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Income Tax Appellate Tribunal, DELHI BENCH “C” NEW DELHI
Before: SHRI AMIT SHUKLA & SHRI PRASHANT MAHARISHI
O R D E R PER AMIT SHUKLA, JM
The aforesaid appeal has been filed by the assessee against the impugned order dated 27.04.2017, passed by Ld. Commissioner of Income Tax (Appeals)-XXXV, New Delhi for the quantum of assessment passed u/s.143(3) for the Assessment Year 2012-13. In the grounds of appeal, the assessee has raised the following grounds:- “Because the action is being challenge on the facts & law, for disallowing security expenses incurred on factory amounting to Rs. 3,86,549/. Alternatively & without prejudice to above, assessee disputes the non capitalization of security expenses to Factory building.
2. Because the action is being challenge on the facts & law, for disallowing Electricity expenses incurred on factory amounting to Rs. 6,13,715/. Alternatively & without prejudice to above, assessee disputes the non capitalization of electricity expenses to Factory building.”
The facts in brief are that the assessee-company was engaged in the business of manufacturing and trading of mosaic and stone tiles. During the year the assessee had only shown expenditure of Rs.3,86,549/- on security expenses; and Rs.6,13,705/- on electricity expenses, aggregating to Rs.10,00,264/- incurred on factory premises. The AO noted that the assessee had sold its factory premises (unit-2) on 07.05.2012 for a sum of Rs.8 crores for which assessee had received advance in cheques from January, 2012 to May, 2012. Thus, when factory was sold out, which means that the assessee has not carried out any business, therefore, these expenses cannot be allowed as business expenditure.
Ld. CIT (A) has also confirmed the addition, holding that the assessee had already taken a decision to sell the factory for which it has also received certain advances in the relevant Financial Year 2011–12, therefore, the assessee was no longer the owner of the factory and could not have carried out any business activities from there. The claim of security and electricity expenses is thus not legally tenable.
Before us, the learned counsel for the assessee submitted that assessee did sold the property/ factory, but the sale deed was executed in the next financial year, 2012- 13, i.e., in May, 2012. Since, assessee was having stocks in the factory and, therefore, security of these stocks kept in factory it was imperative to secure the stocks and the consequently electricity expenses of the factory premises till it was sold. Moreover, these expenditures pertain to Assessment Year 2012–13, i.e., Financial Year 2011–12 and the property was sold in the Financial Year 2012-13. Hence, it cannot be held that assessee had not incurred any expenditure during the relevant financial year when all the bills and vouchers were filed before the authorities below.
On the other hand, learned DR has strongly relied upon the order of the AO and ld. CIT (A).
After considering that relevant finding given in the impugned orders as well as submissions made by the parties, we find that the assessee was in the business of manufacturing and trading of mosaic and stone tiles. On its factory premises (unit-2) which was part of its business asset and business activity, it had debited expenditure of security expenses and electricity expenses for sums aggregating to Rs.10,00,264/-. This expenditure has been claimed in the Financial Year 2011 – 12. The Assessing Officer and ld. CIT (A) have disallowed the said claim of expenses on the ground that the factory was sold on 07.05.2012 and assessee had received certain advances in the month of January and February, 2012. However, the sale deed was executed in the Financial Year 2012-13 and hence, it cannot be said that these expenditure were not incurred in F.Y. 2011–12. Even though assessee may not have full-fledged operations from the said factory, but if the factory was under the control of the assessee and certain stocks were lying, then electricity and security expenses cannot be held to be for non-business purpose, because during the year the factory premises was with the assessee. Accordingly, the security expenditure of Rs.3,86,549/- and electricity expenses of Rs.6,13,715/- which are duly supported by relevant bills and vouchers are allowed. 7. In the result the appeal of the assessee is allowed. Order pronounced in the Open Court on 5th February, 2021