Income Tax Appellate Tribunal - Kolkata
Jindal (India) Ltd., Kolkata vs Department Of Income Tax on 18 April, 2012
आयकर अपीलीय अधीकरण, Ûयायपीठ - " ए ", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "A", KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय, एवं/and
Shri Mahavir Singh, Judicial
Member.
ौी सी.
सी.डȣ.
डȣ.राव, लेखा सदःय
Shri C.D.Rao, Accountant Member
आयकर अपील संÉया /
ITA Nos.1742&1743/Kol/2011
िनधॉरण वषॅ/Assessment Years : 2007-08
and 2008-09.
(अपीलाथȸ/APPELLANT ) (ू×यथȸ/RESPONDENT)
A.C.I.T., Circle-3, Kolkata. M/s.Jindal (India) Ltd.,
Kolkata
(PAN:AAACJ 2054 J)
अपीलाथȸ कȧ ओर से/ For the Appellant: Shri Niraj Kumar
ू×यथȸ कȧ ओर से/For the Respondent: Shri G.Sugla
सुनवाई कȧ तारȣख/Date of Hearing : 18.04.2012.
घोषणा कȧ तारȣख/Date of Pronouncement :
आदे श/ORDER
सी.
सी.डȣ.
डȣ.राव, लेखा सदःय
Per Shri C.D.Rao, AM
The above appeals are filed by revenue against orders dated 05.09.2011 of the ld. CIT-(A)-I, Kolkata pertaining to A.Yrs. 2007-08 and 2008-2009 respectively.
2. In both the appeals the revenue has raised a common ground which is as under
:-
"1. "Whether on the facts and circumstances of the case the ld. CIT(A) erred in holding that expenditure of Rs.2,80,37,820/- (Rs.5,44,97,891/- for A.Yr.2008-09) incurred for replacement for roll was revenue expenditure whereas it failed to appreciate that the depreciation is allowable on rolling mill rolls of steel industries and therefore the expenditure was capital expenditure in nature?"2
3. At the outset, the ld. Counsel appearing on behalf of assessee has submitted that this issue is covered in favour of assessee in assessee's case for A.Yrs.2005-06 and 2006-07. Therefore, he requested to dismiss the appeals of revenue.
4. On the other hand, the ld. DR appearing on behalf of revenue has submitted that the arguments taken by the department in assessee's own case for the immediately preceding assessment years may be adopted as arguments of the department. However, he could not bring any contradictory decision to that of the one taken by the Tribunal in assessee's own case.
5. After hearing the rival submissions and on careful perusal of materials available on record, we consider it fit to abstract the relevant observations of the Tribunal in assessee's own case vide ITA Nos.368 & 369/Kol/2010 for A.Yrs.2005-06 and 2006-07 order dated 30th September, 2010 at para-6 which are as under :-
"6. After hearing the rival submissions, carefully perusing the material available on record, the case laws cited by both the parties and the explanatory notes on Harmmonized Commodity Description & Coding System, we find that the facts of the case of CIT -Vs- Malhotra Industrial Corporation (2002) 254 ITR 635, wherein the Hon'ble P&H High Court had confirmed the order of the Chandigarh Bench are identical to the facts of the case on hand. The ITAT, Chandigarh Bench in that order has held as under :
"We have considered the rival submissions, examined the facts, evidence and material on record. We have also perused the orders of the authorities below. We have also referred to the various decisions relied Upon by learned counsel for the assessee Now, the main issue that needs to be addressed by us is, whether the expenditure incurred on replacement of rolling mill rolls constitutes a capital expenditure or revenue expenditure. The facts detailed above clearly show that the assessee has all throughout been claiming expenditure on replacement of rolls as revenue expenditure Up to the assessment year 1991-92, the Department has allowed the same as deduction. In none of the earlier assessment years, the expenditure was treated as capital expenditure Now, the only issue before us is that the mere fact that the Appendix cited supra prescribed the rate of depreciation of rolls prior to September 30, 1991, as 100 per cent and thereafter at 50 per cent would show that the Legislature had intended to treat the same as capital in nature We are unable to accept the reasoning given by the Commissioner of Income-tax (Appeals) that if the intention of the Legislature was not to treat such expenditure as capital in nature, there was no necessity in providing the rate of depreciation on the rolls for the simple reason that expenditure incurred on rolls prior to the commencement of the business would be capital in nature. Therefore, it is necessary to provide the rate of depreciation on rolls so that depreciation at that rate could be allowed to the assessee. But it does not mean that expenditure incurred on replacement of rolls subsequent to the commencement of the business would also be a 3 capital expenditure. The judgment of the Karnataka High Court in the case of Mysore Spun Concrete Pipe Pvt. Ltd [1992] 194 ITR 159, is directly on this issue. In that case, the expenditure incurred was on replacement of damaged moulds and was claimed as revenue expenditure, though prior to the commencement of the business, expenditure on moulds was capitalized. It may be mentioned that the same Appendix, referred to above, prescribed depreciation at 40 per cent on moulds used in rubber and plastic goods factories and this item figures at (iii) under the head "Machinery and plant" This only shows that the rate of depreciation mentioned in the Appendix provides depreciation when the expenditure is considered as capital and not in the case where the expenditure itself is revenue in nature. Now, it is obvious that the nature of the assessee's business is such that it requires frequent replacement of rolls The expenditure incurred thereon would certainly fall in the nature of current repairs, as the same does not result in creating a capital asset or benefit of enduring nature It may further be mentioned that in the case of Madras Cemnt Ltd [1992] 42 TTJ 175, the Income-tax Appellate Tribunal, Madras, had held that the expenditure incurred on replacement of part of capital item, though capitalized, would still be in the nature of current repairs. Entries made in the books of account for treating the expenditure as capital would not be a decisive test to determine that the expenditure was capital in nature. Similarly, in the case of Jagatjit Industries Ltd. [2000] 241 ITR 556, the Delhi High Court has held that the expenditure on replacement of damaged moulds was revenue expenditure In the case of Co- operative Sugars Ltd [1999] 235 ITR 343, the Kerala High Court has held that expenditure on "machinery maintenance" of sugar plant by replacing substantial part of the plant was revenue expenditure as no new asset was brought into existence. Even the jurisdictional High Court of Punjab and Haryana, in the case of Khalsa Nirbhai Transport Co. (P) Ltd. [1971] 82 ITR 741, has held that the expenditure incurred on replacement of petrol engines by diesel engines in its buses was a revenue expenditure In the light of the legal position discussed above, we hold that the expenditure incurred on replacement of damaged rolls was in the nature of revenue expenditure and not capital in nature The assessee was entitled to claim deduction as current repairs. In this view of the matter, we set aside the orders of the Commissioner of Income-tax (Appeals) and direct the Assessing Officer to allow deduction on the replacement cost of rolls as current repairs Accordingly, this ground of appeal is allowed for both the assessment years."
