Income Tax Appellate Tribunal - Mumbai
Unichem Laboratories Ltd, Mumbai vs Assessee on 11 August, 2009
IN THE INCOME TAX APPELLATE TRIBUNAL
MUMBAI BENCHES "F", MUMBAI
Before Shri R.S.Syal, AM and Smt.Asha Vijayaraghavan, JM
ITA No.1917/Mum/2007 : Asst.Year 2004-2005
M/s.Unichem Laboratories Limited The Dy.Commissioner of Income-tax
Unichem Bhavan, S.V.Road Central Circle 33
Jogeshwari (West) Mumbai - 400 102. Mumbai.
Vs.
PA No.AAACU0551B.
(Appellant) (Respondent)
Appellant by : Shri Nitesh Joshi
Respondent by : Shri Virendra Ojha
ORDER
Per R.S.Syal, AM :
This appeal by the assessee arises out of the order passed by the learned Commissioner of Income-tax (Appeals) on 21.12.2006 in relation to the assessment year 2004-2005.
2. The first ground is against the confirmation of disallowance of Rs.2,08,003 out of repairs and maintenance expenses. This disallowance has two components viz. repairs to plant and machinery of Rs.24,550 and to building of Rs.1,83,453. The assessee claimed repairs to plant and machinery amounting to Rs.2,12,24,284. The Assessing Officer made certain disallowance inter alia a sum of Rs.24,550 paid to M/s.Team Computers Private Limited towards the purchase of a new computer by treating it as a capital expenditure. In the first appeal it was contended on behalf of the assessee that no new computer was purchased by the assessee as was alleged in the assessment order. It was pointed out that the said sum of Rs.24,550 was for the purchase of 40 GB Hard disc for the replacement of the existing hard disc. Not convinced, the learned CIT(A) approved the view taken by the Assessing Officer.
2 ITA No.1917/Mum/2007M/s.Unichem Laboratories Limited.
3. After considering the rival submissions and perusing the relevant material on record we find it as an uncontroverted fact that a new 40 GB Hard disc was purchased by the assessee for its computer. It is noticed that such expenditure was incurred for the replacement of the existing Hard disc of the computer. The Hon'ble jurisdictional High Court in the case of CIT Vs. Polyolefins Industries Ltd. [(1988) 169 ITR 538 (Bom)] has held that the expenses incurred by the assessee for replacement of petrol engine and diesel engine in the jeep were to be allowed as business expenditure. The learned Departmental Representative relied on the judgement of the Hon'ble Supreme Court in the case of CIT Vs. Sri Mangayarkarasi Mills P.Ltd. [(2009)315 ITR 114 (SC)] and contended that the replacement of machinery be held as capital expenditure. We are not convinced with the submission advanced on behalf of the Revenue for the reason that in that case the entire textile mill machinery was considered as a single asset and the replacement of old machines was claimed as replacement of parts of machinery, which the Hon'ble Supreme Court disapproved by holding that the entire textile mill machinery could not be regarded as a single asset. Adverting to the facts of the instant case, we find that the instant case is that of the replacement of some part of computer. Obviously the ratio of the Hon'ble Apex Court judgement will not apply here. Since it is replacement of parts of computer, which is otherwise an independent unit of asset in itself, such replacement would be considered as revenue expenditure. In view of the fact that it is not the case of purchase of a new computer but the replacement of Hard disc with more capacity, in our considered opinion, the said amount has to be allowed as expenditure in full.
4. Turning to the second limb of disallowance out of building expenses, we find that the assessee purchased Gypsum board false ceiling along with accessories; paid labour charges on fixing of aluminium partition, windows and doors; and paid for flooring. The Assessing Officer treated this sum, in total Rs.1,83,453, as 3 ITA No.1917/Mum/2007 M/s.Unichem Laboratories Limited.
capital expenditure and allowed depreciation accordingly. No relief was allowed in the first appeal.
5. Before us the learned Counsel for the assessee placed on record a copy of the order passed by the Tribunal in its own case for assessment year 1995-96 in ITA No.5870/Mum/1998 in which similar expenditure has been held to be of revenue nature. Similar view has been taken by the Tribunal in assessee's own case in assessment years 1998-99 and 1999-2000. The learned Departmental Representative could not point out any single factor distinguishing the facts of the instant case from those considered by the Tribunal in assessee's own case in earlier years. Respectfully following the precedent we overturn the impugned order on this score as well and order for the deletion of addition amounting to Rs.2,08,003. This ground is, therefore, allowed.
6. Ground no.2 is against the deduction u/s.80HHC vis-à-vis DEPB.
7. We find that the facts and circumstances of this ground are mutatis mutandis similar to those decided by the Special Bench of the Tribunal in the case of M/s.Topman Exports Vs. ITO [(2009) 318 ITR (AT) 87 (Mumbai) (SB)]. The Special bench vide its order dated 11.08.2009 has restored the matter to the file of the Assessing Officer for considering the face value of DEPB as covered under section 28 (iiib) and the profit on transfer of DEPB i.e., excess of sale price over the face value of DEPB as falling under section 28 (iiid). It has further been held that there is no scope for allowing separate deduction for individual expenses connected with the sale of DEPB due to the scheme of section 80HHC. We, therefore, set aside the impugned order on this issue and direct the Assessing Officer to recompute the deduction under section 80HHC in accordance with the view taken by the Special Bench in the afore noted case. Needless to say the 4 ITA No.1917/Mum/2007 M/s.Unichem Laboratories Limited.
assessee will be allowed a reasonable opportunity of being heard by the AO in the fresh proceedings.
8. The last effective ground is against deduction of gross or net interest while working out the "profits of the business" u/s.80HHC of the Act. The learned A.R. fairly conceded that recently the Hon'ble Bombay High Court, in an unreported judgment, has decided this issue against the assessee by holding that 90% of the gross interest is to be reduced. In view of the admission of the learned A.R., we approve the view taken by the learned CIT(A). This ground fails.
9. In the result, the appeal is partly allowed for statistical purposes.
Order pronounced on this 6th day of April 2010.
Sd/- Sd/-
(Asha Vijayaraghavan) (R.S.Syal)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Mumbai : 6th April, 2010.
Devdas*
Copy to :
1. The Appellant.
2. The Respondents.
3. The CIT concerned
4. The CIT(A) Central-VIII, Mumbai.
5. The DR/ITAT, Mumbai.
6. Guard File.
TRUE COPY.
By Order
Assistant Registrar, ITAT, Mumbai.