The DCITBharuch Circle, Bharuch V. M/s. Enviro Technology Ltd., Bharuch

ITA 1644/AHD/2009

• Counselvise Citation: 164420514 RSA 2009
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 11-10-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 20-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S N SOPARKAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, B BENCH . .. . . .. . , , , , !' !' !' !', , , , #$ #$ #$ #$ % % % %. .. .& && & . .. .' ' ' ', , , , ( ( ( ( & ' & ' & ' & ' BEFORE S/SHRI G.D. AGARWAL, VICE-PRESIDENT AND T.K. SHARMA , JUDICIAL MEMBER) ITA NO.1644/AHD/2009 [ASSTT.YEAR : 2005-06] DCIT, BHARUCH CIRCLE BHARUCH. /VS. ENVIRO TECHNOLOGY LTD. 2413/14, GIDC, ANKLESHWAR DIST. BHARUCH. ( (( (*+ *+ *+ *+ / APPELLANT) ( (( (,-*+ ,-*+ ,-*+ ,-*+ / RESPONDENT) ( . / &/ REVENUE BY : SHRI SAMIR TEKRIWAL 12 . / &/ ASSESSEE BY : SHRI S.N.SOPARKAR 34 . 25/ DATE OF HEARING : 11 TH OCTOBER, 2011 678 . 25/ DATE OF PRONOUNCEMENT : 14 TH OCTOBER, 2011 &' / O R D E R PER G.D. AGARWAL, VICE-PRESIDENT : THIS IS REVENUES APPEAL AGAINST ORDER OF THE COMMISSIONER OF INCOME-TAX (AP PEALS)-VI, BARODA DATED 19.03.2009 ARISING OUT OF THE ORDER OF THE ASSESSIN G OFFICER UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961. 2. THE ONLY GROUND RAISED IN THIS APPEAL READS AS U NDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE THE CIT(A) HAS ERRED IN ALLOWING DEDUCTION OF RS.7,27,349/- BEING EXPENSES CLEARLY CAPITAL EXPENDITURE AS PER EXPLANATION TO SECTION 3 1 OF THE ACT, CLAIMED AS REPAIR EXPENSES BY THE ASSESSEE. 3. THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAGED IN THE BUSINESS OF TREATMENT OF INDUSTRIAL EFFLUENTS OF SMALL SCALE IN DUSTRIES LOCATED AT ANKLESHWAR INDUSTRIAL ESTATE. THE AO IN THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT DISALLOWED THE ASSESSEES CLAIM OF RS.7,27,349/- TO WARDS REPAIRS AND MAINTENANCE EXPENSES AND TREATED THE SAME AS CAPITA L EXPENDITURE. THE ITA NO.1644/AHD/2009 -2- ASSESSEE CONTENDED BEFORE THE AO THAT EXPENSES INCU RRED BY THE ASSESSEE WAS PURELY REVENUE IN NATURE AND DID NOT AMOUNT TO OBTA INING OF ANY NEW OR FRESH ASSET OR ADVANTAGE OF AN ENDURING NATURE; THAT THE EXPENDITURE INCURRED ON THE REPAIRS TO THE EXISTING CEMENT PLATFORM IS OF ROUTI NE NATURE, AS THE SAME GETS ERODED DUE TO THE TOXIC, HAZARDOUS, CORROSIVE AND A CIDIC LIQUID BEING OFFLOADED FROM THE TANKER FOR THE PURPOSE OF TREATMENT; THAT DUE TO THE NATURE OF THE BUSINESS OF THE COMPANY CONTINUOUS MAINTENANCE OF I TS PLANT & MACHINERY IS REQUIRED; THAT THE EXPENDITURE WAS INCURRED ON THE ASSETS WHICH ARE CAPITALISED IN THE BOOKS OF ACCOUNTS OF THE ASSESSEE. THE AO HOWEVER DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND HELD THAT THE EXPEN DITURE INCURRED BY THE ASSESSEE WOULD GIVE ENDURING BENEFIT TO THE ASSESSE E NOT ONLY FOR THE YEAR UNDER CONSIDERATION BUT ALSO FOR SUBSEQUENT YEARS AND HEL D THE EXPENDITURE TO BE CAPITAL IN NATURE. THE CIT(A) HOWEVER FOUND MERIT IN THE SUBMISSIONS OF THE ASSESSEE AND HELD THAT THE EXPENDITURE INCURRED BY THE ASSESSEE IS REVENUE IN NATURE AS THE SAME WAS TOWARDS REPAIRING AND MAINTE NANCE OF PLANT AND MACHINERY NECESSARY FOR RUNNING OF THE BUSINESS. A GGRIEVED REVENUE IS IN APPEAL BEFORE US. 4. BEFORE US, THE LEARNED DR RELIED UPON THE ORDER OF THE AO WHILE THE LEARNED COUNSEL FOR THE ASSESSEE RELIED UPON THE OR DER OF THE CIT(A) AND ALSO REITERATED THE SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO RELIED UPON DECISION OF THE ITAT A BENCH IN ASSESSEES OWN CASE FOR A.Y.2003-2003 VIDE ITA NO.4 26/AHD/2007 & OTHERS, WHEREIN SIMILAR CLAIM OF THE ASSESSEE WAS ALLOWED B Y THE TRIBUNAL. HE THEREFORE SOUGHT FOR DISMISSAL OF APPEAL OF THE REV ENUE. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BO TH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. WE FIND TH AT FOR THE ASSESSMENT YEAR 2003-2004 THE ASSESSEE HAD MADE SIMILAR CLAIM AND T HE CIT(A) ALLOWED THE ITA NO.1644/AHD/2009 -3- CLAIM. THE ITAT IN REVENUES APPEAL VIDE ITA NO.4 26/AHD/2007 DATED 4-2- 2011 DISMISSED THE APPEAL AND CONFIRMED THE ORDER O F THE CIT(A) IN ALLOWING THE CLAIM OF THE ASSESSEE. THE RELEVANT PORTION OF THE ABOVE ORDER OF THE TRIBUNAL READS AS UNDER: 5. WE FIND THAT THE ASSESSEE HAS INCURRED EXPENDIT URE TO THE TUNE OF RS.40,31,004/- TOWARDS REPAIRS AND MAINTENANCE OF P LANT & MACHINERY AND OUT OF THE SAME AN AMOUNT OF RS.38,31,372/- HAS BEEN CHARGED TO PROFIT AND LOSS ACCOUNT FOR THE YEAR UNDER CONSIDER ATION. ACCORDING TO ASSESSEE, IT IS RUNNING COMMON EFFLUENT PLANT AND L IQUID WASTE IS TREATED AND PROCESS WASTE CONTENTS AND VARIOUS HAZARDOUS AN D CORROSIVE CHEMICALS, WHICH ERODE PLANT & MACHINERY CONSTANTLY , SO REPAIR AND MAINTENANCE OF PLANT & MACHINERY IS THEREFORE NECES SITATE OWING TO NATURE OF BUSINESS AND PURCHASE OF STEEL, CEMENT, R CC ROD FOR REPAIR THE SAME, IS REQUIRED FREQUENTLY AS THERE ARE MORE THAN 200 TANKERS AND DUMPERS CARRYING EFFLUENTS AND SLUDGE TO THE SITE. WE ARE IN FULL AGREEMENT WITH THE ARGUMENTS OF LD. COUNSEL FOR THE ASSESSEE THAT EFFLUENT TREATMENT PLANT CONSTANTLY REQUIRES REPAIR AND MAINTENANCE AND RENOVATION OF PUMP AND OTHER MACHINERY BECAUSE THE WASTE CONTAINS VARIOUS HAZARDOUS AND CORROSIVE CHEMICALS, WHICH ER ODE PLANT & MACHINERY CONSTANTLY. WE FIND FROM THE NATURE OF EX PENDITURE THAT THESE ARE ONLY STEEL, CEMENT, RCC ROD AS NOTED BY ASSESSI NG OFFICER, WHICH CLEARLY SHOWS THAT THESE ARE ONLY FOR REPAIR AND RE NOVATION. ACCORDINGLY, THE CIT(A) HAS RIGHTLY ALLOWED THE CLA IM OF ASSESSEE AND WE CONFIRM THE SAME. THIS ISSUE OF REVENUE'S APPEAL IS DISMISSED. THE TRIBUNAL FOUND THAT THE EXPENDITURE INCURRED ON THE PLANT & MACHINERY BY THE ASSESSEE WAS OF RECURRING NATURE NECESSARY FOR SMOOTH RUNNING OF THE BUSINESS ACTIVITY OF EFFLUENT TREATMENT OF INDUSTRI AL WASTE. SINCE FACTS AND CIRCUMSTANCES OF THE ASSESSEES CASE BEING SIMILAR IN THIS YEAR ALSO, WE ARE INCLINED TO CONFIRM THE DECISION OF THE CIT(A) AND DISMISS THE APPEAL OF THE REVENUE ON THIS ISSUE. HOWEVER, THE LEARNED COUNSEL FOR THE ASSESSEE FAIRL Y ADMITTED THAT IN CASE THE ASSESEES CLAIM IS ALLOWED, THEN THE ASSESSEE WOULD NOT BE ENTITLED TO THE DEPRECIATION TO THE EXTENT OF THE CLAIM BEING ALLOW ED AS REVENUE EXPENDITURE. SINCE, WE HAVE TREATED THE ASSESSEES CLAIM OF EXPE NDITURE AS REVENUE ITA NO.1644/AHD/2009 -4- EXPENDITURE, THE AO IS DIRECTED TO GIVE CONSEQUENTI AL EFFECT TO THE CLAIM OF THE ASSESSEE FOR DEPRECIATION. 6. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( % %% %. .. .& && & . .. .' ' ' ' /T.K. SHARMA ) ( ( ( ( /JUDICIAL MEMBER ( . .. . . .. . G.D. AGARWAL) !' !' !' !' /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD