Jay Hanuman Chawal Udyog P.Ltd., Kanpur V. Dy. Commissioner of Income Tax , Kanpur

ITA 63/LKW/2012

• Counselvise Citation: 6323714 RSA 2012
• Duration Of Justice: 2 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-06-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 21-05-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 13-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHINAV MEHROTRA SHRI ALOK
• Keywords: Capital asset; Revenue expenditure; Capital expenditure

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH A, LUCKNOW BEFORE SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI A.K. GARODIA, ACCOUNTANT MEMBER ITA NO.63/LKW/2012 ASSESSMENT YEAR:2005 - 06 JAY HANUMAN CHAWAL UDYOG PVT. LTD., BY PASS ROAD, PUKHRAYAN, RAMABAI NAGAR. PAN:AABCJ2183P VS. DY.C.I.T., RANGE - 6, KANPUR. (APPELLANT) (RESPONDENT) APPELLANT BY SHRI ABHINAV MEHROTRA, ADVOCATE , RESPONDENT BY SHRI ALOK MITRA, D. R. DATE OF HEARING 21/05/2014 DATE OF PRONOUNCEMENT 1 3 /06/2014 O R D E R PER A. K. GARODIA, A.M. THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER PASSED BY LEARNED CIT (A) - II, KANPUR DATED 30/11/2011 FOR ASSESSMENT YEAR 2005 - 2006. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. BECAUSE THE 'CIT' HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF EXPENSES OF RS.2,24,905/ - DEPOSITED WITH U.P. POWER CORPORATION LTD. TOWARDS COST OF INSTALLATION OF NEW POWER LINE FOR SUPPLY OF POWER TO THE RICE MILL OF THE APPELLANT. 2. BECAUSE THE 'CIT' HAS ERRED IN LAW AND ON FACT AS HE FAILED TO APPRECIATE THE FACT THAT THE INSTALLATION OF POWER LINE BY U.P. POWER CORPORATION FOR SUPPLY OF 2 POWER TO THE APPELLANT'S UNIT DOES NOT AMOUNT TO CREATION OF ANY CAPITAL ASSET OF ENDURING NATUR E. 3. BECAUSE THE 'CIT' HAS ERRED IN LAW AND ON FACTS IN ACCEPTING THE FINDING OF THE LD. ASSESSING OFFICER THAT THE INSTALLATION OF NEW POWER LINE PERTAINS TO EXPENDITURE IN BRINGING ENDURING BENEFIT HENCE TO BE TREATED AS CAPITAL EXPENDITURE. 4. BECAUS E THE 'CIT' HAS FAILED TO APPRECIATE THE FACT THAT INCURRING EXPENDITURE ON POWER LINE NEITHER RESULTS IN COMING INTO EXISTENCE ANY NEW CAPITAL ASSETS NOR IT RESULTS ANY INCREASE IN THE PRODUCTION CAPACITY. IT IS ONLY FOR THE PURPOSE OF CONDUCTING THE BUSI NESS OF THE APPELLANT MORE EFFICIENTLY AND PROFITABLY LEAVING THE FIXED ASSETS UNTOUCHED HENCE ARE REVENUE EXPENDITURE. 5. BECAUSE THE 'CIT' HAS ERRED IN LAW AND ON FACTS IN SUSTAINING THE ADDITION OF DISALLOWANCE OF INTEREST OF RS.10,500/ - ON THE AMOUNT OF TEMPORARY ADVANCE MADE TO LABOUR CONTRACTOR SHRI SAHILENDRA KUMAR GUPTA. 7. BECAUSE THE 'CIT' HAS FAILED TO APPRECIATE THE FACT THAT SHRI SHAILENDRA KUMAR GUPTA WAS LABOUR CONTRACTOR AND WAS SUPPLYING LABOUR IN THE RICE MILL OF THE APPELLANT AND HAS BUSINESS NEXUS WITH THE APPELLANT. HENCE THE FINDING OF 'CIT' THAT THERE HAS NOT BEEN ANY BUSINESS NEXUS IS AGAINST THE FACTS HENCE CONFIRMATION OF DISALLOWANCE OF INTEREST IS AGAINST THE FACT AND IS UNJUSTIFIED. 3. THE LEARNED A.R. OF THE ASSESSEE PLAC ED STRONG RELIANCE ON THE JUDGMENT OF HON'BLE DELHI HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS SAW PIPES LTD. AS REPORTED IN [2008] 300 ITR 35 (DEL) . HE ALSO PLACED RELIANCE ON THE JUDGMENT OF HON'BLE ALLAHABAD HIGH COURT RENDERED IN THE CASE OF COMMISSIONER OF INCOME - TAX VS KANODIA COLD STORAGE AS REPORTED IN [1975] 100 ITR 155 (ALL) . HE ALSO SUBMITTED THAT THE DEMAND NOTICES ISSUED BY UP POWER CORPORATION 3 LIMITED FOR RS.4,06,605/ - IS AVAILABLE ON PAGE 44 OF THE PAPER BOOK WHICH INC LUDES SECURITY OF RS.1,97,200/ - AND SERVICE CONNECTION CHARGES OF RS.2,09,305/ - . HE SUBMITTED THAT AS PER THESE JUDGMENTS OF HON'BLE DELHI HIGH COURT AND HON'BLE ALLAHABAD HIGH COURT , THIS EXPENDITURE IS NOT A CAPITAL EXPENDITURE. 4. LEARNED D.R. OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND THE JUDGMENT S CITED BY LEARNED A.R. OF THE ASSESSEE. WE FIND THAT THE CASE OF THE REVENUE IS THAT THE EXPENSE S INCURRED FOR INSTALLATION OF NEW POWER LINE B Y UP POWER CORPORATION LIMITED AT THE ASSESSEE MILL AMOUNTS TO CAPITAL EXPENDITURE. IN THIS REGARD , WE FIND THAT THE JUDGMENT OF HON'BLE DELHI HIGH COURT CITED BY LEARNED A.R. OF THE ASSESSEE IS SQUARELY APPLICABLE IN THE PRESENT CASE. IN THAT CASE ALSO, THE ASSESSEE PAID SERVICE CHARGES OF RS.52 LAC S TO THE ELECTRICITY BOARD FOR LAYING SERVICE LINE FO R THE PURPOSE OF ASSESSEE AND THE ASSESSEE CLAIMED THIS AS REVENUE EXPENDITURE. IN THAT CASE ALSO , THE ASSESSING OFFICER HELD THAT THE BENEFIT DERIVED BY THE ASSESSEE WAS OF ENDURING NATURE. UNDER THESE FACTS, IT WAS HELD THAT THE SERVICE LINE DID NOT BE LONG TO ASSESSEE BUT TO THE ELECTRICITY BOARD AND WERE LAID SO AS TO ENABLE THE ASSESSEE TO CONDUCT ITS BUSINESS MORE EFFICIENTLY WHICH MIGHT BE AN ENDURING ADVANTAGE BUT WAS INTENDED TO ENABLE THE ASSESSEE TO CARRY ON ITS BUSINESS MORE EFFICIENTLY AND PRO FITABLY LEAVING THE FIXED CAPITAL UNTOUCHED. IT WAS ALSO HELD THAT THE BENEFIT THAT THE ASSESSEE GOT WAS OF A COMMERCIAL NATURE AND A BUSINESS ADVANTAGE AND THEREFORE, THE EXPENDITURE INCURRED BY THE ASSESSEE SHOULD BE TREATED AS REVENUE EXPENDITURE. IN THE PRESENT CASE ALSO, THE FACTS ARE IDENTICAL AND HENCE, 4 RESPECTFULLY FOLLOWING THE DECISION OF HON'BLE DELHI HIGH COURT, WE HOLD THAT IN THE PRESENT CASE ALSO, THE EXPENDITURE INCURRED BY THE ASSESSEE SHOULD BE TREATED AS REVENUE EXPENDITURE. THE ASSESS ING OFFICER IS DIRECTED ACCORDINGLY. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. (ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON THE CAPTION PAGE) SD/. SD/. (SUNIL KUMAR YADAV) ( A. K. GARODIA ) JUDICIAL M EMBER ACCOUNTANT MEMBER DATED: 1 3 /06/2014. *C.L.SINGH COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. CONCERNED CIT 4. THE CIT(A) 5. D.R., I.T.A.T., LUCKNOW ASSTT. REGISTRAR