The Commissioner of Income Tax-IV V. M/s Nagarjuna Fertilizers and Chemicals Ltd

ITTA/509/2013

AI Insights

The case involves the Commissioner of Income Tax-IV, Hyderabad as the appellant and M/s Nagarjuna Fertilizers and Chemicals Limited as the respondent. The dispute centered on whether the expenditure incurred in the replacement of a bi-metallic strip, an integral part of the manufacturing machinery, should be classified as revenue expenditure or capital expenditure for the assessment year 2006-07. The Assessing Officer initially classified it as revenue expenditure, but the Commissioner of Income Tax reversed this decision, classifying it as capital expenditure. The Tribunal, however, reinstated the Assessing Officer's view, leading to the present appeal by the Commissioner of Income Tax.

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 743222 (HC-HYDERABAD)
• Appeal Type: Others
• Pronouncement Date: 25-10-2013
• Assessment Year: misc
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Keywords: Assessment Year 2006-07; Capital expenditure; Revenue expenditure; Bi-metallic strip
• Section: 263

Judgement Text

"HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.509 of 2013 Date: 25.10.2013 Between: The Commissioner of Income Tax-IV, Hyderabad. . .....Appellant AND M/s Nagarjuna Fertilizers and Chemicals Limited, Punjagutta, Hyderabad. ...Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTA AND HON’BLE SRI JUSTICE SANJAY KUMAR I.T.T.A.No.509 of 2013 JUDGMENT: (per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta ) This appeal is preferred against the judgment and order dated 27.05.2011 passed by the learned Tribunal in relation to the assessment year 2006-07 and sought to be admitted on the following suggested questions of law: (1) Whether on the facts and in the circumstances of the case, the order of the Tribunal is not perverse? (2) Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in setting aside the order of the CIT passed under Section 263 of the Act? (3) Whether on the facts and in the circumstances of the case, the Tribunal is correct in law in holding that the expenditure incurred in replacement of bi-metallic strip is revenue expenditure? We have heard the learned Counsel for the appellant and have gone through the judgment and order of the learned Tribunal. It appears from the record that the Commissioner of Income Tax (Appeals) in exercise of his direction under Section 263 of the Income Tax Act, 1961 (for short ‘the Act’) has upset the order of the Assessment Authority. The whole question in this matter is whether the cost of replacement of bi-metallic stripper, an integral part of the machinery, can be treated to be a revenue expenditure or capital expenditure. The Assessing Officer is of the view that it is a revenue expenditure as it is a part and parcel of the manufacturing process of the assessee. However, the Commissioner of Income Tax reversed the said finding on the premise that it is not part and parcel of the manufacturing process and hence it is a capital expenditure and depreciation was allowed. We are of the view, as rightly concluded by the learned Tribunal, that when the Assessing Officer adopts one of the courses permissible in law or where two views are possible and the Assessing Officer has taken one view with which the Commissioner of Income Tax does not agree, it could not be treated as erroneous order, prejudicial to the interests of Revenue. In any view of the matter, we find that both the Assessing Officer and the learned Tribunal found on fact that the aforesaid bi-metallic stripper is an integral part of the plant and has got no independent function so as to qualify as a separate asset and, therefore, the same is allowable as revenue expenditure. This fact-finding is based on materials and as such it cannot be termed to be perverse. The independent functioning of any machine can be deduced from the fact that it produces some independent products and it had been the utility in the manufacturing process as a whole, meaning thereby the installation of machine has got enduring benefit. It is not so in this case. Under the aforesaid circumstances, we do not find any element of law involved for admission of this appeal. Accordingly, the appeal is dismissed. Miscellaneous petitions, if any pending, shall stand disposed of. No order as to costs. ___________________ K.J. SENGUPTA, CJ _________________ SANJAY KUMAR, J 25.10.2013 Gsn "