Dy. CIT, Cir-9, Pune, Pune V. Kirloskar Ferrous Industries Ltd., Pune

ITA 304/PUN/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7645 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-01-2011
• Assessment Year: 2002-2003
• Appeal Filed On: 22-02-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K TIWARI
• Keywords: Capital asset; Revenue expenditure
• Section: 143(3); 260A

Judgement Text

PIN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO. 304/PN/07 (ASSTT YEAR: 2002-03) DY. COMMISSIONER OF INCOME-TAX, CIR.9, PUNE APPELLANT VS. KIRLOSKAR FERROUS INDUSTRIES LTD., RESPONDENT L.K. ROAD, KHADKI, PUNE PAN AAACK7297E APPELLANT BY : SHRI K.K. TIWARI (CIT) RESPONDENT BY : SHRI C.H. NANIWADEKAR ORDER PER G.S. PANNU, A.M: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III, PUNE DATE D 8.11.2006 WHICH, IN TURN, HAS ARISEN FROM AN ORDER DATED 18.3.2005 P ASSED BY THE ASSESSING OFFICER UNDER SEC. 143(3) OF THE INCOME-T AX ACT, 1961 (IN SHORT THE ACT) PERTAINING TO THE ASSESSMENT YEAR 2002-03. 2. THE SOLITARY GROUND RAISED BY THE REVENUE IN THI S APPEAL READS AS FOLLOWS: ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, HE LD CIT(A) ERRED IN DELETING THE PARTIAL ADDITION OF RS 2,02,85,039/- M ADE BY THE AO PERTAINING TO RELINING EXPENSES OF BLAST FURNACE, BY TREATING THE FULL AMOUNT AS REVENUE EXPENDITURE OF THE YEAR. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT SIMILAR ISSUE HAD COME UP FOR CONSIDERATION BEFORE THE TRIBUNAL I N ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2001-02, AND THE TRIBUNAL VIDE ORDER DATED 22.6.2009 IN ITA NO 303/PN/07 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE BY UPHOLDING THE VIEW OF THE COMMISSIONER OF INCOME -TAX (APPEALS) THAT SINCE THE EXPENDITURE IS NECESSARILY IN THE NATURE OF REPAIRS, THE SAME IS ITA 304/PN/07 KIRLOSKAR FERROUS INDS. LTD. PUNE 2 ALLOWABLE AS REVENUE EXPENDITURE. THE LEARNED COUNS EL FOR THE ASSESSEE, THEREFORE, PLEADED THAT FOLLOWING THE PRE CEDENT, THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) BE AFFIRME D. 4. THE LEARNED DEPARTMENTAL REPRESENTATIVE, APPEARI NG FOR THE REVENUE, HAS NOT CONTROVERTED THE FACTUAL MATRIX TH AT SIMILAR ISSUE HAS BEEN DEALT WITH BY THE TRIBUNAL INASSESSEES OWN CA SE OR ASSESSMENT YEAR 2001-02 (SUPRA). SO, HOWEVER, ACCORDING TO THE LEARNED DEPARTMENTAL REPRESENTATIVE, THE ISSUE IS LIABLE TO BE CONSIDERED IN THE LIGHT OF THE JUDGMENT OF THE HONBLE BOMBAY HIGH CO URT IN THE CASE OF TAPARIA TOOLS LTD V JT. CIT 260 ITR 102 (BOM). IT I S CONTENDED THAT THE EXPENDITURE ON REPAIRS RESULTS IN A BENEFIT FOR MOR E THAN ONE YEAR AND, THEREFORE, THE EXPENDITURE OUGHT TO BE WRITTEN OFF AS A DEFERRED REVENUE EXPENDITURE OVER A PERIOD OF THREE YEARS INSTEAD OF THE SAME BEING ALLOWED AS REVENUE EXPENDITURE IN ENTIRETY IN THE I NITIAL YEAR. IN THIS CONTEXT, WE HAVE PERUSED THE JUDGMENT OF THE HONBL E BOMBAY HIGH COURT IN THE CASE OF TAPARIA TOOLS LTD. V. JT. CI T (SUPRA). IN THAT CASE, THE ISSUE RELATED TO ALLOWABILITY OF UP-FRONT ONE T IME PAYMENT OF INTEREST ON DEBENTURES. IT HAS BEEN HELD THAT SUCH EXPENDITU RE WAS A DEFERRED REVENUE EXPENDITURE ON THE MATCHING CONCEPT, BECAUS E ASSESSEE CREATED AN ASSET FOR A PERIOD OF FIVE YEARS ON THE BASIS OF INTEREST PAID ON ALLOTMENT OF DEBENTURES, AND, THEREFORE, SUCH EX PENDITURE WAS TO BE WRITTEN-OFF OVER THE PERIOD OF DEBENTURES, I.E. FIV E YEARS. AS PER THE HONBLE HIGH COURT, THERE WAS A CONTINUING BENEFIT TO THE BUSINESS OF ASSESSEE SPREAD OVER THE ENTIRE PERIOD OF DEBENTURE S AND THE LIABILITY OF INTEREST ALSO WAS ATTRIBUTABLE TO SUCH PERIOD. IN O UR VIEW, THE INSTANT CASE STANDS ON A DIFFERENT FOOTING, INASMUCH AS THE LIABILITY TOWARDS INCURRENCE OF EXPENDITURE DOES NOT GET POSTPONED TO THE SUBSEQUENT PERIOD AS WAS THE CASE WITH INTEREST EXPENDITURE, S INCE THE EXPENDITURE ITA 304/PN/07 KIRLOSKAR FERROUS INDS. LTD. PUNE 3 ON REPAIRS HAS BEEN INCURRED IN THE YEAR UNDER CONS IDERATION. THOUGH THE REPAIRS IN QUESTION, WHICH HAVE BEEN MADE TO A CAPITAL ASSET, MAY NOT BE REQUIRED TO BE UNDERTAKEN FOR MORE THAN ONE YEAR, YET SUCH EXPENDITURE CANNOT BE STAGGERED OVER THE LIFE SPAN OF ASSET DUE TO THE PERIODICITY OF THE OCCURRING OF SUCH EXPENDITURE. M OREOVER, THE TRIBUNAL IN ASSESSEES OWN CASE HAS HELD THE SAME AS ALLOWAB LE EXPENDITURE IN THE YEAR OF ITS INCURRENCE AND IN ORDER TO MAINTAIN CONSISTENCY, WE FOLLOW THE PRECEDENT, AND AFFIRM THE ORDER OF THE COMMISSI ONER OF INCOME-TAX (APPEALS). WE MAY ALSO MENTION AN ASSERTION OF THE LEARNED COUNSEL FOR RESPONDENT TO THE EFFECT THAT THE REVENUE HAS ACCEP TED THE EARLIER ORDER OF THE TRIBUNAL DATED 22.6.2009 (SUPRA) BY NOT PREF ERRING AN APPEAL ON THIS POINT UNDER SECTION 260A OF THE ACT, AND SUCH AN ASSERTION HAS NOT BEEN CONTROVERTED BEFORE US. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D, AS ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 21ST DAY OF JA NUARY, 2011 . SD/- SD/- (I C SUDHIR) (G.S. PA NNU) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE, DATED: 21ST JANUARY, 2011 COPY TO:- 1) KIRLOSKAR FERROUS INDUSTRIES LTD, PUNE 2) THE DCIT, CIR.9, PUNE 3) THE CIT (A)-III, PUNE 4) THE CIT-V, PUNE 5) THE D R, B BENCH, ITAT, PUNE. BY ORDER TRUE COPY ASSTT.REGISTRAR,I.T. A.T., PUNE B