RUTTONSHA INTERNATIONAL RECTIFIER LIMITED,MUMBAI vs. ITO -13(3)(2), MUMBAI, MUMBAI

The assessee has filed the present appeal against the order dated 24.06.2019 passed by the Commissioner of Income Tax (Appeals)-21, Mumbai [hereinafter referred to as the “CIT(A)”] relevant to the A.Y. 2014-15.

The assessee has raised the following grounds: - “1. The CIT(A) erred in upholding the order of the assessing officer wherein the assessing officer added back expenditure failing to appreciate that each item was below the value or Rs.5,000/- and was in the nature of repair and replacement expenditure.

The CIT(A) erred in upholding the order of the assessing officer wherein the assessing officer disallowed the leave encashment actually paid to the employees.

The CIT(A) erred in upholding the order of the assessing officer wherein the assessing officer adjusted the demand of AY 2013- 14 against the refund for AY 2014-15. The demand represented the dividend tax paid for which credit was not granted by the tax department.”

The brief facts of the case are that the assessee filed its return of income on 25.11.2014 declaring total income at loss to the tune of Rs.(-) 27,76,248/-. The return was processed u/s 143(1) of the Act. The case of the assessee company was selected for scrutiny under CASS. Notices u/s 143(2) & 142(1) of the Act were issued and served upon the assessee. The assessee company is engaged in the business activities of Manufacturing of Semiconductor devices like diodes, SCR’s (Thyristor) power equipment’s and battery charges. The assessee claimed the expenses as under: - Head of Expenses Amount (Rs.) Expenditure of Capital Nature 124413 Expenditure of Advertisement 284975 Payment of non-resident 292464 Gratuity paid 913275 Leave encashment 138181 Total 1753308 Since the assessee failed to prove the claim, therefore, the expenses were declined and added to the income of the assessee and the total income of the assessee was assessed to the tune of Rs.(-)10,22,940/-. Feeling aggrieved, the assessee filed an appeal before the CIT(A) who also disallowed the claim of the assessee, therefore, the assessee has filed the present appeal.

Under this issue the assessee has challenged the confirmation of disallowance of expenses to the tune of Rs.1,24,413/- made under the head of expenditure of capital nature. The contention of the assessee is that the expenditure was incurred for purchase of different small items costing of Rs.5,000/- each which are consumable and the same were consumed during the year. It is also pleaded that there is no enduring benefit to the assessee and the assessee furnished the chart in support of its claim but the claim of the assessee has wrongly been declined, therefore, the expenses are liable to be allowed in the interest of justice. It is also contended that if the item has been treated as capital expenses then depreciation in accordance with law is liable to be given to the assessee. However, on the other hand, the Ld. Representative of the Department has strongly relied upon the order passed by the CIT(A) in question. The AO declined the claim of the assessee by treating the expenses as capital in nature. The assessee furnished the details of expenses lies at annexure B which were not examined and discussed in the order. The claim of the assessee is liable to be considered in accordance with law. Accordingly, we restore the issue before the AO to examine the expenses in details and to decide afresh by giving an opportunity of being heard to the assessee in accordance with law. Needless to say that if the expenses would be treated as capital expenses then the claim of the assessee in connection with the depreciation is also liable to be considered in accordance with law. Accordingly, we set aside the finding of the CIT(A) on this issue and restored the issue before the AO to decide the matter of controversy afresh in view of the above said observation. Accordingly, this issue allowed for statistical purposes.

In the result, the appeal filed by the assessee is hereby partly allowed for statistical purposes. Order pronounced in the open court on 18/02/2022 Sd/- Sd/- (M. BALAGANESH) (AMARJIT SINGH लेखध सदस्य / ACCOUNTANT MEMBER न्यधनिक सदस्य/JUDICIAL MEMBER मुंबई Mumbai; ददनांक Dated : 18/02/2022 Vijay Pal Singh, (Sr. PS)