The ACIT, Circle-5,, Ahmedabad v. Nachmo Knitex Ltd.,, Ahmedabad

ITA 1908/AHD/2004 | 2000-2001
Pronouncement Date: 31-01-2011 | Result: Dismissed

Appeal Details

RSA Number 190820514 RSA 2004
Bench Ahmedabad
Appeal Number ITA 1908/AHD/2004
Duration Of Justice 6 year(s) 7 month(s) 27 day(s)
Appellant The ACIT, Circle-5,, Ahmedabad
Respondent Nachmo Knitex Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 31-01-2011
Date Of Final Hearing 30-12-2010
Next Hearing Date 30-12-2010
Assessment Year 2000-2001
Appeal Filed On 03-06-2004
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH (BEFORE S/SHRI G.D. AGARWAL VICE-PRESIDENT AND BHAVNESH SAINI JUDICIAL MEMBER) ITA NO.1908/AHD/2004 [ASSTT. YEAR : 2000-2001] DICTATED ON: 28-01-2011 ACIT CIR.5 AHMEDABAD. VS. NACHMO KNITEX LTD. 11 ASHIMA HOUSE NR. M.J.LIBRARY ELLISBRIDGE AHMEDABAD. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ROBIN RAWAL ASSESSEE BY : NONE O R D E R PER G.D. AGARWAL VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST THE ORDER OF THE CIT(A)-XI AHMEDABAD DATED 12.03.2004 ARISING OUT OF THE ORDER OF THE ASSESSING OFFICER PASSED UNDER SEC TION 143(3) OF THE INCOME TAX ACT 1961. 2. THE LEARNED DR WAS ASKED TO SERVE NOTICE UPON TH E OFFICIAL LIQUIDATOR BECAUSE THE ASSESSEE-COMPANY WAS UNDER LIQUIDATION AND THE OL WAS APPOINTED. ON THE DATE OF HEARING I.E. 30 TH DECEMBER 2010 THE REVENUE FURNISHED EVIDENCE OF SERVICE OF NOTICE ON THE OL. THE SAME IS PLACED ON RECORD. HOWEVER DESPITE SERVICE OF NOTICE NONE A PPEARED ON BEHALF OF THE ASSESSEE-COMPANY. WE THEREFORE PROCEEDED TO DECIDE THE APPEAL EX PARTE AFTER HEARING THE LEARNED DR. 3. THE GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.4 710/- BEING ESI PAYMENT MADE LATE. ITA NO.1908/AHD/2004 -2- 4. WE HAVE HEARD LEARNED DR AND PERUSED THE MATERIA L PLACED BEFORE US. THE CIT(A) HAS RECORDED THE FINDING THAT ENTIRE PAY MENT OF ESI WAS MADE DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSME NT YEAR UNDER APPEAL ITSELF. THE ABOVE FACT FINDING HAS NOT BEEN CONTROVERTED BY THE LEARNED DR. WE THEREFORE FIND NO JUSTIFICATION TO INTERFERE WITH T HE ORDER OF THE CIT(A) ON THIS POINT. 5. GROUND NO.2 OF THE REVENUES APPEAL READS AS UND ER: THE LD.CIT(A) HAS ERRED IN LAW AND ON THE FACTS IN DELETING THE ADDITION OF RS.74 70 874/- BEING THE INTEREST AND FINANCIAL CHARGES CONSIDERED BY THE AO AS CAPITAL EXPENDITURE. THE GROUND NO.3 IS ONLY ARGUMENTS IN SUPPORT OF THE GROUND NO.2. 6. WE HAVE HEARD LEARNED DR AND PERUSED THE MATERIA L PLACED BEFORE US. THE AO HAS DISALLOWED THE INTEREST ON THE GROUND TH AT THE MONEY WAS BORROWED FOR THE EXPANSION OF THE ASSESSEES BUSINE SS. HOWEVER THE LEARNED CIT(A) ALLOWED THE ASSESSEES CLAIM FOLLOWING THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF DCIT VS. C ORE HEALTH CARE LTD. 251 ITR 61. THE RELEVANT FINDINGS OF THE CIT(A) READS AS UNDER: 7.2 I HAVE CAREFULLY CONSIDERED SUBMISSIONS OF TH E AR OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE DECISIONS RELIED UPON BY THE AR AND THE OBSERVATIONS OF THE AO IN THE ASSESSMENT ORDER. ON SIMILAR ISSUE THE GUJARAT HIGH COURT HAS IN THE CASE OF CORE HEALTHCARE LTD. REFERRED TO ABOVE HELD THAT THE DISALLOWANCE ON THIS ACCOUNT CANNOT BE MADE. T HE HIGH COURT HAS IN THAT CASE DEALT WITH THE ARGUMENTS OF THE DEPARTMENT WHI CH ARE SIMILAR TO THAT RAISED BY THE AO IN THE INSTANT CASE. FOLLOWING TH E DECISION OF THE HONBLE GUJARAT HIGH COURT REFERRED TO ABOVE AND ALSO THE D ECISION OF THE ITAT AHMEDABAD IN THE CASE OF GUJARAT ALKALIS & CHEMICAL S LTD. THE DISALLOWANCE MADE BY THE AO IS NOT JUSTIFIED. THE ADDITION MADE BY THE AO OF RS.74 70 873/- IS THEREFORE DELETED. THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CORE HEALTHCARE LTD. (SUPRA) HELD THAT THE TRIBUNAL WAS JUSTIFIED IN AL LOWING AS DEDUCTION UNDER SECTION 36(1)(III) INTEREST ON BORROWING MADE FOR ACQUISITION OF THE CAPITAL ASSETS THOUGH PERTAINING TO THE PERIOD PRIOR TO TH E COMMENCEMENT OF ITA NO.1908/AHD/2004 -3- PRODUCTION. THIS DECISION OF THE HONBLE JURISDIC TIONAL HIGH COURT WAS AFFIRMED BY THE HONBLE APEX COURT AS REPORTED IN 2 98 ITR 194 (SC). THE RATIO OF THE ABOVE DECISIONS WOULD BE SQUARELY APPL ICABLE TO THE ISSUE UNDER APPEAL THEREFORE THE CIT(A) IS FULLY JUSTIFIED IN ALLOWING THE RELIEF TO THE ASSESSEE FOLLOWING THE ABOVE DECISION OF THE HONBL E JURISDICTIONAL HIGH COURT. 7. GROUND NO.4 OF THE REVENUES APPEAL READS AS UND ER: 4. THE LD.CIT(A) HAS ALSO ERRED IN LAW AND ON FAC TS IN DELETING THE DIFFERENCE OF DEPRECIATION OF RS.16 63 054/- ADDED BY THE AO. GROUND NO.5 IS ONLY ARGUMENTS IN SUPPORT OF THE ABO VE GROUND NO.4 8. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAI MED 100% DEPRECIATION ON ENERGY SAVING DEVICE PURCHASED FROM SANTEX AG OF SW ITZER LAND ON 28.02.1999. THE AO DID NOT ACCEPT THE ASSESSEES C LAIM THAT THE MACHINE WAS ENERGY SAVING DEVICE AND THEREFORE ELIGIBLE FOR 100 % DEPRECIATION. THE CIT(A) DISCUSSED THE FACT AT LENGTH FROM PAGE NOS.1 2 TO 15 OF HIS ORDER AND HE HAS ARRIVED AT THE CONCLUSION THAT THE MACHINERY WA S AN ENERGY SAVING DEVICE ELIGIBLE FOR 100% DEPRECIATION. THE FINAL CONCLUSI ON OF THE CIT(A) IN PARA-9.2 READS AS UNDER: 9.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND OBSERVATION OF THE AO IN THE ASSESSMENT ORDER. THE APPELLANT HAD CLEARLY EXPLAINED AS TO HOW THE MACHINE WAS ENERGY EFFICIENT. LOOKING TO THE DETAILS FURNISHED BY THE APPELLANT I HOLD T HAT THERE IS NO JUSTIFICATION FOR HOLDING THAT THE MACHINERY WAS SI MPLY A DRYER MACHINE AND NOT ENERGY SAVING EQUIPMENT. IT IS A THERMALLY ENERGY EFFICIENT EQUIPMENT. HAVING CONSIDERED THE FACTS OF THE CASE I AM OF THE VIEW THAT THE AO IS NOT JUSTIFIED IN MAKING THE ADDITION ON ACCOUNT OF DEPRECIATION. THE ADDITION MADE BY THE AO OF RS.16 63 054/- IS THEREFORE DELETED. 