BIHAR FOUNDAARY & CASTING LTD , RANCHI V. DCIT CIRCLE-1 , RANCHI

ITA 99/RAN/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6361 (ITAT-RANCHI)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-09-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 04-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: INDRAJIT SINGH
• Assessee Lawyers: D. SABBIGARH
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI E-COURTAT KOLKATA BEFORE SHRI S.S, GODARA, JM & DR. A.L. SAINI, AM ITA NO.99/RAN/2019 (ASSESSMENT YEAR: 2015-16) BIHAR FOUNDRY AND CASTINGS LTD. SHANTI NIWAS, MAIN ROAD, RANCHI. VS. DCIT, CIRCLE-1, RANCHI ./ ./PAN/GIR NO. : AABCB1852D ( /APPELLANT ) .. ( / RESPONDENT ) APPELLANT BY : SHRI D. SABBIGARH, AR RESPONDENT BY : SHRI INDRAJIT SINGH, CIT, DR / DATE OF HEARING : 22/07/2020 /DATE OF PRONOUNCEMENT : 10/09/2020 / O R D E R PER BENCH: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2015- 16, IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. COMMISSIONER OF INCOME TAX(APPEALS), JHARKHAND DATED 31.01.2019 WHICH IN TURN ARISES OUT OF AN ASSESSMENT ORDER PASSED BY ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE AS FOLLOWS: 1. FOR THAT, ON THE FACT & CIRCUMSTANCES OF THE CASE, THE ACTION OF THE HONORABLE COMMISSIONER OF INCOME TAX (APPEAL) NOT PROPER IN CONFIRMING WRONG ADDITION MADE BY LEARNED ASSESSING OFFICER FOR RS.50,43,431/- BY DISALLOWING EXPENDITURE INCURRED BY APPELLANT IN COURSE OF BUSINESS UNDER VARIOUS HEADS. THE ADDITION IS TOTALLY ARBITRARY AND IS NOT LEGAL, PROPER & JUSTIFIED AND HENCE SUCH ADDITION OF RS.50,43,431/- IS LIABLE TO BE DELETED. 3. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE SCRUTINY PROCEEDINGS THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS. 36,05,029/- UNDER THE HEAD 'REPAIR AND MAINTENANCE OF BUILDING WHICH FORMS PART OF THE 'OTHER EXPENSES' AGGREGATING TO RS. 80,81,55,201/- DEBITED IN THE PROFIT AND LOSS ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE COMPANY WAS ASKED TO FURNISH THE LEDGER ITA NO.99/RAN /2019 BIHAR FOUNDRY AND CASTINGS LTD. 2 ACCOUNT OF THE SAID EXPENSES AND WAS ALSO SHOW-CAUSED AS TO WHY IT SHOULD NOT BE DISALLOWED BEING AN EXPENSE IN THE NATURE OF A CAPITAL EXPENDITURE, SINCE THE BENEFIT ARISING FROM IT IS ENDURING IN NATURE AND IT GIVES THE LONG LASTING BENEFIT TO THE ASSESSEE COMPANY. IN RESPONSE, THE ASSESSEE COMPANY SUBMITTED THE COPY OF THE LEDGER ACCOUNTS OF THE EXPENSES. THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS NEITHER FURNISHED ANY SUPPORTING DOCUMENTS NOR FILED ANY EXPLANATION PROVING THAT THE SAID EXPENSES TO BE REVENUE IN NATURE, THEREFORE ASSESSING OFFICER DISALLOWED RS. 36,05,029/-. 4. THE ASSESSING OFFICER ALSO NOTICED THAT ASSESSEE HAD DEBITED REPAIR AND MAINTENANCE OF OTHER' OF RS. 14,08,952/- TO THE PROFIT AND LOSS ACCOUNT, WHICH FORMS PART OF THE 'OTHER EXPENSES' OF RS. 80,81,55,201/- DEBITED IN THE PROFIT AND LOSS ACCOUNT. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSEE COMPANY WAS ASKED TO FURNISH THE LEDGER ACCOUNT OF THE SAID EXPENSES AND WAS ALSO SHOW CAUSED AS TO WHY IT SHOULD NOT BE DISALLOWED BEING AN EXPENSE WHOSE EXACT NATURE, PURPOSE, BUSINESS EXPEDIENCY AND COMMERCIAL VIABILITY IS NOT ESTABLISHED AND ALSO, WHETHER THE REPAIR & MAINTENANCE EXPENSES THAT ARE EXPENDED GIVE A LONG LASTING BENEFIT TO THE ASSESSEE OR NOT, OR WHETHER, IT HAS TO BE CATEGORIZED UNDER THE HEAD 'CAPITAL EXPENDITURE'. IN RESPONSE, THE ASSESSEE COMPANY SUBMITTED ONLY THE COPY OF LEDGER ACCOUNT OF THE EXPENSES BUT NEITHER FURNISHED ANY SUPPORTING DOCUMENT NOR FILED ANY EXPLANATION PROVING THE SAID EXPENSES TO BE REVENUE IN NATURE, THEREFORE ASSESSING OFFICER MADE ADDITION OF RS. 14,08,952/-. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD CIT(A) WHO HAS PARTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER OBSERVING THE FOLLOWING: [5.6] DISALLOWANCE OF REPAIRS & MAINTENANCE OF BUILDING CHARGES OF RS.36,05,029/- AND REPAIR MAINTENANCE OF 'OTHER' OF RS.14,08,952/- THE ASSESSING OFFICER HAS DISALLOWED THESE EXPENSES AS CAPITAL EXPENDITURE AND DISALLOWED THE SAME. THE ASSESSING OFFICER HAS FURTHER STATED THAT APPELLANT WAS ASKED TO PRODUCE THE BILLS WHICH WERE NOT PRODUCED AND THEREFORE ADVERSE INFERENCE WAS DRAWN. DURING THE APPELLATE PROCEEDINGS, REMAND REPORT WAS SOUGHT AND IN THIS REGARD, THE ASSESSING OFFICER HAS STATED AS UNDER: ITA NO.99/RAN /2019 BIHAR FOUNDRY AND CASTINGS LTD. 3 'THE ASSESSEE CONTENDED THAT THE EXPENDITURE IS INCURRED FOR DAY TO DAY ROUTINE REPAIR AND MAINTENANCE OF ADMINISTRATIVE AND FACTORY BUILDINGS IN NORMAL COURSE OF BUSINESS. THE EXPENDITURES INCURRED ARE EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND NOT FOR MAKING ANY NEW CONSTRUCTION OF BUILDING ACCORDINGLY THE EXPENDITURE ARE REVENUE EXPENDITURE. THE COPIES OF THE LEDGER ACCOUNTS FILED ON 07.12.2017 ARE SELF-EXPLANATORY AND NOWHERE IN THOSE LEDGERS THERE IS ANY EXPENDITURE OF CAPITAL NATURE. AS PER THE ASSESSMENT ORDER (PAGE 6), THE ASSESSEE HAD FILED LEDGER COPIES BUT NO SUPPORTING DOCUMENTS WERE SUBMITTED. THE LEDGER COPIES WERE PRODUCED FOR VERIFICATION BUT NO SUPPORTING DOCUMENTS WERE SUBMITTED. IN ABSENCE OF THAT IT WAS ADDED BACK AS CAPITAL EXPENDITURE. THE ASSESSING OFFICER WAS RIGHT IN TREATING THE SAME IN ABSENCE OF SUPPORTING DOCUMENTS AS THE EXPENSE HAS GIVEN LONG LASTING BENEFIT TO THE ASSESSEE'. THE LEDGER COPIES WERE PRODUCED FOR VERIFICATION BUT NO SUPPORTING DOCUMENTS WERE SUBMITTED. IN ABSENCE OF THAT IT WAS ADDED BACK AS CAPITAL EXPENDITURE. THE ASSESSING OFFICER WAS RIGHT IN TREATING THE SAME IN ABSENCE OF SUPPORTING DOCUMENTS AS THE EXPENSE HAS GIVEN LONG LASTING BENEFIT TO THE ASSESSEE. AS CAN BE SEEN FROM THE ABOVE, REMAND REPORT FURNISHED BY THE ASSESSEE, THE APPELLANT HAS EXPLAINED THE OTHER BORROWING COST AND THEREFORE THE ADDITION IS NOT SUSTAINABLE. IN VIEW OF THIS THE ADDITION OF RS.36,61,044/- IS HEREBY DELETED'. DURING THE APPELLATE PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE STATED THAT THE APPELLANT WAS NOT REQUIRED BY THE ASSESSING OFFICER TO PRODUCE THE BILLS AND VOUCHERS BUT THE ASSESSING OFFICER FORMED ERRONEOUS OPINION THAT THE BILLS AND VOUCHERS WERE NOT FURNISHED. THE ASSESSING OFFICER WAS REQUIRED TO FURNISH COMMENTS ON THIS ISSUE, WHICH HAVE BEEN CLARIFIED BY THE ASSESSING OFFICER IN THE 2ND REMAND REPORT. ON PERUSAL OF NOTICE AS WELL AS ORDER SHEET FORWARDED, BY THE ASSESSING OFFICER ALONGWITH THE SAID REMAND REPORT, IT IS SEEN THAT THE APPELLANT WAS NOT SPECIFICALLY REQUESTED TO PRODUCE THE BILLS AND VOUCHERS. THEREFORE, IT IS HELD THAT THE ASSESSING OFFICER'S OPINION IS NOT CORRECT. HOWEVER, DURING THE APPELLATE PROCEEDINGS, THE ISSUE OF REPAIRS AND MAINTENANCE EXPENSES HAS BEEN EXAMINED AND IT IS SEEN THAT THERE IS HIGHLY DISPROPORTIONATE INCREASE IN THE SAID EXPENDITURE VIS A VIS IMMEDIATELY PRECEDING YEAR AS COMPARED TO THE INCREASE IN THE PERCENTAGE OF TURNOVER. THEREFORE, CONSIDERING ALL THE FACTS AND CIRCUMSTANCES OF CASE UNDER CONSIDERATION, IT IS HELD THAT 50% OF THE EXPENDITURE CAN BE STATED TO BE OF CAPITAL EXPENDITURE. THEREFORE, OUT OF TOTAL ADDITION OF REPAIR & MAINTENANCE OF BUILDING CHARGES OF RS.36,05,029/- AND REPAIR AND MAINTENANCE OF OTHER OF RS.14,08,952/-, 50% OF THE DISALLOWANCE IS CONFIRMED AS BEING CAPITAL EXPENDITURE AND REMAINING 50% IS DELETED. 6. AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE US. 7. WE HEARD BOTH THE PARTIES AND CAREFULLY GONE THROUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLUDING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. AT THE OUTSET ITSELF WE NOTE THAT THERE IS DIFFERENCE OF RS.29,450/- (RS.50,43,431- RS. 50,13,981) BETWEEN THE FIGURE MENTIONED IN THE ITA NO.99/RAN /2019 BIHAR FOUNDRY AND CASTINGS LTD. 4 GROUNDS OF APPEAL AT RS.50,43,431/- AND FIGURES MENTIONED IN THE ASSESSMENT ORDER AND APPELLATE ORDER RS.36,05,029/- (REPAIRS & MAINTENANCE BUILDING) AND RS.14,08,952/- (REPAIRS & MAINTENANCE OTHER) AGGREGATING TO RS. 50,13,981/- (RS.36,05,029 + RS.14,08,952). HAVING GONE THROUGH THE ASSESSMENT ORDER AND APPELLATE ORDER WE ARE OF THE VIEW THAT ASSESSEE IS IN APPEAL BEFORE US ON ACCOUNT OF FOLLOWING ADDITIONS: (I). REPAIRS & MAINTENANCE BUILDING RS.36,05,029/- (II). REPAIRS & MAINTENANCE OTHER RS. 14,08,952/- WE NOTE THAT LD CIT(A) HAS DELETED 50% OF THESE ABOVE ADDITIONS, THE DETAILS OF WHICH ARE AS FOLLOWS: NATURE OF EXPENSES AMOUNT OF EXPENDITURE AMOUNT DISALLOWED BY AO AMOUNT CONFIRMED BY CIT(A) REPAIR AND MAINTENANCE REPAIR AND MAINTENANCE OF BUILDING 36,05,029/- 36,05,029/- 18,02,515/- REPAIR AND MAINTENANCE OF OTHERS 14,08,952/- 14,08,952/- 7,04,476/- SUB TOTAL 50,13,981/- 50,13,981/- 25,06,991/- WE NOTE THAT LEARNED ASSESSING OFFICER DISALLOWED THESE EXPENDITURES BY TREATING THE SAME AS CAPITAL EXPENDITURE DUE TO FAILURE