Jai Surgical Ltd., New Delhi v. DCIT, New Delhi

ITA 3898/DEL/2011 | 2008-2009
Pronouncement Date: 30-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 389820114 RSA 2011
Assessee PAN AAACJ0771A
Bench Delhi
Appeal Number ITA 3898/DEL/2011
Duration Of Justice 7 month(s) 6 day(s)
Appellant Jai Surgical Ltd., New Delhi
Respondent DCIT, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 30-03-2012
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted D
Tribunal Order Date 30-03-2012
Date Of Final Hearing 28-03-2012
Next Hearing Date 28-03-2012
Assessment Year 2008-2009
Appeal Filed On 23-08-2011
Judgment Text
ITA NO. 3898/DEL/2011 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D NEW DELHI BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI SHAMIM YAHYA ACCOUNTANT MEMBER I.T.A. NO. 3898/DEL/2011 A.Y. : 2008-09 M/S JAI SURGICAL LTD. C/O M/S VINAY MALIK & CO. CA 232 DDA COMMERCIAL COMPLEX PHASE-I JHANDEWALAN EXTENSION NEW DELHI 110 055 (PAN : AAACJ0771A) VS. DY. COMMISSIONER OF INCOME TAX CIRCLE 4(1) CR BUILDING IP ESTATE NEW DELHI 110002 (APPELLANT ) (APPELLANT ) (APPELLANT ) (APPELLANT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) (RESPONDENT ) ASSESSEE BY : SH. SANJAY JAIN CA DEPARTMENT BY : MS. Y. KAKKAR SR. D.R. ORDER ORDER ORDER ORDER PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VII NEW DELH I DATED 02.6.2011 PERTAINING TO ASSESSMENT YEAR 2008-09. 2. THE GROUNDS RAISED READ AS UNDER:- 1. THAT THE ASSESSING OFFICER AS WELL AS THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAVE ERRED IN LAW AND FACTS IN MAKING AN ADDITION OF 83 651.00 UNDER SECTION 14A OF THE IT ACT. ITA NO. 3898/DEL/2011 2 2. THAT THE AUTHORITIES BELOW HAVE ERRED IN MAKING ADDITIONS U/S. 14A WITHOUT ESTABLISHING ANY NEXUS BETWEEN INVESTMENT AND EXPENDITURE ON INTEREST. 3. THAT THE INVESTMENT HAVING BEEN MADE OUT OF OWN FUNDS THE ADDITION U/S. 14A IS NOT JUSTIFIED AND IS AGAINST THE PROVISION OF THE LAW. 4. THAT THE ASSESSING OFFICER HAS ERRED IN DISALLO WANCE OF A SUM OF ` 17 10 647.00 OUT OF TOTAL EXPENDITURE OF ` 19 82 190.00 ON REPAIRS TO BUILDING AND HOLDING T HEM TO BE CAPITAL EXPENSES. 5. THAT THE DISALLOWANCE OF EXPENDITURE ` 17 10 647 .00 WITHOUT ESTABLISHING THAT SUCH EXPENSES HAS RESULTE D IN BRINGING INTO EXISTENCE IN A NEW ASSETS OR ANY BENEFIT OF ENDURING NATURE IS BAD AND OPPOSED TO T HE LAW. 6. YOUR ASSESSEE CRAVES LEAVE TO ADD AMEND OR ALTE R OR FORGO ANY OF THE ABOVE GROUNDS AT THE TIME OF HEARING. 3. IN THIS CASE ASSESSING OFFICER NOTED THAT ASS ESSEE HAD MADE INVESTMENT INCOME WHICH DOES NOT AND SHALL NOT FORM PART OF TAXABLE INCOME. ASSESSING OFFICER FURTHER NOTED ON PERUS AL OF PROFIT AND LOSS ACCOUNT IT WAS OBSERVED THAT THE ASSESSEE COMPANY H AS RECEIVED DIVIDEND INCOME OF ` 4650/-. ASSESSEE WAS ASKED T O SHOW CAUSE AS TO WHY DISALLOWANCE U/S. 14A READ WITH RULE 8D SHOUL D NOT BE MADE. ITA NO. 3898/DEL/2011 3 ASSESSING OFFICER DID NOT FIND ASSESSEES SUBMISSIO NS IN THIS REGARD CONVINCING. HE HELD THAT HE WAS OF THE OPINION T HAT INTEREST EXPENSE OF ` 80 03 817/- ARE NOT DIRECTLY ATTRIBUTABLE TO A NY PARTICULAR INCOME OR RECEIPT AND THAT FOR MAINTAINING SUCH INVESTMENT S AND OTHER INVESTMENT RELATED ACTIVITIES ADMINISTRATIVE EXPEN SES ARE ATTRIBUTABLE TO THEM. ACCORDINGLY HE WORKED OUT DISALLOWANCE U/S. 14A READ WITH RULE 8D OF ` 5 91 382/- AND DISALLOWED THE SAME AND A DDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT THE ISSUE INVOLVED IN THE APPEA L WAS CONSIDERED BY THE ITAT DELHI BENCH IN THE CASE OF CHEMINVEST LTD. VS. ITO (2009) 121 ITD 318 (DELHI). LD. COMMISSIONER OF INCOME TAX (APPEALS) FURTHER REFERRED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF C.I.T. VS. M/S WALFORT SHARE AND STOCK BROKERS PVT. LTD. (2 010) TIOL-47-SC-IT AND ALSO REFERRED THE DECISION OF THE HONBLE MUMBAI HIGH COURT IN THE CASE OF GODREJ BOYCE MANUFACTURING CO. LTD. MUMBAI V S. DCIT (2010) 234 CTR (BOM) 1. CONSIDERING THESE DECISIONS LD. COMMISSIONER OF INCOME TAX (APPEALS) HELD THAT ASSESSING OFFICER W AS JUSTIFIED IN APPLYING RULED 8D IN THE PRESENT CASE FOR QUANTIFYI NG THE DISALLOWANCE U/S. 14A. LD. COMMISSIONER OF INCOME TAX (APPEALS) FU RTHER OBSERVED THAT DISALLOWANCE IN THIS REGARD HAS TO BE DETERMINE D HAVING REGARDING ITA NO. 3898/DEL/2011 4 TO THE ACCOUNTS OF THE ASSESSEE. LD. COMMISSIONER O F INCOME TAX (APPEALS) NOTED THAT ASSESSEE SUBMITTED A DETAILED W ORKING SHOWING THAT INTEREST AMOUNTING TO ` 41 80 589/- COULD BE C ONSIDERED FOR DISALLOWANCE U/S. 14A OF THE ACT ON THE BASIS OF WH ICH THE DISALLOWANCE U/S. 14A HAS BEEN WORKED OUT AT ` 83 651/-. LD. C OMMISSIONER OF INCOME TAX (APPEALS) FOUND THE WORKING TO BE R EASONABLE. HENCE THE DISALLOWANCE OF ` 83 651/- IN TERMS OF SECTIO N 14A OF THE ACT READ WITH RULE 8D OF THE IT RULES 1962 IS CONFIRMED. 5. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 6. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT OF THE MATERIAL PRODUCED AND PRECEDENTS RELIED UPON. LD. COUNSEL OF THE ASSESSEE CONTENDED THAT ASSESSEE HAS SUFFICIENT SURPLUS FUND S WHICH WAS USED FOR INVESTMENTS MADE IN SHARES FOR EARNING DIVIDEN D. HENCE NO DISALLOWANCE IS CALLED FOR IN THIS REGARD. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND RELIED UPON THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS). WE HAVE CAREF ULLY CONSIDERED THE SUBMISSIONS AND PERUSED THE RECORDS. WE FIND THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS MADE A DISAL LOWANCE ON THE BASIS OF THE WORKING SUBMITTED BY THE ASSESSEE. IN THESE CIRCUMSTANCES IN OUR CONSIDERED OPINION ASSESSEE S HOULD NOT HAVE ANY GRIEVANCE IN THIS REGARD. HENCE IN OUR CON SIDERED OPINION LD. ITA NO. 3898/DEL/2011 5 COMMISSIONER OF INCOME TAX (APPEALS) HAS PASSED A RE ASONABLE ORDER WHICH DOES NOT NEED ANY INTERFERENCE ON OUR PART HENCE WE AFFIRM THE SAME. 7. APROPOS DISALLOWANCE OF ` 17 10 647/- ON THIS ISSUE ASSESSING OFFICER OBSERVED THAT THA T ASSESSEE HAS DEBITED A SUM OF ` 19 82 190/- UNDER THE HEAD REPA IR TO BUILDING. ASSESSEE WAS ASKED TO FURNISH THE DETAILS OF REPAIR TO BUILDING. ASSESSEE WAS ALSO ASKED TO FURNISH THE BILLS OF REP AIRS ABOVE ` 15 000/-. IN SUPPORT OF THIS CLAIM ASSESSEE COMPANY SUBMITTED THE COPY OF LEDGER ACCOUNT AND BILLS. ASSESSING OFFICER ON PERUSAL OF THE ABOVE BILLS FOUND THAT THE SAME WERE FOR BUILDING MATERIAL TEAK WOOD EXPENSIVE SANITARY WARE EXPENSIVE LIGHTING SILK F URNISHINGS SPRING MATTRESSES HANDMADE WOOLEN CARPETS EXPENSIVE TILES ETC. ASSESSING OFFICER OPINED THAT EXPENDITURE INCURRED BY THE AS SESSEE WAS NOT REVENUE IN NATURE BUT IT WAS CAPITAL IN NATURE AND WHICH HAS BEEN INCURRED ON THE ACQUIRING OR BRINGING INTO EXISTENC E ON ASSET OR ADVANTAGE OF ENDURING BENEFIT. HENCE THE EXPEND ITURE OF ` 17 10 647/- WAS DISALLOWED AND ADDED BACK TO THE TO TAL INCOME OF THE ASSESSEE. ITA NO. 3898/DEL/2011 6 8. UPON ASSESSEES APPEAL LD. COMMISSIONER OF INCOME TAX (APPEALS) CONFIRMED THE ADDITION. 9. AGAINST THE ABOVE ORDER THE ASSESSEE IS IN APPEA L BEFORE US. 10. WE HAVE HEARD THE RIVAL CONTENTIONS IN LIGHT O F THE MATERIAL PRODUCED AND PRECEDENT RELIED UPON. LD. COUNSEL O F THE ASSESSEE CLAIMED THAT THE ENTIRE REPAIR AND MAINTENANCE HAS BE EN DONE IN THE REVENUE FIELD. IT WAS DONE TO MAINTAIN 25 YEARS OL D BUILDING STRUCTURE. IT WAS CLAIMED THAT THE ASSESSEE IS ENGAGED IN THE B USINESS OF EXPORTS FOREIGN CLIENTS ALSO VISITED ASSESSEES PREMISES. S O ASSESSEE HAS TO KEEP THE PREMISES IN THE MODERN STAGE. UNDER THE CIR CUMSTANCES ASSESSEE HAS INCURRED VARIOUS EXPENSES WHICH ARE IN THE NATURE OF REPAIR TO BUILDING. THE BREAK-UP OF THE EXPENSES IS AS FOLLOWS:- A) WOOD & PLY - ` 422354.40 B) BLDG. MATERIAL - ` 79140.00 C) LABOUR - ` 66373.00 D) FURNISHING - ` 214045.68 E) SANITARY FITTINGS - ` 35722.00 F) HARDWARE - ` 355941.18 G) ELECTRICAL - ` 71140.50 H) PAINT - ` 361844.00 I) MISC. - ` 63889.00 J) STEEL - ` 40200.00 TOTAL TOTAL TOTAL TOTAL - -- - ` 1710649.76 ` 1710649.76 ` 1710649.76 ` 1710649.76 10.1 LD. COUNSEL OF THE ASSESSEE HAS ALSO SUBMITTED COPIES OF BILLS OF EXPENDITURE WHICH ARE INCORPORATED IN PAP ER BOOK PAGE NO. 33 ITA NO. 3898/DEL/2011 7 TO 97 AND COPY OF LEDGER ACCOUNT WHICH IS INCORPOR ATED IN PAPER BOOK PAGE NO. 23-32. UPON CAREFUL CONSIDERATION IN OUR CONSIDERED OPINION THE IMPUGNED EXPENDITURE CANNOT BE CLASSIFIED AS CAP ITAL EXPENDITURE. THE SAME ARE REVENUE IN NATURE AND IN THIS CONTEXT T HE STATEMENT OF THE LD. COUNSEL OF THE ASSESSEE HAS CONSIDERABLE CO GENCY THAT THE ASSESSEE HAS TO MAINTAIN AND KEEP ITS PREMISES IN A MODERN STAGE AS IT HAS TO DEAL WITH THE FOREIGN CLIENTS. UNDER THE CI RCUMSTANCES IN OUR CONSIDERED OPINION THE ORDERS OF THE AUTHORITIES B ELOW ON THIS ISSUE IS TO BE REVERSED AND ASSESSEES CLAIM IS TO BE ALLOWED . HENCE WE SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND DECID E THE ISSUE IN FAVOUR OF THE ASSESSEE. WE HOLD THAT THE ABOVE EXPENDITU RE IS TO BE CLASSIFIED AND ALLOWED AS REVENUE EXPENDITURE. 11. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 30/3/2012. 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 30/3/2012 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