M/s Amco Batteries Ltd.,, Bangalore v. ACIT, Bangalore

ITA 142/BANG/2010 | 2005-2006
Pronouncement Date: 21-03-2011 | Result: Dismissed

Appeal Details

RSA Number 14221114 RSA 2010
Bench Bangalore
Appeal Number ITA 142/BANG/2010
Duration Of Justice 1 year(s) 1 month(s) 17 day(s)
Appellant M/s Amco Batteries Ltd.,, Bangalore
Respondent ACIT, Bangalore
Appeal Type Income Tax Appeal
Pronouncement Date 21-03-2011
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 21-03-2011
Date Of Final Hearing 17-03-2011
Next Hearing Date 17-03-2011
Assessment Year 2005-2006
Appeal Filed On 04-02-2010
Judgment Text
PAGE 1 OF 5 ITA NO.142 & 352/BANG/2010 1 IN THE INOME TAX APPELLATE TRIBUNAL BANGALORE BENCH A BEFORE DR. O K NARAYANAN VICE PRESIDENT AND SMT. P MADHAVI DEVI J.M. ITA NO.142/BANG/2010 (ASST. YEAR 2005-06) M/S AMCO BATTERIES LTD. 3 RD FLOOR TOWER BLOCK UNITY BUILDING J C ROAD N R SQUARE BANGALORE-2. -APPELLANT VS THE ASST. COMMISSIONER OF INCOME-TAX CIRCLE-11(1) BANGALORE. - RESPONDENT ITA NO.352/BANG/2010 (ASST. YEAR 2005-06) (BY REVENUE) ASSESSEE BY : SMT. SHEETAL BORKER ADVOCATE REVENUE BY : SMT. JACINTA ZIMIK VASHAI ADDL. CIT O R D E R PER P MADHAVI DEVI : THESE ARE THE APPEALS FILED BY THE ASSESSEE AND T HE REVENUE FOR THE ASST. YEAR 2005-06 AGAINST THE ORDER OF THE CIT(A)-I BANGALORE DATED 01.12.2009. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE C OMPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURING BATTERI ES. IT FILED ITS RETURN OF INCOME FOR THE ASST. YEAR 2005-06 DECLARIN G A LOSS OF PAGE 2 OF 5 ITA NO.142 & 352/BANG/2010 2 RS.6 41 595/-. DURING THE ASSESSMENT PROCEEDINGS U /S 143(3) OF THE I T ACT THE AO OBSERVED THAT THE ASSESSEE COMP ANY HAD OWNED AN IMMOVABLE PROPERTY AT HEBBAL BANGALORE WH EREIN IT WAS CARRYING ON ITS BUSINESS/MANUFACTURING ACTIVITIES. IT WAS FOUND THAT THIS LAND WAS SOLD TO M/S GODREJ PROPERTIES AN D INVESTMENTS PVT. LTD. AND THE INCOME WAS OFFERED UNDER THE HEAD LONG TERM CAPITAL GAIN. HOWEVER THE ASSESSEE COMPANY HAD IN CURRED CERTAIN EXPENDITURES SUCH AS SEARCH AND VERIFICATION OF LA ND DOCUMENTS SUBMISSION OF REPORT TO POLLUTION CONTROL OBTAININ G OF LEGAL OPINIONS DOCUMENTATION CHARGES RECLASSIFICATION OF LAND USA GE CHARGES PREPARATION OF DRAWINGS SURVEYING OF THE LAND LEVE LING OF THE LAND AND DEVELOPMENT OF LAND UNDER VARIOUS HEADS TOTALIN G TO RS.50 47 650/- AND CLAIMED THE SAME AS REVENUE EXPE NDITURE. THE AO ASKED THE ASSESSEE TO EXPLAIN AS TO WHY THE SAME SHOULD NOT BE TREATED AS CAPITAL EXPENDITURE. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED BEFORE THE AO THAT THE LAND WAS CONVERTED INTO STOCK-IN-TR ADE PRIOR TO SALE OF THE LAND AND THEREFORE THIS EXPENDITURE SHOULD B E ALLOWED AS REVENUE EXPENDITURE. HOWEVER THE AO HELD IT TO BE CAPITAL EXPENDITURE AND DISALLOWED THE SAME. FURTHER HE A LSO OBSERVED THAT THE ASSESSEE HAS MADE A PROVISION OF RS.27 20 647/- FOR WARRANTY ON 31.3.2005. HE HELD THAT THIS IS A PROVI SION MADE AGAINST THE FUTURE LIABILITY AND THEREFORE IT IS LIABLE TO BE BROUGHT TO TAX. PAGE 3 OF 5 ITA NO.142 & 352/BANG/2010 3 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A) AND THE CIT(A) CONFIRMED THE ORDER OF TH E AO AS REGARDS THE HOLDING OF EXPENDITURE AS CAPITAL EXPEN DITURE WHILE HE DELETED THE ADDITION MADE ON ACCOUNT OF PROVISION F OR WARRANTY. 