DCIT (LTU), New Delhi v. M/s. Indian Railway Finance Corporation Ltd., New Delhi

ITA 5860/DEL/2012 | 2004-2005
Pronouncement Date: 11-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 586020114 RSA 2012
Bench Delhi
Appeal Number ITA 5860/DEL/2012
Duration Of Justice 10 month(s) 20 day(s)
Appellant DCIT (LTU), New Delhi
Respondent M/s. Indian Railway Finance Corporation Ltd., New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted C
Tribunal Order Date 11-10-2013
Date Of Final Hearing 30-09-2013
Next Hearing Date 30-09-2013
Assessment Year 2004-2005
Appeal Filed On 21-11-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C: NEW DELHI) BEFORE SHRI RAJ PAL YADAV JUDICIAL MEMBER AND SHRI T. S. KAPOOR ACCOUNTANT MEMBER ITA NO.5860/DEL/ 2012 (ASSESSMENT YEAR : 2004-05) DCIT (LTU) VS. INDIAN RAILWAY FINANCE CORPORATION LTD. LTU NBCC PLZZA EAST TOWER UG FLOOR PUSHP VIHAR SECTOR-III NBCC PLACE BHISHAM PITAMA H MARG LODHI ROAD NEW DELHI. NEW DELHI. PAN:AAAC10681C ASSESSEE BY : SHRI K.SAMPATH ADV. REVENUE BY :SHRI R.S. GILL CIT. DR ORDER PER T.S. KAPOOR AM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XV NEW DELHI DATED 04.09.2012 FOR THE ASSESSMENT YEAR 2004-05. THE GROUNDS TAKEN BY THE REVENUE ARE AS UNDER: 1. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN ALLOWING APPEAL OF THE ASS ESSEE IN RESPECT OF ADDITION OF RS.1213.39 CRORES MADE BY TH E ASSESSING OFFICER ON ACCOUNT OF CAPITAL RECOVERY ON LEASED ASSETS. 2. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF ITA NO.5860/DEL/2012 2 RS.1 94 652/- MADE BY ASSESSING OFFICER TO BOOK PRO FIT U/S 115JB ON ACCOUNT OF PROVISION FOR GRATUITY. 3. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.6 89 163/- MADE BY ASSESSING OFFICER TO BOOK PRO FIT U/S 115JB ON ACCOUNT OF PROVISION FOR LEAVE ENCASHMENT. 4. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.8 57 50 252/- MADE BY ASSESSING OFFICER ON ACCOU NT OF DISALLOWANCE OF BOND ISSUE EXPENSES. 5. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.24 35 621/- MADE BY ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF PRIOR PERIOD EXPENSES. 6. ON THE FACTS AND THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN DELETING THE ADDITION OF RS.1 70 66 694/- MADE BY ASSESSING OFFICER ON ACCOU NT OF DISALLOWANCE OF DEPRECIATION ON FOREIGN CURRENCY FL UCTUATION CAPITALIZED. 7. THE APPELLANT CRAVES LEAVE TO ADD TO ALTER AMEND OR VARY FROM THE ABOVE GROUNDS OF APPEAL AT OR BEFORE THE T IME OF HEARING. 