Commissioner of Income Tax-II V. Exel Rubber Ltd

ITTA/10/2013

AI Insights

The case involves the Commissioner of Income Tax-II, Hyderabad as the appellant and Exel Rubber Limited, Hyderabad as the respondent. The dispute centered on the deductibility of the cost of machinery purchased by Exel Rubber Limited under Section 31(1) of the Income Tax Act, 1961, for the assessment year 2003-04. The Appellate Tribunal had previously ruled that the costs were deductible as 'current repairs' and not as capital expenditure. The High Court of Andhra Pradesh, after reviewing the Tribunal's decision and the arguments presented, concurred with the Tribunal's findings and dismissed the appeal, stating that the questions raised were not of legal significance and that the Tribunal had correctly applied the law.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 745126 (HC-ANDHRA_PRADESH)
• Appeal Type: Others
• Pronouncement Date: 18-06-2013
• Assessment Year: misc
• Other Referred Cases: CIT vs. Sree Narasimha Textiles Pvt. Ltd., CIT vs. Steel Complex Ltd.
• Laws Referred To: Income Tax Act
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Appellate Tribunal; Capital expenditure; Cost of acquisition; Current repairs; Machinery
• Section: 31(1)

Judgement Text

"IN THE HIGH COURT OF JUDICATURE, ANDHRA PRADESH AT HYDERABAD THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE MS. JUSTICE G. ROHINI I.T.T.A. No.10 of 2013 DATE: 18.06.2013 Between: Commissioner of Income Tax-II, Hyderabad. … Appellant And Exel Rubber Limited, Hyderabad. … Respondent This Court made the following: THE HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND THE HON’BLE MS. JUSTICE G. ROHINI I.T.T.A. No.10 of 2013 JUDGMENT: (Per the Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal in relation to the assessment year 2003-04 is sought to be admitted on the following suggested questions of law: “A) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is correct in not holding that cost of acquisition of the machinery purchased, not being accounted in the spares and stocks by the assessee, should be treated as capital expenditure and hence cannot be permitted to be deducted under Section 31(1) of the Income Tax Act? B) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was justified in holding that the cost of machinery purchased by the assessee should be permitted to be deducted as “current repairs” under Section 31(1) of the Income Tax Act? C) Whether the findings of the Appellate Tribunal that the said machinery was purchased with a view to preserve and protect the existing machinery and that the assessee had no enduring advantage on account of such acquisition is based on material on record.” We have gone through the impugned order of the learned Tribunal and have heard the learned counsel for the appellant. In our view, the aforesaid questions formulated are not the questions of law. In fact, the learned Tribunal has followed the question of law for which no further determination is required. We get support for our conclusion from the findings of the learned Tribunal that is reproduced as follows: “So far as items other than pneumatic systems are concerned, they all are parts of the main machinery. None of the items is such which is an independent machinery by itself for use in the production process. As an illustration, control governor, as the name suggests, is necessary to control a particular equipment. Therefore, it has to be treated as a replacement of a part of the machinery. Similarly, motors by themselves have no utility unless they are used to drive a particular machinery. Therefore, these are all replacement parts for the existing machinery and hence allowable as current repairs. This view is supported by the judgment of the Madras High Court in the case of CIT vs. Sree Narasimha Textiles Pvt. Ltd., in 238 ITR 351 and also satisfies the test laid down by the Supreme Court in Saravana Mills’ case (supra). So far as the pneumatic system is concerned, admittedly, it is not for the expansion of the production capacity but to make the water pumping system more efficient. On the same facts, the Kerala High Court held such an expenditure to be of revenue nature in the case of CIT vs. Steel Complex Ltd., in 238 ITR 1054. In this case, the assessee had installed water treatment plant and fume extraction plant, which the Tribunal found that they were for the purposes of greater efficiency and profitability. The Kerala High Court observed that the improvisation was supplemental to the existing business and there was no material to hold that it amounted to a new or fresh venture. The financial outlay was for better conduct and improvement of the existing business and was revenue in nature.” In view of the aforesaid findings of the learned Tribunal, we think that this appeal does not deserve admission. Accordingly, the same is dismissed. No costs. _____________________ K.J. SENGUPTA, CJ ______________ G. ROHINI, J Date: 18.06.2013 ES "