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2016 (8) TMI 771 - ITAT AHMEDABAD

2016 (8) TMI 771 - ITAT AHMEDABAD - TMI - Disallowance of expenses relating to Right to use of land and plantation and horticultural expenses - Held that:- AR has submitted that the expenses have not been incurred during the year, but have been incurred in earlier years and the amortised portion of expenses has been claimed. Before us, ld.AR has not placed any order in support of its claim that though the expenses have not been incurred during the year but since the amount has been amortized, th .....

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ermed as cost of land and further the amount was non-refundable. He has further given a finding that the claim of the assessee was in respect of amount paid towards purchase of land and not towards lease-rent. Before us, ld.AR has not placed any material on record to controvert the findings of ld.CIT(A). Further, the expenses have not been incurred during the year but were incurred in past. In view of the aforesaid facts, we see no reason to interfere with the order of ld.CIT(A) and thus this gr .....

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s proposition, we rely on the decision of Hon’ble Apex Court in the case of CIT vs. Excel Industries Ltd. reported in (2013 (10) TMI 324 - SUPREME COURT ). Before us, Revenue has not placed any material on record to demonstrate that against the amount which is due is Assessee’s hand there is a corresponding liability of the payer, to pay the amount to the Assessee. In view of the aforesaid facts and in the absence of any contrary binding decision in favour of the Revenue, we are of the view that .....

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MBER : Both these appeals by the Assessee are directed against the separate orders of the ld.Commissioner of Income Tax(Appeals)-I, Baroda dated 16/09/2011 & 19/09/2011 for the Assessment Years (AYs) 2002-03 & 2003-04 respectively. 2. We first take up ITA No.3075/Ahd/2011 for AY 2002-03. 2.1. The relevant facts as culled out from the materials on record are as under:- 2.2. Assessee is a company stated to be engaged in the business of providing various port related services for import and .....

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who vide order dated 16/09/2011 (in Appeal No.CAB-I/50/05-06) granted partial relief to the assessee. Aggrieved by the order of the ld.CIT(A), assessee is now in appeal before us and has raised following grounds:- 1. The Learned CIT(A) has erred in fact and in law in confirming the action of the AO in treating an amount of ₹ 1,75,032/- being Right to use land and ₹ 17,33,458/-, being plantation and horticultural expenses as capital expenditure. 2. The Learned CIT(A) has erred in fact .....

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horticultural expenses. AO also noted that the aforesaid expenses were treated by assessee in its books of accounts as deferred Revenue expenses. Assessee was therefore asked to show-cause as to why the expenses not be added to the total income to which assessee inter-alia submitted that it did not have any ownership right over the land and the amount paid was right to use and the rights expired at the end of predefined period. With respect to horticultural and plantation expenses, it was submit .....

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. Aggrieved by the order of the Assessing Officer (AO), assessee carried the matter before the ld.CIT(A), who vide order dated 16/09/2011 (in Appeal No.CABITA I/50/05-06) upheld the order of AO and dismissed the ground of assessee by observing as under:- 2.2. I have considered facts of the case and appellant s submissions. The land in question was in possession of appellant for a period of 99 years under lease from GIDC. On being asked, appellant has not been able to file documents to support it .....

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ture. Ground No.1 of appeal is dismissed. 3.2. Aggrieved by the order of ld.CIT(A), assessee is now in appeal before us. 4. Before us, ld.AR reiterated the submissions made before AO and ld.CIT(A). During the course of hearing, a specific query was put to ld.AR and he was asked as to whether the expenses have been incurred in the impugned year to which ld.AR submitted that the expenses have not been incurred during the year but have been incurred in earlier years and the amortized portion of exp .....

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been incurred during the year, but have been incurred in earlier years and the amortised portion of expenses has been claimed. Before us, ld.AR has not placed any order in support of its claim that though the expenses have not been incurred during the year but since the amount has been amortized, the expenditure is allowable. Further, ld.AR also could not controvert the findings of AO and ld.CIT(A). In view of the aforesaid facts, we see no reason to interfere with the order of ld.CIT(A) and th .....

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the expenditure not be treated as capital expenditure to which assessee inter-alia submitted that since the assessee had acquired the land for a period of 99 years and as it does not have ownership right of the land and after the completion of lease period it has to vacate the land and therefore the payment in respect of lease-hold expense was treated as advance payment of rent and therefore should be allowed as revenue expenditure. The submission of the assessee was not found acceptable to the .....

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ions. Appellant's submission is that by way of lease in question, it did not acquire ownership right on the land since after completion of lease period, company had to vacate the land and payment made towards rent is to be treated as revenue expenditure. Appellant's submission that the payment in question was towards rent is not borne out by the lease deed. There is nothing in the lease deed to indicate that the payment made towards purchase of land was in the nature of rent. In the leas .....

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in nature. It was held that the benefit conferred on the assessee by way of leasehold rights for 99 years against lump sum payment of ₹ 2.04 crore was of enduring nature and there was no material on record to suggest that this amount was paid by way of advance rent nor was there any provision for its adjustment towards rent or for its repayment to the assessee. Also, there was no material on record to show that assessee had made advance payment of rent for future years to secure any reduc .....

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ent. On other hand, documents amply and clearly demonstrated that such payment was towards purchase price for acquiring aforesaid leasehold rights for a period of 99 years. The token rent for land was separately payable by the lessee to the lessor in accordance with agreement executed with GIDC and the payment in question therefore, clearly represented cost of capital asset viz. long term lease acquired by the assessee, which could not be allowed as revenue expenditure. The decision relied upon .....

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der of ld.CIT(A), assessee is now in appeal before us. 6.2. Before us, ld.AR reiterated the submissions made before the AO and the ld.CIT(A). He further submitted that the expenses have not been incurred during the year and were incurred in the past and only the amortized portion of expenses was claimed as deduction. He therefore submitted that the assessee be allowed deduction. Ld.CIT-DR, on the other hand, supported the orders of AO and ld.CIT(A). 7. We have heard the rival submissions, peruse .....

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us, ld.AR has not placed any material on record to controvert the findings of ld.CIT(A). Further, the expenses have not been incurred during the year but were incurred in past. In view of the aforesaid facts, we see no reason to interfere with the order of ld.CIT(A) and thus this ground of Assessee is dismissed. 8. In the result, Assessee s appeal in ITA No.3075/Ahd/2011 for AY 2002-03 is dismissed. 9. Now we take up the Assessee s appeal in ITA No.3076/Ahd/2011 for AY 2003-04. Grounds raised by .....

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eal in ITA No.3075/Ahd/2011 for AY 2002-03(supra) and the submissions made by them while arguing the case for AY 2002-03 would be applicable to the present ground of appeal. 10. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below. In view of the submissions of both the parties that the facts and circumstances raised in the present ground being identical to that of ground No.2 raised in assessee s appeal for AY 2002-03 .....

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ent . The assessee was therefore asked to showITA cause as to why the amount not be considered as income to which assessee inter-alia submitted that assessee had entered into agreement with other PSUs wherein those PSUs had agreed to discharge and evacuate minimum actual aggregate quantities of its products through the facilities of the assessee and if those PSUs failed to discharge and evacuate the material to the extent stated in the agreement, then it was required to make payment towards the .....

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ent and since assessee was following mercantile system of accounting, assessee should have accounted the income on account of the shortfall in the minimum guaranteed amount and more so when the agreement was in force. AO further noted that in AY 2002-03 assessee itself had considered such shortfall as its income. He therefore, considered ₹ 46,31,47,609/- as income accrued to the assessee and made its addition. Aggrieved by the order of AO, assessee carried the matter before the ld.CIT(A), .....

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s different in A.Y.2003-04 viz-a viz earlier years. Appellant's contention that the PSUs objected during the year in question to the clause regarding recovery in respect of minimum guaranteed quantity is firstly not supported with any evidence. Secondly, even if there was some objection. by the PSUs, that alone was not sufficient reason to not account for income in respect of minimum guaranteed quantities accruing as per contract between appellant and PSUs concerned. Addition of ₹ 46,3 .....

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and though the assessee was following mercantile system of accounting, the amount could not be considered as its income. He further submitted that though the assessee had accounted for income for AY 2002-03, but the same could not be realized by the assessee and therefore in subsequent year, i.e. AY 2006-07 the amount was claimed as bad debts. He submitted that the assessee being Public Sector Undertaking and in view of the huge carried forward losses no benefit would have been received by the .....

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