20 Micron Ltd.,, Baroda v. The ACIT., Circle-4,, Baroda

ITA 2763/AHD/2005 | 2002-2003
Pronouncement Date: 07-05-2010 | Result: Allowed

Appeal Details

RSA Number 276320514 RSA 2005
Assessee PAN AAACZ0580B
Bench Ahmedabad
Appeal Number ITA 2763/AHD/2005
Duration Of Justice 4 year(s) 4 month(s) 7 day(s)
Appellant 20 Micron Ltd.,, Baroda
Respondent The ACIT., Circle-4,, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 07-05-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 07-05-2010
Date Of Final Hearing 27-04-2010
Next Hearing Date 27-04-2010
Assessment Year 2002-2003
Appeal Filed On 30-12-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D BEFORE SHRI N.S. SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER DATE OF HEARING: 27.04.2010 DRAFTED ON: 28.04. 2010 ITA NO.2763/AHD/2005 ASSESSMENT YEAR : 2002-2003 20 MICRONS LIMITED 307-308 ARUNDEEP COMPLEX RACE COURSE BARODA-7. VS. ASSTT. COMMISSIONER OF INCOME TAX CIRCLE-4 AAYKAR BHAVAN RACE COURSE CIRCLE BARODA-7. PAN/GIR NO. : AAACZ0580B (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI MILIN MEHTA A.R. RESPONDENT BY: SHRI C.K.MISHRA D.R. O R D E R PER N.S.SAINI ACCOUNTANT MEMBER :- THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-III BA RODA DATED 17.10.2005. 2. GROUND NO.1 OF THE APPEAL READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN FACT AND IN LAW IN CONFIRMING THE ADDITION MADE BY THE A O OF RS.42 29 767 BY TREATING IT OF CAPITAL EXPENDITURE. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. THE ASSESSEE CLAIMED DEDUCTION FOR REPAIRS TO PLANT AND MACHINERY AND BU ILDINGS AT RS.42 29 767/- UNDER THE HEAD EARTH QUAKE EXPENSES. THE ABOVE CLAI M WAS DISALLOWED BY THE LOWER AUTHORITIES ON THE GROUND THAT THE SAME IS CA PITAL IN NATURE. THE LEARNED - 2 - AUTHORISED REPRESENTATIVE OF THE ASSESSEE EXPLAINED THAT DUE TO EARTH QUAKE ON 26.01.2001 THE BUILDING AND PLANT AND MACHINERY GO T DAMAGED. TO RESTORE THE DAMAGED BUILDING AND PLANT AND MACHINERY THE ASSESS EE HAD TO INCUR EXPENSE AND THE ASSESSEE ALSO RECOVERED SUBSIDY AND INSURAN CE CLAIM AND AFTER DEDUCTING SUCH RECEIPTS FROM THE TOTAL EXPENSES NE T AMOUNT WAS CLAIMED AS DEDUCTION. WE FIND THAT THE ABOVE EXPENSES WERE DIS ALLOWED BY THE LOWER AUTHORITIES ON THE GROUND THAT AS THIS EXPENDITURE WAS INCURRED IN RELATION TO CAPITAL ASSETS AND THEREFORE THIS EXPENDITURE WAS CAPITAL IN NATURE AND MOREOVER UNDER THE PROVISIONS OF SECTION 31(I) ONLY CURRENT REPAIRS ARE ALLOWABLE AS DEDUCTION AND EXPENDITURE IN QUESTION BEING EXPENDI TURE ON RENOVATION AND RESTORATION THE SAID IS NOT ALLOWABLE. 4. WE FIND THAT THE GENUINENESS OF EXPENSES IS NOT IN DOUBT FOR DISPUTE. FURTHER THE EXPENSES WERE INCURRED FOR RE INSTATING THE DAMAGE SUFFERED DUE TO EARTH QUAKE AND NOT FOR ACQUIRING ANY NEW AS SET IS ALSO NOT IN DISPUTE. IN OUR CONSIDERED OPINION SIMPLY BECAUSE AN EXPENDITU RE IS INCURRED IN RELATION TO A CAPITAL ASSET DOES NOT MAKE THE EXPENSE AS CAPITA L EXPENSE. THE EXPENSE INCURRED FOR ACQUIRING A CAPITAL ASSET IS DEFINITEL Y CAPITAL IN NATURE BUT AN EXPENSE OF THE NATURE OF REPAIRING INCURRED WITH RE FERENCE TO A CAPITAL ASSET IS REVENUE EXPENSE. 5. FURTHER CURRENT REPAIRS AS APPEARING IN SECTIO N 31(I) DENOTES EXPENSES IN CONTRADISTINCTION TO THE EXPENSES WHICH ARE AS A RESULT OF ACCUMULATED REPAIRING OF OVER A PERIOD OF NUMBER OF YEARS. IN THE INSTANT CASE THE CLAIM OF THE ASSESSEE IS THAT REPAIRING WAS NEE DED NOT BECAUSE OF ANY ACCUMULATION OF NEED OF REPAIRING OF EARLIER YEARS BUT BECAUSE OF DAMAGE CAUSED BY EARTH QUAKE. IN THE ABOVE CIRCUMSTANCES IN OUR CONSIDERED OPINION SUCH REPAIRING ARE CURRENT REPAIRING AND NO PORTION OUT OF THE SAME CAN BE DISALLOWED BY TREATING IT AS ACCUMULATED REPAIRING. IN THE ABOVE CIRCUMSTANCES IN OUR CONSIDERED VIEW THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DISALLOWING THE CLAIM OF DEDUCTION OF RS.42 29 767/-. WE THEREF ORE SET ASIDE THE ORDERS OF - 3 - THE LOWER AUTHORITIES AND ALLOW THE CLAIM OF THE AS SESSEE OF RS.42 29 767/-. HENCE THIS GROUND OF APPEAL OF THE ASSESSEE IS ALL OWED. 6. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN FACT AND LAW IN CONFIRMING THE ACTION OF THE AO IN CALCU LATING BOOK PROFIT FOR THE PURPOSE OF SECTION 115 JB IGNORING E XTRA ORDINARY EXPENSES OF RS.49 29 767 AND THEREBY CALCULATING PR OFIT U/S. 115JB @ RS.46 99 102 AS AGAINST LOSS OF RS.6 30 665 /-. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RE CORD. IN THE INSTANT CASE THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS DEBITED IN HIS PROFIT & LOSS ACCOUNT EXPENSES OF RS.49 29 767/- UNDER THE HEAD EARTH QUA KE EXPENSE AND HAS ACCORDINGLY CLAIMED DEDUCTION IN RESPECT OF THE SAM E WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB OF THE ACT. 8 THE LEARNED ASSESSING OFFICER OBSERVED THAT THE EXPENSE IN QUESTION WAS DEBITED IN PROFIT & LOSS ACCOUNT BELOW THE LINE AS AN EXTRAORDINARY EXPENSE AND IN HIS VIEW THE NET PROFI T AS PER PROFIT AND LOSS ACCOUNT IS THE NET PROFIT WHICH IS REFLECTED ABOVE THE LINE. THE LEARNED ASSESSING OFFICER THEREFORE TOOK THE NET PROFIT AS SHOWN ABOVE THE LINE IN THE PROFIT AND LOSS ACCOUNT AND OBSERVED THAT IN VIEW O F THE DECISION OF HON'BLE SUPREME COURT IN THE CASE OF APPOLLO TYRES LTD. VS. CIT (2002) 255 ITR 273 (SC) HE HAS NO POWER TO MAKE ANY ADJUSTMENT TO SUC H NET PROFIT EXCEPT THOSE SPECIFIED IN EXPLANATION TO SECTION 115JB. THE EXPE NSE IN QUESTION BEING NOT ONE WHICH IS SPECIFIED IN EXPLANATION TO SECTION 1 15JB(2) AND THEREFORE THE CLAIM OF THE ASSESSEE CANNOT BE ALLOWED. THE LEARNE D COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE ABOVE ACTION OF THE LEAR NED ASSESSING OFFICER. - 4 - 9. WE FIND THAT THE LOWER AUTHORITIES HAVE NOT BEE N ABLE TO APPRECIATE THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE COMPANY P REPARED UNDER THE COMPANIES ACT PROPERLY. THE ITEMS WHICH ARE DEBIT ED OR CREDITED BELOW THE LINE ARE ALSO THE PART OF THE PROFIT & LOSS ACCOUNT OF THE ASSESSEE COMPANY AND THE SAME CANNOT BE IGNORED FOR THE PURPOSE OF DETER MINING THE AMOUNT OF NET PROFIT FROM SUCH PROFIT AND LOSS ACCOUNT. OUR ABOVE VIEW GETS CLARIFIED WHEN WE LOOK AT THE ITEMS WHICH ARE SPECIFIED IN EXPLANATIO N TO THE SECTION 115JB(2) LIKE PROVISION FOR DIVIDEND INCOME TAX ETC. WHICH ARE DEBITED BELOW THE LINE IN PROFIT & LOSS ACCOUNT. THUS IN OUR CONSIDERED OPI NION THE LOWER AUTHORITIES ERRED IN TAKING NET PROFIT FIGURE AS PER THE ASSESS EE COMPANYS PROFIT & LOSS ACCOUNT AT RS.42 29 767/-. THE LEARNED AUTHORISED R EPRESENTATIVE OF THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF CIT VS. KHAITAN CHEMICALS AND FERTILIZ ERS LTD. [2008] 307 ITR 150 (DELHI) WHERE IT WAS HELD AS FOLLOWS:- THE ASSESSEE WAS REQUIRED TO SHOW THE PRIOR PERIOD ITEMS/EXTRAORDINARY ITEMS SEPARATELY SO THAT THEIR IMPACT ON THE CURRENT PROFIT OR LOSS COULD BE PERCEIVED. THE FAC T THAT THE ASSESSEE ADOPTED THE ALTERNATIVE APPROACH OF SHOWIN G SUCH ITEMS IN THE STATEMENT OF PROFIT AND LOSS AFTER DETERMINA TION OF CURRENT NET PROFIT OR LOSS DID NOT MEAN THAT THESE ITEMS W ERE NOT TO BE TAKEN INTO ACCOUNT IN COMPUTING THE NET PROFIT OR L OSS AS ENVISAGED IN SECTION 115JA. THUS WHAT THE ASSESSEE HAD DONE WAS ONLY TO INDICATE THE PRIOR PERIOD ITEMS/EXTRAORDINA RY ITEMS SEPARATELY. THIS DID NOT MEAN THAT THE FIGURE OF NE T PROFIT WAS TO BE ARRIVED AT DE HORS THESE ITEMS. THUS THE TRIBUN AL WAS CORRECT IN LAW IN HOLDING THAT THE ASSESSING OFFICER HAD FAILE D TO APPRECIATE THAT THE NET PROFIT FOR THE PURPOSES OF SECTION 115 JA WAS TO BE COMPUTED ONLY AFTER DEDUCTING THE PRIOR PERIOD EXPENSES/EXTRAORDINARY ITEMS. 10. TO THE SAME EFFECT IS ALSO THE DECISION OF THE TRIBUNAL IN THE CASE OF GULF OIL CORPORATION LTD. VS. ACIT [2007] 112 TT J (HYD.)135. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHOR ITIES AND DIRECT THE LEARNED ASSESSING OFFICER TO COMPUTE THE BOOK PROFIT UNDER SECTION 115JB AFTER TAKING - 5 - NET PROFIT AFTER CONSIDERING THE AMOUNT OF EXTRAORD INARY EXPENSES I.E. LOSS ON EARTH QUAKE DEBITED IN PROFIT & LOSS ACCOUNT OF THE ASSESSEE. HENCE THIS GROUND OF APPEAL OF ASSESSEE IS ALLOWED. 11. IN THE RESULT THE APPEAL OF THE ASSESSEE IS A LLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 07 TH DAY OF MAY 2010. SD/- SD/- ( MAHAVIR SINGH) ( N.S. SAINI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; ON THIS 07 TH DAY OF MAY 2010 PARAS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-III BARODA. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD DATE INITIALS 1. DRAFT DICTATED ON 27.04.2010 ---------------- --- 2. DRAFT PLACED BEFORE AUTHORITY 28.04.2010 ---- --------------- 3. DRAFT PROPOSED & PLACED 28.04.2010 ----------- -------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 28.04.2010 ---------- --------- JM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S 03.05.2010 -------- ------------ 6. KEPT FOR PRONOUNCEMENT ON 07.05.2010 --------- ----------- 7. FILE SENT TO THE BENCH CLERK 07.05.2010 ------ -------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------