5. AGAINST THE RELIEF GIVEN BY THE CIT(A) THE REVE NUE IS IN APPEAL BEFORE US AND AGAINST THE CONFIRMATION OF TH E ADDITION THE ASSESSEE IS IN APPEAL BEFORE US. 6. BOTH THE PARTIES REITERATED THE SUBMISSIONS MAD E BEFORE THE AUTHORITIES BELOW AND HAVING GONE THROUG H THE MATERIAL ON RECORD WE FIND THAT WITH REGARD TO THE ISSUE OF LAND DEVELOPMENT EXPENSES THE ASSESSEE HAS ALL ALONG TREATED THE LA ND AS ITS CAPITAL ASSET AND ACCORDING TO THE ASSESSEE IT IS ONLY ON 1 /4/2004 THAT THE SAID CAPITAL ASSET HAS BEEN CONVERTED INTO STOCK-IN -TRADE. HOWEVER WE ALSO FOUND THAT THE ASSESSEE HAS ITSELF OFFERED THE INCOME FROM THE SALE OF THE LAND AS INCOME FROM LONG TERM CAPIT AL GAIN. THE ASSESSEE CANNOT TAKE TWO DIFFERENT AND CONTRADICTOR Y STANDS IN TWO DIFFERENT TRANSACTIONS WITH REGARD TO THE NATURE OF SAME PROPERTY. THE FACT THAT THE ASSESSEE IS OFFERING THE LONG TER M CAPITAL GAIN ITSELF SHOWS THAT IT IS TREATING THE ASSET AS A CAP ITAL ASSET. HOWEVER AS SEEN FROM THE ORDERS OF THE AUTHORITIES BELOW AND NOT REFUTED BY THE ASSESSEE BEFORE US THE ASSESSEE IS I N THE BUSINESS OF MANUFACTURING OF BATTERIES AND THERE IS NO PROVI SION IN THE MEMORANDUM OF ASSOCIATION ABOUT ALSO CARRYING ON OF THE BUSINESS OF DEVELOPMENT AND SALE OF PROPERTY. THEREFORE TH E ASSESSEE PAGE 4 OF 5 ITA NO.142 & 352/BANG/2010 4 CANNOT CHANGE THE NATURE OF ITS LAND FOR A PARTICUL AR PERIOD AND THEN TREAT IT AS CAPITAL ASSET FOR THE PURPOSE OF SALE O F LAND. IN VIEW OF THE SAME WE CONFIRM THE ADDITION MADE BY THE CIT(A) . 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS DI SMISSED. 8. AS REGARDS THE PROVISION FOR WARRANTY IS CONCERN ED WE FIND THAT AS ON 1/4/2004 THE AVAILABLE PROVISION WA S RS.19 24 354/- AND THE WARRANTY EXPENSES INCURRED IN 2004-05 WERE RS.1 15 50 719/- AND THE WARRANTY FOR THE YEAR IS RS. 96 26 365/- AND THE DIFFERENCE BETWEEN THESE TWO IS RS.19 24 35 4/-. THE ASSESSEE HAS MADE A PROVISION OF RS.27 20 647/- DUR ING THE RELEVANT ASST. YEAR FOR THE CLAIMS ACCEPTED BUT NOT SETTLED A S ON 31.3.2005. AS HELD BY THE CIT(A) THE ANALYSIS OF THIS FACT DEMO NSTRATES THAT A SCIENTIFIC BASIS IS ADOPTED TO MEASURE THE FUTURE L IABILITY ON ACCOUNT OF WARRANTY AND THE EXPENSES ACTUALLY INCURRED IS COR RESPONDING TO THE PROVISION MADE. THEREFORE WE CONFIRM THE ORDE R OF THE CIT(A) THAT THE ESTIMATION IS FAIR AND REASONABLE AND NO I NTERFERENCE IN THE SAID ORDER IS CALLED FOR. 9. IN THE RESULT THE APPEAL FILED BY THE REVENUE I S ALSO DISMISSED. THE ORDER PRONOUNCED ON MONDAY THE 21 ST DAY OF MARCH 2011 AT BANGALORE. SD/- SD/- (DR. O K NARAYANAN) (P MADHAVI DE VI) VICE PRESIDENT JUDICIAL MEMBER PAGE 5 OF 5 ITA NO.142 & 352/BANG/2010 5 COPY TO : 1) THE ASSESSEE (2) THE REVENUE (3) THE CIT(A) CONCERNED. (4) THE CIT CONCERNED. (5) THE DR (6) GUARD FILE. MSP/21.3. BY ORDER ASST. REGISTRAR ITAT BANGALORE.