M/s. Sical Logistics Limited, CHENNAI V. DCIT, CHENNAI

MA 97/CHNY/2012

• Counselvise Citation: [2012] 123 COUNSELVISE.COM (IT) 8957 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 19 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 30-08-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 11-07-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: S DAS GUPTA IRS
• Assessee Lawyers: S SATHIYANAR AYANAN
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER M.A.NO. 97/MDS/2012 (IN I.T.A.NO.391/MDS/2012) ASSESSMENT YEAR : 2006-07 M/S. SICAL LOGISTICS LTD., 73-ARMENIAN STREET, CHENNAI-600 001. PAN AAACS3789B. VS. THE DEPUTY COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-V(1), CHENNAI 34. (APPLICANT) (RESPONDENT) APPLICANT BY : SHRI S. SATHIYANAR AYANAN, ADVOCATE RESPONDENT BY : SHRI S. DAS GUPTA, IRS, C IT DATE OF HEARING : 24 TH AUGUST, 2012 DATE OF PRONOUNCEMENT : 30 TH AUGUST, 2012 O R D E R PER DR. O.K. NARAYANAN, VICE-PRESIDENT THIS MISCELLANEOUS PETITION IS FILED BY THE ASSESSE E. IT IS A RECTIFICATION PETITION. IT IS FILED IN THE CONTEXT OF THE ORDER OF THE TRIBUNAL DATED 8.5.2012 PASSED IN ITA NOS. 390 & 39 1/MDS/2012. MA 97/12 :- 2 -: THESE APPEALS RELATE TO THE ASSESSMENT YEARS 2004-0 5 AND 2006- 07 AND ARE FILED BY THE REVENUE. 2. ONE OF THE GROUNDS CONSIDERED BY THE TRIBUNAL IN THOSE APPEALS IS THE ONE RELATING TO THE DISALLOWANCE OF PRE CLOSURE EXPENSES OF LOAN, SUCH AS PREMIUM AND PENALTY. THE CONTENTION OF THE ASSESSEE WAS ACCEPTED BY THE COMMISSIONER OF INCOME- TAX(APPEALS) AND SUCH EXPENSES WERE ALLOWED TO BE T REATED AS REVENUE EXPENDITURE. THE REVENUE ARGUED THAT THE COMMISSIONER OF INCOME-TAX(APPEALS) HAS ERRED IN AL LOWING THESE ITEMS AS ALLOWABLE EXPENSES. 3. IN THE COURSE OF ARGUMENT, THE LEARNED COUNSEL A PPEARING FOR THE RESPONDENT-ASSESSEE RELIED ON THE DECISION OF THE CO- ORDINATE BENCH IN THE CASE OF OVERSEAS SANMAR FINAN CE LTD. (87 TTJ 556) IN SUPPORT OF HIS ARGUMENT. BUT THE REVEN UE RELIED ON THE SPECIAL BENCH DECISION OF THE INCOME-TAX APPELL ATE TRIBUNAL, BANGALORE IN THE CASE OF AZTEC SOFTWARE & TECHNOLOG Y SERVICES LTD. VS. ACIT (107 ITD 141). 4. THE TRIBUNAL TOOK A VIEW IN THE LIGHT OF THE ABO VE SAID SPECIAL BENCH DECISION THAT THE ORDER OF THE TRIBUN AL IN THE CASE MA 97/12 :- 3 -: OF OVERSEAS SANMAR FINANCE LTD. (87 TTJ 556), NO MO RE HOLDS THE FIELD AND ACCORDINGLY, SET ASIDE THE ORDER OF T HE COMMISSIONER OF INCOME-TAX(APPEALS) ON THIS POINT AND RESTORED T HE DISALLOWANCE MADE BY THE ASSESSING AUTHORITY. THIS GROUND OF THE REVENUE WAS THUS ALLOWED. 5. IN THIS PETITION, THE ASSESSEE CONTENDS THAT THE SPECIAL BENCH DECISION OF THE TRIBUNAL HAS CONSIDERED A CAS E OF EXPENDITURE INCURRED IN CONNECTION WITH SET UP OF A BUILDING APPARATUS AS SUCH, AND HENCE IT WAS RIGHTLY HELD A S CAPITAL EXPENDITURE. IN ASSESSEES CASE THE PAYMENTS WERE MADE TOWARDS LOAN WHICH WAS TAKEN FOR THE PURPOSE OF BUS INESS WHICH IS BEING CARRIED ON. THEREFORE, THE TRIBUNAL HAS E RRED IN RELYING ON THE SPECIAL BENCH DECISION IN THE CASE OF AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD. VS. ACIT (107 ITD 141) AND NOT FOLLOWING THE CO-ORDINATE BENCH DECISION IN THE CAS E OF OVERSEAS SANMAR FINANCE LTD. (87 TTJ 556). 6. WE HEARD BOTH SIDES IN DETAIL. EVEN IF THE FACT S CONSIDERED BY THE CO-ORDINATE BENCH IN THE CASE OF OVERSEAS SA NMAR FINANCE LTD. (87 ITR TTJ 556) AND BY THE SPECIAL BE NCH IN THE CASE OF AZTEC SOFTWARE & TECHNOLOGY SERVICES LTD. V S. ACIT (107 MA 97/12 :- 4 -: ITD 141) MIGHT BE DIFFERENT, THE TRIBUNAL HAS TAKE N A DECISION AFTER EXAMINING THE NATURE OF THE EXPENDITURE AGITA TED BY THE REVENUE IN ITS APPEAL. IN THE CASE OF OVERSEAS SAN MAR FINANCE LTD. (87 TTJ 556), THE CO-ORDINATE BENCH DECIDED TH E ISSUE IN FAVOUR OF THE ASSESSEE ON THE BASIS OF A CLEAR FIND ING THAT THOSE ITEMS OF EXPENDITURE RELATE TO REVENUE SIDE. BUT A S FAR AS THE PRESENT CASE IS CONCERNED, THERE IS NO SUCH FINDING THAT THE LOAN AVAILED BY THE ASSESSEE WAS EXCLUSIVELY USED FOR RU NNING AN EXISTING BUSINESS. IF IT WAS THE CASE OF INTEREST AS SUCH, THE SAME COULD BE ALLOWED AS A DEDUCTION, EVEN IF INTEREST W AS INCURRED ON A CAPITAL EXPENDITURE, BUT RELATING TO A RUNNING BU SINESS. BUT THE EXPENSES CONSIDERED IN THIS CASE ARE NOT INTEREST, THEY ARE PRE CLOSURE EXPENSES PAID AS A RESULT OF CONTRACTUAL OB LIGATION WITH THE FINANCE BANK. WHETHER THOSE EXPENSES ALSO CAN BE STRAIGHTWAY CONSIDERED AS REVENUE EXPENDITURE, IS S TILL A DEBATABLE ONE. THE ANSWER DEPENDS UPON THE FACTS O F THE CASE. 7. IN THESE CIRCUMSTANCES, IT IS NOT POSSIBLE TO HO LD THAT THE RELIANCE ON THE DECISION OF THE SPECIAL BENCH BY TH E TRIBUNAL, IS A MISTAKE APPARENT FROM THE RECORD. AT THE MOST, WE FIND IT COULD BE AN ERROR OF JUDGMENT. MA 97/12 :- 5 -: 8. THEREFORE, WE FIND THAT THERE IS NO MISTAKE APPA RENT ON RECORD IN THE ORDER OF THE TRIBUNAL AND AS SUCH, TH IS RECTIFICATION IS LIABLE TO BE DISMISSED. ORDER PRONOUNCED ON THURSDAY , THE 30 TH OF AUGUST , 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 30 TH AUGUST , 2012 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR