Income Tax Appellate Tribunal - Mumbai
Deepa Cotton, Thane vs Asst Cit Cir 1, Kalyan on 26 July, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "J", MUMBAI
BEFORE SHRI RAJENDRA, ACCOUNTANT MEMBER AND
SHRI PAWAN SINGH, JUDICIAL MEMBER
ITA No. 4076/Mum/2015 (Assessment Year- 2007-08)
M/s Deepa Cotton ACIT Circle-1,
Shankeshwar Compound, 1st Floor, Mohan Plaza,
House, no. 1286, Gala No.4, Wayle Nagar, Khadakpada,
Vs.
Ground Floor, Narpoli- Kalyan (W).
Bhiwandi, Thane-421302
PAN: AAIPP6817G
(Appellant) (Respondent)
Assessee by : Shri Ashok J. Patil
(AR)
Revenue by : Ms. Anju Garodia
(DR)
Date of hearing : 26.07.2017
Date of Pronouncement : 26.07.2017
Order Under Section 254(1) of Income Tax Act
PER PAWAN SINGH, JUDICIAL MEMBER:
1. This appeal by assessee under section 253 of Income tax Act ('Act') is directed against the order of ld. Commissioner of Income-tax (Appeals) (the CIT(A)-2, Thane dated 15.04.2015 for Assessment Year (AY) 2007-08. The assessee has raised following grounds of appeal:
1. On the facts and circumstances of the case and in law the Commissioner of Income Tax (A) erred in confirming the order of AO in treating the expenditure of Rs. 21,58,858/- incurred for improving the existing electric connection.ITA No.4076/M/2015- M/s Deepa Cotton
2. The CIT(A) failed to appreciate that the appellant had not acquired any new asset of an enduring nature.
3. The CIT(A) failed to appreciate that the improvement in the electrical connection helped the appellant to carry on the business efficiently with the same machinery.
2. The brief facts of the case are that assessment for the year under consideration was completed on 09.06.2009 under section 143(3) of the Act. In the profit & Loss A/c the assessee debited an amount of Rs. 21,28,858/- on account of Electrical expenditure. The expenditure was allowed to the assessee as Revenue expenditure. Thereafter, the ld. CIT(A)-2, Thane set-aside the assessment order by invoking the powers of revision under section 263 of the Act. The ld. CIT(A) set-aside the assessment order vide order dated 29.03.2012 and treated the Electrical expenditure as Capital expenditure. As per the direction of ld. CIT(A), Assessing Officer (AO) passed the order under section 143(3) r.w.s. 263 of the Act and treated the expenditure as Capital expenditure. On appeal before the ld. CIT(A), the action of AO was sustained. Further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
3. We have heard the ld. Authorized Representative (AR) of the assessee and ld. Departmental Representative (DR) for the Revenue and perused the material available on record. The ld. AR of the assessee argued that assessee is in the business of manufacturing of cotton fabric. The existing electricity connection/line feeding to the establishment of assessee was 2 ITA No.4076/M/2015- M/s Deepa Cotton insufficient for running the factory as there was frequent disruption and production process due to electric power supply. The assessee applied to Maharashtra State Electricity Board (MSEB) for converting the existing connection of Low-tension to high-tension line. Consequent upon on the application of the assessee M/s MSEB granted permission on the condition that the assessee must bear the cost of installation, Transformer, Wire and other equipment as per their specification. The assessee incurred a sum of Rs. 21,28,858/- for converting low-tension line to high-tension electricity line. By making the expenditure nothing new asset was added in the business asset of the assessee. In support of his submission, the ld. AR of the assessee relied upon the decision of Hon'ble Allahabad High Court in CIT vs. Kanodia Cold Storage 100 ITR 155 (All), ACIT vs. Dhampur Sugar Mill P. Ltd. (2015) 370 ITR 194 (All), decision of Hon'ble Rajasthan High Court in CIT vs. Udaipur Distillery Co. Ltd. 268 ITR 451 (Raj) and further the decision of Hon'ble Madrash High Court in CIT vs. Sundaram Clayton Ltd. 321 ITR 69 (Mad). On the other hand, the ld. DR for the Revenue supported the order of authorities below. It was further argued by ld. DR for the Revenue that assessee would be entitled for depreciation on account of eligible rate of deduction in due course.
4. We have considered the submission of the parties and perused the material available on record. The assessee while filing return of income for relevant 3 ITA No.4076/M/2015- M/s Deepa Cotton AY debited the expenditure of Rs. 21,28,858/- from Profit & Loss A/c. The expenditure was allowed to the assessee, however, the order was revised by ld. CIT holding that installing new electricity connection entails the benefit of enduring in nature and treated the expenditure as Capital expenditure. As per the direction of ld. CIT, the AO passed the order under section 143(3) r.w.s. 263 of the Act and treated the said expenditure as Capital expenditure. On appeal before the ld. CIT(A), the action of AO was sustained. We have noted that the expenditure incurred by assessee on account of conversion of low-tension line/connection into high-tension line/connection is not in dispute. The Revenue has disputed the nature of expenditure. The Hon'ble Allahabad High Court in CIT vs. Kanodia Cold Storage (supra) on similar nature of expenditure held that replacement of Transformer and service line for carrying higher KVA electrical power current to enable the establishment to function properly. It was further held that effecting such change no new asset of enduring in nature bellowing to the assessee, came into existence and the expenditure was treated as Revenue Expenditure. Further, in ACIT vs. Dhampur Sugar Mill P. Ltd. (supra) held that the expenditure incurred by assessee by laying of transmission line was clearly on the Revenue Account. The erection of transmission line, vest absolutely in Power Corporation Ltd. The expenditure incurred by assessee was facilitating efficient conduct of its 4 ITA No.4076/M/2015- M/s Deepa Cotton business which was not an advantage of capital in nature. Similar view was taken by Hon'ble Rajasthan High Court in CIT vs. Udaipur Distillery Co. Ltd. (supra) holding that replacing of old Transformer by new Transformer is Revenue expenditure. Thus, respectfully following the decision of various High Courts, we hold that the Expenditure incurred by assessee is Revenue expenditure. Hence, the ground of appeal raised by assessee is allowed.
5. In the result, appeal filed by assessee is allowed.
Order pronounced in the open court on 26th day of July 2017.
Sd/- Sd/-
(RAJENDRA) (PAWAN SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Mumbai; Dated 26/07/2017
S.K.PS
Copy of the Order forwarded to :
1. The Appellant
2. The Respondent.
3. The CIT(A), Mumbai.
4. CIT BY ORDER,
5. DR, ITAT, Mumbai
6. Guard file. या पत त //True Copy/ (Asstt.Registrar)
ITAT, Mumbai
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