Farmson Pharmaceuticals Gujarat Ltd., Baroda V. The ACIT.,Circle-1(2), Baroda

ITA 669/AHD/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1137 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 4 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 08-07-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 03-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ANTONY PARIATH
• Keywords: Depreciation; Revenue expenditure; Capital expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER ./ ././ ./ ITA NOS. 668 TO 670/AHD/2011 / // / ASSESSMENT YEAR : 2004-05 TO 2006-07 FARMSON PHARMACEUTICALS GUJARAT PVT LTD, 28-35 GIDC INDUSTRIAL ESTATE, NANDESARI, BARODA PAN : AAACF 3358 B VS ACIT, CIRCLE 1(2), BARODA / // / (APPELLANT) / // / (RESPONDENT) ASSESSEE BY : SHRI MILIN MEHTA, AR REVENUE BY : SHRI ANTONY PARIATH, SR DR / // / DATE OF HEARING : 08/07/2016 / // / DATE OF PRONOUNCEMENT: 11/07/2016 / // / O R D E R THESE THREE APPEALS BY THE ASSESSEE ARE DIRECTED AG AINST SEPARATE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- I, BARODA DATED 14.12.2010, 14.12.2010 AND 10.12.2010 FOR AYS 2004- 05, 2005-06 AND 2006-07 RESPECTIVELY. 2. BEFORE ME, AT THE OUTSET, LD. COUNSEL FOR THE AS SESSEE SUBMITTED THAT HE IS NOT PRESSING THE APPEALS FOR AYS 2005-06 AND 200 6-07; HENCE THESE APPEALS ARE DISMISSED AS NOT PRESSED. 3. FOR AY 2004-05, THE ASSESSEE HAS RAISED FOLLOWIN G EFFECTIVE GROUNDS:- I) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERR ED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN CONSIDERING AN AMOUNT OF RS.7,67,740/- BEING REPAIRS TO PLANT AND MACHINERY AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE CLAIMED BY THE APPELLANT. II) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERR ED IN FACT AND IN LAW IN CONFIRMING THE ACTION OF THE ASSESSING OFFIC ER IN CONSIDERING AN AMOUNT OF RS.17,02,587/- BEING REPAIRS TO BUILDING AS CAPITAL EXPENDITURE INSTEAD OF REVENUE EXPENDITURE CLAIMED BY THE APPELLANT. SMC-ITA NOS. 668 TO 670/AHD/2011 FARMSON PHARMACEUTICALS GUJ PVT LTD VS. ACIT AY : 2004-05 TO 2006-07 2 4.1 APROPOS GROUND NO.1, LD. COUNSEL FOR THE ASSESS EE REITERATED THE SUBMISSIONS AS WERE MADE BEFORE THE LD. CIT(A). H E SUBMITTED THAT HE HAS NOTHING MORE TO ADD THAN WHAT HAS BEEN SUBMITTED BE FORE THE LD. CIT(A). 4.2 LD. DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 4.3 I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. I FIND THAT THE ASSESSING OFFICER HAS DISALLOWED A TOTAL EXPENDITUR E OF RS.35,20,662/-, BEING REPAIRS TO PLANT & MACHINERIES, TREATING IT AS CAPI TAL IN NATURE. HOWEVER, ON APPEAL BEFORE THE CIT(A), THIS ADDITION HAS BEEN RE STRICTED TO RS.7,67,740/- AS HE WAS OF THE OPINION THAT THE EXPENDITURE ON GE AR BOXES, ELECTRIC MOTOR, PERFORATED CIRCLE, MEMBRANE AND PUMPS ARE IN THE NA TURE OF CAPITAL EXPENDITURE AS THESE ITEMS ARE CAPABLE OF INDEPENDE NT FUNCTIONING AND HAVING ENDURING LIFE. I FIND NO INFIRMITY IN THE ORDER OF CIT(A) IN THIS REGARD AND HIS ORDER ON THIS ISSUE IS UPHELD. GROU ND NO.1 IS REJECTED. 5. GROUND NO.2 IS AGAINST THE DISALLOWANCE OF RS.17 ,02,587/- ON ACCOUNT OF REPAIRS TO BUILDING TREATING IT AS CAPITAL IN NA TURE. 5.1 LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE RE IS NO ADDITION TO THE BUILDING, ONLY FLOORING WAS CHANGED AND WALLS WERE PLASTERED AND PAINTED; THEREFORE, THE EXPENSES WERE INCURRED TOWARDS THE M AINTENANCE OF THE BUILDING. HE ALSO RELIED UPON THE JUDGMENT HONBLE HIGH COURT OF NAGPUR, RENDERED IN THE CASE OF R.B. BANSILAL ABIRCHAND SPI NNING & WEAVING MILLS VS. CIT, REPORTED IN (1957) 31 ITR 0427 (NAG), WHE REIN IT HAS HELD THAT REPLACEMENT OF FLOORING IS REVENUE EXPENDITURE. 5.2 LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDE R OF THE AUTHORITIES BELOW. SMC-ITA NOS. 668 TO 670/AHD/2011 FARMSON PHARMACEUTICALS GUJ PVT LTD VS. ACIT AY : 2004-05 TO 2006-07 3 5.3 I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITI ES BELOW. I FIND THAT ASSESSING OFFICER DISALLOWED THE EXPENDITURE AMOUNT ING TO RS.17,05,587/- TREATING THE SAME AS CAPITAL EXPENDITURE IN RESPECT OF BUILDING AND REPAIRS. ON APPEAL, THE LD. CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER IN TREATING THIS EXPENDITURE AS CAPITAL. I FIND THAT, FOR THE YEAR UNDER CONSIDERATION, ONLY SOME MODIFICATION WORK WAS CARR IED OUT TO THE BUILDING DUE TO THE MANDATORY REQUIREMENT OF FDA RULES AND R EGULATION AND NO NEW ASSET HAS COME INTO EXISTENCE. I AM, THEREFORE , OF THE OPINION THAT SUCH EXPENSE INCURRED BY THE ASSESSEE IS NOT CAPITAL EXP ENDITURE AS IT WOULD FALL WITHIN THE AMBIT OF THE WORDS CURRENT REPAIRS INA SMUCH AS NO ASSET AS BEEN CREATED. 5.4 ALTERNATIVELY ALSO, THE HONBLE SUPREME COURT I N A RECENT JUDGMENT IN THE CASE OF CIT VS. EXCEL INDUSTRIES LTD, REPORT ED IN (2013) 358 ITR 295 (SC), HAS HELD THAT THE PREPONEMENT OR POSTPONEMENT OF YEAR OF CLAIM OR ALLOWANCE IS A BASICALLY REVENUE NEUTRAL IN CHARACT ER, MORE SO WHEN THE RATE OF INCOME TAX IN CASE OF COMPANY IS NEARLY SAME. I N VIEW OF THESE OBSERVATIONS, I SEE NO JUSTIFICATION IN REDUCTION O F DEPRECIATION CLAIM MADE BY THE ASSESSEE WHICH IS DELETED. THUS, THIS GROUN D OF THE ASSESSEE IS ALLOWED. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. 6. IN THE COMBINED RESULT, ITA NO. 668/AHD/2011 IS PARTLY ALLOWED, WHEREAS ITA NOS. 669 AND 670/AHD/2011 ARE DISMISSED . ORDER PRONOUNCED IN THE COURT ON 11 TH JULY, 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 11/07/2016 *BIJU T. SMC-ITA NOS. 668 TO 670/AHD/2011 FARMSON PHARMACEUTICALS GUJ PVT LTD VS. ACIT AY : 2004-05 TO 2006-07 4 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE. / BY ORDER, TRUE COPY / // / ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD