Case Law Details
Tewari Warehousing Co. Pvt. Ltd Vs DCIT (ITAT Kolkata)
ITAT Kolkata held that the electricity load extension charges are allowable as revenue expenditure. Accordingly, addition towards the same is unjustifiable and liable to be set aside.
Facts- The assessee is a private limited company engaged in the business of loading, unloading, blending and packing of raw tea. E-return for AY 2014-15 filed declaring total income of Rs. 1,99,63,630/-. Case selected for scrutiny followed by serving of notices u/s 143(2) & 142(1) of the Act. Assessment u/s 143(3) of the Act completed on 31.12.2016 making various additions and assessing income at Rs. 2,34,65,970/-. The additions made by ld. AO were challenged before ld. CIT(A) but the assessee failed to get any relief. Aggrieved, the assessee is now in appeal before this Tribunal.
Conclusion- Held that for entry appearing in 26AS statement, addition cannot be made in the hands of the assessee unless until a complete evidence is put forth to prove that such transaction has actually taken place.
Hon’ble Punjab & Haryana High Court in the case of CIT vs. Lakhani Rubber Works held that the electricity load extension charges are allowable as revenue expenditure. We also observe that during the year the assessee has purchased new plant and machinery and which further, justifies the payment of electricity load extension charges. In our considered view the said sum paid towards electricity load extension charges is a revenue expenditure.
FULL TEXT OF THE ORDER OF ITAT KOLKATA
This appeal filed by the assessee pertaining to the Assessment Year (in short “AY”) 2014-2015 is directed against the order passed u/s 250 of the Income Tax Act, 1961 (in short the “Act”) by ld. Commissioner of Income-tax (Appeals)-NFAC, Delhi [in I.T.A. No.: 700/KOL/2022 Assessment Year: 2014-2015 Tewari Warehousing Co. Pvt. Ltd. short ld. “CIT(A)”] dated 29.11.2022 arising out of the assessment order framed u/s 143(3) of the Act dated 31.12.2016.
2. The assessee has raised the following grounds of appeal:
”1. For that the Ld. CIT(A) erred in confirming the addition of Rs. 95845 towards undisclosed receipt from Coochbehar Tea Co ltd based on 26AS Statement when the appellant denied any transaction.
2. For that the Ld. CIT(A) erred in confirming the addition of Rs.253575 towards Tea Bag Packing u/s 40(a)(ia) when TDS not applicable on purchase of packaging material.
3. For that the Ld. CIT(A) erred in confirming the addition of Rs. 1188307 toward Electricity load extension charges when said expenditure is revenue in nature.
4. For that the Ld. CIT(A) erred in confirming the addition of Rs. 324870 for delayed payment of Employees PF ESI when the same paid before due date specified u/s 139(1) of The IT Act.”
3. Brief facts of the case as culled out from the records are that the assessee is a private limited company engaged in the business of loading, unloading, blending and packing of raw tea. E-return for AY 2014-15 filed declaring total income of Rs. 1,99,63,630/-. Case selected for scrutiny followed by serving of notices u/s 143(2) & 142(1) of the Act. Assessment u/s 143(3) of the Act completed on 31.12.2016 making various additions and assessing income at Rs. 2,34,65,970/-. The additions made by ld. AO were challenged before ld. CIT(A) but the assessee failed to get any relief.
4. Aggrieved, the assessee is now in appeal before this Tribunal.
5. Ld. Counsel for the assessee vehemently argued referring to the written submissions filed before the lower authorities and also various details. Reference was also made to the decisions namely ITO vs. M/s. Star Consortium, ITA No. 04/KOL/2020 order dated 07.04.2021 and also the judgment of Hon’ble Delhi High Court in the case of CIT vs. Dart Manufacturing India Pvt. Ltd., ITA 909/2008 dated 12.08.2008.
6. Per contra, ld. D/R vehemently argued supporting the orders of both the lower authorities.
7. We have heard rival contentions and perused the records placed before us.
Ground no. 1: This ground relates to addition of Rs. 95,845/- for the alleged undisclosed receipt from Coochbehar Tea Co. Ltd. We notice that 26AS statement showed a transaction of Coochbehar Tea Co. Ltd. TDS deducted thereon was claimed by the assessee against the tax liability. We however, find that the assessee has throughout the proceedings before the lower authorities and before us has contended that no such transaction took place with Coochbehar Tea Co. Ltd. Revenue authorities have also not placed any record which could indicate that such transaction has taken place between the assessee and Coochbehar Tea Co. Ltd. We, therefore, are of the considered view that for entry appearing in 26AS statement, addition cannot be made in the hands of the assessee unless until a complete evidence is put forth to prove that such transaction has actually taken place. We, therefore, reverse the finding of ld. CIT(A) and allow this ground of the assessee with the direction that the assessee will not be allowed the claim of TDS on the alleged receipt of Rs. 95,845/-. Thus, ground no. 1 raised by the assessee is allowed.
Ground no. 2: This ground relates to the addition u/s 40(a)(ia) of the Act at Rs. 2,53,575/-. On perusal of the paperbook we notice that the alleged sum is towards purchase of packaging material, tea cartons and is not any payment towards contractual obligation which calls for deduction of tax at source. Since the alleged sum is towards purchase of goods, TDS liability cannot be fastened on the assessee on this sum. We, therefore, reverse the finding of ld. CIT(A) and allow ground no. 2 raised by the assessee.
Ground no. 3: This ground relates to the addition of Rs. 11,88,307/- towards electricity load extension charges. Both the lower authorities have observed that the said sum cannot be allowed as a revenue expenditure since it is capital in nature. Before ld. CIT(A) it was contended by the assessee referring to the judgment of Hon’ble Punjab & Haryana High Court in the case of CIT vs. Lakhani Rubber Works reported in [2010] 326 ITR 415 (Punjab & Haryana) that the electricity load extension charges are allowable as revenue expenditure. We also observe that during the year the assessee has purchased new plant and machinery and which further, justifies the payment of electricity load extension charges. In our considered view the said sum paid towards electricity load extension charges is a revenue expenditure. We, further find support from the judgment of Hon’ble Delhi High Court in the case of Dart Manufacturing India Pvt. Ltd. (supra) wherein Hon’ble Court confirmed the view taken by ITAT holding the expenditure towards installation of low tension lines for supply of electricity to its factory as revenue expenditure. Thus, respectfully following the ratio laid down by the Hon’ble Court, we hold that electricity load extension charges are allowable as revenue expenditure. We, thus, reverse the finding of ld. CIT(A) and allow ground no. 3 raised by the assessee.
Ground no. 4: This ground relates to the addition towards delayed payment of employees’ contribution towards PF&ESI at Rs. 3,24,870/-. At the outset, ld. A/R requested for not pressing this ground. We, therefore, dismiss this ground as not pressed.
8. In the result, the appeal filed by the assessee is partly allowed.
Kolkata, the 23rd February, 2023
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