Navrang Cream Corner, Surat vs Department Of Income Tax

ACIT, Circle-8, Surat .... Appellant Vs. M/s. Navrang Cream Corner, 24-25, Royal Ind. Estate, Bharimata Road, Variyali Bazar, Surat .... Respondent PAN : AADFN 5248 A

Revenue by : Shri M.J. Paul, Sr. DR. Assessee(s) by : Shri M.K. Patel, AR

सुनवाई क तार ख/Date of Hearing : 07/05/2015 घोषणा क तार ख /Date of Pronouncement: 14/05/2015

आदे श/O R D E R

PER SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER:

This appeal has been filed by the Revenue against the order of the Commissioner of Income Tax (Appeals)-V, Surat dated 15.09.2011 for Assessment Year 2008-09, on the following grounds:-

1. The Ld. CIT(A) has erred in allowing claim of machinery repairing expenses of Rs.12,81,600/-

pertaining to FY 2006-07 relevant to AY 2007-08 and not in the year under assessment i.e. 2008-09 by holding that ITA No.147/Ahd/ 2012 ACIT v. Navrang Cream Corner AY 2008-09

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the assessee is eligible for claim for such expenditure in the relevant year as inspection and dry runs were completed only in FY 2007-08 relevant to AY 2008-09.

2. The Ld. CIT(A) ought to have confirmed the addition made by the AO on the grounds that it was prior period expenditure as evidenced from machinery repairing bills furnished by the assessee as the assessee was following mercantile system of accounting.

3. The Ld. CIT(A) ought to have confirmed the addition made by the AO of prior period repairing expenditure of Rs.12,81,600/- as inspection and dry runs on the machinery completed in subsequent FY 2007-08 relevant to AY 2008-09 did not result in any further expenditure in the relevant AY 2008-09 and even otherwise the same could have been claimed in the relevant year in which it was incurred.

4. Hence the decision of the Ld. CIT(A) ought to be set- aside and that of the AO restored.

2. The assessee is engaged in the business of manufacturing and trading of ice cream and various milk products.

3. The only ground related to the addition of Rs.12,81,600/- made on account of disallowance of machinery repairing expenses. In the assessment year 2008-09, the corresponding accounting year ended on 31.03.2008, return of income declaring total income of Rs. Nil was filed by the assessee on 03.10.2008. During the assessment proceedings, the Assessing Officer noticed that the assessee has debited ITA No.147/Ahd/ 2012 ACIT v. Navrang Cream Corner AY 2008-09

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Rs.12,81,000/- in the profit and loss account as repairs of machinery. Subsequently, certain details were asked on behalf of the Revenue by the Assessing Officer in this regard and having considered the submissions of the assessee, the Assessing Officer rejected the explanation furnished by the assessee and added Rs.12,81,000/- in the hands of the assessee.

3.1 The matter was carried before the First Appellate Authority, wherein various contentions were raised on behalf of assessee and having considered the same, CIT(A) allowed the appeal and the same has been opposed on behalf of Revenue inter alia submitting that the CIT(A) erred in allowing claim of machinery repairing expenses of Rs.12,81,600/- pertaining to FY 2006-07 relevant to AY 2007-08 and not in the year under assessment i.e. 2008-09 by holding that the assessee is eligible for claim for such expenditure in the relevant year as inspection and dry runs were completed only in FY 2007-08 relevant to AY 2008-09; he should have confirmed the addition made by the Assessing Officer on the grounds that it was prior period expenditure as evidenced from machinery repairing bills furnished by the assessee as the assessee was following mercantile system of accounting, and CIT(A) also should have confirmed the addition made by the Assessing Officer of prior period repairing expenditure of Rs.12,81,600/- as inspection and dry runs on the machinery completed in subsequent FY 2007-08 relevant to AY 2008-09 did not result in any further expenditure in the relevant AY 2008-09 and even otherwise the ITA No.147/Ahd/ 2012 ACIT v. Navrang Cream Corner AY 2008-09

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same could have been claimed in the relevant year in which it was incurred; accordingly, the order of the CIT(A) in this regard be set-aside and that of the Assessing Officer be restored. On other hand, learned Authorized Representative supported the order of the CIT(A) and submitted that the assessee has maintained complete books of accounts, audited by Chartered Accountant which was verified by the Assessing Officer at the relevant point of time.

4. After going through the rival submissions and material on record, we find that the stand of the assessee has been that the total machinery were destroyed in flood and given to PWS Engineering Pvt Ltd for repairing and the work was completed in January and bills for repairs were issued on that date, but the same could only be put to use after the inspection and dry runs only. The inspection & dry runs were completed in the year under consideration i.e. FY 2007-08 relevant to AY 2008- 09 and the expenses were accounted for in the FY 2007-08, relevant to Assessment Year 2008-09. If the dry run would have failed further time would have taken. Therefore, the amount in question would have been accounted for in only after getting satisfaction that everything is fine as far as the repair is concerned. Therefore, the CIT(A) has rightly allowed the claim of the assessee in this regard. Thus, we are not inclined to interfere with the order of the CIT(A), because the issue of crystallization by way of dry runs has not been ITA No.147/Ahd/ 2012 ACIT v. Navrang Cream Corner AY 2008-09

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disputed by the Revenue. Accordingly, the order of the CIT(A) in this regard is upheld.

5. In the result, the appeal filed by the Revenue is dismissed.

Order pronounced in the Court on 14th of May, 2015 at Ahmedabad.

Sd/- Sd/-

(ANIL CHATURVEDI) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 14/05/2015 *Biju T, PS

आदे श क ूितिल'प अमे'षत/Copy षत of the Order forwarded to : 1. अपीलाथ* / The Appellant 2. ू+यथ* / The Respondent. 3. संबंिधत आयकर आयु, / Concerned CIT 4. आयकर आयु,(अपील) / The CIT(A), 5.

'वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

आदे शानुसार/ BY ORDER,

//TRUE COPY// उप/ उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपीलीय अिधकरण, अिधकरण, अहमदाबाद / ITAT, Ahmedabad