Hindustan Ice Cold Storage Co Ltd, Kolkata V. D.C.I.T,Cir- 8,Kolkata., Kolkata

ITA 203/KOL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4088 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 10 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-08-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 30-01-2013
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: MIRAJ D. SHAH
• Keywords: Capital asset; Depreciation; Principle of natural justice; Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B, BENC H KOLKATA BEFORE SHRI S.S.VISWANETHRA RAVI, JM & DR. A.L.SAI NI, AM ./ ITA NO.203/KOL/2013 ( / ASSESSMENT YEAR:2006-2007) HINDUSTHAN ICE & COLD STORAGE LIMITED, C/O D.J.SHAH & CO., KALYAN BHAVAN, 2 ELGIN ROAD, KOLKATA-20 VS. DCIT, CIRCLE-8, KOLKATA AAYAKAR BHAVAN, P-7, CHOWRINGHEE SQUARE, KOLKATA-69 ./ ./PAN/GIR NO. : AAACH 6265 K ( /APPELLANT ) .. ( / RESPONDENT ) ASSESSEE BY : SHRI MIRAJ D. SHAH, A/R REVENUE BY : MD. GHAYAS UDDIN, JCIT, SR. DR / DATE OF HEARING : 07/12/2016 /DATE OF PRONOUNCEMENT 21/12/2016 / O R D E R PER DR. ARJUN LAL SAINI, AM: THE CAPTIONED APPEAL FILED BY THE ASSESSEE, PERTAIN ING TO THE ASSESSMENT YEAR 2006-2007, IS DIRECTED AGAINST THE ORDER PASSED BY LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXII, KOLKATA IN APPEAL NO.32/XXXII/11-12/R&T/CIR-8/KOL, DATED 07.11.2012, WHICH IN TURN ARISES OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER (AO ) UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, (IN SHORT THE A CT), DATED 28.11.2008. 2. BRIEF FACTS OF THE CASE QUA THE ASSESSEE ARE THA T THE ASSESSEE FILED ITS THE RETURN OF INCOME ON 27.11.2006 DECLARING TO TAL INCOME OF RS.16,45,711/- FOR THE ASSESSMENT YEAR 2006-07. THE CASE WAS SELECTED FOR SCRUTINY U/S. 143(3) OF THE ACT AND THE AO HAS COMPLETED THE ASSESSMENT BY MAKING THE ADDITION ON ACCOUNT OF REV ENUE EXPENDITURE CLAIMED BY THE ASSESSEE IN RESPECT OF REPAIRS AND R EPLACEMENT OF BLOCK ITA NO.203/13 HINDUSTHAN ICE & COLD STORAGE CO. LTD. 2 ICE. THE AO HELD THAT GALVANISED PLAIN SHEET IS MAD E OF IRON. DUE TO THE PROCESS OF GALVANIZATION, IT DOES NOT RUST EASILY A ND IT HAS LONG LIFE RUNNING INTO YEARS. IT IS USED BY ASSESSEE TO MANUFACTURE CAN IN WHICH BLOCK ICE IS MANUFACTURED. THE ASSESSEE IS ONE OF THE LEADING MANUFACTURER OF BLOCK ICE IN WEST BENGAL. DUE TO LONG LIFE (IN YE ARS) AND DURABILITY, IT IS NOT AN EXPENDITURE OF REVENUE NATURE. THEREFORE, TH E AO TREATED THE CAPITAL EXPENDITURE OF GALVANIZED PLAIN SHEET AND OTHER IRON ITEMS PURCHASED BY THE ASSESSEE IN HUGE QUANTITY. 3. AGGRIEVED FROM THE ORDER OF LD. AO, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT(A), WHO HAS ALSO CONFIRMED THE A DDITIONS MADE BY THE AO, BY OBSERVING THE FOLLOWINGS :- I HAVE DULY CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSION OF THE A/R OF THE APPELLANT. I FOUND THA T THE APPELLANT HAD PURCHASED GALVANISED PLAIN SHEET OF IRON. THE A PPELLANT USED THESE TO MANUFACTURE THE CAN IN WHICH BLOCK ICE I S MANUFACTURED. THE APPELLANT PURCHASE IN THIS YEAR MORE THAN 32 METRIC TON OF GALVANISED PLAIN SHEET. THE APPELLANT MADE THE CAN OF USING THE HUGE SHEETS. DURING THE COURSE OF HEAR ING THE APPELLANT TRIED TO JUSTIFIED THAT THESE SHEETS WERE USED FOR REPAIRING. HE HAD TAKEN THE PLEA THAT SOME MACHINES ARE VERY O LD MORE THAN 100 YEARS OLD. THIS ARGUMENT OF THE APPELLANT IS NO T TENABLE BECAUSE THE LIFE OF COMPANY IS NOT 100 YEARS. THE A PPELLANT ALSO RELIED UPON VARIOUS CASE LAWS THAT THEY ARE NOT APP LICABLE IN FAVOUR OF THE APPELLANT BECAUSE IN THIS CASE THE CAPITAL A SSETS COMES IN EXISTENCE. FROM THE SHEET THE APPELLANT MADE THE CA N. THE APPELLANT FAILED TO FILE ANY EVIDENCE WHICH PROVE T HAT THESE HUGE GALVANISED PLAIN SHEET MORE THAN 32 METRIC TON USED FOR REPAIRING. THE APPELLANT TAKEN ANOTHER ARGUMENT THAT THE REPAI RING WORK IS A CONTINUOUS PROCESS THROUGHOUT THE YEAR BUT THE APPE LLANT PURCHASES MOST GALVANISED PLAIN SHEET IN THE MONTH OF MARCH. THE APPELLANT PURCHASED 18.988 METRIC TON IN MARCH AND 3.850 METRIC TON ON 17.2.2006. IT ALSO PROVE THAT THESE SHEETS A RE NOT USED IN REPAIRING BUT THEY PUT TO USE FOR GENERATING THE NE W CAPITAL ASSETS. THE SECOND ADDITION OF RS.1,49,748/- ON 23/2/06 AND RS.1,96,975/- ON 09/03/06 OF M.S.ROUND, M.S.SHEET, H.R.SHEET, R.S.JOIST, M.S.CHANNEL, M.S.FLATS AND SQUARE TABLE. THESE ARE USED IN CONSTRUCTION OF BUILDING, FACTORY SHED AND OTHER PERMANENT STRUCTURE. THE APPELLANT TAKEN THE SAME ARGUMENT TH AT THESE ITEMS ITA NO.203/13 HINDUSTHAN ICE & COLD STORAGE CO. LTD. 3 ARE USED IN REPAIRING WORKS. THE REPAIRING WORKS AR E IN CONTINUOUS PROCESS THROUGHOUT THE YEAR. THIS ARGUMENT OF THE A PPELLANT IS NOT TENABLE BECAUSE THE APPELLANT MADE ALL THE PURCHASE S OF THE M.S.ROUND AND M.S.SHEET ETC. AT THE END OF THE FINA NCIAL YEAR WITHOUT M.S.ROUND HOW THE REPAIRING WORK DONE IN CO NTINUOUSLY THROUGHOUT THE YEAR. THE APPELLANT FAILED TO FILE A NY EVIDENCE WHICH PROVE THAT THE ABOVE ITEMS USED IN REPAIRING. THE THIRD ADDITION WAS RS.1,83,775/-. THIS ADDITION IS RELATED TO THE PURCHASE OF 100 HORSE POWER (HP) WHICH PROVE THAT THERE IS A CREATION OF NEW ASSETS. THE APPELLANT FILED SOME PAPERS, ON GOING THROUGH THESE PAPERS I FOUND THAT ORDER WAS GIVEN O N 17/11/2004 AND CHALLAN DATED 20/05/2005. IT ALSO CLEARLY PROVE THAT THESE ARE THE PURCHASE OF NEW MOTOR NOT REPAIRING WORK. IN TH E CASE OF REPAIRING THERE ARE NO SUCH TIME GAP BETWEEN DATE O F ORDER AND RECEIPT OF ASSETS. THERE IS GAP OF SIX MONTHS. IT P ROVE THAT THE APPELLANT PURCHASE NEW ASSETS. HENCE, THIS IS A CAP ITAL NATURE. THE APPELLANT RELIED UPON THE VARIOUS CASE LAWS MEN TIONED IN HIS SUBMISSION. I FOUND THAT THE FACTS OF THE CA SE OF REFERRED CASE ARE DIFFERENT IN THIS CASE BECAUSE IN THIS CASE THE RE IS GENERATION OF NEW CAPITAL ASSET AND THE APPELLANT FAILED TO FILE ANY EVIDENCE WHICH PROVE THAT THE REPAIRING WORKS DONE. CONSIDER THE ABOVE FINDING AND FACT OF THE CASE I A M OF THE VIEW THAT THE ADDITION MADE BY THE AO TREATING THE CAPITAL EXPENDITURE ON THIS GROUNDS IS AS PER LAW. ITEM AMOUNT 1. GALANIZED PLAIN SHEET RS.13,07,540 2. MS ROUND, MS STEEL, HR SHEET, RS JOIST, MS CHANNEL, MS FLAT, SQUARE TABLE RS. 3,46,7 23 3. HP MOTOR RS. 1,83,575 HENCE, I CONFIRM THE ADDITION MADE BY THE AO AS ABO VE. REGARDING THE ADDITION OF RS.1,49,728/- ON M.S.ANGL E AND M.S. CHANNEL. THIS A/R OF THE APPELLANT IN HIS SUBM ISSION STATED THAT THE SUM OF RS.1,49,728/- PERTAINS TO A.Y.2005- 06 THE APPELLANT DO NOT WANT TO PRESS. HENCE, I CONFIRM THE ADDITION MADE BY THE AO OF RS.1,49,728/- 4. NOT BEING SATISFIED WITH THE ORDER OF LD. CIT(A) , THE ASSESSEE IS IN APPEALS BEFORE US AND HAS TAKEN THE FOLLOWING GROUN DS OF APPEAL :- 1. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE ASSESSMENT ORDER PASSED WAS IN VIOLATION OF PRINCI PLES OF NATURAL JUSTICE HENCE IS BAD IN LAW AND BE QUASHED. 2. FOR THAT IN THE FACTS AND CIRCUMSTANCES OF THE C ASE THE LEARNED COMMISSIONER OF INCOME TAX APPEALS ERRED IN HOLDING THE EXPENDITURE OF RS.19,87,566/- AS CAPITAL EXPENDITUR E AND OR PRIOR ITA NO.203/13 HINDUSTHAN ICE & COLD STORAGE CO. LTD. 4 PERIOD EXPENDITURE. THESE EXPENSES WERE FULL ALLOWA BLE AND HENCE THE ORDER OF THE CIT APPEAL BE REVERSED. 5. ALTHOUGH, IN THIS APPEAL, THE ASSESSEE HAS RAISE D THREE GROUNDS OF APPEAL, BUT AT THE TIME OF HEARING, THE MAIN GRIEVA NCE OF THE ASSESSEE HAS BEEN CONFINED TO THE ISSUE AS TO WHETH ER THE EXPENDITURE OF RS.19,87,566/- IS CAPITAL EXPENDITUR E OR REVENUE EXPENDITURE. 5.1 LD. AR FOR THE ASSESSEE HAS SUBMITTED THAT THE AO HAD DISALLOWED A SUM OF RS.19,87,566/-, WHICH WAS CLAIMED AS REPAI RS EXPENSES BY THE ASSESSEE. THE AO HELD THAT THE NATURE OF SUCH EXPEN DITURE WAS CAPITAL AND, HENCE, HE ADDED THE SAME TO THE INCOME AND ALL OWED DEPRECIATION ON THE SAME. THE ASSESSEE CLAIMED THE FOLLOWING EX PENSES AS REVENUE EXPENSES :- ITEM AMOUNT MS ANGLE AND MS CHANNEL 1,49,728 GALVANIZED PLAIN SHEET 13,07,540 MS ROUND, MS STEEL, HR SHEET, RS JOIST, MS CHANNEL, MS FLAT, SQUARE TABLE 3,46,723 HP MOTOR 1,83,575 TOTAL 19,87,566 LD. AR FOR THE ASSESSEE SUBMITTED THAT ALL THE ABOV E EXPENSES WERE IN THE NATURE OF REPAIRS OR REPLACEMENT EXPENSES AND H ENCE WERE FULLY ALLOWABLE AS REVENUE EXPENDITURE. THE AO AND