THE ACIT, CIRCLE - 1,, Eluru v. RVR Marine Products Ltd,, Bhimavaram

ITA 223/VIZ/2014 | 2010-2011
Pronouncement Date: 30-09-2016 | Result: Dismissed

Appeal Details

RSA Number 22325314 RSA 2014
Assessee PAN AABCR9336E
Bench Visakhapatnam
Appeal Number ITA 223/VIZ/2014
Duration Of Justice 2 year(s) 4 month(s) 18 day(s)
Appellant THE ACIT, CIRCLE - 1,, Eluru
Respondent RVR Marine Products Ltd,, Bhimavaram
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2016
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 30-09-2016
Assessment Year 2010-2011
Appeal Filed On 12-05-2014
Judgment Text
ITA NO.223/VIZAG/2014 M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM 1 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH VISAKHAPATNAM . . $ BEFORE SHRI V. DURGA RAO JUDICIAL MEMBER & SHRI G. MANJUNATHA ACCOUNTANT MEMBER ./I.T.A.NO.223/VIZAG/2014 ( / ASSESSMENT YEAR: 2010-11) ACIT CIRCLE - 1 ELURU VS. M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM [PAN: AABCR9336E ] ( % / APPELLANT) ( &'% / RESPONDENT) C.O. NO.40/VIZAG/2014 (ARISING OUT OF I.T.A.NO.223/VIZAG/2014) ( / ASSESSMENT YEAR: 2010-11) M/S. RVR MARINE PRODUCT S LTD. BHIMAVARAM VS. ACIT CIRCLE - 1 ELURU ( % / APPELLANT) ( &'% / RESPONDENT) / APPELLANT BY : SHRI M.K. SETHI DR / RESPONDENT BY : SHRI G.V.N. HARI AR / DATE OF HEARING : 18.07.2016 / DATE OF PRONOUNCEMENT : 30.09.2016 / O R D E R PER V. DURGA RAO JUDICIAL MEMBER: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A) VISAKHAPATNAM DATED 26.2.2014 FOR THE ASSES SMENT YEAR 2010-11. ITA NO.223/VIZAG/2014 M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM 2 2. FACTS ARE IN BRIEF THAT THE ASSESSEE COMPANY EN GAGED IN THE BUSINESS OF PROCESSING AND EXPORT OF PRAWNS. IT HAS FILED ITS RETURN OF INCOME BY ADMITTING TOTAL INCOME OF RS.51 71 720/-. THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ACCORDINGLY ASS ESSMENT WAS COMPLETED U/S 143(3) OF THE INCOME TAX ACT 1961 (H EREINAFTER CALLED AS THE ACT). IN THE ASSESSMENT ORDER THE A.O. HAS OBSERVED THAT THE ASSESSEE HAS TRANSFERRED/SHIFTED THE LOAN AMOUNT FR OM UNION BANK OF INDIA (UBI) TO IDBI BANK AFTER PAYING INTEREST OF R S.2.25 CRORES TO UBI ON 26.3.2010 AND ON 31.3.2010. ASSESSEE ALSO BOOKE D THE SAME AMOUNT AS EXPENSES IN THE TAX COMPUTATION AND CLAIM ED IT AS A REVENUE EXPENDITURE. HOWEVER THE A.O. HAS ASKED THE ASSES SEE A SPECIFIC QUESTION RELATED TO THIS ON 8.1.2013. THE ASSESSEE HAS SUBMITTED LOAN AGREEMENT COPY AND UTILIZATION OF LOAN CERTIFICATE FROM THE BANK BEFORE THE A.O. THE A.O. AFTER VERIFYING THE SAME HE HAS OBSERVED THAT THE ASSESSEE HAS CLOSED THE LOAN ACCOUNT OF UNION BANK OF INDIA AND HAS TAKEN LOAN FROM IDBI. THE UNION BANK OF INDIA HAS CHARGED AN INTEREST FOR PRE-CLOSURE OF THE ACCOUNT OF ` 2.25 CRORES. THIS INTEREST IS UNDER NORMAL INTEREST OF THE CURRENT PERIOD DUE TO THE A BOVE REASON THE ENTIRE AMOUNT HAS BEEN REDUCED FROM THE ACCUMULATED PROFITS OF THE COMPANY. THE A.O. IN HIS ASSESSMENT ORDER FURTHER OBSERVED THAT THE LOAN AMOUNT WAS TRANSFERRED FROM ONE BANK TO ANOTHE R BANK ITA NO.223/VIZAG/2014 M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM 3 CONSEQUENTLY THE EXPENSES DEBITED BY UBI IS THE IN TEREST PORTION WHICH WAS SUPPOSED TO BE PAID BY THE ASSESSEE IN NUMBER O F YEARS. SINCE THE ASSESSEE HAS TRANSFERRED OR SHIFTED THE LOAN AMOUNT FROM ONE BANK TO ANOTHER BANK THOSE EXPENSES WERE CHARGED BY UBI AN D ASKED THE ASSESSEE TO PAY THE INTEREST. ACCORDING TO THE A.O . THE EXPENSES INCURRED BY THE ASSESSEE ARE OF CAPITAL IN NATURE SPREAD OVER THE NUMBER OF YEARS GIVEN FOR ENHANCING THE PRODUCTION CAPACITY IN TERMS OF DAY-TO-DAY RUNNING AND ASSETS PURCHASING. BY CO NSIDERING THESE FACTS THE A.O. IS OF THE OPINION THAT THE INTEREST CLAIMED MADE BY THE ASSESSEE IS NOT RELATED TO ONE YEAR BUT THE TOTAL LOAN AMOUNT AND RELATED INTEREST AMOUNT IS TO BE PAID BACK IN NUMBE R OF YEARS ACCORDINGLY ADDITION OF RS.2.25 CRORES WAS MADE. ON APPEAL THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. 3. ON BEING AGGRIEVED REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. THE LD. D.R. HAS SUBMITTED THAT THE INTEREST AMOUNT PAI D BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS THE SAME HAS TO BE ALLOWED IN THE IMPUGNED ASSESSMENT YEAR. 4. ON THE OTHER HAND THE LD. A.R. STRONGLY SUPPORT ED THE ORDER PASSED BY THE A.O. ITA NO.223/VIZAG/2014 M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM 4 5. WE HAVE HEARD BOTH THE PARTIES PERUSED THE MATER IALS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. THE ONLY ISSUE FOR CONSIDERATION IS WHETHER THE EXPENDI TURE INCURRED BY THE ASSESSEE HAS TO BE ALLOWED IN THE YEAR UNDER CONSID ERATION OR IN SUBSEQUENT YEARS. THE LD. CIT(A) HAS OBSERVED THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS NOT RELATED TO ANY ACQU ISITION OF CAPITAL ASSET. THEREFORE BY FOLLOWING THE JUDGEMENT OF TH E SUPREME COURT IN THE CASE OF INDIA CEMENTS LIMITED VS. CIT 60 ITR 52 HE HAS HELD THAT THE CLAIM MADE BY THE ASSESSEE IS ALLOWABLE. THE R ELEVANT PORTION OF THE ORDER IS AS UNDER: 4.4 I HAVE CONSIDERED THE SUBMISSIONS MADE. IT COUL D BE SEEN THAT THE ASSESSING OFFICER HAD TAKEN THE VIEW THAT IMPUGNED AMOUNT REPRESENT CAPITAL EXPENDITURE FOR THE REASON THAT THE SAID EX PENDITURE IS NOT ENTIRELY RELATABLE TO THE CURRENT YEAR AND ITS BENEFIT IS OF ENDURING NATURE. APPARENTLY THE SAID EXPENDITURE IS-NOT RELATED TO A NY ACQUISITION OF ANY CAPITAL ASSET. IN THIS REGARD THE OBSERVATION OF T HE HON'BLE COURT IN THE CASE OF INDIA CEMENTS LTD VS. CIT 60 ITR 52 IS REL EVANT WHEREIN THE COURT TOOK THE VIEW THAT LOAN OBTAINED WAS NOT A5 A SSET OR AN ADVANTAGE OF ENDURING NATURE. AS IN THE INSTANT CASE THE SUB JECT EXPENDITURE WAS INCURRED FOR SHIFTING OF LOAN FROM ONE BANK TO ANOT HER TO GET HIGHER WORKING CAPITAL LIMITS THE SUBJECT EXPENDITURE INC URRED IN RELATION THERETO CANNOT BE SAID TO BE TOWARDS OBTAINING ADVANTAGE OF AN ENDURING NATURE. THE EXPENDITURE THOUGH CANNOT BE SAID TO BE INTERES T INCURRED FOR THE CURRENT YEAR IT CANNOT BE DENIED THAT IT IS INCURR ED DURING THE YEAR IN THE NORMAL COURSE OF RUNNING THE BUSINESS FOR BUSINESS PURPOSE. AS IT IS INCURRED DURING THE YEAR DURING THE COURSE OF NORMA L BUSINESS ACTIVITY THE ASSESSEE IS JUSTIFIED IN CLAIMING IT AS DEDUCTION F OR THIS YEAR. THUS AS THE EXPENDITURE IS INCURRED FOR THE PURPOSE OF BUSINESS AND IT IS NOT CAPITAL IN NATURE I AM OF THE VIEW THAT THE IMPUGNED AMOUNT IS ALLOWABLE AS DEDUCTION U/S.37 OF THE I.T. ACT EVEN THOUGH IT WAS NOT SPECIFICALLY CLAIMED IN THE P&L A/C. THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN DOT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO. LTD 356 ITR 460 AND THE DECISION OF HONBLE ITAT IN WINDERMERE PROPERTIES P VT. LTD VS. DOT 2013 TJOL-368-ITAT-MUM ARE RELEVANT WHEREIN IT WAS HELD THAT PRE-CLOSURE EXPENSES ARE ALLOWABLE AS REVENUE EXPENDITURE. HENC E THE AO IS DIRECTED ITA NO.223/VIZAG/2014 M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM 5 TO DELETE THE IMPUGNED ADDITION AND THE SAME MAY BE ALLOWED U/S.37 OF THE I.T. ACT. ACCORDINGLY THIS GROUND OF APPEAL IS ALLOWED. 6. WE FIND THAT THE LD. COMMISSIONER BY TAKING INTO CONSIDERATION THE FACTS AND CIRCUMSTANCES OF THE CASE DECIDED THA T THE ASSESSEE HAS INCURRED THE EXPENDITURE TO RUN THE BUSINESS AN D ACCORDINGLY CONSIDERED THE EXPENSES INCURRED BY THE ASSESSEE AS A REVENUE EXPENDITURE. WE FIND NO INFIRMITY IN THE ORDER PAS SED BY THE LD. CIT(A). THUS THIS GROUND OF APPEAL IS DISMISSED. 7. SO FAR AS CROSS OBJECTION FILED BY THE ASSESSEE IS CONCERNED IT IS ONLY SUPPORTIVE AND THE SAME IS MERE ACADEMIC IN NA TURE AND HENCE DISMISSED. 8. IN THE RESULT THE APPEAL FILED BY THE REVENUE A ND THE CROSS OBJECTION FILED BY THE ASSESSEE ARE DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 30 TH SEPT16. SD/- SD/- ( . ) ( . ) (G. MANJUNATHA) (V. DURGA RAO) /ACCOUNTANT MEMBER /JUDICIAL MEMBER ! /VISAKHAPATNAM: % /DATED : 30.09.2016 VG/SPS ITA NO.223/VIZAG/2014 M/S. RVR MARINE PRODUCTS LTD. BHIMAVARAM 6 '! (! /COPY OF THE ORDER FORWARDED TO:- 1. / THE APPELLANT THE ACIT CIRCLE-1 ELURU 2. / THE RESPONDENT M/S. RVR MARINE PRODUCTS LTD. D.NO.28-8-6 KOMARADA ROAD BALUSUMUDI BHIMAVARAM. 3. ) / THE CIT RAJAHMUNDRY 4. ) ( ) / THE CIT(A) VISAKHAPATNAM 5. ! ! / DR ITAT VISAKHAPATNAM 6 . / GUARD FILE / BY ORDER // TRUE COPY // /0 (SR.PRIVATE SECRETARY) ! / ITAT VISAKHAPATNAM