DCIT Circle 1, Dindigul V. Shri Renuga Textiles Ltd., Theni

ITA 2026/CHNY/2017

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8937 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 10-05-2018
• Assessment Year: 2006-2007
• Appeal Filed On: 21-08-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NOS.2025 & 2026/CHNY/2017 ( )( / ASSESSMENT YEARS : 2005-06 & 2006-07 THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 1, DINDIGUL. V. M/S SHRI RENUGA TEXTILES LTD., 87, CUMBUM ROAD, THENI. PAN : AADCS 8242 G (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI JASDEEP SINGH, CIT -.+, / 0 / RESPONDENT BY : NONE 1 / 2% / DATE OF HEARING : 18.12.2018 3') / 2% / DATE OF PRONOUNCEMENT : 19.12.2018 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER : BOTH THE APPEALS OF THE REVENUE ARE DIRECTED AGAI NST THE RESPECTIVE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEALS) -15, CHENNAI, AND PERTAIN TO ASSESSMENT YEARS 2005-06 AN D 2006-07. SINCE COMMON ISSUE ARISES FOR CONSIDERATION IN BOTH THE A PPEALS, WE HEARD BOTH THE APPEALS TOGETHER AND DISPOSING OF THE SAME BY THIS COMMON ORDER. 2 I.T.A. NOS.2025 & 2026/CHNY/17 2. SINCE THE ASSESSEE-COMPANY IS SAID TO BE ON LIQU IDATION, THE NOTICE OF HEARING WAS SERVED ON THE OFFICIAL LIQUID ATOR. THE OFFICIAL LIQUIDATOR, IN RESPONSE TO THE NOTICE ISSUED BY THI S TRIBUNAL, BY HIS LETTER DATED 26.11.2018, INFORMED THE REGISTRY OF THIS TRI BUNAL THAT THE ASSESSMENT YEARS UNDER CONSIDERATION BEFORE THIS TR IBUNAL ARE PRIOR TO THE DATE OF WINDING UP OF THE ASSESSEE-COMPANY. MO REOVER, THE EARLIER MANAGEMENT HAS NOT HANDED OVER THE BOOKS OF ACCOUNT OF THE COMPANY TILL DATE. THEREFORE, THE OFFICIAL LIQUIDATOR REQU ESTED THE TRIBUNAL TO COMPLETE THE ASSESSMENT PROCEEDINGS ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD AND ON MERIT. ACCORDINGLY, WE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE AND PROCEEDED TO DISPOS E THE APPEALS ON MERIT. 3. SHRI JASDEEP SINGH, THE LD. D.R. SUBMITTED THAT THE ASSESSEE- COMPANY REPLACED 444 RING FRAMES AND INSTALLED 1008 RING FRAMES / SPINDLES. DUE TO INCREASE IN THE NUMBER OF SPINDLE S FROM 444 TO 1008, ACCORDING TO THE LD. D.R., THE PRODUCTION CAPACITY OF THE ASSESSEE- COMPANY HAS INCREASED CONSIDERABLY, THEREFORE, THE COST OF REPLACEMENT OF SPINDLES / RING FRAMES HAS TO BE NECESSARILY TRE ATED AS CAPITAL IN NATURE. REFERRING TO THE ORDERS OF THE CIT(APPEALS ), THE LD. D.R. SUBMITTED THAT THE CIT(APPEALS) OBSERVED THAT THERE WAS NO INCREASE IN THE INSTALLED CAPACITY, THEREFORE, THE COST OF RING FRAMES / SPINDLES IS 3 I.T.A. NOS.2025 & 2026/CHNY/17 REVENUE IN NATURE. ACCORDING TO THE LD. D.R., THE CIT(APPEALS) FAILED TO APPRECIATE THAT THE ASSESSEE, IN FACT, REPLACED 444 SPINDLES AND INSTALLED 1008 SPINDLES, THEREFORE, THE COMPANY EXPANDED ITS CAPITAL ASSET AND CONSEQUENTLY THE PRODUCTION CAPACITY ALSO INCREASED . ACCORDING TO THE LD. D.R., THIS FACT WAS NOT NOTICED BY THE CIT(APPE ALS). 4. WE HEARD THE LD. D.R. AND PERUSED THE RELEVANT M ATERIAL AVAILABLE ON RECORD. THE CIT(APPEALS) FOUND THAT T HERE WAS NO INCREASE IN THE INSTALLED CAPACITY OF THE ASSESSEE, THEREFOR E, THE REPLACEMENT OF SPINDLES / RING FRAMES HAS TO BE CONSIDERED AS REVE NUE EXPENDITURE. THE FACT THAT 444 SPINDLES WERE REPLACED BY 1008 SPINDL ES WAS NOT TAKEN INTO CONSIDERATION BY THE CIT(APPEALS). THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THE MATTER NEEDS TO BE RECO NSIDERED BY THE ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF BOTH THE AUTHORITIES BELOW ARE SET ASIDE AND THE ENTIRE ISSUE IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE- EXAMINE THE MATTER AND BRING ON RECORD WHETHER THERE WAS ANY INCREASE IN THE INSTALLED CAPACITY AND PRODUCTION CAPACITY OF THE MILL AFTER REPLACEMENT OF RING FRAMES / SPINDLES AND THEREAFTER DECIDE THE ISSUE A FRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE ALLOWED FOR STATISTICAL PURPOSES. 4 I.T.A. NOS.2025 & 2026/CHNY/17 ORDER PRONOUNCED IN THE COURT ON 19 TH DECEMBER, 2018 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 19 TH DECEMBER, 2018. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-15, CHENNAI-34 4. PRINCIPAL CIT-6, CHENNAI-34 5. 7: -2 /DR 6. ( ; /GF.