Lipi Specific Family Trust, Ahmedabad V. The ACIT,Circle-6, Ahmedabad

ITA 323/AHD/2012

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9178 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 08-02-2017
• Assessment Year: 2005-2006
• Appeal Filed On: 03-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Additional evidence; Revenue expenditure; Capital expenditure
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH AHMEDABAD BEFORE SHRI N. K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO. 1380/AHD/2011 WI TH C.O. NO.138/AHD/2011 (ASSESSMENT YEAR: 2006-2007) ASSTT.CIT / DCIT, CIRCLE-6, AHMEDABAD APPELLANT VS. LIPI SPECIFIC FAMILY TRUST, PLOT NO.2, PHASE-I, GIDC, VATVA, AHMEDABAD RESPONDENT / CROSS OBJECTOR & ITA NOS. 323/AHD/201 2 & 1140/AHD/2013 (ASSESSMENT YEAR: 2005-06 & 2009-10) LIPI SPECIFIC FAMILY TRUST, PROP. NANDISHWARI PACKAGING PLOT NO.2, PHASE-I, GIDC, VATVA, AHMEDABAD -382445 APPELLANT VS. ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-6, AHMEDABAD R ESPONDENT PAN: AAATL1302N /BY REVENUE : SHRI PRASOON KABRA, SR. D.R. /BY ASSESSEE : SHRI S. N. SOPARKAR & SHRI HIMANSHU SHAH, A.R. ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 2 - /DATE OF HEARING : 08.02.2017 /DATE OF PRONOUNCEMENT : 15.02.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS BATCH OF FOUR CASES PERTAINS TO ASSESSMENT YEA RS 2005-06, 2006-07 & 2009-10 AGAINST THE CIT(A)-XI, AHMEDABADS SEPARA TE ORDERS DATED 04.01.2012, 14.03.2011 & 28.03.2013; IN APPEAL NO. CIT(A)-XI/365/10-11, CIT(A)-XI/749/08-09 & CIT(A)-XI/247/ACIT.CIR-6/11-1 2, IN PROCEEDINGS U/S.143(3) R.W.S. 147, SECTION 144 AND U/S. 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT; RESPECTIVELY. WE PROCEED ASSESSMENT YEAR-WISE FOR THE SAKE OF CO NVENIENCE AND BREVITY. ASSESSMENT YEAR 2005-06 (ASSESSEES APPEAL ITA NO.323/AHD/2012) 2. THIS ASSESSEES APPEAL RAISES TWO SUBSTANTIVE GR OUNDS. FIRST ONE CHALLENGES VALIDITY OF REOPENING TAKEN RECOURSE TO BY THE ASSESSING AUTHORITY AND UPHELD THE LOWER APPELLATE PROCEEDINGS. SHRI S OPARKAR STATES VERY FAIRLY AT THE OUTSET ITSELF THAT THE ASSESSEE DOES NOT WIS H TO PRESS FOR THIS LEGAL GROUND. WE REJECT THE SAME AS NOT PRESSED AT THIS STAGE. 3. THE ASSESSEES LATTER SUBSTANTIVE GROUND CHALLEN GES CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DECLINING ITS DEDUCTI ON CLAIM OF RS.37,65,479/- RAISED U/S.80IB OF THE ACT. THERE IS NO ISSUE THAT IT HAS ALREADY BEEN HELD ENTITLED FOR THE VERY RELIEF IN PRECEDING AND SUCCE EDING ASSESSMENT YEARS. THE ASSESSING OFFICER REOPENED A REGULAR ASSESSMEN T FRAMED IN THE INSTANT CASE SOLELY FOR THE REASON THAT ITS COST OF PLANT A ND MACHINERY USED IN BUSINESS ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 3 - WAS CERTIFIED TO BE OF RS.92,92,711/- (WDV) AS PER FORM 10CCB/3CD. HE THUS SOUGHT TO TREAT IT AS A NON SMALL SCALE INDUST RIAL UNDERTAKING ON THE GROUND THAT ITS CORRESPONDING INVESTMENTS EXCEEDED THRESHOLD LIMIT OF RS.60LACS. HE PROCEEDED ON THE SAME REASONING IN T HE IMPUGNED RE- ASSESSMENT AS WELL RESULTING IN THE DISALLOWANCE IN QUESTION. 