DCIT, Tiruppur v. Eastman Exports Global Clothing P. Ltd.,, Tiruppur

ITA 300/CHNY/2017 | 2013-2014
Pronouncement Date: 09-11-2017 | Result: Partly Allowed

Appeal Details

RSA Number 30021714 RSA 2017
Assessee PAN AACCC0952E
Bench Chennai
Appeal Number ITA 300/CHNY/2017
Duration Of Justice 9 month(s) 5 day(s)
Appellant DCIT, Tiruppur
Respondent Eastman Exports Global Clothing P. Ltd.,, Tiruppur
Appeal Type Income Tax Appeal
Pronouncement Date 09-11-2017
Appeal Filed By Department
Tags No record found
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 09-11-2017
Date Of Final Hearing 28-06-2017
Next Hearing Date 28-06-2017
First Hearing Date 28-06-2017
Assessment Year 2013-2014
Appeal Filed On 03-02-2017
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI . . . ' # BEFORE SHRI N.R.S. GANESAN JUDICIAL MEMBER AND SHRI S. JAYARAMAN ACCOUNTANT MEMBER ./ ITA NO.300/MDS/2017 & '& / ASSESSMENT YEAR : 2013-14 THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 TIRUPUR. V. M/S EASTMAN EXPORTS GLOBAL CLOTHING PVT. LTD. 5/591 SRI LAKSHMI NAGAR PICHAMPALAYMPUDUR TIRUPUR 641 602. PAN : AACCC 0952 E ()*/ APPELLANT) (+ )*/ RESPONDENT) ./ ITA NO.291/MDS/2017 & '& / ASSESSMENT YEAR : 2013-14 M/S EASTMAN EXPORTS GLOBAL CLOTHING PVT. LTD. 5/591 SRI LAKSHMI NAGAR PICHAMPALAYMPUDUR TIRUPUR 641 602. V. THE DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1 TIRUPUR. ()*/ APPELLANT) (+ )*/ RESPONDENT) - . /REVENUE BY : SH. SAILENDRA MAMIDI PRINCIPAL C IT &/0 - . /ASSESSEE BY : SH. T. BANUSEKAR CA 1 - 0' / DATE OF HEARING : 13.09.2017 23' - 0' / DATE OF PRONOUNCEMENT : 09.11.2017 2 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 / O R D E R PER N.R.S. GANESAN JUDICIAL MEMBER: BOTH THE APPEALS OF THE REVENUE AND ASSESSEE ARE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -3 COIMBATORE DATED 24.11.2016 PERTAINING TO ASSESSME NT YEAR 2013- 14. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE APPEALS WE HEARD THESE APPEALS TOGETHER AND DISPOS ING OF THE SAME BY THIS COMMON ORDER. 2. SHRI SAILENDRA MAMIDI THE LD. DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THE FIRST ISSUE ARISES FOR CONSIDERA TION IN THE REVENUES APPEAL IS WITH REGARD TO INCENTIVE GIVEN BY THE GOVERNMENT FOR EXPLORING NEW MARKET FOR EXPORTS. A CCORDING TO THE LD. D.R. WHEN THIS ISSUE CAME BEFORE THIS TRIBUNAL FOR THE ASSESSMENT YEARS 2011-12 AND 2012-13 IN I.T.A. NOS. 47 & 48/MDS/2016 THIS TRIBUNAL FOUND THAT THE GOVERNMEN T OF INDIA PROVIDED INCENTIVE FOR EXPLORING NEW MARKET ACROSS THE GLOBE. EXPLORING A NEW MARKET FOR A SPECIFIED AREA WOULD E XPAND THE MARKET AREA OF THE ASSESSEE THEREFORE THE INCENTI VE GIVEN BY GOVERNMENT OF INDIA FOR EXPLORING THE NEW MARKET IS A CAPITAL RECEIPT HENCE THAT CANNOT BE TREATED AS INCOME EIT HER UNDER 3 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 SECTION 2(24) OR 28 OF THE INCOME-TAX ACT 1961 (IN SHORT 'THE ACT'). ACCORDINGLY THE SIMILAR ADDITION MADE BY THE ASSES SING OFFICER WAS DELETED BY THIS TRIBUNAL. ACCORDING TO THE LD. D. R. THE CIT(APPEALS) DELETED THE ADDITION BY PLACING RELIAN CE ON THE ORDER OF THIS TRIBUNAL. 3. WE HAVE HEARD SH. T. BANUSEKAR THE LD. REPRESEN TATIVE FOR THE ASSESSEE ALSO. THE MARKET LINKED FOCUS PRODUCT SCHEME WAS PROMOTED BY GOVERNMENT OF INDIA FOR GIVING INCENTIV E TO EXPLORE THE NEW MARKET AREA ACROSS THE GLOBE. AS PER THE MARKE T LINKED FOCUS PRODUCT SCHEME THE ASSESSEE RECEIVED THE INCENTIVE . THE QUESTION ARISES FOR CONSIDERATION IS WHETHER SUCH I NCENTIVE IS REVENUE RECEIPT OR CAPITAL RECEIPT. THIS TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSMENT YEARS 2011-12 AND 2012-13 E XAMINED THIS ISSUE AND FOUND THAT THE INCENTIVE RECEIVED BY THE ASSESSEE IS A CAPITAL RECEIPT AND IT CANNOT BE TREATED AS INCOME UNDER SECTION 2(24) OR 28 OF THE ACT. SINCE THE FACTS ARE SIMILAR AND IDENTICAL TO THAT OF ASSESSMENT YEARS 2011-12 AND 2012-13 THE C IT(APPEALS) HAS RIGHTLY PLACED RELIANCE ON THE ORDER OF THIS TR IBUNAL. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY AND ACCORDINGLY THE SAME IS CONFIRM ED. 4 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 4. THE NEXT ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO THE AMOUNT OF ` 1 54 10 800/- SPENT ON CONSTRUCTION OF BUILDING IN THE LEASE HOLD LAND. 5. SHRI SAILENDRA MAMIDI THE LD. DEPARTMENTAL REPR ESENTATIVE SUBMITTED THAT THE ASSESSEE TOOK A VACANT LAND ON L EASE AND CONSTRUCTED A BUILDING. THE COST OF CONSTRUCTION O F THE BUILDING WAS CLAIMED AS REVENUE EXPENDITURE. PLACING RELIANCE O N THE ORDER OF THIS TRIBUNAL FOR ASSESSMENT YEARS 2011-12 AND 2-12 -13 IN I.T.A. NOS.101 102 & 103/MDS/2016 THE LD. D.R. SUBMITTED THAT ON IDENTICAL SITUATION THIS TRIBUNAL REMITTED BACK TH E MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE MATTER IN THE L IGHT OF THE JUDGMENT OF JURISDICTIONAL HIGH COURT AND SUPREME C OURT. HOWEVER ACCORDING TO THE LD. D.R. THE CIT(APPEALS) FOUND T HAT THE EXPENDITURE OF ` 1 54 10 800/- WAS REVENUE EXPENDITURE. ACCORDINGLY HE ALLOWED THE SAME. IN RESPECT OF EL ECTRICAL FITTINGS ACCORDING TO THE LD. D.R. WHEN THE ASSESSEE CLAIME D THE EXPENDITURE OF ` 98 72 104/- THE CIT(APPEALS) FOUND THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON ELECTRICAL FITTINGS WOULD FORM PART OF COST OF CONSTRUCTION THEREFORE IT HA S TO BE CAPITALIZED. ACCORDING TO THE LD. D.R. THE COST OF CONSTRUCTION AND ELECTRICAL 5 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 FITTINGS CANNOT BE TREATED AS REVENUE EXPENDITURE A T ALL. EXPLANATION 1 TO SECTION 32(1) OF THE ACT WOULD BE APPLICABLE N OT ONLY TO THE COST OF ELECTRICAL FITTINGS BUT ALSO TO THE COST OF CONS TRUCTION OF THE BUILDING ON THE LEASEHOLD LAND THEREFORE ACCORDING TO THE LD. D.R. THE CIT(APPEALS) IS NOT JUSTIFIED IN ALLOWING ` 1 54 10 800/-. 6. ON THE CONTRARY SH. T. BANUSEKAR THE LD. REPRE SENTATIVE FOR THE ASSESSEE SUBMITTED THAT THIS TRIBUNAL IN THE A SSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2011-12 FOUND THAT IN VIE W OF THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. TVS LEAN LO GISTICS LTD. (2007) (293 ITR 432) AND ALSO JUDGMENT OF APEX COUR T IN CIT V. MADRAS AUTO SERVICE (P.) LTD. (1998) (233 ITR 468) THE AMOUNT SPENT BY THE ASSESSEE IN CONSTRUCTION OF THE BUILDI NG HAS TO BE TREATED AS REVENUE EXPENDITURE SINCE THE OWNERSHIP OF THE BUILDING WAS WITH LESSOR. ACCORDING TO THE LD. REPRESENTATI VE IN FACT THIS TRIBUNAL AFTER REFERRING TO THE JUDGMENT OF APEX CO URT IN MADRAS AUTO SERVICE (P.) (SUPRA) AND THE JUDGMENT OF MADRA S HIGH COURT IN TVS LEAN LOGISTICS LTD. (SUPRA) AND VARIOUS OTHER J UDGMENTS OF OTHER HIGH COURTS AND THIS TRIBUNAL DIRECTED THE A SSESSING OFFICER TO RE-EXAMINE THE MATTER. THE CIT(APPEALS) AFTER C ONSIDERING THE ORDER OF THIS TRIBUNAL FOR THE ASSESSMENT YEAR 2011 -12 EXAMINED 6 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 THE MATTER INDEPENDENTLY AND FOUND THAT THE OWNERSH IP OF THE BUILDING WAS WITH LESSOR THEREFORE THE CONSTRUCTI ON OF THE BUILDING CANNOT BE SAID TO BE ONE WHICH BRINGS AN ENDURING B ENEFIT TO THE ASSESSEE. ACCORDINGLY BY FOLLOWING THE JUDGMENT O F APEX COURT IN MADRAS AUTO SERVICE (P.) LTD. (SUPRA) AND THE JUDGM ENT OF MADRAS HIGH COURT IN TVS LEAN LOGISTICS LTD. (SUPRA) THE CIT(APPEALS) FOUND THAT THE COST OF CONSTRUCTION OF ` 1 54 10 800/- INCURRED BY THE ASSESSEE IS ON THE REVENUE FIELD AND ACCORDINGLY HE ALLOWED THE SAME. 7. THE LD. REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT IN RESPECT OF EXPENDITURE INCURRED BY THE ASSE SSEE TOWARDS ELECTRICAL FITTINGS TO THE EXTENT OF ` 98 72 104/- THE CIT(APPEALS) FOUND THAT IT IS A CAPITAL EXPENDITURE. THE ASSESS EE HAS FILED A SEPARATE APPEAL IN I.T.A. NO.291/MDS/2017 CHALLENGI NG THE DISALLOWANCE MADE BY THE CIT(APPEALS) TO THE EXTENT OF ` 98 72 104/-. ACCORDING TO THE LD. REPRESENTATIVE THE COST ON ELECTRICAL FITTINGS FORMS PART OF COST OF CONSTRUCT ION OF THE BUILDING ITSELF THEREFORE WHEN THE COST OF CONSTRUCTION WA S TREATED AS REVENUE EXPENDITURE THE CIT(APPEALS) OUGHT TO HAVE TREATED THE EXPENDITURE INCURRED BY THE ASSESSEE ON ELECTRICAL FITTINGS ALSO AS 7 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 REVENUE EXPENDITURE. THE CIT(APPEALS) CANNOT BIFUR CATE THE EXPENDITURE WITH REGARD TO COST OF CONSTRUCTION OF THE BUILDING AND ELECTRICAL FITTINGS. THE ELECTRICAL FITTING BEING A PART OF THE BUILDING ACCORDING TO THE LD. REPRESENTATIVE THE EXPENDITUR E HAS TO BE ALLOWED AS REVENUE IN NATURE. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. THE ASSESSMENT YEAR UNDER CONSIDERATION IS 2013-14. FOR THE ASSES SMENT YEAR 2011-12 THIS TRIBUNAL DIRECTED THE ASSESSING OFFIC ER TO EXAMINE THE MATTER IN THE LIGHT OF THE JUDGMENT OF APEX COURT I N MADRAS AUTO SERVICE (P.) LTD. (SUPRA) AND THE JUDGMENT OF MADRA S HIGH COURT IN TVS LEAN LOGISTICS LTD. (SUPRA). THE CIT(APPEALS) BY TAKING NOTE OF THE DIRECTION EXAMINED THE ISSUE BY HIMSELF AND FOUND THE COST OF CONSTRUCTION OF THE BUILDING TO THE EXTENT OF ` 1 54 10 800/- AS REVENUE EXPENDITURE. THE CIT(APPEALS) FOUND THAT T HE RENT PAYABLE BY THE ASSESSEE FOR THE PRESENT AND IN FUTURE WOULD BE CONSIDERABLY SAVED. THE APEX COURT IN MADRAS AUTO SERVICE (P.) LTD. (SUPRA) HELD THAT EXPENDITURE ON CONSTRUCTION IN LEASE HOLD LAND IS ALLOWABLE AS REVENUE EXPENDITURE IN CASE IT RESULTED IN SAVIN G OF RENT IN FUTURE. HOWEVER THE EXPENDITURE INCURRED BY THE ASSESSEE T OWARDS 8 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 ELECTRICAL FITTINGS TO THE EXTENT OF ` 98 72 104/- WAS TREATED AS CAPITAL EXPENDITURE BY THE CIT(APPEALS). WHEN THE ASSESSEE CONSTRUCTED A NEW BUILDING THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE COST OF CONSTRUCTION OF THE BUILDING AS WELL AS THE ELECTRICAL FITTINGS HAS TO BE TREATED AS COST OF CONSTRUCTION OF THE BU ILDING AND THERE IS NO REASON FOR BIFURCATING THE SAME. BOTH THE COST OF CONSTRUCTION OF THE BUILDING AND ELECTRICAL FITTING HAS TO BE EITHE R IN THE CAPITAL FIELD OR IN THE REVENUE FIELD. THE CIT(APPEALS) ALLOWED THE COST OF CONSTRUCTION ON THE GROUND THAT THE ASSESSING OFFIC ER HAS NOT EXAMINED THE SAVINGS OF RENT PAYABLE IN FUTURE. 9. SINCE THIS TRIBUNAL REMITTED BACK THE MATTER TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE AFRESH FOR AS SESSMENT YEAR 2011-12 IT WOULD BE MORE APPROPRIATE FOR THE ASSES SING OFFICER TO EXAMINE THE MATTER AND FIND OUT WHETHER THE COST OF CONSTRUCTION OF THE BUILDING ON THE LEASEHOLD LAND IS REVENUE EXPEN DITURE OR CAPITAL EXPENDITURE. THE ASSESSING OFFICER SHALL BRING ON RECORD WHETHER THE ASSESSEE SAVED ANY RENT IN FUTURE. ACCORDINGLY THE MATTER NEEDS TO BE RE-EXAMINED BY THE ASSESSING OFFICER. HENCE THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ISSUE OF DISALLOWANCE OF COST OF CONSTRUCTION OF THE BUILDIN G AND THE COST OF 9 I.T.A. NO.300/MDS/17 I.T.A. NO.291/MDS/17 ELECTRICAL FITTINGS IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER I N THE LIGHT OF JUDGMENT OF APEX COURT IN MADRAS AUTO SERVICE (P.) LTD. (SUPRA) AND THE JUDGMENT OF MADRAS HIGH COURT IN TVS LEAN L OGISTICS LTD. (SUPRA). 10. IN THE RESULT THE APPEAL FILED BY THE REVENUE IN I.T.A. NO.300/MDS/2017 IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY THE ASSESSEE IN I.T.A. NO. 291/MDS/ 2017 IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 9 TH NOVEMBER 2017 AT CHENNAI. SD/- SD/- ( ) ( . . . ) (S. JAYARAMAN) (N.R.S. GANESAN) ' / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI 5 /DATED THE 9 TH NOVEMBER 2017. KRI. - +067 87'0 /COPY TO: 1. &/0 /ASSESSEE 2. ASSESSING OFFICER 3. 1 90 () /CIT(A)-3 COIMBATORE 4. PRINCIPAL CIT- 3 COIMBATORE 5. 7: +0 /DR 6. ;& < /GF.