ASST. CIT CEN CIR 43, MUMBAI v. SKS ( SHIP ) LTD, MUMBAI

ITA 6459/MUM/2010 | 2006-2007
Pronouncement Date: 05-07-2013 | Result: Dismissed

Appeal Details

RSA Number 645919914 RSA 2010
Assessee PAN AAACS5407J
Bench Mumbai
Appeal Number ITA 6459/MUM/2010
Duration Of Justice 2 year(s) 10 month(s) 4 day(s)
Appellant ASST. CIT CEN CIR 43, MUMBAI
Respondent SKS ( SHIP ) LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 05-07-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted E
Tribunal Order Date 05-07-2013
Date Of Final Hearing 01-07-2013
Next Hearing Date 01-07-2013
Assessment Year 2006-2007
Appeal Filed On 01-09-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH MUMBAI . . !'#$ % &' BEFORE SHRI H.L. KARWA PRESIDENT AND SHRI N.K. BILLAIYA AM ./I.T.A. NOS. 6458 & 6459/MUM/2010 ( ( ( ( ( / ASSESSMENT YEARS : 2005-06 & 2006-07 THE ACIT AAYAKAR BHAVAN MUMBAI-400 020 M/S. SKS (SHIP) LTD. 501 ABHAY STEEL HOUSE BARODA STREET MUMBAI-400 009 ') % ./ *+ ./PAN/GIR NO. : AAACS 5407J ( ) /APPELLANT ) .. ( -.) / RESPONDENT ) ) / / APPELLANT BY : ` SHRI GIRIJA DAYAL -.) 0 / /RESPONDENT BY : SHRI H.S. RAHEJA 0 12% / DATE OF HEARING :01.07.2013 34( 0 12% / DATE OF PRONOUNCEMENT : 05.07.2013 &5 / O R D E R PER N.K. BILLAIYA AM: THESE TWO APPEALS BY THE REVENUE ARE PREFERRED AGAI NST TWO SEPARATE ORDERS OF THE LD. CIT(A)-38 MUMBAI DT.2.7 .2010 PERTAINING TO A.YRS. 2005-06 & 2006-07. . AS COMMON ISSUES ARE I NVOLVED IN BOTH THESE APPEALS THEY WERE HEARD TOGETHER AND DISPOSE D OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 6458/MUM/2010 A.Y. 2005-06 2. THE REVENUE HAS RAISED FOLLOWING TWO GROUNDS OF APPEAL: ITA NO.6458 & 6459/M/2010 2 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE LD. CIT(A) ERRED IN LAW IN NOT UPHOLDING THE ACTION OF THE AO IN REDUCING THE COST UNDER I.T. ACT 1961 OF THE THREE BARGES FOR THE PURPOSE OF DEPRECIATION ALLOWANCE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LD. CIT(A) ERRED IN LAW IN NOT APPRECIATING THAT TH E PAYMENT OF ADVISORY SERVICE CHARGES TO A SISTER CONCERN OF THE ASSESSEE WAS A COLORABLE DEVICE AND HENCE THE ACTION OF THE AO IN DETERMINING THE COST BY REDUCING THE SAID AMOUNT WAS JUSTIFIABLE. 3. A SURVEY U/S. 133A OF THE ACT WAS CONDUCTED BY T HE INVESTIGATION UNIT ON 8.12.2006 AT THE REGISTERED OFFICE OF THE A SSESSEE. SUBSEQUENTLY THE SURVEY WAS CONVERTED INTO SEARCH BY EXECUTING O NE WARRANT OF AUTHORIZATION U/S. 132 OF THE I.T. ACT COVERING ALL THE ENTITIES OF THE GROUP OF THE ASSESSEE. NOTICES U/S. 153A CALLING FOR RE TURN OF INCOME WERE ISSUED AND SERVED UPON THE ASSESSEE ON 12.10.2007. RETURN OF INCOME FOR THE RELEVANT YEAR DECLARING INCOME OF RS. 5 80 89 9 30/- WAS FILED ON 9.5.2008. STATUTORY NOTICES U/S. 143(2) & 142(1) W ERE ISSUED AND SERVED ON THE ASSESSEE. 3.1. DURING THE COURSE OF THE ASSESSMENT PROCEEDING S THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS PURCHASED THR EE BARGES (FLEET) FROM M/S. CHOWGULE & CO. LTD. (CCPL). THESE PURCHASES P ERTAIN TO ASSESSMENT YEAR 2005-06 AND 2006-07 FOR A TOTAL CON SIDERATION OF RS. 20 23 55 493/-. THE AO FURTHER NOTICED THAT THE VE NDORS M/S. CCPL HAD PAID ADVISORY SERVICES TO M/S. ACE SHIPPING OFFSHO RE COMPANY PVT. LTD. (ASOCPL) DURING A.Y. 2004-05 AT RS. 1 55 00 0 00/- AND FOR A.Y. 2005-06 RS. 1 13 25 964/-. THE AO WAS OF THE FIRM BELIEF THAT THESE PAYMENTS FOR ADVISORY SERVICES WERE UNNECESSARY AND THEREFORE CCPL HAS INFLATED THE COST OF THE BARGES SOLD TO THE ASS ESSEE BY SIMILAR AMOUNT. ITA NO.6458 & 6459/M/2010 3 ON SUCH OBSERVATION THE AO SOUGHT CLARIFICATION FROM THE ASSESSEE AS TO WHY DEPRECIATION SHOULD NOT BE DISALLOWED ON THE IN FLATED COST WHICH INCLUDED PAYMENT OF ADVISORY SERVICES AMOUNTING TO RS. 2 68 25 964/-. THE ASSESSEE FILED A DETAILED REPLY DT. 11.12.2008 AND EXPLAINED THE NATURE OF TRANSACTION BETWEEN CCPL AND ASOCPL. THE AO WAS OF THE FIRM BELIEF THAT THE ASSESSEE COULD NOT PROVIDE ANY EVIDENCE IN SUPPORT OF SERVICES RENDERED NOR COULD IT PROVIDE THE NAME OF TECHNICAL PERSON/STAFF OF ASOCPL. THERE WAS NO SERVICE CONTRACT ENTERED B Y ASOCPL WITH CCPL. IN THE ABSENCE OF SUCH EVIDENCE THE AO CONC LUDED THAT THE SERVICE CHARGES GIVEN TO ASOCPL BY CCPL IS NOTHING BUT ACCOMMODATION ENTRY JUST TO INFLATE THE COST OF BAR GES TO CLAIM A HIGHER DEPRECIATION AT RS. 1.55CRORES PERTAINING TO F.Y. 2 004-05 RELEVANT TO A.Y. 2005-06 AND RS. 1.13 CRORES PERTAINING TO F.Y. 2005 -06 RELEVANT TO A.Y. 2006-07. THEREAFTER THE AO WENT ON TO DISALLOW DEP RECIATION AT RS. 38 75 000/-. 4. AGGRIEVED ASSESSEE CARRIED THE MATTER BEFORE TH E LD. CIT(A). THE ASSESSEE EXPLAINED THE NATURE OF TRANSACTION WITH S UPPORTING EVIDENCES/DOCUMENTS BETWEEN CCPL AND ASOCPL. AFTE R CONSIDERING THE ENTIRE FACTS AND SUBMISSIONS OF THE ASSESSEE T HE LD. CIT(A) CAME TO THE CONCLUSION THAT THE COST OF ASSET TO BE CALCULA TED FOR THE PURPOSE OF ALLOWING DEPRECIATION IS THE COST TO THE APPELLANT AND NOT TO THE PERSON WHO MAKES THE SALE OF THE ASSET TO THE APPELLANT. FOR THIS PROPOSITION THE LD. CIT(A) RELIED UPON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF JOGTA COAL CO. LTD. VS CIT 36 ITR 521. THE LD. CIT(A) FURTHER OBSERVED THAT THE PAYMENT MADE BY CCPL TO ASOCPL IS UNCONNECTED TO THE ACTUAL COST OF THE ACQUISITION OF BARGES BY TH E APPELLANT AND HENCE CANNOT AFFECT THE DETERMINATION OF THE PRICE ON WHI CH DEPRECIATION IS ITA NO.6458 & 6459/M/2010 4 ALLOWED TO THE APPELLANT AND ACCORDINGLY DIRECTED T HE AO TO DELETE THE ADDITION. 5. REVENUE IS AGGRIEVED BY THIS FINDING OF THE LD. CIT(A) AND IS BEFORE US. 6. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ASSESSMENT ORDER. 7. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS PERUSE D THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCE BR OUGHT ON RECORD. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS PURCHASED 3 BARGES (FLEET) TWO FLEETS PERTAINS TO A.Y. 2005-06 AND ONE FLEET PERT AINS TO A.Y. 2006-07. THE AO HAS NOT QUESTIONED THE PURCHASES OF THESE BA RGES BUT WHAT AO HAS QUESTIONED IS THE COST. ACCORDING TO THE AO T HE COST TO THE ASSESSEE INCLUDES AN ALLEGED UNNECESSARY PAYMENT OF SERVICES BY THE VENDOR CCPL TO ONE M/S. ASOCPL. BE THAT AS IT MAY WE FAILED TO UNDERSTAND HOW THE PAYMENT MADE BY CCPL TO ASOCPL WOULD ENTITLE THE AO TO DISALLOW THE DEPRECIATION IN THE HANDS OF THE ASSESSEE. IF THE AO WAS NOT CONVINCED WITH THE TRANSACTION OF CCPL AND ASOCPL THE AO SHOULD HAVE QUESTIONED THE SAME IN THE HANDS OF CCPL. HOW EVER BY ANY STRETCH OF IMAGINATION IT CANNOT BE QUESTIONED IN THE HANDS OF THE ASSESSEE. THE LD. CIT(A) HAS VERY CORRECTLY HELD T HAT THE COST OF AN ASSET FOR THE PURPOSE OF ALLOWING DEPRECIATION IS THE CO ST TO THE ASSESSEE AND NOT TO THE PERSON WHO MAKES THE SALE OF THE SAME TO THE ASSESSEE. CONSIDERING THE FACTS IN TOTALITY WE DO NOT FIND A NY REASON TO INTERFERE ITA NO.6458 & 6459/M/2010 5 WITH THE FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSED. ITA NO. 6459/M/2010 A.Y. 2006-07 9. THE ISSUES INVOLVED ARE IDENTICAL WITH THE ISSUE IN ITA NO. 6458M/10 THOUGH QUANTUM MAY DIFFER THEREFORE ON SIMILAR LINES SIMILAR REASONS THE APPEAL FILED BY THE REVENUE IN ITA NO. 6459/M/10 FOR ASSESSMENT YEAR 2006-07 IS ALSO DISMISSED. 10. IN THE RESULT THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.07.2013 &5 0 4( % 6 7&8 5.07.2013 4 0 9 SD/- SD/- (H.L. KARWA ) (N.K . BILLAIYA ) / PRESIDENT % &' / ACCOUNTANT MEMBER MUMBAI; 7& DATED 05/07/2013 . . ./ RJ SR. PS ITA NO.6458 & 6459/M/2010 6 &5 &5 &5 &5 0 00 0 -1! -1! -1! -1! :!(1 :!(1 :!(1 :!(1 / COPY OF THE ORDER FORWARDED TO : 1. ) / THE APPELLANT 2. -.) / THE RESPONDENT. 3. ; ( ) / THE CIT(A)- 4. ; / CIT 5. ! <9 -1 / DR ITAT MUMBAI 6. 9= > / GUARD FILE. &5 &5 &5 &5 / BY ORDER .!1 -1 //TRUE COPY// ? ?? ? / @ @ @ @ * * * * (DY./ASSTT. REGISTRAR) / ITAT MUMBAI