4. THE CIT(A) UPHOLDS ASSESSING OFFICERS ACTION AS FOLLOWS: 4.2 HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSION S. I HAVE ALSO PERUSED THE SUBMISSIONS MADE BY THE LD. A.R. SINCE DEDUCTION U/ S. 80IB HAS BEEN DISALLOWED BY THE LD. A.O., IT WILL BE PERTINENT TO CONSIDER T HE PROVISIONS OF SECTION 80IB. THE PROVISIONS OF SECTION 80IB (1) ARE REPRODUCED AS UN DER: 'WHERE THE GROSS TOTAL INCOME OF AN ASSESSEE INCLUD ES ANY PROFITS ARID GAINS DERIVED FROM ANY BUSINESS REFERRED TO IN SUB- SECTIONS (3) TO (SUCH BUSINESS BEING HEREINAFTER REFERRED TO AS THE ELIGI BLE BUSINESS), THERE SHALL, IN ACCORDANCE WITH AND SUBJECT TO THE PROVISIONS OF THIS SECTION, BE ALLOWED, IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE, A DE DUCTION FROM SUCH PROFITS AND GAINS OF AN AMOUNT EQUAL TO SUCH PERCENTAGE AND FOR SUCH NUMBER OF ASSESSMENT YEARS AS SPECIFIED IN THIS SECTION' UNAMBIGUOUS READING OF THIS SECTION REVEALS THAT EL IGIBLE BUSINESS HAS BEEN DEFINED IN SUB-SECTION 3 TO 11, 11(A) AND 11(B) OF SECTION 80IB. THUS, TO CLAIM DEDUCTION U/S. 80IB, THE APPELLANT HAS TO FULFILL C ONDITIONS LAID DOWN IN SUB-SECTION 3 TO 11, 11 (A) AND 11(B) OF THIS SECTION. THE ALLO WANCE DEDUCTION U/S. 80IB HAS TO BE ADJUDICATED KEEPING THESE FACTS IN VIEW. AS PER EXPRESS PROVISIONS OF SUB-CLAUSE (I) OF SUB-SECTION 3 TO SECTION 80IB, ELIGIBLE BUSI NESS FOR CLAIMING DEDUCTION U/S. 80IB HAS TO BEGIN MANUFACTURE OR PRODUCE ARTICLE OR THING DURING THE PERIOD BEGINNING FROM 1 ST DAY OF APRIL, 1991 AND ENDING ON 31 ST DAY OF MARCH, 1995. THE APPELLANT BEING AN INDUSTRIAL UNDERTAKING HAS TO FU LFILL THESE CONDITIONS FOR CLAIMING DEDUCTION U/S. 80IB. IT IS CLEARLY MENTION ED BY THE LD. A.O. THAT THE APPELLANT HAS STARTED MANUFACTURING IN DECEMBER, 19 96. THE APPELLANT COULD NOT CONTROVERT THIS FINDING DURING THE APPELLATE PROCEE DINGS. SINCE, THE APPELLANT HAS STARTED MANUFACTURING OF ARTICLE OR THINGS BEYOND 3 1-3-1995, ACCORDINGLY, IN MY CONSIDERED VIEW, THE APPELLANT IS NOT ENTITLED TO D EDUCTION U/S. 80IB AS PER THE PROVISIONS OF SUB-CLAUSE (I) TO SUB-SECTION 3 OF SE CTION 801B. IN SUB-CLAUSE (II) OF SUB-SECTION 3 OF SECTION 80IB, THERE IS EXCEPTION F OR SMALL SCALE INDUSTRIAL UNDERTAKING. HOWEVER, IT IS NOT THE EASE OF THE APP ELLANT THAT THE APPELLANT IS SMALL SCALE UNDERTAKING. 4.3 DURING THE APPELLATE PROCEEDINGS, THE APPELLANT HAS PLACED LOT OF EMPHASIS ON THE PROVISIONS OF SUB-SECTION 2 TO SECTION 80IB. IN MY CONSIDERED VIEW, PROVISIONS OF SUB-SECTION 2 TO SECTION 801B DEFINE THE UNDERTAKING WHICH QUALIFY FOR THE DEDUCTION U/S 80IB. HOWEVER, FOR MAKING AN ELIGIBLE CLAIM FOR DEDUCTION U/S. 80IB, ONE HAS TO FULFILL CONDITIONS LAID DOWN IN SUB-SECTION 3 TO 11, 11(A) AND 11(B) OF SECTION 80IB. THE APPELLANT DOES NOT FULF ILL THE CONDITIONS LAID DOWN IN ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 4 - SUB-SECTION 3 TO SECTION 80IB AND ACCORDINGLY, IT I S NOT ELIGIBLE TO CLAIM DEDUCTION U/S.80IB. IN VIEW OF ABOVE, DISALLOWANCE ON DEDUCT ION U/S.80IB OF RS.37,65,479/- IS CONFIRMED. THIS GROUND OF APPEAL IS DISMISSED. 5. HEARD BOTH SIDES. THE SOLE DISPUTE BETWEEN THE PARTIES IS AS TO WHETHER OR NOT THE ASSESSEE IS A SMALL INDUSTRIAL UNDERTAKI NG U/S.80IB(3) OF THE ACT IN VIEW OF THE FACT THAT COST OF ITS PLANT AND MACHINE RY FOR THE YEAR UNDER CONSIDERATION COMES TO RS.92,92,711/- IN EXCESS OF RS.60LACS. WE FIND FROM THE PAPER BOOK THAT SMALL SCALE INDUSTRIAL SCHEME C OMPRISED IN PAGES 23 TO 28 PRESCRIBE SUCH AN INVESTMENT LIMIT TO BE OF RS.60LA CS IN THE YEAR 1991 AS REVISED TO RS.300LACS IN DECEMBER 1997. WE ALSO NO TICE AT PAGE 14 OF THE PAPER BOOK THAT ASSESSEES CONCERN M/S. NANDESHWARI PACKAGING MANUFACTURING HDPE / P.P. BAGS AT VATVA HAS ALREADY BEEN TREATED AS A SMALL SCALE INDUSTRIAL UNDERTAKING BY THE DISTRICT INDUST RIES CENTRE, AHMEDABAD AUTHORITY. LEARNED DEPARTMENTAL REPRESENTATIVE FAI LS TO REBUT ALL THIS FACTUAL POSITION. WE THUS HOLD THAT THE ASSESSEES INDUSTR IAL UNDERTAKING IN QUESTION IS A SMALL SCALE INDUSTRY SO AS TO BE ELIGIBLE FOR SECTION 80IB DEDUCTION IN QUESTION. WE ACCEPT ASSESSEES INSTANT SUBSTANTIVE GROUND AND DIRECT THE ASSESSING OFFICER TO FRAME CONSEQUENTIAL ASSESSMENT DELETING THE IMPUGNED DISALLOWANCE. ITA NO.323/AHD/2012 PARTLY SUCCEEDS. ASSESSMENT YEAR 2006-07 (REVENUES APPEAL ITA NO. 1380/AHD/2011 + C.O. NO.138/AHD/2011) 6. THE REVENUES FIRST SUBSTANTIVE GROUND IN ITS AP PEAL ITA NO.1380/AHD/2011 PLEADS THAT THE CIT(A) HAS ERRED I N LAW AND ON FACTS IN DIRECTING THE ASSESSING OFFICER TO RESTRICT MANUFAC TURING AND ADMINISTRATIVE EXPENSES DISALLOWANCE OF RS.57,85,114/- TO THAT @1/ 10 TH OF TELEPHONE AND VEHICLE EXPENSES INSTEAD OF THE ENTIRE SUM IN QUEST ION. THE ASSESSEES SECOND GROUND IN ITS CROSS OBJECTION NO.138/AHD/2011 ALSO SEEKS TO DELETE THE REMAINING PORTION OF THE SAID DISALLOWANCE @10% AS WELL. BOTH THE LEARNED ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 5 - REPRESENTATIVES POINT OUT VERY FAIRLY THAT THE ASSE SSING OFFICER HAD COMPLETED A BEST JUDGMENT ASSESSMENT ON 22.12.2008 TO INVOKE THE ABOVE STATED DISALLOWANCE @25% OF ASSESSEES CORRESPONDING EXPEN SES OF RS.2,31,40,457/-. THEY POINT OUT THAT THE CIT(A) D ULY ASSOCIATED THE ASSESSING OFFICER IN REMAND PROCEEDINGS AFTER THE A SSESSEE SUBMITTED ITS ADDITIONAL EVIDENCE IN THE COURSE OF LOWER APPELLAT E PROCEEDINGS. AND THAT THE ASSESSING OFFICER SUBMITTED HIS REPORT AS PER P ARA 6.1 OF THE LOWER APPELLATE ORDER SEEKING TO CONFIRM AT LEAST 3% OF T HE DISALLOWANCE FIGURE HEREINABOVE. THIS MADE THE CIT(A) TO RESTRICT THE IMPUGNED DISALLOWANCE TO 10% OF THE TELEPHONE AND VEHICLE EXPENSES ONLY AS P ER HIS ORDER IN ASSESSMENT YEAR 2005-06. BOTH THE LEARNED REPRESEN TATIVES THUS INDICATE THAT THE SAID FINDINGS ON THE VERY ISSUE IN PRECEDING AS SESSMENT YEAR HAVE ATTAINED FINALITY FOR WANT OF CHALLENGE. WE APPRECIATE THIS FAIR STAND TO CONFIRM THE LD. CIT(A)S ACTION UNDER CHALLENGE IN THE INSTANT GROU ND RAISED AT REVENUES AND ASSESSEES BEHEST. 7. THE REVENUES LATTER SUBSTANTIVE GROUND AVERS TH AT THE CIT(A) HAS ERRED IN DELETING UNEXPLAINED UNSECURED LOAN ADDITI ON OF RS.25LACS OBTAINED FROM SHRI SEVANTIBHAI KANJIBHAI PATEL. WE NOTICE H EREIN AS WELL THAT THE ASSESSING OFFICERS REMAND REPORT IN PARA 7.1 AT PA GE 6 OF THE LOWER APPELLATE ORDER ACCEPTED ASSESSEES EVIDENCE IN THE NATURE OF ABOVE CREDITORS CONFIRMATION ALONGWITH PAN DETAILS. HE HIMSELF ACC EPTS THE SAID LOAN TRANSACTION TO BE A GENUINE ONE. WE THUS CONCLUDE THAT THE CIT(A) HAS RIGHTLY DELETED THE IMPUGNED ADDITION OF RS.25LACS IN THE NATURE OF UNEXPLAINED UNSECURED LOANS. THE REVENUES INSTANT LATTER SUBSTANTIVE GROUND AS WELL AS ITS MAIN APPEAL ITA NO.1380/AHD/2 011 IS DECLINED. 8. WE NOW PROCEED TO DEAL WITH ASSESSEES REMAINING GROUNDS IN ITS CROSS OBJECTION. ITS FIRST SUBSTANTIVE GROUND PLEADS THA T BOTH THE LOWER AUTHORITIES HAVE ERRED IN DISALLOWING 10% OF MISCELLANEOUS EXPE NSES COMING TO ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 6 - RS.13,705/-. LEARNED COUNSEL STATE HEREIN AS WELL THAT THE CIT(A) HAS FOLLOWED HIS ACTION AS IN THE PRECEDING ASSESSMENT YEAR TO ARRIVE AT THE IMPUGNED DISALLOWANCE @10% IN IDENTICAL SET OF CIRC UMSTANCES. THE SAME IS ALSO STATED TO HAVE BECOME FINAL IN THE EARLIER ASS ESSMENT YEAR. WE THUS FIND NO REASON TO ADOPT A DIFFERENT APPROACH IN THE IMPU GNED ASSESSMENT YEAR. THIS GROUND IS ACCORDINGLY REJECTED. 9. THE ASSESSEES LAST SUBSTANTIVE GROUND ASSAILS C ORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION IN DISALLOWING DEDUCTION CLAIM OF RS.38,50,685/- RAISED U/S.80IB OF THE ACT. THERE IS NO DISPUTE TH AT LD. CIT(A) HAS UPHELD THE IMPUGNED DISALLOWANCE SOLELY ON THE GROUND THAT THE ASSESSEE FILED ITS AUDIT REPORT/FORM 10CCB IN COURSE OF THE LOWER APPELLATE PROCEEDINGS THAN THAT WITH ITS RETURN. HE FOLLOWS HONBLE PUNJAB & HARYA NA HIGH COURTS DECISION IN CIT VS. JAIDEEP INDUSTRIES 180 ITR 81 (P&H) THAT THE SAME IS TO BE MANDATORILY FILED WITH THE RETURN OF INCOME. WE NO TICE THAT THE SAID HONBLE HIGH COURTS FULL BENCH DECISION IN (2002) 254 ITR 6 (P&H) CIT VS. PUNJAB FINANCIAL CORPORATION HAS OVERRULED ITS FORMER DECI SION HEREINABOVE TO CONCLUDE THAT SUCH AN AUDIT REPORT NEED NOT BE MAND ATORILY FILED WITH A RETURN OF INCOME. THERE IS ADMITTEDLY NO OTHER OBJECTION ON PART OF THE CIT(A) TO DECLINE THE IMPUGNED DEDUCTION CLAIM. WE ACCEPT AS SESSEES ARGUMENTS ACCORDINGLY TO DIRECT THE ASSESSING OFFICER TO DELE TE THE IMPUGNED DISALLOWANCE. ASSESSEES C.O. NO.138/AHD/2011 PART LY SUCCEEDS. ASSESSMENT YEAR 2009-10 (ASSESSEES APPEAL ITA NO.1140/AHD/2013) 10. THE ASSESSEES FORMER SUBSTANTIVE GROUND CHALLE NGES ACTION OF BOTH THE LOWER APPELLATE AUTHORITIES IN DISALLOWING ITS EXPE NDITURE OF CLAIM OF RS.23,42,000/- IN THE NATURE OF CONSUMPTION OF STOR ES AND SPARES TO BE CAPITAL ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 7 - IN NATURE. WE NOTICE AT THIS STAGE THAT THE LOWER APPELLATE ORDER ELABORATELY DISCUSSES ASSESSING OFFICERS FINDING AND ASSESSEE S SUBMISSIONS AS UNDER: 4. VIDE GROUND NO.3, THE APPELLANT HAS CHALLENGED DISALLOWANCE OF EXPENSES OF RS. 27,02,000/- DEBITED UNDER THE HEAD STORES AN D SPARES. THE A.O. HAS TREATED THESE EXPENSE AS CAPITAL EXPENSES AND ALLOWED DEPRE CIATION AS PER THE PROVISIONS OF I.T. ACT. THE A.O. DEALT WITH THIS DISALLOWANCE IN PARA-5 OF THE ASSESSMENT ORDER. THE A.O. MADE THIS DISALLOWANCE WITH THE FOL LOWING OBSERVATIONS :- '5. ADDITION ON CONSUMPTION OF STORES AND SPARES :- DURING THE YEAR THE ASSESSEE HAS CLAIMED 72,23,025/ - TOWARDS CONSUMPTION OF STORES / SPARES, THERE WAS SUBSTANTI AL INCREASE IN COST COMPARED TO EARLIER YEAR. UP ON VERIFICATION IT SEE N THAT ASSESSEE IS CLAIMING CERTAIN PLANT AND MACHINERY ITEMS UNDER CO NSUMPTION OF STORES EVEN THE BILLS ENCLOSED IN SUPPORT OF HIS CLAIM, AS SESSEE HAS SHOWN CERTAIN ITEMS OF PLANT AND MACHINERY .NATURE WHICH AREAS UN DER FROM THE DETAILED SUBMITTED BY THE ASSESSEE WITH REGARD TO COST OF CO NSUMABLE STORES. ASSESSEE HAS PRODUCED MAJOR FOUR BILLS AND SUMMARY OF BILLS, WHICH ARE AS UNDER: SR. NO. NAME OF THE SUPPLIERS NAME OF THE ITEMS / PLANT ASSESSABLE VALUE AS PER INVOICE TOTAL PRICE / VALUE INCLUDING EXCISES DUTY AND VAT 1 GUJARAT MACHINERY GROOVED SLEEVE 191000 217075 2 GUJARAT MACHINERY SCREW & BARREL 311000 373544 3 LOHIA STARLINGER LTD. CHEESE WINDER 1840000 2147435 4 MET LEE ENGINEERS M.S. PIPES 360000 420589 2702000 FROM THE ABOVE IT IS CLEAR OUT OF FOUR BILLS PRODUC ED THREE BILLS ARE IN THE NATURE OF PLANT AND MACHINERY. EVEN IF IT IS A SPAR E PART IT IS EMBEDDED TO A