9911796707
TMI Blog2023 (1) TMI 1068X X X X Extracts X X X X X X X X Extracts X X X X ..... idence is brought on record that the liability is other than purchase of machinery. Thus, the credit in the books is not on account of trading liability. The expenditure incurred and purchases of machinery are certainly a capital expenditure. Further, the assessee has never claimed depreciation on such machinery. In the case of CIT vs Mahindra Mahindra [ 2018 (5) TMI 358 - SUPREME COURT] held on a perusal of section 41(1), it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s. 41(1) of the Act without appreciating the facts that Liability is for Capital Expenditure incurred in A.Y.2011/12, the Liability was not waived and Liability written off in A.Y.2019/20 by returning the disputed machinery. The addition of Rs.15,95,250/- should therefore be deleted. The appellant reserves the right to add, alter, modify, amend or withdraw any of the grounds of appeal before hearing. 2. Brief facts of the case are that the assessee is a private limited company, is engaged in the business of Calcium Carbonate powder and trading of Calcium Bauxite. The assessee has filed its return of income for the AY.2016-17, on 05.10.2016 declaring total income of Rs. Nil. The case was selected for scrutiny. During the asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot established his claim of sundry creditor is capital in nature and thereby as it Rs.15,95,250/-, in the income of assessee. 4. Aggrieved by the addition in the assessment order, the assessee filed appeal before the ld. CIT(A). The appeal of assessee was adjudicated by NFAC, Delhi/ [ld CIT(A)]. Before NFAC, the assessee filed its submissions. The submissions of assessee is recorded in para 4 at page no. 2 to 6. The assessee in its submission reiterated that they have purchased machinery from supplier M/s. Sabko Emerystone Engineering Industries Pvt. Ltd. in AY.2011-12. The machinery was defective, it was never put to use, the supplier was asked to take its machinery, the assessee has not paid any amount till AY.2016-17. The Provisions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed the depreciation on such machinery in any of assessment years. 5. The ld. CIT(A) after considering the submission of assessee held that the assessee claimed that amount in respect of purchase machinery that is capital gains. However, one hand, the amount was shown outstanding, on the other hand, the assessee claimed that the machinery was defective and it would not use. The machinery was never added to the fixed assets schedule nor any depreciation was claimed. The ld. CIT(A) held that basic accounting principle, of double entry, this claim is contradictory. When revenue become outstanding then it was debited in trading has not profit and loss account and at the same time, on liability side the amount is shown outstanding. It was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nos.50 to 51 of the paper book. Such machineries were defective. The machinery was never put to use. The assessee never claimed depreciation on such machineries. The supplier was asked to remove/take back the delivery of such machineries. Since, the liability was not on account of trading liability and the assessee has not claimed such expenditure many of the years, therefore, no addition can be made under section 41 of the Act. The ld. AR submits that grounds of appeal raised by assessee is squarely covered by the decision of Hon'ble Apex Court in the case of CIT vs Mahindara Manindra Ltd. (supra). 7. On the other hand, Ld. Sr. DR for the Revenue supported the order of ld. CIT(A). The ld. Sr. DR submits that the assessee has show ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... than purchase of machinery. Thus, the credit in the books is not on account of trading liability. The expenditure incurred and purchases of machinery are certainly a capital expenditure. Further, the assessee has never claimed depreciation on such machinery. The Hon'ble Apex Court in the case of CIT vs Mahindra Mahindra (supra) held on a perusal of section 41(1), it is evident that it is a sine qua non that there should be an allowance or deduction claimed by the assessee in any assessment for any year in respect of loss, expenditure or trading liability incurred by the assessee. Then, subsequently, during any previous year, if the creditor remits or waives any such liability, then the assessee is liable to pay tax under section 41. T ..... X X X X Extracts X X X X X X X X Extracts X X X X
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