R.M. Mohite Textiles Ltd., Kolhapur V. Jt. CIT, Kolhapur

ITA 136/PUN/2009

• Counselvise Citation: 13624514 RSA 2009
• Duration Of Justice: 3 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 12-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 28-01-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Keywords: Opportunity of being heard; Question of law; Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 37(1); 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 136 & 831/PN/09 (ASSESSMENT YEAR: 2005-06 & 2006-07) R.M. MOHITE TEXTILES LTD, .. APPELLANT 2078 E-WARD, 10 TH LANE, RAJARAMPURI, KOLHAPUR PAN AABCR 3410K VS. JT. COMMISSIONER OF INCOME-TAX, .. RESPONDENT RANGE 1, KOLHAPUR APPELLANT BY : SHRI KISHOR PHADKE RESPONDENT BY : SHRI HARESHWAR SHARMA DATE OF HEARING : 12.01.20 12 DATE OF PRONOUNCEMENT : 28.02 .2012 ORDER PER G.S. PANNU, A.M .: SINCE A COMMON ISSUE IS INVOLVED IN THE CAPTIONED APPEALS FILED BY THE ASSESSEE, WE FIND IT CONVENIENT TO DISPOSE OF THE A PPEALS BY A COMBINED ORDER. 2. WE SHALL FIRST TAKE UP ITA NO 136/PN/09 FOR THE ASSESSMENT YEAR 2005- 06. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS), KOLHAPUR DATE D 28.11.20078 WHICH, IN TURN, HAS ARISEN FROM ORDER DATED 27.12.2007 PASSED BY THE ASSESSING OFFICER, UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961 (I N SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEAR 2005-06. 3. THE SUBSTANTIVE DISPUTE IN BOTH THE APPEALS IS C OMMON RELATING TO THE EXPENDITURE INCURRED BY THE ASSESSEE ON REPLACEMENT OF MACHINERIES, WHICH HAS BEEN TREATED BY THE ASSESSING OFFICER AS A CAPI TAL EXPENDITURE. IN BOTH THE YEARS, THE FACTS AND CIRCUMSTANCES ARE IDENTICAL AN D, THEREFORE, WE MAY TAKE UP FOR DISCUSSION THE APPEAL OF THE ASSESSEE FOR TH E ASSESSMENT YEAR 2005-06 IN ORDER TO APPRECIATE THE CONTROVERSY. 4. IN THE ASSESSMENT YEAR 2005-06, THE ASSESSEE COM PANY FILED A RETURN OF INCOME ON 29.10.2005 DECLARING A TOTAL INCOME OF RS 45,31,250/- . THE ASSESSEE COMPANY IS ENGAGED IN MANUFACTURE OF COTTO N YARN TOWEL AND KNIT FABRIC IN ITS TEXTILE MILL. IN THE COURSE OF ASSESS MENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAD CLAIMED EXPENSES ON ACCOUNT OF MODERNIZATION AND REPLACEMENT EXPENSES AMOUNTING TO RS 1,15,52,698/- AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT. THE SAI D EXPENDITURE REPRESENTED COST OF REPLACEMENT OF 5040 RING FRAMES AND BALANCI NG MACHINES AND WAS CLAIMED AS A REVENUE EXPENDITURE DEDUCTIBLE UNDER S ECTION 37(1) OF THE ACT. ON BEING ASKED TO JUSTIFY AS TO WHY SUCH EXPENDITUR E WAS CLAIMED AS A REVENUE EXPENDITURE IN THE INCOME-TAX PROCEEDINGS, WHILE IN THE ACCOUNT BOOKS THE SAME WAS CAPIALIZED AS CAPITAL EXPENDITUR E, THE ASSESSEE EXPLAINED THAT REPLACEMENT