M/s Bombardier Transportation India Ltd., New Delhi v. DCIT, New Delhi

CO 205/DEL/2011 | 2005-2006
Pronouncement Date: 25-11-2011 | Result: Dismissed

Appeal Details

RSA Number 20520123 RSA 2011
Assessee PAN AAACA5584C
Bench Delhi
Appeal Number CO 205/DEL/2011
Duration Of Justice 4 month(s) 27 day(s)
Appellant M/s Bombardier Transportation India Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Cross Objection
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 25-11-2011
Date Of Final Hearing 17-11-2011
Next Hearing Date 17-11-2011
Assessment Year 2005-2006
Appeal Filed On 28-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : A : NEW DELHI BEFORE SHRI I.P. BANSAL JUDICIAL MEMBER AND SHRI A.N. PAHUJA ACCOUNTANT MEMBER ITA NO.2282/DEL/2011 ASSESSMENT YEAR : 2005-06 DCIT CIRCLE 3 (1) NEW DELHI. VS. M/S BOMBARDIER TRANSPORTATION INDIA LTD. 3 RD FLOOR B-WING SOMDUTT CHAMBERS-1 NEW DELHI 110 066. PAN : AAACA5584C C.O. NO.205/DEL/2011 ASSESSMENT YEAR : 2005-06 M/S BOMBARDIER TRANSPORTATION INDIA LTD. 3 RD FLOOR B-WING SOMDUTT CHAMBERS-1 NEW DELHI 110 066. PAN : AAACA5584C VS. DCIT CIRCLE 3 (1) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SHRI Y.S. KAKKAR SR.DR ORDER PER I.P. BANSAL JM: THE APPEAL IS FILED BY THE REVENUE AND THE CROSS OBJE CTIONS BY THE ASSESSEE. THEY ARE DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT (A) DATED 14 TH FEBRUARY 2011 FOR ASSESSMENT YEAR 2005-06. THE GROUNDS OF APPEAL READ AS UNDER:- ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 2 1. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.200119/- MADE ON ACCOUNT OF DISALLOWAN CE OF CLUB EXPENSES IGNORING THAT SUCH EXPENDITURE WAS INCURRED F OR THE PERSONAL PURPOSES OF THE DIRECTORS OF THE ASSESSEE COM PANY AND HENCE NOT LAID OUT WHOLLY AND EXCLUSIVELY FOR THE BUS INESS PURPOSES. 2. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.29940/- MADE ON ACCOUNT OF DISALLOWANC E OF EXTRA DEPRECIATION ON COMPUTER PERIPHERALS/ACCESSORIES IGNO RING THAT AS PER THE IT RULES 60% DEPRECIATION IS ALLOWABLE ONL Y ON COMPUTER AND COMPUTER SOFTWARE AND NOT ON COMPUTER PERIPHERALS AND ACCESSORIES. 3. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.555675/- MADE ON ACCOUNT OF DISALLOWAN CE OF 50% OF ENTERTAINMENT EXPENSES CLAIMED BY THE ASSESSEE IGNOR ING THAT ASSESSEE HAS NOT FILED ANY VOUCHERS IN SUPPORT OF HIS CLAIM FOR THESE EXPENSES. 4. THE LD. CIT (A) HAS ERRED ON FACTS AND IN LAW IN DELETING ADDITION OF RS.4238311/- MADE ON ACCOUNT OF CEASED LI ABILITY BY INVOKING THE PROVISIONS OF SECTION 41 (1) OF THE ACT IG NORING THAT THE ASSESSEE FAILED TO SUBMIT ANY DOCUMENTARY EVIDENCE TO JUSTIFY ITS CLAIM. RELIANCE IS PLACED ON THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. SUNDRAM IYANGAR 222 ITR 344. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO A MEND MODIFY ALTER ADD OR FOREGO ANY GROUND (S) OF APPEA L AT ANY TIME BEFORE OR DURING THE HEARING OF THIS APPEAL. 1.1 GROUNDS OF CROSS OBJECTIONS READ AS UNDER:- 1. THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEA LS) [CIT (A)] HAS ERRED ON FACTS AND IN LAW IN DISALLO WING THE EXPENDITURE AMOUNTING TO RS.467 810 UNDER SECTION 40(A) (IA) OF THE INCOME-TAX ACT 1961 (ACT) ON ACCOUNT OF DELAY IN DEPOSIT OF TAX DEDUCTED AT SOURCE. 2. THAT THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW IN TREATING THE EXPENDITURE AMOUNTING TO RS.2 403 468 INCURR ED BY THE RESPONDENT ON REPAIRS AND MAINTENANCE OF BUILDING AS CAPITAL IN NATURE. 3. THAT THE LEARNED CIT (A) HAS ERRED ON FACTS AND IN LAW NOT ADJUDICATING ON THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SECTION 40(A)(I) OF THE ACT ON THE PAYMENTS MADE BY THE RESPONDENT TO NON-RESIDENTS IN RESPECT OF REPAIR CHARGE S REPLACEMENT OF PARTS AND SUBSCRIPTION/MEMBERSHIP FEES FOR NEWSLETTERS. ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 3 2. NOTICE OF HEARING WAS SENT TO THE ASSESSEE HOWEVER NONE ATTENDED ON BEHALF OF THE ASSESSEE. THEREFORE WE PROC EEDED TO DECIDE THE PRESENT APPEAL EX PARTE QUA THE ASSESSEE ON M ERITS AFTER HEARING THE LEARNED DR. THE ASSESSEE IN THE PRESENT CASE IS ENGAGED IN THE MANUFACTURE OF LOCOMOTIVE COMPONENTS SIGNALIN G EQUIPMENTS TRANSFORMERS AND OTHER COMPONENTS AND REPAIRS AND REHAB ILITATION OF TAP CHANGERS. IT FILED ITS RETURN OF INCOME ON 28 TH OCTOBER 2005 DECLARING TAXABLE INCOME OF ` 54 36 85 515/-. THE ASSESSMENT WAS COMPLETED VIDE ORDER DATED 31 ST DECEMBER 2008 PASSED U/S 143 (3) OF THE ACT WHEREBY THE INCOME OF THE ASSESSEE HAS BEEN ASSESSED AT A SUM OF ` 55 34 07 640/- WHEREIN VARIOUS ADDITIONS WERE MADE AGGREGATING TO A SUM OF ` 97 22 128/-. AGGRIEVED WI TH THE ADDITIONS THE ASSESSEE HAD FILED AN APPEAL BEFORE THE CIT (A) AND ON THE ADDITIONS WHICH HAVE BEEN DELETED BY THE CIT (A) TH E REVENUE HAS FILED AN APPEAL AND ON THE ADDITIONS WHICH HAVE BEEN SUSTAIN ED BY THE CIT (A) THE ASSESSEE HAS FILED CROSS OBJECTIONS. DEPARTMENTAL APPEAL 3. GROUND NO.1. THIS ISSUE HAS BEEN DISCUSSED BY THE ASSESSIN G OFFICER IN PARA 6 OF THE ASSESSMENT ORDER. HE FOUND TH AT THE ASSESSEE HAS INCURRED A SUM OF ` 2 00 119/- TOWARDS CLUB EXPEND ITURE WHICH IS IN THE NATURE OF CLUB MEMBERSHIP AND OTHER EXPENSES FOR A VAILING CLUB SERVICES. IT WAS EXPLAINED BY THE ASSESSEE THAT THESE EXPE NDITURES ARE ONLY FOR THE BUSINESS PURPOSES AND THE SAME SHOULD NOT BE DISALLOWED. HOWEVER THE ASSESSING OFFICER DID NOT ACCEPT SUCH SUBMISSI ONS OF THE ASSESSEE ON THE GROUND THAT THESE EXPENSES ARE NOT WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS THEREF ORE THE ENTIRE AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. LEARNED CIT (A) HAS DISCUSSED THIS GROUND IN PARA 7 OF THE IMPUGNED ORDER. THE DETAILS OF EXPENSES AS GIVEN IN THE ORDER OF THE CIT (A) ARE AS UN DER:- ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 4 AMOUNT (INR) PARTICULARS ENTRANCE FEE SUBSCRIPTION COST OF CLUB SERVICES TOTAL TAJ CHAMBERS - 37 000 1 24 319 1 61 319 THE CITY CLUB - 36 300 - 36 300 EXIM CLUB - 2 500 - 2 500 TOTAL - 75 800 1 24 319 2 00 119 4. IT WAS EXPLAINED THAT OBJECTIVE OF MEMBERSHIP OF C LUB SUCH AS TAJ CHAMBERS IS TO PROVIDE THE ASSESSEE A PLATFORM TO MEET PE OPLE IN A BUSINESS-FRIENDLY ATMOSPHERE AND TO DEVELOP AND FOSTER BUSINESS RELATIONSHIPS. RELIANCE WAS PLACED ON SEVERAL DECISIONS AND AFTER CONSIDERING ALL THESE SUBMISSIONS OF THE ASSESSEE LEARNED CIT (A) RELYING UPON THE DECISIONS OF HONBLE DELHI HIGH COUR T IN THE CASE OF CIT VS. SAMTEL COLOUR LTD. (2009) 19 DTR (DEL) 295 H AS HELD THAT THESE EXPENDITURES ARE REVENUE IN NATURE HENCE ALLOWABLE AND IT HAS FURTHER BEEN MENTIONED BY LEARNED CIT (A) THAT THE SAID DECI SION WAS LATER ON FOLLOWED BY HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. NESTLE INDIA LTD. AND OTIS ELEVATORS LTD. THE DEPARTMENT IS AGGRIE VED HENCE HAS FILED THE APPEAL. 5. THE LEARNED DR RELYING UPON THE ORDER OF ASSESSING OFFICER PLEADED THAT THESE EXPENDITURES WERE NOT WHOLLY AND E XCLUSIVELY INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS TH EREFORE THE ASSESSING OFFICER WAS RIGHT IN MAKING THE DISALLOWANCE AN D CIT (A) HAS WRONGLY DELETED THE SAME. 6. WE HAVE HEARD THE LEARNED DR AND WE HAVE CAREFUL LY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER OF THE CIT (A). IN OUR OPINION LEARNED CIT (A) HAS RIGHTLY HELD THAT T HESE EXPENDITURES ARE REVENUE IN NATURE AND THEY HAVE BEEN INCURRED W HOLLY AND ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 5 EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. WE FIND NO MAT ERIAL TO INTERFERE WITH THESE FINDINGS OF CIT (A) HENCE GROU ND NO.1 IS DISMISSED. 7. GROUND NO.2: THIS GROUND HAS BEEN DISCUSSED BY THE A SSESSING OFFICER IN PARA 7 WHEREIN HE HAS DISALLOWED DEPRECIAT ION @ 60% ON COMPUTER ACCESSORIES AND PERIPHERALS LIKE PRINTERS SCANN ERS ETC. AGAINST THE CLAIM OF THE ASSESSEE DEPRECIATION @ 60% APP LICABLE TO COMPUTERS AND COMPUTER SOFTWARE AND IN THIS MANNER D ISALLOWANCE OF ` 29 940/- WAS MADE. LEARNED CIT (A) VIDE PARA 8 O F HIS ORDER FOLLOWING THE DECISION OF HONBLE DELHI HIGH COURT I N THE CASE OF RAJDHANI POWERS HAS DIRECTED THE ASSESSING OFFICER TO ALL OW DEPRECIATION @ 60%. 8. AFTER HEARING THE LEARNED DR AND CONSIDERING THE LATEST DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. BS ES YAMUNA POWERS LTD. DATED 31 ST AUGUST 2010 REPORTED AS 2010-TIOL-636-H.C.-DEL-IT I N WHICH THEIR LORDSHIPS HAVE HELD AS UNDER WE FIND NO M ERIT IN THIS GROUND OF APPEAL:- 4. WE ARE IN AGREEMENT WITH THE VIEW OF THE TRIBUNAL TH AT COMPUTER ACCESSORIES AND PERIPHERALS SUCH AS PRINTER S SCANNERS AND SERVER ETC. FORM AN INTEGRAL PART OF THE COMPUTER SYSTEM. IN FACT THE COMPUTER ACCESSORIES AND PERIPHER ALS CANNOT BE USED WITHOUT THE COMPUTER. CONSEQUENTLY AS THE Y ARE THE PART OF THE COMPUTER SYSTEM THEY ARE ENTITLED TO DEPRECIATION AT THE HIGHER RATE OF 60%. 8.1 ACCORDINGLY THIS GROUND IS ALSO DISMISSED. 9. GROUND NO.3. THIS ISSUE HAS BEEN DISCUSSED BY THE ASSESSIN G OFFICER IN PARA 8 OF THE ASSESSMENT ORDER. IT WAS FOUND BY THE ASSESSING OFFICER THAT TOTAL ENTERTAINMENT EXPENDITURE WERE CLAIMED BY THE ASSESSEE AT A SUM OF ` 11 11 350/-. IT WAS SUBMITT ED THAT ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 6 ENTERTAINMENT EXPENSES REPRESENT EXPENSES ON MEALS WITH C LIENTS CONSULTANTS AND OTHER BUSINESS ASSOCIATES ON A DAY-TO-DAY BASIS. IN THE ABSENCE OF THE DETAILS FURNISHED BY THE ASSESSEE IN RE SPECT OF EACH OF THE TRANSACTION WITH NECESSARY DOCUMENTARY EVIDENCE THE ASSESSING OFFICER DISALLOWED 50% OF THESE EXPENDITURES ON THE GROUND THAT SOME PART OF THE EXPENDITURE MAY BE FOR PERSONAL EXPENSES OF DIRECTORS AND EMPLOYEES. IN APPEAL LEARNED CIT (A) HAS DISCUSSED THIS ISSUE IN PARA 9 OF HIS ORDER. LEARNED CIT (A) HAS REFE RRED TO THE OBSERVATIONS OF ASSESSING OFFICER AND HAS FOUND THAT THE D ISALLOWANCE HAS BEEN MADE FOR THE MAIN REASON THAT THE ASSESSEE WAS NO T ABLE TO ESTABLISH EACH OF THE TRANSACTION WITH DOCUMENTARY EVI DENCE AS TO WHO ARE THE CLIENTS ENTERTAINED. LEARNED CIT (A) HAS OBSE RVED THAT THIS APPROACH OF THE ASSESSING OFFICER IS NOT JUSTIFIED. FROM THE COMPARATIVE CHART OF ENTERTAINMENT EXPENSES FILED BY THE ASSESSEE IN RESPECT OF LAST THREE YEARS HE HAS OBSERVED THAT THE AM OUNT OF EXPENDITURE IS NOT EXCESSIVE. 10. THE LEARNED DR RELIED UPON THE ORDER OF ASSESSING O FFICER. WE HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER AS WELL AS THE ORDER PASSED BY THE CIT (A). IN OUR OPINION LEARNED CIT ( A) HAS RIGHTLY DELETED THE ADDITION LOOKING INTO THE ENTIRETY OF F ACTS I.E. THE MAGNITUDE OF BUSINESS CARRIED ON BY THE ASSESSEE INCOME SHOWN BY IT ETC. WE ARE OF THE OPINION THAT LEARNED CIT (A) HA S RIGHTLY HELD THAT THERE WAS NO PROPER REASON FOR MAKING THE DISALLOWANCE . LEARNED CIT (A) HAS ALSO TAKEN INTO CONSIDERATION THE SIMILAR EXPEN DITURE INCURRED BY THE ASSESSEE IN RESPECT OF LAST THREE YEARS. THEREFORE THERE IS NO MATERIAL ON RECORD TO JUSTIFY THE INTERFERENCE IN TH E ORDER OF THE CIT (A). WE DECLINE TO INTERFERE AND THIS GROUND OF THE REVEN UE IS DISMISSED. 11. GROUND NO.4: THIS ISSUE HAS BEEN DISCUSSED BY THE ASSESSI NG OFFICER IN PARA 10 OF HIS ORDER. FROM THE DETAILS T HE ASSESSING OFFICER ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 7 NOTICED THAT THE BALANCE OF ` 42 38 311/- IN THE NA ME OF M/S KIRLOSKAR PNEUMATIC COMPANY LTD. AS ON 31 ST MARCH 2004 WAS SAME AS ON 31 ST MARCH 2005 AND IT WAS STAGNANT THE ASSESSEE WAS REQUIRED TO FILE THE CONFIRMATION DETAILS OF TRANSACTIONS AND EXPLANATION A S TO WHY THE SAID AMOUNT SHOULD NOT BE TREATED AS CESSATION OR REMISSION OF THE LIABILITY AND SHOULD NOT BE ADDED UNDER THE PROVISIONS OF SECTIO N 41 (1) OF THE ACT. IN RESPECT OF SUCH QUERY OF THE ASSESSING OFFICER T HE ASSESSEE FILED LETTER DATED 30 TH DECEMBER 2008 WHEREBY THE DETAILS OF THE TRANSACTION ENTERED INTO WITH THE SAID PARTIES WERE FU RNISHED. IT WAS SUBMITTED THAT THERE WAS SOME DISPUTE BETWEEN THE ASSESSEE COMPANY AND THE SAID PARTY. THEREFORE THE SAME AMOU NT WAS OUTSTANDING AS ON 31 ST MARCH 2005. IT WAS ALSO SUBMITTED THAT CONFIRMATION FROM THE SAID PARTY COULD NOT BE SUBMITT ED DUE TO ONGOING DISPUTE. ON THESE SUBMISSIONS FINDING THAT THE ASSESSEE COULD NOT FURNISH THE CONFIRMATION THE ASSESSING OFFICER OBSERVED: .. IT APPEARS THAT M/S KIRLOSKAR PNEUMATIC LTD. HAS WRITTEN OFF THE SAID AMOUNT AS BAD DEBT. AND IN THIS MANNER THE ASSESSING OFFICER MADE THE ADDITION OF ` 42 38 311/- U/S 41(1) OF THE ACT. 12. LD. CIT (A) HAS DISCUSSED THIS ISSUE IN PARA 11 OF HIS ORDER. ON THE FACTS OF THE CASE IT HAS BEEN FOUND BY LEARNED CI T (A) THAT THE AMOUNT HAS BEEN ADDED BY THE ASSESSING OFFICER MAINLY BE CAUSE THAT THE ASSESSEE COULD NOT FILE CONFIRMATION AND THE AMOUNT REMAINED STAGNANT AS ON 31 ST MARCH 2005 AND THE ASSESSEE COLD NOT SHOW THAT THE PAYMENTS HAVE BEEN MADE IN SUBSEQUENT YEARS. LEARN ED CIT (A) AFTER CONSIDERING THE PROVISIONS OF SECTION 41 (1) OF THE ACT HAS OBSERVED THAT THE MAIN CONDITIONS FOR APPLICABILITY O F SECTION 41 (1) ARE: (I) IN THE ASSESSMENT OF AN ASSESSEE AN ALLOWANCE OR DEDUCTION MADE IN RESPECT OF ANY LOSS EXPENDITURE OR TRADING LIABILITY INCURRED BY HIM; ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 8 (II) (A) ANY AMOUNT IS OBTAINED BY THE ASSESSEE IN RE SPECT OF SUCH TRADING LIABILITY INCURRED BY HIM; (II) (B) ANY AMOUNT IS OBTAINED BY THE ASSESSEE IN RE SPECT OF SUCH LOSS OR EXPENDITURE. (II)(C) ANY BENEFIT IS OBTAINED BY THE ASSESSEE IN R ESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF; AND (III) SUCH AMOUNT OR BENEFIT IS OBTAINED IN SUBSEQUENT YEAR. 13. EXPLANATION 1 FURTHER PROVIDE THAT FOR INCLUSION OF CASE REMISSION OR CESSATION OF ANY LIABILITY BY A UNILATERAL ACT BY WAY OF WRITING OFF SUCH LIABILITY IN THE ACCOUNTS OF THE ASSESSEE. HE FURTH ER OBSERVED THAT THE FACT THAT LIMITATION OF THREE YEARS HAS EXPIRED W ILL NOT BE RELEVANT FOR MAKING ADDITION U/S 41 (1) AS IT HAS BEEN HELD BY DELHI ITAT IN THE CASE OF DCIT VS. HINDUSTAN REFRIGERATION AND AIR-CONDI TIONING COMPANY 91 TTJ 296 AND HE HAS ALSO REFERRED TO VARIOUS OTHER D ECISIONS. WITH REGARD TO THE ISSUE OF DISCHARGING THE ONUS LEARNED CI T (A) HAS OBSERVED THAT SECTION 41 (1) PROVIDE FOR CHARGING OF CERTAIN BENEFITS WHICH ARE OBTAINED BY THE ASSESSEE IN THAT YEAR AND IN A CASE WHERE THE ASSESSEE DISPUTES OBTAINING OF ANY BENEFIT THE ASSESSING OFFICER WILL BE UNDER STATUTORY OBLIGATION TO ESTABLISH THE SAM E BY COVERING EVIDENCE IN FAVOUR OF SUCH ACCRUAL OF BENEFIT. IN C ASE WHERE THE ASSESSEE CONTINUE TO REFLECT OR REFER THE LIABILITY STIL L PAYABLE TO THE CREDITORS AND DECIDE NOT TO WRITE THEM OFF UNILATERA LLY THEN THE BURDEN WILL BE OF ASSESSING OFFICER TO DISCHARGE SUCH ONUS AND SUC H VIEW IS SUPPORTED BY THE DECISIONS OF THE TRIBUNAL IN THE CASE OF SHRI VARDHMAN OVERSEAS LTD. VS. ACIT 24 SOT 393 (DEL) AND U TTAM AIR PRODUCTS (P) LTD. VS. DCIT 99 TTJ 718. HE ALSO FIND T HAT THE ASSESSEE ALSO HAS NOT UNILATERALLY WRITTEN IT OFF THEREFORE EXPLANATION IS NOT APPLICABLE AND IN VIEW OF THIS DISCUSSION LEARNED CIT (A) HAS HELD THAT SECTION 41 (1) WAS NOT APPLICABLE AND HAS DELETED THE ADDITION. ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 9 14. AFTER NARRATING THE FACTS AND RELYING UPON THE F OLLOWING DECISIONS IT WAS PLEADED BY THE LEARNED DR THAT THE DISALLOWANC E WAS RIGHTLY MADE BY THE ASSESSING OFFICER AND IT HAS WRONGLY BEEN DE LETED BY THE CIT (A). I) JAY ENGINEERING WORKS LTD. VS. CIT 311 ITR 299 (D EL) TO CONTEND THAT IN THE SAID CASE THE ASSESSEE HAD WRITTEN OF F AN AGGREGATE SUM OF ` 1 16 240/- IN RESPECT OF CHEQUES ISSU ED IN REGARD TO WAGES LYING UNCLAIMED AND SUNDRY CREDITOR B ALANCE. IT WAS CLAIMED THAT AN ASSESSING OFFICER UNILATERALLY WRITI NG OFF OF THE LIABILITY CAN BE TREATED AS AN INCOME ONLY W.E.F . 1.4.97 AND ON THESE FACTS HONBLE HIGH COURT HAS HELD THAT THE A MENDMENT IN THE SECTION WAS ONLY EXPLANATORY AND APPLICABLE T O THE EARLIER YEARS ALSO. THE FACTS OF THE SAID CASE ARE ENTIRELY DIFFERENT FROM THE FACTS OF THE PRESENT CASE. IN THE PRESENT CASE THE ASSESSEE HAS NOT WRITTEN BACK SUCH ACCOUNT THEREFORE THIS DECISIO N IS NOT APPLICABLE. (II) SOLID CONTAINERS LTD. VS. DCIT 308 ITR 417 (BOM) . IN THIS CASE ALSO THE LOAN TAKEN BY THE ASSESSEE FROM P WAS WRIT TEN BACK IN THE RELEVANT ASSESSMENT YEAR AS A RESULT OF CONSEN T TERMS ARRIVED AT BETWEEN THE ASSESSEE AND P. IT WAS CL AIMED BY THE ASSESSEE THAT SAID LOAN WAS A CAPITAL RECEIPT AND DOES NOT COME WITHIN THE PURVIEW OF SECTION 41 (1) AND IT WA S HELD THAT THE SAME WAS LIABLE TO BE TAXED U/S 28. THE FACTS OF T HIS CASE IS ALSO DIFFERENT AS THE SAID AMOUNT WAS WRITTEN BACK. (III) CIT VS. T.V. SUNDARAM IYENGAR & SONS LTD. 222 ITR 344 (SC). IN THAT CASE ALSO THE AMOUNT WAS WRITTEN BACK B Y THE ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 10 ASSESSEE THEREFORE THIS CASE IS ALSO NOT APPLICABLE TO TH E FACTS OF THE PRESENT CASE. 15. AFTER CONSIDERING THE SUBMISSIONS OF THE LEARNED DR AND THE CASE LAW RELIED UPON BY HER WE FIND NO INFIRMITY IN THE FINDINGS RECORDED BY LEARNED CIT (A) WHEREBY ACCORDING TO THE FATS OF THE PRESENT CASE IT HAS BEEN HELD THAT THE IMPUGNED AMOUNT COULD NOT BE ADD ED TO THE INCOME OF THE ASSESSEE UNDER THE PROVISIONS OF SECTION 41 (1) OF THE ACT. WE DECLINE TO INTERFERE AND THIS GROUND OF THE REVENUE IS DISMISSED. CROSS OBJECTIONS 16. GROUND NO.1: THIS ISSUE HAS BEEN DISCUSSED BY THE ASSESSI NG OFFICER IN PARA 4 OF THE ASSESSMENT ORDER. IT WAS FOUND BY THE ASSESSING OFFICER THAT TDS OF ` 9 824/- ON THE EXPENDIT URE OF `4 67 810/- WAS PAID ONLY ON 6 TH APRIL 2005 AGAINST THE DUE DATE OF REMITTANCES TO GOVERNMENT ON 07.01.2005 07.02.2005 AND 07.03.2005. APPLYING THE PROVISIONS OF SECTION 40 (A ) (IA) HE HAS ADDED BACK THE SAID AMOUNT TO THE INCOME OF THE ASSESSEE . LEARNED CIT (A) HAS DISCUSSED THIS ISSUE IN PARA 5 OF THE IMPUGNED ORDER AND HE HAS UPHELD THE DISALLOWANCE. 17. THE LEARNED DR RELIED UPON THE SPECIAL BENCH DE CISION OF ITAT IN THE CASE OF BHARTI SHIPYARD LTD. VS. DCIT 132 ITD 53 WHEREIN IT HAS BEEN HELD THAT PROVISO TO SECTION 40 A (IA) IS NOT RE TROSPECTIVE IN OPERATION. 18. AFTER HEARING THE LEARNED DR AND AFTER CONSIDERI NG THE FACTS OF THE PRESENT CASE WE FIND THAT THE DECISION OF LEARNED CIT (A) IS IN ACCORDANCE WITH THE AFOREMENTIONED DECISION OF SPECI AL BENCH THEREFORE WE DISMISS THIS GROUND OF CROSS OBJECTION. ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 11 19. GROUND NO.2 OF THE CROSS OBJECTION: THIS ISSUE HAS B EEN DISCUSSED BY THE ASSESSING OFFICER IN PARA 9 OF THE ASSESSMENT ORDER. HE FOUND THAT THE ASSESSEE CLAIMED A SUM OF ` 28 68 000/ - ON ACCOUNT OF REPAIR AND MAINTENANCE OF BUILDING AS AGAINST THE SIMILAR SUM CLAIMED OF ` 2 07 000/- FOR IMMEDIATE PRECEDING YEA R. HE REQUIRED THE ASSESSEE TO EXPLAIN THE SAME. FROM THE DETAILS HE FOUND THAT AN AMOUNT OF ` 24 03 468/- HAS BEEN INCURRED BY THE ASSESSE E AS CAPITAL EXPENDITURE THE DETAILS OF WHICH HAVE BEEN GIVEN IN A CHART WHICH IS REPRODUCED HERE FOR THE SAKE OF CONVENIENCE:- SL. NO. DATE OF INVOICE NAME AMOUNT (RS.) NARRATION 1. 17 MAY 04 SHAH & TALATE 45 500 REPLACEMENT OF EXISTING WASH BASIN AND FIXING THE SAME. 2. 05 SEP 04 DEGVILA CONSTRUCTION CO. 245 774 EXTENSION OF PANEL ROOM; DISMANTLING FLOOR ETC. 3. 11 DEC 04 DEGVILA CONSTRUCTION CO. 99 463 EXTENSION OF PANEL ROOM + COMPOUND WORK 4. 11 FEB 05 DEGVILA CONSTRUCTION CO. 87 528 HARD PAD NEAR OFFICE PASSAGE. 5. 11 FEB05 DEGVILA CONSTRUCTION CO 11 46 787 FLOORING WORK RENOVATION OF CANTEEN TOILET 6. 03 FEB 05 DEGVILA CONSTRUCTION CO 5 76 982 UPGRADATION OF CANTEEN DISMANTLING OF EXISTING FLOORING LAYING OF CERAMIC FLOORING. 7. 03 FEB 05 DEGVILA CONSTRUCTION CO 2 01 434 RENOVATION OF TOILETS DISMANTLING FLOORING FIXING PLUMBING WORK. TOTAL 24 03 468 20. HOLDING THAT THESE EXPENDITURES ARE CAPITAL IN NA TURE THE ASSESSING OFFICER HAS ADDED THE SAID AMOUNT TO THE ASSESSABLE INCOME OF THE ASSESSEE AFTER GRANTING THE DEPRECIATION OF 10% ON 45 500/- AND ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 12 5% ON THE REST OF THE AMOUNT OF ` 23 57 968/- AND I N THIS MANNER AN AMOUNT OF ` 22 81 020/- WAS ADDED TO THE INCOME OF T HE ASSESSEE. BEFORE CIT (A) IT WAS CLAIMED THAT THE EXPENDITURE WHICH HAVE BEEN TREATED AS CAPITAL DID NOT BRING INTO EXISTENCE ANY N EW CAPITAL ASSET. THE EXPENDITURES WERE INCURRED TO UPGRADE AND KEEP I N LINE WITH THE LATEST AND MODERN AVAILABLE FACILITIES THEREFORE CA NNOT BE TREATED AS CAPITAL EXPENDITURE. REFERENCE WAS MADE TO VARIOUS J UDICIAL PRONOUNCEMENTS TO SAY THAT RENOVATION DOES NOT COME WI THIN THE PURVIEW OF CAPITAL EXPENDITURE. 21. ALTERNATIVELY IT WAS CLAIMED THAT THE AMOUNT OF ` 7 78 416/- HAS BEEN ADDED TWICE BY THE ASSESSING OFFICER AND DISALLOWAN CE SHOULD HAVE BEEN ONLY TO THE EXTENT OF ` 16 25 052/- INSTEA D OF ` 24 03 468/- MADE BY THE ASSESSING OFFICER. LEARNED CIT (A) AFTER C ONSIDERING THESE SUBMISSIONS HAS RECORDED A FINDING THAT THE AMOUNT EXPE NDED BY THE ASSESSEE REPRESENT CAPITAL EXPENDITURE. HOWEVER ON THE SECOND CONTENTION OF THE ASSESSEE HE HAS REMITTED THE MATTER BA CK TO THE FILE OF ASSESSING OFFICER AND IT HAS BEEN OBSERVED THAT AFTER VERIFYING THE CONTENTION OF THE ASSESSEE IF THE SAME IS FOUND CORRECT THEN THE SAID AMOUNT SHOULD BE REDUCED FROM THE DISALLOWANCE. THE ASSESSEE IS AGGRIEVED WITH SUCH FINDINGS RECORDED BY THE LEARNED CIT (A) AND HAS CONTENDED THAT THE AMOUNT INCURRED AS EXPENDITURE ON RENOVATION CANNOT BE TREATED AS CAPITAL AND IT SHOULD BE TREATED AS REVENUE. 22. AFTER NARRATING THE FACTS IT HAS BEEN SUBMITTED B Y THE LEARNED DR THAT THE DISALLOWANCE UPHELD BY LEARNED CIT (A) I S ALSO IN ACCORDANCE WITH THE DECISION OF HONBLE DELHI HIGH C OURT IN THE CASE OF BIG JOES INDIA LTD. VS. CIT WHEREIN FINDING THAT HUGE EXPENDITURES WERE INCURRED BY THE ASSESSEE ON STRUCTURAL CHANGES OF ITS BUSIN ESS PREMISES BY ERECTING NEW WOODEN COUNTERS AND ACQUIRING LIFTS SHAFTS ETC. HAD GIVEN ENDURING BENEFIT TO THE ASSESSEE FOR A L ONG PERIOD AND THEREFORE THE EXPENDITURE WAS CAPITAL IN NATURE AND IT COULD NOT BE ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 13 CLAIMED AS CURRENT REPAIRS. THUS IT WAS SUBMITTED BY T HE LEARNED DR THAT ORDER OF THE CIT (A) SHOULD BE UPHELD. 23. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED DR AND GONE THROUGH THE ORDER OF ASSESSING OFFICER AND CIT (A). LEARNED CIT (A) HAS RECORDED A FINDING THAT HE HAS EXAMINED T HE BILLS ISSUED BY DAYVILA CONSTRUCTION COMPANY AND HE FOUND THAT MAJOR EXPENDITURE HAS BEEN INCURRED ON ACCOUNT OF CEMENT STEEL ETC. F OR EXTENSION OF PANEL ROOM. FROM THIS BILL ISSUED ON 5 TH SEPTEMBER 2004 HE FOUND THAT ONE WHOLE STRUCTURE NAMELY PANEL ROOM WAS BRO UGHT INTO EXISTENCE. SIMILARLY THE BILL FOR THE WORKERS TOILE T RENOVATION THE OFFICE TOILET RENOVATION CANTEEN COMPOUND WALL E TC. REVEAL THAT COMPLETE OVERHAULING WAS DONE AND THE ENTIRE AREA WA S DISMANTLED AND FITTED WITH TOTALLY NEW BRICK WORK TILES FIXTU RES AND FITTINGS ETC. AND THUS HE HAS HELD THAT THIS DOES NOT COME WITHIN T HE CATEGORY OF REPAIRS AND THEREFORE THE BENEFIT ARISING FROM SUCH RENOVATION ARE ENDURING IN NATURE. NO MATERIAL HAS BEEN BROUGHT O N RECORD TO CONTROVERT THESE FINDINGS OF FACT THEREFORE WE FIND NO INFIRMITY IN UPHOLDING THE DISALLOWANCE. SO AS IT RELATES TO DOUBL E ADDITION THE SAME HAS BEEN RESTORED BACK TO THE FILE OF ASSESSING OFFIC ER. THEREFORE WE DECLINE TO INTERFERE IN THE FINDINGS R ECORDED BY THE CIT (A) AND THIS GROUND OF CROSS OBJECTIONS IS DISMISSED. 24. GROUND NO.3 OF THE CROSS OBJECTIONS: THIS ISSUE HAS B EEN DISCUSSED BY THE ASSESSING OFFICER IN PARA 5 OF THE ASSESSMENT ORDER. FROM THE DETAILS FURNISHED BY THE ASSESSEE WITH REGARD TO PAYMENTS MADE TO NON-RESIDENTS HE FOUND THAT THE ASSESSEE DID NOT DEDUCT TAX OUT OF THE FOLLOWING PAYMENTS MADE TO NON-RESIDENTS:- I) REPAIR CHARGES PAID TO TAIT ELECTRONICS 427103 II) IEEE PUBLICATION EXPENSES AND NEWSLETTER 11957 III) REPAIR CHARGES 223193 TOTAL 662253 ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 14 25. APPLYING THE PROVISIONS OF SECTION 40A(I) THE SAI D AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. BEFORE CIT (A) IT WAS CLAIMED THAT TDS ON THE PAYMENTS MADE TO NON-RESIDENT WILL B E APPLICABLE ONLY WHEN THE AMOUNT PAID IS IN THE NATURE OF INCOME CHARGEABLE TO TAX UNDER THE PROVISIONS OF INCOME-TAX ACT AND THUS IT WAS CLAIMED THAT THE AMOUNT BEING NOT CHARGEABLE TO TAX UNDER I NCOME-TAX ACT THE TDS WAS NOT REQUIRED TO BE DEDUCTED THEREFORE THE AMOUNT CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE. ON THESE SUBMISSIONS O F THE ASSESSEE LEARNED CIT (A) HAS DIRECTED THE ASSESSING OFFICER TO EXAMINE WHETHER THESE PAYMENTS ARE CHARGEABLE TO TAX IN INDIA . IF THE SAID PAYMENTS ARE NOT CHARGEABLE TO TAX IN INDIA THE AMO UNT CANNOT BE DISALLOWED U/S 40A(I). 26. AFTER HEARING THE LEARNED DR AND CONSIDERING THE FACTS OF THE CASE WE FIND NO INFIRMITY IN THE DIRECTIONS ISSUED BY LEARNED CIT (A). WE DECLINE TO INTERFERE AND THIS GROUND OF CROSS OBJEC TIONS IS DISMISSED. 27. IN THE RESULT THE APPEAL FILED BY THE REVENUE A S WELL AS THE CROSS OBJECTIONS FILED BY THE ASSESSEE BOTH ARE DISMISSED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 25.11.20 11. SD/- SD/- [A.N. PAHUJA] [I.P. BANSAL] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 25.11.2011. DK ITA NO.2282/DEL/2011 C.O. NO.205/DEL/2011 15 COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ITAT BY ORDER DEPUTY REGISTRAR ITAT DELHI BENCHES