The ACIT, Range--8, Ahmedabad V. Troikaa Pharamaceuticlas Ltd., Ahmedabad

ITA 996/AHD/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6052 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 04-06-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 01-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEETA SHAH
• Assessee Lawyers: BHAVESH R SHAH
• Keywords: Capital asset; Depreciation; Revenue expenditure
• Section: 37

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M ASSTT. CIT, CIRCLE-8, AHMEDABAD. V/S . TROIKA PHARMACEUTICALS LTD., OM TOWERS, JODHPUR TEKRA, SATELLITE ROAD, AHMEDABAD. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SMT. NEETA SHAH, SR.DR RESPONDENT BY:- SHRI BHAVESH R. SHAH, AR O R D E R PER D. C. AGRAWAL, ACCOUNTANT MEMBER . THIS IS AN APPEAL FILED BY THE REVENUE RAISING FOL LOWING GROUNDS:- (1) THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.6,21,172/- MADE BY THE AO ON ACCOUNT OF GARDEN EXPENSES. (2) THE LD. CIT(A)-XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.5,57,335/- MADE BY THE AO ON ACCOUNT OF FILTRATION EXPENSES. 2. THUS THERE ARE TWO ISSUES INVOLVED ONE IS DELET ING THE ADDITION OF GARDEN EXPENSES AND THE OTHER IS DELETION OF FILTRA TION EXPENDITURE. THEY ARE DISCUSSED AS UNDER. ITA NO.996/AHD/2010 ASST. YEAR :2006-07 2 3. GARDEN EXPENSES OF RS.62,172/- THE ASSESSEE HAS INCURRED THESE EXPENSES FOR MAINTENANCE OF GARDEN AT THE FACTORY P REMISES AND EACH EXPENSE RANGED FROM RS.500/- TO RS.5,000/-. IT WAS EXPLAINED THAT EXPENDITURE WAS INCURRED TO MAKE THE SURROUNDING AT MOSPHERE OF THE FACTORY PREMISES POLLUTION FREE, AND IT IS NOT RELA TED TO APPRECIATION OF THE ASSETS. THE AO, HOWEVER, DID NOT AGREE AND TREATED THIS EXPENDITURE AS CAPITAL IN NATURE. THE LD. CIT(A) DELETED THE ADDIT ION FOLLOWING THE DECISION OF LD. CIT(A) FOR ASST. YEAR 2004-05 AND 2 005-06 ON THE SAME ISSUE. 4. IT WAS POINTED OUT BY LD. AR THAT REVENUE HAS NO T FILED ANY APPEAL AGAINST THE DECISION OF LD. CIT(A) IN ASST. YEAR 20 04-05 AND 2005-06 AND, THEREFORE THE ISSUE IS SETTLED IN FAVOUR OF TH E ASSESSEE. EVEN OTHERWISE ACCORDING TO THE LD. AR THE EXPENDITURE I NCURRED ON MAINTENANCE OF GARDEN IS REVENUE EXPENDITURE. HE RE LIED ON THE DECISIONS OF HON. BOMBAY HIGH COURT IN ZENITH STEEL PIPES LTD . VS. CIT (1990) 185 ITR 126 (BOM) AND TEKSONS (P) LTD. VS. CIT (19 79) 120 ITR 745 (BOM). 5. ON THE OTHER HAND, LD. DR RELIED ON THE ORDER OF AO. 6. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE DECL INE TO INTERFERE IN THE ORDER OF LD. CIT(A). BY MAINTAINING GARDEN NO N EW ASSET IS CREATED AND NO ENDURING BENEFIT IS RECEIVED. IT IS AN EXPEN DITURE FOR MAINTENANCE OF FACTORY PREMISES. GARDEN CANNOT BE TREATED IN IS OLATION OF FACTORY PREMISES. IT IS ONE AND INTEGRAL PART OF THE FACTOR Y AND, THEREFORE, ITS MAINTENANCE WOULD BE REVENUE EXPENDITURE IN THE SAM E WAY AS THE MAINTENANCE OF FACTORY ESTABLISHMENT. GARDEN NOT ON LY SERVES THE 3 PURPOSES OF KEEPING THE ENVIRONMENT CONGENIAL AND C ONDUCIVE FOR EFFICIENCY OF THE WORKERS AS THEY OCCASIONALLY RELA X AND USE THE GARDEN PORTION OF THE FACTORY PREMISES FOR LUNCH HOURS AND BREATHING AFRESH IN THE OPEN AIR. IT IS UNDISPUTED POSITION OF LAW THAT ANY EXPENDITURE FOR THE WELFARE OF THE EMPLOYEES WOULD BE REVENUE EXPENDITU RE. EXPENDITURE INCURRED FOR MAINTENANCE OF GARDEN IS PRIMARILY FOR HEALTHY AND SOOTHING ENVIRONMENT. EVEN THOUGH IT ADDS VALUE TO THE FACTO RY BUILDING BUT FOR THAT REASON ALONE EXPENDITURE SO INCURRED CANNOT B E CONSIDERED AS CAPITAL AND BE DISALLOWED. IT CAN BE SAID THAT SUCH EXPENDI TURE ON MAINTENANCE OF GARDEN IS INCURRED WHOLLY AND EXCLUSIVELY FOR THE P URPOSES OF BUSINESS. FOR THE REASONS STATED ABOVE, THIS GROUND OF REVENU E IS REJECTED. 7. FILTRATION EXPENSES OF RS.5,57,335/- THE AO NOTICED THAT ASSESSEE HAS CLAIMED A SUM OF RS.6,55,689/- FOR PURCHASE OF VARIOUS GOODS IN MAINTENANCE DEPARTMENT. THE ASSESSEE HAS BEEN DEBIT ING THE CENVAT CREDIT AVAILABLE ON PURCHASE OF SUCH GOODS TO THE R.G.23 C PART-II REGISTER. IT WAS EXPLAINED THAT AS PER EXCISE RULES TWO REGISTERS ARE AVAILABLE FOR CLAIMING CENVAT CREDIT I.E. ONE RG 23 C PART II FOR KEEPING RECORD OF RAW MATERIAL AND THE OTHER IS RG23C PART III FOR CAPITAL GOODS INCLUSIVE OF STORES AND OTHER ITEMS WHICH DO NOT FA LL UNDER THE CATEGORY OF RAW MATERIALS. FINDING THAT MATERIAL RELATING TO FI LTRATION EXPENDITURE HAVE BEEN ENTERED INTO RG 23C PART II MEANT FOR CAPITAL GOODS, THE AO HELD THAT EXPENDITURE SO INCURRED IS CAPITAL IN NATURE. HE ACCORDINGLY DISALLOWED THE CLAIM UNDER SECTION 37 BUT ALLOWED T HE DEPRECIATION THEREON @ 15%. THIS RESULTED IN AN ADDITION OF RS.5 ,57,335/-. THE LD. CIT(A) ON THE OTHER HAND, ALLOWED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT (I) BOOK ENTRY WILL NOT ULTIMATELY DE CIDE THE BASIC CHARACTER OF EXPENDITURE BUT IT IS THE BUSINESS EXPEDIENCY AN D LEGITIMATE CLAIM WHICH WILL DECIDE THE SAME; (II) SECONDLY SUCH CONS UMABLES DO NOT GIVE 4 RISE TO ANY ENDURING BENEFIT BUT ARE OF THE NATURE OF DAY TO DAY USE AND KEEPING THE CAPACITY OR MAINTAINING ALREADY EXISTIN G PLANT FUNCTIONING TO THE STANDARD REQUIRED FOR MANUFACTURING AND PRODUCT ION OF PHARMA DRUGS. LD. CIT(A) ENCLOSED ALONG WITH THE ORDER THE LIST O F ITEMS WHICH WERE CONSUMED UNDER THE HEAD FILTRATION EXPENSES. 8. WE HAVE HEARD THE LD. DR AND THE LD. AR. IN OUR CONSIDERED VIEW THERE IS NO CASE FOR INTERFERENCE IN THE ORDER OF L D. CIT(A). FOR THE REASONS MENTIONED IN HIS ORDER AND ON PERUSAL OF GOODS AND SAMPLE USED UNDER THE HEAD FILTRATION EXPENSES, WE ARE SATISFIED THAT THEY ARE THE DAY TO DAY CONSUMABLES AND DO NOT CREATE ANY CAPITAL ASSET OR ANY ENDURING BENEFIT TO THE ASSESSEE. THEIR MAINTENANCE EXPENDITURE WOUL D FALL UNDER THE HEAD CURRENT REPAIRS. ACCORDINGLY WE DO NOT FIND ANY MER IT IN THE APPEAL FILED BY THE REVENUE AND HENCE THE SAME IS DISMISSED. THE APPEAL OF THE REVENUE IS ACCORDINGLY DISMISSED. 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 11/6/2010 SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 11/6/2010 MAHATA/- 5 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD