DCIT, CHENNAI V. Mahindra Holidays & Resorts India Ltd., CHENNAI

MA 61/CHNY/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8571 (ITAT-CHENNAI)
• Duration Of Justice: 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 13-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 18-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: H P MAHAJANI
• Keywords: Capital asset; Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER] M.P.NO.61/MDS/2012 [ARISING OUT OF I .T.A NO.1761/MDS/2011 ] ASSESSMENT YEAR : 2005-06 THE DY. CIT (LTU) CHENNAI VS M/S MAHINDRA HOLIDAYS & RESORTS INDIA LTD C/O M/S SUBBARAYA AIYAR PADMANABHAN 7 RAMAMANI, ADVOCATES 75A, DR.RADHAKRISHNAN SALAI MYLAPORE, CHENNAI 600 004 [PAN AAACM 6469L] (PETITIONER) (RESPONDENT) PETITIONER BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI H.P.MAHAJANI, CA DATE OF HEARING : 06-07-2012 DATE OF PRONOUNCEMENT : 13-07-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS A MISCELLANEOUS PETITION FI LED BY THE REVENUE AGAINST THE ORDER OF THE TRIBUNAL DATED 25.5.2012 I N I.T.A.NO. 1761/MDS/2011. 2. THE MISCELLANEOUS PETITION OF THE REVENUE READ S AS UNDER: 1. THE ABOVE APPEAL WAS DISPOSED OFF BY TRIBUNAL VI DE ORDER DATED 25-05-2012. GR. 2 RAISED BY DEPARTMENT WAS AG AINST THE DIRECTION OF CLT(A) TO ALLOW THE EXPENDITURE IN CURRED ON MAKING OF NEW FURNITURE AS REVENUE EXPENDITURE. TH OUGH TRIBUNAL MADE A MENTION ABOUT THIS GROUND IN PARA 1 3 AND 15 M.P 61/2012 :- 2 -: OF ITS ORDER, THERE IS NO FINDING ON THE ISSUE SINC E PARA. 18 SPEAKS ABOUT EXPENDITURE LIKE SALARIES, INTEREST, R ENT ETC. ONLY AND THERE IS NO MENTION ABOUT FURNITURE. 2. DURING THE COURSE OF HEARING D.R. SPECIFICALLY P OINTED OUT THAT THE ISSUE INVOLVED IN THE APPEAL BEFORE TRIBUN AL FOR A.Y. 1998-99 WAS DISALLOWANCE OF INTEREST DURING PRE- COMMENCEMENT PERIOD WHEREAS ISSUE INVOLVED IN THE PRESENT APPEAL IS TREATING THE EXPENDITURE INCURRED IN MANUFACTURE OF FURNITURE IS REVENUE EXPENDITURE. HOWEVER, TRIBURAL IN PARA. 17 OF ITS ORDER HAS NOTED THAT D .R. COULD NOT POINT OUT THAT THE ORDER OF THE TRIBUNAL HAD ANY DISTINGUISHABLE FACTS, WHICH IS AGAINST FACTS ON R ECORD. 3. FURTHER DURING THE COURSE OF HEARING, D.R. RELIED ON THE FOLLOWING DECISIONS: BALLIMAL NAVAL KISHORE & ANR. VS CLT (SC) 224 ITR 4 14 CIT VS SARAVANA SPINNING MILLS (P) LTD. (SC) 293 IT R 201 BHARAT GEARS LTD. VS CLT (DEL) 337 ITR 368 CIT VS INDIAN MOLASSES CO. (P) LTD. (SC) 78 ITR 474 ARVIND MILLS LTD. VS CLT (SC) 197 ITR 422 E.I.D. PARRY (INDIA) LTD VS CIT (MAD) 257 ITR 253 HOWEVER THESE DECISIONS WERE NOT CONSIDERED BY THE TRIBUNAL IN ARRIVING AT THE CONCLUSION IN PARA. 17 & 18 OF ITS ORDER. SINCE NON-CONSIDERATION OF AN EXISTING DECISION OF SUPREME COURT/JURISDICTIONAL HIGH COURT IS A MISTAKE APPARENT FROM RECORD AS HELD BY HON'BLE SUPREME COU RT IN ACLT VS SAURASHTRA KUTCH STOCK EXCHANGE LTD. REPORTED IN 305 ITR 227, IS REQUESTED THAT THE ORDER DATED 25-0 5-2012 MAY BE RECALLED AND RENDER JUSTICE TO THE DEPARTME NT. 4. AFTER HEARING THE RIVAL SUBMISSIONS AND PERUS ING THE MATERIALS AVAILABLE ON RECORD, WE FIND THAT THE REV ENUE HAS TAKEN IN ITS APPEAL GROUND NO.2 AS UNDER: 2.1. THE CIT(A) ERRED IN DIRECTING THE ASSESSING O FFICER TO VERIFY THE EXPENDITURE INCURRED BY THE ASSESSEE DUR ING CONSTRUCTION AND ALLOW THE SAME IF IT WAS INCURRED ON SALARIES, RENT, INTEREST, REPAIRS AND FURNITURE. M.P 61/2012 :- 3 -: 2.2. THE CIT(A) FAILED TO APPRECIATE THAT THE EXPEN DITURE ON FURNITURE IS CLEARLY A CAPITAL EXPENDITURE WHICH WO ULD NOT BE ALLOWABLE AS A REVENUE EXPENDITURE. 2.3. THE CIT(A) OUGHT TO HAVE APPRECIATED THAT THE FURNITURE DURING CONSTRUCTION PERIOD, HAS NOT BEEN PUT TO USE AND IT IS NOT EVEN ELIGIBLE FOR ANY DEPRECIATION. 5. THE TRIBUNAL DECIDED THE SAID GROUND OF APPEAL VIDE PARA NOS.17 & 18 OF ITS ORDER DATED 25.5.2012 AS UNDER: 17. AFTER HEARING THE SUBMISSIONS OF BOTH THE PART IES, WE FIND THAT THE CIT(A) IN DECIDING THE ISSUE UNDER CONSIDERATION HAS FOLLOWED THE ORDER OF THE TRIBUNA L PASSED IN THE CASE OF THE ASSESSEE ITSELF IN THE ASSESSMENT YEAR 1998-99. THE LEARNED D.R COULD NOT POINT OUT THAT THE ORDER OF THE TRIBUNAL WAS VARIED BY ANY HIGHER AUTHORITY ON APPEAL OR THERE WAS NO DISTINGUISHABLE FACTS IN THE PRESENT CASE THAN THE FACTS INVOLVED IN THE ASSESSMENT YEAR 1998-99. THEREFORE, WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL OF THE REVENUE. 18. WITH REGARD TO THE GROUND NO.3 RAISED BY THE ASSESSEE, THE ONLY CONTENTION OF THE A.R. OF THE ASSESSEE IS THAT THE CIT(A) WAS NOT JUSTIFIED IN DI RECTING THE ASSESSING OFFICER TO VERIFY THE NATURE OF EXPEN SES BEFORE ALLOWING THE SAME AS BECAUSE IN THE ASSESSMENT YEAR 1998-99, THE TRIBUNAL ALLOWED THE APPEAL OF THE ASSESSEE. WE DO NOT FIND ANY FORCE I N THIS ARGUMENT OF THE A.R. BECAUSE THERE IS NO MATER IAL ON RECORD TO SHOW THE ENTIRE AMOUNT OF ` 1.6 CRORES ARE ON ACCOUNT OF REVENUE EXPENDITURE LIKE SALARIES, INTEREST, RENT ETC. AND NO PART OF THE EXPENDITURE UNDER THE HEAD CONSTRUCTION EXPENSES PENDING ALLOCATION INCLUDES ANY EXPENDITURE INCURRED FOR ACQUIRING NEW CAPITAL ASSET. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, THE CIT(A) WAS JUSTIFIED IN DIRECT ING THE ASSESSING OFFICER TO ALLOW REVENUE EXPENDITURE AFTER VERIFYING IF THE AMOUNTS WERE FOR SALARIES, R ENT, M.P 61/2012 :- 4 -: INTEREST ETC. THEREFORE, THIS GROUND OF APPEAL OF T HE ASSESSEE IS DISMISSED. 6. THE CONTENTION OF THE DR BEFORE US IS THAT AT THE T IME OF THE ORIGINAL HEARING, IT WAS POINTED OUT THAT THE EXPEN DITURE ON FURNITURE WAS CAPITAL IN NATURE AND THEREFORE, THE CIT(A) WAS NOT JUSTIFIED IN DIRECTING THE ASSESSING OFFICER TO ALLOW EXPENDITUR E INCURRED ON FURNITURE AFTER VERIFICATION. 7. THE A.R OF THE ASSESSEE FAIRLY CONCEDED THAT EXPEN DITURE INCURRED ON MAKING OF FURNITURE IS CAPITAL EXPENDIT URE AND NOT ALLOWABLE. HOWEVER, HE CONTENDED THAT NO EXPENDITU RE ON MAKING OF FURNITURE IS INVOLVED IN THE AMOUNT IN QUESTION. 8. WE FIND THAT THE TRIBUNAL HAD ALSO CLARIFIED IN PAR A 18 OF THE ORDER THAT DETAILS OF EXPENSES ARE REQUIRED TO BE V ERIFIED BY THE ASSESSING OFFICER SO THAT ONLY THE REVENUE EXPENDIT URE IS ALLOWED AS DEDUCTION. IN THE ABOVE CIRCUMSTANCES, WE MODIFY T HE ORDER OF THE TRIBUNAL CONTAINED IN PARA 17 IN RESPECT OF GROUND NO.2 OF THE APPEAL OF THE REVENUE AND DIRECT THE ASSESSING OFFICER T O ALLOW DEDUCTION IN RESPECT OF REVENUE ITEMS LIKE SALARIES, RENT, INTER EST ETC. AS OBSERVED BY THE TRIBUNAL IN PARA 18 OF THE ORIGINAL ORDER. THUS, GROUND NO.2 OF THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICA L PURPOSES. M.P 61/2012 :- 5 -: 9. IN THE RESULT, THE MISCELLANEOUS PETITION F ILED BY THE REVENUE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY , THE 13 TH JULY,2012. SD/- SD/- (VIKAS AWASTHY) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 13 TH JULY, 2012 RD COPY TO: PETITIONER/RESPONDENT/CIT(A)/CIT/DR