OF THE ASSESSEE TO PRODUCE BILLS AND VOUCHERS FOR THE SAME. HOWEVER, IN COURSE OF APPEAL PROCEEDINGS IT IS ARGUED BY THE ASSESSEE THAT THE ASSESSING OFFICER NEVER ASKED FOR PRODUCTION OF BILLS AND VOUCHERS BUT ASKED TO PRODUCE LEDGER COPIES OF THE SAME. THE ASSESSEE HAD PRODUCED LEDGER COPIES AND STORES ACCOUNTS OF THOSE EXPENDITURES WHICH WERE ASKED FOR. THE DOCUMENTS FILED ARE SELF- EXPLANATORY TO PROVE THE GENUINENESS OF THE TRANSACTIONS AND NATURE OF THE TRANSACTIONS. FROM THE DOCUMENTS, IT IS EVIDENTLY CLEAR THAT THE EXPENDITURE ARE INCURRED FOR DAY TO DAY ROUTINE REPAIR AND MAINTENANCE OF BUILDINGS AND OTHER ASSETS IN NORMAL COURSE OF BUSINESS. THE EXPENDITURES INCURRED ARE EXCLUSIVELY FOR THE PURPOSE OF RUNNING THE BUSINESS. THE COMMISSIONER OF INCOME TAX (APPEAL) CALLED FOR REMAND REPORT IN THESE MATTERS AND FROM THE REMAND REPORT IT IS CONFIRMED THAT THE OPINION OF THE ASSESSING ITA NO.99/RAN /2019 BIHAR FOUNDRY AND CASTINGS LTD. 5 OFFICER WAS NOT CORRECT THEREFORE LD CIT(A) DELETED 50% ADDITION. THE ASSESSEE SUBMITTED ALL THE RELEVANT DETAILS BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS). THE DETAILS OF THE REPAIR AND MAINTENANCE OF THE BUILDING IS OF THE AMOUNT OF RS. 18,768/- BEING MAINTENANCE CHARGE OF ITS CALCUTTA OFFICE BUILDING AND THE BALANCE AMOUNT RS. 35,86,261/- IS THE VALUE OF MATERIAL ISSUED ON DAY TO DAY BASIS THROUGHOUT THE YEAR FROM ITS CIVIL STORE. THE DETAILS OF WHICH ALSO FILLED BEFORE THE COMMISSIONER (APPEALS). SIMILARLY DETAILS OF REPAIR AND MAINTENANCE OF OTHER ASSETS RS.14,08,952/- WERE ALSO FILLED. HOWEVER, AFTER CAREFUL CONSIDERATION OF ALL THE FACTS AND RECORDS, THE COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED 50% OF THE EXPENDITURE AS CAPITAL EXPENDITURE CITING THE REASON FOR DISPROPORTIONATE INCREASE IN EXPENSES AS COMPARED TO PRECEDING YEAR WITHOUT FINDING ANY SPECIFIC ITEM OF EXPENDITURE WHICH IS NOT ALLOWABLE OR EXCESSIVE. THUS, THE ADDITION CONFIRMED BY THE COMMISSIONER OF INCOME TAX (APPEALS) IS ON ESTIMATED BASIS WITHOUT APPRECIATING THE FACTS THAT THE REPAIRS MAINTENANCE OF BUILDING AND OTHER ASSETS ARE NOT VARIED WITH THE PRODUCTION OR SALE. THEREFORE, IN OUR VIEW THE ACTION OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR CONFIRMING THE ADDITION OF 50% EXPENDITURE AS CAPITAL EXPENDITURE ON ESTIMATED BASIS IS NOT TENABLE THEREFORE IT NEEDS TO BE DELETED, ACCORDINGLY WE DELETE THE 50% ADDITION CONFIRMED BY THE LD CIT(A). 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON THIS 10/09/2020. SD/- (S. S. GODARA) SD/- (A. L. SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA; DATED: 10/09/2020 RS / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-BIHAR FOUNDRY AND CASTINGS LTD. ITA NO.99/RAN /2019 BIHAR FOUNDRY AND CASTINGS LTD. 6 2. /RESPONDENT- DCIT, CIRCLE-1, RANCHI 3. / CONCERNED CIT 4. - / CIT (A) 5. , / DR, ITAT, 6. [ / GUARD FILE. // TRUE COPY// BY ORDER/ , SR. PRIVATE SECRETARY