The Hon'ble Supreme Court in the case of CIT -Vs- Saravana Spinning Mills P. Ltd. (Supra) at page 208 has observed as under :
"To give an example, a compressor is an important part of an air-condition machine. Repair of the compressor will come in the connotation of the word "current repairs" in section 31(i) of the said Act because the assessee does not replace the air-condition machine. At the highest, he replaces a part of the air-condition machine. So is the case of the picture tube in a television set, when the picture tube is replaced the television set is not replaced, therefore, such repairs alone can come within the connotation of the word "current repairs" in section 31(i) of the said Act as it stood at the material time."
In the case of CIT -Vs- Mysore Spun Concrete Pipe Pvt. Ltd. (supra), the Hon'ble Karnataka High Court has held as under :
"Held, that it was a matter of common knowledge that moulds do not last long. The assesee required moulds which, by constant use, needed replacement. The replacement of moulds was not in the nature of replacement of a capital machinery but in the nature 4 of replacing a part of a machinery especially in the context of the entire set up being treated as one unit. The replacement of moulds was in the nature of maintenance of the machinery installed in the factory. It could be termed loosely as rebuilding of the machinery as a whole used in the productive process of the assessee. Therefore, the expenditure incurred on replacement of damaged moulds and replacement of runners and end rings was revenue in nature."
In the case of CIT -Vs- Renu Sagar Power Co. Ltd. (supra), the Hon'ble Allahabad High Court has held as under :
"Held, that the Tribunal had found that the turbine rotor was part of the turbo generator set. The Tribunal was justified in holding that the expenditure by the assessee on the replacement of one turbine rotor amounting to Rs.1,05,44,904/- was on account of current repairs and as such it was revenue expenditure."
We further find force in the contention of the Ld. Counsel for the assessee that since in this case rolls used in iron and steel industries are the parts of the machinery and are replaced very frequently during the year the expenses incurred on replacement of the rolls is allowable as current repairs, therefore, cannot be disallowed simply because assessee was entitled to get 80% depreciation on this item u/s. 32 of the Act. The Hon'ble Delhi High Court in the case of CIT Vs. Hi Line Pens Pvt. Ltd. (Supra) has held as under :
"Held, that the replacement was not of the premises but of certain "parts" such as the internal wires and GI Pipes. The analogy of replacement of the entire machine was not applicable to the case of the assesee. It was not the intention of the assessee to bring about any new capital asset. The expenses incurred by the assessee were towards repairing the premises taken on lease so as to make them more conducive to its business activity. Such expenses could fall within the expression of repairs to the premises as appearing in section 30(a)(i). Once the assessee's claim falls within that provision there was no question of considering the question of applicability of section 32. Thus, the Tribunal rightly agreed with the view taken by the Commissioner (Appeals) and held in favour of the assessee."
In view of the above, we find no infirmity in the orders of the Ld. CIT(A) in deleting the additions for both the assessment years. Therefore, the grounds of appeal of the revenue for both the assessment years are dismissed."
5.1. Keeping in view of the fact that the ld. DR for revenue could not bring any contradictory material we do not find any reason to deviate from the tribunal's order taken in the immediately preceding assessment years in assessee's own case and there being no dispute regarding the facts involved in these appeals and the one decided by the Tribunal in the earlier assessment years. Therefore respectfully following the same we dismiss the appeals of revenue.
55. In the result both the appeals of revenue are dismissed.
Order pronounced in the court on 04.05.2012.
Sd/- Sd/-
महावीर िसंह, Ûयाियक सदःय सी.
सी.डȣ.
डȣ.राव,
राव, लेखा सदःय,
सदःय
Mahavir Singh, Judicial Member C.D.Rao, Accountant Member.
(तारȣख)
तारȣख)Date: 04.05.2012.
R.G.(P.S.)
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. M/s.Jindal (India) Ltd., 2/1, Ahmed Mamuji Street, Liluah, Howrah-711204.
2 A.C.I.T., Circle-3, Kolkata.
3. The C.I.T. 4. CIT(A)-I, Kolkata.
5. The CIT(DR), Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches