DEEPA COTTON, THANE V. ASST CIT CIR 1, KALYAN

ITA 4076/MUM/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 9814 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2007-2008
• Appeal Filed On: 30-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANJU GARODIA
• Assessee Lawyers: ASHOK J PATIL
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 143(3); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH J, MUM BAI BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 4076/MUM/2015 (ASSESSMENT YEAR- 2007-08) M/S DEEPA COTTON SHANKESHWAR COMPOUND, HOUSE, NO. 1286, GALA NO.4, GROUND FLOOR, NARPOLI- BHIWANDI, THANE-421302 PAN: AAIPP6817G VS. ACIT CIRCLE-1, 1 ST FLOOR, MOHAN PLAZA, WAYLE NAGAR, KHADAKPADA, KALYAN (W). (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ASHOK J. PATIL (AR) REVENUE BY : MS. ANJU GARODIA (DR) DATE OF HEARING : 26.07.2017 DATE OF PRONOUNCEMENT : 26.07.2017 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOME TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF I NCOME-TAX (APPEALS) (THE CIT(A)-2, THANE DATED 15.04.2015 FOR ASSESSMENT YEA R (AY) 2007-08. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE COMMISSIONER OF INCOME TAX (A) ERRED IN CONFIRMING THE ORDER OF AO IN TREATING THE EXPENDITURE OF RS. 21,58,858/- INCURRED FOR IMPROVI NG THE EXISTING ELECTRIC CONNECTION. ITA NO.407 6/M/2015- M/S DEEPA COTTON 2 2. THE CIT(A) FAILED TO APPRECIATE THAT THE APPELLANT HAD NOT ACQUIRED ANY NEW ASSET OF AN ENDURING NATURE. 3. THE CIT(A) FAILED TO APPRECIATE THAT THE IMPROVEMEN T IN THE ELECTRICAL CONNECTION HELPED THE APPELLANT TO CARRY ON THE BUS INESS EFFICIENTLY WITH THE SAME MACHINERY. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSMENT FOR THE YEAR UNDER CONSIDERATION WAS COMPLETED ON 09.06.2009 UNDER SEC TION 143(3) OF THE ACT. IN THE PROFIT & LOSS A/C THE ASSESSEE DEBITED AN AMOUNT OF RS. 21,28,858/- ON ACCOUNT OF ELECTRICAL EXPENDITURE. T HE EXPENDITURE WAS ALLOWED TO THE ASSESSEE AS REVENUE EXPENDITURE. THE REAFTER, THE LD. CIT(A)-2, THANE SET-ASIDE THE ASSESSMENT ORDER BY I NVOKING THE POWERS OF REVISION UNDER SECTION 263 OF THE ACT. THE LD. CIT( A) SET-ASIDE THE ASSESSMENT ORDER VIDE ORDER DATED 29.03.2012 AND TR EATED THE ELECTRICAL EXPENDITURE AS CAPITAL EXPENDITURE. AS PER THE DIRE CTION OF LD. CIT(A), ASSESSING OFFICER (AO) PASSED THE ORDER UNDER SECTI ON 143(3) R.W.S. 263 OF THE ACT AND TREATED THE EXPENDITURE AS CAPITAL EXPE NDITURE. ON APPEAL BEFORE THE LD. CIT(A), THE ACTION OF AO WAS SUSTAIN ED. FURTHER AGGRIEVED BY THE ORDER OF LD. CIT(A), THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVE (AR ) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) FOR THE REVENU E AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. AR OF THE ASS ESSEE ARGUED THAT ASSESSEE IS IN THE BUSINESS OF MANUFACTURING OF COT TON FABRIC. THE EXISTING ELECTRICITY CONNECTION/LINE FEEDING TO THE ESTABLIS HMENT OF ASSESSEE WAS ITA NO.407 6/M/2015- M/S DEEPA COTTON 3 INSUFFICIENT FOR RUNNING THE FACTORY AS THERE WAS F REQUENT DISRUPTION AND PRODUCTION PROCESS DUE TO ELECTRIC POWER SUPPLY. TH E ASSESSEE APPLIED TO MAHARASHTRA STATE ELECTRICITY BOARD (MSEB) FOR CONV ERTING THE EXISTING CONNECTION OF LOW-TENSION TO HIGH-TENSION LINE. CON SEQUENT UPON ON THE APPLICATION OF THE ASSESSEE M/S MSEB GRANTED PERMIS SION ON THE CONDITION THAT THE ASSESSEE MUST BEAR THE COST OF INSTALLATIO N, TRANSFORMER, WIRE AND OTHER EQUIPMENT AS PER THEIR SPECIFICATION. THE ASS ESSEE INCURRED A SUM OF RS. 21,28,858/- FOR CONVERTING LOW-TENSION LINE TO HIGH-TENSION ELECTRICITY LINE. BY MAKING THE EXPENDITURE NOTHING NEW ASSET W AS ADDED IN THE BUSINESS ASSET OF THE ASSESSEE. IN SUPPORT OF HIS S UBMISSION, THE LD. AR OF THE ASSESSEE RELIED UPON THE DECISION OF HONBLE AL LAHABAD HIGH COURT IN CIT VS. KANODIA COLD STORAGE 100 ITR 155 (ALL), ACI T VS. DHAMPUR SUGAR MILL P. LTD. (2015) 370 ITR 194 (ALL), DECISI ON OF HONBLE RAJASTHAN HIGH COURT IN CIT VS. UDAIPUR DISTILLERY CO. LTD. 268 ITR 451 (RAJ) AND FURTHER THE DECISION OF HONBLE MADRASH H IGH COURT IN CIT VS. SUNDARAM CLAYTON LTD. 321 ITR 69 (MAD). ON THE OTHE R HAND, THE LD. DR FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITIES BELOW. IT WAS FURTHER ARGUED BY LD. DR FOR THE REVENUE THAT ASSESSEE WOUL D BE ENTITLED FOR DEPRECIATION ON ACCOUNT OF ELIGIBLE RATE OF DEDUCTI ON IN DUE COURSE. 4. WE HAVE CONSIDERED THE SUBMISSION OF THE PARTIES AN D PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ASSESSEE WHILE FILING RETU RN OF INCOME FOR RELEVANT ITA NO.407 6/M/2015- M/S DEEPA COTTON 4 AY DEBITED THE EXPENDITURE OF RS. 21,28,858/- FROM PROFIT & LOSS A/C. THE EXPENDITURE WAS ALLOWED TO THE ASSESSEE, HOWEVER, T HE ORDER WAS REVISED BY LD. CIT HOLDING THAT INSTALLING NEW ELECTRICITY CON NECTION ENTAILS THE BENEFIT OF ENDURING IN NATURE AND TREATED THE EXPENDITURE A S CAPITAL EXPENDITURE. AS PER THE DIRECTION OF LD. CIT, THE AO PASSED THE ORDER UNDER SECTION 143(3) R.W.S. 263 OF THE ACT AND TREATED THE SAID E XPENDITURE AS CAPITAL EXPENDITURE. ON APPEAL BEFORE THE LD. CIT(A), THE A CTION OF AO WAS SUSTAINED. WE HAVE NOTED THAT THE EXPENDITURE INCUR RED BY ASSESSEE ON ACCOUNT OF CONVERSION OF LOW-TENSION LINE/CONNECTIO N INTO HIGH-TENSION LINE/CONNECTION IS NOT IN DISPUTE. THE REVENUE HAS DISPUTED THE NATURE OF EXPENDITURE. THE HONBLE ALLAHABAD HIGH COURT IN CI T VS. KANODIA COLD STORAGE (SUPRA) ON SIMILAR NATURE OF EXPENDITURE HE LD THAT REPLACEMENT OF TRANSFORMER AND SERVICE LINE FOR CARRYING HIGHER KV A ELECTRICAL POWER CURRENT TO ENABLE THE ESTABLISHMENT TO FUNCTION PRO PERLY. IT WAS FURTHER HELD THAT EFFECTING SUCH CHANGE NO NEW ASSET OF ENDURING IN NATURE BELLOWING TO THE ASSESSEE, CAME INTO EXISTENCE AND THE EXPENDITU RE WAS TREATED AS REVENUE EXPENDITURE. FURTHER, IN ACIT VS. DHAMPUR S UGAR MILL P. LTD. (SUPRA) HELD THAT THE EXPENDITURE INCURRED BY ASSES SEE BY LAYING OF TRANSMISSION LINE WAS CLEARLY ON THE REVENUE ACCOUN T. THE ERECTION OF TRANSMISSION LINE, VEST ABSOLUTELY IN POWER CORPORA TION LTD. THE EXPENDITURE INCURRED BY ASSESSEE WAS FACILITATING E FFICIENT CONDUCT OF ITS ITA NO.407 6/M/2015- M/S DEEPA COTTON 5 BUSINESS WHICH WAS NOT AN ADVANTAGE OF CAPITAL IN N ATURE. SIMILAR VIEW WAS TAKEN BY HONBLE RAJASTHAN HIGH COURT IN CIT VS. UD AIPUR DISTILLERY CO. LTD. (SUPRA) HOLDING THAT REPLACING OF OLD TRANSFOR MER BY NEW TRANSFORMER IS REVENUE EXPENDITURE. THUS, RESPECTFULLY FOLLOWIN G THE DECISION OF VARIOUS HIGH COURTS, WE HOLD THAT THE EXPENDITURE I NCURRED BY ASSESSEE IS REVENUE EXPENDITURE. HENCE, THE GROUND OF APPEAL RA ISED BY ASSESSEE IS ALLOWED. 5. IN THE RESULT, APPEAL FILED BY ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF JULY 2017. SD/- SD/- ( RAJENDRA ) (PAWAN SING H) ACCOUNTANT MEMBER JU DICIAL MEMBER MUMBAI; DATED 26/07/2017 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/