2. AT THE OUTSET THE LD. AR SUBMITTED THAT APPEAL FILED BY REVENUE IS PARTLY COVERED IN FAVOUR OF ASSESSEE VIDE EARLIER O RDER OF TRIBUNAL FOR THE ASSESSMENT YEAR 1997-98 TO 2000-2001 2003-04 2005 -06. HE HIGHLIGHTED OUR ATTENTION TO A CHART FILED EARLIER WHEREIN GROU ND WISE OBSERVATIONS OF ASSESSING OFFICER AND CIT (A) ALONG WITH TRIBUNALS FINDINGS FOR EARLIER YEARS WERE PLACED. IT WAS SUBMITTED THAT GROUND NO. 1 4 AND 5 WERE COVERED ITA NO.5860/DEL/2012 3 IN FAVOUR OF ASSESSEE BY THESE TRIBUNALS ORDER WH EREAS GROUND NO.2 3 AND 6 THOUGH WERE NOT COVERED BUT CIT (A) HAD ALLOWED THE SE GROUNDS. 3. THE LD. DEPARTMENTAL REPRESENTATIVE CONCEDED TO THE FACTS OF THE CASE HOWEVER WITH REGARD TO GROUND NO.2 AND 3 THE LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THESE WERE PROVISIONS FOR LEAVE ENCASHMENT AND GRATUITY AND THEREFORE WERE RIGHTLY ADDED TO THE COMPUTATION OF INCOME U/S 155JB OF THE ACT. REGARDING GROUND NO.6 HE ARG UED THAT ASSESSING OFFICER HAD RIGHTLY MADE THE ADDITION ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON CAPITALIZED VALUE OF FOREIGN CURREN CY FLUCTUATION AND LD. CIT (A) HAS WRONGLY HELD THAT THE ISSUES RELATED TO EARLIER YEAR. 4. THE LD. AR ARGUING GROUND NO.2 AND 3 SUBMITTED T HAT THESE ARE NOT PROVISIONS AND RATHER THESE WERE ASCERTAINED LIABIL ITIES AND THEREFORE WERE RIGHTLY DELETED BY LD. CIT (A). HE FURTHER SUBMITTE D THAT ISSUES WERE FAIRLY COVERED IN FAVOUR OF ASSESSEE AND RELIED UPON THE F OLLOWING CASE LAWS: 1) 336 ITR 054 (DEL) IN THE CASE OF CIT VS. I L PEA PARAMOUNT (PVT.) LTD. 2) 314 ITR 055 (DEL) IN THE CASE OF CIT VS. HEWLET PACKARD INDIA (PVT.) LTD. 3) 251 ITR 015 (BOM) IN THE CASE OF CIT VS. ECHJAY FORGINGS (PVT.) LTD. 4) 323 ITR 344 (MAD) IN THE CASE OF CIT VS. PANASON IC HOME APPLIANCES. IT WAS FURTHER SUBMITTED THAT DURING ASSESSMENT Y EAR 2002-03 THE COD PERMISSION WAS NOT GIVEN TO DEPARTMENT FOR FILING A PPEAL ON THESE GROUNDS ITA NO.5860/DEL/2012 4 AND THEREFORE SUBMITTED THAT THESE TWO GROUNDS AR E DULY COVERED IN FAVOUR OF ASSESSEE. 5. AS REGARDS GROUND NO.6 THE LD. AR SUBMITTED THA T LD. CIT (A) HAD DELETED THIS ADDITION AS HE HELD THAT IT DID NOT BE LONG TO THE YEAR UNDER CONSIDERATION ON THE BASIS THAT FOREIGN CURRENCY FL UCTUATION LOSS WAS CAPITALIZED IN THE ASSESSMENT YEAR 2001-02 AND DEPR ECIATION WAS BEING CLAIMED BY ASSESSEE ON THIS CAPITALIZED AMOUNT. HE FURTHER SUBMITTED THAT ASSESSEE COULD HAVE CLAIMED THE WHOLE AMOUNT OF LOS S ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN VIEW OF VARIOUS DECISIONS I N FAVOUR OF ASSESSEE AND SUPPORTED HIS CASE WITH THE FOLLOWING DECISIONS: 1) OIL & NATURAL GAS CORPORATION OF INDIA LTD. VS. CIT REPORTED IN 322 ITR 180 (SC) 2) CIT VS. WOODWARD GOVERNOR INDIA (PVT.) LTD. REPORTE D IN 294 ITR 451 (DEL) AFFIRMED IN 312 ITR 254 (SC). 3) CIT VS. BANK OF INDIA REPORTED IN 218 ITR 371(B OM). HE FURTHER SUBMITTED THAT ISSUE OF ALLOWABILITY OF DEPRECIATION ON CAPITALIZED FOREIGN EXCHANGE FLUCTUATION WAS FURTHER COVERED IN FAVOUR OF ASSESSEE BY 1) 332 ITR 322 (P&H) IN THE CASE OF CIT VS. NATION AL HYDROELECTRIC POWER CORPN. LTD. 2) 327 ITR 142 ( P &H) IN THE CASE OF CIT VS. ARIHA NT COTSYN LTD. 3) 286 ITR 341 (BOM) IN THE CASE OF ASSOCIATED BEAR ING CO. LTD. VS. CIT 4) 229 ITR 203 (MAD) IN THE CASE OF CIT VS. SOUTH I NDIA VISCOSE LTD. ITA NO.5860/DEL/2012 5 5) 219 ITR 178 (BOM) IN THE CASE OF CIT VS. TATA HY DRO ELECTRIC SUPPLY COMPANY LTD. 6. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND HAVE GONE THROUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT FIRST GROUND OF APPEAL IS COVERED IN FAVOUR OF ASSESSEE BY TRIBUNALS ORDER I N ITA NOS. 699 359 3357 AND 2109 FOR ASSESSMENT YEAR 1997-1998 TO 2000 -200 1 VIDE ORDER OF TRIBRUNAL DATED 08.08.2008. THE RELEVANT FINDINGS O F HONBLE TRIBUNAL IN THESE APPEALS ARE AS UNDER: THE CHART FOR 30 YEARS OF OPENING BALANCE IN THE P RESENT YEAR I.E. A. Y. 1997-98 IS SUBMITTED BY THE LD. AR OF TH E ASSESSEE. AS PER THE SAME OPENING BALANCE OF LEASED ASSETS I S RS.126 256.37 LACS RATE OF DEPRECIATION AS PER COM PANIES ACT IS 4.75% AND RATE OF INTEREST IS 14.97%. THE TOTAL FO R 30 YEARS OF DEPRECIATION IS RS.126 256.42 LACS AND FINANCE INCO ME IS RS.157 820.46 LACS. TOTAL OF CAPITAL RECOVERY IS RS .126 256.37 LAKHS AND TOTAL OF LEASE EQUALIZATION IS NIL. SINCE IN THE PRESENT CASE ALSO AS PER THIS CHART EVEN AFTER DE DUCTION OF FINANCE INCOME 14.97% PA. THE FULL VALUE OF THE CO ST OF ASSETS I.E. RS.162 256.37 LACS IS FULLY RECOVERED IN LEAS E PERIOD OF 30 YEARS AND HENCE IT IS A CASE OF FINANCE LEASE AS P ER THE GUIDELINES ISSUED BY ICAI. IN THE LIGHT OF VARIOUS JUDICIAL PRONOUNCEMENTS CITED BY LD. AR OF THE ASSESSEE WE FIND NO REASON FOR NOT ACCEPTING THE BASIS AS SUGGESTED BY ICAI IN THESE GUIDELINES FOR DECIDING THE CHARACTER OF LEASE IN T HE PRESENT CASE AS FINANCE LEASE. HOWEVER THE ASSESSEE COMPANY HAS GIVEN THIS CHART FOR OPENING VALUE OF LEASE ASSETS IN THE ASSE SSMENT YEAR 1997-98 WHICH IS EXAMINED BY US. SIMILAR CHARGE FO R ASSETS GIVEN ON LEASE DURING A. Y. 1997-98 AND IN SUBSEQUE NT YEARS IS NOT FURNISHED TO US. HENCE THE ASSESSING OFFICER S HOULD VERIFY THOSE CHARTS AND IF THIS CONDITION IS SATISFIED AL L THOSE TRANSACTIONS SHOULD ALSO BE ACCEPTED AS FINANCE LEA SE TRANSACTIONS. ITA NO.5860/DEL/2012 6 7. THE ISSUE INVOLVED IN THE PRESENT APPEAL VIDE GR OUND NO.1 BEING SAME WE RESPECTFULLY FOLLOWING THE ABOVE ORDER OF TRIBUN AL RESTORE GROUND NO.1 TO THE OFFICE OF ASSESSING OFFICER TO DO THE NEEDFUL A S PER DIRECTIONS OF EARLIER TRIBUNAL ORDER. 