ACIT, CHENNAI v. M/s. MEC International Pvt Ltd., CHENNAI

ITA 595/CHNY/2011 | 2003-2004
Pronouncement Date: 29-03-2012 | Result: Partly Allowed

Appeal Details

RSA Number 59521714 RSA 2011
Assessee PAN AAACM6504C
Bench Chennai
Appeal Number ITA 595/CHNY/2011
Duration Of Justice 11 month(s) 29 day(s)
Appellant ACIT, CHENNAI
Respondent M/s. MEC International Pvt Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-03-2012
Appeal Filed By Department
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 29-03-2012
Date Of Final Hearing 14-03-2012
Next Hearing Date 14-03-2012
Assessment Year 2003-2004
Appeal Filed On 31-03-2011
Judgment Text
IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH CHENNAI. BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD JUDICIAL MEMBER I.T.A. NO. 595/MDS/2011 ASSESSMENT YEAR: 2003-04 THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE IV(3) AAYAKAR BHAVAN MAIN BUILDING IV FLOOR 121 M.G. ROAD NUNGAMBAKKAM CHENNAI 600 034. VS. M/S. MEC INTERNATIONAL PVT. LTD. OLD NO. 37 NEW NO. 6 ARCOT ROAD VADAPALANI CHENNAI 600 026. [PAN: AAACM6504C] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB ADDL. CIT ASSESSEE BY : SHRI. T. BANUSEKAR C.A. DATE OF HEARING : 14.03.2012 DATE OF PRONOUNCEMENT : 29.03.2012 ORDER PER CHALLA NAGENDRA PRASAD JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST O RDER OF THE CIT(A) V CHENNAI DATED 22.12.2010 IN ITA NO. 456/05-06 FO R THE ASSESSMENT YEAR 2003 04. SHRI SHAJI P. JACOB ADDL. CIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI T. BANUSEKAR C.A. REPRESENTED ON BEHALF OF THE ASSESSEE. THE ISSUES ARE COMMON IN BOTH THE APPEALS . 2. THE DEPARTMENT RAISED SEVERAL GROUNDS IN THIS A PPEAL AND THE FIRST GROUND IN THIS APPEAL IS AGAINST ALLOWING VARIOUS E XPENSES CLAIMED BY THE ASSESSEE FOR ITS BUSINESS EXCEPT BROKERAGE AND ADVE RTISEMENT. I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO. 595 595595 595/M/ /M/ /M/ /M/11 1111 11 2 3. THE ASSESSING OFFICER DISALLOWED VARIOUS EXPENS ES TOWARDS TRAVELLING LEGAL AND PROFESSIONAL BROKERAGE AND COMMISSION A DVERTISEMENT SALARIES WHILE COMPLETING THE ASSESSMENT ON THE GROUND THAT THERE IS NO BUSINESS ACTIVITY IN THE FORM OF TRADING AND MANUFACTURING. 4. THE CIT(A) AFTER CONSIDERING THE SUBMISSIONS O F THE ASSESSEE DIRECTED THE ASSESSING OFFICER TO ALLOW ALL THE EXP ENDITURES EXCEPT BROKERAGE AND COMMISSION AND ADVERTISEMENT EXPENSES. IT WAS T HE CONTENTION BEFORE THE CIT(A) THAT THE ASSESSEE WAS INCORPORATED DURIN G 1962-63 AND WAS ENGAGED IN THE MANUFACTURING AND TRADING OF ELECTRI CAL CONDUCTORS UPTO 1996-97 BUT AS TEMPORARILY SUSPENDED THE BUSINESS IN 1997 DUE TO UNFAVOURABLE TRADE CONDITIONS AND HAD REVIVED THE B USINESS DURING 2003-04 ONWARDS. THE ASSESSEE PRODUCED TRADING ACCOUNT FOR ALL THE THREE YEARS 2003-04 2004-05 AND 2006-07 AND SUBMITTED THAT THE ASSESSEE HAD REVIVED ITS BUSINESS OPERATIONS FROM 2003-04 ONWARDS. HENCE THE OBSERVATIONS OF THE ASSESSING OFFICER THAT THE EXPENSES INCURRED BY THE ASSESSEE ARE NOT TOWARDS BUSINESS ACTIVITY ARE NOT CORRECT. CONSIDER ING THESE SUBMISSIONS THE CIT(A) ALLOWED THE EXPENSES AS STATED ABOVE. 5. WE HAVE HEARD BOTH THE SIDES AND CONSIDERED THE MATERIALS AVAILABLE ON RECORD. WE AGREE WITH THE SUBMISSIONS OF THE ASS ESSEE THAT THERE IS ONLY TEMPORARY SUSPENSION IN MANUFACTURING AND TRADING A CTIVITY BY THE ASSESSEE AND IN FACT IT HAD REVIVED ITS BUSINESS ACTIVITIES FROM THE ASSESSMENT YEAR I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO. 595 595595 595/M/ /M/ /M/ /M/11 1111 11 3 2003-04. THEREFORE SINCE THE GENUINENESS OF THE EXPENDITURE IS NOT IN DOUBT WE DIRECT THE ASSESSING OFFICER TO ALLOW THE SE EXPENSES AND CONFIRM THE ORDER THE CIT(A) ON THIS GROUND. 6. THE NEXT ISSUE IN THIS APPEAL IS AGAINST DELETI ON OF ADDITION OF ` .4 44 368/- MADE TOWARDS REFUNDABLE RENTAL DEPOSITS AND TREATING AS INCOME IN THE HANDS OF THE ASSESSEE. 7. THE ASSESSING OFFICER TREATED THIS AMOUNT AS IN COME OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE HAS NOT RETURNED TH IS ADVANCE OF ` .4 44 368/- RECEIVED FROM M/S. WHIRLPOOL INDIA LTD. AT THE TIME OF VACATING THE PREMISES. 8. THE CIT(A) CONSIDERED THIS ISSUE IN PARA 2 OF H IS ORDER AND DELETED THIS ADDITION. THE CIT(A) HELD THAT THE ASSESSEE AL WAYS SHOWN THIS AMOUNT AS LIABILITY IN ITS BALANCE SHEET AND AS PER THE TE RMS OF THE AGREEMENT THE SAME NEEDS TO BE REFUNDED AFTER MEETING THE EXPENDI TURE FOR REPAIRS ETC. AND THE SAME CANNOT BE TREATED AS INCOME OF THE ASS ESSEE. 9. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIALS AVAILABLE ON RECORD. THE ASSESSING OFFICER IS NOT CORRECT IN TRE ATING THIS AMOUNT AS INCOME OF THE ASSESSEE SIMPLY BECAUSE THE ASSESSEE HAS NOT REFUNDED THIS AMOUNT AT THE TIME OF VACATING THE PREMISES. THE LI ABILITY ALWAYS FASTENED ON THE ASSESSEE AND THE ASSESSEE WAS SHOWING THIS ADVA NCE AS LIABILITY TO BE REPAID AFTER MEETING THE EXPENSES INCURRED FOR THE REPAIRS IN THE PREMISES. I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO. 595 595595 595/M/ /M/ /M/ /M/11 1111 11 4 THEREFORE WE AGREE WITH THE VIEW TAKEN BY THE CIT( A) ON THIS ISSUE AND DISMISS THE GROUND OF APPEAL OF THE REVENUE. 10. THE NEXT ISSUE RAISED BY THE DEPARTMENT IS AGA INST RESTRICTING THE ADDITION TO ` .43 479/- AS AGAINST ` .13 71 699/- MADE TOWARDS WRITING BACK OF PROVISIONS MADE FOR URBAN LAND TAX. 11. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS PRO DUCED NEW EVIDENCE BEFORE THE CIT(A) FOR THE FIRST TIME ON THIS ISSUE. THE CIT(A) CONSIDERING THE SAID EVIDENCES RESTRICTED THE ADDITION TO ` .43 479/- WITHOUT PROVIDING A REASONABLE OPPORTUNITY TO THE ASSESSING OFFICER TO EXAMINE THE EVIDENCES PRODUCED BEFORE HIM FOR THE FIRST TIME AND THEREFOR E IS IN VIOLATION OF RULE 46 A OF INCOME TAX RULES. 12. THE LD. COUNSEL FOR THE ASSESSEE DID NOT OBJEC T FOR REMITTING BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRES H EXAMINATION IN THE LIGHT OF EVIDENCES PRODUCED BY THE ASSESSEE BEFORE THE CIT(A ). THEREFORE WE SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFIC ER FOR FRESH EXAMINATION AFTER PROVIDING ADEQUATE OPPORTUNITY OF BEING HEARD TO TH E ASSESSEE. THIS GROUND OF APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSE. 13. THE NEXT GROUND RAISED BY THE DEPARTMENT IS AG AINST DELETION OF ADDITION OF ` .51 000/- MADE TOWARDS RENT RECEIVED FOR THE MONTH OF MARCH 2003. THE ASSESSING OFFICER MADE ADDITION OF ` .12 000/- ON THE GROUND THAT AS THE ASSESSEE IS MAINTAINING MERCANTILE SYSTEM OF ACCOUNTING AND THE RENT FOR MONTH OF MARCH 2003 IS TO BE ASSESSED IN THE ASSESSMENT YEAR I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO. 595 595595 595/M/ /M/ /M/ /M/11 1111 11 5 2003-04. THE CIT(A) DELETED THIS ADDITION ON THE GR OUND THAT THE RENT FOR THE MONTH OF MARCH 2003 WAS RECEIVED IN APRIL 2004 AN D WAS ASSESSED FOR THE ASSESSMENT YEAR 2004-05. 14. WE HAVE HEARD BOTH THE SIDES AND MATERIALS AVA ILABLE ON RECORD. WE FEEL IT NECESSARY TO SEND BACK THIS ISSUE TO THE FI LE OF THE ASSESSING OFFICER TO VERIFY WHETHER THE ASSESSEE HAS OFFERED RENT PERTA INING TO THE MONTH OF MARCH 2003 IN THE ASSESSMENT YEAR 2004-05 AS CONTE NDED BY THE ASSESSEE. THE ASSESSING OFFICER SHALL EXAMINE WHET HER THE ASSESSEE HAS OFFERED 12 MONTHS RENT DURING THE ASSESSMENT YEAR 2003-04 IF THE ASSESSEE HAS OFFERED 12 MONTHS RENT DURING THE ASS ESSMENT YEAR 2003-04 THE MARCH 2003 MONTH RENT SHOULD NOT BE CONSIDERED FOR ADDITION. THIS GROUND OF APPEAL OF THE DEPARTMENT IS ALLOWED FOR S TATISTICAL PURPOSE. 15. THE LAST GROUND OF APPEAL OF THE REVENUE IS AG AINST DIRECTING THE ASSESSING OFFICER TO ALLOW LEASE RENT PAID TO WAKF BOARD AS DEDUCTION. 16. THE ASSESSING OFFICER DISALLOWED THE RENT PAID TO WAKF BOARD ON THE GROUND THAT IT IS NOT ALLOWABLE DEDUCTION. THE CIT( A) ALLOWED THE SAID DEDUCTION ON THE GROUND THAT THE SAID EXPENDITURE W AS ALLOWED IN ALL THE EARLIER YEARS. 17. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE M ATERIALS AVAILABLE ON RECORD. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE SAID AMOUNT RELATES TO LEASE RENT PAID TO WAKF BOARD FOR ITS PR EMISES IN WHICH THE ASSESSEE COMPANY IS OPERATING ITS BUSINESS OFFICE A ND GODOWN AND STATED I II I.T.A. .T.A. .T.A. .T.A. NO. NO. NO. NO. 595 595595 595/M/ /M/ /M/ /M/11 1111 11 6 THAT THE SAME WAS ALLOWED IN ALL EARLIER YEARS FROM 1962 ONWARDS CONSISTENTLY AND THERE IS NO MATERIAL CHANGE IN F ACTS DURING THE ASSESSMENT YEAR AND THEREFORE THE ASSESSING OFFICE R CANNOT TAKE A DIFFERENT VIEW TO DISALLOW SUCH EXPENSES IN THIS ASSESSMENT Y EAR. 18. AS CONTENDED BY THE ASSESSEE THE DEPARTMENT I S ALLOWING THIS EXPENDITURE FROM PAST SEVERAL YEARS I.E. SINCE 1962 AS DEDUCTION TO THE ASSESSEE AND SINCE THERE IS NO CHANGE IN THE FACTS IN THIS ASSESSMENT YEAR WE DIRECT THE ASSESSING OFFICER TO ALLOW THE LEASE RENT PAID AS DEDUCTION SUBJECT TO VERIFICATION AS TO WHETHER SUCH DEDUCTIO N WAS ALLOWED IN EARLIER ASSESSMENT YEARS OR NOT AS CLAIMED BY THE ASSESSEE . WE ALLOW THIS GROUND OF APPEAL OF THE REVENUE FOR STATISTICAL PURPOSE. 19. IN THE RESULT THE APPEAL OF THE DEPARTMENT IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 29.03.2012. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI DATED THE 29.03.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.