OF RING FRAMES AND BALAN CING MACHINES WAS NOT DONE WITH A VIEW TO BRING INTO EXISTENCE A NEW ASSE T; THAT THE REPLACEMENT WAS NOT OF A WHOLE PLANT OF TEXTILE MILL; THAT THE REPL ACEMENT WAS FOR THE PURPOSE OF RUNNING THE TEXTILE MILL EFFICIENTLY AND WITH A VIE W TO STAY UPDATED SO AS TO REMAIN COMPETITIVE IN THE MARKET. IT WAS ALSO STATE D THAT BY INCURRING THE EXPENDITURE ON REPLACEMENT OF 5040 SPINDLES THERE W AS NO ADDITION TO THE INSTALLED CAPACITY AND THAT THIS SHOWED THAT THE RE PLACEMENT HAD BEEN MADE ONLY TO RESTORE THE MACHINERY TO ITS ORIGINAL STATE OF EFFICIENCY. THE ASSESSEE ALSO SUBMITTED THAT THE ISSUE RELATES TO REPLACEMEN T OF MACHINERY DONE IN ONE OR MORE OF THE SEVERAL PROCESSES OF A TEXTILE MILL. IN THE CASE OF A SPINNING MILL THERE ARE VARIOUS STAGES AND THE NATURE OF PROCESSE S INVOLVED AND THE FACT THAT THE OUTPUT OF INTERMEDIARY PRODUCT IS NOT MARKETABL E AND FURTHER THAT OUTPUT OF ONE PROCESS BECOMES THE INPUT OF THE NEXT PROCESS, MAKES THE ENTIRE PROCESS AS AN INTEGRATED ONE. THEREFORE, AS PER THE ASSESSE E, REPLACEMENT OF MACHINERY DONE IN ONE OR MORE OF THE SEVERAL PROCES SES OF A TEXTILE INDUSTRY WOULD QUALIFY TO BE A REVENUE EXPENDITURE UNDER SEC TION 37(1) OF THE ACT. THE ASSESSEE ALSO SOUGHT TO DISTINGUISH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF CIT V. SARVANA SPINNING MILLS (P) LTD. 293 ITR 201 (SC) BY CONTENDING THAT THE HONBLE SUPREME COURT DID NO T GO INTO THE QUESTION AS TO WHETHER REPLACEMENT EXPENDITURE IS A REVENUE EXP ENDITURE OR CAPITAL EXPENDITURE, BUT HAS ONLY HELD THAT SAME CANNOT BE TERMED AS CURRENT REPAIRS TO BE ALLOWED DEDUCTION UNDER SECTION 31(I) OF THE ACT. AS PER THE HONBLE SUPREME COURT SECTIONS 31 AND 37(I) OF THE ACT OPER ATE IN DIFFERENT SPHERES AND THE TESTS APPLICABLE TO SECTION 31 CANNOT BE RE AD INTO SECTION 37(1) AND, THEREFORE, ASSESSEE EXPLAINED THAT THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SARVANA SPINNING MILLS (P) LTD . WOULD NOT AFFECT THE CLAIM OF THE ASSESSEE FOR ALLOWABILITY OF THE EXPENDITURE UNDER SECTION 37(1) OF THE ACT. 5. THE AFORESAID SUBMISSIONS PUTFORTH WERE NOT FOUN D ACCEPTABLE BY THE ASSESSING OFFICER. AS PER THE ASSESSING OFFICER THE BENEFIT RESULTING TO THE ASSESSEE ON ACCOUNT OF INCURRING THE IMPUGNED EXPEN DITURE ON REPLACEMENT OF OLD AND WORN OUT MACHINERIES IS AN ENDURING BENEFIT IN THE CAPITAL FIELD AND, THEREFORE, THE AMOUNT OF RS 1,15,52,698/- CLAIMED AS REVENUE EXPENDITURE ON ACCOUNT OF REPLACEMENT OF 5050 SPINDLES WAS TO BE T REATED AS A CAPITAL EXPENDITURE. IN COMING TO THE ABOVE CONCLUSION, THE ASSESSING OFFICER ALSO NOTICED THAT THE ASSESSEE ITSELF HAS TREATED THE SA ME AS CAPITAL EXPENDITURE IN ITS ACCOUNT BOOKS. 6. IN APPEAL BEFORE THE COMMISSIONER OF INCOME-TAX (APPEALS), IT WAS CONTENDED THAT THE REPLACEMENT OF RING FRAMES DID N OT BRING INTO EXISTENCE IN ANY NEW ASSET WHICH INCREASED THE INSTALLED CAPACIT Y OF THE TEXTILE MILL. ACCORDING TO THE ASSESSEE, BY REPLACEMENT OF THE OL D RING FRAMES, ASSESSEE HAD MADE SUBSTANTIAL SAVINGS IN TERMS OF REPAIR EXP ENDITURE AND MANUFACTURING EXPENDITURE HAD ALSO COME DOWN SHARPL Y. IT WAS ALSO STATED THAT TREATMENT IN THE ACCOUNT BOOKS IS NOT A FINAL DECIDING FACTOR. AS PER THE ASSESSEE, EVEN IF CAPITAL EXPENDITURE IS DEBITED TO THE PROFIT & LOSS ACCOUNT, THE SAME CANNOT BE ALLOWED IN THE COMPUTATION OF IN COME AS DEDUCTION AND ON SIMILAR LINES, IF REVENUE EXPENDITURE IS CAPITALIZE D, THE SAME CANNOT BE DENIED AS DEDUCTION IN THE COMPUTATION OF INCOME MERELY BE CAUSE OF THE ENTRIES IN THE ACCOUNT BOOKS. 7. THE COMMISSIONER OF INCOME-TAX (APPEALS), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE AND DISCUSSING IN DETAI L THE RELEVANT CASE LAW ON THE SUBJECT, REJECTED THE CONTENTION OF THE ASSESSE E AND CONFIRMED THE TREATMENT OF THE EXPENDITURE ON REPLACEMENT OF RING FRAMES AS CAPITAL EXPENDITURE. STILL AGGRIEVED, ASSESSEE IS IN FURTH ER APPEAL BEFORE US. 8. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT ITS CLAIM FOR DEDUCTION IS IN TERMS OF SECTION 37(1) OF THE ACT AND THAT THE IMPUGNED REPLACEMENT WAS REQUIRED AS THE MACHINERIE S HAD BECOME VERY OLD AND THAT IT HAD NOT RESULTED IN ANY FRESH INSTALLED CAPACITY. IN-FACT, NO NEW ASSET IN THE FORM OF ADDITIONAL PRODUCTION CAPACITY HAS RESULTED BECAUSE OF THE EXPENDITURE INCURRED ON REPLACEMENT OF RING FRAMES AND BALANCING MACHINES. IN THIS CONNECTION, IT WAS ALSO POINTED OUT THAT BE FORE THE LOWER AUTHORITIES THE ASSESSEE HAD FURNISHED A CERTIFICATE FROM THE CHART ERED ENGINEER AVERRING THEREIN THAT THERE WAS NO ADDITION TO THE INSTALLED PRODUCTION CAPACITY AS A RESULT OF THE IMPUGNED EXPENDITURE ON REPLACEMENT O F RING FRAMES AND BALANCING MACHINES. IT WAS EXPLAINED THAT THE REPLA CEMENT HAD BEEN MADE ONLY TO RESTORE OLD AND WORN OUT MACHINERIES TO ITS ORIGINAL STATE OF EFFICIENCY SO THAT THE ENTIRE INTEGRATED MANUFACTURING UNIT, W HICH IS CONSIDERED AS PROFIT MAKING APPARATUS, FUNCTIONS EFFICIENTLY AND PRODUCE S QUALITY PRODUCTS. IT WAS SOUGHT TO BE REITERATED THAT THE JUDGMENT OF THE HO NBLE SUPREME COURT IN THE CASE OF SARVANA SPINNING MILLS (P) LTD. (SUPRA) IS APPLICABLE FOR DECIDING A CLAIM UNDER SECTION 31(I) OF THE ACT ON ACCOUNT OF CURRENT REPAIRS AND NOT A CLAIM OF THE EXPENDITURE BEING REVENUE EXPENDITURE WITHIN THE MEANING OF SECTION 37(1), AS IS THE CASE OF THE ASSESSEE. THE LEARNED COUNSEL ALSO REFERRED TO THE JUDGMENT OF THE HONBLE SUPREME COU RT IN THE CASE OF CIT V. RAMRAJU SURGICAL COTTON MILLS & ORS. 294 ITR 328 (S C) FOR THE PROPOSITION THAT THE SUPREME COURT HAS ITSELF EXPLAINED THE RATIO LA ID DOWN IN THE CASE OF SARVANA SPINNING MILLS (P) LTD. (SUPRA) AS BEING AP PLICABLE ONLY FOR A CLAIM MADE UNDER SECTION 31(1) OF THE ACT AND NOT A CLAIM UNDER SECTION 37(1) OF THE ACT. IT WAS, THEREFORE, CONTENDED THAT THE ISSUE BE DECIDED IN THE LIGHT OF THE PROPOSITION THAT NO NEW ASSET HAVING BEEN BROUGHT I NTO EXISTENCE, THEREFORE, THE EXPENDITURE BE ALLOWED AS A REVENUE EXPENDITURE . 9. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS RELIED UPON THE ORDE RS OF THE AUTHORITIES BELOW AS WELL AS THE RATIO OF THE HONBLE SUPREME COURT I N THE CASE OF SARVANA SPINNING MILLS (P) LTD (SUPRA) AS ALSO THE JUDGMENT IN THE CASE OF CIT V. SHRI MANGYARKARASI MILLS (P) LTD. 315 ITR 114 TO CONTEND THAT THE LOWER AUTHORITIES MADE NO MISTAKE IN TREATING THE IMPUGNED EXPENDITUR E AS NOT ALLOWABLE UNDER SECTION 37(1) OF THE ACT AS REVENUE EXPENDITURE. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. FACTUALLY SPEAKING, THE CLAIM OF THE ASSESSEE IS WITH REGARD TO EXPENDI TURE INCURRED ON REPLACEMENT OF RING FRAMES AND BALANCING MACHINES I N A TEXTILE MILL. THE SAID EXPENDITURE HAS BEEN CLAIMED AS A REVENUE EXPENDITU RE ALLOWABLE IN TERMS OF SECTION 37(1) OF THE ACT. HOWEVER, THE REVENUE HAS TREATED THE SAME AS A CAPITAL EXPENDITURE. NOTABLY, THE ASSESSEE HAS ALSO INCURRED EXPENDITURE ON ACCOUNT OF ACQUIRING NEW SPINDLES AND RING FRAMES D URING THE YEAR WHICH HAS BEEN TREATED BY THE ASSESSEE AS A CAPITAL EXPENDITU RE AND THERE IS NO DISPUTE ON THAT ASPECT. HOWEVER, FOR THE IMPUGNED EXPENDITU RE, WHILE IT TREATED THE SAME AS A CAPITAL EXPENDITURE IN ACCOUNT BOOKS, IN THE INCOME-TAX PROCEEDINGS, SAME HAS BEEN CLAIMED AS A REVENUE EXP ENDITURE ON THE STRENGTH OF SECTION 37(1) OF THE ACT. SECTION 37(1) OF THE ACT PROVIDES DEDUCTION FOR ANY EXPENDITURE NOT BEING AN EXPENDIT URE OF THE NATURE PRESCRIBED IN SECTIONS 30 TO 36 AND ALSO NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE OR PERSONAL EXPENSE OF THE ASSESSEE. A FURTHER QUALIFICATION PRESCRIBED IN SECTION 37(1) OF THE ACT IS THAT THE EXPENDITURE SHOULD BE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSES OF THE BUSINESS OF THE ASSESSEE. IN THE PRESENT CASE, THE DISPUTE IS WHETH ER THE EXPENDITURE INCURRED ON REPLACEMENT OF MACHINERIES IS IN THE NATURE OF A CAPITAL EXPENDITURE SO AS TO FALL OUTSIDE THE PURVIEW OF SECTION 37(1) OF THE ACT OR NOT. 10. HAVING CONSIDERED THE RIVAL POSITIONS, IN OUR V IEW, THE ISSUE STANDS FULLY COVERED BY THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF SHRI MANGYARKARASI MILLS (P) LTD. (SUPRA). THE ISSUE BEF ORE THE HONBLE SUPREME COURT WAS WITH REGARD TO THE EXPENDITURE INCURRED O N REPLACEMENT OF MACHINERY IN A TEXTILE MILL. THE ASSESSEE HAD CLAIM ED THE EXPENDITURE AS A REVENUE EXPENDITURE, WHICH WAS EXPLAINED TO BE ON R EPLACEMENT OF PARTS OF THE SPINNING MILL ON THE STRENGTH OF SECTION 37(1) OF THE ACT. THE HONBLE SUPREME COURT, FIRSTLY ADDRESSED THE QUESTION AS TO WHETHER INDIVIDUAL MACHINERY IN A TEXTILE MILL IS AN INDEPENDENT ITEM OR MERELY A PART OF A COMPLETE SPINNING MILL, WHICH ONLY TOGETHER ARE CAP ABLE OF MANUFACTURE, AS THERE IS NO INTERMEDIATE MARKETABLE PRODUCT PRODUCE D. ON THIS ASPECT, IT REFERRED TO THE EARLIER JUDGMENT OF THE HONBLE SUP REME COURT IN THE CASE OF SARVANA SPINNING MILLS (P) LTD. (SUPRA) AND HELD TH AT EACH MACHINE IN A TEXTILE MILL SHOULD BE TREATED INDEPENDENTLY AS SUCH AND NO T AS A MERE PART OF AN ENTIRE COMPOSITE MACHINERY OF THE SPINNING MILL. AC CORDING TO THE HONBLE APEX COURT, IT CAN AT BEST BE CONSIDERED PART OF AN INTE GRATED MANUFACTURE PROCESS EMPLOYED IN A TEXTILE MILL. THEREAFTER, WITH REGARD TO THE NATURE OF THE EXPENDITURE, IT HELD AS UNDER: 17. WE ARE OF THE PINION THAT THE EXPENDITURE OF T HE ASSESSEE IN THIS CASE IS CAPITAL IN NATURE AND THERE IS SUFFICIENT JUDICIAL PRECEDENT TO SUPPORT THIS VIEW. IN THE CASE OF TRAVANCORE COCHIN CHEMICALS LTD. VS. CIT 19 77 CTR (SC) 148 : (1997) (SIC- 1977) 2 SCC 20 THIS COURT HELD THAT EXPENDITURE IS OF A CAPITAL NATURE WHEN IT AMOUNTS TO AN ENDURING ADVANTAGE FOR THE BUSINESS AND REPAI R IS DIFFERENT FROM BRINGING A NEW ASSET FOR THE BUSINESS. FURTHER, IN LAKSHMIJI SUGAR MILLS (P) CO. VS. CIT AIR 1972 SC 159 IT HAS BEEN HELD BY THIS COURT THAT BRINGING IN TO EXISTENCE A NEW ASSET OR AN ENDURING BENEFIT FOR THE ASSESSEE AMOUNTS TO CAPITA L EXPENDITURE. WE HAVE ALREADY EXPLAINED WHY REPLACEMENT, IN THIS CASE, AMOUNTS TO BRINGING INTO EXISTENCE A NEW ASSET AND ALSO AN ENDURING BENEFIT FOR THE ASSESSEE . IT IS CLEAR THEN THAT EXPENDITURE OF THE ASSESSEE HERE IS NOT OF A REVENUE NATURE AND THUS, CANNOT BE CLAIMED AS A DEDUCTION UNDER S. 37 OF THE ACT. IN VIEW OF THE AFORESAID, IN OUR VIEW, THE LOWER AU THORITIES MADE NO MISTAKE IN REJECTING THE CLAIM OF THE ASSESSEE THAT THE COST O F RING FRAMES AND BALANCING MACHINES WAS A REVENUE EXPENDITURE UNDER SECTION 37 (1) OF THE ACT. QUITE CLEARLY, AS PER THE HONBLE APEX COURT, THE EXPENDI TURE INCURRED ON REPLACEMENT OF INDIVIDUAL MACHINERIES IN A SPINNING MILL, WHICH IS ALSO CASE BEFORE US, AMOUNTS TO BRINGING INTO EXISTENCE NOT O NLY A NEW ASSET, BUT ALSO AN ENDURING BENEFIT TO THE ASSESSEE WHICH QUALIFIES TO BE REGARDED AS A CAPITAL EXPENDITURE AND THUS NOT ALLOWABLE UNDER SECTION 3 7(1) OF THE ACT. AS A CONSEQUENCE, WE THEREFORE UPHOLD THE ACTION OF THE REVENUE AND THE ASSESSEE HAS TO FAIL ON THIS ASPECT. 11. IN SO FAR AS THE RELIANCE PLACED BY THE ASSESSE E ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF RAMARAJU SURGI CAL COTTON MILLS & ORS. (SUPRA) IS CONCERNED, THE SAME IN OUR VIEW DOES NOT HELP THE CASE OF THE ASSESSEE. THE ISSUE BEFORE THE HONBLE SUPREME COUR T RELATED TO EXPENDITURE INCURRED ON REPLACEMENT OF MACHINERIES. THE HONBLE SUPREME COURT NOTED ITS EARLIER JUDGMENT IN THE CASE OF SRAVANA SPINNING MI LLS (P) LTD (SUPRA), BUT WITHOUT EXPRESSING ANY OPINION ON THE RIVAL CONTENT IONS, SET-ASIDE THE MATTER TO THE COMMISSIONER OF INCOME-TAX (APPEALS) FOR DISPOS AL AFRESH IN ACCORDANCE WITH LAW. NO DOUBT THE ISSUE BEFORE THE HONBLE SUP REME COURT RELATED TO A CLAIM UNDER SECTION 37(1) OF THE ACT; SO HOWEVER, A S THE MATTER HAS MERELY BEEN SET-ASIDE TO THE FILE OF THE COMMISSIONER OF I NCOME-TAX (APPEALS), NO PROPOSITION, MUCH LESS CONTRARY TO THE PROPOSITION RELIED UPON BY US FOLLOWING THE JUDGMENT IN THE CASE OF SHRI MANGYARKARASI MILL S (P) LTD. (SUPRA) HAS BEEN LAID DOWN BY THE HONBLE COURT. WE, THEREFORE, FOL LOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SHRI MANGYARKA RASI UPHOLD THE PLEA OF THE REVENUE AND THE ASSESSEE FAILS ON THIS GROUND. 12. AS A RESULT OF THE AFORESAID DECISION, GROUND N O. 1, 2 & 3 FOR ASSESSMENT YEAR 2005-06 WHICH READ AS UNDER, ARE DI SMISSED: 1. THE LD CIT(A), KOLHAPUR ERRED IN LAW AND ON FAC TS IN DISALLOWANCE OF RS 1,12,44,726/- BEING REPLACEMENT OF RINGFRAMES AND T REATING THE SAME AS CAPITAL EXPENDITURE. 2. THE LD CIT(A), KOLHAPUR ERRED IN LAW AND ON FACT S IN DISALLOWANCE OF RS 2,56,785/- BEING EXPENDITURE INCURRED ON OVERHEAD TRAVELLING CLEANER OF AND TREATING THE SAME AS CAPITAL EXPENDITURE. 3. THE LD CIT(A) KOLHAPUR ERRED IN LAW AND ON FACTS IN DISALLOWANCE OF RS 51,187/- BEING EXPENDITURE INCURRED ON RINGFRAMES INSTALLATION CHARGES AND TREATING THE SAME AS CAPITAL EXPENDITURE. 13. APART FROM THE AFORESAID, THE ASSESSEE HAS RAIS ED AN ADDITIONAL GROUND OF APPEAL WHICH READS AS UNDER: 3. THE LD AO ERRED IN LAW AND ON FACTS IN LEVYING THE LEVY OF INTEREST U/S 234B AND INTEREST U/S 234C WITHOUT APPRECIATING THAT THE APPELLANTS RETURNED INCOME WAS BASED ON CORRECT LEGAL PRECEDENTS PREVAI LING AT THAT TIME. 14. AS PER THE ASSESSEE, THE DISALLOWANCE OF EXPEND ITURE CLAIMED UNDER SECTION 37(1) OF THE ACT HAS RESULTED BECAUSE OF TH E SUBSEQUENT JUDGMENT OF THE HONBLE SUPREME COURT AND, THEREFORE, THE SAME COULD NOT BE VISUALIZED BY THE ASSESSEE AT THE TIME OF ADVANCE-TAX PAYMENT AND, THEREFORE, THE CHARGEABILITY OF INTEREST UNDER SECTIONS 234B AND 2 34C WAS NOT JUSTIFIED. IN SUCH A SITUATION THE ASSESSEE CANNOT BE FASTENED WI TH THE LIABILITY FOR PAYMENT OF INTEREST UNDER SECTIONS 234B AND 234C, AND RELIA NCE WAS PLACED ON THE FOLLOWING DECISIONS: (I) HARYANA WAREHOUSING CORPN. V. DCIT 75 ITD 155 ( TM); (II) BALAKRISHNA BREEDING FARMS P.LTD V CCI T 276 I TR 20 (KER); AND, (III) PRIME SECURITIES LTD. V. ACIT 333 ITR 464 (BO M) IT WAS, THEREFORE, CONTENDED THAT THE SAID ADDITION AL GROUND BE ADMITTED FOR ADJUDICATION AS IT INVOLVED A PURE QUESTION OF LAW. 15. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REP RESENTATIVE OPPOSED THE PRAYER OF THE ASSESSEE BY POINTING OUT THAT NO SUCH PLEA HAS BEEN RAISED BEFORE THE LOWER AUTHORITIES AND THAT THE CLAIM OF THE ASSESSEE WAS FOUND UNTENABLE BY THE ASSESSING OFFICER EVEN PRIOR TO TH E JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SHRI MANGYARKARSHI MI LLS (P) LTD. (SUPRA). 16. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. IN THIS CASE, WE FIND THAT THE ASSESSEE SEEKS TO DENY ITS LIABILITY FOR PAYMENT OF ADVANCE TAX ON ACCOUNT OF THE DISALLOWANCE OF ITS CLAIM OF REVENUE EXPENDITURE AND IT WAS CANVASSED THAT IT WAS NOT POSSIBLE FOR THE ASSESSEE TO ANTICIPATE THE EVENTS, INASMUCH THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SHRI MANGHYARKARSHI MILLS (P) LTD. WAS OF A SUBSEQUENT PERIOD. CONSIDERING THE AFORESAID, IN OUR VIEW, THE ADDITIONAL GROUND RAISE D CHALLENGING THE CHARGEABILITY OF INTEREST UNDER SECTION 234B AND 23 4C OF THE ACT IS AN ISSUE WHICH REQUIRES ADJUDICATION FOR THE PROPER DETERMIN ATION OF THE TAX LIABILITY OF THE ASSESSEE. WE, THEREFORE, ADMIT THE AFORESAID GR OUND OF APPEAL FOR ADJUDICATION. SINCE THE SAME WAS NOT BEFORE THE LOW ER AUTHORITIES, WE DEEM IT FIT AND PROPER TO RESTORE THIS ISSUE BACK TO THE F ILE OF THE ASSESSING OFFICER, WHO SHALL PASS A SPEAKING ORDER WITH REGARD TO CHAR GEABILITY OF INTEREST UNDER SECTION 234B AND 234C OF THE ACT IN THE PRESENT CAS E IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION, THE ASSESSING OFFICER SHALL AL LOW THE ASSESSEE A REASONABLE OPPORTUNITY OF BEING HEARD AND THEREAFTE R PASS AN ORDER ON THIS ASPECT AS PER LAW. 17. AS A RESULT, THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005- 06 IS PARTLY ALLOWED. 18. THE GROUNDS OF APPEAL AND FACTS AND CIRCUMSTANC ES IN THE ASSESSMENT YEAR 2006-07 ARE IDENTICAL AND, THEREFORE, OUR DECI SION IN THE APPEAL OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2005-06 SHALL APPL Y MUTATIS MUTANDIS IN ASSESSMENT YEAR 2006-07 ALSO. 19. RESULTANTLY, BOTH THE APPEALS ARE PARTLY ALLOWE D. DECISION PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF FEBRUARY, 2012. SD/- SD/- (I C SUDHIR) (G.S . PANNU) JUDICIAL MEMBER ACCOUNTANT MEMB ER PUNE, DATED 28 TH FEBRUARY, 2012 B COPY TO:- 1) R M MOHITE TEXTILE P LTD KOLHAPUR 2) JT.CIT R-1 KOLHAPUR 3) THE CIT (A), KOLHAPUR 4 THE CIT KOLHAPUR 5) DR A BENCH, I.T.A.T., PUNE. 6) GUARD FILE TRUE COPY BY ORDER SR. PS, ITAT PUNE