8. GROUND NO.4&5 REGARDING DISALLOWANCE OF BOND EX PENSES IS COVERED IN FAVOUR OF ASSESSEE VIDE TRIBUNALS ORDER RELATIN G TO ASSESSMENT YEAR 1997- 98 TO 2000-2001& HONBLE TRIBUNAL HAS HELD AS UNDER : IT IS SUBMITTED BY LD. AR OF THE ASSESSEE BEFORE U S THAT THIS ISSUE IS NOW COVERED IN FAVOUR OF THE ASSESSEE BY T HE JUDGMENT OF HONBLE JURISDICTIONAL HIGH COURT RENDERED IN TH E CASE OF CIT VS. KHIRNANI CHEMICALS LTD. AS REPORTED IN 290 ITR 196 (DEL) RELIANCE WAS ALSO PLACED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT RENDERED IN THE CASE OF VIT VS. S OUTH INDIA CORPORATION AS REPORTED IN 290 ITR 217. IT WAS SUBM ITTED THAT IN THE CASE HONBLE HIGH COURT HAS DECIDED SIMILAR ISSUE IN FAVOUR OF THE ASSESSEE AFTER CONSIDERING CBDT CIRCU LARNO. 56 DATED 19/03/1971. LD. DEPARTMENTAL REPRESENTATIVE OF THE REVENUE SUPP ORTED THE ORDERS OF THE AUTHORITIES BELOW: WE HAVE HEARD THE SUBMISSIONS OF BOTH THE PARTIES A ND PERSUED THE MATERIAL AVAILABLE ON RECORD AND HAVE GONE THRO UGH THE ORDERS OF THE AUTHORITIES BELOW AND THE JUDGMENT CI TED BY LD. AR OF THE ASSESSEE. WE FIND THAT IN THE CASE OF M/S KHIRANI CHEMICALS LTD. (SUPRA) THE ISSUE BEFORE HONBLE DE LHI HIGH COURT WAS REGARDING EXPENSES INCURRED ON ISSUE OF D EBENTURES. IN THAT CASE ALSO THE ASSESSEE CLAIMED DEDUCTION O F THE ENTIRE EXPENSES IN THE YEAR OF ISSUE OF DEBENTURE WHEREAS THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE E XPENDITURE WOULD QUALIFY ONLY FOR AMORTIZATION U/S 35D OF THE IT ACT. UNDER THESE FACTS IT WAS HELD BY HONBLE DELHI HIG H COURT THAT THE TRIBUNAL WAS PERFECTLY JUSTIFIED IN HOLDING THA T THE ITA NO.5860/DEL/2012 7 EXPENDITURE WAS A PERMISSIBLE DEDUCTION AND ACCORDI NGLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. SINCE THE FACTS IN THE PRESENT CASE ARE SIMILAR WE DECIDE TH IS ISSUE IN THE PRESENT CASE ALSO IN FAVOUR OF THE ASSESSEE BY FOLL OWING THE JUDGMENT OF HONBLE DELHI HIGH COURT. GROUND NO.2 O F THE ASSESSSEES APPEAL IN ALL THE FOUR YEARS STAND ALLO WED. SINCE THE ISSUE REMAINS SAME IN THE PRESENT YEAR T HEREFORE RESPECTFULLY FOLLOWING THE ABOVE TRIBUNAL ORDER WE DISMISS GROUND NO.4 ALSO. 9. SIMILARLY GROUND NO.5 IS COVERED IN FAVOUR OF AS SESSEE VIDE TRIBUNALS ORDER FOR ASSESSMENT YEAR 2002-03 WHEREIN AT PAGE 3 AT PARA 9 THE HONBLE TRIBUNAL HAS HELD AS UNDER: WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE ABOUT THE ALLOWABILITY OF EXPENSES. ONLY DISPUTE IS REGARDING THE YEAR OF ALLOWABILITY. IF THE ASSESSING OFFICER IS OF THE VIEW THAT THE EXPENSES ARE PERTAINING TO THE PRIOR PERIO D THE SAME ARE REQUIRED TO BE CONSIDERED FOR THE PRIOR PERIOD AND ALLOWED IN THAT YEAR. IF IT IS FOUND THAT THE EXPENSES ARE ALL OWABLE IN THIS YEAR ON THE BASIS OF CRYSTALLIZATION OF LIABILITY THE SAME MAY BE CONSIDERED IN THE YEAR UNDER APPEAL. THE ASSESSEE I S THEREFORE DIRECTED TO PLACE NECESSARY EVIDENCE IN SUPPORT OF CLAIM OF EXPENSES. THE ASSESSING OFFICER ON APPRECIATION OF EVIDENCE MAY DETERMINE THE YEAR OF ALLOWABILITY AND ALLOW TH E SAME IN EITHER OF THE YEARS. 10. SINCE THE ISSUE INVOLVED IN THE PRESENT YEAR IS SAME THEREFORE RESPECTFULLY FOLLOWING THE ABOVE TRIBUNALS ORDER WE DIRECT THE ASSESSING OFFICER TO DETERMINE THE ALLOWABILITY OF THE EXPENS ES IN EITHER OF THE YEARS ITA NO.5860/DEL/2012 8 AND ALLOW ACCORDINGLY IN THE YEAR TO WHICH IT PERTA INS. THE ASSESSING OFFICER SHOULD ADOPT THE SAME BASIS AS WAS ADOPTED BY HIM I N THE EARLIER YEAR. 11. AS REGARDS GROUND NO.2 REGARDING DELETION OF R S.1 94 652/- MADE BY ASSESSING OFFICER TO BOOK PROFITS ON ACCOUNT OF PRO VISIONS OF GRATUITY WE FIND THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR O F ASSESSEE AS GRATUITY IS NOT MERELY A PROVISION BUT IT IS AN ASCERTAINED LIABILI TY. THE VARIOUS CASE LAWS RELIED UPON BY LD. AR ALSO SUPPORTS THE CASE OF ASS ESSEE. THEREFORE GROUND NO.2 IS ALSO DISMISSED. 12. AS REGARDS GROUND NO.3 REGARDING DELETION MADE BY CIT (A) ON ACCOUNT OF PROVISIONS FOR LEAVE ENCASHMENT WE FIND THAT IT IS ALSO AN ASCERTAINED LIABILITY AND NOT MERELY PROVISIONS AND THEREFORE LD. CIT (A) HAD RIGHTLY DELETED THE ADDITION. THE CASE LAW RELI ED UPON BY LD. AR ALSO SUPPORTS THE CASE OF ASSESSEE. 13. NOW COMING TO GROUND NO.6 REGARDING DEPRECIATI ON ON CAPITALIZED FOREIGN EXCHANGE FLUCTUATION WE FIND THAT ASSESSEE HAD CAPITALIZED LOSS ON ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION AND HAS BEE N CLAIMING DEPRECIATION ON THE CAPITALIZED PORTION. THOUGH THE LD. CIT (A) HAD DELETED THE ADDITION CONSIDERING IT TO BE NOT RELATING TO THE YEAR UNDER CONSIDERATION YET THE FACT REMAINS THAT DEPRECIATION ON CAPITALIZED LOSS ON AC COUNT OF FOREIGN EXCHANGE FLUCTUATION IS A REVENUE EXPENDITURE ALLOWABLE UNDE R THE PROVISIONS OF ACT ITA NO.5860/DEL/2012 9 AND ASSESSEES CASE IS FULLY SUPPORTED BY JUDICIAL PRONOUNCEMENTS RELIED UPON BY HIM. THEREFORE GROUND NO.6 IS ALSO DISMISS ED. GROUND NO.7 IS GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATI ON. IN VIEW OF THE ABOVE THE APPEAL FILED BY REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 11/10/ 2013 SD/- SD/- (RAJ PAL YADAV) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 11TH DAY OF OCTOBER 2013 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT) NEW DELHI. AR ITAT NEW DELHI.