MACHINERY. REGARDING M.S. PIPES THEY ARE CONSUMABLE NATURE WHICH CAN BE STORED FOR UTILIZATION IN MANUFACTURING PROCESS. THUS, AFT ER EXCLUDING M.S. PIPES FROM THE ABOVE LIST THE OTHER THREE ITEMS ARE UTILIZED IN TH E MANUFACTURING PROCESS WHERE IN THE PART ARE SPARE OR PLANT OR MACHINERY WILL GIVE LONGEVITY MORE THAN ONE YEAR AND WITH THE UPKEEP AND MAINTENANCES OF THE SAID IT EMS OF SPARE WILL GENERATE AND INJURING BENEFIT TO THE ASSESSEE IN TERMS OF ITS UT ILIZATION IN THE BUSINESS THUS THE COST OF MACHINERY CLAIMED UNDER CONSUMPTION OF STOR ES/SPARES AMOUNTING TO ' 27,02,2000/-ARE TO BE CAPITALIZED AND THE ASSESSEE IS ENTITLED TO DEPRECIATION ON THE SAID ASSETS. THE ASSESSEE HAS ALREADY CLAIMED 6,27 ,767/- TOWARDS REPAIRS TO MACHINERY. THERE IS EVERY POSSIBILITY OF EXTENDED L IFE TO THE MACHINERY WHENEVER SPARES AND OTHER ITEMS WERE EMBEDDED WITH THE MACHI NERY. IT IS FURTHER STATED THAT RESPECTFULLY FOLLOWING THE SUPREME COURT DECISION I N THE CASE OF EMPIRE JUTE CORPORATION LTD. 124 ITR PAGE 1. THEREFORE, 27,02, 000/- FORMING PART OF EXPENSES UNDER HEAD CONSUMPTION OF STORES AND SPARES ARE EXC LUDED FROM THAT HEAD AND ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 8 - CONSIDERED FOR ADDITION TREATING IT AS CAPITAL IN N ATURE, WHILE DOING SO DEPRECIATION IS GRANTED ON THE ASSETS MENTIONED ABOVE. FROM THE ABOVE IT IS CLEAR THAT ASSESSEE IS USING A BOVE MACHINERY TOWARDS CONSUMPTION OF SPARES. SUCH MACHINERY WITH THAT VAL UE WILL DEFINITELY GIVE ENDURING BENEFIT TO THE ASSESSEE, AS THE LONGEVITY OF A SCREW OR BARREL EMBEDDED TO THE MACHINERY WILL CONTINUE AND PROLONG THE EXISTEN CE OF THE MACHINERY. THEREFORE THE TREATMENT OF ASSESSEE TOWARDS REVENUE IN RESPEC T OF CONSUMPTION OF STORES AND SPARES IS PATENTLY INADMISSIBLE AS THE USAGE OF THE ITEMS MENTIONED BY THE ASSESSEE ARE NOT FOR DISPOSABLE PURPOSE ACCORDINGLY CERTAIN AMOUNT INCURRED TOWARDS THE PURCHASE OF MACHINERY AND SPARES AS PER THE LIST FU RNISHED BY THE ASSESSEE HAS TO BE TREATED AS CAPITAL EXPENDITURE IN NATURE, AND TH E SAME WERE ACCORDINGLY CONSIDERED FOR THE GRANT OF DEPRECIATION TREATING I T AS PLANT AND MACHINERY AND THEY WERE USED IN THE MANUFACTURING PROCESS. ACCORD INGLY DEPRECATION IS GRANTED ACCORDING TO THE BASIC COST OF THE MACHINERY, AND O THER EXPENSES ARE ALLOWED AS REVENUE FOR THE PURPOSE OF ABOVE TREATMENT OF CAPIT AL NATURE. ACCORDINGLY AN AMOUNT OF 27,02,000/- CLAIMED UNDER CONSUMPTION OF SPARES AND STORES IS TREATED AS CAPITAL IN NATURE S AME IS ADDED TO THE TOTAL INCOME. {ADDITION OF 27,02,000/-}' 4.1 ON THIS ISSUE, APPELLANT VIDE ITS LETTER DAT ED 13.3.2013 SUBMITTED AS UNDER :- 'GROUND NO.3: ADDING EXPENSES ON CONSUMPTION OF STO RES AND SPARES OF RS.27.02,000/- AS CAPITAL IN NATURE. (A) VIDE DISCUSSION AT PARA 5 OF THE ASSESSMENT ORD ER, THE LD. ASSESSING OFFICER CONSIDERED CONSUMPTION OF STORES AND SPARES AS CAPITAL EXPENDITURE AND MADE DISALLOWANCE AMOUNTING TO RS.27,02,000/-. (B) THE LD. ASSESSING OFFICER HELD THAT ASSESSEE IS USING ABOVE MACHINERY TOWARDS CONSUMPTION OF SPARES. SUCH MACHI NERY WITH THAT VALUE WILL DEFINITELY GIVE ENDURING BENEFIT TO THE ASSESS EE, AS LONGEVITY OF A SCREW OR BARREL EMBEDDED TO THE MACHINERY WILL CONTINUE A ND PROLONG THE EXISTENCE OF THE MACHINERY. THE LD. ASSESSING OFFIC ER HAS RELIED ON THE JUDGEMENT OF HON'BLE SUPREME COURT IN CASE OF EMPIR E JUTE CORPORATION LTD 124ITR1. (C) THE CONTENTIONS RAISED BY THE LD. ASSESSING OFF ICER ARE WHOLLY ILLOGICAL, UNJUSTIFIABLE AND IMPROPER TO THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. THE APPELLANT INCURRED RS.72,23,0 25/- TOWARDS CONSUMPTION OF STORES AND SPARES. THE LD. ASSESSING OFFICER VIDE PARA 5 HELD PURCHASE OF M.S.PIPES RS.3,60,000/- TO BE REVE NUE EXPENDITURE. HOWEVER, WHILE CONSIDERING DISALLOWANCE, THE SAME W ERE TREATED AS CAPITAL EXPENDITURE. (D) EVEN OTHERWISE, THE SAID STORES AND SPARES WERE CONSUMED FOR SMOOTH FUNCTIONING OF PLANT & MACHINERY IN ORDINARY COURSE OF BUSINESS. NEITHER IT HAS RESULTED INTO BEING A NEW PLANT & MA CHINERY, NOR HAS ITS CONSUMPTION RESULTED INTO PROVIDING LONG TERM ENDUR ING BENEFIT TO THE APPELLANT. THESE ARE THE NORMAL REPAIRS AND REPLACE MENT OF THE PARTS. ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 9 - THESE ARE REVENUE EXPENDITURE. THE SAID EXPENSES WE RE INCURRED IN ORDINARY COURSE OF BUSINESS. IN THE CIRCUMSTANCES, MAY WE HUMBLY REQUEST YOUR HO NOUR TO DELETE THE SAID DISALLOWANCE OF RS.27,02,000/ 4.2 I HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIO NS. IT IS SEEN THAT THE A.O. HAS TREATED EXPENSES INCURRED TOWARDS GROOVED SLEEV E, SCREW & BARREL, CHEESE WINDER OF RS. 23,42,000/- AS CAPITAL IN NATURE. THE A.O. WAS OF THE OPINION THAT BY INCURRING THESE EXPENSES THE APPELLANT HAD DERIVED BENEFITS OF ENDURING NATURE AS THE LIFE OF PLANT & MACHINERY IS ENHANCED. SECONDLY , THE A.O. OBSERVED THAT BENEFIT OF THESE MAJOR REPAIRS AND MAINTENANCE WILL BE ENJO YED BY THE APPELLANT FOR MANY YEARS. ON THE OTHER HAND THE APPELLANT CONTENDED TH AT THESE ARE NORMAL REPAIR AND MAINTENANCE EXPENSES. HOWEVER, THE APPELLANT HAS FA ILED TO FILE COGENT EVIDENCES TO PROVE THAT BY INCURRING THESE EXPENSES, ENDURING BENEFITS HAS NOT ACCRUED TO IT. THE APPELLANT HAS MADE A VERY GENERAL SUBMISSION WH ICH CANNOT BE BELIEVED IN THE ABSENCE OF DOCUMENTARY EVIDENCES. IT CANNOT BE BELI EVED THAT EVERY EXPENSE DEBITED UNDER THE HEAD STORES AND SPARES IS A REVEN UE EXPENDITURE. THE DESCRIPTION OF THESE EXPENSES INDICATE THAT THESE ARE APPARENTL Y FULL-FLEDGED MACHINES. FOR EXAMPLE CHEESE WINDER COSTING RS. 18,40,0007-IS APP ARENTLY A NEW MACHINE AS THE APPELLANT HAS FAILED TO FILE DOCUMENTARY EVIDEN CES TO PROVE THAT IT FORMS PART OF SOME BIGGER MACHINE. SINCE THE APPELLANT HAS FAILE D TO CONTROVERT THE FINDINGS OF THE A.O., ACCORDINGLY, I AM INCLINED TO AGREE WITH THE CONTENTIONS OF THE LD. A.O. ACCORDINGLY, DISALLOWANCE TO THE EXTENT OF RS.23,42 ,000/- IS CONFIRMED. 11. HEARD BOTH SIDES REITERATING THEIR RESPECTIVE S TANDS. WE FIRST OF ALL COME TO PAGE 15 OF THE PAPER BOOK INDICATING THE AS SESSEES PLANT AND MACHINERY TO BE HAVING VALUE OF RS.4.65CRORES AS ON 31.03.2009. WE THEREAFTER PROCEED TO PAGES 105 TO 107 OF THE PAPER BOOK INDICATING THE ITEM OF EXPENSES TO BE IN THE NATURE OF GROOVED SLEEVE W ITH WATER COOLING JACKET, PLASTIC EXTENSION SPARES IN THE NATURE OF SCREW & B ARREL AND CHEESE WINDERS; RESPECTIVELY. WE AFFORDED AMPLE OPPORTUNITY TO LEA RNED DEPARTMENTAL REPRESENTATIVE TO PROVE FROM THE CASE RECORDS THAT THE SAME IN ANY WAY AMOUNTED TO PURCHASE OF ALTOGETHER NEW MACHINES OR THE SAID ITEMS HAVE RESULTED IN INCREASE IN ASSESSEES PRODUCTION IN QU ESTION. HE FAILED TO POINT OUT ANY SUCH MATERIAL. WE THUS OBSERVE THAT THE IM PUGNED ITEMS ARE NOTHING BUT REGULAR WEAR AND TEAR REPLACEMENTS TO ASSESSEE S ALREADY EXISTING MACHINERY LIABLE TO BE TREATED AS REVENUE EXPENDITU RE. WE ACCORDINGLY ACCEPT ASSESSEES INSTANT SUBSTANTIVE GROUND AND DI RECT THE ASSESSING OFFICER TO DELETE THE IMPUGNED DISALLOWANCE. ITA NOS. 1380/AHD/2011 WITH C.O. NO.138/AHD/11, 323 /AHD/12 & 1140/AHD/13 (LIPI SPECIFIC FAMILY TRUST) A.YS. 2006-07, 2005-06 & 2009-10 - 10 - 12. THE ASSESSEES LATTER SUBSTANTIVE GROUND ASSAIL S CORRECTNESS OF BOTH THE LOWER AUTHORITIES ACTION DISALLOWING 1/10 TH OF ITS TELEPHONE, VEHICLE AND MISCELLANEOUS EXPENSES AGGREGATING TO RS.7,66,237/- . BOTH THE LEARNED REPRESENTATIVES STATE VERY FAIRLY HEREIN AS WELL TH AT WE HAVE ALREADY CONFIRMED IDENTICAL LOWER APPELLATE FINDINGS IN THE PRECEDING ASSESSMENT YEAR BY ADOPTING JUDICIAL CONSISTENCY. WE APPRECIATE THIS FAIR APPROACH AND AFFIRM THE LOWER APPELLATE FINDINGS UNDER CHALLENGE. ITA NO.1140/AHD/2013 IS PARTLY ACCEPTED. 13. THE ASSESSEE PARTLY SUCCEEDS IN ITS TWO APPEALS ITA NOS.323/AHD/2012 & 1140/AHD/2013 ALONGWITH CROSS OBJECTION 138/AHD/2 011. THE REVENUES SOLE APPEAL ITA NO.1380/AHD/2011 IS DISMISSED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 15 TH DAY OF FEBRUARY, 2017.] SD/- SD/- ( N. K. BILLAIYA ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL M EMBER AHMEDABAD: DATED 15/02/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 45 / GUARD FILE. BY ORDER / . // . /0