Gal aluminum Extrusion P.Ltd, Ahmednagar V. Addl CIT Rg- Ahmednagar, Ahmednagar

ITA 129/PUN/2013

• Counselvise Citation: 12924514 RSA 2013
• Duration Of Justice: 1 year(s) 1 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 14-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P L PATHADE
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER , AND SHRI R.K. PANDA, ACCOUNTANT MEMBER. ITA.NO.129/PN/2013 (ASSESSMENT YEAR 2008-09) GAL ALUMINIUM EXTRUSION PVT. LTD., 180/3/1, NAGAR KALYAN ROAD, A.P. BHALAWANI, TAL : PARNER, DIST : AHMEDNAGAR .. APPELLANT PAN NO.AABCG2100R VS. ADDL.CIT, AHMEDNAGAR RANGE, AHMEDNAGAR .. RESPONDENT ASSESSEE BY : NONE REVENUE BY : SHRI P.L. PATHADE DATE OF HEARING : 18-02-2014 DATE OF PRONOUNCEMENT : 19-02-2014 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 19-11-2012 OF THE CIT(A)-I, PUNE RELATING TO ASSESSMENT YEAR 2008-09. 2. DESPITE SERVICE OF NOTICE NONE APPEARED ON BEHAL F OF THE ASSESSEE. THEREFORE, THIS APPEAL IS BEING DECIDED O N THE BASIS OF MATERIAL AVAILABLE ON RECORD AND AFTER HEARING THE LD. DEPARTMENTAL REPRESENTATIVE. 3. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER: HON.CIT(A) ERRED IN CONFIRMING NET CONSUMPTION OF D IES AND MOULDS AT RS.3,92,214/- AS CAPITAL EXPENDITURE IT MAY PL BE TREATED AS REVENUE EXPENDITURE 2 3.1 FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PRIVATE LTD. COMPANY ENGAGED IN THE MANUFACTURING OF ALUMINIUM E XTRUDED PROFILES, SECTIONS, PIPES, FRAMES ETC. IT FILED IT S RETURN OF INCOME ON 17-09-2008 DECLARING TOTAL INCOME OF RS.73,67,696/- . DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER NOTED THAT THE ASSESSEE HAS PURCHASED DIES AND MOULDS FOR RS.21,13 ,386/- DURING THE YEAR AND CLAIMED THE SAME AS REVENUE EXPENDITURE. THE ASSESSING OFFICER WAS OF THE OPINION THAT SUCH EXPENDITURE IS CAPITAL IN NATURE. HE, THEREFORE, ALLOWED DEPRECIATION @15% TREATING T HE SAME AS PLANT AND MACHINERY WHICH WORKS OUT TO RS.3,17,008/- AND ADDED THE BALANCE AMOUNT OF RS.17,96,378/- TO THE TOTAL INCOM E OF THE ASSESSEE. 4. BEFORE THE CIT(A) THE ASSESSEE FILED THE DETAILS OF OPENING STOCK, PURCHASES, SALES, CLOSING STOCK AND NET CONS UMPTION OF DIES AND MOULDS WHICH ARE AS UNDER : OPENING STOCK PURCHASES SALE CLOSING STOCK NET CONSUMPTION 8,33,150 21,13,409 3,31,800 22,22,545 3,92,214 4.1 THE LEDGER ACCOUNT FOR MOULDS AND DIES ALONG W ITH THE AUDITED ACCOUNTS FOR THE A.Y. 2008-09 WERE PRODUCED BEFORE THE CIT(A) TO SUBSTANTIATE THE ABOVE DETAILS. IT WAS ARGUED THAT MOULDS AND DIES ARE CONSUMABLE ITEMS IN THE COURSE OF MANUFACTURING PRO CESS AND IT DOES NOT MAKE ANY PERMANENT OR LONG TERM ADDITIONS TO MA CHINERY. IT WAS SUBMITTED THAT LIFE OF DIES IS NOT MORE THAN 9 MONT HS AND THEREFORE THE AMOUNT HAS BEEN CORRECTLY DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE DECISION OF THE HONBLE PUNJAB AND HARYANA HIGH COU RT IN THE CASE OF 3 CIT VS. MALERKOTLA STEELS & ALLOYS LTD. REPORTED IN 336 ITR 49 WAS RELIED UPON. 5. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE THE LD.CIT(A) DIRECTED THE ASSESSING OFFICER TO ALLOW 1 5% DEPRECIATION ON THE NET CONSUMPTION OF MOULDS AND DIES OF RS.3,9 2,214/- AND DISALLOWED THE BALANCE AS CAPITAL IN NATURE. THE R ELEVANT OBSERVATION OF THE LD.CIT(A) READS AS UNDER : 3.3 I HAVE PERUSED THE HONBLE PUNJAB & HARYANA HIG H COURT ORDER, WHICH RELATES TO A STEEL INDUSTRIAL UNIT AND WHERE THE MOULDS WERE USED IN THE PRODUCTION PROCESS CARRIED OUT BY THE ASSESSEE . IT WAS FOUND THAT THE MOULDS ARE USED IN AN ELECTRIC FURNACE WHICH IS SUCH AT A VERY HIGH DEGREE OF TEMPERATURE, THEREBY REQUIRIN G FREQUENT REPLACEMENT. HENCE, IT