Kanaka Infratech Limited, Mumbai V. The Assistant CIT, Circle - 2, Bharuch

ITA 975/AHD/2016

• Counselvise Citation: [2018] 111 COUNSELVISE.COM (IT) 1903 (ITAT-SURAT)
• Duration Of Justice: 1 year(s) 11 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-03-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 18-04-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS R KAVITHA
• Assessee Lawyers: SHRISURENDRAMODIANI
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL,SURAT BENCH,SURAT , , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . / ITA NO.975/AHD/2016/SRT [ [ / ASSESSMENT YEAR: 2009-10 KANAKA INFRATECH LTD., MANGALYA, C WING, 5 TH FLOOR, MAROLMAROSHI ROAD, NEAR MAROL FIRE BRIGADE, ANDHERI (EAST), MUMBAI 400 059. [PAN: AAACJ 5870E] VS. ASST. COMMISSIONER OF INCOME TAX, CIRCLE-2, BHARUCH. ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRISURENDRAMODIANI, C.A /RESPONDENT BY : MRS. R.KAVITHA, SR. D.R /DATE OF HEARING : 16-03-2018 /DATE OF PRONOUNCEMENT : 20-03-2018 / ORDER PERC.M.GARG, JUDICIAL MEMBER : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-3, VADODARA (CIT(A) FOR SHORT) DATED 08.02.2016 FOR THE ASSESSMENT YEAR (AY) 2009-10 PASSED IN THE FIRST APPEALNO.CAB-3/1031/2014-15. 2. THE SOLE EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS FOLLOWS: 2 ITA NO.975/AHD/2016/SRT (A.Y: 2009-10) SHRI KANAKA INFRATECH LTD., THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING DISALLOWANCE OF FEES TO ADVOCATE TO THE EXTENT OF RS. 1016000/-. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH SIDES AND CAREFULLY PERUSED THE RELEVANT MATERIAL PLACED ON THE RECORD OF THE TRIBUNAL. THE LD. ASSESSEESREPRESENTATIVE (AR) SUBMITTED THAT THE LITIGATION EXPENSES RELATE TO LAND AT POWAI AT MUMBAI. THIS WAS ORIGINALLY ALLOTTED TO THE ASSESSEE BUT LATER ALLOTTED TO ANOTHER PARTY. HENCE, THE ASSESSEE TOOK THE MATTER BEFORE HON'BLE SUPREME COURT AND RECENTLY IN 2017 THE HONBLE SUPREME COURT DECIDED AGAINST THE ASSESSEE. IN THE ABOVE CIRCUMSTANCES, THE LAND TO WHICH LITIGATION EXPENSES RELATES, WAS NEVER ACQUIRED BY THE ASSESSEE AND IT NEVER APPEARED IN THE BOOKS OF ACCOUNTS OR BALANCE SHEET. THE ASSESSING OFFICER (AO), ON HIS OWN, MADE AN INCORRECT ASSUMPTION THAT THE AMOUNT OF RS. 2,21,35,217/- IN THE BALANCE SHEET RELATES TO LAND AT MUMBAI WHEREAS THAT AMOUNT RELATED TO A DIFFERENT PROPERTY ALTOGETHER AT UDUPI. TO SUPPORT THIS CONTENTION, THE LD. AR PLACED COPY OF SCHEDULE TO FINAL ACCOUNT/BALANCE SHEET WHEREIN SAID AMOUNT HAS BEEN SHOWN AS KANAKA MALL BUILDING PROJECT, UDUPI. THE LD. AR ALSO SUBMITTED COPY OF THE DECISION OF HONBLE SUPREME COURT DATED 13.11.2017 WHEREIN APPEAL OF THE ASSESSEE HAS BEEN DISMISSED REGARDING ALLOTMENT OF POWAI AT MUMBAI LAND. 4. THE LD. DEPARTMENTAL REPRESENTATIVE (DR)SUPPORTED THE ACTION OF AO AND LEGAL EXPENSES INCURRED FOR IMMOVABLE PROPERTY AND LAND SHOULD BE CAPITALIZED AND THE SAME CANNOT BE ALLOWED AS REVENUE EXPENDITURE. 3 ITA NO.975/AHD/2016/SRT (A.Y: 2009-10) SHRI KANAKA INFRATECH LTD., 5. ON CAREFUL CONSIDERATION OF ABOVE RIVAL SUBMISSION, UNDISPUTEDLY THE ASSESSEE FILED A CASE BEFORE HONBLE SUPREME COURT SEEKING RESTORATION OF AUCTION SETTLEMENT IN HIS FAVOUR REGARDING LAND SITUATED AT MAHADAPOWAI, MUMBAI, WHICH HAS BEEN DISMISSED BY THE HONBLE APEX COURT BY PASSING ORDER ON 13.11.2017 AND RESULTANTLY THE ASSESSEE COULD NOT ACQUIRE SAID LAND. 5. IN THIS SITUATION, WHEN NO LAND OR IMMOVABLE PROPERTY HAS BEEN ACQUIRED BY THE ASSESSEE AND THE PROPERTY WHICH WAS POINTED OUT BY THE AO IS SITUATED AT UDUPI BEING A DIFFERENT IMMOVABLE PROPERTY THEN IT CANNOT BE EXPECTED FROM THE ASSESSEE TO CAPITALIZED LEGAL EXPENSES INCURRED TOWARDS THE CASE WHICH WAS LOST IN THE COURT AND THE ASSESSEE REMAINED EMPTY HANDED AS HIS REQUEST FOR RESTORING THE ALLOTMENT WAS DISMISSED BY THE COURT. THEREFORE, WE ARE OF THE CONSIDERED OPINION THAT WHEN NO IMMOVABLE PROPERTY OR LAND HAS BEEN ACQUIRED BY THE ASSESSEE BY WAY OF LITIGATION THEN THE LEGAL EXPENSE OR ADVOCATE FEES INCURRED BY THE ASSESSEE CANNOT BE HELD AS CAPITAL EXPENDITURE AND THE SAME HAS TO BE TREATED AS REVENUE EXPENDITURE. THEREFORE, ADDITION MADE BY THE AO AND UPHELD BY THE LD. CIT(A) ON WRONG APPRECIATION OF FACTS CANNOT BE READ AS SUSTAINABLE AND THUS WE DIRECT THE AO TO DELETE THE SAME. ACCORDINGLY, SOLE GROUND OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT,APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 20 TH MARCH, 2018. 4 ITA NO.975/AHD/2016/SRT (A.Y: 2009-10) SHRI KANAKA INFRATECH LTD., / SURAT ; DATED : 20 TH MARCH, 2018 EDN / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT(A)-3, VADODARA; 4. PRL. CIT-3, VADODARA; 5. , , / DR, ITAT,SURAT; 6. / GUARD FILE. / BY ORDER, // TRUE COPY // / ASSISTANT REGISTRAR , / ITAT, SURAT SD/ - SD/ - ( ) ( O.P.MEENA ) / ACCOUNTANT MEMBER ( ) (C.M.GARG) / JUDICIAL MEMBER