DCIT, New Delhi V. M/s Cement Corp. of India Ltd., New Delhi

ITA 2946/DEL/2013

• Counselvise Citation: 294620114 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 13-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR SUDHA KUMARI
• Assessee Lawyers: A K VARMA
• Keywords: Depreciation; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH B BB B : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND PRESIDENT AND PRESIDENT AND PRESIDENT AND SHRI SHRI SHRI SHRI H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU, JUDICIAL , JUDICIAL , JUDICIAL , JUDICIAL MEMBER MEMBER MEMBER MEMBER ITA NO ITA NO ITA NO ITA NO. .. .5399/DEL/2013 5399/DEL/2013 5399/DEL/2013 5399/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DEL NEW DEL NEW DEL NEW DELHI. HI.HI. HI. VS. VS. VS. VS. M/S CEMENT CORPORATION OF M/S CEMENT CORPORATION OF M/S CEMENT CORPORATION OF M/S CEMENT CORPORATION OF INDIA LIMITED, INDIA LIMITED, INDIA LIMITED, INDIA LIMITED, CORE CORE CORE CORE- -- -5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 7, LODHI ROAD, 7, LODHI ROAD, 7, LODHI ROAD, 7, LODHI ROAD, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 003. 110 003. 110 003. 110 003. PAN : AAACC0949B. PAN : AAACC0949B. PAN : AAACC0949B. PAN : AAACC0949B. (APPELLANT) (RESPONDENT) ITA NO ITA NO ITA NO ITA NOS.1985/DEL/2013 & 2946/DEL/2013 S.1985/DEL/2013 & 2946/DEL/2013 S.1985/DEL/2013 & 2946/DEL/2013 S.1985/DEL/2013 & 2946/DEL/2013 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEARS SS S : : : : 2007 2007 2007 2007- -- -08 & 2008 08 & 2008 08 & 2008 08 & 2008- -- -09 0909 09 DEPUTY DEPUTY DEPUTY DEPUTY COMMISSIONER OF COMMISSIONER OF COMMISSIONER OF COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), 3(1), 3(1), 3(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S CEMENT CORPORATION OF M/S CEMENT CORPORATION OF M/S CEMENT CORPORATION OF M/S CEMENT CORPORATION OF INDIA LIMITED, INDIA LIMITED, INDIA LIMITED, INDIA LIMITED, CORE CORE CORE CORE- -- -5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 7, LODHI ROAD, 7, LODHI ROAD, 7, LODHI ROAD, 7, LODHI ROAD, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 003. 110 003. 110 003. 110 003. PAN : AAACC0949B. PAN : AAACC0949B. PAN : AAACC0949B. PAN : AAACC0949B. (APPELLANT) (RESPONDENT) APPELLANT BY : DR. SUDHA KUMARI, CIT - D R. RESPONDENT BY : SHRI A.K. VARMA, CA. ORDER ORDER ORDER ORDER PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP PER G.D. AGRAWAL, VP : :: : THESE APPEALS BY THE REVENUE ARE DIRECTED AGAINST SEPARATE ORDERS OF LEARNED CIT(A), NEW DELHI DATED 3 RD JANUARY, 2013, 18 TH FEBRUARY, 2013 AND 29 TH JULY, 2013 FOR THE AY 2007-08, 2008-09 AND 2009-10 RESPECTIVELY. 2. THE REVENUE HAS RAISED COMMON GROUNDS OF APPEAL IN ALL THE THREE YEARS. ITA-5399/D/2013 & 2 OTHERS 2 3. GROUND NO.1 IS AGAINST THE DISALLOWANCE OF DEPRE CIATION ON PLANT AND MACHINERY IN ALL THE THREE YEARS AS UNDER:- ASSESSMENT YEAR AMOUNT 2007-08 `53,57,552/- 2008-09 `45,86,536/- 2009-10 `39,29,428/- 4. WE HAVE HEARD THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED RELEVANT MATERIAL PLACED BEFORE US. WE FIND THAT L EARNED CIT(A) ALLOWED THE RELIEF TO THE