Sri Vignesh Yarns Pvt. Ltd., Tiruppur V. DCIT, Tiruppur

ITA 2399/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86263 (ITAT-CHENNAI)
• Duration Of Justice: 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 24-12-2014
• Assessment Year: 1997-1998
• Appeal Filed On: 23-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: V S JAYAKUMAR
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3); 234B; 154

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NOS. 1354/MDS/2013 & 2399/MDS/2014 ( / ASSESSMENT YEAR: 1997-98) SRI VIGNESH YARNS PVT.LTD., 88-F-17-C, KAMARAJ ROAD, TIRUPUR-641 604. VS THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-II(3), RACE COURSE ROAD, COIMBATORE - 641 018. PAN: AACCS4775P ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. V.S.JAYAKUMAR, ADVOCATE /RESPONDENT BY : MR. P. RADHAKRISHNAN, JCIT /DATE OF HEARING : 24 TH DECEMBER, 2014 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE ASSESSEE AGAINS T THE ORDERS OF THE COMMISSIONER OF INCOME TAX (APPEA LS)-II, COIMBATORE DATED 25.03.2013 & 22.07.2014 RESPECTIVE LY FOR THE ASSESSMENT YEAR 1997-98. 2. THOUGH ASSESSEE HAS RAISED SEVERAL GROUNDS IN IT A NO.1354/MDS/2013, EFFECTIVE GROUNDS ARE THE FOLLO WING FOUR GROUNDS:- 2 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 I) DISALLOWANCE OF COST OF TWO COMBER MACHINES CLAIMED AS REVENUE EXPENDITURE; II) DISALLOWANCE OF COST OF 339 UNITS OF YARN CLEAR ERS CLAIMED AS REVENUE EXPENDITURE; III) DISALLOWANCE OF COST OF ONE AUTO CONER CLAIME D AS REVENUE EXPENDITURE; AND IV) CHARGING OF INTEREST UNDER SECTION 234B & 234C OF THE ACT. 3. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT EXCEPT GROUND NO.(II), THE OTHER THREE GROUNDS ARE NOT PRESSED AND MAY BE TREATED AS WITHDRAWN. TH EREFORE, THE ABOVE GROUND NO.I), III) AND IV) RELATING TO D ISALLOWANCE OF COST OF TWO COMBER MACHINES, COST OF AUTO CONER AN D CHARGING OF INTEREST UNDER SECTION 234B & 234C OF T HE ACT ARE DISMISSED AS WITHDRAWN. 4. THE ONLY GROUND REMAINS FOR ADJUDICATION IN THE APPEAL IN ITA NO.1354/MDS/2013 IS WHETHER OF COST OF 339 UNITS OF YARN CLEARERS IS REVENUE EXPENDITURE OR CAPITAL EXP ENDITURE. 3 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 5. COUNSEL FOR THE ASSESSEE SUBMITS THAT COMMISSION ER OF INCOME TAX (APPEALS) FOR THE FIRST TIME DISALLOWED THE EXPENDITURE OF ` 13,34,935/- BEING COST OF 339 UNITS OF YARN CLEARERS CLAIMED AS REVENUE EXPENDITURE BY THE ASS ESSEE HOLDING IT AS CAPITAL EXPENDITURE ALONG WITH COST OF TWO COMBER MACHINES AND COST OF ONE AUTO CONER. COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ASSESSING OFFICER WHI LE COMPLETING THE ASSESSMENT ACCEPTED THE CLAIM OF THE ASSESSEE THAT COST OF 339 UNITS OF YARN CLEARERS IS REVENUE EXPENDITURE AND RESTRICTED DISALLOWANCE TO COST OF TWO COMBER MACHINES AND COST OF ONE AUTO CONER AMOUNTIN G TO ` 1,23,53,260/-. COUNSEL SUBMITS THAT ASSESSEE HAS A GITATED BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) AGA INST THE DISALLOWANCE OF THE COST OF TWO COMBER MACHINES AND ONE AUTO CONER IN TREATING THEM AS CAPITAL EXPENDI TURE AND NOT REVENUE EXPENDITURE AND THE COMMISSIONER OF INC OME TAX (APPEALS) ACCEPTED THE CLAIM OF THE ASSESSEE WH ICH WAS ALSO CONFIRMED BY THE TRIBUNAL. THE DEPARTMENT CARR IED THE MATTER TO THE HIGH COURT AND FURTHER TO THE SUPREME COURT AND THE HONBLE SUPREME COURT RESTORED THE APPEAL T O THE FILE OF THE COMMISSIONER OF INCOME TAX (APPEALS) WITH A DIRECTION 4 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 TO DISPOSE OFF THE MATTER IN ACCORDANCE WITH LAW AN D IN TERMS OF THE DIRECTIONS GIVEN IN THE CASE OF CIT VS.RAMAR AJU SURGICAL COTTON MILLS (294 ITR 328). PURSUANT TO T HE ORDER OF THE HONBLE SUPREME COURT, THE COMMISSIONER OF INCO ME TAX (APPEALS) PASSED ORDER DATED 25.03.2013 HOLDING THAT COST OF TWO COMBER MACHINES AND COST OF ONE AUTO CO NER AS CAPITAL EXPENDITURE. THE COMMISSIONER OF INCOME TA X (APPEALS) ALSO HELD THAT COST OF 339 UNITS OF YARN CLEARERS AS CAPITAL EXPENDITURE WHICH IS NEVER A SUBJECT MATTER OF DISPUTE. AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) THE ASSESSEE IS IN APPEAL BEFORE US. S O FAR AS THE GROUNDS RAISED IN RESPECT OF DISALLOWANCE OF COST O F TWO COMBER MACHINES AND ONE AUTO CONER IS CONCERNED, T HE ASSESSEE IS NOT PRESSING THE GROUNDS. COMING TO THE DISALLOWANCE OF THE COST OF 339 UNITS OF YARN CLEAR ERS TREATING THEM AS CAPITAL EXPENDITURE, COUNSEL SUBMITS THAT T HIS ISSUE IS NEVER IN DISPUTE BEFORE ANY OF THE AUTHORITIES AS THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSMENT A CCEPTED THAT THIS EXPENDITURE AS REVENUE EXPENDITURE AND NO DISALLOWANCE WAS MADE. COUNSEL SUBMITS THAT THE DI RECTION OF THE HONBLE SUPREME COURT WAS ONLY TO CONSIDER W HETHER 5 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 THE COST OF TWO COMBER MACHINES AND ONE AUTO CONER IS CAPITAL EXPENDITURE OR REVENUE EXPENDITURE. COUNSE L FURTHER SUBMITS THAT ASSESSEE ALSO FILED RECTIFICATION PETI TION BEFORE THE COMMISSIONER OF INCOME TAX (APPEALS) TREATING T HE COST OF 339 UNITS OF YARN CLEARERS ALSO AS CAPITAL EXPE NDITURE BUT THE COMMISSIONER OF INCOME TAX (APPEALS) REJECTED T HE RECTIFICATION PETITION AGAINST WHICH ASSESSEE ALSO PREFERRED AN APPEAL IN ITA NO.2399/MDS/2014. 6. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDERS OF THE LOWER AUTHORITIES. 7. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. ON READING OF THE ASSESSMENT ORDER DATED 31.03.2000 PASSED UNDER SECTION 143(3) OF THE ACT WE FIND THAT ASSESSING OFFICER ACCEPTED THE COST OF 339 UNITS O F ELECTRONIC YARN CLEARERS AS REVENUE EXPENDITURE OBSERVING AS UNDER:- THE ELECTRONIC YARN CLEARER IS A SMALL COMPONENT WHICH MONITORS THE YARN AS IT PASSES THROUGH IT AND CLEAN S THE YARN OF IMPURITIES SO THAT THE YARN IS OF UNIFORM THICKN ESS AND QUALITY. IT CONSISTS OF SENSITIVE ELECTRONIC PARTS AND THE OUTER COVER IS MADE OF PLASTIC. THE YARN CLEARERS HAVE TO BE REPLACED OFTEN AS THEY HAVE A TENDENCY TO MALFUNCTI ON DUE TO CONSTANT USAGE. DURING THIS YEAR, THE ASSESSEE H AS PURCHASED 339 ELECTRONIC YARN CLEARERS, EACH COSTIN G ABOUT ` 3900/-. TAKING ALL THESE POINTS INTO CONSIDERATION, THE 6 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 ASSESSEES CLAIM THAT THIS IS A REVENUE EXPENDITURE IS ACCEPTED. THE ASSESSING OFFICER TREATED THE COST OF TWO COMBE R MACHINES AND ONE AUTO CONER AS CAPITAL EXPENDITURE AS AGAINST THE CLAIM OF THE ASSESSEE AS REVENUE EXPEND ITURE. THE ASSESSEE CARRIED THE MATTER TO THE COMMISSIONE R OF INCOME TAX (APPEALS) AND THE COMMISSIONER OF INCOME TAX (APPEALS) BY ORDER DATED 5.11.2004 ALLOWED THE CLA IM OF THE ASSESSEE HOLDING THAT COSTS OF COMBER MACHINES AND AUTO CONER ARE REVENUE EXPENDITURE. FURTHER APPEAL WAS PREFERRED BY THE REVENUE TO THE TRIBUNAL AND THE TR IBUNAL BY ORDER DATED 17.12.2006 IN ITA NO.425/MDS/2005 UPHE LD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSED THE APPEALS OF THE REVENUE. THE DEPARTME NT SEEMS TO HAVE CARRIED THE MATTER FURTHER TO HIGH CO URT AND SUPREME COURT AND THE HONBLE SUPREME COURT REMITTE D THE APPEAL BACK TO THE FILE OF THE COMMISSIONER OF INCO ME TAX (APPEALS) WITH THE DIRECTION TO DISPOSE OFF THE MAT TER IN ACCORDANCE WITH LAW AND IN TERMS OF DIRECTIONS GIVE N IN THE CASE OF CIT VS.RAMARAJU SURGICAL COTTON MILLS (SUPR A). PURSUANT TO THE DIRECTIONS OF THE HONBLE SUPREME C OURT AND 7 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE, THE COMMISSIONER OF INCOME TAX (APPEALS) ADJUDICATED TH E ISSUE THAT COST OF TWO COMBER MACHINES AND ONE AUTO CONER AS CAPITAL EXPENDITURE PLACING RELIANCE ON THE DECISIO N OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MANGAYARKARASI MILLS P. LTD. (315 ITR 114) (SC). T HE COMMISSIONER OF INCOME TAX (APPEALS) ALSO ADJUDICAT ED THAT COST OF 339 UNITS OF YARN CLEARERS IS ALSO CAPITAL EXPENDITURE. THE COMMISSIONER OF INCOME TAX (APPEALS) PROBABLY B Y OVERLOOKING THE FACT THAT THE ISSUE TO BE DECIDED P URSUANT TO THE DIRECTION OF THE HONBLE SUPREME COURT IS ONLY THE DISALLOWANCE OF THE COST OF TWO COMBER MACHINES AND ONE AUTO CONER, PROCEEDED TO ADJUDICATE THAT EVEN THE C OST OF 339 UNITS OF YARN CLEARERS IS CAPITAL EXPENDITURE, EVEN THOUGH THE SAID ISSUE WAS NOT BEFORE THE HONBLE SUPREME COURT . SINCE THE ISSUE IS NOT ARISING OUT OF THE ORDERS OF ANY O F THE LOWER AUTHORITIES ORIGINALLY IS DECIDED BY THE COMMISSIO NER OF INCOME TAX (APPEALS) WHICH IS NOT ONLY CORRECT BUT ALSO BEYOND HIS JURISDICTION. IT IS A MISTAKE APPARENT FROM RECORD ALSO. THUS WE MODIFY THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) RESTRICTING THE DISALLOWANCE ONLY TO 8 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 COST OF TWO COMBER MACHINES AND ONE AUTO CONER. GRO UND NO.(II) RAISED BY THE ASSESSEE IS ALLOWED. 8. SINCE COMMISSIONER OF INCOME TAX (APPEALS) HAS N O JURISDICTION TO DECIDE THE ISSUE WHICH IS NOT BEFO RE THE LOWER AUTHORITIES AT ANY STAGE ORIGINALLY, HE COULD HAVE RECTIFIED HIS ORDER ON THE APPLICATION FILED BY THE ASSESSEE. TH E ASSESSEE PREFERRED AN APPEAL AGAINST THE ORDER OF THE COMMIS SIONER OF INCOME TAX (APPEALS) IN REJECTING THE PETITION FILE D UNDER SECTION 154 OF THE ACT. IN VIEW OF OUR ABOVE FINDI NGS, WE ALLOW THE APPEAL OF THE ASSESSEE FILED AGAINST THE ORDER UNDER SECTION 154 OF THE COMMISSIONER OF INCOME TAX (APPE ALS). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA NO. 1354 IS PARTLY ALLOWED AND THAT OF THE APPEAL IN ITA NO.239 9 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, TH E 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 9 ITA NOS.1354/MDS/2013 & 2399/MDS/2014 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .