C& C Construction Pvt. Ltd. vs Commissioner Of Income Tax
2011 Latest Caselaw 5729 Del

*                   IN THE HIGH COURT OF DELHI AT NEW DELHI

+                                    ITA No.1118/2011


%                                Decided on : 25th November, 2011.


C& C CONSTRUCTION PVT. LTD.                 ..... Appellant
                 Through : Mr. Ajay Vohra with
                 Ms. Kavita Jha, Advocates.

                          versus

COMMISSIONER OF INCOME TAX                   ..... Respondent

Through : Mr. Sanjeev Rajpal, Adv.

CORAM:

HON'BLE MR. JUSTICE SANJIV KHANNA HON'BLE MR. JUSTICE R.V. EASWAR

1. Whether Reporters of local papers may be allowed to see the judgment?

2. To be referred to the Reporter or not ?

3. Whether the judgment should be reported in the Digest?

SANJIV KHANNA, J. (ORAL) :

This appeal under Section 260A of the Income Tax Act, 1961

(„Act‟ for short) impugns the order dated 26.6.2009 passed by the

Income Tax Tribunal („Tribunal‟ for short) in ITA No.4000/Del/2007.

The appeal relates to the assessment year 2003-04.

2. The findings of the authorities/tribunal and the reasoning portion

of the impugned order is reproduced as under :

"2. With regard to ground No.1, the assessee claimed 100% depreciation amounting to Rs.41,37,577/-. The AO, however, allowed depreciation on sheds @ only 10%, treating the construction as construction of office building. The assessee had submitted that the sheds were of

temporary nature and were necessary for carrying out efficient business for earning of profits; that after the project is over, the sheds are handed over to the contractee. The AO rejected this plea of the assessee since the assessee had not shown any income from any such transfer to its contractee. It was observed that Rs.20,26,181/- had been incurred at the Koklata Regional Office-I of the assessee, whereas sums of Rs.10,75,297/- and Rs.10,14,599/- had been incurred at two other different sites. It was from this that the AO concluded that the expenses had been incurred on construction of the office building. Depreciation was allowed @10% and not @100% as claimed by the assessee, keeping in view the scale of the expenditure, the past history and the above conclusion that the expenditure was on construction of office building. The ld. CIT(A) upheld the AO‟s order with regard to allowing depreciation @ 10% concerning the construction at the assessee‟s Kolkata Regional Office-1. However, it was found by the ld. CIT(A) that the other two expenses of Rs.10,75,297/- and Rs.10,14,599/- (total amounted to Rs.2,08,98,967/- pertained to two other projects, namely, GSB-WMM Project and Panogarh Palsit, where the construction was of temporary sheds. The AO was directed to allow depreciation @ 100% on these two sites.

3. xxx

4. xxx

5. We have heard the parties and have perused the material on record. The Tribunal order in the assessee‟s own case for assessment year 1998-99 is at pages 10 to 27 of the assessee‟s paper book („APB‟ for short). In that year, as observed in para 6 of the Tribunal order, the structures were admittedly of temporary nature and they were constructed on the land which did not belong to the assessee. For the present year, the assessee seeks to draw parity with the facts for assessment year 1998-99 by contending that here also, the structures were of temporary nature; that they were not built on the land owned by the assessee; and that after the contract got over, these structures were to be handed over to the contractee. It has, however, been found by the authorities

below concurrently, that the construction in question is different from the construction involved in assessment year 1998-99. It was observed that the expenditure of Rs.20,26,181/- included the purchase of cement for Rs.1,92,360/- and of sand of Rs.1,02,386/-. Likewise, there were other expenses of sanitary items, water tank, plywood, roof tiles, black stone, tube well, tiles, etc. These heads of expenses were found not to be required for construction of temporary sheds required for residence of labours and storage of material. These facts do not stand rebutted. These facts were also not before the Tribunal for assessment year 1998-99."

3. Mr. Ajay Vohra, Advocate for the appellant submits that the

expenditure on the sheds was not capital expenditure and in fact was

revenue expenditure. It is pointed out to Mr. Vohra that this contention

and issue was not raised before the Tribunal. He submits that even if

this issue and contention was not raised before the authorities/Tribunal,

the Tribunal should have sue moto, on its own, granted the said relief.

He relies upon Commissioner of Income Tax vs. Mahalakshmi

Textile Mills Ltd., reported as (1967) 66 ITR 710.

4. It is not possible to accept the contention of Mr.Vohra. An

appeal under Section 260A of the Act is maintainable against every

order passed by the Tribunal, where High Court is satisfied that a

substantial question of law is involved. A contention/ issue, which is

not raised, dealt with or answered by the Tribunal, cannot be raised

before the High Court for the first time in an appeal under Section

260A of the Act. A contention/question raised and answered by the

Tribunal or dealt with by the tribunal suo motu and a question/issue

which was raised, but not answered/decided by the Tribunal, can be

made subject matter of an appeal under Section 260A of the Act.

Therefore, a contention/issue, which is not raised and not decided by

the Tribunal, cannot form subject matter of an appeal before the High

Court.

5. It may be noticed that an appeal under Section 260A of the Act

is the fourth tier of appeal in most of the cases and a third tier of appeal

in a few cases.

6. Learned counsel for the appellant has referred to sub-Section (6)

to Section 260A of the Act and submits that jurisdiction of the Court is

very wide. The said sub-Section reads as under:-

            "(6)       The High Court may determine any issue
            which -

(a) has not been determined by the Appellate Tribunal; or

(b) has been wrongly determined by the Appellate Tribunal, by reason of a decision on such question of law as is referred to in sub-section (1)."

7. Clause (a) of sub-Section (6) to Section 260A of the Act

states that the High Court may decide an issue, which is not determined

by the Appellate Tribunal. The word "determined" means that the issue

is not dealt with, though it was raised before the Tribunal. The word

"determined" presupposes an issue was raised or argued but there is

failure of the Tribunal to decide or adjudicated the same. In a given

case, a substantial question of law may arise because of the facts and

findings recorded by the Tribunal, but the said issue/question is not

determined. In such cases, an appeal under Section 260A of the Act

can be entertained. This would depend upon the facts of each case and

the reasoning and findings recorded by the Tribunal. This is not so in

the present case.

8. The facts and reasoning of the Tribunal recorded above shows

that the Tribunal was of the opinion that the construction in question

cannot be regarded as a temporary construction and therefore 100%

depreciation was not permissible and depreciation should be as per the

prescribed schedule. The nature of construction was permanent. The

question, whether expenditure incurred by the assessee was capital

expenditure or revenue expenditure, was not raised, argued or decided.

This was not an issue or a question, which had arisen because of the

findings recorded by the Tribunal. The appellant-assessee had filed an

appeal before the Tribunal, having lost before the CIT(Appeals). The

appellant-assessee did not raise the question/issue now raised in the

appeal. The question, whether the expenditure incurred by the assessee

was capital expenditure or revenue expenditure, can be decided after

examining and ascertaining the facts and then applying law to the facts

ascertained. This issue and question requires examination from a

different context and on distinct principles after elucidating and

recording the relevant factual matrix.

9. The reliance placed by the counsel for the appellant on

Mahalakshmi Textile Mills Ltd. (supra) is misconceived and not

apposite. In paragraph 2 of the aforesaid case, it was observed that

besides submitting the claim that expenditure was allowable as

development rebate, the assessee in the said case had urged that the

amount laid out for introducing the Casablanca Conversion System

was allowable under Section 10(2)(v) of the Indian Income Tax Act,

1922. The expenditure was allowed by the Tribunal under the said

Section. Though this issue had not been raised before the lower

authorities, but the Tribunal allowed the assessee to raise the said issue

and had decided the said question. The Supreme Court noticed that

the Appellate Tribunal was competent to pass such orders on the

appeal "as it thinks fit" as empowered and mandated by Section 33(4)

of the Indian Income Tax Act, 1922. It was held that the Tribunal had

not exceeded its jurisdiction.

10. In the present case, what is urged by the counsel for the

appellant is that though the issue was not raised and argued before the

Tribunal, but the Tribunal should have examined the issue whether the

expenditure was on revenue account.

11. The aforesaid contention is not acceptable and has to be rejected.

The appeal is accordingly dismissed.

No orders as to costs.

SANJIV KHANNA, J.

R.V.EASWAR, J.

NOVEMBER 25, 2011 Sk/NA