9. AT THE TIME OF HEARING BEFORE US THE LEARNED DR WAS UNABLE TO CONTROVERT THE ABOVE FACTUAL FINDING RECORDED BY TH E CIT(A) THAT THE MACHINE WAS AN ENERGY SAVING DEVICE ELIGIBLE FOR 100% DEPRE CIATION. IN VIEW OF THE ITA NO.1908/AHD/2004 -4- ABOVE WE FIND NO JUSTIFICATION TO INTERFERE WITH T HE ORDER OF THE CIT(A) ON THIS ISSUE THE SAME IS SUSTAINED. 10. GROUND NO.6 OF THE REVENUES APPEAL READS AS UN DER: THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DEL ETING RS.10 50 000/- ADDED BY THE AO AS CAPITAL EXPENDITURE. GROUND NO.7 IS ONLY ARGUMENTS IN SUPPORT OF THE GRO UND NO.6. THE GROUND NOS.8 AND 9 ARE OF GENERAL NATURE NEEDS NO SPECIFIC ADJUDICATION. 11. THE FACTS RELATING TO THE ABOVE GROUND NO.6 ARE THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE PAID A SUM OF RS.1 0 50 000/- TO IDBI AS AN UPFRONT FEE FOR SANCTION OF THE LOAN. THE AMOUNT W AS CONSIDERED AS A CAPITAL EXPENDITURE BY THE AO. HOWEVER ON APPEAL THE CIT (A) ACCEPTED THE CONTENTION OF THE ASSESSEE WITH THE FOLLOWING FINDI NGS: 12.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE AR O F THE APPELLANT CAREFULLY. I HAVE ALSO GONE THROUGH THE OBSERVATIO NS OF THE AO IN THE ASSESSMENT ORDER. AS STATED IN THE EARLIER PARA RE LATING THE GROUND AGAINST DISALLOWANCE OF INTEREST CHARGED OF RS.74 7 0 874/- FOLLOWING THE RATIO O THE DECISION OF THE GUJARAT HIGH COURT N TH E CASE OF DCIT VS. CORE HEALTHCARE LTD. 251 ITR 61 THERE IS NO REASON FOR DISALLOWANCE OF THIS EXPENDITURE. IT SHOULD BE CONSIDERED AS REVEN UE EXPENDITURE. APART FROM THIS IT IS ALSO NOTICED THAT THE PAYMENT OF UP FRONT FEES IS AGAINST OBTAINING LOANS AND THEREFORE ALSO IT IS THE NATU RE OF REVENUE EXPENDITURE. IN THESE CIRCUMSTANCES I AM OF THE V IEW THAT THERE IS NO JUSTIFICATION FOR THE DISALLOWANCE MADE BY THE AO. THE ADDITION MADE BY THE AO OF RS.10 50 000/- IS THEREFORE DELETED. 12. IT IS UNDISPUTED FACT THAT THE AMOUNT WAS PAID AS FEES TO IDBI FOR SANCTION OF LOAN. THUS BY MAKING THE ABOVE PAYMENT NO ASSET WAS ACQUIRED BY THE ASSESSEE. IT IS ALSO NOT IN DISPUTE THAT THE L OAN WAS TAKEN FOR THE EXISTING ITA NO.1908/AHD/2004 -5- BUSINESS. MERELY BECAUSE LOAN WAS FOR THE EXPANSIO N OF THE ASSESSEES EXISTING BUSINESS IT CANNOT BE SAID THAT THE EXPENDITURE WA S CAPITAL EXPENDITURE. IN VIEW OF THE ABOVE WE UPHOLD THE ORDER OF THE CIT(A ) ON THIS POINT AND REJECT THE GROUND NO.6 AND 7 OF THE REVENUES APPEAL. 13. IN RESULT REVENUE APPEAL IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 31 ST JANUARY 2011 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (G.D. AGARWAL) VICE-PRESIDENT PLACE : AHMEDABAD DATE : 31-01-2011 COPY OF THE ORDER FORWARDED TO: 1) : ASSESSEE 2) : DEPARTMENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR ITAT. BY ORDER DR/AR ITAT AHMEDABAD