The DCIT, Circle-4,, Ahmedabad v. Milestone Automobiles Pvt.Ltd.,, Ahmedabad

ITA 2759/AHD/2007 | 2003-2004
Pronouncement Date: 24-05-2010 | Result: Dismissed

Appeal Details

RSA Number 275920514 RSA 2007
Assessee PAN AACCM4188L
Bench Ahmedabad
Appeal Number ITA 2759/AHD/2007
Duration Of Justice 2 year(s) 11 month(s) 5 day(s)
Appellant The DCIT, Circle-4,, Ahmedabad
Respondent Milestone Automobiles Pvt.Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 24-05-2010
Appeal Filed By Department
Order Result Dismissed
Bench Allotted A
Tribunal Order Date 24-05-2010
Date Of Final Hearing 24-05-2010
Next Hearing Date 24-05-2010
Assessment Year 2003-2004
Appeal Filed On 19-06-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH 'A' [BEFORE SHRI BHAVNESH SAINI JM & SHRI A N PAHUJA A M] ITA NO.2759/AHD/2007 (ASSESSMENT YEAR:-2003-04) DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4 AHMEDABAD V/S MILESTONE AUTOMOBILES P. LTD. A-201 NARNARAYAN COMPLEX NAVRANGPURA AHMEDABAD [PAN: AACCM 4188 L] [APPELLANT] [RESPONDENT] REVENUE BY :- SHRI C K MISHRA DR ASSESSEE BY:- NONE O R D E R A N PAHUJA: THIS APPEAL BY THE REVENUE AGAINST AN ORDER DATED 09- 04-2007 OF THE LD. CIT(APPEALS)-VIII AHMEDABAD RA ISES THE FOLLOWING GROUNDS: 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACT S OF THE CASE IN DELETING THE ADDITION OF RS.66 35 770/- BEING THE INSURANCE CLAIM RECEIVED. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 3. IT IS THEREFORE PRAYED THAT THE OR DER OF THE LD. CIT(A) MAY BE CANCELLED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED T O THE ABOVE EFFECT. 2 AT THE OUTSET NONE APPEARED ON BEHALF OF THE AS SESSEE AND THE BENCH DECIDED TO DISPOSE OF THE APPEAL AFT ER HEARING THE LEARNED DEPARTMENTAL REPRESENTATIVE. 3 FACTS IN BRIEF AS PER RELEVANT ORDERS ARE THAT RETURN DECLARING LOSS OF RS.43 89 930/-FILED ON 30.11.2003 BY THE AS SESSEE ENGAGED IN TRADING OF CARS BESIDES HAVING WORKSHOP FOR REPA IRS AFTER BEING PROCESSED U/S 143(1) OF THE INCOME-TAX ACT 1961[HER EINAFTER REFERRED TO AS THE ACT] WAS TAKEN UP FOR SCRUTINY WITH THE ISSUE OF NOTICE U/S 143(2) OF THE ACT ON 25.11.2004. DURING THE COURSE OF ASSESSMENT ITA NO.2759/AHD/2007 FOR AY 2003-04 MILESTONE AUTOMOBILES P LTD. 2 PROCEEDINGS THE ASSESSING OFFICER[AO IN SHORT] NOT ICED THAT 22 COARSA AND OPEL ASTRO CARS VALUED AT RS.1 24 88 900 /- WERE BURNT DURING THE RIOTS IN AHMEDABAD ON 28.02.2002 AND THE FIR BEFORE THE POLICE DEPARTMENT WAS REGISTERED ON THE SAME DAY .I NITIALLY THE INSURANCE CLAIM FILED BY THE ASSEESSEE BEFORE THE N EW INDIA INSURANCE COMPANY WAS REJECTED VIDE LETTER DATED 20 .08.2002 BUT LATER ON VIDE LETTER DATED 30.12.2002 THE APPROVAL OF THE CLAIM WAS CONVEYED TO THE EXTENT OF RS.66 35 770/- BY WAY OF EXGRATIA. TO A QUERY BY THE AO SEEKING TO ADD THE SAID AMOUNT TH E ASSESSEE VIDE LETTER DATED 16.03.2006 SUBMITTED THAT ONLY IN ORDE R TO COMPENSATE THE LOSS NEW INDIA ASSURANCE CO. LTD. GRANTED THE CLA IM OF RS.66 35 770/- AS EX- GRATIA. THUS CLOSING STOCK OF RS.1 24 88 900/- IS TO BE SUBSTITUTED BY RS.66 35 770/- RESULTING IN A LOSS OF RS.58 53 130 /-. INSURANCE CLAIM CAN NEVER BE SOURCE OF INCOME SINCE IT IS COMPENSATORY IN NAT URE THE ASSESSEE ARGUED. WHILE REFERRING TO DECISIONS IN ANCHOR PRESSINGS (P ) LTD. V. CIT & OTHERS 161 ITR 159 AND CIT V. TUTICORIN ALKALI CHEMICAL & FERTILIS ER LTD. 227 ITR THE ASSESSEE CONTENDED THAT WHETHER RECEIPT OF MONEY IS TAXABLE OR NOT OR WHETHER CERTAIN DEDUCTIONS FROM THAT RECEIPTS WERE PERMISSIBLE IN L AW OR NOT THESE QUESTIONS HAVE TO BE DECIDED ACCORDING TO THE PRINCIPLES OF L AW AND NOT IN ACCORDANCE WITH ACCOUNTANCY PRACTICE. SINCE INSURANCE CLAIM HAS GON E DIRECTLY TO UNPAID VENDORS VIZ. CMAC- TCFC FINANCE LTD & M/S MAHENDRA & KOTAK LTD. AND WAS SETTLED ONLY IN NOVEMBER 2003 THE ASSESSEE POINTED OUT THA T THEY HAD REDUCED THE OPENING STOCK OF RS.1 24 88 900/- AS ON 1.4.2003 B Y CREDITING INSURANCE CLAIM OF RS.66 35 770/- AND THEREFORE AMOUNT OF RS.66 35 7 70/- COULD NOT BE TREATED AS INCOME FOR THE AY 2003-04. HOWEVER THE AO REJECT ED THESE CONTENTIONS OF THE ASSESSEE WHILE RELYING ON THE DECISION OF THE HON' BLE HIGH COURT OF MADRAS IN THE CASE OF DEVI FILMS PVT. LTD. V. CIT 75 ITR 301 AND CONCLUDED THAT SINCE THE RELEVANT STOCK IN TRADE OF CARS WERE BURNT ONLY ON 28.02.2002 TRADING LOSS IF ANY COULD BE CLAIMED IN THE AY 2002-03 AND NOT IN THE YEAR UNDER CONSIDERATION. THE AO FURTHER RELIED UPON DECISION IN THE CASE OF CIT V. S.N.A.S.A. ANNAMALAI CHETTIYAR 86 ITR 607 W HEREIN IT WAS HELD THAT THE ITA NO.2759/AHD/2007 FOR AY 2003-04 MILESTONE AUTOMOBILES P LTD. 3 COMPENSATION RECEIVED IN LIEU OF LOSS OF STOCK IN T RADE AS A RESULT OF ANY ACTION WAS A TRADING RECEIPT. THE AO FURTHER REFERRED TO A DECISION IN THE CASE OF CIT V. CHAMANLAL MANGALDAS & CO. 39 ITR 8 (SC) WHERE IT W AS HELD THAT THE INCOME WHICH ACCRUES OR ARISES AND THE ASSESSEE HAS THE RI GHT TO RECEIVE CANNOT BE AFFECTED BY THE MANNER IN WHICH THE BOOK ENTRY IS M ADE. ACCORDINGLY THE AO ADDED THE INSURANCE CLAIM AMOUNTING TO RS.66 35 770 /- AS INCOME EARNED BY THE ASSESSEE-COMPANY AND ADDED TO THE TOT AL INCOME OF THE YEAR UNDER CONSIDERATION. 4 ON APPEAL THE LEARNED CIT(A) CONCLUDED IN THE FO LLOWING TERMS:- 2.2 BEFORE ME IT WAS VEHEMENTLY CONTENDED BY THE LEARNED COUNSEL THAT THOUGH THE FIRE TOOK PLACE IN FEBRUARY 2002 THE VA LUE OF DAMAGED CARS WERE SHOWN AT COST PRICE AS ON 31.03.2002 AND 31.03 .2003 AND NO AMOUNT WAS DEBITED TO PROFIT AND LOSS ACCOUNT AS LO SS OR DAMAGE ON ACCOUNT OF FIRE. THOUGH THE ORIGINAL CLAIM WAS REJE CTED THE INSURANCE COMPANY AS A SPECIAL GESTURE GRANTED EX-GRATIA OF R S.66 35 770/- THEREBY RESULTING IN LOSS OF RS.58 53 130/-. AS THE SAID SE TTLEMENT TOOK PLACE IN THE F.Y. 2003-04 THE ADJUSTMENT TO THE STOCK WAS MADE FOR THE A.Y 2004-05. THE BALANCE LOSS OF RS.58 53 130/- WAS ADJUSTED AGA INST CREDIT WAIVER GRANTED BY THE FINANCIERS AND THE ASSESSEE DID NOT CLAIM ANY LOSS IN THE ACCOUNTS EVEN IN THE YEAR ENDED 31.3.2004. THE AO D ID NOT APPRECIATE THIS ASPECT AND MADE THE ADDITION. IN ANY CASE THE INSURANCE CLAIM WAS ONLY COMPENSATORY IN NATURE AND CANNOT CONSTITUTE I NCOME. THE AO DID NOT CONSIDER ALLOWING MATCHING LOSS IN VIEW OF HIS TREA TMENT IN SHORT THE ACTION OF THE AO WAS SOUGHT TO BE REVERSED. 2.3 I HAVE EXAMINED THE ISSUE IN DETAIL AND ALSO PE RUSED THE ASSESSMENT ORDER. I FIND THAT ON RECEIPT OF EX-GRATIA AND WAIV ER BY THE FINANCIERS THE APPELLANT PASSED NECESSARY TREATMENT IN THE BOOKS F OR THE YEAR ENDED 31.3.2004 WHEREIN NO COST OF THE DAMAGED CARS WAS E FFECTED. IN OTHER WORDS ENTIRE COST WAS ADJUSTED AGAINST EX-GRATIA R ECEIVED FROM THE INSURANCE COMPANY AND WAIVER GRANTED BY THE FINANCI ERS. IN ANY CASE FOR THE YEAR ENDED 31.3.2003 THE ASSESSEE HAS NOT DEBI TED ANY CLAIM AND HENCE THE TREATMENT IN THE BOOKS WAS AS IF THE FIRE ACCIDENT NEVER OCCURRED. THIS IS REVENUE NEUTRAL AND NO ADJUSTMENT WAS CALLED FOR. THE AO DID NOT APPRECIATE THE ENTIRE ISSUE IN PROPER PE RSPECTIVE AND THE ADDITION WAS NOT CALLED FOR. THE CLAIM OF THE APPEL LANT IS VERIFIABLE FROM THE FINAL ACCOUNTS ENCLOSED DURING THE SUBMISSIONS. IN SHORT FOR THIS ASSESSMENT YEAR THERE IS NEITHER ANY INSURANCE CLAI M RECEIVED NOR WAS ANY CLAIM FOR DAMAGE DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE CLAIM ITA NO.2759/AHD/2007 FOR AY 2003-04 MILESTONE AUTOMOBILES P LTD. 4 HAVING BEEN SETTLED IN THE SUBSEQUENT FINANCIAL YEA R NO ADJUSTMENT ON THIS COUNT IS CALLED FOR THIS ASSESSMENT YEAR. IN THAT V IEW OF THE MATTER THE EXPLANATION SUBMITTED BY THE APPELLANT IS ACCEPTABL E AND THE TREATMENT GIVEN BY THE AO IS OUT OF PLACE. THE ADDITION IS DI RECTED TO BE DELETED. 5. THE REVENUE IS NOW IN APPEAL BEFORE US AGAINST THE AFORESAID FINDINGS OF THE LD. CIT(A). THE LEARNED DR MERELY S UPPORTED THE ORDER OF THE AO. 6. WE HAVE HEARD THE LEARNED DR AND GONE THROUGH T HE FACTS OF THE CASE. UNDISPUTEDLY THE ASSESSEE IS ENGAGED IN TRADING OF CARS AND 22 COARSA AND OPEL ASTRO CARS VALUED AT RS.1 2 4 88 900/- WERE BURNT DURING THE RIOTS IN AHMEDABAD ON 28.02.2002 I .E. IN THE PERIOD RELEVANT TO THE AY 2002-03. THE ASSESSEE DID NOT CL AIM ANY TRADING LOSS IN THE AY 2002-03. EVEN ACCORDING TO THE AO THE SAID LOSS COULD HAVE BEEN CLAIMED IN THE PERIOD RELEVANT TO T HE AY 2002-03. IN THE YEAR UNDER CONSIDERATION NEW INDIA INSURAN CE COMPANY VIDE THEIR LETTER DATED 30.12.2002 CONVEYED APPROVAL OF AN EXGRATIA OF RS.66 35 770/- AS A SPECIAL CASE WITHOUT PRECEDENC E AS IT WAS NOT OTHERWISE COVERED IN THE POLICY . ACCORDING TO THE ASSESSEE EXGRATIA CLAIM WAS ACCEPTED ONLY ON 19.11.2003 AND AN AMOUNT OF RS. 60 LACS WAS REMITTED BY THE INSURANCE COMPANY DIRECTLY TO THE FINANCE COMPANY M/S GMACT TCFC FINANCE LTD. TILL THEN DUE TO PENDENCY OF THEIR CLAIM WITH INSURANCE COMPANY AS ALSO SUIT FILED BY THE ASSESSEE ENTIRE ORIGINAL COST OF RS. 1 24 88 980/- WAS REFLECTED AS CLOSING STOCK AS ON 31.3.2003. ON RECEIPT OF EXGRAT IA BY THE FINANCIERS BALANCE LOSS OF RS. 58 53 130/- IS STA TED TO HAVE BEEN ADJUSTED BY THE ASSESSEE AGAINST WAIVER GRANTED BY THE FINANCIERS IN THE PERIOD RELEVANT TO THE AY 2004-05. IN THE LIGHT OF THESE FACTS THE LD. CIT(A) OBSERVED THAT ON RECEIPT OF EX-GRATIA AND W AIVER BY THE FINANCIERS THE ENTIRE COST WAS ADJUSTED AGAINST EX-GRATIA RECEIVED FROM THE INSURANCE COMPANY AND WAIVER GRANTED BY THE FINANCIERS. THE LD. CIT(A ) FURTHER CONCLUDED THAT IN ANY CASE FOR THE YEAR ENDED 31.3.2003 THE ASSESSEE DID NOT DEBIT ANY CLAIM NOR ITA NO.2759/AHD/2007 FOR AY 2003-04 MILESTONE AUTOMOBILES P LTD. 5 RECEIVED ANY INSURANCE CLAIM NOR WAS ANY CLAIM FOR DAMAGE DEBITED TO THE PROFIT AND LOSS ACCOUNT THE CLAIM HAVING BEEN SETTLED IN THE SUBSEQUENT FINANCIAL YEAR. ACCORDINGLY THE LD. CIT(A) DELETED THE ADDITION. T HE LD. DR APPEARING BEFORE US DID NOT REFER US TO ANY MATERIAL CONTROVERTING TH ESE FINDINGS OF FACTS RECORDED BY THE LD. CIT(A). IN THESE CIRCUMSTANCES AND IN THE ABSENCE OF ANY MATERIAL BEFORE US FOR TAKING A DIFFERENT VIEW IN THE MATTER WE A RE NOT INCLINED TO INTERFERE. THUS GROUND NO. 1 IN THE APPEAL IS DISMISSED 7. GROUND NOS. 2 & 3 BEING GENERAL IN NATURE DO N OT REQUIRE ANY SEPARATE ADJUDICATION AND ARE THEREFORE DISMISSED . 8 IN THE RESULT APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT TODAY ON 24 -05 -2010 SD/- SD/- (BHAVNESH SAINI) JUDICIAL MEMBER (A N PAHUJA) ACCOUNTANT MEMBER DATE : 24-05-2010 COPY OF THE ORDER FORWARDED TO : 1. MILESTONE AUTOMOBILES P. LTD. A-201 NARNARAYAN COMPLEX NAVRANGPURA AHMEDABAD 2. THE DCIT CIRCLE-4 AHMEDABAD 3. CIT CONCERNED 4. CIT(A)-VIII AHMEDABAD 5. THE DR ITAT AHMEDABAD 6. GUARD FILE BY ORDER DEPUTY REGISTRAR ASSISTANT REGISTRAR ITAT AHMEDABAD