CIT(A) FAILED TO APPRECIATE THE SAME AND HELD THE EXPENDITURE TO BE IN THE NATU RE OF CAPITAL AND REJECTED THE CLAIM OF THE ASSESSEE. LD. AR SUBMITT ED THAT THESE ARE REVENUE EXPENDITURE FOR THE PURPOSE OF BUSINESS. FO R THIS PURPOSE, LD. AR RELIED ON THE FOLLOWING JUDGMENTS :- ITA NO.203/13 HINDUSTHAN ICE & COLD STORAGE CO. LTD. 5 I) ALEMBIC CHEMICAL WORKS CO. LTD., [1989] 177 ITR 377; II) ASSAM BENGAL CEMENT COMPANIES LTD. [1955] 27 IT R 34 III) ASSOCIATED CEMENT COMPANIES LTD. [1988] 172 IT R 257 IV) EMPIRE JUTE CO. LTD. [1980] 124 ITR 1(SC) V) TEA ESTATE P. LTD. [1992] 198 ITR 535 (CAL) VI) SARAVANA SPT. MILLS (P) LTD. 293 ITR 201 5.2 ON THE OTHER HAND, LD. DR FOR THE REVENUE HAS P RIMARILY REITERATED THE STAND TAKEN BY THE AO, WHICH WE HAVE ALREADY NO TED IN OUR EARLIER PARAGRAPHS AND THE SAME IS NOT BEING REPEATED FOR T HE SAKE OF BREVITY. 5.3. HAVING HEARD THE RIVAL SUBMISSIONS, PERUSED TH E MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW THAT THERE IS MERIT I N THE SUBMISSIONS OF LD. AR OF THE ASSESSEE, AS THE PROPOSITION CANVASSED BY THE LD. AR FOR THE ASSESSEE ARE SUPPORTED BY THE JUDGMENTS CITED SUPRA . AS HE HAS SUBMITTED THAT THE LAW IS WELL SETTLED THAT WHERE T HE EXPENDITURE IS FOR REPAIRS OF EXITING PLANT AND MACHINERY, SUCH EXPEND ITURE SHALL BE ALLOWABLE AS REVENUE EXPENDITURE. THE ASSESSING OFF ICER CONSIDERING THAT SUCH REPAIRS WOULD LEAD TO A LONG LIFE OF THE EXITI NG ICE CANS AND CAME TO A CONCLUSION THAT THE EXPENSES SHOULD BE CAPITALIZED. IN THIS REGARD, LD. AR SUBMITTED THAT REPAIRING IS OF COLD STORAGE AND IC E PLANT. THE SAME HAS BEEN DAMAGED DUE TO WEAR AND TEAR. THE REPAIRING I S OF OUR COLD STORAGE AND ICE PLANT CANNOT BE CONSIDERED AS BRINING INTO EXISTENCE ANY NEW ASSET OR ANY NEW ADVANTAGE OF ENDURING BENEFIT. HE ALSO SUBMITTED THAT THE PHRASE ENDURING BENEFIT IS NOT THINKING OF AD VANTAGES THAT ARE PERMANENT. CONSIDERING THE FACTUAL POSITION, WE ARE OF THE VIEW THAT THE EXPENDITURE INCURRED BY THE ASSESSEE ARE REVENUE IN NATURE, THEREFORE, WE ITA NO.203/13 HINDUSTHAN ICE & COLD STORAGE CO. LTD. 6 ARE OF THE VIEW THAT THE ADDITION MADE BY THE AO AN D CONFIRMED BY THE LD. CIT(A) NEEDS TO BE DELETED. ACCORDINGLY, WE DELETE THE ADDITION. 5.4. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21/1 2/2016. SD/ - (S.S.VISWANETHRA RAVI) SD/ - (DR. A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER /KOLKATA ; ! DATED 21/12/2016 ' $%& /PRAKASH MISHRA , 0 . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) % & , / ITAT, 1. / THE APPELLANT-HINDUSTH AN ICE & COLD STORAGE CO.LTDD 2. / THE RESPONDENT.-DCIT, CIRCLE-8, KOLKATA 3. 1 ( ) / THE CIT(A), KOLKATA. 4. 1 / CIT 5. 23 4 0056 , 56 , / DR, ITAT, KOLKATA 6. 4 78 / GUARD FILE. 2 0 //TRUE COPY//