ITO, CHENNAI V. Ramsays Corporation Pvt Ltd., CHENNAI

ITA 2270/CHNY/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 2693 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 14-12-2015
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Keywords: Depreciation; Additional depreciation; Revenue expenditure; Capital expenditure

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , !' . ' $ % , & %' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER . /ITA NO. 2270/MDS/2015 / ASSESSMENT YEAR : 2011-12 THE INCOME-TAX OFFICER, COMPANY WARD -5(1), CHENNAI 600 034. ( /APPELLANT) V. M/S. RAMSAYS CORPORATION PVT. LTD. NO.18, LGN ROAD, CHENNAI 600 002. CHENNAI -600 002. PAN AADCR8596A RESPONDENT) / APPELLANT BY : SHRI A.V.SREEKANTH, JCIT / RESPONDENT BY : SHRI PHILIP GEORGE, ADVOCATE ! / DATE OF HEARING : 18.02.2016 '# ! / DATE OF PRONOUNCEMENT : 16.03.2016 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DATED 16 .9.2015 FOR THE ASSESSMENT YEAR 2011-12. - - ITA 2270/15 2 2. THE FIRST GROUND IN THIS APPEAL IS WITH REGARDIN G TO ALLOWING THE COST OF THE TOLLS CONSUMED AS REVENUE EXPENDITURE. 3. THE ASSESSING OFFICER TREATED AN AMOUNT OF ` 1,41,43,138/- UNDER THE HEAD SPARES AND TOOLS AS CAPITAL EXPENDITURE AND ALLOWED DEPRECIATION AT 15%. HOWEV ER, THE COMMISSIONER OF INCOME-TAX(APPEALS) PLACING RELIANC E ON THE ORDER OF THE TRIBUNAL IN THE CASE OF ACIT V. M/S. L AKSHMI ELECTRICAL CONTROLS SYSTEMS PVT. LTD. IN ITA NOS.12 60 & 1261/MDS/2012 FOR THE ASSESSMENT YEARS 1997-98 AND 1998-99 AND ALSO THE JUDGMENT OF THE MADRAS HIGH COURT IN T HE CASES OF CIT VS. TVS MOTORS LTD. [364 ITR 1] AND CIT V. ADIT YA FERRO ALLOYS P. LTD. [366 ITR 490](MAD), ALLOWED THE CLAI M OF THE ASSESSEE AS REVENUE EXPENDITURE. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 4. THE LD. DR SUBMITTED THAT THE ASSESSEE HAS CLAIM ED THE ENTIRE EXPENDITURE AS REVENUE EXPENDITURE AND NOT C APITALIZED THE COST OF TOOLS AND THESE TOOLS ARE USED BY THE A SSESSEE FOR PRODUCING PARTS WHICH TANTAMOUNT TO THE COST OF ACQ UIRING PROFIT - - ITA 2270/15 3 EARNING APPARATUS AND NOT FOR OPERATING THE PROFIT EARNING APPARATUS. 5. ON THE OTHER HAND, THE LD. AR STRONGLY PLACED R ELIANCE ON THE ORDER OF THE CIT(APPEALS) AND SUBMITTED THAT TH E COMMISSIONER OF INCOME-TAX(APPEALS) IS CORRECT IN H OLDING THAT THE EXPENDITURE INCURRED UNDER THE HEAD 'SPARES AND TOOLS IS REVENUE EXPENDITURE. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. IN OUR OPINION, THE ARGUMENT OF THE LD. DR IS MISPLACED AS JURISDICTIONAL HIGH COURT IN THE CASES CITED SUPRA CATEGORICALLY HELD THAT COST OF MOULDS AND DIES WOU LD BE ALLOWABLE AS AN EXPENDITURE U/S.31 AS THE OBJECT OF THE EXPENDITURE WAS NOT FOR BRINGING INTO EXISTENCE A N EW ASSET OR TO OBTAIN A NEW ADVANTAGE. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPE ALS) ON THIS GROUND AND THE SAME IS CONFIRMED. 7. THE NEXT GROUND IN THIS APPEAL IS THE COMMISSION ER OF INCOME-TAX(APPEALS) HAS ERRED IN LAW IN ALLOWING TH E CLAIM OF DEPRECIATION OF 100% ON THE CIVIL STRUCTURE OF THE WINDMILL AS THE - - ITA 2270/15 4 SAID CLAIM WAS NEITHER MADE IN THE RETURN OF INCOME , NOR BEFORE THE ASSESSING OFFICER DURING THE ASSESSMENT PROCEED INGS. FURTHER, ON THE CIVIL STRUCTURE THE ADMISSIBLE DEPR ECIATION IS 10% AND NOT 100% AND THEREFORE, THE LD. CIT(A) HAS GROS SLY ERRED IN ALLOWING 100% DEPRECIATION ON CIVIL STRUCTURE SUPPO RTING THE WINDMILL. 8. THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAS RAISED AN ADDITIONAL GROUND IN THE COURSE OF PROCEEDINGS RELATING TO CLAIM OF ADDITIONAL DEPRECIATION ON WINDMILL BEFORE THE CIT(APPEALS) . DURING THE SECOND HALF OF THE PREVIOUS YEAR RELEVANT TO A . Y. 2010 - 11, IT HAD INSTALLED WINDMILL AND CLAIMED DEPRECIATION @ 10% THEREO N . THE BALANCE ADDITIONAL DEPRECIATION OF 10% HAS BEEN CLAIMED DURING THE PRE VIOUS YEAR RELEVANT TO A . Y . 2011-12 . CASE-LAWS IN DCIT V. COSMO FILMS LTD., 124 TAXMAN . COM 189, APOLLO LTD V. DCIT 45 TAXMAN.COM 337, BRAKES INDIA LTD V. DCIT 144 ITD 403 ETC HAVE BEEN RELIED UPON . IT IS THE CONTENTION OF THE ASSESSEE THAT EXCEPTING THE JUDICIAL RATIO IN THESE CASES THIRD PROVISO TO SEC. 32(1)(II) WAS INSERTED W.E.F. 1.4.2016 BY THE FINANCE ACT, 2015 W HICH ALLOWS THE ASSESSEE BALANCE 10% OF ADDITIONAL DEPRECIATION IN THE - - ITA 2270/15 5 SUCCEEDING YEAR, WHERE IT HAS INSTALLED NEW MACHINE RY DURING THE SECOND HALF OF THE YEAR. 8.1 WITH REGARD TO DEPRECIATION ON THE CIVIL STRUCTURE SUPPORTING THE WINDMILL, RELIANCE HAS BEEN PLACED I N THE CASE OF CIT V. PARRY ENGINEERING AND ELECTRONICS P LTD., IN ITA NO.604 OF 2012 DATED 29.1.2013 (GUJARAT), WHICH IN TURN HAS R EFERRED TO THE APEX COURT IN THE CASE OF CIT V. KARNATAKA POWER CO RPORATION (247 ITR 268). HOWEVER, THE AO DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWED THE CLAIM OF THE ASSESS EE. AGGRIEVED BY THIS, THE ASSESSEE WENT IN APPEAL BEFO RE THE CIT(APPEALS). 9. ACCORDING TO THE CIT(APPEALS), AS REGARDS THE CLAIM OF ADDITIONAL DEPRECIATION ON WINDMILL IS . CONCERNED, THE SAME IS CLEARLY NOT ALLOWABLE IN VIEW OF THE EXPRESS PROVIS IONS OF THE ACT, WHICH ENTITLES SUCH CLAIM TO NEWLY INSTALLED MACHIN ERY ONLY. AS MAY BE SEEN THAT THE MACHINERY INSTALLED AND PUT TO USE HAS BEEN IN THE PRECEDING YEAR, WHICH IS FORTIFIED BY T HE DECISION OF THE TRIBUNAL IN THE CASE OF BRAKES INDIA LTD V. D C I T 144 ITD 403. THEREFORE, THE CIT(APPALS) OBSERVED THAT THE A SSESSEE IS - - ITA 2270/15 6 NOT ENTITLED TO CLAIM THE BALANCE OF ADDITIONAL DEPRECIATION DURING THE YEAR. THE PLEA OF THE ASSESSEE WITH REGARD TO T HE THIRD PROVISO TO S . 32(1)(II) ALSO CLEARLY MANDATES THAT ADDITIONAL DEPRECIATION COULD ONLY BE CLAIMED AS ENVISAGED IN THE PROVISION ITSELF I . E., FROM 1 . 4.2016 ONLY. TO SUPPORT HIS VIEW, THE CIT(APPEALS) RELIED ON THE JUDGMENT OF THE JURISDI CTIONAL HIGH COURT DECISION IN THE CASES OF CIT V. C. JAICHANDER , 370 ITR 579 AND CIT V. V.R . KARPAGAM (MAD) 90 CCH 34, WHEREIN IT HAS BEEN HELD THAT THE AMENDMENTS ARE PROSPECTIVE I N NATURE. HOWEVER, THE CIT(APPEALS) OBSERVED THAT AS REGARDS THE ISSUE RELATING TO THE CIVIL STRUCTURE BEING ELIGIBLE FOR CLAIM OF DEPRECIATION THE CONTENTION OF THE ASSESSEE IS UPHE LD IN AS MUCH THAT THE SAME SHALL QUALIFY FOR THE CLAIM OF DEPREC IATION PREFERRED IN TERMS OF THE PLEA OF THE ASSESSEE AND THE GROUND IS PARTLY ALLOWED. AGAINST THIS, THE REVENUE IS IN APPEAL BE FORE US . 10 . WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MA TERIAL ON RECORD. THIS ISSUE IS SQUARELY COVER BY THE JUD GMENT OF THE SUPREME COURT IN THE CASE OF CIT V. KARNATAKA POWER CORPORATION CITED SUPRA WHEREIN IT WAS HELD THAT GE NERATING STATION BUILDING IS SO CONSTRUCTED TO BE AN INTEGRA L PART OF IS - - ITA 2270/15 7 GENERATING SYSTEM. ACCORDINGLY, WE AGREE WITH THE FINDING OF THE CIT(APPEALS) AND THE SAME IS CONFIRMED. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 16 TH OF MARCH, 2016 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 16 TH MARCH, 2016. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.