RSA Number | 23019923 RSA 2007 |
---|---|
Assessee PAN | AAPCS9229F |
Bench | Mumbai |
Appeal Number | CO 230/MUM/2007 |
Duration Of Justice | 2 year(s) 6 month(s) 23 day(s) |
Appellant | M/S. SHANGHVI FILAMENTS LTD, MUMBAI |
Respondent | THE ITO RG 8(3)-1,, MUMBAI |
Appeal Type | Cross Objection |
Pronouncement Date | 20-04-2010 |
Appeal Filed By | Assessee |
Order Result | Dismissed |
Bench Allotted | J |
Tribunal Order Date | 20-04-2010 |
Date Of Final Hearing | 08-04-2010 |
Next Hearing Date | 08-04-2010 |
Assessment Year | 2003-2004 |
Appeal Filed On | 27-09-2007 |
Judgment Text |
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH J : MUMBAI BEFORE SHRI D.K. AGARWAL (JM) AND SHRI PRAMOD KUMAR ( AM ) ITA NO. 4407/MUM/2007 ASSESSMENT YEAR : 2003 - 04 THE INCOME TAX OFFICER RANGE - 8(3) - 1 201 AAYAKAR BHAVAN M.K. ROA D MUMBAI - 400 020 . ..( APPELLANT ) VS. M/S. SANGHVI FILAMENTS LTD. 4 TH FLOOR GOPAL BHAVAN BAPUBHAI VASHI ROAD VILE PARLE (W) MUMBAI - 400 0 56 . ..( RESPONDENT ) P.A. NO. ( AAPCS 9229 F ) C.O. NO.230/MUM/2007 ARISING OUT OF ITA NO.4407/MUM/2007 ASSESSMENT YEAR : 2003 - 04 M/S. SANGHVI FILAMENTS LTD. MUMBAI - 400 056. ..( CROSS OBJECTOR ) VS. THE INCOME TAX OFFICER RANGE - 8(3) - 1 MUMBAI - 400 020. ..( APPELLANT IN APPEAL ) APPELLANT BY : SHRI L.K. AGARWAL RESPONDENT BY : NONE O R D E R PER D.K. AGARWAL (JM). THIS APPEAL PREFERRED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 2.3.2007 PASSED THE LD. CIT(A) FOR THE ASSESSMENT YEAR ITA NO. 4407/M/07 & CO230/07 A.Y: 03 - 04 2 2003 - 04. THE ASSESSEE HAS ALSO FILED CROSS O BJECTION SUPPORTING THE ORDER PASSED BY THE LD. CIT(A). THE APPEAL AND CROSS OBJECTION ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. AT THE TIME OF HEARING NONE WAS PRESENT ON BEHALF OF THE ASSESSEE NOR FILED ANY APPLICATION FOR A DJOURNMENT OF THE CASE . IT WAS THEREFORE DECIDED TO DISPOSE OF THE APPEAL EXPARTE QUA THE ASSESSEE ON MERITS AFTER HEARING THE LD. DR. 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF FLOCKED FABRICS FILED RETURN DECLARING LOSS OF RS.1 12 05 869/ - . DURING THE COURSE OF A SSESSMENT IT WAS INTERALIA OBSERVED BY THE AO THAT THE ASSESSEE COMPANY IS A SICK INDUSTRY WITHIN THE MEANING OF S ICK I NDUSTRIAL C OMPANY ACT 1985. THERE HAS BEE N NO MANUFACTURING ACTIVITIES. YET ASSESSEE HAS CLAIMED MANUFACTURING EXPENSES RS.2 70 381/ - PERSONAL EXPENSES RS.2 61 500/ - ADMINISTRATIVE EXPENSES RS.1 61 849/ - AND DEPRECIATION RS.68 65 737/ - . THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY ALL EXPENSES INCLUDING DEPRECIATION SHOULD NOT BE DISALLOWED AS THE ASSESSEE HAD NOT DONE ANY BUSINESS ACTIVITY DURING THE RELEVANT PREVIOUS YEAR. IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT THE PLANT AND MACHINERY HAD BEEN SET UP IN PREVIOUS YEAR RELEVANT TO ASS ESSMENT YEAR 2000 - 01 AND REQUIREMENT OF USE D IS ITA NO. 4407/M/07 & CO230/07 A.Y: 03 - 04 3 MET UPON THE COMMENCEMENT OF THE BUSINESS AND CONTINUES TO BE USED TILL THE UNIT IS NOT CLOSED AND THE BUSINESS IS NOT DISCONTINUED. IN RESPECT OF OTHER EXPENSES IT WAS SUBMITTED THAT THE SALE WAS NOT A SIN E QUA NON FOR CLAIM OF EXPENDITURE. HOWEVER THE AO WAS OF THE VIEW THAT IN ORDER TO CLAIM DEPRECIATION THE ASSESSEE HAS BOOKED SOME BOGUS IRRELEVANT AND / OR PERSONAL EXPENSES IN THE BUSINESS. THE ASSESSEE HAS BOOKED SOME WAGE EXPENSES IN THE CLOSED UNIT THAT MEANS THESE EXPENSES WERE BOGUS AND NOT PERTAINING TO THE UNIT BUT ENTERED TO JUSTIFY ITS CLAIM FOR EXPENSES AND ACCORDINGLY HE DISALLOWED DEPRECIATION RS.19 88 411/ - PAYMENT TO EMPLOYEES RS.2 61 500/ - MANUFACTURING EXPENSES RS.2 77 381/ - A DMINISTRATIVE EXPENSES RS.1 61 849/ - PRELIMINARY EXPENSES RS.12 376/ - AND INTEREST EXPENSES RS.94 47 302/ - AGGREGATING TO RS.1 21 41 819/ - AND ACCORDINGLY COMPLETED THE ASSESSMENT AT AN INCOME OF RS. NIL VIDE ORDER DATED 5.1.2006 PASSED U/S.143(3) OF THE I.T. ACT 1961 (THE ACT). ON APPEAL BEFORE THE LD. CIT(A) IT WAS INTERALIA SUBMITTED BY THE ASSESSEE THAT (PARA 2.2 OF CIT(A) S ORDER) : T HE FABRICS REQUIRED RE - HEATING TREATMENT FOR FIXATION PURPOSES AS ALSO BRUSHING WAS NEEDED TO REMOVE EXCESS FLOCK WH ICH HAS BEEN DEPOSITED DURING THE MANUFACTURING PROCESS. THE BRUSHING HAD TO BE DONE BY MACHINES WHERE FLOCK HAD TO BE REMOVED EQUALLY FROM ALL OVER THE FABRIC AND MANUALLY WHERE IT HAD TO BE REMOVED FROM PARTICULAR PLACE S AND PATCHES. WE SUBMIT THAT MAJ ORITY OF THE FABRICS WAS THEN REFINISHED OUT OF 61440 MTRS. OF STOCK. WE SUBMIT THAT POWER CONSUMPTION IN THESE MONTHS CLEARLY EVIDENCES THE USER OF MACHINERY. ITA NO. 4407/M/07 & CO230/07 A.Y: 03 - 04 4 WE SUBMIT THAT THE USE OF MACHINERY HAS A DIRECT NEXUS WITH THE POWER CONSUMPTION. WE THERE FORE SUBMIT THAT THESE POWER BILLS PROVE THAT THE PLANT & MACHINERY WAS USED DURING THE PREVIOUS YEAR ENDED 31.3.2003 RELEVANT TO ASSESSMENT YEAR 2003 - 04. WE THEREFORE SUBMIT THAT THE PLANT AND MACHINERY WAS USED DURING THE RELEVANT PREVIOUS YEAR AND DE PRECIATION IS CORRECTLY CLAIMED. WE PRAY YOUR HONOUR TO HOLD IT ACCORDINGLY. AS REGARDS ALL THE EXPENSES INCURRED DURING THE RELEVANT PREVIOUS YEAR WE SUBMIT THAT ALL THESE EXPENSES ARE INCURRED FOR THE PURPOSES OF BUSINESS. WE SUBMIT NONE OF THE EXP ENSES ARE FOR PERSONAL PURPOSES NOR ARE THEY IN THE NATURE OF CAPITAL EXPENDITURE. WE THEREFORE SUBMIT THAT ALL EXPENSES BEING INCURRED FOR THE PURPOSES OF BUSINESS AND OUT OF COMMERCIAL EXPEDIENCY NEEDS TO BE ALLOWED. WE PRAY YOUR HONOUR TO HOLD IT SO. WE SUBMIT THAT THE MACHINES WERE USED POWER WAS CONSUMED AND WAGES WERE PAID ETC. IN THESE MONTHS. WE SUBMIT THAT THE ACTIVITY WAS DULY CARRIED OUT IN THESE MONTHS. WE SUBMIT THAT THE CLOSURE OF THE ACTIVITY WAS SUBSEQUENT TO THAT. . .. THE LD. CIT(A) WHILE OBSERVING THAT THE BARE MINIMUM EXPENDITURE INCURRED BY THE APPELLANT FOR REPROCESSING THE FINISHED GOODS AND ALSO TO KEEP THE FACTORY IN READY CONDITION TO RESUME MANUFACTURING CANNOT BE DISALLOWED AND CANNOT BE HELD AS NON BUSINESS EXPEND ITURE DELETED ALL THE DISALLOWANCES EXCEPT INTEREST RS.94 47 302/ - AND DEPRECIATION RS.60 07 726/ - AND ACCORDINGLY PARTLY ALLOWED THE APPEAL. 4. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) THE REVENUE IS IN APPEAL BEFORE US TAKING FOLLOWING EFFECTIV E GROUND OF APPEAL: ITA NO. 4407/M/07 & CO230/07 A.Y: 03 - 04 5 (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN NOT UPHOLDING THE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF PAYMENT OF EMPLOYEE/DIRECTOR OF RS.2 61 500/ - MANUFACTURING EXPE NSES OF RS.2 77 381/ - ADMINISTRATIVE EXPENSES OF RS.1 61 849/ - PRELIMINARY EXPENSES OF RS.12 376/ - AND CURRENT YEARS DEPRECIATION OF RS.52 56 068/ - ON THE GROUND THAT THERE WAS NO MANUFACTURING ACTIVITY AND NO SALE DURING THE YEAR. 5. AT THE TIME OF H EARING THE LD. DR SUBMITS THAT FOR THE REASONS AS MENTIONED IN THE ASSESSMENT ORDER THE LD. CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF PAYMENT OF EMPLOYEE/DIRECTOR OF RS.2 61 500/ - MANUFACTURING EXPENSES OF RS.2 77 381/ - ADMINISTRATIVE EXP ENSES OF RS.1 61 849/ - PRELIMINARY EXPENSES OF RS.12 376/ - AND CURRENT YEARS DEPRECIATION OF RS.52 56 068/ - DESPITE THE FACT THAT THERE WAS NO MANUFACTURING ACTIVITY AND NO SALE DURING THE YEAR. 6. HAVING CAREFULLY HEARD THE SUBMISSIONS OF THE LD. DR A ND PERUSING THE MATERIAL AVAILABLE ON RECORD WE FIND THAT THE ASSESSEE S CLAIM THAT DURING THE YEAR UNDER CONSIDERATION IT HAS CARRIED ON THE PROCESS OF RE - HEATING TREATMENT FOR FIXATION PURPOSES AND ALSO BRUSHING TO REMOVE EXCESS FLOCK DEPOSITED DURING THE MANUFACTURING PROCESS WAS NOT CONTROVERTED BY THE REVENUE EVEN AT THIS STAGE. THIS BEING SO AND IN THE ABSENCE OF ANY CONTRARY MATERIAL PLACED ON RECORD ITA NO. 4407/M/07 & CO230/07 A.Y: 03 - 04 6 BY THE REVENUE AGAINST THE FINDING RECORDED BY THE LD. CIT(A) THAT THE BARE MINIMUM EXPENDITURE I NCURRED BY THE APPELLANT FOR REPROCESSING THE FINISHED GOODS AND ALSO TO KEEP THE FACTORY IN READY CONDITION TO RESUME MANUFACTURING CANNOT BE DISALLOWED AND CANNOT BE HELD AS NON BUSINESS EXPENDITURE WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE LD. C IT(A) IN DELETING THE ABOVE DISALLOWANCE DOES NOT CALL FOR ANY INTERFERENCE AND ACCORDINGLY THE GROUNDS TAKEN BY THE REVENUE ARE REJECTED. C.O. 230/MUM/2007 (A. Y. 2003 - 04) (BY ASSESSEE) : 7. THE GROUNDS TAKEN BY THE ASSESSEE READ AS UNDER : 1. O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ON APPRECIATION OF FACTS AND LAW ALLOWED THE EXPENSES AND CURRENT YEAR DEPRECIATION. THE LD. CIT(A) HAS RIGHTLY CONSIDERED THE FACTS AND GRANTED THE RELIEF ACCORDINGLY. 2. ON THE F ACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ON JUDICIAN GROUNDS AND OBJECTIVE CONSIDERATION DELETED THE DISALLOWANCE S. T HE APPELLANTE ORDER WARRANTS NO INTERFERENCE OR SET ASIDE. 8. AFTER HEARING THE LD. DR AND PERUSING THE MATE RIAL AVAILABLE ON RECORD WE FIND THAT THE ASSESSEE IN HIS CROSS OBJECTION HAS MERELY SUPPORTED THE ORDER OF THE LD. CIT(A) THEREFORE KEEPING IN VIEW OF OUR FINDING RECORDED IN REVENUE S APPEAL IN PARA - 6 OF THIS ORDER THE CROSS ITA NO. 4407/M/07 & CO230/07 A.Y: 03 - 04 7 OBJECTION S FILED BY THE ASSESSEE DO NOT REQUIRE ANY FRESH ADJUDICATION AND ACCORDINGLY THE SAME ARE REJECTED. 9. IN THE RESULT REVENUE S APPEAL AND ASSESSEE'S CROSS OBJECTION STAND DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.4.201. SD/ - SD/ - ( PRAMOD KUMAR ) ( D.K. AGARWAL ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DATED: 20.4. 20 10 . JV. COPY TO: THE APPELLANT THE RESPON DENT THE CIT CONCERNED MUMBAI THE CIT(A) CONCERNED MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR ITAT MUMBAI.
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