ALIMCO INDUSTRIES P. LTD, MUMBAI v. ITO 3(1)(1), MUMBAI

ITA 7097/MUM/2008 | 2004-2005
Pronouncement Date: 31-01-2011 | Result: Partly Allowed

Appeal Details

RSA Number 709719914 RSA 2008
Assessee PAN AAAGA4428P
Bench Mumbai
Appeal Number ITA 7097/MUM/2008
Duration Of Justice 2 year(s) 1 month(s) 15 day(s)
Appellant ALIMCO INDUSTRIES P. LTD, MUMBAI
Respondent ITO 3(1)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 31-01-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted A
Tribunal Order Date 31-01-2011
Assessment Year 2004-2005
Appeal Filed On 15-12-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A MUMBAI BEFORE SHRI R.S. SYAL (AM) & SMT. ASHA VIJAYARAGH AVAN (JM) I.T.A.NO.7097/MUM/2008 (A.Y. 2004-05) M/S. ALIMCO INDUSTRIES P.LTD. 5-B SANJAY BLDG. GALA NO.57 MITTAL INDL.ESTATE MUMBAI-400059. PAN: AAAGA4428P VS. INCOME-TAX OFFICER-3(1)(1) AAYKAR BHAVAN M.K. ROAD MUMBAI-400 020. APPELLANT RESPONDENT APPELLANT BY SHRI ASHOK SHARMA RESPONDENT BY SHRI K ANTA NAYAK. O R D E R PER R.S. SYAL AM : THIS APPEAL BY HE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(A) ON 11-09-2008 IN RELATION TO THE ASSTT. YEAR 2004-05. 2. THE FIRST GROUND CHALLENGING THE RE-OPENING OF THE ASSESSMENT WAS NOT PRESSED BY THE LD. A.R. THE SAME THEREFORE STANDS DISMISSED. 3. THE SECOND GROUND IS AGAINST THE CONFIRMATION O F ADDITION OF RS.20 907/- ON ACCOUNT OF EMPLOYEES CONTRIBUTION TO PROVIDENT FUND. BRIEFLY STATED FACTS OF THIS GROUND ARE THAT THE ASSESSEE DEPOSITED THIS SU M TOWARDS EMPLOYEES CONTRIBUTION AFTER THE DUE DATE UNDER THE RESPECTIV E ACTS. THE AO MADE ADDITION WHICH CAME TO BE UPHELD IN THE FIRST APPEAL. ITA 7097/M/08 2 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERU SING THE RELEVANT MATERIAL ON RECORD IT IS FOUND FROM ANNEXURE TO THE TAX AUD IT REPORT COPY OF WHICH IS PLACED ON RECORD SHOWING THE PAYMENTS AFTER THE D UE DATE UNDER THE RESPECTIVE ACTS BUT BEFORE THE TIME PRESCRIBED U/S.139(1) OF T HE I.T. ACT 1961. THE HONBLE DELHI HIGH COURT IN CIT VS. AIMIL LTD. (2010) 321 I R 508 (DEL.) HAS HELD THAT NO DISALLOWANCE CAN BE MADE IF THE EMPLOYEES SHARE IS DEPOSITED BEFORE THE DUE DATE OF FILING RETURN U/S.139(1) OF THE ACT. IN THE ABSENCE OF ANY CONTRARY DECISION BROUGHT ON RECORD BY THE LD. D.R. WE ORDE R FOR THE DELETION OF THIS ADDITION. THIS GROUND IS ALLOWED. 5. GROUND NO. 3 IS AGAINST THE CONFIRMATION OF ADDI TION OF RS.17 20 321/- ON ACCOUNT OF UNUTILIZED MODVAT CREDIT AT THE END OF THE YEAR. THE AO MADE ADDITION FOR THE SAID SUM WHICH WAS APPEARING IN TH E BALANCE-SHEET AT THE END OF THE YEAR. CONSIDERING THE PROVISIONS OF SEC. 145A THE AO CAME TO HOLD THAT THIS AMOUNT WAS LIABLE TO BE ADDED. NO RELIEF WAS ALLOWE D IN THE FIRST APPEAL. 6. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELE VANT MATERIAL ON RECORD WE FIND THAT SEC. 145A AS INSERTED BY FINANCE (NO. 2) ACT 1998 W.E.F. 01-04- 1999 PROVIDES THAT THE VALUATION OF PURCHASE AND S ALE OF GOODS AND INVENTORY FOR THE PURPOSE OF DETERMINING THE INCOME UNDER THE HEA D PROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE IN ACCORDANCE WIT H THE METHOD OF ACCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE AND FURTHER ADJU STED TO INCLUDE THE AMOUNT OF ANY TAX DUTY CESS. ETC. ACTUALLY PAID OR IN CURRED BY THE ASSESSEE TO BRING THE GOODS TO THE PLACE OF ITS LOCATION. FROM THE PR ESCRIPTION OF THIS SECTION IT IS APPARENT THAT THE EXCLUSIVE METHOD FOLLOWED BY THE ASSESSEE FOR VALUING THE INVENTORY IS NOT ACCEPTABLE. NOT ONLY ANY TAX DU TY OR CESS ETC. IS REQUIRED TO BE INCLUDED IN THE VALUATION OF CLOSING AND OPENING STOCKS BUT THE SAME HAS ALSO ITA 7097/M/08 3 TO FIND ITS PLACE IN THE FIGURE OF PURCHASE AND SAL E. AS THE AO HAS SIMPLY ADDED THE VALUE OF CLOSING MODVAT TO THE CLOSING STOCK WI THOUT GIVING EFFECT TO THE OTHER COMPONENTS SUCH AS PURCHASE SALE AND OPENIN G STOCK THIS ACTION CANNOT BE UPHELD. THE HONBLE JURISDICTIONAL HIGH COURT IN CIT VS. MAHALAXMI GLASS WORKS P.LTD. (2009) 318 IR 116 (BOM.) AND THE HONB LE DELHI HIGH COURT IN CIT VS. MAHAVIR ALUMINIUM LTD. (2008) 297 ITR 77 (DEL.) HAVE PROVIDED FOR THE INCLUSION OF EXCISE DUTY IN BOTH OPENING AND CLOSI NG STOCK. THE IMPUGNED ORDER ON THIS POINT BEING NOT IN CONFORMITY WITH THE AB OVE JUDGMENTS IN THE LIGHT OF SEC. 145A IS LIABLE TO BE AND HEREBY SET ASIDE. W E REMIT THE MATTER TO THE FILE OF THE AO FOR DECIDING THIS ISSUE AFRESH IN ABOVE TER MS AFTER ALLOWING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 7. THE LAST GROUND IS AGAINST THE CONFIRMATION OF D ISALLOWANCE OF RS.68 489/- ON ACCOUNT OF INTEREST PAID ON TERM LOAN U/S.36(1)( III) OF THE ACT. THE ASSESSEE TOOK A LOAN OF RS.15 LAKHS FROM BANK AGAINST BUILDI NG ON 15-11-2003 ON WHICH INTEREST OF RS.68 489/- WAS PAID. THE BUILDING WAS ALREADY IN EXISTENCE AND THE LOAN WAS TAKEN FOR ITS RENOVATION. INVOKING THE MAN DATE OF PROVISO TO SEC. 36(1)(III) THE AO CAME TO HOLD THAT SUCH INTEREST COULD NOT BE ALLOWED AS DEDUCTION BECAUSE THE RENOVATED BUILDING WAS NOT PU T TO USE IN THIS YEAR. NO RELIEF WAS ALLOWED IN THE FIRST APPEAL. 8. BEFORE US THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT THE SAID INTEREST OF RS.68 489/- WAS CLAIMED AS DEDUCTION AN D NOT INCLUDED IN THE CAPITAL WORK IN PROGRESS AS ALLEGED BY THE AO. IT WAS SUBMI TTED THAT IF THE DEDUCTION WAS NOT TO BE ALLOWED U/S.36(1)(III) THEN THE SAME SHO ULD HAVE BEEN CAPITALIZED AND GRANTED DEPRECIATION ACCORDINGLY. ITA 7097/M/08 4 9. WE AGREE WITH THE SUBMISSION MADE BY THE LD. A.R . FOR THE OBVIOUS REASON THAT THIS INTEREST COMPONENT RELATES TO FUNDS BORRO WED FOR THE PURPOSE OF RENOVATION OF BUILDING WHICH PROCESS HAS NOT BEEN COMPLETED UPTO THE END OF THE YEAR. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE HIGH COURT IN J.C.T. LTD. VS. DCIT & ANR. (2005) 276 ITR 115 (CAL.). WE THEREFORE DIRECT THE AO TO CAPITALIZE THIS AMOUNT TO THE AMOUNT OF BUILDING AN D ALLOW DEPRECIATION ACCORDINGLY. 10. IN THE RESULT THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THE 31ST DAY OF JANUARY 2011. SD/- SD/- (SMT. ASHA VIJAYARAGHAVAN) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEM BER MUMBAI: 31ST JANUARY 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-XXVII MUMBAI. 4 CIT CITY-3 MUMBAI. 5.DR A BENCH MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER ASST.REGISTRAR ITAT MUMBAI. ITA 7097/M/08 5 DETAILS DATE INITIALS DESIGNA TION 1. DRAFT DICTATED ON 27-01-2011 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 27-01-2011 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/ AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *