ACIT, CHENNAI V. M/s. Soundararaja Mills Ltd., Dindigul

ITA 1637/CHNY/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4851 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 23-06-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 04-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO.1637/MDS/2010 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(3), CHENNAI. V. M/S. SOUNDARARAJA MILLS LTD., (FORMERLY : M/S. SOUNDARARAJA FINANCE LTD.), SOUNDARARAJA BUILDINGS, G.T.N. SALAI, DINDIGUL-624 005. (PAN : AAACS8799R ) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : NONE O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-V, CHENNAI IN ITA NO. 55/2006-07 DATED 28-07-2010 FOR THE ASSESSMENT YEAR 2003-04. 2. SHRI SHAJI P. JACOB, LEARNED SR. D.R. REPRESENTE D ON BEHALF OF THE REVENUE AND NONE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. AT THE TIME OF HEARING IT WAS SUBMITTED BY THE L EARNED DR THAT THE ISSUE IN THE APPEAL WAS AGAINST THE ORDER OF THE LEARNED CIT (A) IN ALLOWING THE CLAIM OF THE ASSESSEE IN TREATING THE EXPENDITURE OF ` 7,75,45,599/- ON THE PURCHASE OF I.T.A. NO.1637/MDS/2010 2 CARDING MACHINE AS REVENUE EXPENDITURE. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAD RELIED UPON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT V. JANAKIRAM MILLS LTD., REPORTED IN 275 ITR 403. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) FAILED TO APPRECIATE THAT T HE EXPENDITURE WAS NOT FOR RESTORATION OF THE MACHINERY TO ITS ORIGINAL STATE OF EFFICIENCY BUT WAS FOR INCREASING THE INSTALLED CAPACITY. IT WAS THE SUBM ISSION THAT IN THE AUDIT REPORT OF THE ASSESSEE IT IS CLEARLY MENTIONED THAT THERE WAS AN INCREASE IN THE INSTALLED CAPACITY. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. IT WAS FURTHER SUBMITTED THAT IN VIEW OF THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASES OF CIT V. MANGAYARKARASI MILLS P. LTD. REPORT ED IN 315 ITR 114 AND CIT V. SARAVANA SPINNING MILLS PVT. LTD. REPORTED IN 293 I TR 201, THE ORDER OF THE LEARNED CIT(A) WAS LIABLE TO BE REVERSED. 4. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D DR. WE HAVE ALSO PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE LEARNED CIT(A). A PERUSAL OF THE ORDER OF THE ASSESSING OFFICER CLEARLY SHOWS TH AT THE ASSESSING OFFICER HAS CATEGORICALLY GIVEN A FINDING THAT THE AUDIT REPORT SHOWS THAT THERE HAS BEEN AN INCREASE IN THE INSTALLED CAPACITY. A PERUSAL OF T HE ORDER OF THE LEARNED CIT(A) SHOWS THAT THIS FINDING OF THE ASSESSING OFFICER HA S NOT BEEN DISPROVED. ONCE IT IS ACCEPTED THAT THE MACHINERY PURCHASED HAS RESULTED IN THE INCREASE IN THE INSTALLED CAPACITY, THEN THE EXPENDITURE INCURRED W OULD HAVE TO BE TREATED AS CAPITAL EXPENDITURE IN VIEW OF THE DECISIONS OF THE HON'BLE SUPREME COURT IN THE I.T.A. NO.1637/MDS/2010 3 CASE MANGAYARKARASI MILLS P. LTD. AS ALSO THE DECIS ION IN THE CASE OF SARAVANA SPINNING MILLS PVT. LTD., REFERRED TO SUPRA. IN T HE CIRCUMSTANCES, AS IT IS NOTICED THAT THE INSTALLED CAPACITY HAS BEEN INCREASED AND THIS FACT HAS NOT BEEN DISPROVED, WE ARE OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ON THE PURCHASE OF CARDING MACHINE IS LIABLE TO BE TRE ATED AS A CAPITAL EXPENDITURE. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE IS ALLOWED. 5. THE ORDER WAS PRONOUNCED IN THE COURT ON 23/06/2 011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 23 RD JUNE, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE