M/s NMPL Granite Pvt Ltd , Bellary V. Income Tax Officer Ward-1 , Hospete

ITA 924/BANG/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5667 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-01-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 24-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR G MANOJ KUMAR
• Assessee Lawyers: S V RAVISHANKAR
• Keywords: Depreciation; Revenue expenditure; Capital expenditure
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC-B BENCH : BANGALORE BEFORE SHRI ARUN KUMAR GARODIA, ACCOUNTANT MEMBER ITA NO. 924 / BANG/201 7 ASSESSMENT YEAR : 20 1 2 - 1 3 M/S. NMPL GRANITE PVT. LTD., NO. 2198, BKG HOUSE, KHB COLONY, SANDUR, BELLARY 583 101. PAN: AACCN 6150B VS. THE INCOME TAX OFFICER, WARD 1, HOSAPETE. APPELLANT RESPONDENT APPELLANT BY : SHRI S.V. RAVISHANKAR, ADVOCATE RESPONDENT BY : DR. G. MANOJKUMAR, ADDL. CIT (DR) DATE OF HEARING : 1 1 .01.2018 DATE OF PRONOUNCEMENT : 19 .0 1 .201 8 O R D E R PER SHRI A.K. GARODIA, ACCOUNTANT MEMBER THIS APPEAL IS FILED BY THE ASSESSEE WHICH IS DIREC TED AGAINST THE ORDER OF LD. CIT (A) GULBARGA DATED 10.03.2017 FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER. 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX (APPEALS) PASSED UNDER SECTION 250 OF THE ACT IN SO FAR AS IT IS AGAINST THE APPELLANT IS OPPOSED TO LAW, WEIGHT OF EVIDENCE, PR OBABILITIES, FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE. 2. THE APPELLANT DENIES ITSELF LIABLE TO TAXED OVER AND ABOVE THE INCOME RETURNED BY THE APPELLANT OF RS. 1,86,220/-, UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN TREA TING EXPENDITURE INCURRED IN REPLACEMENT OF SPARE PARTS AND OTHER CO NSUMABLES AMOUNTING TO RS.14,31,493/- AS A CAPITAL EXPENDITUR E ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 4. THE LOWER AUTHORITIES FAILED TO APPRECIATE THAT THE EXPENDITURE OF RS.14,31,493/- DOES NOT RESULT IN ANY ENDURING BENE FIT TO THE APPELLANT ITA NO.924/BANG/2017 PAGE 2 OF 4 NOR HAS RESULTED IN ENHANCEMENT OF THE CAPACITY AND WAS INCURRED FOR PRESERVING AND MAINTAINING OF THE EQUIPMENT ON THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. THE CHARGING OF INTEREST UNDER SECTION 234B OF T HE ACT AND FURTHER THE CALCULATION OF INTEREST UNDER SECTION 234B OF T HE ACT IS NOT IN ACCORDANCE WITH LAW SINCE THE RATE, METHOD OF CALCU LATION, QUANTUM IS NOT DISCERNABLE FROM THE ORDER OF ASSESSMENT ON THE FACTS AND CIRCUMSTANCE OF THE CASE. 6. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, SUBSTI TUTE AND DELETE ANY OR ALL OF THE GROUNDS OF APPEAL URGED ABOVE. 7. FOR THE ABOVE AND OTHER GROUNDS TO BE URGED DURI NG THE HEARING OF THE APPEAL THE APPELLANT PRAYS THAT THE APPEAL BE A LLOWED IN THE INTEREST OF EQUITY AND JUSTICE. 3. IT WAS SUBMITTED BY LD. AR OF ASSESSEE THAT ALTH OUGH SEVERAL GROUNDS ARE RAISED BUT THE ISSUE INVOLVED IN ONLY ONE AS TO WHE THER THE EXPENSES INCURRED BY THE ASSESSEE ON REPLACEMENT OF SPARE PARTS AND O THER CONSUMABLES AMOUNTING TO RS. 14,31,493/- (NET OF DEPRECIATION A LLOWED) IS A CAPITAL EXPENDITURE IN THE FACTS OF THE PRESENT CASE. HE P OINTED OUT THAT ON PAGE NO. 5 OF THE PAPER BOOK IS THE COPY OF INVOICE REGARDING PURCHASE OF THE EQUIPMENT FOR REPAIR OF WHICH, THE EXPENSES IN DISPUTE WAS IN CURRED. HE POINTED OUT THAT IT IS A HITACHI HYDRAULIC EXCAVATOR OF RS. 76 LAKHS PU RCHASED IN FINANCIAL YEAR 2007-08 AS PER THE INVOICE NUMBER 13500501 DATED 14 .03.2008. THEREAFTER HE SUBMITTED THAT ON PAGE NO. 8 OF THE PAPER BOOK IS T HE BILL ISSUED BY PSN CONSTRUCTION EQUIPMENT PVT. LTD. DATED 29.02.2012 F OR RS. 22,63,170/- AGAINST WHICH A CREDIT NOTE WAS ISSUED BY THE SAID PARTY OF RS. 9,05,411/-, COPY AVAILABLE ON PAGE NO. 6 OF THE PAPER BOOK. HE SUBM ITTED THAT NET AMOUNT OF THIS BILL AFTER REDUCING THE AMOUNT OF CREDIT NOTE IS RS.13,57,759/- WHICH IS IN DISPUTE OUT OF TOTAL DISALLOWANCES MADE BY THE AO O F RS. 14,31,493/-. REGARDING THE BALANCE AMOUNT, HE SUBMITTED THAT THE RE ARE TWO MORE BILLS AVAILABLE ON PAGES 9 AND 7 OF THE PAPER BOOK OF R S. 52,280/- AND RS. 1,37,552/- AND TOTAL OF THESE THREE BILLS BEFORE RE DUCING THE AMOUNT OF CREDIT NOTE IS RS. 24,53,002/- OUT OF WHICH DISCOUNT GIVEN ON DEFECTIVE ENGINE OF RS. 9,05,441/- IS REDUCED RESULTING INTO NET AMOUNT OF RS. 15,47,561/- AND THEREAFTER, AN AMOUNT OF RS. 1,16,067/- IS REDUCED ON ACCOUNT OF DEPRECIATION ALLOWED BY THE AO AND THE NET ADDITION IS MADE BY T HE AO OF RS. 14,31,493/-. ITA NO.924/BANG/2017 PAGE 3 OF 4 HE POINTED OUT THAT AS PER THE INVOICE AVAILABLE IN PAGE NO. 8 OF THE PAPER BOOK, THE EXPENSES INCURRED ARE IN RESPECT OF ECHAIN, ERO LLER, SPROCKET, UPPER ROLLER AND IDLER ASSY AND THESE ITEMS ARE NOT FOR THE CHAN GE OF ENGINE OF THIS EQUIPMENT. BUT THE AO AND CIT (A) HAD PROCEEDED ON THIS BASIS THAT THE EXPENSES INCURRED ARE ON REPLACEMENT OF ENGINE. HE ALSO SUBMITTED THAT AS PER TWO SMALL BILLS AVAILABLE ON PAGES 7 & 9 OF THE PAPER BOOK, VARIOUS SMALL ITEMS ARE PURCHASED SUCH AS ENGINE OIL FILTER, FILT ER FUEL, FILTER ELEMENT, DAPHNE SUPER HYDRO 46 HN AND THESE ITEMS CANNOT BE CONSIDE RED AS REPLACEMENT OF ENGINE. THEREAFTER, HE PLACED RELIANCE ON A JUDGME NT OF HONBLE HIGH COURT OF MYSORE RENDERED IN THE CASE OF HANUMAN MOTOR SERVIC E VS. CIT AS REPORTED IN 66 ITR 88, COPY AVAILABLE ON PAGES 10 TO 12 OF PAPE R BOOK. HE POINTED OUT THAT IN THAT CASE, THE ISSUE IN DISPUTE WAS REGARDING RE PLACEMENT OF TWO PETROL ENGINES WITH TWO DIESEL ENGINES OF TWO BUSES AND IT WAS HELD BY HONBLE HIGH COURT OF MYSORE THAT IF ONLY OLD PART OF A MACHINER Y IS REPLACED BY A NEW PART, IT DOES NOT MEAN THAT A NEW ASSET HAS BEEN BROUGHT INT O EXISTENCE AND IT WAS HELD THAT THE EXPENSES INCURRED ON SUCH PART REPLAC EMENT IS ALLOWABLE AS REVENUE EXPENDITURE ON REPAIR. THE LD. DR OF REVEN UE SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 4. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIND THAT AS PER THE ASSESSMENT ORDER, THE AO HAS DISALLOWED THE EXPENSES IN DISPUT E BY HOLDING THAT EXPENSES ARE INCURRED ON REPLACEMENT OF ENGINE AND HE HAS HE LD IN PARA NO. 3.01 OF THE ASSESSMENT ORDER THAT THE COST TOWARDS REPLACEMENT OF ENGINE OF A MACHINE SHALL NOT BE ALLOWED AS REVENUE EXPENDITURE AS IT I S IN THE NATURE OF CAPITAL EXPENDITURE. HE HAS FURTHER HELD THAT ENGINE CANNO T BE TREATED AS SPARE PART OF THE MACHINE. AS PER THE COPY OF PURCHASES BILLS AV AILABLE IN PAPER BOOK, IT IS SEEN THAT THE EXPENSES IN DISPUTE DOES NOT APPEAR T O BE ON ACCOUNT OF REPLACEMENT OF THE ENGINE OF THE EQUIPMENT BUT EVEN IF IT IS REPLACEMENT OF ENGINE, IT IS UNDISPUTED THAT ONLY PART OF THE EQUI PMENT IS REPLACED AND NOT THE WHOLE EQUIPMENT. BY NOW, THIS IS A SETTLED POSITIO N OF LAW THAT WHEN A PART OF THE EQUIPMENT IS REPLACED, THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE. THE JUDGMENT OF HONBLE HIGH COURT OF MYSORE CITED BY L D. AR OF ASSESSEE IS ALSO HELPING THE CASE OF THE ASSESSEE AND HENCE, RESPECT FULLY FOLLOWING THIS ITA NO.924/BANG/2017 PAGE 4 OF 4 JUDGMENT OF HONBLE HIGH COURT OF MYSORE, I HOLD TH AT THE EXPENSES IN QUESTION IN THE PRESENT CASE IS NOT CAPITAL EXPENDITURE AND THE SAME IS ALLOWABLE AS REVENUE EXPENDITURE INCURRED ON REPAIRS AND MAINTEN ANCE AND ACCORDINGLY, THE DISALLOWANCE MADE BY THE AO IS DELETED. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. SD/- (ARUN KUMAR GARODIA) ACCOUNTANT MEMBER BANGALORE, DATED, THE 19 TH JANUARY, 2018. /MS/ COPY TO: 1. APP ELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER SENIOR PRIVATE SECRETARY, INCOME TAX APPELLATE TRIBUNAL, BANGALORE.