Punjab-Haryana High Court
Commissioner Of Income-Tax (Central) ... vs M/S Majestic Auto Limited on 22 May, 2013
Bench: Hemant Gupta, Ritu Bahri
I.T.A. No.117 of 2004 1
IN THE HIGH COURT OF PUNJAB AND HARYANA
AT CHANDIGARH
I.T.A. No.117 of 2004
Date of Decision:22.05.2013
Commissioner of Income-tax (Central) Ludhiana .....Appellant
Vs.
M/s Majestic Auto Limited, Ludhiana .....Respondent
CORAM:- HON'BLE MR. JUSTICE HEMANT GUPTA
HON'BLE MS. JUSTICE RITU BAHRI
Present:- Mr. Rajesh Katoch, Advocate,
for the appellant.
M/s Akshay Bhan and Aalok Mittal, Advocates,
for the respondent.
HEMANT GUPTA, J.(Oral)
The present appeal under Section 260-A of the Income Tax Act, 1961 (for short, 'the Act') arises out of an order dated 21.11.2003 passed by the Income Tax Appellate Tribunal, Chandigarh Bench `B', Chandigarh for the assessment year 1995-96.
After hearing learned counsel for the parties, we find that the following substantial questions of law arise for consideration:-
(i) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the addition of Rs.3,20,600/- on account of closing stock of stores, spares, tools etc.?
(ii) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in deleting the additions of the amount incurred by the assessee on pre operative expenses incurred by the assessee prior to manufacturing of the motor-
cycles?
Kumar Vimal2013.05.31 11:47 I attest to the accuracy and integrity of this document Chandigarh I.T.A. No.117 of 2004 2 During the course of assessment, the assessee was asked to explain as to why value of closing stock of spares and tools and items of sundry repairs may not be added in the immediate preceding year. The stand of the assessee was that the facts are similar to the facts of the assessment year 1994-95. The Assessing Officer, relying upon the order passed in the assessment year 1994-95, took into consideration stock of equivalent to one month purchases to be available with the assessee and made an addition of Rs.3,20,600/-. The assessee has also claimed pre- operative expenses for scooter project, YF-10 Project and BMW Project. The Assessing Officer allowed such expenditure as capital expenditure.
In an appeal against the order, the Commissioner of Income Tax (Appeal) reduced the period of closing stock taken by the Assessing Officer as 30 days to 15 days but maintained pre-operative expenses incurred by the assessee as capital expenditure. However, the Tribunal in respect of valuation of spare, tools and repair items, relied upon the order passed by it on 21.8.2002 in the case of M/s Hero Cycles Ltd., Ludhiana Vs. ACIT, CC, Ludhiana in ITA Nos.340/Chandi/95 and set aside the amount of closing stock of 15 days ordered to be taken into consideration by the Commissioner of Income Tax (Appeals). However, pre-operative expenses was allowed as the revenue expenditure, relying upon an order passed by the Tribunal in assessee's own case for the assessment year 1984-85.
Similar question, as is question No.1, was the subject matter of consideration in ITA No.116 of 2004 in the assessee's own case for the assessment year 1994-95. Vide separate order of today, it has been held that the Tribunal was not right in law in deletion of addition on account of Kumar Vimal 2013.05.31 11:47 I attest to the accuracy and integrity of this document Chandigarh I.T.A. No.117 of 2004 3 closing stocks of stores, repaired items and tools etc. In view of the reasons recorded in ITA No.116 of 2004, the first question of law is answered in favour of the revenue and against the assessee and the deletion of the addition made by the Tribunal is set aside.
In respect of questions No.2, the Division Bench of this Court in I.T.R. No.122 of 1999 titled 'The Commissioner of Income Tax, Patiala Vs. Vardhman Spinning & General Mills, Ludhiana' (decided on 11.08.2008) has found that the expenses incurred by the assessee for exploring the possibility of setting up of a project is a revenue expenditure as no asset of permanent nature with enduring benefit is acquired by the assessee. It was observed to the following effect:-
"After hearing learned counsel for the parties, we find that the view expressed by the Tribunal allowing the expenses to be revenue in nature cannot be faulted with. It is a case where the assessee made certain expenses for exploring the possibility of setting up a paper project at Saharanpur which could not materialise. No asset of permanent nature with enduring benefit was acquired by the assessee. The plant could not be set up to which such an expenditure made could possibly be capitalized."
In view of the above, the second question of law is answered against the revenue and in favour of the assessee.
The present appeal is, thus, disposed of, in the manner mentioned above, with no order as to costs.
( HEMANT GUPTA )
JUDGE
May 22, 2013 ( RITU BAHRI )
renu/Vimal JUDGE
Kumar Vimal
2013.05.31 11:47
I attest to the accuracy and
integrity of this document
Chandigarh