE ORDER U/S 250 DATED 17.5.2013, WHILE APPRECIATING T HE FACTS OF THE CASE IN PARA 4, WHERE BRIEF FACTS WERE SUMMARIZED, IT WAS INADVERTENTLY MENTIONED THAT AN AMOUNT OF RS.10,13, 625/-, WAS TREATED AS CAPITAL EXPENDITURE BY THE AO, WHILE THE CORRECT AMOUNT WAS RS.11,26,250/-. AS THIS MISTAKE IS APPARENT FRO M RECORD, ACCORDINGLY, I HOLD THAT IN THE PARA 4 ON BRIEF FAC TS, FIGURE OF RS.10,13,625/-' MAY BE SUBSTITUTED BY THE FIGURES OF RS.11,26,250/-. 5.2 I FIND THAT IN PARA-6 OF THE ORDER DATED 17.5 .2013, WHICH IS THE MAIN PARA IN WHICH DECISION WAS GIVEN BY ME ON THIS GROUND OF APPEAL, NO FIGURES WHATSOEVER, HAVE BEEN MENTION ED AND THE DECISION HAS BEEN GIVEN ONLY ON THE TREATMENT OF EX PENSES AS REVENUE, AND THEREFORE THE TYPOGRAPHICAL MISTAKE IN PARA 4 WOULD NOT HAVE HAD ANY IMPLICATION ON THE MERIT OF THE IS SUE, ON WHICH I HAD HELD THAT IN THE APPELLANT'S BUSINESS, CHANGING OF FABRIC OF FURNITURE/SOFA DID NOT BRING IN EXISTENCE ANY NEW A SSET AND ACCORDINGLY, SUCH REPAIRS WERE HELD AS ALLOWABLE AS CURRENT REPAIRS' U/S 31. IN THIS REGARD, THE DECISIONS CITE D BY THE ITA NO. 956/DEL/2015 DCIT VS. M/S. INTEROCEAN OCEA N SHIPPING INDIA PVT. LTD. 6 APPELLANT, NAMELY; M/S BALLIMAL NAVAL KISHORE VS. E RR (1997) 224 ITR 414/90 TAXMAN 402 (SC), AND M/S SRI MANGAYARKAR SI MILLS (P) LTD. (2009) 315 ITR 114/182 TAXMAN 141 (SC), WE RE REFERRED TO BY ME. IN VIEW OF THIS, AS THERE IS NO IMPLICATI ON OF TYPOGRAPHICAL ERROR IN PARA 4 OF THE ORDER ON THE C RUX OF DECISION GIVEN IN PARA 6, THEREFORE, THE SAME DECISION IN PA RA-6 ON GROUND NO.1 IS DELIVERED ONCE AGAIN. HOWEVER, AS THE HON'B LE ITAT HAS PREFERRED TO SET ASIDE THE APPEAL ON THE BASIS OF O BSERVATION WITH REGARD PARA 4 OF THE ORDER U/S 250, THE MISTAKE CRE PT IN THE PARA 4 IS BEING RECTIFIED. HELD ACCORDINGLY. THE GROUND NO. 1 IS ALLOWED. THE APPELLANT GETS FULL RELIEF. 6. THE AFORESAID FINDING OF THE LD. CIT (A) IS BASED ON CORRECT APPRECIATION OF FACTS AND LAW, BECAUSE THE ITEMS OF RE PAIRS AND MAINTENANCE ON ACCOUNT OF CHANGING OF FABRIC OF FURNI TURE / SOFA ETC. DOES NOT BRING INTO EXISTENCE ANY NEW ASSET BUT IN FACT S UCH AN EXPENDITURE IS ALLOWABLE AS CURRENT AFFAIRS. ACCORDIN GLY, THE ORDER OF THE LD. CIT (A) IS AFFIRMED. 7. SINCE WE HAVE ALREADY DECIDED THE ISSUE ON MERITS, WE ARE NOT DECIDING THE APPEAL ON MAINTAINABILITY OF THE REVENU ES APPEAL ON ACCOUNT OF TAX EFFECT IN TERMS OF CIRCULAR NO. 21/2015 DATED 10 TH DECEMBER, 2015, THOUGH IN THESE FACTS AND CIRCUMSTANCE S IT IS SQUARELY APPLICABLE, BECAUSE NOW DISPUTED ADDITION IN THE PRESENT APPEAL IS ONLY RS. 11,26,250/-, ON WHICH THE TAX EFF ECT IS MUCH BELOW THE PRESCRIBED LIMITED OF RS.10 LACS. ACCORDINGLY, TH E APPEAL OF THE REVENUE IS DISMISSED. ITA NO. 956/DEL/2015 DCIT VS. M/S. INTEROCEAN OCEA N SHIPPING INDIA PVT. LTD. 7 8. IN THE RESULT THE APPEAL OF THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH FEBRUARY, 2018. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 27 /02/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI