2016 (10) TMI 806 - AT - Income Tax

Genuineness of expenditure - expense of dismantling, loading, unloading and assembling charges for movement of the crawler crane - Held that - The background is that the said crane so acquired by the assessee was owned by Janak Cranes and was installed at Maithan Power Project at Jharkhand on hire to Simplex Infrastructure Limited vide work order dated 22/25-05-2009. The assessee acquired the crane as on where basis from Janak Cranes along with work order for hiring by Simplex Infrastructure Limited at the same site/location and continued with the said crane on hire to Simplex Infrastructure Limited on same terms and condition at the same site. There is no evidence on record to prove that the cranes were de-assembled , transported and re-assembled i.e. demobilized and mobilized at Kolkatta as initially claimed by the assessee or at different location at the same site at Maithan Power Project at Jharkhand which was subsequently claimed by the assessee. The assessee is not coming out with the true and correct facts to reflect the true character of the said transaction and payment thereof and in our view prima facie it appears that this payment of ₹ 25,00,000/- is connected with the purchase of the crane but the assessee is not coming out with the true and correct facts - matter remanded back for re-determination of the issue on merits - Decided partly in favor of assessee.

Summary

Issues Involved:
1. Disallowance of revenue expense for dismantling, loading, unloading, and assembling charges of ?25,00,000/-.

Detailed Analysis:

1. Disallowance of Revenue Expense:
The assessee company, engaged in the business of hiring cranes and equipment, purchased a used crane from Janak Cranes for ?7.20 crores. The company claimed an expenditure of ?25,00,000/- for dismantling, loading, unloading, and assembling the crane, which was moved to another site at Kolkata. The AO disallowed this expense, treating it as non-genuine.

Assessee's Argument:
The assessee argued that the crane, being a crawler type, needed to be dismantled and transported on trailers. The expense was necessary for moving the crane from one site to another and should be considered revenue expenditure, not capital expenditure. The company provided various documents, including invoices, work orders, and bank statements, to support its claim.

AO's Observations:
The AO noted inconsistencies in the assessee's statements about the crane's movement. Initially, the crane was said to have moved to Kolkata, but later it was claimed to have moved within the same site. The AO found no supporting documents proving the crane's mobilization and concluded that the expense was non-genuine, adding ?25,00,000/- to the assessee's income.

CIT(A) Findings:
The CIT(A) upheld the AO's decision, observing discrepancies in the dates and locations mentioned in the invoices and work orders. The CIT(A) concluded that the transaction was a sham and a colorable device to claim a bogus expenditure, treating the ?25,00,000/- as non-genuine.

Tribunal's Decision:
The Tribunal noted the discrepancies and lack of evidence for the crane's dismantling and transportation. However, it pointed out that the Revenue did not conclusively prove the transaction as a sham. The Tribunal found that the payment might be connected to the crane purchase but lacked clarity on the true nature of the transaction. It set aside the matter, directing the AO to re-examine the issue, allowing the assessee to present all necessary evidence. The AO was instructed to verify the contentions and adjudicate the matter in accordance with the law, ensuring a fair hearing for the assessee.

Conclusion:
The appeal was allowed for statistical purposes, with the case remanded to the AO for a thorough re-examination of the evidence and the true nature of the ?25,00,000/- expense.