Deputy Commissioner of Income-tax, V. M/s. Sterling Construction Systems Pvt. ltd., Raigad

ITA 995/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7748 (ITAT-PUNE)
• Duration Of Justice: 2 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 30-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MUKESH JHA
• Keywords: Business expenditure
• Section: 143(3); 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A , PUNE , , . , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI D. KARUNAKARA RAO , AM . / ITA NO. 995 /P U N/201 5 / ASSESSMENT YEAR : 20 10 - 11 THE DY . COMMISSIONER OF INCOME TAX, PANVEL CIRCLE, NEW PANVEL . / APPELLANT VS. M/S. STERLING CONSTRUCTION SYSTEMS PVT. LTD., B, GANESH DARSHAN, PARIMAL ROAD, NERA L (E), DIST. RAIGAD. . / RESPONDENT PAN: AA KCS6477J / APPELLANT BY : SHRI MUKESH JHA, JCIT / RESPONDENT BY : NONE / DATE OF HEARING : 01 .0 8 . 2017 / DATE OF PRONOUNCEMENT: 09 . 0 8 .201 7 / ORDER PER SUSHMA CHOWLA, J M : TH E APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT (A) - 2 , THANE , DATED 30.03.2015 RELATING TO ASSESSMENT YEAR 20 10 - 11 AGAINST ORDER PASSED UNDER SECTION 143(3) OF THE INCOME - TAX AC T , 1961 (IN SHORT THE ACT) . ITA NO. 995 /P U N/20 1 5 M/S. STERLING CONSTRUCTION SYSTEMS PVT. LTD. 2 2 . THE REVENUE HAS RAISED THE FOLLOWING GROUND OF APPEAL : - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE WRITE - OFF OF CENVAT CREDIT ON CLOSURE OF FACTORY IS ALLOWABLE AS E XPENDITURE U/S 37(1) OF I.T. ACT, 1961 AS THE CENVAT CREDIT DEBITED TO THE ACCOUNT DOES NOT PERTAIN TO THE YEAR UNDER CONSIDERATION. 3. DESPITE SERVICE OF NOTICE, NONE APPEARED ON BEHALF OF THE ASSESSEE. HOWEVER, ON PERUSAL OF RECORD, IT TRANSPIRES THAT THE ISSUE RAISED IN THE PRESENT APPEAL FILED BY THE REVENUE IS COVERED BY EARLIER ORDER OF TRIBUNAL. WE PROCEED TO DECIDE THE PRESENT APPEAL AFTER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE. 4. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DELETION OF ADDITION MADE ON ACCOUNT OF WRITE OFF OF CENVAT CREDIT ON CLOSURE OF FACTORY AT RS.48,15,896/ - . 5. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF READY TO USE PANELS AND ALLIED CONSTR UCTION MATERIAL FOR THE CONSTRUCTION INDUSTRY, BUILDERS AND CONSTRUCTION CONTRACTORS. THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAD CLOSED ITS FACTORY AT KALAMB & KHALAPUR KARJAT, MAHARASHTRA, WHICH WAS MANUFACTURING WALL PANEL I.E. PRE - FABRICATED S TRUCTURAL COMPONENTS. THE ASSESSEE HAD AVAILABLE EXCISE INPUT CREDIT OF RS.48,15,896/ - WHICH WAS BROUGHT FORWARD FROM EARLIER YEAR AND OF THE CURRENT YEAR AT RS.14,997/ - . THE SAID EXCISE INPUT CREDIT WAS ELIGIBLE TO BE SET OFF AGAINST EXCISE DUTY PAYABLE , BUT SINCE THE MANUFACTURING UNITS HAVE BEEN CLOSED DOWN, THEN THE SAME WERE NOT ELIGIBLE FOR ANY SET OFF. THE ASSESSEE HAD DEBITED SUM OF RS.48,15,896/ - AS EXCISE DUTY PAID TO THE PROFIT AND LOSS ACCOUNT. THE ASSESSEE CLAIMED THAT THOUGH THE EXCISE DUT Y CREDIT ITA NO. 995 /P U N/20 1 5 M/S. STERLING CONSTRUCTION SYSTEMS PVT. LTD. 3 PERTAINS TO EARLIER YEAR AND THE SAME WAS CARRIED FORWARD, BUT THE OCCURRENCE OF ITS LOSS CRYSTALLIZED IN THE CURRENT YEAR DUE TO CLOSURE OF FACTORY AND THEREFORE, THE SAME COULD NOT BE CONSIDERED AS PRIOR PERIOD ITEM. THE ASSESSING OFFICER WAS O F THE VIEW THAT IN THE ABSENCE OF ANY DOCUMENTARY EVIDENCE TO SHOW THAT INPUT CREDIT OF EXCISE DUTY WAS AVAILABLE TO IT, THE SAID EXPENSES WERE NEITHER ALLOWABLE UNDER SECTION 37(1) OF THE ACT NOR UNDER SECTION 36 OF THE ACT AND HENCE, THE SAME WERE DISALL OWED AND ADDED TO THE INCOME OF ASSESSEE. 6. BEFORE THE CIT(A), THE CLAIM OF ASSESSEE WAS THAT WHERE IT WAS FOLLOWING EXCLUSIVE METHOD OF ACCOUNTING, WHEREIN THE DUTY PAID ON PURCHASE OF RAW MATERIAL WAS CARRIED FORWARD FROM YEAR TO YEAR BASIS AND ADJUSTE D AGAINST EXCISE DUTY PAYABLE ON MANUFACTURING ITEMS, THE SAID DUTY PAYMENT WAS NOT CLAIMED AS EXPENDITURE IN ANY OF THE YEARS. IN FURTHERANCE, THE ASSESSEE CLAIMED THAT ONCE THE MANUFACTURING UNIT OF THE ASSESSEE HAD CLOSED DOWN AND THE BENEFIT OF CENVAT CREDIT WAS NOT AVAILED OF AGAINST EXCISE DUTY PAYABLE ON MANUFACTURING ITEMS AND THE SAME REMAINED UN - UTILIZED, THEN THE WRITE OFF OF CENVAT CREDIT ON CLOSURE OF FACTORY WAS ALLOWABLE AS EXPENDITURE UNDER SECTION 37(1) OF THE ACT. IN THIS REGARD, RELIANC E WAS PLACED ON THE RATIO LAID DOWN BY THE CHANDIGARH BENCH OF TRIBUNAL IN MOHAN SPINNING MILLS VS. ACIT (2012) 27 TAXMANN.COM 332 (CHD). THE RELEVANT FINDINGS OF THE SAID DECISION ARE REPRODUCED AT PAGES 3 AND 4 OF THE APPELLATE ORDER. FURTHER, RELIANCE WAS PLACED ON OTHER DECISIONS OF AHMEDABAD BENCH OF TRIBUNAL IN GIRODHAR FIBERS PVT. LTD. VS. ACIT IN ITA NO.2027/AHD/2009, RELATING TO ASSESSMENT YEAR 2006 - 07 AND IN ACIT VS. M/S. RANGOLI INDUSTRIES PVT. LTD. IN ITA NO.1936/AHD/2010. THE CIT(A) TOOK NOT E OF CENTRAL EXCISE REGISTRATION CERTIFICATE AND THE COPY OF INTIMATION FILED TO THE SUPERINTENDENT OF CENTRAL EXCISE REGARDING SURRENDER OF ITA NO. 995 /P U N/20 1 5 M/S. STERLING CONSTRUCTION SYSTEMS PVT. LTD. 4 REGISTRATION ON CLOSURE OF FACTORY. HE ALSO PERUSED THE DETAILS OF CENVAT CREDIT AVAILABLE AND UTILIZED AND BALANC E THEREOF OF RS.48,30,894/ - AND HELD THAT THE ISSUE WAS SQUARELY COVERED BY THE DECISION OF CHANDIGARH BENCH OF TRIBUNAL IN MOHAN SPINNING MILLS VS. ACIT (SUPRA) . IN VIEW THEREOF, THE APPEAL OF ASSESSEE WAS ALLOWED AND THE DISALLOWANCE MADE BY THE ASSESSI NG OFFICER WAS DELETED. 7. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER OF CIT(A). 8. ON PERUSAL OF RECORD, THE ISSUE ARISING IN THE PRESENT APPEAL IS AGAINST DELETION OF ADDITION OF RS.48,15,896/ - . IN THE FACTS OF PRESENT CASE, WHEREIN THE ASSESSEE HAD WRITTEN OFF CENVAT CREDIT ON CLOSURE OF ITS FACTORY AS BEING NOT ELIGIBLE FOR SET OFF, THEN THE SAID EXPENDITURE IS TO BE ALLOWED AS EXPENDITURE IN THE HANDS OF ASSESSEE BEING BUSINESS EXPENDITURE UNDER THE PROVISIONS OF SECTION 37(1) OF THE ACT. THE ASSESSEE ADMITTEDLY, HAD NOT AVAILED OF THE BENEFIT OF SET OFF OF CENVAT AVAILABLE AGAINST EXCISE DUTY PAYABLE ON MANUFACTURED ITEMS AND FURTHER, THE SAME WAS NEVER CLAIMED AS EXPENDITURE IN ANY OF THE YEARS. ON CLOSURE OF FACTORY, THE ASSESSEE HAS ALSO S URRENDERED ITS REGISTRATION CERTIFICATE AND HAS WRITTEN OFF CENVAT CREDIT BALANCE IN ITS BOOKS OF ACCOUNT. THE LOSS ON ACCOUNT OF SUCH WRITE OFF PERTAINS TO THE YEAR UNDER CONSIDERATION, SINCE THE FACTORY HAS BEEN CLOSED WITHIN ACCOUNTING PERIOD. 9. WE F IND THAT THE ISSUE RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED BY THE ORDER OF CHANDIGARH BENCH OF TRIBUNAL IN MOHAN SPINNING MILLS VS. ACIT (SUPRA). THE CIT(A) HAS REPRODUCED THE FINDINGS OF THE TRIBUNAL AT PAGES 3 AND 4 OF THE APPELLATE ORDER AND T HE SAME ARE BEING REFERRED TO BUT ARE NOT BEING ITA NO. 995 /P U N/20 1 5 M/S. STERLING CONSTRUCTION SYSTEMS PVT. LTD. 5 REPRODUCED FOR THE SAKE OF BREVITY. FOLLOWING THE SAME PARITY OF REASONING, WE UPHOLD THE ORDER OF CIT(A) AND DISMISS THE GROUNDS OF APPEAL RAISED BY THE REVENUE. 10 . IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 9 TH DAY OF AUGUST , 201 7 . SD/ - SD/ - ( D.KARUNAKARA RAO ) (SUSHMA CHOWLA ) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PU NE ; DATED : 9 TH AUGUST , 201 7 . GCVSR / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 2 , THANE ; 4. / THE CIT - 2 , THANE ; 5. , , / DR A , ITAT, PUNE; 6. / GUARD FILE . / BY ORDER , // TRUE COPY // / SR. PRIVAT E SECRETARY , / ITAT, PUNE