ACIT, Coimbatore V. M/s. Kannappan Iron & Steel Company Pvt. Limited, Coimbatore

ITA 1951/CHNY/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 4806 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 5 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 15-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 31-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AN D SHRI GEORGE MATHAN, JUDICIAL MEMBER I.T.A. NO. 1951/MDS/2009 ASSESSMENT YEAR : 2006-07 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-I(2, COIMBATORE. V. M/S. KANNAPPAN IRON & STEEL CO. PVT. LTD., 9-110, KALIDAS ROAD, RAMNAGAR, COIMBATORE-641 009. (PAN : AABCK2974P) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB RESPONDENT BY : SHRI SAROJ KUMAR PARIDA 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(APPEAL S)-I, COIMBATORE IN APPEAL NO. 263/08-09 DATED 16-10-2009 FOR THE ASSESSMENT Y EAR 2006-07. 2 SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED O N BEHALF OF THE REVENUE AND SHRI SAROJ KUMAR PARIDA, ADVOCATE REPRESENTED ON BE HALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ISSU E IN THE REVENUES APPEAL WAS AGAINST THE ACTION OF THE LEARNED CIT(A) IN HOL DING THAT THE EXPENDITURE INCURRED ON THE REPLACEMENT OF THE CONVERSION KIT F OR FURNACE ASSEMBLY WAS A REVENUE EXPENDITURE. IT WAS THE SUBMISSION OF THE LEARNED DR THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURE AND SALE OF M.S. INGOTS AND STEEL RODS. IT WAS I.T.A. NO.1951/MDS/2009 2 THE SUBMISSION THAT DURING THE YEAR THE ASSESSEE HA D CLAIMED EXPENSES RELATING TO THE REPLACEMENT OF THE CONVERSION KIT WHICH FORM S PART OF THE FURNACE ASSEMBLY TO AN EXTENT OF ` 30,34,931/- AND AN AMOUNT OF ` 2,71,460/- TOWARDS FRP COOLING TOWER. IT WAS THE SUBMISSION THAT THE EXPENDITURE WAS CAPITAL IN NATURE AND CONSEQUENTLY THE ASSESSING OFFICER HAD DISALLOWED T HE REVENUE EXPENDITURE CLAIMED AND TREATED THE SAID EXPENDITURE AS CAPITAL EXPENDITURE. HE VEHEMENTLY SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 4. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE FURNACE AS A WHOLE WAS NEVER REPLACED. IT WAS THE SUBMISSION THAT AS THE FURNACE WAS USED FOR MELTING THE RAW MATERIAL BY SUBJECTING THE RAW MATERIAL TO TEMPERATURE AS HIGH AS 1800 DEGREE CENTIGRADE. THE COPPER COIL WO UND AROUND THE FURNACE REQUIRED PERIODICAL REPLACEMENT ALONG WITH THE COOL ING TOWER WHICH WAS OUTSIDE THE FURNACE. IT WAS THE SUBMISSION THAT THE REPLAC EMENT WAS NECESSARY ONCE IN 3 OR 4 YEARS TO MAINTAIN THE WORKING CONDITION. IT W AS THE SUBMISSION THAT THERE WAS NO NEW ASSET INTRODUCED AS A CONSEQUENCE OF THE EXPENDITURE AND THERE WAS NO ADVANTAGE ASSOCIATED IN THE FORM OF INCREASE IN PRODUCTION CAPACITY. IT WAS THE SUBMISSION THAT ONLY A PART OF THE MACHINERY HA D BEEN REPLACED. IT WAS THE FURTHER SUBMISSION THAT THE ACTUAL COST OF THE FURN ACE ITSELF WAS ABOUT ` 1.8 CRORES DURING THE FINANCIAL YEAR 2000-01 AND IF THE FURNAC E WAS TO BE REPLACED THE COST WOULD BE IN THE RANGE OF ` 2.6 CRORES IN THE ASSESSMENT YEAR 2005-06. IT WAS THE SUBMISSION THAT THE LEARNED CIT(A) HAS TAKEN INTO C ONSIDERATION THE DECISION OF I.T.A. NO.1951/MDS/2009 3 THE HON'BLE SUPREME COURT IN THE CASE OF SARAVANA S PINNING MILLS REPORTED IN 293 ITR 201 (SC) AS ALSO THE DECISION IN THE CASE OF M/ S. MANGAYARKARASI MILLS (P) LTD. REPORTED IN 306 ITR 114 (SC). HE VEHEMENTLY SUPPOR TED THE ORDER OF THE LEARNED CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PER USAL OF THE ASSESSMENT ORDER AND THE ORDER OF THE LEARNED CIT(A) CLEARLY S HOWS THAT BY REPLACEMENT OF THE COOLING TOWER AND THE COIL, THE ASSESSEE HAS NO T REPLACED THE ENTIRE MACHINERY. THE ASSESSEE HAS ONLY REPLACED A PART O F THE MACHINERY WHICH HAD UNDERGONE SUBSTANTIAL WEAR AND TEAR. THE ASSESSEE HAS NOT DERIVED ANY ENDURING ADVANTAGE NOR HAS THE ASSESSEE DERIVED ANY ADVANTAG E IN THE FORM OF INCREASE IN THE PRODUCTION CAPACITY. THIS BEING SO, IN VIEW OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASES OF SARAVANA SPINNING MIL LS, REFERRED TO SUPRA, AND M/S. MANGAYARKARASI MILLS (P) LTD., REFERRED TO SUP RA, WE ARE OF THE VIEW THAT THE FINDING AS ARRIVED AT BY THE LEARNED CIT(A) IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIRCUMSTANCES, THE RE VENUES APPEAL IS DISMISSED. 7. THE ORDER WAS PRONOUNCED IN THE COURT ON 24/06/2 011. SD/- SD/- (ABRAHAM P. GEORGE) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 24 TH JUNE, 2011. H. C OPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE