C/TAXAP/61/2020 ORDER IN HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 61 of 2020 PRINCIPAL COMMISSIONER OF INCOME TAX, GANDHINAGAR Versus GUJARAT POWER CORPORATION LTD. Appearance: MRS MAUNA M BHATT(174) for Appellant(s) No. 1 for Opponent(s) No. 1 CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR. JUSTICE BHARGAV D. KARIA Date : 17/02/2020 ORAL ORDER (PER : HONOURABLE MR.JUSTICE BHARGAV D. KARIA) 1. This appeal is at instance of revenue filed under Section 260A of Income Tax Act, 1961 (for short Act, 1961) and is directed against order dated 31.07.2019 passed by Income Tax Appellate Tribunal, Ahmedabad B Bench, Ahmedanad in ITA No.3578/Ahd/2008 for assessment year 2005-06. 2. Revenue has proposed following questions of law as substantial questions of law, for consideration of this Court: [A] Whether Appellate Tribunal has erred on facts and in law, in upholding order of CIT(A) deleting addition of Rs.25,16,488/- on account of claim under Section 35D of Act? Page 1 of 6 Downloaded on : Thu Feb 27 14:43:20 IST 2020 C/TAXAP/61/2020 ORDER [B] Whether Appellate Tribunal has erred on facts and in law, in upholding order of CIT(A) deleting addition of Rs.2,72,81,590/- on account of Rent, Rates and Taxes? [C] Whether Appellate Tribunal has erred in law and on facts in confirming order passed by CIT(A) directing Assessing Officer to give deduction for principal part of rent received from taxable income without there being corresponding claim in return or before Assessing Officer during assessment proceedings?" 3. issue raised by Revenue in this appeal is with regard to deleting addition by CIT (A) for claim made by assessee of Rs.25,16,488/- under Section 35D of Act. 4. assessee claimed deduction, under Section 35D of Act, 1961, for first time in year 2004-05. issue of dis-allowance, under Section 35D of Act, was subject matter of appeal, for assessment year 2003-04 and also for assessment year 2004-05. 5. Learned advocate Ms.Mauna M. Bhatt for appellant submitted that Tribunal on merits of case has held that assessee is not entitled to claim deduction under Section 35D of Act which provides for amortization of certain preliminary expenses. She relied upon observations made by Tribunal in paragraph No.16.1, which reads thus: 16.1. From mindful reading of above section 35D of Act it can be construed that ROC fee is allowable only Page 2 of 6 Downloaded on : Thu Feb 27 14:43:20 IST 2020 C/TAXAP/61/2020 ORDER when paid for registration of company. Printing charges are to be for printing of Memorandum or Article of Association or printing of prospectus. There is no specific mention about allowance of stamp fee in given section. We observe that payment made to ROC is not for registration and same has been established by AO in his order which is not disputed by Ld. AR. Moreover it is also noted that these expenditures were incurred post commencement of business. Besides this same could not 16.1. From mindful reading of above section 35D of Act it can be construed that ROC fee is allowable only when paid for registration of company. Printi be substantiated to have been incurred in connection with setting up or extension of industrial undertaking. In light of above observation it is evident that deduction claimed u/s 35D of Act was not eligible and ought not to have been allowed in very first assessment u/s 143(3) of Act. It is further observed that case of Honble Rajasthan HC in Agro Transport Ltd. v CIT (224 ITR 90) was in context to expenditure for obtaining registration which is different from present case hence same cannot aid present case in hand. 6. However, CIT (A) as well as Tribunal both relied upon fact that once Assessing Officer has allowed claim under Section 35D of Act in first year of allowance, it could not have been cured and therefore, in view of doctrine of consistency, claim made by assessee is required to be allowed for year under consideration. 7. Tribunal therefore followed decision taken by in assessee s own case being ITA No.84/Ahd/2007 and dismissed appeal of Page 3 of 6 Downloaded on : Thu Feb 27 14:43:20 IST 2020 C/TAXAP/61/2020 ORDER Revenue. 8. Learned advocate for appellant submitted that decision in ITA No.84/Ahd/2007 is not carried further and challenged before this Court, which has attained finality. 9. In view of aforesaid facts and more particularly, as Tribunal has not given any independent finding for year under appeal and followed its earlier decision in assessee s own case in ITA No.84/Ahd/2007, which has attained finality, appeal requires to be dismissed only on that ground. 10. With regard to Question [B], facts are that assessee possesses several pieces of lands in Bhavnagar and Amreli Districts where activities of assessee was not commenced till year under consideration despite fact that these lands were acquired by it in earlier year. 11. assessee therefore filed appeal before CIT (A). CIT (A) after considering submissions, held as under: 5.3. matter has been given due consideration and I am inclined to agree with arguments of Authorized Representative. Besides fact that expenses involved are recurring in nature and do not bring into existence any new fixed assets, as emphasized by Authorized Representative, laying out of such expenses is necessity to keep control of assets. Payment of taxes Page 4 of 6 Downloaded on : Thu Feb 27 14:43:20 IST 2020 C/TAXAP/61/2020 ORDER of any kind, whether one time or recurring nature, never enhance value of asset being used in question nor brings into existence of any advantage of enduring nature. Clearly, land revenue, through levied on land, fixed asset for appellant, in itself is not capital expense but is only revenue expenses paidout to fulfill statutory requirement emanating out of ownership of land. Hence, after considering in totality, I hold that sum of Rs.2,72,81,590/- is revenue in nature and hence allowable expenses. 12. appellant-Revenue therefore being aggrieved by order passed by CIT (A), preferred appeal before Tribunal. Tribunal, considering facts and materials available on record, held as under: 29. We have heard rival contentions of both parties and perused materials available on record. issue in present case relates whether rent and taxes paid by assessee with respect to land where activity has not been commenced are liable to be capitalized. From preceding discussion, we note that assessee has been incurred such expenditure year after year and it is not getting any benefit of enduring nature out of such expenditure. We also note that purchase of land for business purpose is routine activity of assessee and its commercial activities are already in operation in respect other projects. Therefore, in our considered view expenditures claimed by assessee are revenue in nature. Accordingly there cannot be any disallowance on accont of such expenses treating them as capital in nature. Hence, we uphold finding of learned CIT(A). Thus ground of appeal of Revenue is dismissed. Page 5 of 6 Downloaded on : Thu Feb 27 14:43:20 IST 2020 C/TAXAP/61/2020 ORDER 13. Thus, CIT(A) as well as Tribunal have arrived at concurrent finding of fact that payment of rent and taxes, paid by assessee, is not capital expenses but is only revenue expenses paid out to fulfill statutory requirement for purpose of continuing ownership of land. 14. In such circumstances, no question of law much less any substantial question of law can be said to be arisen out of impugned order of Tribunal. 15. With regard to Question C is concerned, same does not arise out of order of Tribunal and therefore, we decline to answer same. 16. Appeal therefore fails and is accordingly, dismissed. (J. B. PARDIWALA, J) (BHARGAV D. KARIA, J) PALAK Page 6 of 6 Downloaded on : Thu Feb 27 14:43:20 IST 2020 Principal Commissioner of Income-tax, Gandhinagar v. Gujarat Power Corporation Ltd