Income Tax Appellate Tribunal - Indore
Madhya Pradesh State Industries ... vs Department Of Income Tax
1
IN THE INCOME TAX APPELLATE TRIBUNAL
INDORE BENCH, INDORE
BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER
And
SHRI R.C. SHARMA, ACCOUNTANT MEMBER
ITA No. 259/Ind/2012
A.Y. 2008-09
Asstt.Commissioner of Income Tax 2(1)
Bhopal :: Appellant
Vs
M/s Madhya Pradesh State
Industries Corporation, Bhopal
PAN - AABCB - 9653P :: Respondent
Appellant by Shri Darshan Singh
Respondent by Written submissions
Date of hearing 1.11.2012
Date of pronouncement 1.11.2012
O R D E R
PER JOGINDER SINGH, judicial member
The Revenue is aggrieved by the impugned order dated 24th February, 2012 passed by the learned first appellate authority, 2 Bhopal. The first ground raised is that on the facts and in the circumstances of the case, the learned CIT(A) erred in allowing the expenses amounting to Rs.30,89,247/- under the title "head office" incurred for maintaining the head office and to keep the corporate entity live when such expenses are neither covered u/s 37 of the Act as no manufacturing/trading activity was undertaken under the year under consideration, nor covered u/s 57 of the Act as the said expenses were not incurred solely and exclusively for the purpose of earning income.
2. During hearing, we have heard Shri Darshan Singh, learned CIT DR whereas the assessee has filed written submissions. Mr. Darshan Singh advanced his arguments which are identical to the ground raised by supporting the assessment order. We have considered the written submissions of the assessee along with the arguments advanced by the learned CIT DR. For coming to a fair conclusion we are summarising hereunder the unit and headwise details of the expenses incurred by the assessee :- 3
Head of RACP Dewas Head Office Total
Expenses/Unit Ratlam Udyog (in Rs.)
Dewas
Salary/Allowances 7349033.4 0.00 805982.00 8155015.45
& Bonus 5
Employer's 148092.15 0.00 21603.00 169695.15
contribution to
provident fund &
Pension fund
Staff Welfare 30660.00 0.00 .00 30660.00.0
Gratuity 139865.00 73278.00 0.00 213143.00
Telephone 0.00 0.00 49085.00 49085.00
Salary to Home 0.00 0.00 1785976.00 1785976.00
Guard
Travelling Expenses 7207.60 0.00 72818.00 80025.00
Printing/ Postage 1828.00 0.00 66024.00 67852.00
Legal Expenses 20000.00 0.00 264026.00 284026.00
Rent, Rates & Taxes 0.00 0.00 1600050.00 1600050.00
Electricity & Water 0.00 0.00 2824.00 2824.00
Advertisement 0.00 0.00 4562.00 4562.00
Miscellaneous 173298.80 37486.00 22006.00 232790.80
Finance Charges 1679.00 0.00 7291.66. 8970.66 Total Expenses Before 7871664.00 110764.00 4702247.66 12684675.66 Depreciation 192653.00 18027.00 0.00 210680.00 Total 80643 I 7.00 128791.00 4702247.66 12895355.66 Fringe Benefit Tax 0.00 0.00 1891.00 1891.00 Grand Total 8064317.00 128791.00 4704138.66 12897246.66 If the expenses incurred by the assessee under different heads are analysed, in the light of the finding recorded by the learned CIT(A), we find that the amount of Rs.30,89,247/- was incurred on account of maintenance and operation of "Head Office especially when the assessee is a corporate entity and has not wound up its business. Such expenses have been incurred for smooth running and to keep the corporate entity live. Regarding the remaining expenses of Rs. 78,71,664/- out of the total expenses of Rs.1,28,95,256/- wherever the learned CIT(A) found 4 that such expenses were essentially not incurred for genuine purposes, the same were disallowed and the genuine expenses to the extent of Rs.30,89,247/- which were necessary for smooth functioning were only allowed by the learned CIT(A). While coming to this conclusion, reliance has already been placed in CIT vs. Rampur Timber & Tannery Co. Pvt. Ltd.; 129 ITR 58 (All) and Chennai & Co. Pvt. Ltd. V. CIT; 206 ITR 616. It is pertinent to mention here that no expenses in respect of manufacturing activities have been allowed by the learned CIT(A). It is further noted that the expense like salary, employees' contribution to PF and Pension fund, staff welfare, telephone, salary to home guard, travelling expenses, printing and postage, legal expenses, electricity and water charges, etc. are necessary to keep the corporate entity live. Nowhere the Assessing Officer has brought on record that any expenditure was incurred for extraneous consideration, therefore, the ITO is not expected to decide the reasonableness because it is the assessee who knows his business interest better. Reasonableness is to be decided by the assessee though the Assessing Officer is empowered to disallow the payment/expenditure if made for extra commercial consideration. In view of the uncontroverted finding recorded by 5 the learned CIT(A), we find no infirmity in the order of the learned CIT(A) on the issue and confirm the same, resulting into dismissal of the ground.
3. The next ground pertains to set off of unabsorbed depreciation of earlier years against the income from other sources amounting to Rs. 79,82,428/-. At the outset, in its written submission, it was claimed that the impugned issue is covered in favour of the assessee by the decision of the Tribunal for the A.Y. 2007-08 (ITA No. 393/Ind/2010) in the case of the assessee itself. This factual matrix was fairly consented to be correct by the learned CIT DR.
4. We have perused the record available on the file and considered the written submissions of the assessee along with the submissions of the learned CIT DR. The facts, in brief, are that the assessee company is engaged in the business of manufacturing and trading of various items. The assessee declared loss of Rs.5,14,588/- in its return filed on 29.9.2008. The claim of the assessee is that most of the units of the assessee company were running under heavy losses. The assessee claimed unabsorbed depreciation of Rs.2,11,29,222/- since 1997-98. The question before us is whether unabsorbed depreciation is allowed 6 to be set off against any other income i.e. income from any other sources. We find that the Tribunal for the A.Y. 2007-08 in the case of the assessee (ITA No. 393/Ind/2010) held as under :-
"6. We have considered the rival contentions, carefully gone through the orders of the authorities below and found from record that the A.O. has declined set off of unabsorbed depreciation against income from other sources, on the plea that such unabsorbed depreciation is part of brought forward business losses, which can be allowed to set off to the extent of specified period as mentioned u/s 73(3). As per our considered view joint reading fo section 32(2) with section 72(2) and 73(3) clearly provide that unabsorbed depreciation carried forward in earlier eyars is to be added to the amount of depreciation of the current year and it is deemed to be part of the current year's depreciation allowance. Once the unabsorbed depreciation is treated as a part of the current year's depreciation allowance. Once the unabsorbed depreciation is treated as a part of the current year's depreciation, the resultant business loss of current year is eligible to be allowed to be set off against income from other sources......"
We further find that while coming to the aforesaid conclusion, the Tribunal relied upon various decisions like CIT vs. Jaipur China Clay Mines (P) Ltd. (1996) 59 ITR 55 (SC) Garden Silk 7 Wvg.; Garden Silk Wvg. Factory v. CIT (1991) 189 ITR 512 (SC); CIT vs. Vrmani Industries Pvt. Ltd., etc. Etc. (1995) 216 ITR 607 (SC); Rajapalayam Mills Ltd. Vs. CIT (1978) 115 ITR 777 (SC); Escorts Electronics Ltd. Vs. CIT (2002) 124 Taxman 718 Del.; Jt. CIT vs. Infocon International Ltd. (2005) 2 SOT 444 (Bang) and CZIT vs. Himatasingika Seide Ltd. (2006) 286 ITR 255 156 Taxman 151 (Kar.). The Tribunal further held as under :-
"7. In view of the above discussion, we do not find any infirmity in the order of the CIT(A) for allowing set off of unabsorbed depreciation by treating the same as part of the current year's depreciation against income from other sources.
8. In the result, the appeal of the Revenue is dismissed."
In the absence of any contrary decision or facts brought on record by the revenue, we find no infirmity in the conclusion drawn in the impugned order. So far as the decision relied upon by the learned CIT DR is concerned, it would not help the Revenue being distinguishable on facts.
Finally, the appeal of the Revenue is dismissed. This order was pronounced in the open Court in the presence of ld. Representatives from both sides at the conclusion of the hearing on Ist November, 2012.
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Sd sd/- (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: Ist November, 2012
Copy to: Appellant, Respondent, CIT, CIT(A), DR, Guard File Dn/-11