ACIT, New Delhi v. M/s. Shivam Autotech Ltd., New Delhi

ITA 2429/DEL/2010 | 2006-2007
Pronouncement Date: 10-02-2012 | Result: Partly Allowed

Appeal Details

RSA Number 242920114 RSA 2010
Assessee PAN AAJCS7372M
Bench Delhi
Appeal Number ITA 2429/DEL/2010
Duration Of Justice 1 year(s) 8 month(s) 19 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Shivam Autotech Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 10-02-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted G
Tribunal Order Date 10-02-2012
Date Of Final Hearing 02-02-2012
Next Hearing Date 02-02-2012
Assessment Year 2006-2007
Appeal Filed On 21-05-2010
Judgment Text
ITA NO. 2429/DEL/2010 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH G NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 2429/DEL/2010 A.Y. : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX CIRCLE 8(1) ROOM NO. 163 CR BUILDING NEW DELHI VS. M/S SHIVAM AUTOTECH LTD. 2-A/3 ASAF ALI ROAD NEW DELHI (PAN/GIR NO. : AAJCS7372M) (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : NONE DEPARTMENT BY : S. MOHANTY D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: PER SHAMIM YAHYA: PER SHAMIM YAHYA: PER SHAMIM YAHYA: AM AMAM AM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 10.2.2 010 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE GROUNDS RAISED READ AS UNDER:- 1. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED I N LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN DELETING THE ADDITION OF ` 7 98 665/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF CAPITALIZATION OF EXPENSES ON REPAIR AND MAINTENANCE OF PLANT AND MACHINERY. 2. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ITA NO. 2429/DEL/2010 2 DIRECTING THE ASSESSING OFFICER RECALCULATE THE DISALLOWANCE U/S. 14A AMOUNTING TO ` 2 53 753/-. 3. LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND ON THE FACTS AND CIRCUMSTANCES OF THE CASE IN ADMITTING ADDITIONAL EVIDENCE IN CONTRAVENTION WIT H RULE 46A OF THE I.T. RULES. 4. THE APPELLANT CRAVES TO AMEND MODIFY ALTER ADD OR FOREGO ANY GROUND OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. 3. IN THIS CASE ASSESSING OFFICER OBSERVED THAT D URING THE YEAR UNDER CONSIDERATION ASSESSEE HAS SHOWN DIVIDEND INC OME OF ` 15 69 697/- UNDER THE HEAD OTHER INCOME. ASSESSI NG OFFICER MADE THE DISALLOWANCE U/S 14A AND ADDED A SUM OF ` 2 53 7 53/- BY APPLYING RULE 8D. FURTHER ASSESSING OFFICER DEMANDED THE DETAIL OF R EPAIR AND MAINTENANCE TO MACHINERY EXPENSES DEBITED IN THE PRO FIT AND LOSS ACCOUNT AT ` 51 58 966/- IN EXCESS OF ` 20 000/-. BASED ON THE SAID LIST THE ACIT MADE AN ADDITION OF ` 9 39 606/- AFTE R ALLOWING THE DEPRECIATION THEREON @15% AT ` 1 40 941/-. ACCORDIN GLY NET ADDITION OF ` 7 98 665/- WAS MADE. 4. AGAINST THE ABOVE ORDER THE ASSESSEE FILED AN AP PEAL BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEALS). 4.1 AS REGARDS DISALLOWANCE U/S. 14A LD. COMMISSION ER OF INCOME TAX (APPEALS) OBSERVED THAT ASSESSING OFFICER WAS RIGHT IN MAKING THE DISALLOWANCE U/S 14A. HOWEVER LD. COMMISSIONER O F INCOME TAX (APPEALS) ALSO OBSERVED THAT ASSESSEES ALTERNATE PLEA THAT THE ITA NO. 2429/DEL/2010 3 CALCULATION HAS BEEN WRONGLY MADE IS ALSO CONSIDERE D. HE FOUND THAT ASSESSEES CLAIM WAS RIGHT THAT THE CALCULATION WAS NOT CORRECTLY MADE BY THE ASSESSING OFFICER AND THE TOTAL DISALLOWANC E HAS TO BE LESS THAN THE AMOUNT CALCULATED BY THE ASSESSING OFFICER. TH IS GROUND WAS ACCEPTED AND THE ASSESSING OFFICER WAS DIRECTED TO RECALCULATE THE DISALLOWANCE AFTER GIVING AN OPPORTUNITY TO THE AS SESSEE OF BEING HEARD. 4.2 AS REGARDS CAPITALIZATION OF EXPENSES OF REPA IR AND MAINTENANCE PLANT AND MACHINERY. LD. COMMISSIONER OF INCOME TAX (APPEALS) OBSERVED THAT THESE EXPENSES CONSTITU TE ELECTRICAL REPAIRING CHARGES SPARE PARTS PURCHASES FOR THE MAC HINE SOFTWARE INSTALLED IN PLANT AND MACHINERY ETC. THE ASSESS ING OFFICER HELD THAT THE SPARES INSTALLED IN THE MACHINE ARE A PART OF THE MACHINE WHICH HELPS IN INCREASING THE MANUFACTURING CAPACITY OF THE MACHINE AND THESE MACHINE PARTS HAVE ALSO BEEN HELD BY THE ASSESSING OFFICER TO HAVE ENDURING BENEFIT. IN THIS REGARD LD. CO MMISSIONER OF INCOME TAX (APPEALS) CONSIDERED THE ASSESSEES SUBMISSIONS HE OBSERVED THAT ASSESSEE COMPANY IS A MANUFACTURER OF GEAR COMPON ENTS OF VARIOUS SIZES AND MODELS AND IS MAINLY SUPPLIER TO M/S HERO HONDA MOTORS LTD. AND M/S MICO BOSH. LD. COMMISSIONER OF INCOME TAX (APPEALS) ACCEPTED THE ASSESSEES CLAIM THAT REPLACE MENT OF SPARES DOES NOT INCREASE PRODUCTION CAPACITY OF THE MACHINE S AND THESE SPARES DO NOT GIVE ANY BENEFIT OF ENDURING NATURE A S THESE ARE CURRENT REPAIRS ONLY. ACCORDINGLY LD. COMMISSIONER OF INC OME TAX (APPEALS) HELD THAT ASSESSING OFFICER WAS CORRECT IN TREATIN G REPAIR AND MAINTENANCE EXPENDITURE AS CAPITAL EXPENDITURE AND GRANTED THE RELIEF TO THE ASSESSEE IN THIS REGARD. ITA NO. 2429/DEL/2010 4 5. AGAINST THE ABOVE ORDER THE REVENUE IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E. NONE APPEARED ON BEHALF OF THE ASSESSEE. IN OUR CONSI DERED OPINION THE MATTER CAN BE DISPOSED OF BY HEARING THE LD. DEPARTM ENTAL REPRESENTATIVE AND PERUSING THE RECORDS. 7. APROPOS CAPITALIZATION OF EXPENSES OF REPAIR AND MAINTENANCE PLANT AND MACHINERY WE FIND THAT LD. COMMISSIONER O F INCOME TAX (APPEALS) HAS GIVEN A FINDING THAT THESE EXPENSES C ONSTITUTE ELECTRICAL REPAIRING CHARGES SPARE PARTS PURCHASES FOR THE MAC HINE SOFTWARE INSTALLED IN PLANT AND MACHINERY ETC. LD. COMMISS IONER OF INCOME TAX (APPEALS) FOUND THAT THE REPLACEMENT OF SPARES DOES NOT INCREASE PRODUCTION CAPACITY OF THE MACHINES AND THESE SPARE S DO NOT GIVE ANY BENEFIT OF ENDURING NATURE AS THESE ARE CURRENT RE PAIRS ONLY. IN THE BACKGROUND OF THE AFORESAID DISCUSSION IN OUR CONS IDERED OPINION THERE IS NO INFIRMITY IN THE ORDER OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS) THAT THE EXPENSES INVOLVED ARE REVENU E IN NATURE AS SUCH WE UPHOLD THE ORDER OF THE LD. COMMISSIONER OF I NCOME TAX (APPEALS) ON THIS ISSUE. 8. APROPOS DISALLOWANCE U/S 14A WE FIND THAT ASSES SING OFFICER HAS APPLIED RULE 8D AND LD. COMMISSIONER OF INCOME TAX (AP PEALS) HAS DIRECTED TO MAKE THE CALCULATION AFRESH. 9. WE FIND THAT HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MFG. CO. LTD. VS. DCIT IN ITA NO. 626 OF 2010 234 CTR 1 HAS OVERRULED THE ITAT DECISION OF DAGA CAPITAL MANAGEME NT (SUPRA) AND HELD THAT RULE 8D HAS BEEN NOTIFIED ON 24.3.2008 AND WILL BE APPLICABLE ITA NO. 2429/DEL/2010 5 ONLY FROM ASSESSMENT YEAR 2008-09. IT WAS FURTHER H ELD THAT REASONABLE DISALLOWANCE CAN BE MADE BY THE ASSESSIN G OFFICER. HENCE THE PRESENT YEAR IS A.Y. 2006-07 AND RULE 8D IS CLEA RLY NOT APPLICABLE SO APPLICATION OF RULE 8D BY THE ASSESSING OFFICER CANNOT BE SUSTAINED. HOWEVER A REASONABLE DISALLOWANCE HAS TO BE COMPUTED. 10. ACCORDINGLY WE REMIT THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO CONSIDER THE CASE IN LIGHT OF THE AFORESAID HON BLE HIGH COURT DECISION. 11. IN THE RESULT THE APPEAL FILED BY THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 10/2/2012. SD/- SD/- [ [[ [RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV RAJPAL YADAV] ]] ] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] [SHAMIM YAHYA] JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATE 10/2/2012 SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR SRBHATNAGAR COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: COPY FORWARDED TO: - -- - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR ITAT TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT DELHI BENCHES