Shri P.N. Nagpal,HUF, Ahmedabad v. The Dy.CIT.,Circle-9,, Ahmedabad

ITA 3310/AHD/2009 | 2005-2006
Pronouncement Date: 07-01-2011 | Result: Allowed

Appeal Details

RSA Number 331020514 RSA 2009
Assessee PAN AABHP8805M
Bench Ahmedabad
Appeal Number ITA 3310/AHD/2009
Duration Of Justice 1 year(s) 23 day(s)
Appellant Shri P.N. Nagpal,HUF, Ahmedabad
Respondent The Dy.CIT.,Circle-9,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 07-01-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 07-01-2011
Date Of Final Hearing 05-01-2011
Next Hearing Date 05-01-2011
Assessment Year 2005-2006
Appeal Filed On 14-12-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH AHMEDABAD BENCH B BB B BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI T.K.SHARMA T.K.SHARMA T.K.SHARMA T.K.SHARMA JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER AND AND AND AND SHRI N.S. SAINI ACCOUNTANT MEMBER SHRI N.S. SAINI ACCOUNTANT MEMBER SHRI N.S. SAINI ACCOUNTANT MEMBER SHRI N.S. SAINI ACCOUNTANT MEMBER DATE OF HEARING: 5-1-2011 DRAFTED ON: 5- 1-2011 ITA NO. 3310 3311 /AHD/ 2009 ASSESSMENT YEARS :2005-06 & 2006-07 P. N. NAGPAL HUF PROP. OF ASOPALAV EYE HOSPITAL NR. SHAHIBAUG UNDER BRIDGE SHAHIBAUG AHMEDABAD. VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-9 DIRECT TAX BHAVAN OPP. OLD SACHIVALAYA AMBAWADI AHMEDABAD. PAN/GI R NO. : AABHP 8805 M (A PPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI MEHUL K. PATEL. RESPONDENT BY: SHRI K. MADHUSUDAN SR.D.R. O R D E R O R D E R O R D E R O R D E R PER N.S.SAINI ACCOUNTANT MEMBER:- THESE ARE TWO APPEALS FILED BY THE ASSESSEE AGAIN ST THE SEPARATE ORDERS OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-XV AHMEDABAD FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07 DATED 29-10-2 009. 2. IN THE ASSESSMENT YEAR 2005-06 THE ASSESSEE IN G ROUND NO.1 AND 2 OF THE APPEAL HAS CHALLENGED THE REASSESSMENT ORDER ON THE GROUND THAT THE SAME WAS PASSED WITHOUT SUPPLYING THE COPY OF REASO NS RECORDED FOR REOPENING OF THE ASSESSMENT. 3. AT THE TIME OF THE HEARING THE LD. AUTHORISED RE PRESENTATIVE OF THE ASSESSEE SUBMITTED THAT IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT VS. INCOME TAX OFFICER ( 2003) 259 ITR 19 (SC) WHEN A NOTICE UNDER SECTION 148 OF THE INCOME-TAX ACT 1 961 IS ISSUED THE PROPER COURSE OF ACTION FOR THE NOTICEE IS TO FILE THE RET URN AND IF HE SO DESIRES TO SEEK REASONS FOR ISSUING THE NOTICES. THE ASSESSING OFFI CER IS BOUND TO FURNISH REASONS WITHIN A REASONABLE TIME. ON RECEIPT OF REA SONS THE NOTICEE IS ENTITLED TO FILE OBJECTIONS TO ISSUANCE OF NOTICE AND THE AS SESSING OFFICER IS BOUND TO DISPOSE OF THE SAME BY PASSING A SPEAKING ORDER. TH EREFORE THE REASSESSMENT - 2 - ORDER PASSED BY THE ASSESSING OFFICER WAS NOT IN AC CORDANCE WITH THE ABOVE DECISION OF THE HONBLE SUPREME COURT. THEREFORE THE ORDERS OF THE LOWER AUTHORITIES SHOULD BE SET ASIDE AND THE MATTER SHOU LD BE RESTORED TO THE FILE OF THE ASSESSING OFFICER FOR REFRAMING THE ASSESSMENT AFTER SUPPLYING COPY OF REASONS TO THE ASSESSEE AND MEETING THE OBJECTIONS OF THE ASSESSEE BY PASSING A SPEAKING ORDER. HE FURTHER POINTED OUT THAT THE FINDING OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) THAT REASONS F OR REOPENING OF ASSESSMENT WERE SUPPLIED TO THE ASSESSEE WAS NOT CO RRECT IN SO FAR AS THE ORDER OF THE ASSESSING OFFICER IS DATED 12-12-2008 WHEREAS THE REASONS WERE SUPPLIED TO THE ASSESSEE ON 15-12-2008 AS EVIDENCED FROM THE ENVELOPE CONTAINING THE REASON SENT TO THE ASSESSEE BY POST PLACED AT PAGE-31 OF THE PAPER BOOK. 4. THE LD. DEPARTMENTAL REPRESENTATIVE COULD NOT CO NTROVERT THE SUBMISSIONS OF THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE. 5. WE THEREFORE FIND THAT THE REASONS WERE NOT SUPP LIED TO THE ASSESSEE BEFORE COMPLETION OF THE ASSESSMENT AND THE ASSESSE E WAS NOT ALLOWED SUFFICIENT OPPORTUNITY TO FILE HIS OBJECTIONS AGAIN ST THE REOPENING OF THE ASSESSMENT BEFORE COMPLETION OF THE REASSESSMENT. WE THEREFORE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER IS DIRECTE D TO ALLOW PROPER OPPORTUNITY TO THE ASSESSEE TO FILE OBJECTIONS AGAINST REOPENIN G OF ASSESSMENT AND THEREAFTER TO DISPOSE OFF THE OBJECTIONS BY PASSING A SPEAKING ORDER IN ACCORDANCE WITH THE PROCEDURE LAID DOWN BY THE HON BLE SUPREME COURT IN THE CASE OF GKN DRIVESHAFT (SUPRA) AND THEREAFTER TO PR OCEED IN THE MATTER AS PER LAW. THUS THIS GROUND OF APPEAL OF THE ASSESSEE I S ALLOWED. 6. IN VIEW OF OUR ABOVE DECISION THE OTHER GROUNDS OF APPEAL TAKEN BY THE ASSESSEE HAVE BECOME INFRUCTUOUS AND ACADEMIC IN NA TURE AND WE REFRAIN FROM ADJUDICATING THE SAME. 7. IN THE ASSESSMENT YEAR 2006-07 THE ASSESSEE IN G ROUND NOS.1 AND 2 OF THE APPEAL HAS CHALLENGED THE DISALLOWANCE OF EXPE NDITURE OF `.21 28 406/- UNDER THE HEAD BUILDING RESTRUCTURING AND RENOVATI ON EXPENSES AND - 3 - `.1 15 060/- OUT OF CARPETING AND FLOORING EXPENSE S AND TREATING THE SAME AS CAPITAL EXPENDITURE AND ALSO NOT ALLOWING DEPRECIAT ION ON THE SAID EXPENDITURE. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS AVAILABLE ON RECORD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS CLAIMED DEDUCTION OF `.21 28 406/- UNDER THE HEAD BUILDING RESTRUCTURING AND RENOVATION EXPENSE S AND `.1 15 060/- UNDER THE HEAD CARPETING AND FLOORING EXPENSES. THE ASS ESSING OFFICER DISALLOWED DEDUCTION FOR THE SAME BY OBSERVING TO QUOTE AS UND ER:- 3.2. THE SUBMISSIONS FILED BY THE ASSESSEE HAVE BE EN CONSIDERED CAREFULLY HOWEVER THE SAME IS NOT FOUND TENABLE. THE ASSESSEE HAS INCURRED AN EXPENDITURE ON ACCOUNT OF BUILDING RE STRUCTURING AND RENOVATION EXPENSES OF `.21 28 406/- AND ON ACCOU NT OF CARPETING FLOORING EXPENSES OF `.1 15 060/-. THE ASSESSEE HA S DONE TOTAL RESTRUCTURING RECONSTRUCTION AND RENOVATION OF HIS CAPITAL ASSETS I.E. HOSPITAL BUILDING KNOWN AS AASHOPALAV EYE HOSPITAL . IT IS WORTHWHILE HERE TO MENTION THAT THE WRITTEN DOWN BOOK VALUE OF THE PROPERTY ON WHICH THESE EXPENSES ARE INCURRED IS ONLY `.1 03 64 0/- AT THE BEGINNING OF THE ASSESSMENT YEAR. ON VERIFICATION OF THE BILL S OF THESE BUILDING RESTRUCTURING AND RENOVATION EXPENSES AND CARPETI NG FLOORING EXPENSES IT IS SEEN THAT IT INCLUDES WORK OF LAYING COMPLETE FALLS CEILING PURCHASE OF BLACK GRANITE KOTA STONE FLOORING TIL ES WALL TILES CEMENT SAND BRICKS GREET-KAPCHI LABOUR BILLS FOR RCC BE AMS /SLABS STRUCTURAL CONSULTANCY CHARGES LABOUR PAYMENT FOR MASONRY WOR K PAINT-PRIMER LABOUR FOR PAINT WORKS PURCHASE OF STEEL TMT BARS SS SHEETS GL PIPE AND PIPE AND BATHROOM FITTING ETC. FURTHER MORE IN PREV IOUS YEAR I.E. F.Y. 2004-05 (A. Y. 2005-06) ALSO THE ASSESSEE HAS INCUR RED SIMILAR SUBSTANTIAL EXPENDITURE UNDER THE HEADING BUILDING RESTRUCTURING AND RENOVATION EXPENSES TO THE EXTENT OF `.25 29 566/- . THIS SHOWS APPARENTLY THAT THE ENTIRE PROPERTY IS BEING RECONS TRUCTED SINCE LAST TWO YEARS WHICH INCLUDES COMPLETE RESTRUCTURING AND RE NOVATING THE EXISTING STRUCTURE AND REBUILDING IT WITH RCC BEAMS AND SLAB S AND REPLACING TILES FLOORING CARPETING REPLACING BATHROOM FITTINGS P AINTING CONSTRUCTING OF LIFT WELL RESURFACING THE WALLS FALLS CEILING ETC . ALL THESE CHANGES MADE IN THE EXISTING CAPITAL ASSET I.E. BUILDING IS OF ENDU RING NATURE AND AS SUCH THESE ARE EXPENDITURE OF CAPITAL IN NATURE AND NOT REVENUE EXPENDITURE AS CLAIMED BY THE ASSESSEE BY DEBITING ALL THESE EX PENSES TO THE PROFIT AND LOSS ACCOUNT. 3.3. THE FACTS OF THE CASE OF RELIED DECISIONS BY T HE ASSESSEE IN HIS REPLY TO THE SHOW CAUSE NOTICE ISSUED ARE DIFFEREN T FROM THE FACTS OF THE ASSESSEES OWN CASE. THERE ARE IN FACT NUMBER OF DECISIONS ON THIS ISSUE OF THE HON. SUPREME COURT OF INDIA AS WELL AS DIFFE RENT HIGH COURTS. ON AN OVERVIEW OF ALL THE CASE LAWS ON INSTANT ISSUE THE FOLLOWING EMERGES WHICH ARE RELEVANT TO DETERMINE THAT A PARTICULAR E XPENDITURE IS CAPITAL EXPENDITURE IN NATURE: - 4 - (A) WHEN EXPENDITURE IS INCURRED GIVING AN ADVANTAGE O F ENDURING BENEFIT SUCH EXPENDITURE IS ON CAPITAL AC COUNT; (B) WHERE THE EXPENDITURE IS INCURRED ON A FIXED CAPITA L IT IS ON CAPITAL ACCOUNT AND AS SUCH CAPITAL EXPENDITURE IN NATURE; (C) IF THE EXPENDITURE IS INCURRED FOR SUBSTANTIAL REP LACEMENT IT IS A CAPITAL EXPENDITURE. 3.4. THE ISSUE DEALT IN ASSESSEES OWN CASE BY THE HON. ITAT AHMEDABAD FOR ASSESSMENT YEAR 1997-98 IS NOT RELEVA NT HERE FOR THIS YEAR. AS IN THAT DECISION THE HON. ITAT HAD HELD TH AT BUILDING REPAIR AND MAINTENANCE EXPENSES BEING A SUM OF `.2 29 461/- AR E REVENUE EXPENDITURE. BUT IN THE INSTANT CASE THE ISSUES INV OLVED ARE EXPENDITURE INCURRED BY THE ASSESSEE ON BUILDING RESTRUCTURING AND RENOVATION EXPENSES OF `.21 28 406/- AND CARPETING AND FLOOR ING EXPENSES OF `.1 15 060/-. HENCE THE RATIO OF HON. ITAT AHMEDAB ADS DECISION IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 1997-98 IS NOT APPLICABLE IN THE PRESENT CASE. 3.5. IN VIEW OF THE ABOVE DISCUSSIONS AND FACTS OF THE CASE THE EXPENDITURE DEBITED TO PROFIT AND LOSS ACCOUNT OF B UILDING RESTRUCTURING AND RENOVATION EXPENSES OF `.21 28 406/- AND ON ACC OUNT OF CARPETING AND FLOORING EXPENSES OF `.1 15 060/- TREATING IT A S REVENUE EXPENDITURE IS NOT CORRECT. I HOLD THAT THE SUMS OF `.21 28 40 6/- AND `.1 15 060/- RESPECTIVELY DEBITED TO PROFIT AND LOSS ACCOUNT AR E CAPITAL EXPENDITURE AND AS SUCH NOT AN ALLOWABLE REVENUE EXPENDITURE U/ S. 37(1) OF THE I. T. ACT. THE SUMS OF `.21 28 406/- BEING BUILDING RESTR UCTURING AND RENOVATION EXPENSES AND `.1 15 060/- BEING CARPETIN G AND FLOORING EXPENSES ARE THEREFORE DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 9. ON APPEAL THE LD. COMMISSIONER OF INCOME TAX (A PPEALS) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. 10. BEFORE US THE AUTHORISED REPRESENTATIVE SUBMITT ED THAT NO EXTENSION OF BUILDING WAS UNDERTAKEN DURING THE YEAR AND THE EXP ENDITURE INCURRED WAS FOR REPAIRS ONLY. IN THE ALTERNATE SUBMISSION IT WAS S UBMITTED THAT IF THE EXPENDITURE IN QUESTION IS TREATED AS CAPITAL EXPEN DITURE THEN DEPRECIATION THEREON MUST BE ALLOWED TO THE ASSESSEE. HE ALSO R ELIED UPON THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE FOR ASSES SMENT YEAR 1997-98 IN ITA NO.566/AHD/2002 ORDER DATED 7 TH JULY 2006 WHEREIN EXPENDITURE IN THE NATURE OF REPLACEMENT OF FLOOR TILES WAS ALLOWED AS REVENU E EXPENDITURE. 11. ON THE OTHER HAND THE DEPARTMENTAL REPRESENTATI VE RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. - 5 - 12. WE FIND THAT NO MATERIAL WAS BROUGHT BEFORE US BY THE ASSESSEE TO SHOW THAT EXPENDITURES WERE NOT MADE FOR CONSTRUCTING NE W FALSE CEILING OR FOR CONSTRUCTING NEW LIFT WELL ETC. NO MATERIAL WAS BR OUGHT BEFORE US BY THE ASSESSEE TO SHOW THAT SIMILAR TO THE FACTS OF THE A SSESSMENT YEAR 1997-98 EXPENDITURE DURING THE YEAR WAS INCURRED FOR REPLAC ING OF FLOOR TILES ONLY DURING THE YEAR UNDER CONSIDERATION ALSO. NO MATERIAL WAS ALSO BROUGHT BEFORE US TO SHOW THAT ANY EXPENDITURE WAS INCURRED DURING THE Y EAR FOR REPAIR OF WORN OUT FLOOR DURING THE YEAR AND QUANTUM OF SUCH EXPENDITU RE. IN ABSENCE OF ANY MATERIAL BROUGHT BEFORE US TO SHOW THAT ANY AMOUNT WHICH WAS IN THE NATURE OF CURRENT REPAIRS WERE DEBITED UNDER THE HEAD WE DO N OT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE LD. COMMISSIONER O F INCOME TAX (APPEALS). FURTHER THE ORDER OF THE LD. COMMISSIONER OF INCOM E TAX (APPEALS) IS ALSO SUPPORTED BY THE AMENDMENT MADE IN SECTION 30 BY TH E FINANCE ACT 2003 W.E.F. 1 ST APRIL 2004 BY INSERTING THE FOLLOWING EXPLANATION :- FOR THE REMOVAL OF DOUBTS IT IS HEREBY DECLARED T HAT THE AMOUNT PAID ON ACCOUNT OF THE COST OF REPAIRS REFERRED TO IN SUB-S ECTION (I) AND THE AMOUNT PAID ON ACCOUNT OF CURRENT REPAIRS REFERRED TO IN SUB-SECTION (II) OF CLAUSE (A) SHALL NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EXPENDITURE. THE NOTES ON CLAUSES TO FINANCE BILL 2003 HAVE EXPL AINED THE ABOVE EXPLANATION AS UNDER:- CLAUSE 12 SEEKS TO AMEND SECTION 30 OF THE INCOME TAX ACT RELATING TO RENT RATES TAXES REPAIRS AND INSURANCE FOR BUILD INGS. UNDER THE EXISTING PROVISION CONTAINED IN SUB-CLAUS ES (I) AND (II) OF CLAUSE (A) OF THE SAID SECTION DEDUCTION FOR COST OF REPA IRS TO THE PREMISES OCCUPIED BY THE ASSESSEE AND THE AMOUNT PAID ON ACC OUNT OF CURRENT REPAIRS TO THE PREMISES OCCUPIED BY THE ASSESSEE O THERWISE THAN AS A TENANT IS ALLOWED. IT IS PROPOSED TO INSERT AN EXPLANATION AFTER CLAUS E (C) OF THE AFORESAID SECTION SO AS TO CLARIFY THAT THE AMOUNT PAID ON AC COUNT OF THE COST OF REPAIRS AND THE AMOUNT PAID ON ACCOUNT OF CURRENT R EPAIRS SHALL NOT INCLUDE ANY EXPENDITURE IN THE NATURE OF CAPITAL EX PENDITURE. THIS AMENDMENT WILL TAKE EFFECT FROM 1 ST APRIL 2004 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YE AR 2004-05 AND SUBSEQUENT YEARS. HOWEVER WE FIND FORCE IN THE ALTERNATE SUBMISSION OF THE ASSESSEE THAT DEPRECIATION ON THE ABOVE CAPITAL EXPENDITURE SHOUL D HAVE BEEN ALLOWED TO THE - 6 - ASSESSEE. WE THEREFORE MODIFY THE ORDERS OF THE LOW ER AUTHORITIES TO THE ABOVE EXTENT AND DIRECT THE ASSESSING OFFICER TO ALLOW DE PRECIATION ON THE ABOVE CAPITAL EXPENDITURE AS PER LAW. THUS THIS GROUND OF APPEAL OF THE ASSESSEE IS PARTLY ALLOWED AS ABOVE. 13. GROUND NO.3 OF THE APPEAL OF THE ASSESSEE IS DI RECTED AGAINST DISALLOWANCE OF 10% OUT OF VEHICLE EXPENSES. 14. AT THE TIME OF THE HEARING THE LD. AUTHORISED R EPRESENTATIVE OF THE ASSESSEE DID NOT MAKE ANY SUBMISSION ON THE ABOVE G ROUND OF APPEAL. THEREFORE THE SAME IS DISMISSED FOR WANT OF PROSEC UTION. 15. IN THE RESULT APPEAL OF THE ASSESSEE FOR ASSES SMENT YEAR 2005-06 IS ALLOWED AND THAT FOR THE ASSESSMENT YEAR 2006-07 IS PARTLY ALLOWED. ORDER SIGNED DATED AND PRONOUNCED IN THE COURT ON 7 TH DAY OF JANUARY 2011. SD/- S D/- (T.K (T.K (T.K (T.K. . . . SHARMA) SHARMA) SHARMA) SHARMA) ( N.S. SAINI ( N.S. SAINI ( N.S. SAINI ( N.S. SAINI ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER A AA ACCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER CCOUNTANT MEMBER DATED: AHMEDABAD 7 TH DAY OF JANUARY 2011. COMPILED AND COMPARED BY: PATKI COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT (APPEALS)-XV AHMEDABAD. 5. THE DR AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER //TRUE COPY// (DY./ASSTT.REGISTRAR) ITAT AHMEDABAD - 7 - ` DATE INITIALS 1. DRAFT DICTATED ON 5-1-2011 --------------- ---- 2. DRAFT PLACED BEFORE AUTHORITY 6-1-2011 ------ ------------- 3. DRAFT PROPOSED & PLACED 6-1-2011 ------ ------------- JM BEFORE THE SECOND MEMBER 4. DRAFT DISCUSSED/APPROVED 6-1-2011 ----------- -------- JM/AM BY SECOND MEMBER 5. APPROVED DRAFT COMES TO P.S ---------------- -- ------------------ 6. KEPT FOR PRONOUNCEMENT ON ---------------- --- ----------------- 7. FILE SENT TO THE BENCH CLERK ---------------- -------------------- 8. DATE ON WHICH FILE GOES TO THE ---------------- -------------------- 9. DATE OF DISPATCH OF ORDER ---------------- --- ------------------