WAS HELD THAT THE MOULDS MERE LY FACILITATE THE PRODUCTION PROCESS AND CANNOT BE CONSIDERED AS CREATING A NEW ASSET. HOWEVER, I FIND THAT THE NATURE OF APPELLANTS BUSINESS IS ALUMINIUM EXTRUSION, WHICH IS QUALITATIVELY DIFFERENT FROM STEEL INDUSTRY. FURTHER, AS AGAINST NET CONSUMPTION OF RAW MATERIAL OF RS.26,50, 21,312/- THE APPELLANT HAS INCURRED NET EXPENDITURE OF ONLY RS.3, 92,224/- FOR MOULDS & DIES, WHICH ITSELF SHOWS THAT MOULDS & DIES ARE N OT A FREQUENTLY USED ITEM IN THE MANUFACTURING PROCESS. HE NCE THE RATIO OF THE PUNJAB & HARYANA HIGH COURT DECISION DOES NOT APP LY TO THE FACTS & CIRCUMSTANCES OF THE APPELLANTS CASE. CONSEQUENTLY THE ASSESSING OFFICER IS DIRECTED TO ALLOW 15% DEPRECIATION ON THE NET CONSUMPTION OF MOULDS & DIES OF RS.3,92,224/- AND DISALLOW THE BALA NCE, BEING CAPITAL IN NATURE. GROUND OF APPEAL NO.1 IS THUS, PA RTLY ALLOWED. 5.1 AGGRIEVED WITH SUCH ORDER OF CIT(A) THE ASSESSE E IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIV E AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. THE O NLY DISPUTE IN THE IMPUGNED APPEAL IS REGARDING THE TREATMENT OF NET C ONSUMPTION OF DIES AND MOULDS AT RS.3,92,214/- AS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. WE FIND THE ASSESSEE CLAIMED THE PURC HASE OF DIES AND MOULDS AT RS.21,13,386/- DURING THE YEAR AS REVENUE EXPENDITURE WHICH WAS DISALLOWED BY THE ASSESSING OFFICER WHO A LLOWED 4 DEPRECIATION @15% ON THE SAME AND TREATED THE BALAN CE AMOUNT OF RS.17,96,378/- AS CAPITAL EXPENDITURE. WE FIND BEF ORE THE CIT(A) THE ASSESSEE GAVE THE DETAILS OF CONSUMPTION OF MOULDS AND DIES BY FILING THE LEDGER ACCOUNT CONTAINING THE OPENING AND CLOSI NG STOCK AS WELL AS PURCHASES AND SALES OF MOULDS AND DIES ACCORDING TO WHICH THE NET CONSUMPTION WAS SHOWN AT RS.3,92,214/-. WE FIND TH E LD.CIT(A) TREATED THE NET CONSUMPTION OF MOULDS AND DIES AS C APITAL EXPENDITURE AND CONSEQUENTLY ALLOWED DEPRECIATION ON THE SAME. WE FIND BEFORE THE CIT(A) THE ASSESSEE HAS SUBMITTED THAT THE MOUL DS AND DIES ARE CONSUMABLE ITEMS AND DOES NOT MAKE ANY PERMANENT OR LONG TERM ADDITIONS TO MACHINERY AND THAT THE LIFE OF THE DIE S IS NOT MORE THAN 9 MONTHS. THIS FACT HAS NOT BEEN DISPUTED BY THE LD. CIT(A). EVEN THOUGH THE DIES AND MOULDS ARE NOT FREQUENTLY USED BY THE ASSESSEE IN THE MANUFACTURING PROCESS AS OBSERVED BY LD.CIT(A), HOWEVER, THE FACT THAT IT HAS A SHORT SPAN OF LIFE CANNOT BE IGN ORED. IN OUR OPINION, THE NEW DIES/MOULDS CONSUMED BY THE ASSESSEE DURING THE YEAR SHOULD BE CONSIDERED AS IN THE NATURE OF REPLACEMENT OF OL D/DISCARDED DIES/MOULDS. IT CANNOT BE SAID THAT IT HAS ENHANCE D THE CAPACITY OF THE EXISTING PLANT AND MACHINERY OR IT HAS GOT ANY ENDU RING BENEFIT. IN THIS VIEW OF THE MATTER, WE ARE OF THE CONSIDERED O PINION THAT THE NET CONSUMPTION OF MOULDS/DIES OF RS.3,92,214/- DURING THE YEAR SHOULD BE TREATED AS REVENUE EXPENDITURE. THIS VIEW OF OU RS FIND SUPPORT FROM THE DECISIONS OF HONBLE DELHI HIGH COURT IN T HE CASE OF CIT VS. JAGJOT INDUSTRIES LTD. REPORTED IN 241 ITR 556 AND HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. MYSORE SPUN CONCR ETE PIPE (P) LTD. REPORTED IN 194 ITR 159 (KARNATAKA). THE GROU ND RAISED BY THE ASSESSEE IS ACCORDINGLY ALLOWED. 5 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON 19-02-2014. SD/- SD/- (SHAILENDRA KUMAR YADAV ) ( R.K. PANDA ) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE, DATED 19 TH FEBRUARY 2014 COPY OF THE ORDER IS FORWARDED TO: 1. THE ASSESSEE 2. THE DEPARTMENT 3. THE CIT(A)-I, PUNE 4. THE CIT-I, PUNE 5. THE DR A BENCH, PUNE. 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, PUNE