ASSESSEE FOLLOWING THE OR DER OF HIS PREDECESSOR FOR AY 2003-04 TO 2006-07 WHEREIN THE C IT(A) HAS HELD AS UNDER:- IN THE PRESENT CASE ALSO, ALTHOUGH THE PRODUCTION HAS NOT BEEN CARRIED OUT IN THE YEARS UNDER CONSIDERATI ON BUT THE ASSETS ARE KEPT AS A STAND BY FOR THE WHOLE YEAR. MOREOVER, ALTHOUGH THE PRODUCTION IS SUSPEND ED BUT THE OTHER ACTIVITIES OF THE UNITS ARE BEING CAR RIED OUT. IN SUCH CIRCUMSTANCES, I FIND THAT THE AO WAS NOT JUSTIFIED IN DISALLOWING THE DEPRECIATION ON THE AS SETS OF THESE UNITS. THE ADDITIONS MADE BY HIM ARE, THEREF ORE, DIRECTED TO BE DELETED. 5. IT WAS BROUGHT TO OUR KNOWLEDGE THAT IN AY 2003- 04 TO 2006-07, THE COMMITTEE ON DISPUTES DID NOT PERMIT THE REVENU E TO FILE APPEAL AGAINST THE ORDER OF LEARNED CIT(A) ON THE ABOVE GR OUND. THE ASSESSEE IS A GOVERNMENT OF INDIA UNDERTAKING AND THE HIGH P OWERED COMMITTEE FORMED BY THE GOVERNMENT I.E., COD DIRECTED THE CBD T TO ACCEPT THE ABOVE ORDER. WHEN THE ABOVE ORDER OF LEARNED CIT(A ) IS ACCEPTED BY THE GOVERNMENT FOR AY 2003-04 TO 2006-07, THERE WOU LD BE NO JUSTIFICATION TO INTERFERE WITH THE ORDER OF LEARNE D CIT(A) FOR AY 2007-08 TO 2009-10 WHEREIN HE HAS ONLY FOLLOWED THE ORDER O F HIS PREDECESSOR ITA-5399/D/2013 & 2 OTHERS 3 FOR AY 2003-04 TO 2006-07. IT WAS ALSO POINTED OUT BY THE LEARNED COUNSEL THAT NOW THE ISSUE IS SQUARELY COVERED BY T HE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. BHARAT ALUMUNIUM CO.LTD. 187 TAXMANN 111, WHEREIN THEIR LORDSHIPS HELD AS UNDER:- THOUGH AS PER SECTION 32(1), IN ORDER TO BE ENTITL ED TO CLAIM DEPRECIATION, ASSET IS TO BE OWNED BY ASSESSE ES AND IT IS ALSO TO BE USED FOR PURPOSE OF BUSINESS O R PROFESSION, BUT EXPRESSION USED FOR THE PURPOSE OF BUSINESS, WHEN APPLIED TO BLOCK OF ASSETS, WOULD M EAN USE OF BLOCK OF ASSETS AND NOT ANY SPECIFIC BUILDIN G, MACHINERY, PLANT OR FURNITURE IN SAID BLOCK OF ASSE TS AS INDIVIDUAL ASSETS LOSE THEIR IDENTITY AFTER BECOMIN G INSEPARABLE PART OF BLOCK OF ASSETS. 6. IT WAS POINTED OUT BY THE LEARNED COUNSEL THAT E VEN IF SOME OF THE UNITS OF THE ASSESSEE ARE CLOSED, OTHER UNITS A RE CERTAINLY WORKING AND THE DEPRECIATION IS TO BE ALLOWED ON THE ENTIRE BLOCK OF ASSETS OF THE PLANT & MACHINERY AND NOT ONLY INDIVIDUAL PLANT AND MACHINERY OF EACH UNIT OF THE ASSESSEE. IN OUR OPINION, THE ABO VE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WOULD BE SQUARELY APPLICABLE TO THE ASSESSEE OF THE ASSESSEE. WHEN SOME OF THE UNITS A RE CLOSED AND SOME OF THE UNITS ARE WORKING, THEN, THE DEPRECIATI ON ON THE ENTIRE BLOCK OF ASSETS WOULD BE ALLOWED. ACCORDINGLY, GRO UND NO.1 OF THE REVENUES APPEAL IS REJECTED. 7. GROUND NO.2 OF THE REVENUES APPEAL IN ALL THE T HREE YEARS IS AGAINST THE DELETION OF THE DISALLOWANCE OF QUARRY DEVELOPMENT EXPENSES IN EACH YEAR AS UNDER:- ASSESSMENT YEAR AMOUNT 2007-08 `1,79,88,000/- 2008-09 `2,13,95,000/- 2009-10 `1,69,19,000/- ITA-5399/D/2013 & 2 OTHERS 4 8. WE FIND THAT LEARNED CIT(A) ALLOWED THE RELIEF T O THE ASSESSEE WITH THE FOLLOWING FINDING:- I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT FINDINGS OF THE AO AND THE FACTS ON RECORD. PERUSA L OF THE FACTS ON RECORD SHOW THAT EXPENDITURE ON QUARRY DEVELOPMENT WAS CLAIMED AS REVENUE IN THE EARLIER Y EAR AND HAD BEING ALLOWED AS REVENUE. DURING THE YEAR THE APPELLANT HAS CLAIMED QUARRY DEVELOPMENT EXPENSES O F RS.1,79,88,000/-. THE ONLY CONTENTION OF THE AO IS THAT THE EXPENSES WERE CAPITAL IN NATURE AND WERE THEREF ORE BEING DISALLOWED. THE AO HAS NOT BROUGHT ANY FACTS ON RECORD OR EVIDENCES TO SHOW AS TO HOW THE EXPENSES WERE CAPITAL IN NATURE. THE EXPRESSION CAPITAL EXPENDITURE DENOTES PERMANENCY AND CAPITAL EXPENDITURE THEREFORE MEANS AN EXPENDITURE WHICH HAD BEEN INCURRED FOR CREATION OF AN ASSET WHICH HAS AN ELEMENT OF PERMANENCY. CAPIT AL EXPENDITURE WILL ALSO INCLUDED AN EXPENDITURE WHICH RESULTS IN ENDURING BENEFIT. THE HON'BLE SUPREME C OURT IN THE CASE OF ALEMBIC CHEMICALS WORKS CO.LTD. V. C IT, GUJARAT [1989] 177 ITR 377, HAS HELD THAT THERE IS NO SINGLE DEFINITIVE CRITERION WHICH BY ITSELF, IS DETERMINATIVE AS TO WHETHER A PARTICULAR OUTLAY IS CAPITAL OR REVENUE. THE ONCE FOR ALL PAYMENT TES T IS ALSO INCONCLUSIVE. WHAT IS RELEVANT IS THE PURPOSE OF THE OUTLAY AND ITS INTENDED OBJECT AND EFFECT, CONSIDER ED IN A COMMON SENSE WAY HAVING REGARD TO THE BUSINESS REALITIES. THE HON'BLE SUPREME COURT IN THE CASE OF CIT V. ASSOCIATED CEMENT COMPANY LTD. (1988) 172 ITR 257 (SC) HAS HELD AS UNDER:- ..NATURE OF THE ADVANTAGE IN A COMMERCIAL SENSE A ND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FI ELD THAT THE EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICA TION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FACILITATING THE ASSESSEES TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEES BUSINESS TO BE CARRIED ON MORE EFFECTIVE LY OR MORE PROFITABLY WHILE LEAVING THE FIXED CAPITAL ITA-5399/D/2013 & 2 OTHERS 5 UNTOUCHED, THE EXPENDITURE WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR A N INDEFINITE FUTURE. SIMILARLY IN THE CASE OF EMPIRE JUTE CO.LTD. V. CIT , (1980) 124 ITR 1 (SC) IT HAS BEEN HELD AS UNDER:- THERE MAY BE CASES WHERE EXPENDITURE, EVEN IF INCURRED FOR OBTAINING ADVANTAGE, OF ENDURING BENEF IT, MAY, NONE-THE-LESS, BE ON REVENUE ACCOUNT AND THE T EST OF ENDURING BENEFIT MAY BREAK DOWN. IT IS NOT EVER Y ADVANTAGE OF ENDURING NATURE ACQUIRED BY AN ASSESSE ES THAT BRINGS THE CASE WITHIN THE PRINCIPLE LAID DOWN IN THIS TEST. WHAT IS MATERIAL TO CONSIDER IS THE NAT URE OF THE ADVANTAGE IN A COMMERCIAL SENSE AND IT IS ONLY WHERE THE ADVANTAGE IS IN THE CAPITAL FIELD THAT TH E EXPENDITURE WOULD BE DISALLOWABLE ON AN APPLICATION OF THIS TEST. IF THE ADVANTAGE CONSISTS MERELY IN FAC ILITATING THE ASSESSEES TRADING OPERATIONS OR ENABLING THE MANAGEMENT AND CONDUCT OF THE ASSESSEES BUSINESS T O BE CARRIED ON MORE EFFICIENTLY OR MORE PROFITABLY W HILE LEAVING THE FIXED CAPITAL UNTOUCHED, THE EXPENDITUR E WOULD BE ON REVENUE ACCOUNT, EVEN THOUGH THE ADVANTAGE MAY ENDURE FOR AN INDEFINITE FUTURE. IN THE INSTANT CASE, THE DETAILS OF EXPENDITURE SHO W THAT THE EXPENSES HAVE NOT RESULTED IN CREATION OF ANY A SSET NOR HAVE THEY RESULTED IN ANY ENDURING BENEFIT TO T HE APPELLANT. THE EXPENSES ARE CLEARLY IN THE NATURE OF EXPENSES INCURRED FOR CARRYING ON THE BUSINESS OF T HE APPELLANT. THE AO HAS NOT BROUGHT ANY FACTS ON REC ORD TO SHOW AS TO WHICH EXPENSES DEBITED UNDER THE HEAD QUARRY DEVELOPMENT EXPENSES WERE CAPITAL IN NATURE. THE EXPENSES ARE IN THE NATURE OF SALARIES , WAGES, FUEL, POWER, RENT ETC. WHICH CANNOT BE SAID TO BE IN THE NATURE OF CAPITAL EXPENDITURE. THE EXPENDITURE HAS BEEN INCURRED ON REMOVAL OF OVER BURDEN AT THE SITE OF LIME STONE DEPOSITS. THE EXPENDITURE HAS BEEN INCU RRED FOR REMOVING THE SOIL, STONES ETC IN ORDER TO REACH THE DEPOSITS OF CEMENT GRADE LIME STONES. THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS. KATRAS J HARIA COAL CO.LTD. 118 ITR 6 (CAL) HAS HELD THAT EXPENSES FOR REMOVAL OF OVER BURDEN WERE NOT FOR ACQUIRING ANY R IGHT OF PROPERTIES AND WILL ALSO NOT RESULT IN ANY ENDUR ING BENEFIT AND THEREFORE WERE REVENUE IN NATURE. IN V IEW OF THE FINDINGS ABOVE AND IN VIEW OF THE JUDICIAL ITA-5399/D/2013 & 2 OTHERS 6 DECISIONS DISCUSSED ABOVE THE DISALLOWANCE MADE BY THE AO IS DELETED. THESE GROUNDS OF APPEAL ARE ALLOWED. 9. AFTER CONSIDERING THE FACTS OF THE CASE AND THE ARGUMENTS OF BOTH THE SIDES, WE DO NOT FIND ANY INFIRMITY IN THE ABOV E ORDER OF LEARNED CIT(A). ADMITTEDLY, BY REMOVING THE OVERBURDEN OF THE MINES, THE ASSESSEE HAS NOT ACQUIRED ANY ASSET. IT WAS ALSO E XPLAINED THAT REMOVAL OF THE SOIL, STONES ETC. IN ORDER TO REACH THE DEPOSITS OF CEMENT GRADE LIME STONES IS A CONTINUOUS PROCESS AND THE E XPENDITURE IS REQUIRED TO BE INCURRED YEAR AFTER YEAR. IT WAS AL SO EXPLAINED THAT IN THE EARLIER YEAR, SUCH EXPENDITURE WAS ALWAYS ALLOW ED. WHILE ALLOWING THE RELIEF, THE CIT(A) HAS RELIED UPON THE THREE DE CISIONS OF HONBLE APEX COURT, VIZ., IN THE CASE OF ALEMBIC CHEMICALS WORKS CO.LTD. VS. CIT, GUJARAT [1989] 177 ITR 377, CIT VS. ASSOCIAT ED CEMENT COMPANY LTD. [1988] 172 ITR 257 AND EMPIRE JUTE CO.LTD. V S. CIT [1980] 124 ITR 1. WE ARE OF THE OPINION THAT RELYING UPON THE RATIO OF ALL THE ABOVE THREE DECISIONS OF HONBLE APEX COURT AND CONSIDERI NG THE FACTS OF THE CASE, LEARNED CIT(A) RIGHTLY HELD THAT THE QUARRY D EVELOPMENT EXPENSES NEED TO BE ALLOWED AS A REVENUE EXPENDITUR E. WE, THEREFORE, UPHOLD HIS ORDER WITH REGARD TO GROUND NO.2 ALSO. 10. IN THE RESULT, ALL THE APPEALS OF THE REVENUE A RE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2014. SD/- SD/- ( (( ( H.S. SIDHU H.S. SIDHU H.S. SIDHU H.S. SIDHU ) )) ) (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL (G.D. AGRAWAL ) )) ) JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 30.09.2014 VK. ITA-5399/D/2013 & 2 OTHERS 7 COPY FORWARDED TO: - 1. APPELLANT : DEPUTY COMMISSIONER OF INCOME TA X, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -3(1), NEW DELHI. 3(1), NEW DELHI. 3(1), NEW DELHI. 3(1), NEW DELHI. 2. RESPONDENT : M/S M/S M/S M/S CEMENT CORPORATION OF INDIA LIMITED, CEMENT CORPORATION OF INDIA LIMITED, CEMENT CORPORATION OF INDIA LIMITED, CEMENT CORPORATION OF INDIA LIMITED, CORE CORE CORE CORE- -- -5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 5, SCOPE COMPLEX, 7, LODHI ROAD, NEW DELHI 7, LODHI ROAD, NEW DELHI 7, LODHI ROAD, NEW DELHI 7, LODHI ROAD, NEW DELHI 110 003. 110 003. 110 003. 110 003. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR