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Income Tax Appellate Tribunal, DELHI BENCH ‘G’ : NEW DELHI
Before: SHRI O.P.KANT & SHRI KULDIP SINGH
PER KULDIP SINGH, JUDICIAL MEMBER : Appellant, Deputy Commissioner of Income Tax, Circle Rewari (hereinafter referred to as ‘the revenue’) by filing the present appeal sought to set aside the impugned order dated 04.05.2016 passed by the Commissioner of Income-tax (Appeals)- Rohtak qua the assessment years 2012-13 on the grounds inter alia that :
“1. CIT(A) has erred in deleting the addition of Rs.. 2,00,00,000/- made on the ground of share premium/share capital which was unexplained/undisclosed source money u/s 68 of the I.T. Act as the assessee company failed to explain the identity, creditworthiness of the person from whom share capital has been received. Moreover, it is clear on the perusal of balance sheet for the F.Y. 2011-12 that there is increase in share capital to Rs. 26,00,000/- as compared to F.Y. 2010-11 which was shown as Rs. 18,00,000/- and Rs. 1,92,00,000/- is added during the F.Y. 2011-12 in share premium account so the CIT(A) contention that Rs. 2,00,00,000/- has been received in F.Y. 2010-11 is not tenable, and not supported y evidence.
2. CIT(A) has erred in deleting the addition of Rs. 26,33,675/- made u/s 57 of the I.T. Act. During the assessment proceedings, the assessee stated that he has expanded its business in the year 2011-12 and commenced the operation of its MS rolling unit in khuskhera, Rajasthan. However, the assessee company failed to produce any documentary evidence regarding commencement of business operation/production from the new unit during the F.Y. 2011-12.”
Briefly stated the facts necessary for adjudication of the controversy at hand are : the assessee is into the business of Iron and Steel furnace under the name & style of M/s. Shree Balaji Grit & Rollings Pvt. Ltd. The Assessing Officer noticed that it has received share premium / share capital to the tune of Rs. 2,00,00,000/- in the F.Y. 2010-11. On failure of the assessee to explain the receipt of share premium, AO treated the amount of Rs. 2,00,00,000/- as income from unexplained sources u/s 68 of the Act. The Assessing Officer has also disallowed the deduction of expenses claimed by the assessee to the tune of Rs. 26,33,675/- u/s 57(iii) on the ground that the expenses are to be capitalized and thereby assessed the total income of the assessee at Rs. 2,30,09,475/-.
Assessee carried the matter before the Ld. CIT(A) by way of filing the appeal who has deleted the addition by accepting the appeal filed by the assessee. Feeling aggrieved the revenue has come up before the Tribunal by way of filing the present appeal.
We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
GROUND NO. 1
Ld. CIT(A) deleted the addition of Rs. 2,00,00,000/- made by the AO by returning following finding :-
“A perusal of the facts of the case reveals that the amount of Rs. 2,00,000/- was received during the AY 2011-12. During the year under consideration, the share application money received in the previous year was transferred to the share capital a/c and share premium a/c. Therefore, the amount cannot be added in the 2012- 13. Moreover, it is also supported by the documents on record. In the circumstances, the addition cannot be made during this assessment year but should have been examined in the previous year. It is also pertinent to note that all details relating to the source of funds have been submitted by the assessee. In view of the above, I delete the said addition. This ground of appeal is allowed.”
6. When undisputedly assessee has received the amount in question during the F.Y. 2010-11 relevant to A.Y. 2011-12 as has been duly discussed by AO at page 8 of the order and thrashed by Ld. CIT(A) at page 2 of the impugned order, there is no illegality and perversity in the finding returned by Ld. CIT(A), hence, Ground No. 1 is determined against the revenue.
GROUND NO. 2
Assessee has claimed deduction of Rs. 26,33,675/- on account of expenses which has been disallowed by the AO on the ground that these expenses are liable to be capitalized u/s 57(iii) of the Act. No doubt, there was no order received by the assessee from customer creating lull in the business but assessee remained into manufacturing activities during the year under assessment. In these circumstances necessary expenditure of staff salary, payment of rental, professional expenses etc. are required to be incurred to keep the business alive. Their machines remained in operative posture.
We are of the considered view that the Ld. CIT(A) has rightly and legally deleted the addition by following the decision rendered by Hon’ble Punjab & Haryana High Court in the case of CIT vs. Nahar Exports Ltd. reported at 213 CTR page3 20 has allowed and Hon’ble Madras High Court in the case of CIT vs. Chennai Petroleum Corporation reported at 262 CTR 664 wherein it has been held that “machinery could not be put to use due to raw material paucity, assessee’s claim for depreciation could not be rejected. Consequently Ground No. 2 is also determined against revenue.
In view of what has been discussed above, finding no illegality or perversity in the impugned order passed by the Ld. CIT(A). The appeal filed by the revenue is hereby dismissed. Order pronounced in open court on this 29th day of June, 2021.